Emissions case holds up $80M: Corinth power plant operator says it is penalized due to long-term Con Ed contracts

ALBANY, May 21, 2009 (Albany Times Union - McClatchy-Tribune Information Services via COMTEX) -- ERC | Quote | Chart | News | PowerRating -- The state is sitting on about $80 million meant for energy efficiency and alternative energy programs because of a lawsuit against a multi-state program aimed at reducing greenhouse gas emissions from power plants.

The New York State Energy Research and Development Authority, which is responsible for the state's proceeds from the Regional Greenhouse Gas Initiative, is holding back on the spending because of a lawsuit filed in January by Indeck Corinth, owners of a natural gas-fired electrical power plant in Corinth, Saratoga County.

New York raised about $80 million under RGGI in December and March, when auctions were held for state-created allowances that plants must have to cover emissions of carbon dioxide, a known greenhouse gas that a broad and growing scientific consensus blames for planetary climate change. New York and nine other northeastern states participate in RGGI, the nation's first "cap and trade" system. The program will decrease the amount of available allowances starting in 2012.

If Indeck wins its lawsuit, the state could have to return RGGI funds.

"It would be prudent to delay the commencement of spending the RGGI auction proceeds ... until the authority has more complete information on the litigation," wrote authority President Francis Murray Jr. in an April 16 memo to the authority board.

The state's next two auctions are set for June and September, and could result in tens of millions of dollars in proceeds that could also be held back -- funds designed to support programs that NYSERDA hopes would ultimately keep about 8.3 million tons of CO2 out of the atmosphere; that's the equivalent of taking 83,000 cars off the road for year.

The state also projects its programs would retain or create 3,000 green jobs and save $1.3 billion in energy costs.

The authority's spokesman said officials would decline to comment about the decision to hold off on spending RGGI funds.

However, Murray wrote, the authority feels safe to spend an unspecified small share of RGGI funds earmarked for municipal water and wastewater treatment programs. That spending will help attract federal stimulus funds, and Murray wrote that the authority could find other funds to reimburse RGGI spending should the Indeck lawsuit prove successful.

The company has claimed that the state Department of Environmental Conservation failed to set aside enough free RGGI allowances to protect power plants like Indeck, which has a long-term contracts to sell power to Con Edison and cannot raise prices to cover the added expense of RGGI.

At about 450,000 tons a year, CO2 emissions at the Corinth plant would cost Indeck about $1.3 million a year under RGGI.

"Indeck Energy supports the goal of the RGGI program, but it must be fair to all generators and not discriminate against a select few," said Gerry DeNotto, Indeck's CEO. The company would prefer that RGGI rules be changed so that the long-term customers like Con Ed -- rather than the power plants -- would bear the cost of RGGI allowances, said company spokesman Peter Barden.

On Wednesday, five environmental and energy groups filed papers in state Supreme Court supporting the state in its legal battle with Indeck.

"For more than a decade, New York has been a leader in the global fight to cut the pollution that is changing our climate," said Jackson Morris, an associate with Environmental Advocates of New York. "And every step of the way, a few bad actors have tried to slow down the nation's first effort to cut global warming pollution. Polluters' concerns have been raised and addressed, and Indeck is the lone holdout dragging its feet."

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

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