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Source: The Buffalo News

Greenhouse gas initiative criticized

Officials say program endangers AES plant


Posted: August 17, 2011
Originally Published: August 17, 2011

SOMERSET — Local officials charged at a news conference Tuesday that New York’s participation in a plan to charge coal-fired power plants for their emissions is endangering the AES Corp. power plant on Lake Road.

That 675-megawatt coal-burning power plant employs 120 people. It’s the largest property taxpayer in Niagara County.

AES reported that the plant sank into the red in 2009. The company announced in February that it’s for sale.

The Niagara County Industrial Development Agency has granted the Somerset plant two tax breaks in the past four years to help keep it open.

Defenders of the Regional Greenhouse Gas Initiative to charge coal-fired plants for emissions attended the news conference in Town Hall.

“There’s no question AES [Somerset] is in trouble. RGGI isn’t the reason,” Brian P. Smith, communications and program director for Citizens Campaign for the Environment, insisted afterward.

The company’s 2011 annual report said the initiative doesn’t materially affect its overall financial results, but it could if the rules become harsher.

AES says the main problems for the coal-fired plants are the rising cost of coal, decreasing demand for power in New York and the plummeting cost of natural gas burned by its competitors.

The parent AES Corp., a multinational organization, reported net income of $910 million in the first six months of this year, up from $831 million in the same period in 2010.

The governors of 10 northeastern state agreed to the Regional Greenhouse Gas Initiative in 2005. It took effect in New York with a 2008 executive order by then-Gov. David A. Paterson.

Americans for Prosperity, a conservative group that backs the interests of energy producers, sent its New Jersey state director, Steve Lonegan, to speak at the news conference and at a public meeting Tuesday evening.

Along with Town Councilman Daniel Engert, Assemblyman Steven Hawley, R-Batavia, and State Sen. George D. Maziarz, R-Newfane, Lonegan touted a lawsuit attempting to overturn New York’s participation in the initiative.

It’s a cap-and-trade system, said Emily DeSantis of the state Department of Environmental Conservation.

Companies such as AES have to buy one allowance for every ton of carbon dioxide they want to emit into the atmosphere. The current auction price is $1.89 per ton; companies can buy and sell the credits among themselves.

Peter Bajc, AES Somerset president, said the local plant spent $10 million a year on such credits in the first two years of the program, which

correspond with the years AES Somerset has lost money.

Lonegan said the initiative is losing steam. New Jersey Gov. Chris Christie pulled his state out of it in May, and the New Hampshire State Legislature passed a withdrawal bill this year, although Gov. John Lynch vetoed it.

“The withdrawal of New Jersey from RGGI was a devastating blow. The withdrawal of New York would be a knockout punch,” Lonegan said.

But the big picture wasn’t on the minds of the local leaders or residents on hand Tuesday. They were thinking of AES’ prospects and the impact of the tax reduction designed to help keep it afloat.

James Hoffman of Somerset said, “My school taxes went up 23 percent because of that.”

AES still pays for nearly half of the Barker Central School budget, but in the plant’s glory days it paid almost 80 percent.

County Legislature Chairman William L. Ross said an AES shutdown would cost the county $5 million a year in revenue, equaling a county property tax increase of 7 to 8 percent.

AES’ payments to the school, town and county will total $14.3 million for 2011-12. The figure will be reduced to $12.8 million each of the three next years.

“AES? Exceptionally important, and we’re going to do everything we can on the county level to keep them,” Ross said.

Smith said, “We believe strongly that RGGI contributes to significant job growth, lower utility bills and reduced pollution.”

Asked about the alleged positive impacts, Lonegan said, “There haven’t been any. . . . Some well-meaning people may believe that.”

DeSantis said the investments of funds from the greenhouse gas payments in energy improvements have saved consumers across the state $2.7 million a year.