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Huntley picked for state's new clean-coal power plant But Town of Tonawanda project will proceed only if the $1.5 billion price tag is reduced

The Huntley Station in the Town of Tonawanda won conditional backing Tuesday from the New York Power Authority for its plan to build a new clean-coal power plant -- but only if the project's $1.5 billion price tag comes down or new sources of funding are found.

The designation was a partial victory for the Huntley Station and its owner, NRG Energy, which emerged as the winner among five contenders statewide for the state's nod to develop the clean coal power plant.

It also was a defeat for AES Corp.'s Somerset plant in Barker. AES had proposed a $1.2 billion project to add 675 megawatts of additional generating capacity to the Niagara County facility.

But the Huntley project will go forward only if the cost of the project can be reduced over the next 18 months to make the electricity it produces cheap enough to be competitive economically.

"At this time, it is not," said Timothy S. Carey, the Power Authority's president and chief executive officer, in a memo to the group's trustees. "The price of NRG's proposal was too high to be workably competitive for NYPA."

Power Authority officials did not say how much additional funding, or cost reductions, was needed. NRG executives could not be reached to comment.

The new plant, originally expected to begin operating in 2013, would create more than 1,000 construction jobs and about 100 permanent full-time jobs.

Beyond pushing back the timetable for the project, the Power Authority's decision also means that the final selection now will be made during the term of Gov.-elect Eliot L. Spitzer, who takes office next month.

Gov. George E. Pataki is expected to come to Western New York today to discuss the decision; a spokesman on Tuesday declined to comment on the authority's decision.

"Whenever there's lingering uncertainty, it's a cause for concern," said Andrew Rudnick, president of the Buffalo Niagara Partnership.

Local political and business officials who supported the NRG proposal said the decision, while short of the complete victory they had hoped for, still was a significant advance in the efforts to secure future operations at the Huntley Station.

Without the project, the Huntley Station -- long cited as one of the nation's dirtiest by environmentalists -- likely would face future job cuts as older generating units are shut down to reduce pollution.

"I think it's a major step in stabilizing the future of the plant," said Town of Tonawanda Supervisor Ronald H. Moline.

"I'm not too concerned about the use of the word 'conditional,' " he said. "Obviously, power costs have to be controlled, and I'm sure they will be."

The Power Authority selected the plan to build a 680-megawatt clean coal power plant at the Huntley Station over a pair of competing proposals from AES Corp. at its Somerset plant in Barker and at a closed coal plant in Bainbridge in Chenango County.

AES executives and supporters were disappointed by the decision.

"We remain convinced that our proposals offered the best technology and the best opportunity" to build a clean-coal plant with the ability to capture carbon dioxide emissions when a system to store the gas is developed sometime in the future, said Peter Norgeot, the president of AES Eastern Energy.

Niagara County already had granted the AES plant tax breaks in an attempt to make the site more attractive.

The power authority picked the Huntley Station because its staff believed that the technology the project would use offered the highest efficiency and lowest emissions of the competing proposals. The authority also believes that the Huntley site was the most likely to receive all the needed permits in a timely manner.

But the big question hanging over the Huntley proposal was its cost, prompting concerns from the Power Authority staff that the high price would make the electricity the new plant generates too expensive for the current market.

Awarding NRG a long-term contract for the Power Authority to buy the power produced by the new plant -- a key element in obtaining essential financing for the project -- "is not prudently achievable given the gap between the bids and the expected price in the current market environment," Carey said in the memo.

Rather than rejecting all of the bids, Carey recommended that the Power Authority work with NRG to try to find ways to reduce the project's cost or obtain new funding. Those efforts could include, on the state and federal level, obtaining additional tax credits or tax-exempt financing. Grants from private organizations also are a possible source of additional funding.

"We just need to keep up the pressure" to help bring in additional funding for the project," said State Sen. Mary Lou Rath, R-Williamsville. "This project, from my understanding, rose to the top because of the science behind it."

Spitzer apparently supports the concept of such a power plant, if his stump speeches are any indication. In his main environmental address during the campaign, Spitzer talked of a state energy plan he began promoting in 2000 that included retooling existing power plants to run on cleaner burning fuels.

Spitzer also has an interest in the Huntley facility. In January 2005, he and Pataki announced a deal with coal-burning plants to reduce emissions and focus on cleaner-burning technologies; that deal helped lead to the plan to build a new plant at Huntley.

The Huntley proposal would use a process using heat and pressure to convert coal into combustible gas. The gas then is cleaned to remove sulfur and other contaminants before it is burned in a turbine, which then spins a generator.

The AES proposal would have used a pulverized-coal generating system that operates at higher temperatures and pressures than conventional units.

Norgeot declined to comment on the fate of the AES project in Somerset without the lucrative incentives that the state was offering, although he noted that the long-term power purchase agreement from the Power Authority was a key element in financing the project.

"We'll have to let time tell," he said.

The winning bidder will be in line for incentives, including Empire Zone benefits, up to $1 billion in tax-exempt financing and, depending on the site, tax credits for brownfield cleanup. The state also has pledged to invest $50 million for a system to capture and store carbon dioxide produced at the plant, once a workable technology is developed.

Staff Reporter Tom Precious contributed to this report.


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