The coal-fired Huntley Station power plant in the Town of Tonawanda is losing money and is at risk of being shut down, a new report commissioned by an environmental group warned Tuesday.
The report, commissioned by the Clean Air Coalition of Western New York and prepared by an Ohio energy consulting firm that wants to reduce the nation’s dependence on electricity generated from coal, estimated that the Huntley plant has lost money during three of the past five years and said those losses are likely to widen in the future as coal prices rise and natural gas prices remain low.
In addition, flat demand for electricity, caused by a combination of a still-sluggish economy and improving energy efficiency, is putting further pressure on Huntley, which is owned by New Jersey-based NRG Energy.
The plant also is being squeezed as more renewable power sources, such as wind and solar, comes into operation and more generating capacity is added locally that runs on cheaper natural gas, including a coal-fired plant in Dunkirk owned by NRG that the company plans to convert into a 430-megawatt gas-fired plant.
“The Huntley plant does not appear to be financially viable and is at risk for retirement,” the report warned.
David Gaier, an NRG spokesman, declined to discuss the report’s financial estimates about the Huntley Station. “I can’t confirm or support any numbers or conclusions,” he said. “We agree that coal-fired plants are under pressure at a time of all-time low natural gas prices.”
But Gaier also said NRG believes coal-fired power plants can play an important role in the nation’s electricity supply, especially by providing a proven and reliable source of energy in a power market that is becoming more heavily dependent on natural gas.
With Huntley’s future in doubt, the report also warned that local towns and school districts that depend on the power plant for $6 million a year in tax revenue, begin planning for the day when those payments stop.
The plant currently pays about $3 million annually to the Kenmore-Town of Tonawanda school district, accounting for about 3 percent of its spending. The plant also paid $2 million to the Town of Tonawanda, equal to about 2 percent of the town’s budget, and $1 million to Erie County under a payment-in-lieu-of-taxes agreement that runs through 2030.
It also puts the future of the estimated 100 people who work at the plant in jeopardy, the report warned.
“The economics of the Huntley plant just don’t add up,” said Erin Heaney, the Clean Air Coalition’s executive director. “It’s time for everyone to come to the table to preserve workers’ jobs, preserve the environment and generate sufficient tax revenue for the region.”
The Clean Air Coalition has long supported efforts to reduce air pollution, especially in the Town of Tonawanda. The Ohio research firm lists its mission as “to accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce dependence on coal and other non-renewable energy resources.”
“It sounds like they’ve got a little bias to begin with,” said Town of Tonawanda Supervisor Anthony Caruana.
NRG officials in 2012 proposed converting the Huntley plant to run on natural gas as part of Gov. Andrew M. Cuomo’s “energy highway” initiative, but the plan was not accepted by state energy officials. “As far as we know it was not considered,” Gaier said.
The report said the Huntley plant is being hit by a “perfect storm” of conditions that have led to the retirement of more than 13,000-megawatts of coal-fired generating capacity across the country since 2008 and helped drive the Somerset power plant in Barker into bankruptcy at the end of 2011.
The report, prepared by the Institute for Energy Economics and Financial Analysis in Cleveland, estimated that the Huntley plant has been generating cash operating losses of about $1 million a year in both 2011 and 2012, even without including additional costs such as property tax payments that total nearly $16 million annually and interest expenses.
It predicted that Huntley’s cash operating losses would grow to more than $3 million in 2015 and top $6 million annually by 2015, assuming the plant continues to run at its current capacity and its coal costs keep rising at the 7 percent annual pace that they have for the past five years.
For starters, wholesale power prices in Western New York, which have dropped by 36 percent since 2008 as natural gas costs have plunged and demand weakened, also are putting a strain on Huntley’s finances by reducing the price that Huntley can command for the electricity that it generates.
Putting further pressure on Huntley is the glut of generating capacity in Western New York, which is more than adequate to absorb the mothballing of Huntley’s 436 megawatts of capacity. The $150 million conversion of the Dunkirk plant to natural gas will potentially add to the region’s glut of generating capacity by increasing the Chautauqua County generating station’s maximum output from the current 75 megawatts to 435 megawatts by the fall of next year.
