The coal-fired Huntley Station power plant in the Town of Tonawanda is losing money and is at risk of being shut down, a new report commissioned by an environmental group warned Tuesday.
The report, commissioned by the Clean Air Coalition of Western New York and prepared by an Ohio energy consulting firm that wants to reduce the nation’s dependence on electricity generated from coal, estimated the Huntley plant has lost money during three of the past five years and said those losses are likely to widen in the future as coal prices rise and natural gas prices remain low.
“The Huntley plant does not appear to be financially viable and is at risk for retirement,” the report warned.
David Gaier, a spokesman for New Jersey-based NRG, which owns the plant, declined to discuss the report’s financial estimates about the Huntley Station.
“I can’t confirm or support any numbers or conclusions,” he said. “We agree that coal-fired plants are under pressure at a time of all-time-low natural gas prices.”
Stuck in the middle are a town, school district and county dependent on the power plant for $6 million a year in tax revenue.
“We’d be very concerned to see NRG leave here,” said Town of Tonawanda Supervisor Anthony F. Caruana.
The plant pays about $3 million annually to the Kenmore-Town of Tonawanda school district, accounting for about 3 percent of its spending. The plant also paid $2 million to the Town of Tonawanda, equal to about 2 percent of the town’s budget, and $1 million to Erie County under a payment-in-lieu-of-taxes agreement that runs through 2030.
While the town’s budget has come in under the state’s 2 percent property tax cap for the last three years, Caruana noted NRG’s 2 percent contribution is equal to the cap.
“Where do you make it up?” he asked.
With Huntley’s future in doubt, the report warned that officials should begin planning for the day those payments stop. The future of the estimated 100 people who work at the plant is also in jeopardy, the report warned.
“The economics of the Huntley plant just don’t add up,” said Erin Heaney, the Clean Air Coalition’s executive director. “It’s time for everyone to come to the table to preserve workers’ jobs, preserve the environment and generate sufficient tax revenue for the region.”
The Clean Air Coalition has long supported efforts to reduce air pollution, especially in the Town of Tonawanda. The Ohio research firm that prepared the report says its mission is “to accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce dependence on coal and other non-renewable energy resources.”
“It sounds like they’ve got a little bias to begin with,” said Caruana.
But one of the report’s authors said the firm’s mission is dictated by the fact that energy markets and policy are headed away from coal.
“You would have to dismiss the larger market forces moving away from coal in order to make a case we’re biased,” said Thomas Sanzillo, a former deputy state comptroller.
Gaier said NRG believes coal-fired power plants can play an important role in the nation’s electricity supply, especially by providing a proven and reliable source of energy in a power market that is becoming more heavily dependent on natural gas.
The plant also is being squeezed as more renewable power sources, such as wind and solar, come into operation and more generating capacity is added locally that runs on natural gas, including a coal-fired plant in Dunkirk owned by NRG that the company plans to convert into a 430-megawatt gas-fired plant.
NRG officials in 2012 proposed converting the Huntley plant to run on natural gas as part of Gov. Andrew M. Cuomo’s initiative to promote clean energy supplies and upgrade the state’s aging energy infrastructure, but state energy officials did not accept the plan.
The report said the Huntley plant is being hit by a “perfect storm” of conditions that have led to the retirement of more than 13,000 megawatts of coal-fired generating capacity across the country since 2008 and helped drive the Somerset power plant in Barker into bankruptcy at the end of 2011.
The report, prepared by the Institute for Energy Economics and Financial Analysis in Cleveland, estimated that the Huntley plant generated cash operating losses of about $1 million a year in both 2011 and 2012, even without including additional costs such as property tax payments that total nearly $16 million annually and interest expenses.
It predicted that Huntley’s cash operating losses would grow to more than $3 million in 2015 and top $6 million annually by 2015, assuming the plant continues to run at its current capacity and its coal costs keep rising at the 7 percent annual pace that they have for the past five years.
For starters, wholesale power prices in Western New York, which have dropped by 36 percent since 2008 as natural gas costs plunged and demand weakened, also are putting a strain on Huntley’s finances by reducing the price that Huntley can command for the electricity it generates.
Putting further pressure on Huntley is the glut of generating capacity in Western New York, which is more than adequate to absorb the mothballing of Huntley’s 436 megawatts of capacity. The $150 million conversion of the Dunkirk plant to natural gas will potentially add to the region’s glut by increasing the station’s maximum output from the current 75 megawatts to 435 megawatts by the fall of next year.
As it is, the region has been meeting its electricity needs over the past two years with Huntley operating at only a fraction of its capacity. The plant, which had been running at 60 to 65 percent of capacity from 2005 to 2008, ran at just 19 percent in 2012 and 28 percent during the first 10 months of last year, the report said.
The Clean Air Coalition did not take a position on the Dunkirk plant conversion because the group centered around Tonawanda has no members in that area, Heaney said.
Heaney said the environmental group plans to host a series of community meetings to discuss ways to ease the transition for workers, local governments and schools during the first two weeks of March.
“We’re hoping everyone can pull together,” she said. “We need to make sure the region has a plan.”
Mark Mondanaro, superintendent of the Kenmore-Tonawanda School District, said he hopes the Huntley plant can remain viable but that a shutdown, and the ensuing loss of tax revenue, would tighten the financial squeeze on a district that already has cut spending, such as by dropping modified sports programs and eliminating some school bus service.
“We’re always thinking about it. It’s something that’s been a topic in all of the time I’ve been here,” he said. “We know that if $3 million went away, it basically just keeps us in the downward trend we’ve been in.”
The Clean Air Coalition has long been concerned about elevated rates of cancer and asthma in the Tonawanda area, which Heaney said has a high concentration of air polluting facilities, including 53 air-permitted facilities within a two-mile radius.
“We think this really will improve public health,” if the Huntley station were put into retirement, she said.
Gaier noted that NRG spent about $35 million in 2005 to convert Huntley to use low-sulfur coal, which produces fewer greenhouse gas emissions. Four years later, the company spent $115 million to install additional environmental controls that further cut harmful emissions.
“Huntley is actually one of the cleanest coal-fueled power plants in New York and in the nation,” Gaier said.
Ted Skerpon, the president of Local 97 of the International Brotherhood of Electrical Workers, which represents workers at the Huntley plant, said the union has been advocating upgrades to the state’s electricity transmission system that would allow power produced at upstate plants, such as Huntley, to be sold in downstate markets, where the demand for electricity is growing.
The transmission of electricity from upstate to downstate currently is limited by constraints on the existing system.
News Staff Reporter Joseph Popiolkowski contributed to this report. email: firstname.lastname@example.org