Lockport Union-Sun & Journal Online

Courts

March 28, 2011

County suit vs. NYPA thrown out

A state court has thrown out Niagara County’s lawsuit against New York Power Authority that aimed to undo the so-called “sweep” of NYPA funds into the New York State kitty two years ago.

In a written ruling late Friday, the Supreme Court Appellate Division, 4th Department out of Rochester, said Niagara County does not have authority to sue NYPA on behalf of residential electric consumers whom it claims were overcharged for electricity. Further, the ruling said, “there is nothing in the Public Authorities Law prohibiting (NYPA) from contributing surplus funds to the State.”

The ruling reversed a December 2009 ruling by Supreme Court, Niagara County, Justice Ralph A. Boniello III denying NYPA’s bid to get the suit dismissed.

On NYPA’s appeal, the 4th Department, by unanimous decision of five justices, agreed Niagara County has no legal right to challenge the authority’s 2009 “loan” of $544 million in surplus funds to the cash-strapped State of New York.

The county argued that if NYPA had that much money sitting around, it must have been overcharging customers, including residents who receive electricity generated at the Niagara Power Project in Lewiston, and the surplus should go to rate reduction. The appellate panel disagreed, saying there is nothing in federal or state law requiring NYPA to return surplus revenues to consumers.

With that finding, the county’s suit was “terminated,” County Attorney Claude Joerg confirmed Monday.

It’s up to the county Legislature whether the county will try appealing to the state Court of Appeals. Given the unanimous vote of the 4th Department judges, it won’t be easy, however. The county would have to get permission from the 4th Department or the Court of Appeals itself, by persuading the court there is a constitutional issue or a statewide matter of importance at stake.

To date, the county has paid $249,000 to the Buffalo law firm Webster Szanyi for its work on the suit, according to  Dan Huntington, director of the county management and budget office. The balance of the county casino cash fund from which legal fees were paid is $229,000.

Preparing a request to go before the Court of Appeals would cost another $20,000, Joerg estimated. The question isn’t whether the amount is too high, he said, it’s whether the expense is justified.

The 4th Department’s bottom line, delivered in the last paragraph of its four-page ruling, is firm: The county’s argument that NYPA should only use surplus funds to lower residential electric rates, even to below actual costs of producing and transmitting hydropower, is erroneous. State Public Authorities Law does not require NYPA to reduce rates to less than production costs, it said emphatically.

“So long as (NYPA) is providing preference power at cost ... (it) has fulfilled its statutory mandate and there is nothing in the Public Authorities Law prohibiting it from contributing surplus funds to the State,” the ruling said.

It remains to be seen whether termination of the suit affects the county’s pursuit of cash and low-cost power from NYPA, above and beyond what it received in a 2005, 50-year settlement agreement with municipalities affected by operation of the Niagara Power Project.

Since it was lodged in mid-2009, members of the county Legislature’s Republican-led majority caucus, and state Sen. George Maziarz, R-Newfane, have been adamant the suit would force NYPA to show new respect to the county where, Maziarz frequently points out, the lion’s share of NYPA power and profits are generated.

For over a year, the county has had a team in talks with NYPA leaders about a so-called Niagara Development initiative, basically a list of $250 million in local capital projects the authority could underwrite countywide, from improvements at Niagara Falls International Airport and Olcott Harbor to restoration of the Flight of Five canal locks in Lockport. Some legislators portrayed NYPA as pursuing the initiative only to make the lawsuit go away; the authority feared having to open its books in court and show where all the power and profits from Niagara ended up, they insisted.

Now the suit is terminated and NYPA has yet to announce funding of any Niagara-based capital projects. Did the 4th Department ruling cost the county a bargaining chip in its dealings with the Authority?

No, because NYPA has never seen a link between the suit and the initiative, President/CEO Richard Kessel reiterated Monday. The Authority “absolutely” is still looking into underwriting projects in Niagara County, he said, not because of the lawsuit but because of his feeling the authority historically has shortchanged a hydropower host community.

“I think we have a good relationship despite the litigation,” Kessel said. “The legislature and the power authority have a lot of mutual things that we want to do. ... I think we want to continue to have an open dialogue, a positive relationship with the county.”

Since Kessel has said so repeatedly, the Legislature will take him on his word that NYPA help for Niagara is coming regardless of the suit, Chairman William Ross, C-Wheatfield, and Majority Caucus Leader Richard Updegrove, R-Lockport, both said.

Though it failed, outwardly, neither leader would voice regret for backing the costly legal action.

NYPA’s willingness to allocate large blocks of low-cost hydropower for startup businesses in Niagara County — the Yahoo! data center and the now-withdrawn Verizon proposal — is not coincidental, Updegrove insisted.

“The litigation opened a dialogue with the power authority,” he said. “The power authority has not been unfair with allocations of low-cost power recently ... . We would assert those are ancillary benefits” of the suit.

Plus, it still sticks in everyone’s craw that NYPA can give money made here to the state, political leaders said.

“The power authority should not be allowed to provide money from the sale of power to the state’s general fund. That money has a direct impact on the cost of electricity for county residents and businesses” Updegrove said.

“I believe we did the right thing,” Ross said. “As long as it was casino money, not tax money, funding the fight, I think the majority of people wanted to see the power authority challenged.”

Maziarz promised NYPA will be challenged again, next time by the state Senate Energy and Telecommunications Committee that he chairs. The appellate division failed Niagara County residents, again, he charged.

“The county can’t sue on behalf of its residents who are paying for the sweep? I think that’s ridiculous,” Maziarz said. “First they refused to hear the Verizon (appeal) in a timely fashion, now this. I don’t know what the 4th Department has against Niagara County.”

With suit dismissal, NYPA never did show Niagara County exactly where locally generated hydropower, and revenues, flow as Boniello had ordered it to do. No matter, Maziarz said — the state Senate can seek the same information.

“I will have the Energy Committee get it. We’re going to find out where every kilowatt produced in Niagara County goes,” he said.

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