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Generating profits Niagara plant a huge moneymaker, but region sees little of the payoff

The janitors and clerks earn an average of $52,000 a year, laborers and security guards $57,000, trade apprentices $65,000.

And that's the cheap help at the New York Power Authority, a Buffalo News investigation has found.

The authority's 1,600 employees earned an average of more than $82,000 in 2005. One in five made more than $100,000. Executives make $200,000-plus.

And the Power Authority's largess doesn't stop with paychecks.

It doles out a lot of gadgets and gizmos to employees: some 245 cell phones, 274 Blackberries, 303 laptops and 720 credit cards -- most of the white-collar staff.

The authority owns its own plane, which is sometimes used like an airborne taxi.

And, in addition to a staff of 15 lawyers who earned an average of about $133,000, the authority spent a lot on outside attorneys in 2005.

Some $17,200.

Per business day.

How does the authority pay for all this?

In large part because of huge profits generated at the Niagara Power Project in Lewiston.

The plant has long been a big money maker for the authority -- its Golden Goose -- and never more profitable than the past two years, when it cleared a third of a billion dollars.

But Western New York -- where residents pay electric rates 50 percent higher than the national average -- sees little of those proceeds beyond the wages and benefits paid to employees at the power plant. In fact, a study commissioned by the authority found 86 percent of the plant's economic benefit leaves the area.

Niagara profits, The News found, help underwrite a gold-plated bureaucracy and help finance money-losing operations in and around New York City.

They also subsidize electric bills of businesses statewide, most of them operating outside the Buffalo Niagara region. The authority also engages in pork barrel spending that often has thinly veiled political overtones.

"It's disgusting the way the community's resources are being exploited by the power brokers in Albany. They're profiting from their revenue. What about us? We're getting squat," said Doug Taylor, a North Tonawanda business owner who has studied the authority's finances and been active in a coalition involved in the relicensing of the Lewiston plant.

The authority's top fiscal official disputes the notion that the authority is unfairly exploiting the Niagara facility or the region, noting that state law treats the plant as a state, not local, asset.

"The Niagara facility is the largest revenue producer for the authority -- there's no disputing that. But there are significant benefits provided to both residential and individual users, in that they receive power at cost from that facility," said Joseph M. Del Sindaco, executive vice president and chief financial officer.

The News, working with a certified public accountant, reviewed financial documents obtained under the state Freedom of Information Law and audits conducted of authority operations by the state comptroller and interviewed authority and union officials and others familiar with authority spending practices.

Among the News' findings:

* The Niagara plant has long been a key profit center for the authority, and net revenue has been on the upswing the past several years. The plant cleared $166 million in 2005 and $165 million last year.

* The authority has a history of redirecting billions of dollars from the Lewiston and Massena hydropower plants to downstate to help subsidize money-losing plants, sell electricity at a loss to governments in and around New York City and build power plants involving huge cost overruns.

* Niagara profits are a primary source of $219 million in "voluntary contributions" made to state government over the years, particularly from 2003 to 2005. The bulk of the funds benefit a jobs program that primarily helps companies in Central and downstate New York.

* Authority staff are well compensated. One in five employees earn over $100,000. Costly electronic gizmos are widely issued, and the authority has a big travel budget used to operate a plane and book commercial flights, often at higher-than-average costs.

"The Niagara Power Project is being used to subsidize the waste and abuse of the New York Power Authority," said Rep. Brian Higgins, the Buffalo Democrat who is a critic of the authority.

>Plant profits

The authority is the largest publicly owned utility in the nation and one of the five largest of the state's 258 authorities. Its generation plants provide the state a quarter of its electricity. The authority also operates more than 1,400 miles of transmission lines.

The Niagara plant generated 56 percent of the electricity produced by the authority and 41 percent of its profits in 2005. A hydropower plant in Massena accounted for most of the rest: 28 percent of the power and 22 percent of the profits.

Niagara's profits over the past decade total $715 million.

In reality, the Niagara and Massena hydroplants were even more profitable. In 2005, the authority assessed the Lewiston plant $26 million to help cover authoritywide administrative overhead of $97.2 million. Absent that charge, the Lewiston plant's profits would have been $192 million.

