TO: Batchellerville Bridge Action Committee Members
FROM: Peter VanAvery
DATE: April 23, 2009

The U.S. Court of Appeals has ruled that the Hudson River-Black River Regulating District's practice of charging downstream hydroelectric firms for the cost of operating Great Sacandaga Lake and the Conklingville Dam is in violation of the Federal Power Act.

This decision, which applies only to hydroelectric firms, is a game-changer that could cost the District several million dollars annually. While the District can still charge those firms for maintaining the dam and reservoir, the loss of operating income will force it to identify and bill additional downstream beneficiaries not in the power generation business.

The lawsuit was brought by Albany Engineering Corporation, a hydro plant operator, against the Federal Energy Regulatory Commission (FERC) and the Regulating District. Although the Court of Appeals ruling came down last November, it was not revealed by the District until its board meeting earlier this month.

Under state law, 37 downstream property owners (mainly hydro plant operators) and five municipalities (Albany, Watervliet, Troy, Rensselaer, and the Village of Green Island) currently pay an annual assessment that covers the District's operating and maintenance costs.

Title 21 of the NYS Environmental Protection Law -- which allows the District to recover its capital, maintenance, and operating costs through assessments against public corporations and real estate parcels benefited by the construction of dams and reservoirs -- provided the legal foundation for this assessment methodology. Or so the District thought.

In its lawsuit, Albany Engineering argued that the Federal Power Act (FPA) preempted state law. Like NYS law, the FPA allows owners of upstream dams to recoup costs -- but only for "interest, maintenance, and depreciation." Operating costs are not covered. The provisions of the Federal act apply only to FERC-licensed hydro plants, like the one at the Conklingville Dam. The latter is owned by Erie Boulevard Hydropower.

The big challenge now before the District is how to make up for this lost revenue. Under state law, it can still bill downstream beneficiaries -- but not hydro plants -- for the whole ball of wax: operating and maintenance expenses. Its options include raising the assessments on the five municipalities already billed for those expenses and/or seeking additional downstream beneficiaries (such as municipalities that rely on a regulated river flow to swirl away effluvia from wastewater treatment plants).

Here are the current assessments for the five downstream municipalities: Albany ($118,697), Watervliet ($9,780), Troy ($63,127), Rensselaer ($11,558), Village of Green Island ($4,001).

At its April meeting, the District's board voted unanimously to pursue the latter course. It plans to hire a consultant to identify additional beneficiaries to be assessed. This promises to be a controversial task. The District commissioned a similar "Hudson River Flow Regulation Benefit Study" in 2003, but was not fully satisfied with the results.

That 84-page study, conducted by Gomez and Sullivan Engineers, P.C., set off a firestorm among Great Sacandaga's access permit holders. On page 3, in a section titled "Increased Real Estate Values for Lakeshore Property," appears the following quote: "One of the biggest benefits of Great Sacandaga Lake is the creation of 125 miles of lakeshore property." It's followed by an analysis of the market value of the total housing units in the Great Sacandaga Lake Region.

That's not the only reason why this court decision should send chills up the spines of the lake's property owners. The access permit system by which the District allows front-lot and back-lot property owners access to Great Sacandaga also is under legal siege. In January, National Grid filed a lawsuit against the District alleging that the permit system was illegal and that shoreline property owners should be identified as beneficiaries and required to pay an annual assessment. Could the District lose this lawsuit, too?

I doubt that I'm the only access permit holder who feels that he has a target painted on his back.

I don't know how much the District actually spent on this losing lawsuit, but at its March meeting, the board voted to spend an amount not to exceed $307,100 on legal services in connection with this litigation.

As you know, the Batchellerville Bridge Replacement Project is simmering on the back burner. While the NYS Department of Transportation budgeted $39 million for the project, the lowest construction company bid came in at $64 million.

The Saratoga County Board of Supervisors has now passed a resolution urging the state to fill the gap with $25 million from Federal stimulus money provided by the American Recovery and Reinvestment Act. The resolution was addressed to Governor David Paterson.

The next meeting of the Regulating District's board will be held at 10:00 a.m. on Tuesday, May 12, at the Holiday Inn, 308 North Comrie Avenue, Johnstown. While the agenda is not yet available, one topic may be the long-awaited unveiling of the cost of the access permit system.

For nine years, the District has been trying to determine the permit system's true cost. The latest attempt is based on methodology developed by Red Oak Consulting. According to the minutes of the March board meeting, a representative of that firm will attend the May meeting and will "attest to the approach and the total budgeted amount in the permit system for the next three years." The District's three-year budget is now in its final stages of preparation, with board approval scheduled for June.

This board meeting could be very interesting -- and very expensive -- for access permit holders.

The lake's level is at 766.8 feet above sea level -- about 6.4 feet above target.