Wanna buy a power plant?
While that's the only plant it had an option to buy, passing up Barrett could be a sign that LIPA will also take a pass on the other four war horses that generate much of the electricity used in Nassau and Suffolk counties.
Don't mistakenly think this is an isolated, bureaucratic decision with little consequence as long as the lights stay on. Instead, it's one that dramatically illuminates how what happens to plants is closely linked to Long Island's energy future, environmental health and electricity costs.
Does Long Island need all five of these aging and inefficient generating facilities? Will any be "repowered," or modernized, to reduce their carbon emissions and use less fuel?
Are the enormous tax assessments on these plants unfair to ratepayers? Is there a more equitable way to distribute the $400 million that LIPA pays annually in property taxes to relatively few jurisdictions? What happens to the communities that have, for so long, relied on these tax windfalls?
There could be another buyer
National Grid owns the five baseload power plants - the two behemoths in Northport and Port Jefferson, along with those in East Rockaway and Island Park and a little-used one in Glenwood Landing. The company inherited the plants in 2007, when it bought KeySpan, which had acquired the plants when the Long Island Lighting Co. went bust.
LIPA is under contract to buy the power from these plants through 2013 and can extend that until 2028. But National Grid, primarily a transmission and distribution company that wants to expand its natural gas business, is no longer interested in owning and operating the facilities. So if LIPA, which has been offered the plants for book value, doesn't buy them, it's likely they will soon be put up for sale.
LIPA chief Kevin Law rejected Barrett because the public utility, which already has a $7-billion debt load, can't afford to borrow anymore. And even if it had the money, LIPA says it can't afford to repower the plants to make them cleaner and more fuel-efficient. Considering the challenging economic times and angry customers already paying among the highest electric bills in the nation, that makes sense.
There might be a more creative solution. What if the New York Power Authority, which has pretty deep pockets, purchased the plants with tax-exempt financing? NYPA already operates a small generating plant in Hauppauge and many others around the state. And doesn't NYPA, as a state agency, have a responsibility to take the lead in making these plants less damaging to our environment?
The plants, on average, are running at about 30 percent fuel efficiency, which means the rest of the heat is released into the atmosphere as carbon emissions. Repowered plants will also use less fuel, reducing LIPA's costs and directly lowering bills.
While a NYPA purchase might make sense for economic and public policy reasons, only a political consensus in Albany would allow that to happen. And those haven't been too easy to come by these days, especially when upstate is known to get extremely jealous when the agency turns it gaze and dollars downstate.
Hidden taxes in your LIPA bill
Long Island doesn't need all five of these plants, yet we are paying dearly - about $200 million next year in taxes - to keep them on the books. While National Grid, as owner, is responsible for the property taxes, they're passed along as part of the cost of power. So all LIPA customers are paying the bill. For political reasons, neither LIPA nor National Grid has ever filed a tax grievance challenging the assessments, but that sentiment may be changing.
The Association for a Better Long Island, which says it represents the owners of $15 billion worth of real estate, just asked for and got a stack of LIPA tax documents. While the business group may not have the legal right to challenge the assessment, it's determined to stir up the fairness debate. Why are LIPA customers paying $34 million a year for the Barrett plant, which has book value of $90 million? LIPA pays $25 million a year for the Port Jefferson plant, meaning all ratepayers pick up about 40 percent of that school district's budget.
LIPA wants to get into the debate - and it should. LIPA should pay some taxes, and it must remember that the communities that live with these plants deserve consideration. In other parts of the country, public utilities pay a percentage of their gross receipts into a general fund that's spread around to counties and towns. Certainly, that's an easy formula to devise where there's just one municipality and one school district. Still, a fair way to distribute LIPA's taxes without dramatically hurting any current beneficiary needs to be explored.
LIPA's decision not to buy the Barrett plant has consequences. Like the fin of a shark, it's a signal that there's a lot more going on under the water. hN