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DUNKIRK – The atmosphere was absolutely electric as hundreds of people crowded into a banquet room in the Clarion Hotel on Sunday to cheer Gov. Andrew M. Cuomo’s announcement that the nearby NRG Power Plant would not be closing.

Over the previous objections of some competitors and environmentalists, but with the support of nearly everyone else, the aging coal-fired facility on Dunkirk Harbor will be converted to burn natural gas, solving the two biggest problems facing owner NRG Energy: the cost of its fuel and the significant pollution that it causes.

In 2012, NRG filed a notice of intent with the New York State Public Service Commission to shut down the plant’s four generators, due to the high cost of coal. The units could produce 635 megawatts of power; the plant currently operates only one unit, producing 75 megawatts. The only other option was to repower the facility to use low-cost natural gas, which also burns cleaner.

“The state has decided that the plant will remain open, it will modernize, and it will be better than ever before,” Cuomo told his jubilant audience a few minutes after his plane landed here Sunday morning.

He said an agreement reached with NRG, other energy suppliers and the New York Power Authority has NRG investing $150 million to upgrade the plant, saving the jobs of nearly 70 employees and providing work for an additional 50 in construction to make the changeover. Completion is expected in 2015.

Before the deal was reached Friday, plans were under way in the community to take four busloads of supporters to Albany later this week to make Dunkirk’s case before the Public Service Commission, which has to sign off on the arrangement. When word spread that the trip would be unnecessary, backers instead converged on the hotel to welcome the governor with a band, cheerleaders, posters and flags.

Politicians from Dunkirk and Chautauqua County praised the agreement as a disaster avoided and as a sign of good things for the future. NRG is the county’s largest taxpayer and is responsible for more than 40 percent of the city’s annual property tax revenue. Forecasts of teacher layoffs and slashed services accompanied fears of the plant shutdown.

After the announcement, Mayor A.J. Dolce acknowledged that the last few weeks were tense. Then he got the word late Friday that an agreement was reached. “I knew we could cancel the buses, that the news was good, but I just wasn’t sure how good this was going to be until we heard more details on Saturday,” Dolce said.

State Sen. Catharine M. Young, R-Olean, who helped rewrite the factors the PSC must consider when making energy decisions – including the economics of the community, system stability and effects on the environment – was exuberant over the outcome of what she described as a “sometimes traumatic journey.”

“We couldn’t let it happen. We would lose our tax base, we would lose our jobs, we would lose our future,” she said. “This agreement saves us. It gives us a foundation on which to build our economy. It gives us hope. This is our community’s Christmas miracle!”

Cuomo noted that the generating plant has a 10-year guarantee for the energy it produces. Also, he said, “The New York Power Authority will be providing $15 million to the project, because this adds to the reliability and stability of the entire power system.”

Sen. Charles E. Schumer, D-N.Y., who was unable to attend Sunday’s event, has been active in advocating for the plant’s approval and issued a statement saying, “We’ve worked long and hard for this, because we knew it was triple win – a win for jobs in Chautauqua County, a win for the taxpayers of Dunkirk and the Dunkirk city schools, and a win for cleaner energy throughout the Northeast. We are glad it is now happening.”

Assemblyman Andrew W. Goodell, R-Jamestown, citing the plant’s long history of pollution problems from its coal-burning generators, captured the spirit of the audience when he said, “Thanks to the governor, there will be no coal in our stocking this year!”

According to the Governor’s Office, the repowered plant will expand from the current 75 megawatts of production to 435 megawatts and provide “critical local system reliability benefits for National Grid customers. The project will also help relieve transmission bottlenecks in the region and will reduce electricity supply costs to consumers.”

Previous estimates of more than $500 million for the facility included the cost of building an entirely new plant, according to the Governor’s Office. This plan instead converts its existing units, with NRG estimating its total 10-year investment at about $300 million in capital, taxes and operating expenses. National Grid has agreed to a $150 million deal for the energy; other energy markets reportedly will make up the difference.

Labor leaders, who were key in mobilizing turnout at PSC hearings and other rallies in the last year, also said they are pleased with the outcome. Applause for union leader David E. Wilkinson of Local 106, International Brotherhood of Electrical Workers, almost matched that for the governor.

James W. Murty, assistant business manager for Local 97, IBEW, which represents the power plant workers, said in a statement, “We are delighted to see this issue resolved in a way that preserves and grows jobs and the regional economy, while offering critical fuel diversity and system reliability. This is one of the first of many major chapters emerging from Gov. Cuomo’s Energy Highway Blueprint.”

At one point, it looked as though the weather would force the governor to make his announcement from afar.

City public works crews were battling snow since Wednesday when the area was pounded by a lake-effect storm and the mayor declared a state of emergency. Dolce said city crews focused their efforts on Route 5 around the hotel Sunday so the show could go on.

The Dunkirk mayor has high hopes for the new power facility. The city has a State University of New York campus building on Central Avenue where a high-tech business incubator has been operating in conjunction with Fredonia State College. Dunkirk also received more good news in the form of a state grant to help with the seawall-replacement project and new recreational facilities on its waterfront. In addition, the city will be participating in two regional grants that promote water distribution and tourism along Lake Erie.

“It really has been a great week for Dunkirk,” Dolce said.

News Albany Bureau Chief Tom Precious contributed to this report. email: mmiller@buffnews.com