New York Power Authority
Management and Operations The New York Power Authority (NYPA) provides about a quarter of the electricity used in New York State. It sells electricity to government entities, the investor-owned- utilities operating in New York State, and other non-residential customers. In 1996, New York State began to significantly deregulate its power industry. With the assistance of a consulting firm specializing in utility operations, we examined actions taken by NYPA in preparing to operate in a more competitive environment.
We found that certain actions need to be taken by NYPA management if NYPA is to be in a position to compete effectively in the newly deregulated power industry. For example, NYPA is expanding a plant and taking or considering actions that will enable it to provide a significant amount of power to the New York City area. However, as the power market in this area is deregulated and becomes more competitive, NYPA may not be able to generate enough revenue from electricity sales in the market to cover the costs of these actions, which could increase NYPA’s operating costs by more than $1 billion a year. We recommend that NYPA limit these actions until it can show that their financial viability has been justified by independent studies of market conditions and other relevant factors. We also recommend that NYPA seek legislation clarifying its role in the new competitive environment, significantly upgrade its capability to buy and sell electricity in the open market so that it can compete effectively with the specialized companies now operating in this market, and complete a suspended organizational assessment that was intended to determine how NYPA should be staffed after the sale of its nuclear power plants and in preparation to compete in deregulated power markets We estimated that NYPA may be incurring more than $10 million a year in unnecessary expenses for administrative and support staff who are no longer needed because its nuclear operations were sold.
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