MINUTES OF THE REGULAR MEETING OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

December 19, 2006

 

 

Table of Contents

 

            Subject                                                                                                                                    

 

1.              Minutes of the Regular Meeting held on November 28, 2006                                

2.              Financial Reports for the Eleven Months Ended November 30, 2006 - Exhibit  “2-A”

3.              Report from the President and Chief Executive Officer                                           

4.              Allocation of 2,100 kW of Hydro Power - Exhibit “4-A” – “4-A2”
Resolution

5.              Power for Jobs Program – Extended Benefits - Exhibit “5-A”
Resolution

6.              Power for Jobs Program – Extended Benefits – 2007 - Exhibit “6-A” & “6-B”
Resolution

7.              Economic Development Plan – Use of Net Revenues Produced by Sale of Expansion Power
Resolution

8.              Modification of Westchester County Governmental Customer  Pricing and Implementation of Energy Charge Adjustment Clause – Notice of Adoption - Exhibit “8-A” – “8-C” 
Resolution

9.              Increase in New York City Governmental Customer Rates – Notice of Adoption - Exhibit “9-A” – “9-C”  
Resolution

10.           Westchester County Governmental Customers – New Supplemental Electricity Agreements - Exhibit “10-A” & “10-B”  
Resolution

11.           2007 Operation and Maintenance, Capital and Fuel Budgets - Exhibit “11-A”
Resolution

12.           Approved Budget and Financial Plan Information Pursuant to New Regulations of the Office of the State Comptroller - Exhibit “12-A” & “12-B”  
Resolution

13.           Robert Moses Niagara Power Project – Standardization of the Upgrade Program Prototype Unit – Expenditure Authorization
Resolution     

14.           Proposed Niagara University Hydropower Contracts – Notice of  Public Hearing - Exhibit “14-A”  
Resolution

15.           Lease of Office Space in the Clarence D. Rappleyea Building to Thomas M. Bona, P. C. - Exhibit “15-A” & “15-B”  
Resolution

16.           Sublease of Office Space in the Paramount Building, 1633 Broadway, New York City, to Cellfish Media, LLC -  Exhibit “16-A” & “16-B”  
Resolution

17.           Informational Item: Permit for Temporary Use of Office Space in the Clarence D. Rappleyea Building to Westchester County Narcotics Initiative and
 Westchester County Office of the  District Attorney
Resolution

18.           Motion to Conduct an Executive Session                                                                

19.           Motion to Resume Meeting in Open Session                                                          

20.           Procurement (Services) and Other Contracts – Business Units and Facilities – Awards - Exhibit “20-A”  
Resolution

21.           Procurement (Services) Contracts – Business Units and Facilities – Extensions, Approval of Additional Funding and Increase in Compensation Ceiling - Exhibit “21-A”  
Resolution

22.           Conditional Award of Contract and Authorization to Negotiate a Strategic Alliance with NRG Energy, Inc. Regarding Proposed Advanced Clean Coal Power Plant Facility
Resolution

23.           Authorization of Actions to Initiate the Establishment of a Trust for Other Post-Employment Benefits
Resolution

24.           Power for Jobs and Energy Cost Savings Benefits – Chapter 645 of the Laws of 2006 – Voluntary Contributions
Resolution

25.           Resolution – Robert J. Deasy                                                                                    

26.           Resolution – Michael E. Brady                                                                                   

27.           Other Business                                                                                                              

28.           Next Meeting                                                                                                                

            Closing                                                                                                                           


 

                Minutes of the Regular Meeting of the Power Authority of the State of New York held at the Clarence D. Rappleyea Building, White Plains, New York, at 11:00 a.m.

 

Present:                  Frank S. McCullough, Jr., Chairman

                                Michael J. Townsend, Vice Chairman

                                Elise M. Cusack, Trustee

                                Robert E. Moses, Trustee

                                Thomas W. Scozzafava, Trustee

                                Joseph J. Seymour, Trustee

                                Leonard N. Spano, Trustee

 

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Timothy S. Carey                                 President and Chief Executive Officer

Joseph Del Sindaco                             Executive Vice President and Chief Financial Officer

Thomas J. Kelly                                    Executive Vice President and General Counsel

Vincent C. Vesce                                  Executive Vice President – Corporate Services and Administration

Robert J. Deasy                                    Senior Vice President – Energy Resource Management

Steven J. DeCarlo                                 Senior Vice President – Transmission

Angelo S. Esposito                              Senior Vice President – Energy Services and Technology

Louise M. Morman                              Senior Vice President – Marketing and Economic Development

William J. Nadeau                                Senior Vice President – Energy Resource Management and Strategic Planning

Brian Vattimo                                        Senior Vice President – Public and Governmental Affairs

Edward A. Welz                                   Senior Vice President and Chief Engineer – Power Generation

Thomas P. Antenucci                          Vice President – Project Management

Arnold M. Bellis                                   Vice President – Controller

Arthur M. Brennan                              Vice President – Internal Audit and Compliance

John M. Hoff                                        Vice President – Procurement and Real Estate

Donald A. Russak                                Vice President – Finance

William V. Slade                                   Vice President – Environment, Health and Safety

Thomas H. Warmath                           Vice President and Chief Risk Officer

Daniel Wiese                                        Vice President and Inspector General – Corporate Security

James H. Yates                                     Vice President – Major Account Marketing and Economic Development

Anne B. Cahill                                      Corporate Secretary

Angela D. Graves                                 Deputy Corporate Secretary

Michael E. Brady                                  Treasurer

Dennis T. Eccleston                            Chief Information Officer

Joseph J. Carline                                  Assistant General Counsel – Power and Transmission

Amy J. Levine                                       Principal Attorney II – Power and Transmission

Timothy Sheehan                                 Principal Attorney II – Finance Affairs

Denise D’Ambrosio                             Principal Attorney I – Finance and Risk Management

Frederick E. Chase                               Executive DirectorHydro Relicensing

Paul F. Finnegan                                  Executive Director – Public and Governmental Affairs

John J. Suloway                                   Executive Director – Licensing, Implementation and Compliance

Jordan Brandeis                                   Director – Supply Planning, Pricing and Power Contracts

Connie Cullen                                       Director – Media Relations

Thomas A. Davis                                 Director – Financial Planning

Lydia Helle Maide                                Director – Major Accounts Group

James F. Pasquale                                Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing

Joan Tursi                                             Director – Budgets

Mary Jean Frank                                  Associate Corporate Secretary

Steven Lockfort                                    Manager – Risk Reporting

John J. Canale                                       Project Manager

Oksana U. Karaczewsky                     Senior Procurement Compliance Coordinator

Jeffrey Carey                                         Special Assistant to President and Chief Executive Officer

Jack Murphy                                         Temporary PR Counsel

Steven Mitnick                                     Transition Office of New York State Governor-Elect Eliot Spitzer

Eileen M. Natoli                                    Director, Governor’s Office of Regulatory Reform

Jim Rolson                                             Reporter, Bloomberg News

Jay Simonis                                           Manager, Endicott Interconnect

 

 


 

Chairman McCullough presided over the meeting.  Secretary Cahill kept the Minutes.

 

 


 

1.             Approval of the Minutes

 

The Minutes of the Regular Meeting of November 28, 2006 were unanimously adopted.

 

 

2.             Financial Reports for the Eleven Months Ended November 30, 2006

 

Mr. Bellis provided the Financial Reports for the eleven months ended November 30, 2006


 

3.             Report from the President and Chief Executive Officer

               

                President Carey welcomed Steven Mitnick, a member of Governor-Elect Spitzer’s transition team, to the meeting. 

 

 

4.             Allocation of 2,100 kW of Hydro Power  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve two allocations of available Replacement Power (‘RP’), totaling 2,100 kW, to two industrial companies.

 

BACKGROUND

 

“Under the RP Settlement Agreement, National Grid (‘Grid’) (formerly Niagara Mohawk Power Corporation), with the approval of the Authority, identifies and selects certain qualified industrial companies to receive delivery of RP.  Qualified companies are current or future industrial customers of Grid that have or propose to have manufacturing facilities for the receipt of RP within 30 miles of the Authority’s Niagara Switchyard.  RP is up to 445,000 kW of firm hydro power generated by the Authority at its Niagara Power Project that has been made available to Grid, pursuant to the Niagara Redevelopment Act (through December 2005) and Chapter 313 of the 2005 Laws of the State of New York.

 

DISCUSSION

 

“On October 22, 2003, the Authority, Grid, Empire State Development Corporation and the Buffalo Niagara Enterprise signed a Memorandum of Understanding (‘MOU’) that outlines the process to coordinate marketing and allocating Authority hydro power.  The entities noted above have formed the Western New York Advisory Group (‘Advisory Group’) with the intent of better using the value of this resource to improve the economy of Western New York and the State of New York.  Nothing in the MOU changes the legal requirements applicable to the allocation of hydro power. 

 

                “Based on the Advisory Group’s discussions, staff recommends that the available power be allocated among two companies as set forth in Exhibit ‘4-A.’  The Exhibit shows, among other things, the amount of power requested by each company, the recommended allocation and additional employment and capital investment information.  These projects will help maintain and diversify the industrial base of Western New York and provide new employment opportunities.  They are projected to result in the creation of 32 jobs.

 

RECOMMENDATION

 

“The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees approve the allocation of 2,100 kW of hydro power to the companies listed in Exhibit ‘4-A.’

 

“The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development, the Vice President – Major Accounts Marketing and Economic Development and I concur in the recommendation.”

 

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Trustee Seymour, Mr. Pasquale said that eligibility for hydro power allocations was limited to companies within a 30-mile radius of the Niagara plant.  President Carey pointed out that the projects planned by the companies requesting the allocations involve an investment of company capital as well.

 

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the allocation of 2,100 kW of Replacement Power, as detailed in Exhibit “4-A,” be, and hereby is, approved on the terms set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 


 

 

 

 

 

 

 

 

 


 

APPLICATION SUMMARY

Replacement Power

 

Company:                                              EPCO Carbon dioxide Products Inc.

 

Location:  Medina

                                                                  

County:                                                  Orleans County

 

IOU:                                                       National Grid

 

Business Activity:                               Manufacturer of purified liquid carbon dioxide

 

Project Description:                           EPCO will install a new 300-ton per-day liquid CO2 manufacturing plant, complete with compressor skids, clean-up systems, control systems and storage tanks.  The project will include a building to house the equipment.  In addition, the company will invest in tractor and trailers.

 

Prior Application:                               None

 

Existing Allocation:                            None

 

Power Request:                                    2,100 kW

                                               

Power Recommended:                        1,000 kW  

 

Job Commitment:

                   Existing:                              0 jobs

                   New:                                    20 jobs

 

New Jobs/Power Ratio:                      20 jobs/MW

 

New Jobs –

Avg. Wage and Benefits:                   $64,000

 

Capital Investment:                             $7 million 

 

Capital Investment                              $7 million/MW

Per MW

 

Summary:                                             EPCO manufactures purified liquid carbon dioxide.  The company purchases CO2 gas, which is a by-product of ammonia and ethanol plants and gas wells.  After purchasing the gas, EPCO purifies and liquefies it at its liquefaction plants adjacent to the host facilities.  EPCO then sells the liquid CO2 to both wholesalers and end users of CO2.  Electricity is a critical component of the overall manufacturing cost of CO2, representing about 40-50% of the total cost.

 

 


 

APPLICATION SUMMARY

Replacement Power

 

Company: Saint-Gobain Ceramics & Plastic, Inc.

 

Location:  Niagara Falls

                                                                  

County:                                                  Niagara County

 

IOU:                                                       National Grid

 

Business Activity:                               Manufacturer of ceramic abrasive grain

 

Project Description:                           Saint-Gobain will add additional capacity for both existing products and new products that have been developed by the company’s R&D group.  The company will purchase and install new equipment, including processing kilns, electrically heated dryers and other supporting equipment and machines.

