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A cap on rates for electricity and the possible sale of the electric generating plant in Somerset are among the steps that New York State Electric and Gas Co. wants to take in order to meet a 1998 deadline for free-market competition among producers of electricity.

As part of the plan, NYSEG's 18,600 customers in Niagara County would be among the first who would be allowed to choose a different electric company starting Aug. 1, 1998. NYSEG customers in the City of Norwich in Chenango County also would be eligible to choose their electric company at that time.

The rest of NYSEG's customers would have the freedom to choose their electric company one year later -- on Aug. 1, 1999.

NYSEG has proposed those steps, as well as a corporate restructuring, in an effort to meet the deadline set by the state Public Service Commission for free-market competition in a field that heretofore has been dominated by virtual monopolies among the utilities.

Western New York NYSEG customers will have a chance to learn more about the company's plan at a public information session and hearing, scheduled for Tuesday evening in the Niagara County Courthouse, 175 Hawley St.

Tuesday's information session is scheduled to begin at 6 p.m. with the public hearing at 7:15 p.m.

"The idea is that customers will have more choices, and the cost of electricity will go down, to encourage economic growth and help residential customers with their electric bills," said Edward Collins, PSC spokesman in Albany.

The plan would freeze basic electric rates for residential and light commercial customers through Dec. 31, 2001, and would reduce the rate for those customers by 5 percent in 2002. Heavy commercial electricity users would see annual rate reductions of 5 percent in each of the next five years, through Dec. 31, 2002.

Average electricity rates for Niagara County customers are 13.8 cents per kilowatt hour for residential customers, 11.7 cents per kwh for commercial users, and about 8 cents per kwh for industrial users, according to NYSEG.

The plan would eliminate a 7 percent electric rate increase previously approved by the state Public Service Commission for NYSEG customers. Altogether, "we will forego $725 million in electric revenues to help reduce the price of electricity," said Wes von Schack, NYSEG chairman, president and CEO.

The NYSEG plan is the company's attempt to meet the state Public Service Commission's vision of free-market competition among electricity producers by 1998, agreed on by commission members last year, Collins said.

It was developed by NYSEG, state Public Service Department staff, the New York Power Authority, New York State Department of Economic Development, National Association of Energy Services Companies and a pro-competition coalition of energy companies and customers after NYSEG submitted its own plan earlier this year.

The company has not calculated the cost of implementing this latest plan, said Clay Ellis, NYSEG spokesman. To meet the cost, "we're just going to have to do all that we can to decrease costs and to increase sales," he said.

Some of the costs will likely be absorbed through an auction of NYSEG's seven coal-fired electricity generating stations, including the Kintigh Plant in Somerset and its 18 percent interest in the Nine Mile Point 2 nuclear generating station.

According to a press release, NYSEG plans to bid on some or all of the coal-fired plants. Niagara Mohawk Power Co., the largest co-tenant and operator of Nine Mile 2, is considered a likely buyer of NYSEG's interest in that plant, according to NYSEG officials.

The company would be restructured under a new holding company, von Schack said, with three subsidiaries handling electric and natural gas delivery, power generation and energy services.

"The holding company structure is necessary for organizational flexibility in order to meet the demands of the competitive marketplace," he said.

Ellis said Friday he did not want to speculate on whether the plan would force layoffs of NYSEG employees. NYSEG has about 4,000 employees in New York State, including 160 at the Kintigh plant, 90 at its Lockport division and 240 at its Lancaster division and service center.

"The Lockport public hearing on NYSEG's plan will be followed by hearings in Plattsburgh, Johnson City and Auburn. The five-member Public Service Commission is expected to make a decision on the plan some time after the last hearing, scheduled for Nov. 13 in Auburn but before the end of the year.

Written comments may be submitted at any of the hearings or mailed to: John Crary, Secretary, New York State Public Service Commission, Three Empire State Plaza, Albany, N.Y. 12223.

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