While National Grid USA and National Fuel Gas Corp. get most of the attention in Western New York when it comes to gas and electricity, they aren’t the only large utilities serving the region.
New York State Electric & Gas operates in the eastern suburbs of Erie County and other rural markets in upstate New York, serving 879,000 electricity customers and 262,000 natural gas customers, while employing 1,940.
Its 20,000-square-mile service area stretches from Western New York and the Southern Tier to parts of the Albany area, from the far northeastern corner of the state on the Canadian border to the northern suburbs of New York City. In all, that includes 42 counties for electricity and 33 counties for natural gas.
The company is owned by Spanish energy company Iberdrola USA, which also owns Rochester Gas & Electric and several utilities in New England, serving 2.5 million customers in the Northeast overall. Locally, its primary markets are in the Lockport and Lancaster areas.
Mark S. Lynch, president and CEO of both NYSEG and RG&E, spoke with The Buffalo News last month while in Cheektowaga to present a $500,000 economic development grant to Niagara Transformer Corp.
Jonathan D. Epstein: How has this winter been for NYSEG?
Mark S. Lynch: Anytime you go into a winter season, obviously you have to be conscious of the weather, and this type of weather does affect our operations.
I think NYSEG was a little fortunate that we did not have it as severe as some of the other utilities had, but we’re very concerned about the ice, almost more than we are about the snow, other than wind. Wind has a very big impact on our system as well.
So far this year, we’ve actually done very well, going back from November all the way through until where we are now. We’ve had outages, but we’ve been able to minimize them and literally get our customers back on within a day or less.
JE: So it hasn’t been bad?
ML: Not from a customer outage standpoint. It still does put stress on our equipment. It still does make it very hard for our line crews to get out and make repairs and to do our normal maintenance. You have to realize that our employees are out in the field when we had these below-zero temperatures and winds blowing. They’re up in a bucket trying to make repairs. It’s very hard on them. But I can tell you that our employee base is one of the best in the nation. They just continue to excel. They always step up to the challenge.
JE: How has electricity consumption been this year?
ML: It is what you would expect. It’s gone up obviously with the colder weather. You see heating and electricity both go up incrementally. Gas usage has gone up a little bit compared to last year. But again, you have to look at the average temperatures we’ve had. Last year, we had a week or two where it got really cold. This year, it’s been pretty consistently cold.
JE: Looking at the electricity market more broadly, is there enough power capacity in the market?
ML: We were required quite a few years ago to divest our generation. So we do not really own any generation. We have some hydro, but they’re very small plants. Essentially, the capacity that we have, we purchase from the wholesale market that the New York Independent System Operator administers.
This year we have not seen, nor do we anticipate having, a resource issue. There seems to be plenty of supply in the market that we can purchase.
Obviously the weather has a certain impact on the cost of that energy. You have a direct correlation. Gas will drive a lot of the electricity prices. So we have seen an increase in cost from the wholesale market, but we do not own that generation.
JE: Is there a need for more capacity to meet demand and bring the prices down?
ML: Within New York State, you have the New York State Reliability Council that really looks at making sure we maintain a sufficient reserve margin above our anticipated peak, be it winter or summer. They make sure that we have capacity through purchases from other markets or internal generation, but we have usually enough supply internally, plus a reserve margin.
One of the issues that we do look at and we are concerned about is global reliability issues. If you have certain generation plants that may retire in a certain area, they may cause some local problems, and we may have to help those plants stay online or look at transmission fixes to basically come in behind that to allow a plant to retire or shut down for a short period of time. But overall, you can usually deal with all of those issues.
JE: Where do you see prices going from a consumer perspective?
ML: NYSEG and RG&E have not had a rate increase since September 2012. Our electricity prices are the lowest in the state. Our gas prices are some of the lowest in the state.
What you are seeing is the phenomenon of the wholesale market, and that is always going to fluctuate with weather, with conditions, and especially with the gas side of the business. Gas can drive the commodity prices up or down... As that price goes up, the overall cost of the energy goes up.
JE: What kind of investments have you made in your power delivery network? How are those investments working out?
ML: Well, we’ve been doing quite a bit. Since Iberdrola came in and bought NYSEG and RG&E, over the last five years, we’ve actually doubled our investment in the system. We’re spending to the tune of $300 million to $400 million between NYSEG and RG&E. We’re basically improving our infrastructure, upgrading, modernizing, and what we’re seeing is a lot of benefits.
We still have a lot to go here. There are a lot of things we want to do. With some of the large storms that we’ve had, going back to Lee and Irene, and then most recently Sandy, we’re seeing that resiliency in our system. We need to look at more or less hardening it, trying to make it less susceptible to some of these larger storms that we’re having. We’re investing in those types of programs, looking at our transmission and distribution systems to make sure that they’re strong enough.
JE: Are there plans to develop your business in Western New York?
ML: We’re continuing to look here in our Lancaster and Lockport division for capital expenditures for basically project development. We’ve got a series of projects, which is normal replacement, as well as some expansion and strengthening. Economic development is really key for us. One of the things we’re very proud of is that we invest in our communities that we serve.
JE: Is it difficult to be in the electricity business when you don’t have any generation assets of your own?
ML: That’s a very loaded question. It does make it difficult in some ways.
At the end of the day, we still have to do the right thing, regardless of who owns it or is planning for it, and that’s the key: to make sure that it is planned for and planned for responsibly.