 

Prior Application:                               Yes

 

Existing Allocation:                            2,200 kW of RP 

 

Power Request:                                    1,270 kW

                                               

Power Recommended:                        1,100 kW  

 

Job Commitment:     

                   Existing:                            57 jobs

                   New:                                    12 jobs

                                                                  

New Jobs/Power Ratio:                      11 jobs/MW

 

New Jobs –

Avg. Wage and Benefits:                   $58,000

 

Capital Investment:                             $4.6 million 

 

Capital Investment                              $4.2 million/MW

Per MW

 

Summary:                                             This investment is crucial to the future viability of this operation, since it shifts the mix of products away from standard seeded gel abrasive, which is being replaced by new and more advanced products.  Saint Gobain will add specialty products that have diversified markets.  The project will also help the company’s competitiveness in the worldwide markets that it serves, as well as help it compete with its sister plant in France that is in a position to develop and manufacture these products.  In addition, Niagara County will support training grants for Saint Gobain.

 

  


 

5.             Power for Jobs Program - Extended Benefits

 

The President and Chief Executive Officer submitted the following report:

 

Summary

 

“The Trustees are requested to approve extended benefits for 49 Power for Jobs (‘PFJ’) customers as listed in Exhibit ‘5-A.’  These customers have been recommended to receive such extended benefits by the Economic Development Power Allocation Board (‘EDPAB’). 

 

BACKGROUND

 

                “In July 1997, the New York State Legislature and Governor George E. Pataki approved a program to provide low-cost power to businesses and not-for-profit corporations that agree to retain or create jobs in New York State.  In return for commitments to create or retain jobs, successful applicants receive three-year contracts for PFJ electricity.

 

“The PFJ program originally made 400 megawatts (‘MW’) of power available.  The program was to be phased in over three years, with approximately 133 MW made available each year.  In July 1998, as a result of the initial success of the program, the Legislature and Governor Pataki amended the PFJ statute to accelerate the distribution of the power, making a total of 267 MW available in Year One.  The 1998 amendments also increased the size of the program to 450 MW, with 50 MW to become available in Year Three.

 

                “In May 2000, legislation was enacted that authorized another 300 MW of power to be allocated under the PFJ program.  The additional MW were described in the statute as ‘phase four’ of the program.  Customers that received allocations in Year One were authorized to apply for reallocations; more than 95% reapplied.  The balance of the power was awarded to new applicants.

 

                “In July 2002, legislation was signed into law by Governor Pataki that authorized another 183 MW of power to be allocated under the program.  The additional MW were described in the statute as ‘phase five’ of the program.  Customers that received allocations in Year Two or Year Three were given priority to reapply for the program.  Any remaining power was made available to new applicants. 

 

“Chapter 59 of the Laws of 2004 extended the benefits for PFJ customers whose contracts expired before the end of the program in 2005.  Such customers had to choose to receive an ‘electricity savings reimbursement’ rebate and/or a power contract extension.  The Authority was also authorized to voluntarily fund the rebates, if deemed feasible and advisable by the Trustees.

 

“PFJ customers whose contracts expired on or prior to November 30, 2004 were eligible for a rebate to the extent funded by the Authority from the date their contract expired through December 31, 2005.  As an alternative, such customers could choose to receive a rebate to the extent funded by the Authority from the date their contract expired as a bridge to a new contract extension, with the contract extension commencing December 1, 2004.  The new contract would be in effect from a period no earlier than December 1, 2004 through the end of the PFJ program on December 31, 2005.

 

“PFJ customers whose contracts expired after November 30, 2004 were eligible for rebate or contract extension, assuming funding by the Authority, from the date their contracts expired through December 31, 2005.

 

“Approved contract extensions entitled customers to receive the power from the Authority pursuant to a sale-for-resale agreement with the customer’s local utility.  Separate allocation contracts between customers and the Authority contained job commitments enforceable by the Authority.

 

“In 2005, provisions of the approved State budget extended the period PFJ customers could receive benefits until December 31, 2006.  In 2006, a new law (Chapter 645 of the Laws of 2006) included provisions extending program benefits until June 30, 2007.

 

“Section 189 of the New York State Economic Development Law, which was amended by Chapter 59 of the Laws of 2004, provided the statutory authorization for the extended benefits that could be provided to PFJ customers.  The statute stated that an applicant could receive extended benefits ‘only if it is in compliance with and agrees to continue to meet the job retention and creation commitments set forth in its prior power for jobs contract.’

 

“Chapter 313 of the Laws of 2005 amended the above language to allow EDPAB to consider continuation of benefits on such terms as it deems reasonable.  The statutory language now reads as follows:

 

An applicant shall be eligible for such reimbursements and/or extensions  only  if  it  is  in compliance  with  and  agrees  to continue to meet the job retention and creation commitments set forth in its prior power for jobs contract, or such other commitments as the board deems reasonable. (emphasis supplied)

 

“At its meeting of October 18, 2005, EDPAB approved criteria under which applicants whose extended benefits EDPAB had reduced for non-compliance with their job commitments could apply to have their PFJ benefits reinstated in whole or in part.  EDPAB authorized staff to create a short-form application, notify customers of the process, send customers the application and evaluate reconsideration requests based on the approved criteria.  To date, staff has mailed 200 applications, received 109 and completed review of 108.

 

DISCUSSION

 

“At its meeting on December 19, 2006, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 49 businesses listed in Exhibit ‘5-A.’  Collectively, these organizations have agreed to retain more than 69,000 jobs in New York State in exchange for rebates.  The rebate program will be in effect until June 30, 2007, the program’s sunset. 

 

                “The Trustees are requested to approve the payment and funding of rebates for the companies listed in Exhibit ‘5-A’ in a total amount currently not expected to exceed $4.6 million.  Staff recommends that the Trustees authorize a withdrawal of monies from the Operating Fund for the payment of such amount, provided that such amount is not needed at the time of withdrawal for any of the purposes specified in Section 503(1)(a)-(c) of the General Resolution Authorizing Revenue Obligations, as amended and supplemented.  Staff expects to present the Trustees with requests for additional funding for rebates to the companies listed in the Exhibit in the future.

 

FISCAL INFORMATION

 

“Funding of rebates for the companies listed on Exhibit ‘5-A’ is not expected to exceed $4.6 million.  Payments will be made from the Operating Fund.  To date, the Trustees have approved $60 million in rebates.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Financial Officer and the Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommend that the Trustees approve the payment of electricity savings reimbursements to the Power for Jobs customers listed in Exhibit ‘5-A.’

 

                “The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development, the Senior Vice President – Public and Governmental Affairs, the Vice President – Major Account Marketing and Economic Development and I concur in the recommendation.”

 

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman McCullough, Mr. Pasquale said that all of the companies whose allocations had been reduced had been notified of the reductions, as well as the process for reconsideration of the reductions.  Chairman McCullough added that a very high percentage of those companies had applied for such reconsideration.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

WHEREAS, the Economic Development Power Allocation Board (“EDPAB”) has recommended that the Authority approve electricity savings reimbursements to the Power for Jobs (“PFJ”) customers listed in Exhibit “5-A”;

 

NOW THEREFORE BE IT RESOLVED, That to implement such EDPAB recommendations, the Authority hereby approves the payment of electricity savings reimbursements to the companies listed in Exhibit “5-A,” and that the Authority finds that such payments for electricity savings reimbursements are in all respects reasonable, consistent with the requirements of the PFJ program and in the public interest; and be it further

 

RESOLVED, That based on staff’s recommendation, it is hereby authorized that payments be made for electricity savings reimbursements as described in the foregoing report of the President and Chief Executive Officer in the aggregate amount of up to $4.6 million, and it is hereby found that amounts may properly be withdrawn from the Operating Fund to fund such payments; and be it further

 

RESOLVED, That such monies may be withdrawn pursuant to the foregoing resolution upon the certification on the date of such withdrawal by the Vice President – Finance or the Treasurer that the amount to be withdrawn is not then needed for any of the purposes specified in Section 503(1)(a)-(c) of the General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development or her designee be, and hereby is, authorized to negotiate and execute any and all documents necessary or desirable to effectuate the foregoing, subject to the approval of the form thereof by the Executive Vice President and General Counsel; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents to effectuate the foregoing resolutions, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 


 


 

 


 

6.             Power for Jobs Program - Extended Benefits - 2007

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve extended benefits for two Power for Jobs (‘PFJ’) customers as listed in Exhibits ‘6-A’ and ‘6-B’ until June 30, 2007 to reflect recently enacted changes in the law.  These customers have been recommended to receive such extended benefits by the Economic Development Power Allocation Board (‘EDPAB’). 

 

BACKGROUND

 

                “In July 1997, the New York State Legislature and Governor George E. Pataki approved a program to provide low-cost power to businesses and not-for-profit corporations that agree to retain or create jobs in New York State.  In return for commitments to create or retain jobs, successful applicants receive three-year contracts for PFJ electricity.

 

“The PFJ program originally made 400 megawatts (‘MW’) of power available.  The program was to be phased in over three years, with approximately 133 MW made available each year.  In July 1998, as a result of the initial success of the program, the Legislature and Governor Pataki amended the PFJ statute to accelerate the distribution of the power, making a total of 267 MW available in Year One.  The 1998 amendments also increased the size of the program to 450 MW, with 50 MW to become available in Year Three.

 

                “In May 2000, legislation was enacted that authorized another 300 MW of power to be allocated under the PFJ program.  The additional MW were described in the statute as ‘phase four’ of the program.  Customers that received allocations in Year One were authorized to apply for reallocations; more than 95% reapplied.  The balance of the power was awarded to new applicants.

 

                “In July 2002, legislation was signed into law by Governor Pataki that authorized another 183 MW of power to be allocated under the program.  The additional MW were described in the statute as ‘phase five’ of the program.  Customers that received allocations in Year Two or Year Three were given priority to reapply for the program.  Any remaining power was made available to new applicants. 

 

“Chapter 59 of the Laws of 2004 extended the benefits for PFJ customers whose contracts expired before the end of the program in 2005.  Such customers had to choose to receive an ‘electricity savings reimbursement’ rebate and/or a power contract extension.  The Authority was also authorized to voluntarily fund the rebates, if deemed feasible and advisable by the Trustees.

 

“PFJ customers whose contracts expired on or prior to November 30, 2004 were eligible for a rebate to the extent funded by the Authority from the date their contract expired through December 31, 2005.  As an alternative, such customers could choose to receive a rebate to the extent funded by the Authority from the date their contract expired as a bridge to a new contract extension, with the contract extension commencing December 1, 2004.  The new contract would be in effect from a period no earlier than December 1, 2004 through the end of the PFJ program on December 31, 2005.

 

“PFJ customers whose contracts expired after November 30, 2004 were eligible for rebate or contract extension, assuming funding by the Authority, from the date their contracts expired through December 31, 2005.

 

“Approved contract extensions entitled customers to receive the power from the Authority pursuant to a sale-for-resale agreement with the customer’s local utility.  Separate allocation contracts between customers and the Authority contained job commitments enforceable by the Authority.

 

“In 2005, provisions of the approved State budget extended the period PFJ customers could receive benefits until December 31, 2006.

 

“Section 189 of the New York State Economic Development Law, which was amended by Chapter 59 of the Laws of 2004, provided the statutory authorization for the extended benefits that could be provided to PFJ customers.  The statute stated that an applicant could receive extended benefits ‘only if it is in compliance with and agrees to continue to meet the job retention and creation commitments set forth in its prior power for jobs contract.’