As it is, the region has been meeting its electricity needs over the past two years with Huntley operating at only a fraction of its capacity. The plant, which had been running at 60 percent to 65 percent of its capacity from 2005 to 2008, ran at just 19 percent of its capacity in 2012 and 28 percent of capacity during the first 10 months of last year, the report said.
Heaney said the environmental group plans to host a series of community meetings to discuss ways to ease the transition for both workers and local governments and schools during the first two weeks of March.
“We’re hoping everyone can pull together,” she said. “We need to make sure the region has a plan.”
Town of Tonawanda officials noted that the report used outdated tax payment figures from 2012, which did not reflect a reduction in the plant’s payments under its PILOT agreement that has since taken effect. Those payments are less than half of the roughly $14 million a year that NRG paid before the agreement took effect.
“We’ve been adjusting for the last four or five years,” Caruana said of the tax payment agreement that was negotiated in 2008 but did not take effect until the payment that NRG made early last year. The Huntley plant still is among the town’s five biggest taxpayers.
“Losing them would be significant, but you can’t really comment on the viability of their current internal affairs,” he said.
Mark Mondanaro, the Ken-Ton superintendent, said he hopes the Huntley plant can remain viable, but said a shutdown, and the ensuing loss of tax revenue, would tighten the financial squeeze on a school district that already has taken steps to reduce spending, such as dropping modified sports programs and eliminating school bus service for students that live within a wider radius of their school.
“We’re always thinking about it. It’s something that’s been a topic in all of the time I’ve been here,” he said. “We know that if $3 million went away, it basically just keeps us in the downward trend we’ve been in.”
The coalition has long been concerned about elevated rates of cancer and asthma in the Tonawanda area, which Heaney said has a high concentration of air polluting facilities, including 53 air-permitted facilities within a two-mile radius.
“We think this really will improve public health” if the Huntley station was put into retirement, she said.
Gaier noted that NRG spent about $35 million in 2005 to convert Huntley to use low-sulfur coal, which produces fewer greenhouse gas emissions. Four years later, the company spent $115 million to install additional environmental controls that further reduced harmful emissions at the plant.
“Huntley is actually one of the cleanest coal-fueled power plants in New York and in the nation,” Gaier said.
Ted Skerpon, the president of Local 97 of the International Brotherhood of Electrical Workers, which represents workers at the Huntley plant, said the union has been advocating upgrades to the state’s electricity transmission system that would allow power produced at upstate plants, like Huntley, to be sold in downstate markets, where the demand for electricity is growing. The transmission of electricity from upstate to downstate currently is limited by capacity constraints on the existing system.
“The Huntley plant is part of what the Governor described as cheap abundant power that will help lower downstate rates,” he said. “The IEEFA was very short minded in the fact that they did not look at any other options, not to mention they held no conversations with NRG.”
Coal-fired plants across the country have been struggling mightily since natural gas prices began plunging as vast new supplies of the fuel began hitting the market through the use of new drilling techniques that tap into gas trapped in previously inaccessible layers of shale. In addition, ever-tightening pollution rules have made coal-fired power plants subject to higher costs due to mandates to reduce harmful emissions of greenhouse gases, such as carbon dioxide.
The Somerset coal-fired plant in Barker, which fell into bankruptcy in late 2011 and was taken over by its bondholders, also is battling the same headwinds in the power generation market.
The Huntley Station opened in 1942 and grew to include six generating units by 1958. But two of its aging units were retired in 2005 and two more were shut down two years later, leaving the plant with two operating units, each with a capacity of 218 megawatts. Those units, which are the plant’s youngest, were put into service in 1957 and 1958, putting them at the latter stages of their life span.
