Spitzer Opposes Excessive Nimo Exit Fee On Western Ny Village

Attorney General Spitzer said today he has filed formal papers opposing a decision by the state Public Service Commission (PSC) that would require a small municipality in Western New York to pay more than $14 million in fees as a condition for setting up its own electric service.

"The state should be doing everything it can to enhance customer choice and encourage competition in the energy industry," Spitzer said. "This ruling shields a utility from the consequences of its management decisions and effectively bars a municipality from setting up an alternative electric service that might provide cheaper power to residential and business customers."

At issue is a PSC ruling requiring the Village of Lakewood in Chautauqua County to pay $14.5 million as a condition of terminating utility service with Niagara Mohawk Power Corporation (Niagara Mohawk).

Spitzer said the ruling - the PSC's first formal decision involving Niagara Mohawk's so-called "exit fee" - would set a precedent that would discourage municipalities and private entities across the state from setting up their own electric services in competition with existing utilities.

The Attorney General acknowledged that municipalities do have a financial obligation to a utility company that has invested in physical assets in a community. In fact, it is reasonable to expect a town or village, or private company to be required to purchase assets such as distribution lines and equipment as part of setting up municipal electric service, he said.

Spitzer objected to the PSC decision that requires Lakewood to pay for Niagara Mohawk's "stranded costs" unrelated to local service. These include the company's share of nuclear power plant cost overruns and other bad investments.

Stranded costs account for more than 80 percent or $11.7 million of Lakewood's exit fee.

"It is unjust to ask Lakewood to pay for Niagara Mohawk's management decisions," Spitzer argues in his official comments filed with the PSC.

Spitzer is calling on the PSC to recalculate the exit fees so that they reflect only compensation for any Niagara Mohawk property Lakewood must acquire to establish its municipal electric service.

This matter is being handled by Assistant Attorneys General Charlie Donaldson and Richard W. Golden of the Telecommunications and Energy Bureau, and directed by Assistant Attorney General in Charge, Mary Ellen Burns.