 

“Chapter 313 of the Laws of 2005 amended the above language to allow EDPAB to consider continuation of benefits on such terms as it deems reasonable.  The statutory language now reads as follows:

 

An applicant shall be eligible for such reimbursements and/or extensions only if it is in compliance with and agrees to continue to meet the job retention and creation commitments set forth in its prior power for jobs contract, or such other commitments as the board deems reasonable. (emphasis supplied)

 

“At its meeting of October 18, 2005, EDPAB approved criteria under which applicants whose extended benefits EDPAB had reduced for non-compliance with their job commitments could apply to have their PFJ benefits reinstated in whole or in part.  EDPAB authorized staff to create a short-form application, notify customers of the process, send customers the application and evaluate reconsideration requests based on the approved criteria. 

 

“In 2006, a new law (Chapter 645 of the Laws of 2006) included provisions extending program benefits until June 30, 2007.

 

DISCUSSION

 

“At its meeting on December 19, 2006, EDPAB recommended that the Authority’s Trustees approve a contract extension to the business listed on Exhibit ‘6-A.’  Exhibit ‘6-B’ lists a business that EDPAB is recommending to continue to receive electricity savings reimbursements.  Together, these businesses have agreed to retain more than 400 jobs in New York State in exchange for the contract extension or rebate.  The contract will be extended and the rebate program will be in effect until June 30, 2007, the program’s newly enacted sunset date.  The power will be wheeled by the investor-owned utilities as indicated in the Exhibits. 

                 

FISCAL INFORMATION

 

“The cost of the rebate to the customer listed on Exhibit ‘6-A’ will not be known until 2007.  Payments will be made from the Operating Fund.  To date, the Trustees have approved $60 million in rebates.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Financial Officer and the Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommend that the Trustees approve the contract extension for, and the extension of eligibility to receive electricity savings reimbursements to,

 the Power for Jobs customers listed in Exhibits ‘6-A’ and ‘6-B.’

 

                “The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development, the Senior Vice President – Public and Governmental Affairs, the Vice President – Major Account Marketing and Economic Development and I concur in the recommendation.”

 

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

WHEREAS, the Economic Development Power Allocation Board (“EDPAB”) has recommended that the Authority approve a contract extension and an electricity savings reimbursement to the Power for Jobs (“PFJ”) customers listed in Exhibits “6-A” and “6-B”;

NOW THEREFORE BE IT RESOLVED, That to implement such EDPAB recommendations, the Authority hereby approves a contract extension for the company listed in Exhibit “6-A,” and the extension of eligibility to receive electricity savings reimbursements to the company listed in Exhibit “6-B”; and be it further

RESOLVED, That the Senior Vice President – Marketing and Economic Development or her designee be, and hereby is, authorized to negotiate and execute any and all documents necessary or desirable to effectuate the foregoing, subject to the approval of the form thereof by the Executive Vice President and General Counsel; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents to effectuate the foregoing resolutions, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 


 


 


 

7.             Economic Development Plan – Use of Net Revenues Produced by Sale of Expansion Power

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve Economic Development Plans (‘Plans’) covering the use of net revenues produced by the sale of Expansion Power (‘EP’) and to authorize the submission of such Plans to the Economic Development Power Allocation Board (‘EDPAB’) for the period of one year.

 

BACKGROUND

 

                “Chapter 32 of the Laws of 1987: (a) authorized the Authority to enter into new contracts for the sale of EP to customers in Western New York; (b) provided for the sale of industrial power as Economic Development Power (‘EDP’) under newly established criteria and (c) established EDPAB to review applications for EDP and to recommend approved applications to the Authority.

 

                “The eighth unnumbered paragraph of Section 1005 (13) of the Public Authorities Law (‘PAL’), as amended by Chapter 32, directs the Authority to identify net revenues produced by the sale of EP and, further, to identify an amount of such net revenues to be used solely for Industrial Incentive Awards.  These awards are to be made in conformance with Plans, covering all such net revenues, that are submitted by the Authority to EDPAB and are approved by EDPAB pursuant to Section 188 of the Economic Development Law (‘EDL’).

 

                “Net revenues are defined by Section 1005 as any excess of revenues properly allocated to the sales of EP over costs and expenses properly allocated to such sales.  The Authority is directed in Section 1005 to identify net revenues no less often than annually.  Section 188 of the EDL provides that EDPAB is to review each Plan applying the same economic development criteria as those used to evaluate applications for power.  The statute does not specify a definition of Industrial Incentive Awards.

 

                “In 1990, 1996 and 2001, the Authority approved a five-year program under which EP net revenues were to be dedicated to helping maintain stable industrial rates.  EDPAB has periodically approved such Plans for use of EP revenues to hold industrial rates at a stable level.

 

DISCUSSION

               

“Allocations of EDP have been a useful economic development tool.  EDPAB has recommended allocations associated with the creation or retention of more than 81,000 jobs, totaling 193 MW, to date.  The costs of providing EDP are greater than the revenues produced by such sales.  In order to continue to market this power on a competitive basis consistent with the aim of the legislation creating EDPAB, the rates for industrial power must be kept low enough to be of sufficient economic incentive for industries to locate or expand in New York State.

 

                “The Authority’s EDP programs were recently reviewed by the Temporary State Commission on the Future of New York State Power Programs for Economic Development and numerous changes in the form and administration of these programs were recommended.  Any such changes would require legislation.  Moreover, the Power for Jobs (‘PFJ’) and the Energy Cost Savings Benefit (‘ECSB’) programs will end on June 30, 2007.  The ECSB awards go to the same customers that benefit from current Industrial Incentive Award rate relief.  Thus, pending clarification on the future of these programs, it is appropriate to propose extensions of the Industrial Incentive Awards for one year instead of the usual five-year extension.

 

“It is therefore proposed that the Authority’s Chairman be authorized to submit the Authority’s Plans to EDPAB for the ensuing one-year period, providing for the use of all net EP revenues to support industrial rates, provided that the Chairman, at his discretion, may recommend to EDPAB a different use of such net revenues, consistent with statutory requirements.  The Authority will report to EDPAB on the effect of using these funds.

 

RECOMMENDATION

 

                “The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees authorize the Chairman to submit to the Economic Development Power Allocation Board for approval for the ensuing one-year period, Economic Development Plans that provide for the use of net revenues from the sale of Expansion Power to support industrial rates, provided that the Chairman, at his discretion, may recommend to the Economic Development Power Allocation Board a different use of such net revenues consistent with statutory requirements.

 

                “The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development and I concur with the recommendation.”

 

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees.  Chairman McCullough said that the future of these Plans depend on the actions of the State Legislature in the coming session.  Responding to a question from Trustee Seymour, Chairman McCullough said that these Plans cover just one year, instead of the usual five years, because of the uncertainties as to the future of the EDP programs.  He said that management would be monitoring any changes made and reporting back to the Trustees on them.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the Authority hereby approves Economic Development Plans that provide for the use of net revenues from the sale of Expansion Power to support industrial rates for a one-year period, or for such other use as determined by the Chairman, consistent with statutory requirements, in accordance with the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman or his designee be, and hereby is, authorized to submit annually for the next year Economic Development Plans to the Economic Development Power Allocation Board for review and approval; and be it further

 

RESOLVED, That the Chairman or his designee be, and hereby is, authorized to execute any and all documents necessary or desirable to effectuate such Economic Development Plans; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolutions, subject to the approval of the form thereof by the Executive Vice President and General Counsel.


 

8.             Modification of Westchester County Governmental Customer Pricing and Implementation of Energy Charge Adjustment Clause – Notice of Adoption 

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to take final action to approve a modification in the rates for the sale of firm power to the Westchester County Governmental Customers (‘Customers’) in 2007. 

 

“This proposed final action is twofold.  First, staff seeks approval to increase the production rates of the Customers by 25.8% on average as compared to 2006 rates effective with the January 2007 billing cycle.  Second, Trustee approval is requested to reinstitute a monthly Energy Charge Adjustment (‘ECA’) mechanism applicable to the Customers.  Implementation of these two elements will ensure that the Authority fully recovers the actual costs to supply electricity to the Customers.   

 

BACKGROUND

 

“At their September 26, 2006 meeting, the Trustees directed the publication in the New York State Register (‘State Register’) of notice that the Authority proposed to revise the production rates for the Customers and to reinstitute a monthly ECA mechanism, effective January 1, 2007.  Notification of the proposed rate modification was published in the State Register on October 11, 2006.  The public comment period closed on November 27, 2006, in accordance with the State Administrative Procedure Act (‘SAPA’).  Since this proposal would increase revenues to the Authority by more than 2%, a public forum was held at the Authority’s White Plains office on November 15, 2006, consistent with Authority policy.  No party made any comments at the public forum, and no written comments were submitted to the Authority through the end of the public comment period.

 

DISCUSSION

 

                “Because the production rates for the Customers remained unchanged from February 1990 through December 2004, with only modest increases in 2005 and 2006, a significant increase in the base rates is needed to recover the Authority’s actual costs of serving the Customers.  Significant cost components that drive this proposed rate increase include the cost of purchased power, the cumulative effects of inflation since 1990 and charges associated with the New York Independent System Operator (‘NYISO’).

 

“The 2007 production rate increase is based on a pro forma Cost-Of-Service (‘COS’).  The pro forma 2007 COS for the Customers is $44.4 million and revenues at current production rates are expected to be $35.3 million, resulting in a projected revenue deficiency of $9.1 million.  The new base production rates proposed would result in a 25.8% increase over 2006 rates.  Staff proposes to apply the production increase equally to both the base demand and energy rates.  Both the current and proposed new rates are contained in the table in Exhibit ‘8-A.’ 

               

                “In order for the Authority to recover all costs incurred to serve the Customers, the ECA mechanism will be reinstituted, replacing the tariff modifications approved by the Trustees in 1994.  Under this ECA mechanism, Authority invoices to the Customers will include a charge or credit each month that reflects the difference between the projected cost of electricity recovered by the base rates and the actual costs incurred by the Authority for, among other things, purchased power and NYISO charges.  Exhibit ‘8-B’ contains the final ECA tariff provision.  Staff supplied the Trustees with mark-ups to the existing tariff provision at their September 26th meeting.

 

                “Exhibit ‘8-C’ contains the public forum transcript, which indicates that no party made any comments on the Authority’s proposal.  Also, as indicated, the Authority received no written comments on its proposed rulemaking.  Because there were no public comments of any kind, this memorandum recommends the adoption without modification of the September 26th proposed rulemaking.

 

 

 

FISCAL INFORMATION

 

                “The adoption of the production rate increase would result in an estimated $9.1 million of additional revenue over current rates.

 

RECOMMENDATION

 

                “The Vice President – Major Account Marketing and Economic Development recommends that the Trustees authorize the Corporate Secretary to file a Notice of Adoption with the New York State Department of State for publication in the New York State Register of a modification in production rates and implementation of an Energy Charge Adjustment clause applicable to the Westchester County Governmental Customers.

 

                “It is also recommended that the Senior Vice President – Marketing and Economic Development, or her designee, be authorized to issue written notice of final action to the affected customers.

 

                “The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President – Marketing and Economic Development, the Vice President – Controller, the Vice President – Major Account Marketing and Economic Development, the Vice President – Finance, the Assistant General Counsel – Power and Transmission and I concur in these recommendations.”

 

Mr. Yates presented the highlights of staff’s recommendations to the Trustees.  In response to questions from Trustee Seymour, Ms. Morman said that the Authority’s electricity rates would still be lower than those of Con Edison and National Grid for the next couple of years and that it was conceivable in the future that these municipalities may not want to purchase their power from the Authority.  She said that the next item deals with this possibility by providing for shorter contract terms for these customers.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the Trustees adopt a modification in production rates and implementation of an Energy Charge Adjustment clause applicable to the Westchester County Governmental Customers as described in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development  or her designee be, and hereby is, authorized to issue written notice of this final action by the Trustees to the affected customers; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file such notices as may be required with the New York State Department of State for publication in the New York State Register and to submit such other notice as may be required by statute or regulation concerning the rate increase; and be it further

 

 

 

 

 

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all certificates, agreements and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.


