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Somerset power plant to be sold; seeks PILOT reduction

SOMERSET – The coal-burning Somerset Operating Co. power plant is to be sold to a New York City energy firm, and in the meantime, the current owners are seeking a reduction in the payments the plant makes to Niagara County, the Barker Central School District and the Town of Somerset.

However, Somerset Operating has applied to the Niagara County Industrial Development Agency for a further reduction in the payment-in-lieu-of-taxes, or PILOT, costs it faces. The current tab is $5.12 million a year, split among the county, town and school district. Three years ago, the figure was $14.3 million, and a decade ago, the power plant’s annual tax bill was well over $20 million.

Despite the major reductions, the plant is still Niagara County’s largest taxpayer. Now, the company wants a $500,000 cut in the PILOT payments, and IDA Chairman Henry M. Sloma said the taxing entities are on board with the idea.

“I don’t think anybody’s happy with this, but we’re responding to the wishes of the taxing jurisdictions,” Sloma said.

Coal plants have struggled as low-cost natural gas has undercut prices and new anti-pollution requirements have raised costs.

Barker School Superintendent Roger Klatt said, “The revenue, albeit reduced, is still a benefit to the district.” The school gets 59.25 percent of the money. The $4.62 million payment would be in effect for the next two school years and the 2017 and 2018 county and town taxes.

Somerset Supervisor Daniel M. Engert said that despite state and federal hostility to coal-burning power plants that has resulted in threatened shutdowns of plants in Tonawanda and Dunkirk, he thinks the Somerset plant and its 99 jobs can be saved. “Our goal has always been to be the last plant standing,” he said.

Klatt said he was told by the Somerset Operating management that the sale of the plant won’t close until February. The sale is not mentioned in the IDA application, which says the PILOT reduction is needed to keep the plant from closing or laying off workers.

The 201-megawatt plant, and a mothballed Cayuga County power plant owned by the same group of investors, is to be sold to Riesling Power LLC, a newly created entity controlled by Bicent Power, according to filings with the state Public Service Commission.

Engert said the actual operator and owner of the plant will be Beowulf Energy, a New York firm that specializes in acquiring energy infrastructure properties. Beowulf acquired Bicent in 2007, and the PSC filing says Bicent’s financing comes from a variety of investment firms.

The current owners of the Somerset plant are a group of bondholders who ended up with the Somerset and Cayuga plants in 2012 after the bankruptcy of AES Eastern Energy, the former owners. Somerset Operating was set up by the bondholders, who operate under the name of Upstate New York Power Producers. Its largest stockholders include the California Public Employees Retirement System and J.P. Morgan Investment Management.

Beowulf did not return a call seeking comment Friday, and neither did Jack White, the plant manager and president of Somerset Operating.

email: tprohaska@buffnews.com