The Price of Private Equity’s New York Power Plant Grab

IN NOVEMBER 2021, without fanfare, and having received no public comments, the New York Public Service Commission (PSC) issued a succinct declaratory ruling enabling a new company called Generation Bridge LLC to absorb a massive fossil fuel-burning power plant in Staten Island and another one upstate, in Oswego. The PSC’s language made it seem benign. “No further review will be conducted of the proposed transfer of ownership interests,” the order stated, noting that the direct owners of the Arthur Kill and Oswego Harbor plants were authorized to go into debt up to $700 million to fund their acquisitions and would continue to be subject to lightened regulation.

Four months later, the phone rang at the National Response Center (NRC), the 24-hour federal hotline for reporting hazardous discharges. It was someone near the Oswego plant, a whopping 1,800 MW, residual fuel oil-burning facility perched on the southern edge of Lake Ontario. “Caller is reporting there is a large black container that is floating in the water and the container is discharging an unknown oil into the water,” an NRC staff member entered into a call log on March 8.

A similar report came two days later. “Caller is reporting that there is an unknown heavy oil product leaking into the Oswego Harbor from the site of a power plant. The oil is creating a large sheen on the water. The cause of the oil sheen is unknown due to limited access to the site,” the NRC recorded.

Upon notification by the NRC, officials from seven local, state, and federal agencies quickly launched an investigation. It turned out an underground fuel transfer line had corroded, and there was a hole in an oil pipe. No. 6 fuel oil was gushing into Lake Ontario and onto its shore.

Oswego Harbor Power, which stores 68 million gallons of oil on site, was confirmed as the source. But conspicuously unnamed as a responsible party was the new owner: Generation Bridge, a subsidiary of a fund managed by ArcLight Capital Partners—a private equity firm that has quietly scooped up and cut costs on some of the dirtiestfossil fuel-burning infrastructure in the United States, which experts say might otherwise be destined for retirement.

According to NRC call logs and a December 2021 Spill Prevention, Control and Countermeasure plan on file with the US Environmental Protection Agency, while the facility had reported small incidents of 1-to-50-gallon spills under its previous owner, NRG Energy, this was—by far—the first accident of such scale to occur during the period the spill prevention plan covers, which dates back to May 2014. As of June 20, at least 45,500 gallons of oil had leaked from the site, according to an incident report. Spills of this size are relatively uncommon in New York. Between 1994 and 2011, the average annual volume of all oil spills into US waterways was just 14,985 gallons, Coast Guard records show.

A Wave of Acquisitions

The acquisition of the plant by ArcLight is part of a wave of transactions around New York and the US over the last few years. As climate and shareholder activists pressure public companies to divest from high-emitting infrastructure, firms like NRG have rushed to offload fossil fuel assets, selling off bundles of aging plants like Arthur Kill and Oswego.

In New York, where researchers estimate over 20 percent of fossil fuel power plant capacity is now owned by private equity, companies like ArcLight appear to be jumping on the chance to collect fossil fuel infrastructure with uncertain futures under the 2019 Climate and Community Protection Act (CLCPA), which calls for a 100 percent emissions-free grid by 2040.

Many plants owned by private equity firms have been the subject of some of the state’s highest-profile battles over polluting infrastructure, including a rebuild of a fracked-gas plant in Newburgh, at a plant acquired in 2017 by private equity firm Tiger Infrastructure, and the Greenidge power plant in Dresden, which private equity firm Atlas Holdings repurposed for mining bitcoin and reopened in 2017, kicking off a fierce debate over fossil fuel-powered cryptocurrency mining in the state.

Unlike the publicly traded companies selling off the facilities, private equity companies insulate themselves through forming cascades of LLCs, which makes it nearly impossible to know who to point a finger at when something goes wrong, and they are exempt from most public disclosure rules. Their focus on loading up companies with debt to generate outsize profits for investors nearly always involves cost cutting, which can mean understaffing and delayed maintenance, according to researchers with the Private Equity Stakeholder Project.

Through its subsidiaries, such as Generation Bridge and Eastern Generation, ArcLight has been at the helm of these acquisitions. The PSC has given the greenlight to the purchase of at least six generation stations by ArcLight subsidiaries since 2015, approving all the transactions for lightened regulation. In the case of ArcLight subsidiaries’ latest buy ups, the Oswego, Arthur Kill, and Bethlehem plants—which all occurred after the passage of the CLCPA in 2019—the PSC has also approved the transactions for exemption from further environmental review. Emissions from private equity-held power plants across New York amount to an estimated one-sixth of total CO2 emissions by the state electricity sector, at a minimum.

According to a 2022 report by Americans for Financial Reform, ArcLight is the second most greenhouse gas emitting private equity firm in the world, and it has a particularly bad track record of seeking to keep rickety facilities open. It co-owns the Gavin Power Plant, a coal-burning facility in Cheshire, Ohio, whose emissions are linked with an estimated 244 deaths annually; and previously co-owned the Limetree Bay refinery, on St. Croix in the US Virgin Islands, which spewed oil onto nearby homes, and contaminated drinking water in 2021—shortly after ArcLight helped finance its reopening. Since 2000, ArcLight has paid over $700 million in penalties for environmental and safety violations.

In Oswego, according to filings with the PSC, some things changed after ArcLight acquired the facility. Just months prior to the spill, Consolidated Asset Management Services took over the plant’s operations. CAMS is a Houston-based investment advisory firm that advertises itself as an expert in environment, social, and governance issues. Former employees have characterized it as not being able to retain qualified workers and of possessing “zero knowledge” of oil and gas.

‘Squeezing Every Last Penny’

ArcLight and other private equity buyouts of oil and gas power plants could have even longer-lasting environmental, climate, and health impacts than that of the March oil spill in Oswego if, as some advocates fear, control by private equity enables the facilities to remain open, burning oil and gas longer than would otherwise be possible.

The CLCPA climate law charges state officials, including Public Service Commissioners, with overseeing the retirement of fossil fuel generation facilities and their replacement with renewable energy and storage capacity. The state has not yet adopted a detailed timeframe identifying which privately owned plants should retire and when. But climate and environmental justice advocates have suggested a blueprint for doing that in New York City. They say the city should start by shuttering the oldest emitters, known as “peaker plants,” which run only a few hours per year, produce high volumes of air pollution, and are overwhelmingly located in communities of color.