 


 

 

Final Tariff Revision

 

Production Service Tariffs 11, 12, 13 and 77    

 

 

F.  Energy Charge Adjustment:

     The charges for electric service hereunder will be subject each month to an addition or a deduction when the "average cost of energy" for the previous month, as stated herein increases or decreases from the “base cost of energy” as defined below.

            The “base cost of energy” shall be equal to (a) the sum of the projected cost of fuel, purchased power, ancillary services and other NYISO-related charges and hedging costs to be incurred to serve the Westchester Governmental Customers for the calendar year in question, less (b) any projected NYISO capacity, energy, or ancillary service revenues or credits to be received by the Authority associated with providing service to  the Westchester Governmental Customers, as well as any other projected NYISO credits or revenues associated with providing service to the Westchester Governmental Customers (e.g., as a generator or a load serving entity), including Transmission Congestion Credits and rents associated with transmission paths determined by the Authority to be used in serving the Westchester Governmental Customers for the calendar year; all divided by the projected kilowatthour sales to such Westchester Governmental Customers for the calendar year.

            The “base cost of energy” expressed in cents per kilowatthour is 7.021 cents.  Such base cost may be amended from time to time.

            The "average cost of energy" shall be equal to (a) the sum of the costs of fuel, purchased power, ancillary services and other NYISO-related charges and hedging costs actually incurred in the previous month to serve the Westchester Governmental Customers, less (b) any NYISO capacity, energy, and ancillary service revenues or credits actually received in the previous month by the Authority and

 

 

 

 

associated with the service provided by the Authority to the Westchester Governmental Customers as well as any other NYISO credits or revenues actually received by the Authority and associated with providing service to the Westchester Governmental Customers (e.g., as a generator or a load serving entity), including Transmission Congestion Credits and rents associated with transmission paths determined by the Authority to be used in serving the Westchester Governmental Customers; all divided by the total kilowatt hours sold to such Westchester Governmental Customers for such previous month.

            The "average cost of energy" as determined hereinabove will be adjusted from time to time as determined by the Authority to permit reconciliation of revenues derived from Energy Charge Adjustments billed to the Westchester Governmental Customers in prior billing periods with energy‑related costs applicable to such billing periods.

            The difference between the "average cost of energy", including adjustments, and the “base cost of energy” shall be added to or subtracted monthly from the charges for electric service to the Westchester Governmental Customers.

 

 

 

 


 

9.             Increase in New York City Governmental Customer Rates – Notice of Adoption  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to take final action to approve an increase in the rates for the sale of firm power to the New York City Governmental Customers (‘Customers’) in 2007. 

 

“This proposed action is consistent with the rate-setting process set forth in the Long-Term Agreements (‘LTAs’) for the purchase of electric service executed by each of the Customers and the Authority.  Under this proposed final action, staff seeks approval to increase the ‘Fixed Costs’ component (as defined in the LTAs) of the Customers’ 2007 production rates.  This proposition, by itself, would increase the estimated billed production revenues of these Customers by 1.8% on average as compared to 2006 rates.

 

BACKGROUND

 

                “At their September 26, 2006 meeting, the Trustees directed the publication in the New York State Register (‘State Register’) of a notice that the Authority proposed to increase the Fixed Costs component of the production rates to be charged in 2007 to the Customers.  The Customers were directly notified of the proposed rate increase by mail on September 27, 2006.  The State Register notice was published on October 11, 2006.  Since this proposal would increase revenues to the Authority by less than the 2% required for a public forum under Authority procedures, none was held for this proposed action.  The public comment period closed on November 27, 2006.  Comments were filed pursuant to State Administrative Procedure Act (‘SAPA’) procedures by the City of New York’s Department of Citywide Administrative Services (‘City’) and jointly by the Port Authority of New York and New Jersey and the Metropolitan Transportation Authority (‘PA/MTA’). 

 

“As indicated in the September 26th memorandum to the Trustees, under the LTAs the Authority must establish Fixed Costs based on cost-of-service (‘COS’) principles and make changes only under a SAPA proceeding, with the approval of the Trustees.  As the memorandum also indicated, the LTAs establish two distinct cost categories:  Fixed Costs and Variable Costs.  Fixed Costs include operation and maintenance (‘O&M’), shared services (e.g., headquarters), debt service, other expenses (i.e., certain directly assignable costs) and a credit for investment and other income.   

 

“Staff is not requesting the Trustees’ approval of the Variable Costs component of the production rates (i.e., fuel and purchased power, risk management, New York Independent System Operator (‘NYISO’) ancillary services and O&M reserve, less a credit for NYISO revenues from Customer-dedicated generation) as that is developed in collaboration with the Customers in accordance with the provisions of the LTAs.  As prescribed by the LTAs previously approved by the Trustees, the Authority will issue revised tariffs reflecting the new rates for 2007 that incorporate both the final Fixed Costs and Variable Costs.  For 2007, the Customers have collectively selected an ‘Energy Charge Adjustment (‘ECA’) with Hedging’ cost-recovery mechanism offered under the LTA under which the Authority will pass through all Variable Costs to the Customers, including those of certain agreed-upon hedging transactions.  This cost-recovery mechanism also employs the LTA’s pre-established ECA under which Authority invoices will include a charge or credit each month that reflects the difference between the projected cost of electricity recovered by the tariff rates and the actual costs incurred by the Authority.   

 

DISCUSSION

               

“Based on staff’s analysis, the final increase in Fixed Costs sought by this action is $12.2 million.  Under the LTAs, Customers’ concerns must be considered in a confidential process prior to presenting any proposed changes to the Fixed Costs to the Trustees or issuing them for public comment.  Numerous Customer data requests were subsequently presented to staff, and in all cases, responses to relevant questions were provided to the Customers.  In addition, the Customers filed formal written comments in accordance with SAPA.  A review and analysis of these written comments is as follows:

 

A.      Comments on Proposed Fixed Costs Increase.

 

                “Issue 1:  O&M Component of Fixed Costs.

 

                “Comments:  The Customers raised concerns that the 500 MW Combined Cycle Unit (‘500 MW CCU’) and Poletti plant O&M components of Fixed Costs are too high.  The City contends that the 500 MW CCU’s projected O&M should be reduced by $2.0 million based on its assessment of the projected 2006 actual cost (based on nine months of actual 2006 expenses provided by the Authority) and further requests an amortization through 2009 for what it deems to be a non-recurring $2.3 million projected 2007 outage expense.  City Comments at 3-4.  In a similar vein, PA/MTA requests a 500 MW CCU O&M reduction of $3.3 million based on PA/MTA’s view that the modern technology and newness of the plant compels a lower Fixed Costs O&M.  PA/MTA also requests that the unit’s outage costs be amortized rather than expensed in 2007.  Regarding Poletti, PA/MTA requests an O&M reduction of $0.7 million based on a comparison of a group of ‘peer units’ (i.e., generating plants of an allegedly similar nature elsewhere).  PA/MTA Comments at 2-3, 13-17.

 

                “Staff Analysis:  The 500 MW CCU’s first year of operation is 2006 and, to date, the plant has exceeded the projected generation output without incident, largely because the facility is brand new.  The actual O&M expenses are currently less than projected in the areas of contracted services support, materials and waste removal due, in part, to the better-than-expected operational level.  This ‘under-run’ is also, in part, attributable to budgeted operations staff positions not yet filled. 

 

                “However, because the 500 MW CCU has provided more generation output than expected, the O&M projection for the 2007 Fixed Costs component includes additional costs needed to ensure effective operation in 2007.  Moreover, the plant was frequently called on to ‘ramp up’ and ‘ramp down’ in response to market price signals, which accelerates the need for increased maintenance expenses.  As a result, in addition to the recurring baseline costs of operation, the O&M projection reflects the expected cost of the turbine inspection and repair outages, as well as preventive maintenance tasks that are based on the expected number of actual hours of operation and amount of output.  These cost items are included in the proposed final 2007 O&M budget, which is also being presented for Trustee approval today.  In short, the operational experience of the 500 MW CCU in 2006 is expected to continue in 2007.  Accordingly, the Authority cannot accept the City’s argument to lower this component based on nine months of 2006 Fixed Costs data because that would put the Authority at risk for under recovery.  For the same reasons, PA/MTA’s argument that the plant’s ‘state of the art’ technology, by itself, justifies no increase to this component is misplaced, and must be rejected.

 

“Staff has also reviewed PA/MTA’s comments regarding peer performance and has determined that the peer groups PA/MTA used are not representative because this comparison ignores the conditions under which the 500 MW CCU and Poletti projects must operate. 

 

“Staff has considered the Customers’ comments on amortizing the 500 MW CCU outage costs.  The current outage schedule includes more extensive Hot Gas Path Inspection outages in 2008 followed by additional turbine inspection outages in 2010.  Due to the schedule of these outages, staff does not see any benefit to amortizing the outage cost through 2009 as suggested.

                 

                “Recommendation:  For the reasons stated above, staff recommends no changes to the 500 MW CCU and Poletti O&M component of the Fixed Costs category.

 

                “Issue 2:  Shared Services.

 

                “Comments:  The Customers request that the Authority reduce the Shared Services component of the Fixed Costs.  Both the City and PA/MTA have requested, through separate analyses, a $1.6 million reduction in Shared Services.  City Comments at 4; PA/MTA Comments at 17-19.

 

                “Staff Analysis:  The Shared Services component of the Fixed Costs consists of the portion of the headquarters O&M budget not directly assignable to any facility or project, plus the Research and Development O&M budget offset by the allocation to capital projects.

 

                “These Shared Services allocations are based on the level of headquarters resources required to support the Customers and the proportional amount of labor assigned to support the 500 MW CCU, Poletti and Small Hydro projects.  The Authority uses the same methodology to allocate the headquarters costs to other Authority facilities.

 

                “Neither the City nor PA/MTA justifies its proposed reductions to this component.  The City simply states that the Authority’s allocator percentage used to calculate Shared Services, a weighted average based on labor ratios applied to non-directly assignable headquarters costs, should remain unchanged from 2006.  However, Authority staff provided updated cost data to show that this allocator percentage rose 1.64%, and the City does not provide any compelling reason to reject staff’s explanation.  PA/MTA proffered an alternative analysis regarding the Shared Services costs at the 500 MW CCU, but that analysis is unconvincing.  PA/MTA does not rebut staff’s methodology and the supporting cost data staff supplied to the Customers, but rather extrapolates based on the 11 employees that work at that site, ignoring the Authority’s allocation methodology.  See PA/MTA Comments at 19. 

 

                “Recommendation:  For the reasons stated above, staff recommends no changes to the Shared Services component of the Fixed Costs category.

 

        “Issue 3:  Other Expenses – Decommissioning and Asset Retirement Charges.

 

                “Comments:  The City comments that the 3.5% inflation factor used to calculate the Decommissioning and Asset Retirement Charges for the Poletti project and the 500 MW CCU are too high and should be revised using an inflation factor of 2.7%.  The City also believes that the residual value of the land for the Poletti project and the 500 MW CCU should be factored into the calculation, which, in effect, would reduce the Decommissioning and Asset Retirement charges.  City Comments at 5-6.

 

                “Staff Analysis:  The long-term inflation rate staff used for the calculations (3.5%) is an Authority corporate-wide assumption used in all of its long-term planning studies.  The City suggested a 2.7% rate based on a U. S. Department of Energy estimate.  However, staff continues to believe that the Authority’s inflation rate is a reasonable and appropriate measure of long-term inflation.  In fact, Authority staff has analyzed the U. S. Department of Labor’s statistics on inflation, which are widely available, and has calculated that the annualized inflation factor over the past 30 years was 4.3%, which is greater than staff’s estimate.

