Potsdam hopes to sell electricity from hydro dam to private buyer to maximize profits
Sunday, March 16, 2014 - 8:38 am

By JIMMY LAWTON

POTSDAM – With both generators at Potsdam West Hydro electric dam now operational, Mayor Steve Yugartis is hoping to strike a deal with a private buyer that could maximize profits.

Within the next couple weeks Yugartis hopes to be selling power on the open market, which will require approval form National Grid. But the long-term goal is to find a private buyer.

“We can sell our power right to grid at a wholesale rate, but we are negotiating with a private buyer to purchase all of our power. It can be a substantial difference in profit,” he said.

Yugartis said eliminating a “middleman” can jump revenues by 20 to 50 percent and with hopes of generating $200,000 a year, a margin that high could be crucial.

Yugarits said that profit is likely to rise in coming years as electricity is necessity in everyday life. He also said green energy, such as hydro electric power is in an even higher demand.

He said subsidies, tax exemptions and other incentives can often be used to purchase green electricity, that’s something he expects businesses will be looking for down the road.

“I think we are on the right side of history here. Chances are, over time the price of electricity is going to drift upward and our cost to produce it will go down,” he said. “One of the things to recognize is we are producing green power and that green power is desirable, it can be sold at a premium its more valuable,” he said.

Before the power can be sold, Yugartis said there are still fair number of tweaks that need to be made at plant.

“We have some tuning up to do of the system, some controls we want to adjust and a vibration sensor that needs to be mounted in a different location. There is some work to do, but it doesn’t appear to be anything serious,” he said.

Yugartis said ice build at the dam is also limiting the amount of power the plant can generate by restricting water flows used to produce the power.

“Because we have not been operating this winter we have a lot of ice restricting our flow,” he said. “We aren’t going to get up to full speed until that ice goes.”

The dam consists of two generators each capable of producing about 450 kilowatts hours of power for a total of 900 kWh.

He said one generator was producing between 150 to 190kWh during the initial start up last week, which is well below capacity.

Yugartis says the hang-ups don’t have him worried as most of the problems amount to minor adjustments. He said last Wednesday’s success was major step forward for the village.

“It feels great. It’s a real relief. It’s been such a long difficult road and to actually see those generators producing was great,” he said. “We thought we were close a number of times in the past, but we came across serious problems. Now we are nearing the end of the tunnel.”

The achievement was also important to Administrator David Fenton, who has spent the last three years working toward the goal.

“It’s going to be an important revenue source for the village in the future,” he said.

While the dam will soon be generating electricity and money, it will be sometime before it achieves major returns on the project. Costs for the project rose from original $3.5 million to around $4.7 million, because Canadian Turbines, an Ontario-based equipment manufacturer, failed to deliver parts it said it would. The village had to finally purchase the parts elsewhere.

The village has a judgment of nearly $7 million against the Canadian firm in state court, and work is being done to see what can be done through Canadian courts, but chances of recovering that from Canadian Turbines appear slim.

To fund the project the village took out a $3.5 million 20-year loan, which is being repaid at about $250,000 a year, Fenton said the village has 16 years left on that loan.

To make up the shortfall, the village expects to use money from a reserve fund from revenues from the first hydro plant east of the new one, and a capital fund.

Despite the hang-ups and problems both Fenton and Yugartis agreed that the dam will be a sound investment for the future as energy costs continue to increase.