Niagara power profits flow downstate

Audits show revenue subsidizes N.Y. City housing, subways, generators

By DOUGLAS TURNER
News Washington Bureau Chief
8/21/2005
WASHINGTON - The State Power Authority has sent hundreds of millions of dollars in profits over the last decade - mainly from its hydropower plants in Lewiston - to New York City to subsidize housing, subways and money-losing generators, audits by two state comptrollers show.

Yet the authority insists it can't give Buffalo or Erie County any more money when it renews a 50-year lease on the Niagara Power Project without raising local utility fees.

The authority wants to renew its license to run the Power Project through 2057. To get that federal approval, it is required to provide compensation to Erie and Niagara County.

In its renewal application, the authority has offered Niagara County entities more than $1.1 billion, but its first and final offer to Buffalo and Erie County stands at $100 million, or $2 million a year for the next 50 years.

Audits by state comptroller Alan Hevesi and former state comptroller H. Carl McCall show huge profits from the Lewiston plants and, to a lesser degree, from its St. Lawrence River dam going to New York City.

The audits show a large portion of the annual profits from the big upstate hydro plants - more than a half billion dollars - go to:

• The 2,694 buildings of the New York City Housing Authority, providing shelter for 417,000 residents.

• The Metropolitan Transportation Authority, which runs the city's subways, seven bridges, two tunnels and hundreds of miles of commuter railroads stretching from Patterson, N.J., out to Long Island, and to New Haven, Conn.

• Offset annual operating losses at the authority's nuclear and fossil fuel plants.

Hevesi also said the authority is using its profits to make up for $265 million in cost overruns at its new natural gas-powered station in Queens County.

The comptroller called the Queens project a calamity the authority could have avoided by letting a private power company, such as Consolidated Edison, build it.

Profits also have helped balance the authority's books when it lost $175 million in its "Power Now" program, which involves construction of a number of small generating stations, Hevesi's 2004 audit said.

McCall's audit from 2001 reached a similar conclusion.

"It is clear that the net operating revenue generated by the Niagara and St. Lawrence plants" has been used and will continue to be used by the authority to offset the agency's massive losses at its nuclear, fossil fuel and small hydro plants, McCall said then.

The authority denied Hevesi's observations that the authority subsidizes New York's housing and transportation systems. The authority also objected to the audit in a statement to The Buffalo News.

"There is no hydro subsidy built into NYPA's downstate government rates," authority spokesman Michael Saltzman said.

Yet an earlier audit by McCall reached the same conclusion as Hevesi's staff that the Power Authority was subsidizing the New York City housing and transportation ventures.

Neither the Hevesi nor McCall audit states the amount that the Power Authority subsidizes New York City's city's housing and commuter transportation programs. The subsides come in the form of low utility costs.

Power Authority officials refused to allow the auditors to interview its trustees, and the most recent financial plan the authority released was 3 years old.

Rep. Brian M. Higgins said industrial power customers in the Buffalo Niagara region need to understand these downstate subsidies to put into perspective the authority's threats to raise rates if the congressman gets what he is seeking in compensation for Buffalo and Erie County.

The Buffalo Democrat has proposed the authority allocate $1 billion over the next half century to restore the lakefronts of Buffalo, Lackawanna and other municipalities that were abandoned by the authority's former industrial customers such as Bethlehem Steel.

Higgins is seeking $10 million a year combined for Buffalo and Erie County. That would be indexed at a 3 percent annual inflator, which brings the total to $1 billion by 2057.

The $10 million is $8 million a year more than what the authority has offered. Higgins said the authority "has been bullying these industrial customers, and threatening residential customers as well" as the time drew near for the authority's formal application to the Federal Energy Regulatory Commission for a new 50-year license.

Higgins intends to use the comptrollers' audits to buttress his efforts for more compensation for Buffalo and Erie County.

An act of Congress originally gave the Power Authority a 50-year license for the Niagara Power project in 1957, and the Power Authority last week filed to renew the license.

Approval of the new license can come from either the commission or Congress.

The Power Authority hopes to bypass the congressional approval by getting a local "consensus" to support its proposed new license, and the commission has the power to decide if a consensus exists.

Higgins is taking two steps to win more compensation for Buffalo and Erie County.

He said he will file as an "intervenor" against the renewal application, basically objecting to the consensus.

In addition, he has filed a renewal bill in Congress that includes greater compensation for Buffalo and Erie County.

Higgins' staff has reached out to Sens. Charles E. Schumer and Hillary Rodham Clinton, D-N.Y., and Rep. Louise M. Slaughter, D-Fairport, for support for that bill, but they so far have refrained from endorsing it.

Bureau assistant Patti Truant contributed to this article.


e-mail: dturner@buffnews.com

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