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Every day, a small charge of the Niagara River's cheap power hurries along transmission lines on a long journey to the Pascoag Fire District, a small rural utility in the northwest corner of Rhode Island. For the 5,000 people and businesses in the district, a former textile center fallen on hard times, Niagara's power is a godsend. "To be very candid," said Ted Garille, the fire district's general manager, "without (cheap electricity), it's lock the doors and shut out the lights for us. It's that crucial." Even larger chunks of cheap Niagara power head west to Ohio, south to Pennsylvania and east to New Jersey, Connecticut, Massachusetts and Vermont. Federal law sends 10 percent of Niagara's power, some of the cheapest electricity in the nation, to seven customers in seven states outside New York. The sale of Niagara's power to out-of-state customers is just one piece of a puzzle that, when fully assembled, seems to shortchange the region. A Buffalo News study revealed the following: About 15 percent of Niagara's power goes to private utilities serving upstate homeowners, but the benefit to Western New York is minimal. It amounts to a $2-a-month savings for the average residential customer in the region.
Niagara generates twice as much power as any other facility in the New York
Power Authority system, and also produces more revenue and profits. The Niagara Project will increase its output by 15 percent as part of a $300 million modernization, but the authority is balking at setting aside that power for Western New York. Local politicians want to keep the "loose juice" here.
Niagara County shortchanged
Not enough. "It's tragic," says Carol Smootz, a Washington, D.C., lawyer representing a coalition of Niagara County municipalities and school districts. "It's almost criminal, in my mind, how little the community benefits." No one disputes that Niagara County is underpaid for what it provides -- acres of tax-free, prime waterfront land, host to a massive generating plant and the biggest moneymaker in the Power Authority system. The question of what the county deserves and who pays for it is at the core of a contentious and possibly destructive argument over the future of Niagara's power. "We host it; we're responsible for its existence," said Assemblyman Robert A. Daly, R-Niagara Falls. "Our community deserves more." Power Authority officials are reluctant to talk about the 2007 relicensing this far in advance, but Eugene W. Zeltmann, president and chief operating officer of the authority, warned in April about asking for too much. Zeltmann said the authority recognizes its relationship with the community at both the Niagara and St. Lawrence power projects and continues to help them both. Besides sending one-third of Niagara's power to local industry, the authority has financed parks, built a bridge at Goat Island, constructed 10 miles of the Robert Moses State Parkway and donates electricity to the annual Festival of Lights. For Zeltmann, there's a risk in the authority's trying to do too much. "There are some local interests," he said, "who view the relicensing process as nothing more than a chance to reap significant financial benefits from the Power Authority at the expense of both our customers and other authority obligations." It's a careful balancing act, a task complicated by laws and contracts that tie the authority's hands.
Power to Rhode Island
Good question, and Garille, general manager of the Pascoag Fire District, understands why Niagara County residents might be upset. "It is a New York plant," Garille said, referring to Niagara, "although you are using federal waters. Yes, I've heard the arguments. They present a very strong argument." But as the only remaining municipal utility on Rhode Island, one that began in 1887, Pascoag feels it has as much right as anyone to a share of Niagara's power. "This is a very depressed area," Garille said, one that never really recovered once the Army stopped buying woolen blankets after World War II and Pascoag's mills shut down. U.S. Sen. Charles E. Schumer says Western New York has its own economic problems, and he wants to revise the federal rules that ship Niagara power out of state. Under federal regulations, 10 percent of the local power leaves the state because the Niagara River is an international waterway and federal money helped build the Niagara Power Project. Additional Niagara power would help one of the nation's weakest job growth rates, Schumer said. And he called it irrational public policy that New York was forced to buy additional power last year to meet rising demand while selling Niagara power out of state. "The proposed sale of power from the Niagara Power Project is not in the best interests of the people of Buffalo and Niagara Falls or the state of New York," Schumer said in testimony submitted to the Power Authority. "I strongly urge you to reject this sale." Schumer will introduce legislation dropping those requirements, but members of Congress from other states already have gone on record as opposing any cutbacks. New York could get a shock if power allocations are changed, as Schumer wants, says Clarence "Rapp" Rappleyea, chairman of the Power Authority. "I'm obviously concerned you could open up a whole new world," he said. "Seven states now are getting power. Other states along the Great Lakes may want it. There may be a whole raft of people looking to grab this power." But Louis Ciminelli, Western New York's only representative on the authority, says go for it. "New York State is the Empire State," said Ciminelli, a Buffalo businessman who expects to play a key role in relicensing. "We should have some clout on this issue." Garille, in Rhode Island, believes he has reached a compromise with Schumer to exempt small allocations like the one Pascoag receives. "This power from the New York Power Authority is gold," he said. "No question about it."
