LEWISTON — The city will get control of the downtown canal system and all of its electricity-generating equipment — including generators under Bates Mill No. 5 — in an agreement with NextEra Energy.

Councilors approved a letter of agreement with the utility at their meeting Tuesday. Lincoln Jeffers, interim economic development director, said the deal will make it much easier to fully develop the downtown area, use the canals and decide Bates Mill No. 5’s fate once and for all.

“The canals are recognized as blighted and under-utilized,” Jeffers said. “This gives us site control, allowing River Front Island development to happen more easily and really open up the options down there.”

Under the plan, Lewiston would close its generator at the Upper Androscoggin Generating Station just south of Locust Street and surrender its federal license to generate electricity.

The utility would transfer canal ownership to the city and would guarantee to keep water flowing at 70 cubic feet per second.

“That would keep the water flowing at historic levels, once we plug all of the leaks,” Jeffers said.

NextEra plans to install $2 million worth of new rubber dams at the Lewiston sections of the Monty Hydro facility and the Deer Rips Dam, and the city would create a tax-increment financing district for that work.

The TIF tax-break money would pay for repairing leaks at dams, weirs and gates along the canal. Canal repairs are expected to cost $750,000.

“That’s basically just plugging the leaks and sealing it,” Jeffers said. “Anything else the council decides it wants to do down the road will be something else.”

The deal also includes all of NextEra’s water-generating assets along the canal, especially the massive turbines under Bates Mill No. 5, the saw-tooth-roofed building along Main and Canal streets. Owning those will allow the city to completely demolish the building.

“It was a challenge in the past,” Jeffers said. “When the council decided to demolish the building previously, we would have had to stop at the last two saw-tooths, and pay to build a wall around that facility. We managed to work around it, but it was a challenge. So, this really opens up the options for what we can do with Bates Mill 5.”

Lewiston also gets an indemnity agreement, protecting it from having to pay for environmental cleanup costs at the generator site.

The city and NextEra began negotiating for the canals in 2009.

The canals were dug in the mid-1800s and have been a feature of the downtown ever since. The 4,400-foot-long main canal runs from just above the Great Falls, through downtown along Canal Street to Gully Brook, where it empties into the Androscoggin River.

Cross Canal cuts off from the main canal at about Ash Street, running to the river. The lower canal cuts off from Cross Canal at about Oxford Street, running parallel to the main canal before turning back to the river at about Chestnut Street.

Jeffers said the city has a two-month due diligence period to review the agreement and create the TIF district. Councilors will have to approve that district before the deal is finalized.

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