 

                “The City also contends that the residual value of the land for these two facilities should be factored in the calculation for the cost of decommissioning.  However, decommissioning activities do not presume or require that the land be disposed of at the time of decommissioning.  Moreover, it is not possible at this time to foreclose the possibility that the land would continue to be used by the Authority for power generation purposes.  As no determination has been made as to the disposition of the land at the time of decommissioning it is not appropriate to make any adjustments on this basis.

 

                “Recommendation:  For the reasons stated above concerning the amortization of decommissioning costs, the inflation rate and value of land, staff recommends no changes to this cost item. 

 

B.      Other Comments.

 

“PA/MTA raised the following concerns regarding the Fixed Costs component that are not germane to the matters presented for Trustee approval as described in this memorandum:

 

“Issue 3:  Alternative Approach to Establishing Portions of Fixed Costs for 2008-09.

 

                “Comments:  PA/MTA suggests adopting a fixed COS level for the generator O&M and Shared Services components of the Fixed Costs and applying an escalation factor to those items for the 2008 and 2009 rate years.[1]  The PA/MTA proposal would use the components established for 2007 as the baseline to which the escalation factor would be applied.  It states that this would decrease the administrative burden of reviewing these costs annually, provide budget certainty for all parties and provide the Authority an incentive to reduce costs.  PA/MTA Comments at 21. 

 

                “Staff Analysis:  PA/MTA would essentially re-open the terms of the LTAs relating to Fixed Costs rate setting and Customer review.  Such a dramatic change to the contract terms is certainly not warranted based on any recent experiences, and could not be adopted by the Authority absent a negotiated agreement. 

 

                “Moreover, the LTA process, in which the Fixed Costs are submitted to the Customers mid-year prior to their implementation and subject to review and inquiry, provides a number of concrete benefits to the Customers.  Such submission and review may capture significant Fixed Costs reductions that benefit the Customers, or significantly lower what would otherwise be a large cost increase proposed by staff but which might contain flaws.  Doing away with the submission of a COS may also disadvantage the Authority by not allowing proper cost recovery.  In only the second year in which the Fixed Costs have been determined under the LTA, experience suggests that it has worked satisfactorily for both the Authority and the Customers.

 

                “However, staff would not necessarily rule out various means to streamline the rate-setting process and is open to discussing this matter further with the Customers if there is continued interest.

 

                “Recommendation:  Staff believes that the Fixed Costs procedures contained in the LTA are satisfactory, and does not recommend any changes at this time.  Staff also believes that it is bound by the existing LTAs.   

 

C.      Final Recommendation.

 

“Based on the foregoing analysis, the proposed increase in the Fixed Costs component of the production rates will be implemented without modification.

 

“As mentioned, the final rates will combine the Trustee-authorized Fixed Costs increase with the Variable Costs increase achieved in accordance with the LTAs.  For the Trustees’ information, the combined increase is $98.6 million and would represent an estimated 14.4% increase in production rates, and an estimated 10.5% increase in average total bills.  The combined Fixed Costs and Variable Costs increase would be equally applied to demand and energy charges.

 

“Exhibit ‘9-A’ shows the overall estimated Customer bill impacts for 2007.  Exhibit ‘9-B’ shows the final 2007 Conventional and Time-of-Day production rates.  Exhibit ‘9-C’ contains the comments filed by the Customers.

 

FISCAL INFOMATION

 

                “The adoption of the Fixed Costs increase would result in an estimated $12.2 million of additional revenue to the Authority over current rates.

 

RECOMMENDATION

 

                “The Vice President – Major Account Marketing and Economic Development recommends that the Trustees authorize the Corporate Secretary to file a Notice of Adoption with the New York State Department of State for publication in the New York State Register for an increase in Fixed Costs applicable to the New York City Governmental Customers under the Long-Term Agreements.

 

                “It is also recommended that the Senior Vice President – Marketing and Economic Development, or her designee, be authorized to issue written notice of final action to the affected customers.

 

                “The  Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President – Marketing and Economic Development, the Vice President – Controller, the Vice President – Major Account Marketing and Economic Development, the Vice President – Finance, the Assistant General Counsel – Power and Transmission and I concur in the recommendation.”

 

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the Trustees adopt an increase in Fixed Costs applicable to the New York City Governmental Customers under the Long-Term Agreements, as described in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development or her designee be, and hereby is, authorized to issue written notice of this final action by the Trustees to the affected customers; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file such notices as may be required with the New York State Department of State for publication in the New York State Register and to submit such other notice as may be required by statute or regulation concerning the rate increase; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 


 

 

  



 


 

 


 

10.          Westchester County Governmental Customers – New Supplemental Electricity Agreements 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize the execution of new supplemental electricity agreements (‘New Supplemental Agreements’) with each of the 104 Westchester County Governmental Customers (‘Customers’), as listed in Exhibit ‘10-A.’

BACKGROUND

 

                “The Authority has served governmental customers in southeastern New York State since their transfer from Consolidated Edison Company of New York, Inc. (‘Con Edison’) beginning in 1976 as part of the Authority’s purchase of the Indian Point 3 Nuclear and Charles Poletti Power (then the Astoria 6) Plants.  A total of 104 governmental customers located in  Westchester County purchase Authority electricity under an Application for Electric Service (‘Original Agreements’) in order to serve myriad government facilities, including office buildings, public schools, public housing, hospitals, water and wastewater treatment plants, parks and police and fire stations.  In 2005, the Customers accounted for about $55 million in total revenue to the Authority, of which two-thirds was for electricity supply.

                “In 1996, and again in 2001, the majority of the Customers signed Supplemental Power Service Agreements with the Authority (‘Supplemental Agreements’).  These Supplemental Agreements contained, among other things, commitments from the Customers to remain full-requirements electricity customers of the Authority for certain fixed terms, in return for which the Authority agreed to constrain its ability to raise production rates from those established in 1990.

 

                “Under the Supplemental Agreements, the Customers realized rates frozen at 1990 levels for 10 years.  Then, in both January 2005 and January 2006, as permitted by the Supplemental Agreements, the Authority increased production rates by 2.4% based on a prescribed index.  These pricing arrangements essentially insulated the Customers from the significant increases in costs the Authority has experienced in serving them over the last several years.  Because the Supplemental Agreements signed a decade ago did not accommodate these significant changes in costs and industry structure, the Authority gave the Customers the requisite three-year notice of termination of the Supplemental Agreements to be effective at the end of 2006.  In January 2007, absent new supplemental electricity agreements, the Authority would serve the Customers under their Original Agreements, whereby the Authority would fully recover the actual costs to supply electricity to the Customers.  The New Supplemental Agreements have been developed at the request of the County of Westchester.    

“Over the course of the last year, staff has been engaged in ongoing discussions with the County of Westchester regarding terms of a suitable new agreement that would include provisions and pricing reflecting the additional costs and risks of supplying the Customers. 

DISCUSSION

 

“The attached form of agreement (Exhibit ‘10-B’) is a result of discussions with the County of Westchester and the Authority.  The principal features of the New Supplemental Agreement are as follows:

·   The Customers agree to be full-requirements electricity customers of the Authority through December 31, 2008, with the right to purchase renewable energy from a non-Authority source and supply limited amounts of their load with distributed generation.

·   As early as January 1, 2009, the Customers can elect to purchase any quantity of supply from non-Authority sources and cease being full-requirements customers.

·   The Customers may fully terminate service from the Authority on one year’s written notice, which cannot become effective earlier than January 1, 2009.  On full termination of service, the Customers’ Original Agreements would also be terminated.

·   The Customers confirm their acceptance of the proposed increase in production rates for 2007, as well as a tariff change implementing a revised Energy Charge Adjustment (‘ECA’) mechanism.  The Trustees are being requested to take final action to approve these rate modifications at their meeting today.

·   The Authority can modify the Customers’ rates at any time based on a fully supported pro forma cost-of-service and the State Administrative Procedure Act process, subject to review and comment by the Customers.

·   The Customers are committed to pay for any supply resources secured for them by the Authority under a collaborative Request for Proposals or similar process.  If a Customer terminates the agreement, it will be subject to an exit fee that represents the Customer’s pro rata share of any resources that are added to the Authority’s portfolio of production resources through a collaborative procurement process.

·   If a Customer elects to purchase renewable energy credits/attributes from the Authority, the cost/benefits of such attributes will be borne directly by the Customer through an appropriate bill surcharge/credit.  Customers have the right to purchase or enter into agreements for renewable energy and/or credits/attributes from sources other than the Authority.

·   The Authority and the Customers will continue to work in partnership to identify energy efficiency and clean energy technology projects at the Customers’ facilities and to implement such projects that the Authority and the Customers agree are economically feasible.  The costs of such programs shall be borne by the Customers in the same manner as under the current cost-recovery mechanisms for Authority energy efficiency projects.

“The agreement, substantially in the form attached as Exhibit ‘10-B,’ is expected to be submitted for approval to the County of Westchester Board of Acquisition and Contract within the next two weeks.  The County of Westchester accounts for nearly 35% of the revenues in the Authority’s Westchester County Governmental Customer segment.  In addition, this agreement, substantially in the form attached but tailored to specific Customers, will also be offered to the other Customers noted on Exhibit ‘10-A.’  Each will require approval by their governing board or responsible public official before the Authority can execute the agreement with each Customer.

FISCAL INFORMATION

 

“Once executed, the New Supplemental Agreements will secure approximately $90 million in production revenues to the Authority through December 31, 2008.

RECOMMENDATION

 

                “The Director – Major Accounts Governmental recommends that the Trustees authorize the execution of agreements, substantially in the form attached hereto as Exhibit ‘10-B,’ with the County of Westchester and other governmental entities in the County, conditioned on the County of Westchester’s providing written notice that all necessary approvals of the New Supplemental Agreement have been obtained.

 

                “The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President – Marketing and  Economic Development, the Vice President – Controller, the Vice President – Major Account Marketing and Economic Development, the Vice President – Finance, the Assistant General Counsel – Power and Transmission and I concur in the recommendation.”

