Con Ed chairman promises we will survive the summer

Real Estate Weekly, June 13, 2001 by Elaine Misonzhnik

As far as Eugene McGrath, chairman and chief executive officer of Con Edison, is concerned, New York will not see a blackout this summer and energy costs will not be significantly higher than in the past. But to make sure that the energy crisis doesn't reach the City by next year, McGrath insisted that emergency measures, such as the building of new power plants, should be taken as soon as possible.

"Electricity keeps computers functioning, subways running, and all, of our other systems operating," he said at a Real Estate Board of New York luncheon on June 6. "Attention to New York City power intensifies around this time each year. But this year, it's even worse due to the extraordinary crisis in California. Wherever I go people want to know the same thing: Will New York become the next California? Will energy prices go sky high?"

According to McGrath, New York will not experience anything of the magnitude of the California crisis due to the drastically different market conditions in the two states.

Trying to explain what happened on the West Coast, he said that the economic growth and the Silicon Valley explosion were not matched by an increased capacity for generating power. And in addition, because of the recently undertaken deregulation campaign, the consumers in California were confused as to the real value of energy, estimating it to be much lower than what it actually was.

"An important difference in New York's deregulation model is that it doesn't mask the market price," McGrath said.

"But we still need to put this discussion in the context of the great economic prosperity New York has enjoyed in the past few years. All of our infrastructures are being strained and they were built many years ago. We should do all right this summer, but we need to have greater capacity in order to make the pricing model work."

Con Edison proposes the building of new power plants around the New York region, but McGrath warned that an energy-supply system based entirely on natural gas is bound to backfire.

"Building new power plants is going to take great political leadership. It's going to be a difficult proposition," he said. "But the new power plants should not be using just natural gas. As we are seeing in California right now, if we become too dependent on natural gas, we could have a problem."

As far as this summer in concerned, however, we are in good shape.

"Absent any unusual occurrence, like weather the likes of which we haven't seen in fifty years, we should be in good shape on the supply side," McGrath said. "From a pricing perspective the supply prices will be going up, but at the same time we saw an increased reduction in distribution costs. So our prices should be the same as last summer."

In conclusion, McGrath asked REBNY members to educate the public about the energy issue -- what are the options available to them and what the City can do to avoid a blackout.

"Please recognize that we are in a transition period," he said. "New York City needs your help."