In comparison, the more than 200 coal-fired units that were retired across the country through the end of 2012 had an average age of 51 years, while the 105 other units that were scheduled to be retired in 2013 and beyond had an average age of 57 years, the report said.
email: drobinson@buffnews.com
The report, commissioned by the Clean Air Coalition of Western New York and prepared by an Ohio energy consulting firm that wants to reduce the nation’s dependence on electricity generated from coal, estimated that the Huntley plant has lost money during three of the past five years and said those losses are likely to widen in the future as coal prices rise and natural gas prices remain low.
In addition, flat demand for electricity, caused by a combination of a still-sluggish economy and improving energy efficiency, is putting further pressure on Huntley, which is owned by New Jersey-based NRG Energy.
The plant also is being squeezed as more renewable power sources, such as wind and solar, comes into operation and more generating capacity is added locally that runs on cheaper natural gas, including a coal-fired plant in Dunkirk owned by NRG that the company plans to convert into a 430-megawatt gas-fired plant.
“The Huntley plant does not appear to be financially viable and is at risk for retirement,” the report warned.
David Gaier, an NRG spokesman, declined to discuss the report’s financial estimates about the Huntley Station. “I can’t confirm or support any numbers or conclusions,” he said. “We agree that coal-fired plants are under pressure at a time of all-time low natural gas prices.”
But Gaier also said NRG believes coal-fired power plants can play an important role in the nation’s electricity supply, especially by providing a proven and reliable source of energy in a power market that is becoming more heavily dependent on natural gas.
With Huntley’s future in doubt, the report also warned that local towns and school districts that depend on the power plant for $6 million a year in tax revenue, begin planning for the day when those payments stop.
The plant currently pays about $3 million annually to the Kenmore-Town of Tonawanda school district, accounting for about 3 percent of its spending. The plant also paid $2 million to the Town of Tonawanda, equal to about 2 percent of the town’s budget, and $1 million to Erie County under a payment-in-lieu-of-taxes agreement that runs through 2030.
It also puts the future of the estimated 100 people who work at the plant in jeopardy, the report warned.
“The economics of the Huntley plant just don’t add up,” said Erin Heaney, the Clean Air Coalition’s executive director. “It’s time for everyone to come to the table to preserve workers’ jobs, preserve the environment and generate sufficient tax revenue for the region.”
The Clean Air Coalition has long supported efforts to reduce air pollution, especially in the Town of Tonawanda. The Ohio research firm lists its mission as “to accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce dependence on coal and other non-renewable energy resources.”
“It sounds like they’ve got a little bias to begin with,” said Town of Tonawanda Supervisor Anthony Caruana.
NRG officials in 2012 proposed converting the Huntley plant to run on natural gas as part of Gov. Andrew M. Cuomo’s “energy highway” initiative, but the plan was not accepted by state energy officials. “As far as we know it was not considered,” Gaier said.
The report said the Huntley plant is being hit by a “perfect storm” of conditions that have led to the retirement of more than 13,000-megawatts of coal-fired generating capacity across the country since 2008 and helped drive the Somerset power plant in Barker into bankruptcy at the end of 2011.
The report, prepared by the Institute for Energy Economics and Financial Analysis in Cleveland, estimated that the Huntley plant has been generating cash operating losses of about $1 million a year in both 2011 and 2012, even without including additional costs such as property tax payments that total nearly $16 million annually and interest expenses.
It predicted that Huntley’s cash operating losses would grow to more than $3 million in 2015 and top $6 million annually by 2015, assuming the plant continues to run at its current capacity and its coal costs keep rising at the 7 percent annual pace that they have for the past five years.
For starters, wholesale power prices in Western New York, which have dropped by 36 percent since 2008 as natural gas costs have plunged and demand weakened, also are putting a strain on Huntley’s finances by reducing the price that Huntley can command for the electricity that it generates.
Putting further pressure on Huntley is the glut of generating capacity in Western New York, which is more than adequate to absorb the mothballing of Huntley’s 436 megawatts of capacity. The $150 million conversion of the Dunkirk plant to natural gas will potentially add to the region’s glut of generating capacity by increasing the Chautauqua County generating station’s maximum output from the current 75 megawatts to 435 megawatts by the fall of next year.
