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NIMO DEAL FAVORS BUSINESS

Big industrial users, not residential customers, will receive the lion's share of rate cuts under a deal announced Friday between Niagara Mohawk and state regulators.

The agreement, part of a sweeping plan to reorganize the utility and end its monopoly on the upstate energy market, would reduce residential electricity bills -- as well as those for small- and medium-sized businesses -- by about 3 percent over the next three years. But the monthly base rate -- charged to every residence before even a light is turned on -- would nearly double to $17.

In the end, the bill of a typical residential customer would drop by a couple of dollars a month, though some smaller users -- such as people living in small apartments -- will face rate increases.

Rates for large industrial users, such as manufacturing plants, will drop about 25 percent over three years.

Environmentalists denounced the deal, saying it retreats from requirements that Niagara Mohawk encourage energy efficiency. It also fails to meet demands by some environmental groups to clean up the company's older coal-burning plants, such as those in the Town of Tonawanda and Dunkirk, that emit more pollution than newer facilities. The agreement, these groups maintain, will boost use of less costly -- though dirtier-to-produce -- electricity.

Some consumer representatives blasted the deal and the administration of Gov. Pataki for giving a financial boon to big corporations at the expense of residential and small business customers. But the utility defended the deep rate breaks for big corporate clients.

"Industrial customers will see the largest decreases to protect and create jobs in upstate New York. It is critical that we encourage large employers to stay in our region and that we attract more quality jobs for upstate residents," said William E. Davis, Niagara Mohawk chairman.

Davis estimated the cuts will save 6,000 jobs, a number critics dismissed as bloated.

The deal, reached after months of closed-door talks involving the utility, the staff of the state Public Service Commission and groups representing various customers, still needs the approval of the commission's full board.

Besides shifting rates, the pact would alter Niagara Mohawk's corporate structure dramatically. It would sell off its non-nuclear plants, ending much of its business of generating electricity. Although it would retain its nuclear plants, the company would concentrate on distribution and service.

The agreement resembles deals made with other utilities across the state as part of a movement to introduce competition into the energy industry. Under Friday's proposal, upstate energy consumers would be able to begin choosing their own electricity companies -- as they do long-distance telephone carriers -- by December 1999.

Only broad outlines of the plan were distributed Friday in a four-page news release.

"Releasing it Friday evening on a holiday weekend indicates to me how consumers are regarded," said Assemblyman Paul Tonko, D-Amsterdam, and chairman of the Assembly Energy Committee. "It doesn't even begin to address an energy price crisis faced by New York residences and small- and medium-sized businesses. This just represents a very hurtful and neglectful process on behalf of the ratepayer."

Pataki's office did not return calls for comment, and offices of the Public Service Commission were closed Friday evening.

"The most powerful lobby group has received a sweetheart deal that only could have been arranged behind closed doors absent the public view," said Robert Ceisler, executive director of the Citizens Utility Board, a residential ratepayers group. "For this utility to sign an agreement that gives windfall benefits to certain customers and sticks it to others is reprehensible."

Ceisler said allowing Niagara Mohawk's monthly base rate nearly to double will give the company a much steadier form of revenue to compete against rivals who might want to enter the state energy market.

"It's a gift to the existing monopoly," he said, adding other companies might need decades to be able to compete against Niagara Mohawk if the rate plan is approved.

Stephen F. Brady, Niagara Mohawk spokesman, said big industrial users have been subsidizing residential customers for years.

"This is the beginning of trying to shift away from that," he said. He added that the deal is "purely intended to keep jobs in New York State." Retaining manufacturers, the utility claimed, helps keep energy rates down for all its customer classes.

Environmentalists weren't happy Friday evening. They say the plan, by sharply cutting rates for manufacturers, will lead to higher consumption of energy and, consequently, more pollution. While the Niagara Mohawk news release is vague on environmental matters, sources close to the talks said the deal calls for the utility to spend $15 million per year over the next three years on energy conservation programs. That would constitute a reduction from about $40 million three years ago.

Brady, for his part, described conservation programs as expensive, adding, "you do reach a point of critical mass."

Sources, meanwhile, said the deal calls for a 10 megawatt wind project -- about one quarter of 1 percent of Niagara Mohawk's total energy output. The utility also would give environmental groups so-called pollution credits allotted to it by the federal government.

"The settlement is inadequate from an environmental perspective," said Walter Simpson, a representative of the Sierra Club of Western New York. He criticized its failure to clean up the utility's old coal plants and dismissed as inadequate its plans for boosting production of alternative, cleaner energy sources.

"We need to get away from the dirty old ways of the past and the way the PSC has structured this deal, it's not going to do that," said Peter Iwanowicz of Environmental Advocates, an Albany environmental lobby group.

Niagara Mohawk defended the plan, saying that whoever ends up owning the company's coal plants will have to meet new, stricter anti-smog standards planned by Washington.

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