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DEEPER CUTS IN CONSUMER ELECTRIC RATES ARE UP TO ALBANY

So now we know what we've suspected for a long time: The restructuring of the state's electric industry won't put more than a few extra dollars in our pockets.

For you and me, the reshaping of the state's utilities and the opening of New York's monopoly electric markets to competition really is shaping up as much ado about very little.

Instead, the really, really big savings -- in the vicinity of 25 or 26 percent -- will go to the commercial and industrial companies that use the most electricity in the territory served by Niagara Mohawk Power Corp.

If you get your electricity from New York State Electric & Gas Corp., it's pretty much the same story. A few bucks in savings for residential customers once the year 2002 rolls around and a 5 percent rate reduction kicks in, by which time big industrial and commercial users will be paying 25 percent less.

The reason: Those big users merit preferential treatment because they consume so much electricity and have the added option of either buying their power from another supplier, such as an independent power producer, or of moving to another part of the country where power costs are much, much cheaper. Niagara Mohawk's industrial rates are 30 percent to 40 percent above the national average.

In addition, the thinking is that giving big power users the largest rate cuts is New York's best chance for giving its lackluster economy a spark, rather than spreading the savings evenly, which would trim Niagara Mohawk's rates by about 5 percent for everyone.

"It will keep jobs in the area and hopefully create new jobs and keep the economy moving," says Kerry P. Burns, a Niagara Mohawk spokeswoman.

And while Gov. Pataki last week said he'd like to see even greater savings for residents in the Niagara Mohawk plan, utility executives say they can't come up with deeper cuts for the little guy without help from Albany.

"The money that's there is the money that's there," says Gerald E. Putnam, NYSEG's senior vice president for economic development and public policy. "There is no more."

If residential and small business customers are going to save significant amounts of money, those price cuts will have to come from a couple of other unsettled areas that could lower costs, but will require difficult negotiations or support from the governor and State Legislature.

Both NiMo and NYSEG say they could cut rates further if the Legislature passes long-stalled legislation that would allow utilities to issue a new type of bonds to recover some of their investments that
were made with the blessing of regulators under monopoly conditions but would not be viable in a competitive market. Because those bonds would be backed by revenue generated by special charges paid by customers, the companies would be able to save hundreds of millions of dollars in interest costs.

Both NiMo and NYSEG estimate that residential rates could fall by another 6 percent if they were able to "securitize" those stranded costs, including expenses associated with buying out costly independent power producer contracts.

Niagara Mohawk already has a deal to buy out more than 80 percent of its independent power producer contracts that force the company to buy their power for more than the current market value. But NYSEG remains saddled with a contracts that are costing it an extra $240 million a year, Putnam says.

One of the most costly contracts for NYSEG ratepayers is with Lockport Energy Associates, which runs the co-generation plant that supplies the Delphi Harrison Thermal Systems plant in Lockport. By buying out that contract and other uncompetitive independent power producer obligations, Putnam says, NYSEG could cut rates by as much as 9 percent in a best-case scenario. More likely, the savings would be less.

"I think they're going to increase the rate reduction for the residential customers," says Ashok Gupta, senior energy economist at the Natural Resources Defense Council. "People can squeeze and be creative to find something to get there, especially if it's in year four or five."

That's what happened with Consolidated Edison's restructuring plan, which initially called for a 3 percent residential rate cut, only to have it boosted to 10 percent in the wake of political pressure.

But Ms. Burns says Niagara Mohawk isn't Con Ed, which is in better financial shape that the Syracuse-based company and also charges higher rates. Even under Niagara Mohawk's restructuring plan, the company still says it expects to lose nearly $40 million between 1998 and 2000, including a projected loss of $32 million in 1999. NiMo doesn't expect to be profitable again until 2001.

In addition, the 17 percent reduction in the sky-high rates charged by Long Island Lighting Co. is the result of a politically motivated $6.1 billion state bailout that lets the utility pawn off its 18 percent stake in the costly and uncompetitive Nine Mile Point 2 nuclear power plant to a state agency, the Long Island Power Authority. No such deal is in the works for NYSEG's 18 percent stake in the nuclear plant, or Niagara Mohawk's 41 percent interest.

"We definitely think there's more that needs to be done," Ms. Burns says. "We really believe the State Legislature holds the purse strings on this."

Famous Footwear opens in Eastern Hills Mall

Famous Footwear, the country's largest retailer of branded family footwear has opened a new store in the Eastern Hills Mall in Clarence.

The new 4,500-square-foot store, which employs eight people, offers everyday low pricing on brand name athletic, dress and casual shoes for the entire family from such manufacturers as Buster Brown, Connie, Dexter, Keds, Naturalizer, Nike, Reebok, Nunn Bush, Rockport, Timberland and Westies.

Based in Madison, Wis., Famous Footwear operates 805 stores, including a total of five stores in the Buffalo market.

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