As it is, the region has been meeting its electricity needs over the past two years with Huntley operating at only a fraction of its capacity. The plant, which had been running at 60 percent to 65 percent of its capacity from 2005 to 2008, ran at just 19 percent of its capacity in 2012 and 28 percent of capacity during the first 10 months of last year, the report said.
Heaney said the environmental group plans to host a series of community meetings to discuss ways to ease the transition for both workers and local governments and schools during the first two weeks of March.
“We’re hoping everyone can pull together,” she said. “We need to make sure the region has a plan.”
Town of Tonawanda officials noted that the report used outdated tax payment figures from 2012, which did not reflect a reduction in the plant’s payments under its PILOT agreement that has since taken effect. Those payments are less than half of the roughly $14 million a year that NRG paid before the agreement took effect.
“We’ve been adjusting for the last four or five years,” Caruana said of the tax payment agreement that was negotiated in 2008 but did not take effect until the payment that NRG made early last year. The Huntley plant still is among the town’s five biggest taxpayers.
“Losing them would be significant, but you can’t really comment on the viability of their current internal affairs,” he said.
Mark Mondanaro, the Ken-Ton superintendent, said he hopes the Huntley plant can remain viable, but said a shutdown, and the ensuing loss of tax revenue, would tighten the financial squeeze on a school district that already has taken steps to reduce spending, such as dropping modified sports programs and eliminating school bus service for students that live within a wider radius of their school.
“We’re always thinking about it. It’s something that’s been a topic in all of the time I’ve been here,” he said. “We know that if $3 million went away, it basically just keeps us in the downward trend we’ve been in.”
The coalition has long been concerned about elevated rates of cancer and asthma in the Tonawanda area, which Heaney said has a high concentration of air polluting facilities, including 53 air-permitted facilities within a two-mile radius.
“We think this really will improve public health” if the Huntley station was put into retirement, she said.
Gaier noted that NRG spent about $35 million in 2005 to convert Huntley to use low-sulfur coal, which produces fewer greenhouse gas emissions. Four years later, the company spent $115 million to install additional environmental controls that further reduced harmful emissions at the plant.
“Huntley is actually one of the cleanest coal-fueled power plants in New York and in the nation,” Gaier said.
Ted Skerpon, the president of Local 97 of the International Brotherhood of Electrical Workers, which represents workers at the Huntley plant, said the union has been advocating upgrades to the state’s electricity transmission system that would allow power produced at upstate plants, like Huntley, to be sold in downstate markets, where the demand for electricity is growing. The transmission of electricity from upstate to downstate currently is limited by capacity constraints on the existing system.
“The Huntley plant is part of what the Governor described as cheap abundant power that will help lower downstate rates,” he said. “The IEEFA was very short minded in the fact that they did not look at any other options, not to mention they held no conversations with NRG.”
Coal-fired plants across the country have been struggling mightily since natural gas prices began plunging as vast new supplies of the fuel began hitting the market through the use of new drilling techniques that tap into gas trapped in previously inaccessible layers of shale. In addition, ever-tightening pollution rules have made coal-fired power plants subject to higher costs due to mandates to reduce harmful emissions of greenhouse gases, such as carbon dioxide.
The Somerset coal-fired plant in Barker, which fell into bankruptcy in late 2011 and was taken over by its bondholders, also is battling the same headwinds in the power generation market.
The Huntley Station opened in 1942 and grew to include six generating units by 1958. But two of its aging units were retired in 2005 and two more were shut down two years later, leaving the plant with two operating units, each with a capacity of 218 megawatts. Those units, which are the plant’s youngest, were put into service in 1957 and 1958, putting them at the latter stages of their life span.
In comparison, the more than 200 coal-fired units that were retired across the country through the end of 2012 had an average age of 51 years, while the 105 other units that were scheduled to be retired in 2013 and beyond had an average age of 57 years, the report said.
email: drobinson@buffnews.com