Judge dismisses Shoreham school district suit seeking higher PILOTs for battery facility

A State Supreme Court judge on Monday dismissed a case by the Shoreham-Wading River Central School District alleging a Brookhaven Town agency underestimated payments due from the developer of a large battery energy storage facility at the Shoreham nuke-plant site.

The order by Justice James F. Matthews in Riverhead tosses a lawsuit filed in June by the district and its board vice president, James Smith, also a taxpayer in the district, seeking higher so-called payments in lieu of taxes that are more aligned with usage at the plant, according to court papers.

Battery plant developer KCE New York, also known as Key Capture Energy, was also a  defendant in the suit.

In his order dismissing the district’s suit, Matthews ruled the school district lacked standing because it “is not a taxpayer and has no injury in fact.”

KCE has a contract with LIPA to build and operate a 50-megawatt battery storage plant on LIPA property at the mothballed nuclear power plant for 20 years. KCE, as part of its effort to develop the plant, reached an agreement with the Town of Brookhaven Industrial Development Agency for reduced property, sales and use taxes for the project. KCE in turn agreed to PILOTs at $100,000 a year starting in the first year and building to $137,500 by year 20. 

KCE plans to use 2.2 acres of the 47-acre LIPA-owned power plant site (the surrounding hundreds of undeveloped acres are owned by National Grid).

The district in its suit charged that the IDA did not value the battery facility "at full value," but rather by their "megawatt output," similar to solar and wind projects. That valuation, the district charged, was "unlawful, improper, in excess of the [IDA's] authority and jurisdiction, in violation of lawful procedure [and] affected by an error of law." 

Representatives for the district and their attorney, Christopher Shishko, did not respond to inquiries seeking specifics on the payment schedule and its alleged deficiencies. Lisa Mulligan, chief executive of the Brookhaven IDA, declined to comment on ongoing litigation. It’s uncertain if the district plans to appeal.

LIPA a year ago approved a resolution for KCE to build and operate two battery facilities—the 50-megawatt plant in Shoreham and a 79-megawatt facility in Hauppauge. KCE said the Shoreham plant would cost ratepayers an average of 11 cents a month on their energy bills when the system is in operation by 2028.

In an affidavit included in the suit, Smith testified the IDA’s “unlawful usage of the solar and wind method of valuation to valuate the [Shoreham] BESS project” results in “inaccurate[ly] valued exemptions and tax abatements” for the developer that would lead to “an additional tax burden placed on district taxpayers such as myself.”

In its motion seeking to dismiss the case, the IDA and KCE countered it has been “clear for 30 years that a school district and the board of education cannot bring litigation challenging a PILOT.”

Most Long Island towns, including Islip where the KCE Hauppauge facility is proposed, have moratoriums in place that would limit or bar battery storage facilities within the municipalities. Brookhaven Town, which includes the Shoreham plant, has no such moratorium, and at least eight facilities have been proposed for the town.

Town hearings and reviews of needed permits for the facilities in Brookhaven are expected to begin next year as new fire safety codes for the plants backed by the state take effect.

The Hauppauge Fire District has been an opponent of KCE’s 79-megawatt lithium ion battery facility near a LIPA substation in Hauppauge, saying such facilities pose a fire risk and should not be located in densely populated areas, schools and homes. LIPA and the state say the batteries are needed for a greening energy grid, and that the new fire codes will ensure their safe operation. 

Fires at three plants across the state in 2023, including one in East Hampton, had heightened concerns about the plants.  

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.