NRG works with National Grid on N.Y. Dunkirk coal power conversion

Dec 20 (Reuters) - U.S. power company NRG Energy Inc (NYSE: NRG - news) said Friday it is working with National Grid Plc (LSE: NG.L - news) to finalize a contract to convert NRG's Dunkirk coal plant in Upstate New York into a 445-megawatt natural gas-fired facility.

There are four units at the Dunkirk plant - the 75-MW Units 1 and 2 and the 185-MW Units 3 and 4.

NRG spokesman Dave Gaier said Units 1, 3 and 4 are currently mothballed and Unit 2 is running on coal under contract until 2015.

Under the deal announced by New York Governor Andrew Cuomo earlier in the week, NRG will build a gas pipeline to Dunkirk and convert Units 2-4 to run on natural gas by the autumn of 2015. Unit 1 will remain mothballed, Gaier said.

The contract NRG and National Grid are working on is a 10-year reliability and congestion management deal worth about $150 million, according to the governor's release.

A unit of National Grid distributes power to about 1.5 million customers in Upstate New York.

Gaier said in addition to the deal with National Grid, NRG will be able to sell the power and capacity from the plant in the wholesale electric market.

He could not say what it will cost NRG to convert the plant from coal to gas. Local (Frankfurt: OTQ.F - news) papers however estimated NRG's total investment at about $300 million, including the conversion, pipeline, fuel, taxes, maintenance and other operating costs.

In the future, NRG may decide to build a new combined-cycle gas-fired power plant at the Dunkirk site.

The conversion from coal to gas of the existing facility will create about 50 construction jobs, preserve permanent jobs and restore tax payments to local governments to their previous level of about $8 million annually, the governor said in his statement.

NRG is the largest taxpayer in Chautauqua County, New York State Senator Catharine Young said in the governor's statement.

The state Public Service Commission (PSC) must approve the deal.

On Thursday, a group of ratepayers opposed to the conversion due in part to its cost filed a lawsuit against the PSC in state court demanding access to documents related to the deal.

Gaier said he could not comment on the lawsuit since it was directed at the PSC. Officials at the PSC were not immediately available for comment.