 

Ms. Maide presented the highlights of staff’s recommendations to the Trustees.  Chairman McCullough said that this adjustment in the Authority’s rate structure was long overdue.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the Senior Vice President – Marketing and Economic Development, or her designee, is authorized to execute agreements between the Westchester County Governmental Customers listed in Exhibit “10-A” and the Authority, conditioned on the County of Westchester’s providing written notice that all necessary approvals of such agreement have been obtained, in substantially the form attached hereto as Exhibit “10-B,” with such amendments, deletions and supplements along with any other documents necessary to effectuate the foregoing, subject to the approval of the form thereof by the Executive Vice President and General Counsel; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and the Senior Vice President – Marketing and Economic Development are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and issue, execute and deliver any and all tariffs, agreements, certificates and other documents to give effect to such agreements and to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 


 

List of Westchester County Governmental Customers

County of Westchester

 

 

Abbott Union Free School District

 

 

Ardsley Union Free School District

 

 

Ardsley, Village of

 

 

Bedford Central School District

 

 

BOCES – South Westchester

 

 

Briarcliff Manor Union Free School District

 

 

Briarcliff Manor, Village of

 

 

Bronxville Union Free School District

 

 

Bronxville, Village of

 

 

Buchanan, Village of

 

 

Byram Hills Central School District No. 1

 

 

Chappaqua Central School District

 

 

Cortlandt, Town of

 

 

Croton Harmon Union Free School District

 

 

Croton-on-Hudson, Village of

 

 

Dobbs Ferry Union Free School District

 

 

Dobbs Ferry, Village of

 

 

Eastchester Fire District

 

 

Eastchester Union Free School District

 

 

Eastchester, Town of

 

 

Edgemont Union Free School District

 

 

Elmsford Union Free School District

 

 

Elmsford, Village of

 

 

Fairview Fire District

 

 

Greenburgh Central School District No, 7

 

 

Greenburgh Graham Union Free School District

 

 

Greenburgh Housing Authority

 

 

Greenburgh, Town of

 

 

Greenville Fire District

 

 

Harrison Central School District

 

 

Harrison Fire District No. 4

 

 

Harrison, Town of

 

 

Hartsdale Fire District

 

 

Hastings-on-Hudson Union Free School District

 

 

Hastings-on-Hudson, Village of

 

 

Hawthorne Cedar Knolls Union Free School District

 

 

Hendrick Hudson School District

 

 

Irvington Union Free School District

 

 

Irvington, Village of

 

 

Lake Mohegan Fire District

 

 

Lakeland Central School District

 

 

Larchmont, Village of

 

 

Mamaroneck Union Free School District

 

 

Mamaroneck, Town  of

 

 

Mamaroneck, Village of

 

 

Millwood Fire District

 

 

Montrose Fire District

 

 

Mt. Kisco Housing Authority

 

 

Mt. Kisco, Village of

 

 

Mt. Pleasant-Blythedale School District

 

 

Mt. Pleasant Central School District

 

 

Mt. Pleasant Cottage Union Free School District

 

Mt. Pleasant, Town of

 

Mt. Vernon School District

 

Mt. Vernon, City of and Housing Authority

 

New Castle, Town of

 

New Rochelle Municipal Housing Authority

 

New Rochelle School District

 

New Rochelle, City of

 

North Castle South Fire District No. 1

 

North Castle, Town of

 

North Tarrytown Housing Authority

 

Northern Westchester Joint Water Works

 

Ossining Union Free School District

 

Ossining, Town of

 

Ossining, Village of

 

Peekskill School District

 

Peekskill Housing Authority

 

Peekskill, City of

 

Pelham Manor, Village of

 

Pelham Union Free School District

 

Pelham, Village of

 

Pleasantville Union Free School District

 

Pleasantville, Village of

 

Pocantico Hills Central School District

 

Port Chester Housing Authority

 

Port Chester, Village of

 

Port Chester-Rye Union Free School District

 

Rye Brook, Village of

 

Rye City School District

 

Rye Neck Union Free School District

 

Rye, City of

 

Rye, Town of

 

Scarsdale Union Free School District

 

Scarsdale, Village of

 

Sleepy Hollow, Village of

 

Tarrytown Municipal Housing Authority

 

Tarrytown Union Free School District

 

Tarrytown, Village of

 

Tuckahoe Housing Authority

 

Tuckahoe Union Free School District

 

Tuckahoe, Village of

 

Valhalla Union Free School District

 

Verplanck Fire District

 

Westchester Joint Water Works

 

White Plains Housing Authority

 

White Plains School District

 

White Plains, City of

 

Yonkers City Board of Education

 

Yonkers Housing Authority

 

Yonkers Parking Authority

 

Yonkers, City of

 

Yorktown, Town of

 

 


 

Form of

S U P P L E M E N T A L  A G R E E M E N T

 

            This Supplemental Agreement (“Agreement”) contains certain supplemental terms and conditions governing the supply of electricity to _________________ (“Customer”) by New York Power Authority (“NYPA”) (and, together with the Customer, the “Parties”) under the Application for Service between NYPA and the Customer dated_________, ____ (“Application for Service”).  This Agreement shall be effective as of January 1, 2007 (“Effective Date”) and, subject to Article VII, supersedes and replaces all previous supplemental agreements between the Customer and NYPA.

 

By executing this Agreement, the Customer agrees, subject to the specific provisions hereof: (a) to be a full requirements electricity customer of NYPA for calendar years 2007 and 2008, except as provided in Article I; (b) thereafter to be a customer of NYPA with the right to self-supply or purchase from non-NYPA sources any portion of its load upon notice to NYPA as set forth herein; and (c) to support and pay for its share of supply resources dedicated to Westchester County and the other governmental entities located in the County (“Westchester Governmental Customers”), as those supply resources may be modified or expanded from time to time as a result of a collaborative process, discussed further herein, plus all other costs as NYPA may set forth through the filing of a cost-of-service (“COS”) .

 

The Application for Service, the applicable tariffs and NYPA’s Rules and Regulations continue in full force and effect, except to the extent modified by this Agreement.  In the event of any conflicts in the terms of the Agreement and the Application for Service, tariffs or Rules and Regulations, this Agreement shall control.

 

I.      Terms of Sale, Termination and Non-NYPA Supply

A.   NYPA agrees to sell, and Customer agrees to purchase full requirements electricity from NYPA commencing January 1, 2007 through December 31, 2008.  Thereafter, Customer may, consistent with this Agreement, at its option:

1.      purchase its full electricity requirements from NYPA,

2.      purchase electricity from both NYPA and non-NYPA sources, or

3.      purchase electricity entirely from non-NYPA sources upon full termination.

 

B.     Customer or NYPA may fully terminate this Agreement for any reason upon at least one (1) year’s prior written notice to the other Party, to be effective no earlier than January 1, 2009.  No full termination of service will become effective sooner than January 1st following the one-year notice.  Any full termination of service under this Agreement shall operate to terminate the Application for Service and all other documents pertaining to the provision of electric service by NYPA to Customer, provided that such agreements shall remain in effect for as long as necessary to effect final billings and account settlements.

 

C.      At any time under this Agreement, Customer may install distributed generation resources at or adjacent to its facilities provided Customer gives NYPA sufficient notice of the commencement of such supply.  For calendar years 2007 and 2008, the aggregate of such generation added at Customer’s facilities in a given calendar year shall not exceed the greater of three percent (3%) per year of Customer’s highest coincident peak billing demand or 250 kW.  Sufficient notice under this subsection C shall be deemed to be at least two (2) months prior to the start of the New York Independent System Operator (“NYISO”) capability period in which the distributed generation resource is expected to commence service. 

 

D.     At any time under this Agreement, Customer may elect to self-supply or purchase from non-NYPA sources physical renewable energy, provided that Customer gives NYPA notice at least two (2) months prior to the start of the NYISO capability period in which the physical renewable energy resource is expected to commence service.

 

E.      Commencing in 2009 and thereafter, and for portions of the Customer’s load not otherwise covered by resources identified in subsections C and D above, Customer may partially terminate service under this Agreement and secure supply from non-NYPA sources for any portion of its load, provided that Customer gives NYPA sufficient written notice indicating the amount and commencement date of such non-NYPA supply.  Sufficient notice under this subsection E shall be deemed to be at least two (2) months prior to the start of the NYISO capability period in which the non-NYPA supply resource is expected to commence. 

 

F.      If the Customer commences delivery of any non-NYPA supply resources under the terms set forth in subsection E above, for that portion of Customer’s load NYPA reserves the right to discontinue its role as Load-Serving Entity at the NYISO for the Customer upon one month’s notice.

 

II.      Production and Delivery Rates and Other Charges

A.  2007 Production Rates:  Customer accepts NYPA’s proposed production rates and COS for 2007, as well as a tariff change implementing a revised Energy Charge Adjustment (“ECA”) provision, scheduled to take effect in January 2007, as to which NYPA’s Trustees, on December 19, 2006, approved under the State Administrative Procedure Act (“SAPA”).

 

B.   Subsequent Production Rates:  Any subsequent proposed rate or other tariff modification (i.e., after the above 2007 proposed rates and tariffs are adopted) by NYPA to Customer will be based on a projected, pro forma COS and other appropriate documentation subject to Customer review and comment.  NYPA will calculate any future COS in a manner generally consistent with the COS for the 2007 rate year, which shall include the costs of supply resources (both capacity and energy) used to supply Westchester Governmental Customers in 2007, and the costs attributable to any other new Short- or Long-Term Resources as appropriate (but excluding any existing or future NYPA “in-city” resources, unless otherwise mutually agreed); as well as any hedging costs and all NYISO expenses and/or credits related to such supply resources.  New Short-Term Resources are supply resources with a term no greater than a Capability Period (as defined by the NYISO) which are secured independently by NYPA in the normal course of meeting          Westchester Governmental Customer requirements.  New Long-Term Resources are resources secured pursuant to Article III, below.

 

                  With respect to any proposed change to the COS, NYPA shall forward to the Customer an explanation of all reasons for the increase/decrease and shall also identify the sources from which NYPA will obtain the total increased revenues and the bases upon which NYPA proposes to allocate the increased costs among its customers. NYPA will endeavor to provide customer with the same prior notice of a proposed rate modification as NYPA provides to its New York City Governmental Customers, but in any event NYPA will provide such notice no less than thirty (30) days’ prior to the filing of proposed action under SAPA with respect to such a modification.

 

                  Upon the conclusion of any SAPA process concerning Customer’s production rates, the applicable tariff will be updated to include the revised demand and energy rates to be charged to Customer effective for the succeeding billing period.  In addition, the tariff applicable to Customer will include an Energy Charge Adjustment (“ECA”) provision to capture monthly fluctuations in costs incurred in serving Customer, substantially in the form which NYPA’s Trustees approved on December 19, 2006, under SAPA.

 

Upon request from Customer, NYPA will provide calculations and supporting information concerning changes in the ECA.

 

C.  Delivery Rates:   NYPA will pass on to Customer, on a basis that is revenue neutral to NYPA, all charges related to the supply of electricity to Customer assessed by the Consolidated Edison Company of New York, Inc. (“Con Edison”) or any other entity from which NYPA is required to secure transmission and delivery service.  To the extent necessary and practicable, NYPA will use a true-up mechanism to assess charges for under-recovery and apply credits for over-recovery of Con Edison delivery charges.  NYPA shall be obligated to actively intervene and collaborate with the Westchester Governmental Customers (along with NYPA’s other affected customers) in all rate cases concerning these delivery service charges before the appropriate regulatory bodies with the objective of assuring that any increase in or modification to the delivery service charges is fair and reasonable to all of NYPA’s customers.  Nothing in this Agreement shall limit in any way Customer’s right to intervene and fully participate in any court or administrative proceeding having as its subject matter, directly or indirectly, such delivery charges.

 

D.  Recovery of Taxes, Fees, and Other External Charges:  Tariff charges shall be subject to increase or decrease by NYPA at any time (either through an adjustment factor applied to the base rates or through the ECA, as appropriate) due to changes in applicable taxes, fees, assessments or other external charges (excluding fines and penalties) that are levied on NYPA (or that NYPA is required to collect from Customer) by federal, state and local government entities, or by grid or market operators such as the NYISO or its successors, it being the Parties’ intent that these external charges be passed through to Customer as incurred, without mark-up.  NYPA will use reasonable efforts to provide timely notice of the imposition of any such charges and nothing shall impede any such Customer’s right to challenge such taxes, fees or charges.  The Parties shall cooperate to minimize any new taxes, fees, assessments, market rules or other charges that result in increased costs levied upon NYPA in association with the sale of electricity to Customer.

 

III.   New Long-Term Supply Resources

                  During the term of this Agreement, Customer may desire NYPA to solicit additional long-term supply resources to the supply portfolio serving Customer and/or the Westchester Governmental Customers through a Request for Proposals (“RFP”) or similar process.  If the Customer so requests, NYPA agrees to collaborate with the Customer in such RFP or similar process.

 

             Prior to entering into any such new long-term supply resource agreement between NYPA and a supplier (“RFP Contract(s)”), NYPA shall obtain the consent of Customer, and the agreement of the Customer to an extension of its Agreement that will be coterminous with the term of the longest of any such RFP Contract, with no right of full or partial early termination by Customer, absent mutual agreement.   Such mutual agreement shall provide for payment of an exit fee based on the net stranded costs related to RFP Contract(s) entered into under this Article III and arising from the Customer’s termination as calculated by NYPA in a commercially reasonable manner.

