Syracuse University statement on assuming operation of its steam plants

Syracuse University today assumed operation of its steam plants from Project Orange Associates (POA) in order to assure the unabated production of steam to the University and other institutions—the U.S. Veterans Administration Medical Center, the SUNY College of Environmental Science and Forestry, SUNY Upstate Medical University and Crouse Hospital.

The University constructed its two steam plants—the Riley Plant in 1952, with later conversion to natural gas power in the early 1970s; the Alco Plant in 1929, with an addition in the 1960s—to meet the heating and other steam needs of the University and the other institutions. In addition to the steam plants, the University constructed and maintains an extensive distribution system of underground steam mains to deliver the steam to University buildings and those of the other institutions.

POA had been operating the University’s steam plants since 1992, pursuant to agreements entered into between POA and the University in 1990. Pursuant to those agreements, POA also constructed a cogeneration facility on land leased to it by the University.

On Oct. 15, POA advised the University that it would terminate production of steam and return control of the University’s steam plants to the University on Oct. 19 at 12:01 a.m. POA has not turned over the cogeneration facility to the University.

POA specified three reasons for its termination of the production of steam: its claims against the University for fraud regarding the steam contract signed by the parties in 1990; the difficulties POA has been experiencing with the turbines in the cogeneration facility, which POA attributes to General Electric International and other General Electric entities; and the University’s alleged refusal to permit POA to install a package boiler in the cogeneration facility.

In response to those alleged reasons, the University is aware that a Supreme Court judge already ruled in May 2009 that POA is not likely to succeed in its claim of fraud against the University with regard to the steam price and refused POA’s application for a preliminary injunction with respect to the steam price. Further, the University long ago consented to POA’s installation of a package boiler in the cogeneration facility. With respect to the alleged difficulties with the turbines in the cogeneration facility, the University is unaware of the details of the dispute between POA and General Electric. Under the 1990 agreements, POA agreed to meet the University’s steam needs by operating the University Steam Plants should there be difficulties with the cogeneration facility. Accordingly, the University disagrees that POA’s disputes with General Electric constitute any basis for POA to terminate providing steam to the University.

The University is disappointed that POA has now declined to meet its contractual obligations to provide steam, but the University will take all necessary steps to continue the supply of steam to the University and its customers.