It’s been a tough few years for the old coal-fired power plant in Lansing - and it doesn’t appear to be getting any easier. Since the costs of coal burning have risen and the demand for the energy it generates has fallen, AES Cayuga has been in need of assistance. In 2007, the plant began negotiating a Payment in Lieu of Taxes (PILOT) agreement with the Tompkins County Industrial Development Agency. In 2008, an agreement was reached between AES Cayuga and the county, town, and school district being directly impacted by the reassessment of taxable value of the plant. In 2009 the PILOT agreement was implemented. This past year, the reassessed values were - at the insistence of AES Cayuga - reassessed again, at an even lower rate than was initially agreed upon.
PILOT agreements between municipalities and for-profit businesses are generally arranged for fledgling companies that need a little extra incentive or help in getting off the ground. The Lansing coal plant that has come to be called AES Cayuga, turns 67 years old this year. AES Corporation purchased the plant from NYSEG in 1999 as one of six plants in a package deal. All six are coal plants within New York State. Operations at two of those plants were ceased almost immediately. Another two were closed just last year. Coal powered AES Thames in Connecticut, filed for bankruptcy last February under similar circumstances as AES Cayuga, “blaming high coal prices and costs associated with transportation and emissions requirements” according to Cassandra Sweet of Dow Jones Newswires.
However, in their 3rd quarter of fiscal year 2011, parent company AES Corporation had a 35% rise in profits. Their consolidated revenue rose ten percent to $4.38 billion - for that quarter alone. Their company tagline is “The Power of Being Global.” While closing coal-fired plants in New York State, AES has been expanding it’s global energy empire with new business developments and investments in brand new plants in South America, including a solar farm in northern Chile. According to a September 30th AP report, AES has also been making enormous investments in natural gas drilling such as the $1.15 billion dollars committed together with ExxonMobil and Apache Corp in order to tap into Argentina’s shale gas reserves - the 3rd largest in the world.
AES Cayuga is just one of a string of coal-fired plants in NY State, bought by AES Corp to be systematically shut down while taking advantage of tax-reassessments through PILOT programs at the expense of increased tax burdens to the residents of their respective communities - over the past decade or so.
Two of the initial 6 plants in the package deal that AES purchased from NYSEG in 1999 were set up outside of the business structure of the remaining 4 - according to AES Corp documents -and were then shutdown almost immediately. |
SO, WHO'S IN CHARGE?
Andrés Gluski, a former economist for the International Monetary Fund (IMF) officially took over as CEO of AES Corporation in September of 2011 at which time the outgoing CEO, Paul Hanrahan said that Gluski was identified as his successor “over three years ago.” AES Eastern Energy, the subsidiary that together with 13 other AES affiliates owns and operates AES Cayuga, officially filed for bankruptcy in December. According to the Wall Street Journal, Swiss based UBS - recently in hot water for helping thousands of wealthy Americans evade taxes on billions of dollars through off-shore accounts - began it’s week last Monday (2/13/12) by buying AES Corp stocks based on assertions that it’s value will rise as “Gluski seeks to trim less profitable businesses and aggressively cut costs.” Indeed, the international energy megalith’s stocks have been rising while the local plant struggles to stay afloat.
Locally, AES Cayuga has not only been the largest single entity tax payer for the Town of Lansing and the Lansing Central School District, but in better times they had also subsidized local charities, organizations, and facilities such as the YMCA. Now that they are the one’s in need assistance however, the lowered assessments on the plant mean more of a fiscal burden on the town and county.
Chair of the Tompkins County Legislature, Martha Robertson is also Chair of the Industrial Developement Agency (IDA), responsible for approving the PILOT agreement. According to Robertson, “The community does not subsidize AES Cayuga in any way. The PILOT functions only to set a fair assessed value for the plant, on which they pay the full tax rate as levied by the taxing jurisdictions. Using a PILOT to set the value, we avoid costly litigation and consultants' fees, maintain predictability for both sides, and have been able to achieve a ‘glide path’ in moving to full value, to mitigate the shock of large fluctuations in either direction.” Predictability however, is not something that many say the PILOT has afforded the town and school board.
 |
| Martha Robertson is both the Chair of the Tompkins County Legistlature and the Chair of the IDA - the agency that agreed to lower tax assessments for AES Cayuga |
On top of a recent loss in state funding, the Lansing Central School District has been consistently surprised by ever decreasing value assessments of the power plant, which means ever decreasing tax revenues. By this point in the original agreement, the plant was to be paying their tax rate based on an assessed value of the plant at $120 million, but had renegotiated the value to $112 million and will be down to $86 million for fiscal year 2013. “When we lose another 26 million [of assessed value on the plant], that’s almost $500,000 of revenue for us,” said Superintendent of Schools, Dr. Stephen Grimm. The school district has already faced measures of budget cuts and layoffs, though Grimm is happy that they’ve “been able to save virtually all of our programs.” He says that the school’s workforce is pushed to maximum capacity and that “it takes it’s toll on people” but that the objective is to make sure that the students aren’t able to notice.
Plant Manager, Jerry Goodenough says, “I think leadership in the school board are doing the best they can.” He points to the “fundamentals in the energy business” as the reason for the PILOT agreement and the recent bankruptcy filing, explaining that “driven by the [low] price of natural gas, coal vendors have found competitive prices overseas.” While hoping that an economic shift will help the coal plant to be competitive again, there does not seem to be a ‘Plan B’ for AES Cayuga. Goodenough says that while the plant is experiencing hard times currently, he is confident in an eventual turn around stating, “There are still financial analysts and futures market watchers that feel coal has a future.”
While coal power is a main factor in the coal futures market, the market itself refers to coal as a commodity. “Coal accounts for 28% of the world's primary energy consumption and is set to remain an energy source for decades to come, particularly in Asia,” according to Bloomberg Businessweek’s Business Exchange.
The Wall Street Journal’s Patrick Fitzgerald reports that per the recent bankruptcy filing, AES NY President, Peter Norgeot, who is also the Vice President of AES Eastern Energy, “said AES intends to use Chapter 11 to wind down its remaining operations, including four plants that aren't operating.” Norgeot has held many different titles within the greater global AES Corporation since the late 80’s.
AES Corporation is the largest independent power provider (IPP) on the globe.
UPDATE: Shortly since publication of this article, AES Cayuga has been renamed and is now called Cayuga Operating Company
UPDATE: Shortly since publication of this article, AES Cayuga has been renamed and is now called Cayuga Operating Company