           

            NYPA shall permit other Westchester Governmental Customers a reasonable amount of time to elect to receive an extension of their respective Agreement(s) on substantially the same terms as set forth in this agreement.              The rates for any Customer subject to the extension described above shall reflect all the costs incurred and benefits derived by NYPA under any such RFP Contract based on COS principles as noted in Article II above for the duration of  Customer’s electricity purchases under this Agreement.

                       

                        If Customer does not choose to enter into an extension of this Agreement, its     rates shall not include any costs incurred or benefits derived by NYPA under any such      RFP Contract.

 

  IV.             Partnership on Energy Efficiency & Renewable Energy

A.  Energy Efficiency:  Parties will work in partnership to identify energy efficiency and clean energy technology projects at the Customer’s facilities and to implement such projects that are economically feasible and agreeable to the Parties.  NYPA will finance, for the Customer, energy efficiency and clean energy technology programs each year over the term of the Agreement that will assist the Customer in implementing projects that promote energy efficiency and improving the environment.  The costs of such programs will be borne by Customer.  Projects will be implemented under existing, revised or new cost recovery agreement(s), as necessary.

  

B. Renewable Energy:  If Customer elects to purchase renewable energy attributes/credits and/or physical renewable energy from NYPA, the cost/benefits of such attributes/credits and/or physical renewable energy will be borne directly by Customer through an appropriate bill surcharge/credit.  Customer has the right to purchase or enter into agreements for renewable energy attributes/credits and/or physical renewable energy from a source other than NYPA.

 

     V.          Approvals

                        Execution of this Agreement has been authorized and approved by the governing board, authorized executive or commissioner of the Customer whose approval is required for the execution of this Agreement, and by NYPA's Board of Trustees.

 

  VI.             Amendment

                        This Agreement may be amended at any time but only upon a written agreement signed by both Parties.

 

VII.             Prior Claims  

            Nothing contained herein shall be read to preclude either Party from asserting claims or bringing actions related to service and/or bills rendered prior to the Effective Date of this Agreement. 

 

AGREED:

[CUSTOMER]         

BY:  ____________________________________

TITLE:  _________________________________

DATE:  _________________________________

 

AGREED:

NEW YORK POWER AUTHORITY

BY:  ________________________________________

TITLE:  _____________________________________

DATE:  _____________________________________

                                                                       

                                                                       

 

Approved as to Form:                                      Approved as to Form:

 

 

___________________________                  ______________________________

[Title]                                                               Executive Vice President and

[Customer]                                                        General Counsel

                                                                        New York Power Authority


 

11.          2007 Operation and Maintenance, Capital and Fuel Budgets

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the 2007 budgets for Operation and Maintenance (‘O&M’), Capital and Fuel Purchases as follows:

 

                                                                                                                     2007 Budget

                                                                                                                        ($ million)

                                                                O&M                                                    281.2

                                                                Capital                                                  644.9

                                                                Fuel                                                      534.3

 

BACKGROUND

 

                “The Authority is committed to providing reliable, affordable energy; retaining and creating jobs in New York State and promoting the development of energy-efficient technologies.  The Authority continues to undertake and implement projects, strategically positioning itself to meet the challenges of a changing electric market.  The 2007 budgets are intended to provide the Authority’s operating facilities and support organizations with the resources needed to meet its overall mission and strategic objectives.

 

DISCUSSION

 

O&M

 

                “The O&M budget of $281.2 million represents an increase of $21.2 million, or 8.2%, from the 2006 budget. The timing of several planned maintenance outages accounts for $10.3 million, almost 50% of the increase. Non-outage expenses increased $10.9 million, or 4.2% from 2006, most of which comprises wage and fee increases.  The increases by organization are as follows: Power Generation ($12.3 million), Headquarters Support ($8.3 million) and Transmission ($0.6 million).

 

“Payroll costs, which include salaries, overtime and fringe benefits, account for $156.5 million, or approximately 56%, of the budget. This represents a $0.3 million reduction from the 2006 budget of $156.7 million. Factors contributing to the payroll decrease include staff reductions and anticipated attrition in 2007, increased vacancies, increased labor charged to capital projects and a reduction in pension costs reflecting a reduced Authority contribution rate to the New York State Retirement System.  These factors are offset by projected salary increases.  Non-payroll expenses of $124.7 million increased $21.5 million due to planned maintenance outages and increased outside services to support numerous headquarters initiatives.

 

                “Power Generation’s 2007 budget is $12.3 million (9.5%) above the 2006 level primarily due to $10.5 million in planned outages at Flynn, Poletti and the 500 MW plants, coupled with increased Federal Energy Regulatory Commission fees ($1.2 million), consultant support for energy supply RFPs ($1.2 million) and increased utility expenses ($0.5 million). This increase is offset by lower personnel costs resulting from position eliminations and anticipated attrition in 2007, increased vacancies and a decrease in fringe benefits expense.  Major non-recurring projects include the Niagara Headgate Refurbishment ($1.3 million), Joint Works with Ontario Power Generation ($1.2 million), B-G Penstock and Tunnel Inspection ($1.0 million), Niagara 480/508 Elevated Drain Rehabilitation ($1.0 million), Niagara Penstock Manhole Inspection and Repairs ($0.7 million), Niagara Landfill Remediation ($0.7 million) and St. Lawrence Foundation Inspection and Grouting ($0.6 million).

 

 “The 2007 Transmission budget is $0.6 million (1.3%) above the 2006 level due to an increase in payroll, transmission line operations and maintenance support and energy management system consultant support.  Major ongoing initiatives include continuation of the Right-of-Way Maintenance program ($2.7 million), Breaker and Insulator Maintenance ($0.5 million) and Tower Painting ($0.4 million).

“Headquarters support departments are $8.3 million (11.2%) above the 2006 level, due primarily to the initiation of a communications program to raise community awareness and understanding of the Authority ($3.0 million), increased outside litigation support ($1.0 million), Leadership in Energy and Environmental Design support and certification costs ($0.9 million) and yearly salary increases.

“The R&D budget of $8.8 million is unchanged from 2006.

Fuel

“The Fuel budget of $534.3 million is decreased $97.2 million (15.4%) from 2006.  This is a cash budget reflecting planned fossil-fuel purchases in 2007 for Poletti, Flynn, the Small Clean Power Plants (‘SCPPs’) and the 500 MW plant.  The budget assumes lower commodity prices and reduced generation at Poletti and Flynn, offset by increased generation at the 500 MW plant.  Outages at Poletti, Flynn and the 500 MW plants were factored into the fuel budget.

Capital

“The 2007 Capital budget totals $644.9 million, an increase of $361.7 million (127.7%) from 2006.  Included in this request are both new and ongoing capital projects, as well as general plant equipment purchases.  The increase reflects the recognition of the cost of $363.6 million in settlement obligations under the Niagara Relicensing Agreements.

“The Energy Conservation/Renewable projects account for $102.2 million (15.8%) of the 2007 request and reflect the same level of projected work for Energy Services and Technology programs for both Southeastern New York (‘SENY’) governmental and other public entity customers. Other significant capital projects include $22.3 million and $19.9 million, respectively, for the B-G and St. Lawrence Life Extension projects and $17.0 million for the Static Var Compensator and Tri-Lakes Reliability project.  Headquarters Administrative support projects total $33.0 million, including the billing system replacement and numerous other IT initiatives.

FISCAL INFORMATION

 

“Payment will be made from the Operating Fund for Operation and Maintenance and Fuel Purchases.

“Payment will be made from the Capital Fund or Energy Conservation Effectuation Fund for capital expenditures.

RECOMMENDATION

 

                “The Executive Vice President and Chief Financial Officer and the Vice President –  Controller recommend approval of the 2007 Operation and Maintenance, Fuel and Capital budgets as discussed herein.

                “The Executive Vice President and General Counsel, the Executive Vice President - Corporate Services and Administration, the Senior Vice President and Chief Engineer – Power Generation and I concur in the recommendation.”

Ms. Tursi presented the highlights of staff’s recommendations to the Trustees.  Chairman McCullough said that this budget anticipates the relicensing of the Niagara project and the financial commitments made by the Authority in the relicensing settlement agreements.  President Carey thanked Ms. Tursi, Mr. Bellis and their staffs for their work on the budget, as well as the entire senior management team.  He said that the quarterly budget review meetings he had instituted were extremely helpful in helping management monitor the budget on a more frequent basis.  Chairman McCullough added that the quarterly meetings were extremely valuable, making the budget a living document and roadmap for the Authority’s programs and holding the department heads accountable for their departments’ expenditures.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the 2007 budgets for Operation and Maintenance, Fuel and Capital expenditures, as discussed in the foregoing report of the President and Chief Executive Officer, are hereby approved; and be it further

 

RESOLVED, That up to $138 million of monies in the Operating Fund are hereby authorized to be withdrawn from such Fund and deposited in the Capital Fund, provided that at the time of withdrawal of such amount or portions of such amount, the monies withdrawn are not then needed for any of the purposes specified in Subsections (1)(a)-(c) of Section 503 of the General Resolution Authorizing Revenue Obligations adopted on February 24, 1998, with the satisfaction of such condition being evidenced by a certificate of the Treasurer or the Deputy Treasurer; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.


 

 

O&M AND FUEL

2007 BUDGET

($ MILLIONS)

 

 

 

 

 

 

%

DEPARTMENT

 

2006

 

2007

 

CHANGE

 

 

 

 

 

 

 

     EXECUTIVE OFFICES

 

10.3

 

11.7

 

13.9%

     BUSINESS SERVICES

 

30.8

 

32.5

 

5.5%

     MARKETING

 

7.0

 

6.6

 

(4.6%)

     HUMAN RESOURCES AND CORP SUPPORT

 

23.2

 

27.8

 

19.4%

 

 

 

 

 

 

 

TRANSMISSION

 

 

 

 

 

 

     ENERGY CONTROL CENTER

 

5.0

 

5.4

 

7.7%

     HEADQUARTERS SUPPORT

 

4.1

 

4.6

 

10.6%

     CLARK ENERGY CENTER

 

10.1

 

11.6

 

42.5%

     TRANSMISSION FACILITIES

 

28.7

 

26.9

 

(6.2%)

TOTAL TRANSMISSION

 

47.9

 

48.5

 

1.3%

 

 

 

 

 

 

 

ENERGY EFFICIENCY

 

2.8

 

3.8

 

35.0%

 

 

 

 

 

 

 

POWER GENERATION

 

 

 

 

 

 

     POWER GENERATION - HQ

 

7.1

 

9.1

 

28.3%

     BLENHEIM - GILBOA

 

14.9

 

15.9

 

6.4%

     POLETTI

 

16.0

 

19.7

 

22.8%

     NIAGARA

 

45.5

 

38.6

 

(15.2%)

     ST. LAWRENCE

 

17.5

 

18.5

 

5.7%

     FLYNN

 

5.2

 

12.4

 

140.2%

     SCPP

 

10.4

 

13.0

 

24.9%

     SMALL HYDRO

 

3.8

 

4.2

 

10.5%

     500 MW

 

8.7

 

10.0

 

15.0%

TOTAL POWER GENERATION

 

129.2

 

141.5

 

9.5%

 

 

 

 

 

 

 

R&D AND INSTITUTIONAL FUNDING

 

8.8

 

8.8

 

0.2%

 

 

 

 

 

 

 

TOTAL O&M BUDGET

 

260.0

 

281.2

 

8.2%

 

 

 

 

 

 

 

FUEL

 

 

 

 

 

 

     OIL

 

91.1

 

72.4

 

(20.5%)

     GAS

 

539.9

 

461.4

 

(14.5%)

     HEDGING

 

0.5

 

0.5

 

0.0%

TOTAL FUEL BUDGET

 

631.5

 

