Low-Cost Electric Deals OK'd for WNY Companies

September 29, 2010 Updated Sep 29, 2010 at 9:13 AM EDT

By David Bertola (Business First of Buffalo)

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Low-Cost Electric Deals OK'd for WNY Companies

September 29, 2010 Updated Sep 29, 2010 at 9:13 AM EDT

BUFFALO, NY (WKBW) - The New York Power Authority has approved proposed long-term contract extensions for the continued sale of low-cost hydropower from the Niagara Power Project to 106 area businesses in a variety of industries.

The contract extensions run from 2013 to 2020 for nearly all the companies, and contain new provisions for maximizing the value of the hydropower for the region's economy in support of jobs, capital investments and tax revenues. The contracts have been forwarded to Gov. David Paterson for his approval.

NYPA President and Chief Executive Officer Richard Kessel said that the extensions include higher minimum job thresholds and, for the first time, annual capital investment commitments over the lifetime of the contracts. The business customers will have to meet at least 90 percent of their job commitments and undertake capital investments totaling approximately $150 million a year in their Western New York facilities over the seven-year contract term, or more than $1 billion.

The Power Authority can reduce a company's allocation if it doesn't meet its job and annual capital investment commitments.

The proposed contracts stemmed from a process the Power Authority initiated early last year with the Niagara project's business customers, who sought long-term hydropower supply commitments beyond the terms of current contracts that expire on Dec. 31, 2012 and June 30, 2013. The companies employ nearly 30,000 people and have an annual payroll of approximately $2 billion.

On July 15, the business customers, union and area officials and others voiced strong support of the contract extensions at a public hearing held by NYPA at the Niagara project's visitors center in Lewiston.

Two of the 106 customers would be offered contract extensions of 15 years, to 2028, based on their commitments to make exceptionally large capital investments in their facilities. Steuben Foods, which currently employs nearly 500 people, is prepared to make a $52 million investment for expanding its food-processing facility in Elma. That could create as many as 150 new jobs.

General Motors, the other company that would receive a 15-year contract, has committed to invest $825 million at its Tonawanda Engine Plant to produce a new line of fuel-efficient engines. This will bring hundreds of jobs back to the facility and ensure its long-term viability.

Niagara project hydropower is provided to Western New York companies under state law from two power programs - Replacement Power and Expansion Power. These blocks of power are reserved for businesses within a 30-mile radius of the Niagara project or for businesses in Chautauqua County. The statutory criteria for allocations are identical for the two programs, centering on bringing about new jobs and capital investments.

Replacement and Expansion Power jointly account for about one-third of the Niagara project's firm generating output.

The power has been provided to businesses at rates typically 75 percent less than the average wholesale market prices in the state. More than 70 percent of Western New York's manufacturing jobs benefit from the low-cost power, which continues to be a driving force for creating new jobs.

During the past two years, NYPA has made new hydro allocations for creating and protecting nearly 2,300 jobs in the region, including those to high-tech and clean energy companies such as Yahoo! In Lockport, Precision Electro Minerals in Niagara Falls and EnRG in Buffalo.

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