These profits from the Niagara and Massena plants allow the authority to live large, starting with its sprawling, costly bureaucracy.

The News looked at job titles with 10 or more employees for the 2005 fiscal year and found the authority's 15 lawyers enjoyed the highest average pay, $133,450.

Others with top salaries include authority senior engineers, who earned an average $112,449, and journeymen operators, who control power generation at plants and earned an average of $100,252.

While authority salaries may appear high compared with others in state government, they're in line with private utilities that the authority competes with for talent, said Vincent C. Vesce, executive vice president for corporate services and administration.

"We are in a very competitive field and have to make sure we have the type of people who are competent and technically up to speed," he said.

Many jobs that do not require high-end skills, however, such as secretaries, laborers and janitors, security guards and clerks, also pay in excess of $50,000.

Authority wages, particularly for lower-skilled employees, are "outrageous," said Taylor.

"They're about double what we pay in Western New York for the same kind of work," he said.

Another reason employees made so much is that more than half of them earn overtime, most in substantial amounts.

Six hundred earned more than $2,500 a year in OT, including 262 who picked up more than $10,000. And that wasn't the ceiling: 87 made more than $20,000 in overtime, topped by a control operator who picked up $51,693 in OT.

Vesce attributed much of the overtime to work to upgrade hydropower plants in Lewiston and Massena.

"Those capital programs have ended up requiring some substantial overtime," he said.

The authority's generosity doesn't stop with the pay and perks. Benefits also are rich.

About 40 percent of authority employees are represented by two unions, the Utility Workers Union of America and the International Brotherhood of Electrical Workers. Their contracts are similar, although not identical.

Union employees receive a state pension, and departing employees, union and otherwise, can cash out up to 20 weeks of unused sick time, depending on the union.

>Local benefits

Non-union staff, primarily based out of White Plains, pay 30 percent of health insurance premiums. Employees represented by the utility union downstate, working under an expired contract, do not pay toward health, dental, vision, hearing, life and disability insurance.

Those represented by the IBEW will began kicking in money starting this year -- $600 for the year. Employees who opt for more-costly coverage provided by HMOs -- most workers, IBEW officials said -- pay the difference.

Retirees enjoy lifetime health insurance at no cost, and the authority also covers a portion of Medicare Part B premiums.

Both contracts prohibit layoffs except under unusual circumstances, such as the sale of a generating plant.

They also mandate the authority to pay for the meals of many field and generation plant employees who work more than two hours overtime after a 10-hour shift. When it's not practical to provide a meal, employees represented by the IBEW get a $23 allowance.

Depending on their union, employees get 11 or 14 paid holidays, in addition to vacation. IBEW members not only get off Christmas, but Christmas Eve; New Year's Day and New Year's Eve; and both Thanksgiving and the day after.

IBEW officials who represent employees at upstate plants and transmission facilities say their contracts are reasonable.

"I don't believe at all that it's too generous. It's a fair wage, it's a living wage," said Dean Walker, president and business manager of IBEW Local 2104, which represents workers at the Lewiston plant.

Some of the Niagara plant's revenues stay in the community, starting with the wages of about 290 employees, who earned an average of $77,600 a year.

In addition, the authority over the years has contributed millions of dollars to Niagara County interests, including its long-standing support of the defunct Festival of Lights.

While some of these contributions have been modest -- $50,000 toward high-tech equipment for the Upper Mountain Fire Company -- there have been major investments. The authority gave $730,000 to upgrade the Artpark hiking trail; $2.1 million to improve the Town of Lewiston water system.

On a grander scale, the authority gave Niagara County $5 million in 1990 to establish a loan program to promote economic development. It spent another $5 million to upgrade the observation tower overlooking Niagara Falls.

In some cases, the funds were outright contributions. In other instances, they represented money that might otherwise have come from state government. And in other instances, the money came with strings attached, intended to help the authority politically.

For example, in 1999, the authority gave the Niagara Falls School Board $7.1 million to renovate adjacent recreational facilities, including Sal Maglie Stadium.

But the authority made the deal conditional on the School Board's supporting its efforts to obtain a 50-year extension of its federal license to operate the Lewiston plant.

