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County eyes tying AES tax to price of electricity

Future property tax payments for the AES Corp. power plant may be tied to the market price of electricity.

Henry M. Sloma, chairman of the Niagara County Industrial Development Agency, said Tuesday that the county has made an offer to AES that would reduce the company's payments less than AES had requested.

But it also would include a clause that would adjust the payments if the wholesale price of electricity goes up or down substantially.

AES is the largest taxpayer in Niagara County. Under terms of a deal made in February, it pays a total of $15.8 million per year to the Town of Somerset, the county and the Barker School District.

"If there is a reduction, it will be short-term, and a market index will be used to determine when to reopen [the deal]," Barker School Superintendent Roger J. Klatt said.

AES Somerset President Peter Bajc said he discussed the concept with Sloma last week and is open to it.

"The reopener could work both ways," Bajc said. If the price of power rises, AES would agree to pay more, but if the electricity price falls, AES would pay less to the taxing entities.

Sloma has said the IDA won't schedule a public hearing on a new payment-in-lieu-of-taxes, or PILOT, arrangement until AES and the three taxing jurisdictions work out its terms.

That hasn't happened yet, but Sloma said he became involved in the talks "reluctantly" out of concern that AES was in financial trouble.

"I testified in court [in a lawsuit over AES' original PILOT] that we didn't want to be in business with this company or any company, but it winds up that we are. The prices drive their viability one way or another," Sloma said.

In its application to the IDA for further tax relief, AES said it is in financial trouble because electricity prices are falling at the same time the price of the coal it burns to produce electricity is rising.

Also, the company was concerned about the cost of new state and federal regulations on coal-fired power plants.

Bajc said the Somerset plant has to pay $10 million a year in a new "carbon dioxide tax," officially called the Regional Greenhouse Gas Initiative charge.

He said the company also fears it will have to spend as much as $139 million to comply with new environmental regulations.

AES applied for a reduction in its total PILOT payment from $15.8 million this year to $12.8 million in 2012 and $9.8 million a year in 2013, 2014 and 2015.

Sloma said the taxing entities' counteroffer was $14.3 million in 2012 and $12.8 million a year from 2013 through 2015.

"The net change would be about $10 million over the term of the PILOT," Sloma said. AES had sought to save $21 million. Bajc said the amounts are still being negotiated.

Under the terms of the existing deal, the school district collects 59.25 percent of the AES payment, or $9.36 million a year, which is nearly half of the Barker school budget.

The February deal gave Somerset $1.46 million per year and the county $4.97 million.


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