Bill aims to tap hydro profits
Higgins targets funds for local projects
Profits at the state hydropower complex in Lewiston surged to $205 million last year, providing the State Power Authority with nearly 70 percent of its profits and triggering a move by U. S. Rep. Brian Higgins to wrestle a share of the money to fund infrastructure improvements in Western New York.
Higgins, a Buffalo Democrat, signaled he is prepared to do battle with the Power Authority in much the same way he did in 2005, when he led the successful fight for more money from the state to fund local projects as a part of a deal to extend the authority’s federal license to operate the Niagara Power Project.
“The filing of legislation is a good way of bringing this issue to a head. Let the fight begin,” Higgins said.
Richard Kessel, Power Authority president, said he agrees in principle with Higgins’ push to devote more of the authority’s resources to Western New York, although he may have different ideas on how to move forward.
“He thinks NYPA has not done enough, and I tend to agree,” Kessel said.
Profits at the Niagara Power Project, one of the nation’s largest hydropower producers, have risen dramatically in recent years, and jumped by another 28 percent last year. That enabled the authority to post a record $298.5 million profit last year, even after making a $119 million “voluntary contribution” to state government to help balance the budget.
The Niagara Power Project has long been the authority’s biggest profit center and never more than last year, although none of the revenue flows directly back to Western New York.
The project produces about half the power generated at authority- operated plants across the state. Revenues increased last year in part because of a spike in energy prices, which allowed the authority to sell a portion of the plant’s production for more than in previous years.
While more than 90 percent of the electricity generated at the plant is sold for a little above cost, the balance is sold at market rates, which last year averaged about six times what it cost to produce.
This pool of power has grown in recent years because a significant portion of electricity set aside for industries in Erie and Niagara counties has gone unused.
Virtually all of the power had been sold at a deep discount to local industry until the early part of this decade, when several major customers closed or scaled back operations.
The amount of unused power peaked at 20.9 percent of the pool in 2006 and dipped to 17.2 percent a year ago. It since has climbed to 19.4 percent and is expected to jump to 21.2 percent next month when Arcelor- Mittal, a successor to Bethlehem Steel that is one of the authority’s largest customers, closes its Lackawanna plant.
This unused power fetched the authority an estimated $161 million from 2005 through 2008, including about $45 million last year.
The authority has retained the earnings, but Higgins is readying legislation that would require it to turn over future proceeds to a locally controlled economic development corporation that would use the money to fund infrastructure work and capital improvements for public facilities in Erie and Niagara counties.
He says he wants to see the money invested in “roads, bridges, cobblestone streets, capital improvements to the Olmsted Parks system, the cleanup of brownfields. When you think of that we could accomplish with the money, this is very, very significant.”
The Higgins bill would amend the 1957 federal law that granted the Power Authority the right to build and operate the Niagara Power Project and prescribed how most of the hydropower generated at the complex is allocated.
The law set aside 695 megawatts of power — about a third of the complex’s generation capacity — for industry within 30 miles of the facility. Higgins argues that any proceeds from the sale of any of that power should remain within Erie and Niagara counties.
“The law of 1957 and everything that has happened subsequent to that says this 695 megawatts belongs in Western New York,” Higgins said. “Then so does the money.”
The Higgins bill would establish a five-member development corporation board, with members appointed by the governor, the mayors of Buffalo and Niagara Falls, the Erie County executive and the chairman of the Niagara County Legislature.
Niagara Falls Mayor Paul A. Dyster expressed strong support for the Higgins proposal.
“If that power is sold, the benefit should stay in the region,” he said.
How much money the development corporation would have to work with is subject to several variables, including the amount of unused power that would be available for sale and the price it could fetch on the open market.
The market rate for electricity in Western New York is about half of what it was last year, when prices reached record levels over the summer. The Buffalo News estimates this year’s proceeds at $25 million to $30 million. If prices returned to historical levels, the annual range would be $30 million to $40 million, based on the current amount of power that is sold at market rate.
Higgins said he believes the authority is underreporting the amount of unused power it is selling and the profits it generates. He says he believes a third of the power is being sold and estimates the proceeds at $63 million annually.
“While the New York Power Authority reaps hundreds of millions in profits on the backs of Western New Yorkers from the Niagara Power Project, we’re bleeding jobs,” Higgins said. “One way out of this is to enhance those things we have that can help us realize economic self-sufficiency and independence.”
Kessel said he wants the authority to focus first on redoubling efforts to allocate unused power to local industries. He said he also wants to explore dedicating more than 695 megawatts of power produced at the Lewiston complex to local business.
“I have a team looking at how we can get those megawatts out to business in Western New York,” he said.
“Traditionally, NYPA has held on to more money and megawatts that I believe should be redistributed.”
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