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New 50-year License for Niagara Power Project, Now Effective, Signifies Substantial New Benefits for Region

Michael Saltzman

September 6, 2007


LEWISTON—The new federal operating license for the New York Power Authority’s (NYPA) Niagara Power Project here went into effect on Saturday, Sept. 1, officially marking the start of a new era for the storied hydroelectric project, with more than $1 billion in financial support and other benefits forthcoming for Western New York over the 50-year term of the new license, in addition to the project providing some of the least-cost and cleanest electricity in the country.  

“The Niagara Power Project has always stood out as an engineering marvel in its harnessing of the U.S. share of Niagara River waters to produce below-market-priced electricity for various categories of customers, including manufacturers and other businesses employing a large segment of the Buffalo-Niagara region’s workforce,” said Frank S. McCullough Jr., NYPA chairman. “The project has been integrally tied to Western New York’s economy from when it first began operating in February 1961 and is sure to continue in that role for decades to come thanks to the new license and a recently completed upgrade to replace turbines and other key equipment.”

Some 44,000 jobs are linked to allocations of Niagara power, provided at rates approximately 75 percent less than the average wholesale market prices in New York State. Factoring in the multiplier effect of those allocations beyond the businesses receiving the power, the project is directly or indirectly tied to nearly $16 billion in gross regional product.  

“Niagara’s importance to Western New York is undeniable and will remain so thanks to the measures undertaken by NYPA for the project’s effective long-term operation,” said Roger B. Kelley, NYPA president and chief executive officer. “But the new license means considerably more than low-cost power, under six settlement agreements with the communities encompassing the boundaries of the project and other key area stakeholders. Substantial financial commitments for capital projects, infrastructure, economic development, the environment, recreational facilities and various other enhancements are included in those agreements.” 

Kelley noted that benefits materialized even before the Sept. 1 start of the new license, with December 2005 payments of $8 million and $5 million, to the Niagara Power Coalition, comprised of the seven host communities within the project’s boundaries, and to the Tuscarora Nation, respectively, under two settlement agreements that year. More recently, NYPA made two upfront payments, totaling $4 million, to the Erie Canal Harbor Development Corp.—one this summer—for Buffalo waterfront development. The payments symbolized a long-term financial commitment under a 2006 settlement agreement that also included funding for the Niagara River Greenway, for which NYPA will provide a total of $9 million a year under separate funds for greenway development in Erie and Niagara counties.    

Another commitment coming into force was the activation of contracts on Sept. 1 for providing hydropower to the host communities, and to the Tuscarora Nation and Niagara University, which are situated adjacent to the project. The nine contracts alone, totaling 32 megawatts (mw) of power, are expected to provide hundreds of millions of dollars in savings for those entities over the 50-year term of the new license.   

More than 100 stakeholders, including state and federal resource agencies, local municipalities, customers, and environmental groups, participated in an Alternative Licensing Process that NYPA adopted in 2002, after the approval of the Federal Energy Regulatory Commission (FERC), the regulatory organization responsible for licensing the nation’s non-federal hydroelectric projects. The alternative approach provided for greater participation by key parties in Western New York from the beginning of the process, differing from the traditional regulatory approach, where the involvement of interested parties is very limited and doesn’t come until after submittal of the license application. 

NYPA undertook more than 40 studies reflecting the input of the stakeholders in identifying environmental, socioeconomic, cultural and land-management issues. Their influence also extended to the license application and Applicant-Prepared Environmental Assessment submitted to FERC on Aug. 18, 2005. Those documents were in addition to four of six settlement agreements NYPA provided the commission the following day, with the remaining two submitted as supplements, in May and June of 2006. 

