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Owners of coal-fired Somerset power plant seek more tax breaks

The Somerset Operating Co. power plant wants a $1 million cut in how much it pays to local governments for its coal-fired power plant in the Town of Somerset on the shores of Lake Ontario.

A new payment-in-lieu-of-taxes arrangement, presented Wednesday to the Niagara County Industrial Development Agency, would reduce the plant's total bill to $3 million a year in 2019 and 2020. The company's current PILOT is $4.12 million.

The power plant's first PILOT, in 2006, was $17.3 million.

If the new PILOT is approved, the tax on the 675-megawatt plant would be 83 percent less than the 2006 amount. The NCIDA has steadily reduced the figure as the plant has been affected by declining electrical prices and the harsh regulatory climate for coal-fired plants.

"As we look at the broader picture of Somerset, will this plant even be here two years from now?" asked Joan G. Aul, an NCIDA board member and M&T Bank vice president.

The proposed PILOT arrangement was worked out in talks among the company, Niagara County, Town of Somerset and the Barker Central School District.

No one from the company was at the meeting, and a call to corporate headquarters seeking comment was not returned.

Somerset Supervisor Daniel M. Engert said so far as he knows, the plant has generated power for only 12 days this year, and that was in January.

The plant employs 78 people. It was purchased in 2016 by Somerset Operating Co., a wholly owned subsidiary of Riesling Power LLC. Riesling, in turn, is owned by Beowulf Energy of Easton, Md.

The PILOT payments would continue to be set up so that Barker schools receive 59.25 percent of the plant's payments, the county receives 31.5 percent and the town pockets 9.25 percent.

"If they're willing to pay taxes for the next two years, they must have something planned for the future," IDA Chairman Stephen F. Brady said. "The governor has made it pretty clear he wants coal out of the state's (power) mix sooner rather than later."

Engert said in an interview that the company told him it has applied to the state for permission to erect a 19-megawatt solar power project on some of the extensive unused land on the 1,800-acre site.

William L. Ross, former County Legislature chairman and an NCIDA member, said the plant itself was built to be convertible to natural gas.

"That would be the only way to save it," said Daryl Bodewes, another NCIDA member.

"It's right up to date. You can't compare it to Huntley (a coal-fired plant in the Town of Tonawanda) or any of these other antiquated plants," Ross said.

However, Engert said there is no natural gas pipeline near the Somerset plant.

"There was no plan submitted on how they plan to continue on," Barker School Superintendent Roger J. Klatt, who was in on the talks for the PILOT renewal, said in a telephone interview.

Klatt said Barker school taxes will show "a gradual increase" – less than 2 percent this year, as the district continues to adjust to the reduced power plant payments.

"We have reserves that were intended for this purpose, to mitigate any large spikes in the tax rate," Klatt said.

He said that reserve fund contains about $5 million; the district's budget is about $17 million.

The Barker Board of Education, the Somerset Town Board and the Niagara County Legislature will be asked to approve the new PILOT before the NCIDA board votes on it. Brady said he expects the NCIDA won't act until its Aug. 8 meeting.

If approved, the Somerset power plant would no longer be the largest property taxpayer in Niagara County, as it has been for decades. The reduction from the current $4.12 million a year to $3 million would put the plant behind National Grid in the tax rankings, county Real Property Tax Director John Shoemaker said.

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