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Utilities deal under review



When Recycled Energy Development agreed to buy and operate the utilities at Eastman Business Park, many local business and government leaders were relieved.

Local and state officials consider Eastman Business Park a key economic development asset. And the utility system — especially the cheap and plentiful electricity generated on the site — is a large part of what makes the park attractive to high-tech businesses.

If the deal goes through — and the general feeling is that it will — Recycled Energy Development will buy the utility system from Kodak, which owns the business park and is currently working to emerge from bankruptcy. Officials with both companies say RED has the experience and resources to ensure stable utilities at the park. But before it can take ownership of the utilities, RED has to navigate a regulatory gauntlet.

The deal cleared its first hurdle last month when a federal bankruptcy court gave Kodak permission to sell the plant to RED. Now, the state Public Service Commission has to sign off on the sale. The PSC review is under way and last week PSC started accepting public comments on the proposed sale. Comments are due by April 1, and the earliest the commission could approve the sale is the middle of April.

"We have not put any timeframe on it," says Christopher Veronda, a spokesperson for Kodak. "It's really something for the PSC to determine what they believe is appropriate."

The commission oversees certain utilities in New York, including electricity and steam. Its review will focus on several factors, including RED's technical expertise and whether the company has sufficient financial resources to run the plant, says a fact sheet that Governor Andrew Cuomo's office sent to business park tenants. The commission will also assess RED's capacity to provide reliable service to customers at reasonable rates.

RED will need approvals from other state agencies, too. For example, the deal involves the transfer of environmental permits, which must be approved by the State Department of Environmental Conservation.

RED also plans to convert the coal-fired boilers that power the utilities to a natural gas system, and that requires a separate regulatory approval. When the conversion work happens depends on the pace of all of the regulatory reviews.

The Finger Lakes Regional Economic Development Council met last week at Eastman Business Park (Kodak Park in its former life); the agenda included an update on and tour of the park.

During the update, council co-chair Joel Seligman, president of the University of Rochester, asked the Regional Economic Development Council's board to reaffirm that the business park is its chief economic development priority. That's the council's way of telling state officials to direct focus and resources to the park.

Lieutenant Governor Bob Duffy told the council and audience members that the state is committed to the park success. The Eastman Business Park is the biggest industrial park in the state and has significant potential for Upstate economic development, he said. Many of the park's tenants are high-tech businesses employing skilled workers and paying good wages. And they also have potential to add manufacturing jobs in a region that needs them.

Duffy and state economic development officials say the state will invest in the park, though state officials haven't offered details.

"Everybody understands how important this [the business park] is," Duffy said.

The park is drawing a variety of tenants, including biofuels companies, medical device makers, and solar tech companies. It's also home to the New York Battery and Energy Storage Technology Consortium's commercialization center. Many of the firms are growing and are part of industry sectors that local leaders want to see thrive.

There are roughly three dozen tenants in the park, about a dozen of which are large users of utilities, says Kodak's Veronda. And Kodak, a heavy utilities user itself, would become one of RED's customers. Veronda says the deal with RED would ensure reliable utilities at attractive rates.

If RED gets the OK to purchase the Eastman Business Park's utilities, it would be responsible for upgrading the power plant to meet new state and federal air-quality standards for industrial boilers. The new standards will be in effect by 2017 and there was concern about Kodak's ability to make the necessary upgrades.

RED could keep the existing coal-fired boilers online and retrofit them with emissions control technologies. But instead it'll replace them with natural gas-fired boilers; natural gas burns cleaner than coal. The company plans to invest $40 million to $80 million over five years for the upgrades.

The natural gas upgrades would also provide economic benefits for the operator and tenants. The boilers generate steam, which is what powers the various utilities. It's already an efficient system, says RED's President and CEO Sean Casten. But the natural gas generators would make it more efficient and improve output, he says.

"The rates are better, the environmental signature is better," Casten says.

It's likely that the new boilers would produce some surplus electricity, which RED would sell to customers outside of the park; that income would help lower rates for business park tenants, Casten says. The state is facilitating discussions with potential buyers, Casten says.

RED laid out its plans in a filing with the Public Service Commission. But the conversion plans have to undergo a regulatory review of their own, separate from the sale proceedings.

The conversion would also require an expanded supply of natural gas to the business park, so the full conversion couldn't happen until a new pipeline is built, Casten says. In that case, the switch may happen in phases, he says.

As for the question of rates, RED has told business park tenants that it's willing to commit, via contracts, to the same amount and structure that Kodak used. Casten says that commitment would give the park's tenants some certainty about rates, which they can use in their planning.

It'll also let the state know that the company isn't going to take advantage of the tenants by raising rates, and that it's willing to put its commitment in writing, Casten says.

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