Thursday, December 30, 2010

Who Can You Trust?????????

Many of you know of the AES Somerset coal fired electric power plant in the northeast corner of Niagara county right on Lake Ontario as seen in the above photo. This is a large operation, 675 Mw, 1800 acre site, serving 650K homes, state of the art pollution equipped (their words) and they employ about 120+ people, many union. Somerset began operating in 1984 and in 1999 AES purchased six power plants in New York (including the Somerset station) from NGE Generation, Inc. for $953 million. A 15.9-mile long railroad line was built for delivery of coal to the plant and there’s a single smoke stack nearly 300 feet tall there. There is a PILOT (payment in lieu of taxes) agreement between the power plant and the Barker school system, the town of Somerset and county of Niagara so you know that this operation is presently getting a very huge break on taxes since being built. A couple of years ago the plant proposed building a pier 3200’ into the lake for 750’ long freighters to deliver coal and limestone to the plant. This was a $25M plan, called LUP (lake unloading project) that never was built. The plant is now considering selling off 178 acres of land to Verizon for a multi-billion dollar data center.

About Nov 5, 2010 something strange happened. AES Corp. temporarily stopped producing electricity at its coal-fired Somerset plant on Lake Road. Meanwhile, the company also withdrew its request for an increased tax break from the Niagara County Industrial Development Agency, although that may only be temporary. The plant was temporarily taken off-line for economic reasons, AES plant manager Peter Bajc said in an e-mail to The Buffalo News. According to the letter AES sent the IDA with its application for a revised tax deal, the AES company had placed two other coal-burning power plants in New York in "protective lay-up" in September because they were losing money. Not only that – the AES Dresden, NY coal fired plant electric plant near Seneca Lake is also scheduled to be mothballed in 2011.

According to the Lockport newspaper - AES Somerset went back on line about Dec 1 after the coal-burning power plant on Lake Road was down 24 days. This article stated in part:

“The plant is in start-up today,” Plant General Manager Peter Bajc said. “During the time we were down, the Somerset people remained on the job.”

AES is asking the Niagara County Industrial Development Agency to amend the payment-in-lieu-of-taxes agreement it has with the Town of Somerset, Barker School District and Niagara County. According to Bajc, AES Somerset needs its annual PILOT payment reduced to $9.8 million from $15.8 million in order to stay competitive – a whopping 48% decrease!

But wait a minute – maybe what was decided less than a year should be reviewed.

In January 11, 2010 article the Tonawanda News reported in part –


AES Eastern Energy has agreed to pay $15.8 million in taxes (PILOT) annually for five years, and there will be no further litigation between AES and the municipalities.

(Barker) School Superintendent Roger Klatt noted that the PILOT provides revenue certainty through 2016 at a time when state aid to education is unclear.

AES has no incentive to get out of it early, according to (Somerset town supervisor) Meyers. The PILOT can be adjusted in five years and because of the uncertainty in the coal industry, the PILOT can be negotiated again.

The newspaper article also reported that AES is the “county’s largest taxpayer”.

One wonders what school Superintendent Klatt would say today about the PILOT revenue certainty or what Somerset Supervisor Meyers would say about AES now attempting (renege?) to get out of their agreement of less that a year ago?

Now all this is interesting to the wind turbine foes as why would anyone possibly consider spending $1.5B in a 166 turbine, 500 Mw offshore wind facility (now proposed by the New York Power Authority known as the GLOW project – Great Lakes Offshore Wind) that would risk selling electricity for several times per kilowatt hour MORE than that produced by an upstate lake shore coal plant – if the coal fired AES plant can’t produce power for a profit in today’s market place? Or would AES’ recent temporary plant closure simply be an intimidating action by AES to get their PILOT agreements reduced? Could the Niagara Co. IDA be foolish enough to fall for this ruse? If there’s not enough demand for a coal fired electricity plant - then why build a $1.5B offshore wind powered electric plant? The truth is there is no need for an offshore wind powered plant. There is no need for additional expensive electricity generated by wind. NYPA’s spokesperson Sharon Laudisi appeared before the Niagara Co. legislature in Sept. 2010 hinting that electric power produced by a GLOW project could sell for an outrageous $.40/kilowatt hour! Who needs this?

We wonder if anyone’s even thought about what may happen if the NYPA GLOW project gets located offshore from Niagara County and all wind generated expensive power will be bought via NYPA’s power purchase agreement hence more expensive, low quality, intermittent electric may be unloaded on NYPA ratepayers against their will. The forcing of offshore wind generated electric may trump lesser expensive coal fired electricity and plants like Somerset would be forever less in demand and hence shuttered permanently like others even though it’s a relatively new plant. And the worst news – Niagara county, the town of Somerset and Barker school district – whose budgets are heavily depending upon the AES PILOT agreement that could soon be reduced may be faced with yet another demand from AES to lower the agreement terms again (lower than $9.8M) after a wind farm is located offshore from Niagara County! In the meantime this desirable 1800-acre AES lakeshore site could have been used to develop a great housing project of beautiful deluxe homes that would have produced enormous amounts of 100% value tax revenue forever for the county, school district and town without the ugliness, pollution and downside of what’s there now. What’s the likelihood that the Somerset plant would ever be razed for a super-housing complex in our lifetime? And if a NYPA supported GLOW project is ever developed in Lake Ontario, a spoiler, you can bet there won’t be any PILOT agreement for the town, school district or county. And the way things are now going – don’t be surprised to see both projects haunting Niagara County in the future. A wind farm could permanently close AES and what might that do to the PILOT agreement? Would a wind farm in Niagara County bring in the amount of taxes that the AES PILOT now produces? Of course not. Would a wind farm cause further havoc with AES (and Niagara Co. IDA) and result in an even smaller AES PILOT in the near future? You bet it would. There will be no PILOT agreement with any offshore wind farm development.


  1. What a great post. I'll have to keep an eye out on this blog. There is NO WAY this plant couldn't be competitive. It would have to be more competitive than any wind installation, that's for sure. The bigger problem with the wind is, you'll still need this coal plant to feed the grid when the wind doesn't blow...

    Wind is a scam and on it's last leg. The trick is to keep your lake free of these monstrosities (and your electric bill from skyrocketing) before Big Wind breathes its last breath.

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