On March 15, 2007, FERC approved the new operating license, five months before the August 31 expiration of the original license, issued by the commission’s predecessor agency in January 1958. FERC could have decided on 30- or 40-year terms for the new license, but chose the longest duration allowed under the law, 50 years, based on the extensive environmental mitigation and enhancement measures, provided for in NYPA’s application and supporting documents. These include: 

--Creation of a $12 million fund for construction of eight Habitat Improvement Projects (HIPs) at designated areas outside the Niagara project’s boundaries, to protect fish and wildlife within the Niagara River basin. NYPA agreed to provide another $1 million annually for additional HIPs, to be identified by an Ecological Standing Committee comprised of representatives of key local and state organizations.  

--Capital Improvements to enhance public access to the river in the area of the project, including additional parking for anglers and others. 

--Improvements to recreational facilities operated by the New York State Office of Parks, Recreation and Historic Preservation within or in the vicinity of the project boundary, supported by a nearly $9.3 million fund NYPA established for this purpose. 

--A $19 million fund to address the project’s impact on groundwater flow. The fund will be administered by the Niagara Falls Water Board and provide for enhancements to the city’s Falls Street Tunnel, as well as any future repairs or maintenance related to the capital improvements. 

While many of the additional commitments NYPA made under settlement agreements, with such parties as the Niagara Power Coalition, Niagara University, and Erie County and Buffalo, were not required for obtaining the new operating license, they were vital for building consensus for the project’s relicensing. The Power Authority recognized its obligation to use the relicensing process as an opportunity to identify measures for enhancing the quality of life in Western New York beyond what the Niagara project does in providing some of the lowest-cost electricity in the country.  That said, it also needed to make certain that its relicensing commitments did not eat into the low electric rates.  

“Since much of Niagara’s power, under federal and state law, is sold at cost, and relicensing expenses are part of the cost of the project, we had to be watchful of the impact new commitments would make on the rates for which the power is sold, and not undermine the project’s significance for Niagara Frontier businesses,” said Chairman McCullough. “After all, allocations from the facility have long been synonymous with supporting the successful operation of the region’s most important manufacturers. Balancing these two competing considerations—our obligation to give back to area communities and maintaining the project’s low rates—was the fundamental challenge of the relicensing process, and one we successfully met.”  

Indeed, on May 22, Chairman McCullough and the other members of the NYPA Board of Trustees affirmed this by authorizing the acceptance of the new license, capping off the Alternative Licensing Process begun nearly five years earlier. 

“No doubt this has been a time consuming and exhaustive process for which we devoted considerable staff time and resources, in evaluating the Niagara project’s role in Western New York and ensuring the facility continues to provide tremendous value for region and the entire state,” said NYPA President Kelley. “Now the focus of our relicensing efforts shifts to the wide-ranging commitments under the settlement agreements, so there is still plenty of hard work ahead.” 

Besides the relicensing benefits, Western New York will also be well served by the Power Authority’s completion last December of a 15-year program to upgrade the Niagara project, whose firm and peaking capacity was increased by a total of 41 megawatts (mw), to 2,441 mw.  The $300 million upgrade included replacement of turbines and retrofitting of other components of all 13 generating units at the Robert Moses Niagara Power Plant, the project’s main generating facility. The work was designed to both improve the plant’s efficiency and to carry out repairs that would have been required in any case to ensure effective long-term operation.

In addition to the upgrade at the Moses plant, the Power Authority last year completed a $24 million maintenance program at the Niagara project’s Lewiston Pump-Generating Plant, which supplements the Moses plant’s output in peak-demand periods.                                                           

To be sure, the New York Power Authority’s Niagara Power Project is firmly established for the future, with its new 50-year license and last year’s completion of the major upgrade and maintenance programs. The ambitious initiatives leading to these milestones are now part of the splendid record of accomplishment that has long set the project apart.  

  About NYPA:

 ■    NYPA uses no tax money or state credit.  It finances its operations through the sale of bonds and revenues earned in large part through sales of electricity.  ■    NYPA is a leader in promoting energy-efficiency, new energy technologies and electric transportation initiatives.  ■    It is the nation’s largest state-owned electric utility, with 18 generating facilities in various parts of the state and more than 1,400 circuit-miles of transmission lines.

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