New York City is the testing ground for a $39.3 million Department of Homeland Security project that will use new superconductor cables designed to prevent blackouts caused by power surges.

"This is about Wall Street, this is about making the electric grid for the financial capital of the world ... more defensible against potential problems," including a terrorist attack, Jay M. Cohen, the agency's undersecretary for science and technology, told The Associated Press.

The agency last week signed a $1.7 million contract with American Superconductor Corp. (AMSC) to make high temperature cables, which will be used by New York utility Consolidated Edison Inc. (ED) under the terms of a separate contract.

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Financial terms of the deal between the two companies were not disclosed, but Con Ed and American Superconductor are together providing one third of the funding for the project, according to the government.

The "secure super grids" use high-temperature superconductor wires and power cables to increase power while maintaining the ability to suppress surges, American Superconductor said.

Jason Fredette, a spokesman for Westborough, Mass.-based firm, said the company's goal is to expand to other major metropolitan areas and urban centers after a successful "proof of concept" in New York.

Cohen said his office is only limited by resources and that because New York City is a principal terror target, "you get the biggest bang for your buck by making Wall Street more resilient."

The design process will start this week with a focus on ensuring that the lab demonstrations are rigorous enough to work at the city's substations, said Con Ed spokesman Michael Clendenin.

If the cables work under New York City's congested streets, they should work anywhere, he added.

The DHS program is a small part of an overall expansion and upgrade to Con Ed's system. The power company earlier this month asked state regulators for a rate increase that would raise its average customers' electricity bills by 11.6 percent beginning next April.

If approved, it would bring Con Ed, which is spending more than $7.5 billion on the project over the next five years, an additional $1.2 billion in revenue, Clendenin said.

Nearly 175,000 people in Queens lost service for up to a week last summer, which led to a Public Service Commission report that said the utility needed to make "substantial" improvements.

If the secure super grid concept is proven to work in the Big Apple, electric companies, utilities, and state and local governments nationwide can pursue similar programs, Cohen said.

DHS has earmarked $5 million for the project this year with the remaining $20 million coming over the next three years, according to DHS.

Shares of American Superconductor added $2.76, or 18.4 percent, to $17.76 Monday after earlier hitting a 52-week high of $18. The company's stock has traded between $6.73 and $15.24 in the past year. Con Ed shares rose 5 cents to $51.