Project Orange Associates stopped operating the Syracuse University steam plants Monday, leaving the university to produce its own steam for the first time since 1992 and creating the possibility of skyrocketing steam costs for its customers.

SU will rely on two steam boilers (built in 1929 and 1952) to supply steam to the university, three nearby hospitals and the State University of New York College of Environmental Science and Forestry (ESF).

University officials did not respond to multiple requests for comment. But in a statement released Tuesday, SU spokesman Kevin Morrow said, ‘The university is disappointed that Project Orange 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.’

Project Orange, run by New York City entrepreneur Adam Victor, notified SU Thursday that it was planning to break the parties’ 1990 steam production agreement. It cut off steam because of a dispute over faulty turbines, the need for new boilers and SU’s alleged misrepresentation of steam production costs in 1990, Victor said.

The turbines, an essential component of the steam production, failed repeatedly and Project Orange has sued General Electric, which made the turbines, Victor said.

Project Orange offered deeply discounted steam to SU while the turbines were being repaired. But SU refused to take it, instead supporting GE in court, Victor said.

‘They’re vindictive and foolish for turning away virtually free steam,’ Victor said. ‘If they don’t take the steam, we can’t run the turbines.’

‘The university will have to deal with the consequences,’ he said. ‘They are left with an ancient, old plant that I don’t want anything to do with.’

A main consequence of SU assuming control and using the two boilers could be a spike in steam prices for ESF and the hospitals, which buy it from SU.

From July to December 2008, SU raised its customers’ rates from $15.27 per thousand pounds of steam to $35 because it believed it would have to produce its own steam rather than buy it from Project Orange, according to an affidavit from Tim Sweet, director of energy and computing management at SU.

SU didn’t end up having to produce its own steam then, but it does now. And there is reason to believe the rates will spike once more.

In a letter this summer to its customers, SU wrote that if ‘the university assumes operation of its boiler plants, the university and its customers will no longer receive the benefit of the discounted steam pricing received over the past 17 years,’ said Gary Kittell, director of physical plant at Upstate University Health System (formerly known as SUNY Upstate Medical University).

SU will pay at least a third more to produce the steam itself. In the 1990 agreement, Project Orange gave the university a 33 percent discount on purchases of steam over a certain quantity. Now that SU is not receiving reduced steam, its customers will see an increase in price.

In the letter to customers, SU estimated a cost of $25 per thousand pounds of steam if it had to assume production. The current price is $15.27.

Cornelius Murphy, ESF president, said he had not heard from SU since the change of hands at midnight Monday.

‘Am I concerned about the price? Yes,’ Murphy said. ‘Do I have any way of knowing? No.’

SU’s customers will see a much higher rate of steam costs, said Sheldon Steiner, an engineer who advised Upstate on expanding its own steam production in 2005.

‘Also, I think SU is going to learn that it’s no pleasure operating that plant,’ Steiner said of the boilers. ‘It’s an old, old plant that comes with the things that old plants come with.’

Steiner said as the two parties quarrel, the courts will ultimately have to decide who’s right and who’s wrong.

‘The principals of these two companies can’t seem to come to an agreement, and it’s the people around them who are going to suffer.’

jdmurp05@syr.edu

Published on October 20, 2009 at 12:00 pm