The company that produces steam for Syracuse University, Project Orange, plans to ask the state to regulate the school’s resale of that steam to its public customers, further escalating hostilities between the two parties.

Adam Victor, president of Project Orange Associates, said Monday that his company is preparing to ask the New York State Public Service Commission to oversee the rate at which SU resells steam to Upstate Medical University, Crouse Hospital, Syracuse VA Medical Center and State University of New York College of Environmental Science and Forestry.

‘We’ve uncovered these unconscionable overcharges,’ Victor said. ‘Project Orange has an interest that the steam it produces and sells is properly used and paid for.’

The university dismissed the latest charges from Project Orange as ‘unfounded.’

‘This threatened complaint … is merely one more effort by Project Orange to distract from and avoid its contractual obligations to the university,’ SU spokesman Kevin Morrow said in an e-mail. Project Orange has a contract with SU to operate its Taylor Street steam plants and provide the university with steam at a discounted price. But in the last year, the partnership has been strained by accusations and litigation from both sides.

In November 2008, Project Orange sued SU for $50 million, accusing it of improperly reporting its steam production costs in the original 1990 agreement and cheating its resale customers. This summer, Project Orange asked the state to condemn the property on which the university’s steam facilities stand through eminent domain law.

The university denied any wrongdoing. It contended that Project Orange is acting only in its private interest, and, in a countersuit, asked a judge to affirm its right to exit the contract, which expires in 2032.

Project Orange sells steam to SU for a fixed rate of $4.27 per thousand pounds. The university then resells some of that steam to ESF and the hospitals. SU said it does not make a profit but does add distribution costs – which in June 2009 meant an additional $5.08 per thousand pounds.

Those distribution costs have varied wildly. The distribution costs have fluctuated from $1.43 to $7.52 over the last six years, according to an affidavit from Tim Sweet, director of SU Energy and Computing Management.

Project Orange alleges that these distribution costs actually represent an illegal profit.

John Dax, a lawyer for Project Orange, said that regulatory oversight is long overdue.

‘They’ve avoided (regulation). We don’t know exactly how, but there’s no legal reason they should be exempt,’ he said.

‘If you look at the rates they charge their customers, which are public entities, they’re really not cost-justified,’ Dax said.

The state law pertaining to steam regulation says that the Public Service Commission has ‘general supervision of all steam corporations having authority…under any charter or franchise.’ This includes investigating price gouging complaints and regulating prices.

SU, which has state approval to resell steam in its charter, would seemingly be subject to such oversight.

Victor, Project Orange president, said the complaint would be filed as soon as his lawyers had finished reviewing it. He did not know how quickly the state would address it. A spokeswoman for the Public Service Commission also declined to give a timeframe.

The two sides will meet in court on Jan. 17 in the eminent domain case.

jdmurph05@syr.edu

Published on September 16, 2009 at 12:00 pm