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AES Corp. defends PILOT pact at Somerset power plant Firm says tax breaks will aid future projects

AES Corp. executives defended the company's payment-in-lieu-of-taxes (PILOT) agreement at its Somerset coal-burning power plant, arguing that the tax savings are essential for potential expansion projects at the Niagara County site, including a wind farm or a port project.

The PILOT agreement approved in late October between AES and the Niagara County Industrial Development Agency has come under fire from taxpayers since the energy firm lost its bid last month to build a $1.2 billion clean coal power plant on the site.

The 12-year agreement, which will gradually reduce AES's tax payments to $15.8 million in 2013 from $17.3 million last year, will save the company an estimated $40 million. Local governments and schools would receive $192 million in tax payments during the term of the agreement.

Jon Reimann, AES' project manager, said the agreement gives the power plant the stable tax expenses it needs to move forward with other significant capital projects. Those projects include a possible wind farm on the 1,800-acre site and a $20 million port project that would give AES and other local companies an alternative to rail transportation for their raw materials.

"We need the certainty to move forward," Reimann said during a meeting with editors and reporters at The Buffalo News. "We believe it's in the interest of all the stakeholders in Niagara County."

Without the PILOT agreement, Reimann said the wind farm and the port projects would not be viable. "The new coal project was one of the projects in the pipeline of business development projects," he said.

New Somerset Supervisor Richard J. Meyers called for negotiations with AES to freeze the assessed valuation of the AES plant, rather than the PILOT agreement. Kevin D. Pierce, AES Somerset's president, said freezing the plant's valuation would not prevent the company's tax payments from increasing.

AES officials also said a ruling last month that granted power producer Mirant Corp. a $163 million tax refund on its payments from 1995-2003 at its Lovett and Bowline power plants in New York and a reduction of unpaid taxes from 2003-2006 at those downstate sites could potentially have an impact on the Somerset plant's valuation without the PILOT.


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