Obviously, any entity would like to be able to control its own destiny and be able to make sure it has sufficient capability to meet the needs of its customers. I still have an obligation to provide safe and adequate service, and we take that charge and that responsibility very seriously.
email: jepstein@buffnews.com
New York State Electric & Gas operates in the eastern suburbs of Erie County and other rural markets in upstate New York, serving 879,000 electricity customers and 262,000 natural gas customers, while employing 1,940.
Its 20,000-square-mile service area stretches from Western New York and the Southern Tier to parts of the Albany area, from the far northeastern corner of the state on the Canadian border to the northern suburbs of New York City. In all, that includes 42 counties for electricity and 33 counties for natural gas.
The company is owned by Spanish energy company Iberdrola USA, which also owns Rochester Gas & Electric and several utilities in New England, serving 2.5 million customers in the Northeast overall. Locally, its primary markets are in the Lockport and Lancaster areas.
Mark S. Lynch, president and CEO of both NYSEG and RG&E, spoke with The Buffalo News last month while in Cheektowaga to present a $500,000 economic development grant to Niagara Transformer Corp.
Jonathan D. Epstein: How has this winter been for NYSEG?
Mark S. Lynch: Anytime you go into a winter season, obviously you have to be conscious of the weather, and this type of weather does affect our operations.
I think NYSEG was a little fortunate that we did not have it as severe as some of the other utilities had, but we’re very concerned about the ice, almost more than we are about the snow, other than wind. Wind has a very big impact on our system as well.
So far this year, we’ve actually done very well, going back from November all the way through until where we are now. We’ve had outages, but we’ve been able to minimize them and literally get our customers back on within a day or less.
JE: So it hasn’t been bad?
ML: Not from a customer outage standpoint. It still does put stress on our equipment. It still does make it very hard for our line crews to get out and make repairs and to do our normal maintenance. You have to realize that our employees are out in the field when we had these below-zero temperatures and winds blowing. They’re up in a bucket trying to make repairs. It’s very hard on them. But I can tell you that our employee base is one of the best in the nation. They just continue to excel. They always step up to the challenge.
JE: How has electricity consumption been this year?
ML: It is what you would expect. It’s gone up obviously with the colder weather. You see heating and electricity both go up incrementally. Gas usage has gone up a little bit compared to last year. But again, you have to look at the average temperatures we’ve had. Last year, we had a week or two where it got really cold. This year, it’s been pretty consistently cold.
JE: Looking at the electricity market more broadly, is there enough power capacity in the market?
ML: We were required quite a few years ago to divest our generation. So we do not really own any generation. We have some hydro, but they’re very small plants. Essentially, the capacity that we have, we purchase from the wholesale market that the New York Independent System Operator administers.
This year we have not seen, nor do we anticipate having, a resource issue. There seems to be plenty of supply in the market that we can purchase.
Obviously the weather has a certain impact on the cost of that energy. You have a direct correlation. Gas will drive a lot of the electricity prices. So we have seen an increase in cost from the wholesale market, but we do not own that generation.
JE: Is there a need for more capacity to meet demand and bring the prices down?
ML: Within New York State, you have the New York State Reliability Council that really looks at making sure we maintain a sufficient reserve margin above our anticipated peak, be it winter or summer. They make sure that we have capacity through purchases from other markets or internal generation, but we have usually enough supply internally, plus a reserve margin.
One of the issues that we do look at and we are concerned about is global reliability issues. If you have certain generation plants that may retire in a certain area, they may cause some local problems, and we may have to help those plants stay online or look at transmission fixes to basically come in behind that to allow a plant to retire or shut down for a short period of time. But overall, you can usually deal with all of those issues.
JE: Where do you see prices going from a consumer perspective?
ML: NYSEG and RG&E have not had a rate increase since September 2012. Our electricity prices are the lowest in the state. Our gas prices are some of the lowest in the state.
What you are seeing is the phenomenon of the wholesale market, and that is always going to fluctuate with weather, with conditions, and especially with the gas side of the business. Gas can drive the commodity prices up or down... As that price goes up, the overall cost of the energy goes up.
JE: What kind of investments have you made in your power delivery network? How are those investments working out?
ML: Well, we’ve been doing quite a bit. Since Iberdrola came in and bought NYSEG and RG&E, over the last five years, we’ve actually doubled our investment in the system. We’re spending to the tune of $300 million to $400 million between NYSEG and RG&E. We’re basically improving our infrastructure, upgrading, modernizing, and what we’re seeing is a lot of benefits.
We still have a lot to go here. There are a lot of things we want to do. With some of the large storms that we’ve had, going back to Lee and Irene, and then most recently Sandy, we’re seeing that resiliency in our system. We need to look at more or less hardening it, trying to make it less susceptible to some of these larger storms that we’re having. We’re investing in those types of programs, looking at our transmission and distribution systems to make sure that they’re strong enough.
JE: Are there plans to develop your business in Western New York?
ML: We’re continuing to look here in our Lancaster and Lockport division for capital expenditures for basically project development. We’ve got a series of projects, which is normal replacement, as well as some expansion and strengthening. Economic development is really key for us. One of the things we’re very proud of is that we invest in our communities that we serve.
JE: Is it difficult to be in the electricity business when you don’t have any generation assets of your own?
ML: That’s a very loaded question. It does make it difficult in some ways.
At the end of the day, we still have to do the right thing, regardless of who owns it or is planning for it, and that’s the key: to make sure that it is planned for and planned for responsibly.
Obviously, any entity would like to be able to control its own destiny and be able to make sure it has sufficient capability to meet the needs of its customers. I still have an obligation to provide safe and adequate service, and we take that charge and that responsibility very seriously.
email: jepstein@buffnews.com