[0] New England Council Energy Report Finds Favorable Trends, Calls for Stronger Regional Coordination.

Business Editors

BOSTON--(BUSINESS WIRE)--Aug. 23, 2001

New England is unlikely to face energy shortfalls and price volatility similar to what California experienced over the past year, according to a study released today by the New England Council.

The reason, according to the Council's 75-page analysis of New England's energy picture, is that policies adopted since the late 1970s have resulted in development of new, cleaner energy sources, significant gains in energy efficiency, less dependence on foreign oil and the ongoing emergence of competitive markets.

James Brett, New England Council president and CEO, credited government, business and other leaders with policies "that kept the growth in energy consumption to 25 percent between 1980 and 1999 even as the region's economy more than doubled." Nationally, energy consumption grew 44 percent during the same period.

Despite improvements in energy efficiency, the region's demand for energy, especially electricity and natural gas, continues to grow. And the region remains the most oil dependent region in the United States.

The report notes that natural gas consumption rose 140 percent over the past 30 years, compared to three percent nationally. During the same period, there was a significant increase in the percentage of primary fuels used to generate electricity-fully one-third of the fuel consumed in the region in 1999 was used to produce electricity, up from 19 percent 30 years ago.

"With the digital economy and the shift from oil to natural gas as the fuel of choice for power generation, we see no indication that this trend will abate," said Brett. "For economic growth to be sustained, the energy issues and challenges facing New England should be addressed through regional energy policies. We learned in the 1970s and 1980s, and we see it in California today, that balancing energy supply and environmental quality requires a long planning horizon. Once demand outstrips supply, the solutions can take years to achieve and the damage to the economy and the environment can take even longer to correct."

The report, "New England's Energy Supply & Demand: 2001 Report and Agenda for Action," was commissioned following major structural changes leading to increased competition in the energy industry, as well as widespread concerns regarding recent events in the California electricity market. The New England Council spearheaded this effort to better understand the changes taking place in New England's energy markets and to identify challenges the region faces over the next decade in maintaining an adequate supply of energy at reasonable cost.

Among the policy recommendations in the Council's report are the following:

-- Capacity to minimize congestion and to move electricity and natural gas throughout the region;

-- Continued development of the wholesale and retail electricity markets with increased reliance on market-based pricing;

-- Duel-fuel permitting to improve reliability by allowing new power plants to burn oil as a backup to natural gas;

-- Life extension of nuclear generating capacity, with appropriate safeguards, to assure fuel diversity and the fulfillment by the federal government of its responsibility to safely dispose of spent nuclear fuel;

-- Environmental regulations and implementation of rules that are coordinated regionally to avoid unintended consequences, including the premature shutdown of needed electricity capacity and excessive reliance on certain fuels.

Other recommendations include:

-- Energy-efficiency programs that recognize the changes in the economy, especially the shift from industrial use to large-scale commercial use in high-technology and related fields;

-- Incentives for alternative-fueled vehicles and higher efficiency standards for automobiles, buildings and appliances; and,

-- Incentives to stimulate greater heating-oil inventory and storage capacity to protect the region against tight supplies and price spikes that result from the region's weather constraints.

Brett said implementing these recommendations will require closer coordination in the region among those who make and influence energy, environmental and economic policies. "With electricity and gas markets becoming more competitive, and with the development of new technologies, the region's energy infrastructure is increasingly linked," said Brett. "As a result, the Council believes the region would benefit from a more integrated approach to developing policies in these three areas--energy, economy and the environment.

"This is also important to the region because of actions in Washington, D.C. Federal energy legislation and actions by regulators at the Federal Energy Regulatory Commission are likely to have a major impact on the region's energy picture. Therefore, it is vital for New England to have a strong, united voice representing the region's interests before federal policymakers in Washington."

In addition to the doubling of energy efficiency since the 1970s and the 26 percent decline in petroleum use over the same period, the Council cited a number of other indicators highlighting progress in the region:

-- Natural gas supplies have increased substantially--the capacity of the region's natural gas pipeline system has grown by over 30 percent over the past three years;

-- Renewable resources now account for 15 percent of the region's electricity fuel mix - higher than the national average;

-- New electric-generating capacity, which with the construction and start-up of 10,000 megawatts of new power plants, is projected to be adequate to serve the region's needs with downward pressure being exerted on price spikes that occur during peak demand;

-- Air-quality improvements with almost all areas of the region now meeting federal health-based standards.

The New England Council report is an update of a 1990 energy report. The Council has issued this updated report to reaffirm that a comprehensive regional energy policy is critical to achieving economic stability and competitiveness.

"I applaud the New England Council's comprehensive regional energy report," said U.S. Representative Charles Bass (R-NH). "The Council has taken the initiative in addressing our region's persistently high costs and supply concerns, as well as our aging infrastructure, which will be strained to serve our growing needs. As a member of the U.S. House Energy and Commerce Committee, I strongly believe sound energy, environmental and economic policies are critical to New England's future."

Copies of the report are available on the Council's web site, [e-mail], or by calling the Council's office at 617-723-4009.

Polestar Communications and Strategic Analysis prepared the updated report, under the direction of the New England Council's Energy and Environment Committees.

The New England Council is a non-profit alliance of schools, hospitals, corporations and other private organizations throughout New England, working together to promote economic growth and quality of life in the six-state region.