Dec 24 - McClatchy-Tribune Regional News - Brian Nearing Albany Times Union, N.Y.


The state announced a $7.7 million settlement Wednesday with three power plant owners that ended a legal challenge against a global warming program aimed at reducing greenhouse gas emissions from power plants.

The deal removes the sole legal roadblock filed in New York against the Regional Greenhouse Gas Initiative, a 10-state effort in the Northeast to limit emissions of carbon dioxide.

RGGI is the nation's first "cap and trade" system designed to force down emissions of CO2, a known greenhouse gas that a growing international scientific consensus blames for global climate change. States in the program set a cap on total CO2 plant emissions beginning this year and have been auctioning allowances that plants must buy to cover emissions. New York joined RGGI auctions in December 2008.

Under the agreement, the New York State Energy Research and Development Authority will cover the cost of RGGI allowances for three natural-gas fired plant owners -- Indeck Corinth, a Chicago-based company with a plant in Corinth; Selkirk Cogen Partners, which owns a plant at the former General Electric plastics plant in Selkirk; and Brooklyn Navy Yard Cogeneration Partners, which has a plant in Brooklyn.

In January, Indeck sued to block RGGI because the company holds long-term contracts from its plant to provide electricity to Con Edison, and could not raise its price to make up for the added expense of acquiring RGGI allowances. The two other companies also sell electricity to Con Ed under long-term contracts.

Under the settlement, Con Ed agreed to pay for the costs of RGGI allowances needed by the three plants; however, in exchange, NYSERDA will use RGGI funds to cover Con Ed's costs for an equivalent amount of "smart grid" and other improvements.

Jeffrey Gordon, a spokesman for NYSERDA, said the settlement is expected to cost about $7.7 million in RGGI proceeds for 2009 through 2011. He said about $4.8 million would benefit the Brooklyn partnership, about $2 million to the Selkirk project and about $850,000 to Indeck.

The settlement calls for the payments to continue through 2016. Gordon could not provide figures on what the settlement cost would be through that year, although if the payments remain constant, the total figure could exceed $15 million.

"We are pleased that the settlement protects the RGGI program and the environmental benefits it offers, maintains funding for green programs and fairly resolves the financial hardship for those generators bound by long-term contracts," said Gerry DeNotto, president of Indeck Energy.

The plant sells electricity under a 1995 contract with Con Edison that will not expire until 2015, and has no way under the contract to charge more. DEC set aside free allowances for 1.5 million tons of CO2 to cover companies with long-term contracts, a figure that apparently was not high enough to include the three companies covered under the settlement.

In a joint statement, Environmental Conservation Commissioner Pete Grannis, NYSERDA President and CEO Francis Murray, and Public Service Commissioner Garry Brown said the settlement "allows New York state to move forward with the critical work of reducing greenhouse gas emissions while building the clean energy economy... The settlement leaves intact the mechanisms to achieve every critical goal of this program."

This is the second hit that RGGI funds have taken this year. Earlier, Gov. David Paterson used $90 million in RGGI proceeds to help balance the state's budget. RGGI funds are meant to promote conservation and alternative energy programs.

A 30-day public comment on the settlement is expected to begin Dec. 30, DEC officials said.

Brian Nearing can be reached at 454-5094 or at bnearing@timesunion.com.

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