'Loose juice'
A new multimillion-dollar upgrade of Niagara's 13 generators will result in increased production, about 325,000 kilowatts of new power. It's called "loose juice," or power that falls outside the authority's existing allocations and contracts. Assemblyman Brian M. Higgins, D-Buffalo, says Niagara's new capacity is big enough to create 3,250 jobs. Higgins wants to keep that power in Western New York and use it for economic development. "We as a community must stand up and demand that power stay here," he said. "Think of what it could do. It puts Western New York back in the ballgame in terms of attracting new companies." Higgins' campaign has gained an important ally in Ciminelli, one of five Power Authority board members. Like Higgins, he wants to use Niagara's new power to create jobs. "I'd love to see 100 percent of the expanded capacity stay in New York State and be used to create wealth in jobs here in Western New York," Ciminelli said. The authority, at this point, is hesitant. Rappleyea says the new power is available only during peak generating periods and cannot be set aside for particular companies. "You'll have peaking power," he said. "There's a misconception you'll have more power all the time. It won't be that way." Right now, the authority's plan is to distribute the new power, when it's available, to the state power grid for use across New York.
Niagara subsidizes others
State auditors, as part of a 1996 review, said the facility was so profitable, the authority used it to subsidize its money-losing operations, most of them located downstate. The Power Authority, according to the state comptroller's office, understated Niagara's profits while also understating the losses at the authority's nuclear and fossil fuel plants. Auditors criticized the authority for transferring "support power" from Niagara to other plants, then selling the power and wrongly crediting those sales to the plant that sold it, not Niagara. "The lion's share of the authority's profit is from Niagara," said Kerin Dumphrey, business manager for the Niagara-Wheatfield Central School District. "What have we gotten in return?" The authority says the audit is outdated and political, the product of a Democrat who yearns for higher office. Comptroller H. Carl McCall is viewed as a possible challenger to Gov. George E. Pataki. Rappleyea says the authority is taking steps to improve its bottom line, most notably by selling its two biggest money-losers, the Fitzpatrick and Indian Point 3 nuclear plants. "I think it's slightly overblown," Rappleyea said of the subsidy claim. "The comptroller's audit was only a snapshot in time." By selling its nuclear plants, the authority hopes to address another constant criticism -- complaints that it is overstaffed and its payroll is bloated. "When we sell our nuclear plants, we will cut our staff literally in half," said authority spokesman Ira Fine. The authority expects to keep about 1,700 workers, but a similar number will be let go. Fine said the nuclear plants require some of the authority's highest-paid employees -- 105 staff members made more than $100,000 in 1998 -- and that the sales will reduce the high end of the payroll. The sales to Entergy Corp. of New Orleans will bring the Power Authority $967 million -- a record sale for the nuclear industry. The deal is awaiting approval by the federal government. "We intend to use the proceeds to pay down our debt, to keep our remaining generation and transmission facilities in top-flight condition and to expand our activities in a number of vital areas," said Zeltmann, the authority's CEO.
Political juice
Critics think the authority should continue selling assets, maybe even go out of business. Why, in a time of deregulation of the electric industry, say private utilities, should the state be involved in power generation at all? The power authority produces between one-quarter and one-third of the state's electricity at its hydropower plants in Lewiston and Massena, the nuclear plants that are nearly sold, and eight fossil fuel plants. It also owns 1,400 miles of high-voltage transmission lines. The plants also produce political juice. The Democratically controlled Assembly passed a bill last year to take a hard look at the future role of the Power Authority. But Republicans killed the bill in the Senate. With Pataki controlling the authority board, and his administration gaining the political clout from thousands of jobs created through cheap electricity -- as well as the high-paying authority jobs -- that's not likely to change. So those looking for change see their best chance in Niagara's relicensing.
Remedies debated
The remedies being debated range from a larger jolt of cheap power for the region to some type of cash assistance, a trust fund or payment in lieu of taxes. As always, there's a balancing act. How do you fairly compensate the region without raising the cost of power for employers and risking layoffs and plant closings? Plant managers, chief executives and labor leaders worry that the politics of relicensing -- the fight over what Niagara County should get -- may turn ugly and drag on for years. "We're already hearing of big investments being put on hold," said Kevin Donovan, chairman of the Western New York AFL-CIO Economic Development Group. Donovan preaches collaboration and cooperation. He says the risk is losing out on a huge expansion, such as the $501 million engine line General Motors Corp. is considering for its Town of Tonawanda plant. For that reason, he and others like the trust fund idea. Daly went so far as to suggest it be funded with profits from the two nuclear plant sales or with a small surcharge on municipal customers. What Daly, Donovan and others want more than anything is to avoid a huge political fight as part of relicensing. They don't want the same kind of delays they've seen with other public-sector projects. "If we don't do this right, we'll end up with a Peace Bridge but no Power Authority," Daly said. "We get one shot at this. We need to be as unified and cohesive as possible."
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