Beyond these grants, organizations in Niagara and Erie counties have received a little less than 20 percent of $1 million the authority spends each year for "community contributions."

Even with expenditures in the Buffalo Niagara region, however, a 2001 study commissioned by the authority found that only 14 percent of the plant's economic benefit remains in Western New York. Most of the money flows to the authority and out-of-town shareholders of companies that receive replacement and expansion power.

>Losses downstate

A series of critical audits by the state comptroller detail Niagara profits subsidizing operations downstate. These audits, which have sometimes prompted vigorous challenges from authority officials, show a diversion of profits from hydropower plants to downstate government customers and to bail out the construction of generation plants in New York City.

In one audit the comptroller concluded about $2 billion in profits from the Niagara and Massena plants, along with the earnings from investments, were used to cover $1.1 billion in losses from 1987 to 1994 at nuclear plants, transmission operations and the sale of power to government customers in and around New York City.

Those losses have continued, totaling $252 million from 2001 to 2005, including $116 million in 2005.

The problem: The price of oil and natural gas, which fuel the authority's major power plants in New York City, skyrocketed because of Hurricanes Katrina and Rita, and the authority had no ability to raise prices in order to pass the cost along to its government customers.

The contract with government customers, including City Hall and the transit and public housing authorities, has been changed so that "increases will be passed along to customers. The losses we experienced in 2005 and 2006 will not recur," Del Sindaco said.

Further losses, however, were found in another audit, the result of what the comptroller said were dubious decisions to build a replacement facility for the Poletti power plant in Queens and 11 smaller gas-fired plants designed to provide electricity during high-demand times.

The Poletti plant wound up costing twice its projected price -- $740 million. The smaller plants lost $175 million during their first two years of operation, although the losses have since been sharply curtailed.

>Money to state

"Voluntary contributions," mandated by the governor and State Legislature, represent another way that Niagara profits are sent to other parts of the state.

During Mario Cuomo's final term as governor, the authority "voluntarily" contributed $47 million to the state treasury. It has transferred money to the state treasury in 10 of former Gov. George E. Pataki's 12 years in office. The amount soared in his final term: totaling $170 million from 2003 to 2005.

That coincided with a push by Pataki and the Legislature for the authority to pick up the tab for the Power For Jobs program, which exempts companies from paying the gross receipts tax on their electric bill.

The program was started in 1997 and was supposed to end in 2000, but lawmakers continue to extend it. In the process, they have required the authority to reimburse the state for an increasing share of lost tax revenue, now 100 percent.
The program involved 599 companies as of a year ago, including 89 from Erie and Niagara counties, whose allocation of discounted power accounted to 12 percent of the statewide total.

Power For Jobs is now slated to end this June, but the authority as it now stands remains on the hook for another contribution of $175 million.

While Niagara power isn't the sole source of funding for the voluntary contributions, the Power Authority acknowledges the plant's profits do go a long way.

"A measurable portion of the net revenues have been used to fund the voluntary contribution," Del Sindaco said.

Higgins sees the program as further evidence that too much of Niagara's profits are leaving town.

"The profits and cheap power from Niagara should stay in the region," he said. "Sadly, they have been hijacked by the State Power Authority to finance an elaborate system of cronyism, waste and abuse."

e-mail: jheaney@buffnews.com

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SUNDAY: Where the power goes

Most hydropower remaining here goes to a handful of companies that enjoy millions in discounts regardless of the economic benefit. Residential customers, meanwhile, pay rates 50 percent higher than the national average.

TODAY: Where the money goes

The Niagara plant cleared $331 million the past two years, but little of it remains here. The Power Authority uses it to underwrite a goldplated bureaucracy and programs that primarily benefit downstate interests.

TUESDAY: Lost opportunity

The community's leadership mishandled a once-in-a-lifetime opportunity to capitalize on the Niagara plant's potential to help the region. Plus the financial and environmental cost of hosting the facility.

ON THE WEB AT BUFFALONEWS.COM/POWERFAILURE

Blog: Post your comments on "Power Failure" blog.

Documents: Expanded listing of authority payroll and community contributions.

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