May 2003

Village Submits Application to Renew Title V Air Permit as Hearing Proceeds to Reopen Expiring Power Plant 2 Permit: NYSDEC Hears Community Comment and Discusses Technical Permit Issues - Old Diesels Decommissioned When $60 million New Turbine Project Operates

(Freeport, New York, May 13, 2003) - The Village Electric Department submitted application to the New York State Department of Environmental Conservation to renew and revise the Title V Air Permit for the existing Power Plant 2 facility. This "timely" application is submitted in accordance with NYS regulations, which require renewal applications to be submitted six months prior to expiration of the existing approval. The Title V renewal application addresses continued operation of the existing Fiat diesels until the new generation combustion turbine project completes construction, startup and testing, and the continued operation of the Curtiss Wright turbine now and after the Fiat diesels are decommissioned. The application process reflects an unusual regulatory situation where there are two parallel proceedings for operation of the same equipment.

The public hearing for the reopening Title V Air Permit for the existing Power Plant 2 diesel generators and Curtiss Wright turbine continued last Wednesday evening, since being adjourned by the NYS Department of Environmental Conservation in October of 2001. The hearing held at Freeport High School provided an opportunity for any interested member of the public to submit unsworn, lay comments to NYSDEC.

The hearing continued Thursday in a formal proceeding before the Administrative Law Judge, Hon. Molly T. McBride. Participation in those formal proceedings is limited to the "parties" in accordance with the technical regulations of NYSDEC, including the applicant (the Village of Freeport Electric Department) and technical staff of the NYSDEC. NY Public Interest Research Group (NYPIRG) and Joseph Kralovich of the Old Lindenmere Civic Association also sought formal party status. Judge McBride has not yet ruled on their "party status".

Parties will then proceed with formal technical discussions related to conditions of the proposed Title V Air Permit modification.

In the eighteen months since the proceeding to reopen the Title V permit was suspended by the NYSDEC, Freeport Electric has been aggressively working to implement new electric generating facilities at the Power Plant 2 site. Despite various regulatory, contractual and bidding delays, air permits for the new 47 MW combustion turbine are expected this month, allowing construction to begin. Last week, the Village announced the award of the construction bids for both the combustion turbines and the electric and gas transmission lines. The new generation project represents a financial commitment of over $64 million by the Village to replace the old diesel technology at PP2, to increase Village generating capacity to meet NYISO requirements.

As soon as the new combustion turbine has completed start up and testing, the Village will decommission the old diesel generators in accordance with a decommissioning plan to be submitted to NYSDEC. The application to renew the air permit sets limits on use of the Curtiss Wright turbine pending compliance testing of that unit.

Under the terms of an interim agreement with LIPA in place since March 2002, the Fiat diesels are only operated under NYISO direction or in the event of a catastrophic system failure. In early March of this year, the Village operated Power Plant 2 diesels for approximately 2 hours when a catastrophic failure of the electric distribution system cut off all residents and businesses in south Freeport from all other sources of electricity.

"We are committed to construction and operation of the new generation facilities at Power Plant 2 as soon as possible," stated Hubert Bianco Superintendent of Electric Utilities. " We will continue to cooperate with the NYSDEC. We look forward to the timely issuance of permits to construct the combustion turbine and gas and electric transmission facilities. These permits will bring us to the inevitable and desired outcome of permanently replacing the aged diesel technology with the latest combustion turbines equipped with state of the art air pollution controls. To facilitate the timely resolution of the Title V permit matters, we encourage the State to either roll the permit renewal into the hearing process directed at reopening the permit conditions, or to continue the hearing to address the permit renewal application."