534.3

 

(15.4%)

 


 

 

CAPITAL

2007 BUDGET

($ MILLIONS)

 

 

 

 

 

 

 

%

 

 

2006

 

2007

 

 

CHANGE

 

 

 

 

 

 

 

 

ENERGY CONSERVATION

 

 

 

 

 

 

 

     SENY CUSTOMER

 

52.0

 

55.2

 

 

 

     OTHER NYPA-FUNDED

 

35.1

 

35.6

 

 

 

     DISTRIBUTED GENERATION

 

0.2

 

0.0

 

 

 

     PETROLEUM OVERCHARGE RESTITUTION

 

2.5

 

2.5

 

 

 

     ENVIRONMENTAL BOND ACT AND BOE

 

10.0

 

8.2

 

 

 

     OFFSET EMISSIONS PROJECTS

 

3.0

 

0.7

 

 

 

 

 

102.8

 

102.2

 

 

-0.6%

 

 

 

 

 

 

 

 

TRANSMISSION

 

26.9

 

31.1

 

 

15.6%

 

 

 

 

 

 

 

 

POWER GENERATION

 

 

 

 

 

 

 

     BLENHEIM - GILBOA

 

30.6

 

24.8

 

 

 

     POLETTI

 

0.4

 

0.2

 

 

 

     FLYNN

 

0.0

 

7.9

 

 

 

     NIAGARA

 

40.7

 

399.1

 

 

 

     ST. LAWRENCE

 

37.0

 

37.9

 

 

 

     500 MW

 

18.3

 

6.9

 

 

 

     SCPP PROJECT

 

5.4

 

1.8

 

 

 

 

 

132.4

 

478.6

 

 

261.5%

 

 

 

 

 

 

 

 

ADMINISTRATION SUPPORT

 

21.1

 

33.0

 

 

56.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL CAPITAL BUDGET

 

283.2

 

644.9

 

 

127.7%


 

 


 

12.          Approved Budget and Financial Plan Information Pursuant to New Regulations of the Office of the State Comptroller  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“In accordance with new regulations adopted by the Office of the State Comptroller (‘OSC’), the Trustees are requested to approve a 2007 annual budget and four-year financial plan and authorize: (i) making the approved budget and four-year financial plan available for public inspection at not less than five convenient public places throughout New York State, (ii) submitting the approved budget and four-year financial plan to OSC and
(iii) posting the approved budget and four-year financial plan on the Authority’s website.

 

BACKGROUND

 

                “Following rulemaking proceedings undertaken pursuant to the State Administrative Procedure Act, OSC implemented new regulations on March 29, 2006 that address the preparation of annual budgets and four-year financial plans by ‘covered’ public authorities, including the Authority.  (See 2 NYCRR Part 203 [‘Part 203,’ attached as Exhibit ‘12-A’].)  As illustrated below, these regulations establish various new procedural and substantive requirements relating to the budgets and financial plans of public authorities.

 

DISCUSSION

 

                “Part 203 sets forth specific requirements in connection with submitting and formatting, preparing supporting documentation for and monitoring both proposed and approved annual budgets and financial plans of public authorities.  On October 24, 2006, the Trustees approved for public release the Authority’s proposed 2007 annual budget and four-year financial plan pursuant to Part 203.

 

“Under Part 203, it is now necessary and appropriate for the Trustees to adopt an approved 2007 budget and four-year financial plan (attached as Exhibit ‘12-B’).  The approved 2007 budget and four-year financial plan must be made available for public inspection, whenever practicable, not less than seven days before the commencement of the next fiscal year and shall be submitted to OSC within seven days of approval by the Trustees in an electronic format prescribed by OSC.  The regulations also require the Authority to post the approved budget and four-year financial plan on its website.

               

“Under Part 203, each approved budget and four-year financial plan must be shown on both an accrual and a cash basis and be prepared in accordance with generally accepted accounting principles; be based on reasonable assumptions and methods of estimation; be organized in a manner consistent with the public authority’s programmatic and functional activities; include detailed estimates of projected operating revenues and sources of funding; contain detailed estimates of personal service expenses related to employees and outside contractors; list detailed estimates of non-personal service operating expenses and include estimates of projected debt service and capital project expenditures. 

               

“Other key elements that must be incorporated in each approved budget and four-year financial plan are a description of the budget process and the principal assumptions, as well as a self-assessment of risks to the budget and financial plan.  Additionally, the approved budget and financial plan must include a certification by the chief operating officer (defined as the executive officer responsible for overseeing the day-to-day activities of an authority) that, to the best of his or her knowledge and belief after reasonable inquiry, the approved budget and financial plan are based on reasonable assumptions and methods of estimation and that the Part 203 regulations have been satisfied.

 

“Finally, as indicated in the proposed budget and four-year financial plan, the approved budget and four-year financial plan uses updated estimates of generation, fuel prices, electric prices, operation and maintenance expenses, capital costs and other revenue and expense items.  The approved budget and four-year financial plan includes a section discussing the differences between the proposed and approved budget and four-year financial plans.

FISCAL INFORMATION

 

                “There is no anticipated fiscal impact.

 

RECOMMENDATION

 

                “The Vice President – Controller recommends that the Trustees approve the attached 2007 annual budget and four-year financial plan and authorize (i) making the approved budget and four-year financial plan available for public inspection at no less than five convenient public locations, (ii) submitting the approved budget and four-year financial plan to the Office of the State Comptroller in the prescribed format and (iii) posting the approved budget and four-year financial plan on the Authority’s website.

 

                “The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer and I concur in this recommendation.”

 

Mr. Davis presented the highlights of staff’s recommendations to the Trustees.  Chairman McCullough opined that the effort to develop these documents represented a tremendous undertaking and a job well done.  He said that these documents provided the Authority with another roadmap for the longer term.  In response to a question from Trustee Seymour, Mr. Davis said that New York Independent System Operator market revenues and fuel expenses were expected to be down in 2010 because of the anticipated retirement of the Poletti plant.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That pursuant to 2 NYCRR Part 203, the attached 2007 annual budget and four-year financial plan, including its certification by the President and Chief Executive Officer, is approved in accordance with the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That pursuant to 2 NYCRR Part 203, the Corporate Secretary be, and hereby is, authorized to make the approved budget and four-year financial plan available for public inspection at not less than five convenient public places throughout New York State, submit the approved budget and four-year financial plan to the Office of the State Comptroller in the prescribed format and post the approved budget and four-year financial plan on the Authority’s website; and be it further               

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 

 
 

13.          Robert Moses Niagara Power Project – Standardization of the Upgrade Program Prototype Unit – Expenditure Authorization

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize capital expenditures of $9.1 million to standardize the design of Unit 4, the first upgraded turbine-generator at the Robert Moses Niagara Power Project (‘Project’).

 

BACKGROUND

 

“Based on economic analyses, the Authority adopted a plan in 1991 to rehabilitate and upgrade the generating units to increase the Project’s use of available water, improve operating efficiency of each unit, allow additional operating flexibility and provide for life extension and modernization of the facilities.  The current upgrade program involves an upgrade of each of the 13 generating units at the Project from a nominal output of 175 MVA to 215 MVA; work included replacement of the turbine, modifications to the generator, replacement of the transformer and other associated equipment modifications and replacement.

 

                “After receiving Federal Energy Regulatory Commission (‘FERC’) approval in 1989, the upgrade program of the Project units began in 1991.  Installation of the prototype turbine-generator on Unit 4 was completed in 1993 without some of the technological advancements made on the later upgraded units.  Upgrade work on the remaining units was completed at a rate of one per year, with the program to be completed in December 2006 when the last (13th) unit was upgraded.  The overall upgrade program will be completed on schedule and under budget.

 

“Unit 4 was the first unit to be upgraded at the start of the program.  For this reason, and through the development of the technology used throughout the program, Unit 4 was considered a ‘prototype unit’ with the understanding that it would eventually be necessary to bring it up to the same standards, design and technologies as the later upgraded units.

 

                “With the conclusion of the 13-unit upgrade program, it is appropriate to plan for the replacement and repair of equipment on the prototype unit.

 

DISCUSSION

 

                “The Project upgrade program, now approaching completion, includes rebuilding the existing wicket gates, installing new greaseless bushings and line boring the lower wicket gate bores.  The first two units that were upgraded (4 and 13) were provided with Teflon-lined type bushings, while the later units used a Teflon-epoxy plug design in their bushings.  The lined bushings have been reported to have higher-than-expected failure rates at other facilities.

 

“The standardization work will include replacement of Teflon-lined bushings with plug-type greaseless bushings, which have a proven record of performance.  Additional work required from the technology advancements made during progression of the upgrade program will include:

 

·   Replacement of the obsolete rotating excitation system with solid-state excitation.

·   Rotor rim reshrink to maintain the rotor centerline, minimize generator vibrations and improve performance and extend the life-cycle of the rotor and rotor poles.

·   Operating ring modifications that replace thordon material with Deva material.

·   Stationary wear rings evaluation and replacement if excessive wear is determined.

·   Installation of stainless steel facing plates.

·   Head cover evaluation and repair if needed.

 

“It is anticipated that some level of standardization will also be required for no more than two additional units completed in the early stages of the program.  Once the scope of work for any further standardization has been fully defined, Trustee approval will be requested.

 

“The Authority’s Expenditure Authorization Procedures will be followed for implementation of the prototype standardization, as well as any future unit standardization efforts.

 

FISCAL INFORMATION

 

“Payments for costs associated with the standardization of Unit 4 at the Project will be made from the Capital Fund.

 

RECOMMENDATION

 

“The Vice President – Project Management, the Vice President – Procurement and Real Estate, the Vice President – Engineering, the Regional Manager – Western New York and the Project Manager recommend that the Trustees authorize capital funding of $9.1 million for the standardization of Unit 4 at the Robert Moses Niagara Power Project.

 

“The Executive Vice President and General Counsel, the Executive Vice President – Corporate Services and Administration, the Senior Vice President and Chief Financial Officer, the Senior Vice President and Chief Engineer – Power Generation, the Vice President – Controller and I concur in the recommendation.”

 

Mr. Canale presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman McCullough, President Carey said that this project is separate and apart from the Life Extension and Modernization (“LEM”) project at Niagara, which will be finished this month on time and under budget.  He said that this project is necessary to bring the units that were first replaced under the LEM project up to the higher standards of the units that were completed last.  President Carey also noted that the LEM project began 15 years ago.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That capital expenditures are hereby approved in accordance with the Authority’s Expenditure Authorization Procedures, as recommended in the foregoing report of the President and Chief Executive Officer, in the amounts and for the purposes listed below:

 

 

 

Description

 

Current

Estimate

 

Previously

Authorized

 

Current

Request

Total

Authorized

Amount

 

Engineering/
Design & Construction Management

 

 

$   460,000

 

 

$0

 

 

$   460,000

 

 

$   460,000

 

Procurement

 

$2,773,000

 

$0

 

$2,773,000

 

$2,773,000

 

Construction

 

$5,047,000

 

$0

 

$5,047,000

 

$5,047,000

 

Authority Direct/Indirect

 

$  820,000

 

$0

 

$  820,000

 

$  820,000

 

Totals

 

 

 

 

 

$9,100,000

 

AND BE IT FURTHER RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 

 


 

14.          Proposed Niagara University Hydropower Contracts – Notice of Public Hearing  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize a public hearing, pursuant to Section 1009 of the Public Authorities Law, on a proposed contract with Niagara University (‘University’).  The proposed contract for sale of Niagara Project (‘Project’) power and energy is part of the Niagara University Relicensing Settlement Agreement (‘NURSA’) dated May 23, 2006 between the University and the Authority in exchange for the University’s support of the Authority’s Niagara Project relicensing efforts.

 

“The form of the Niagara University contract is attached as Exhibit ‘14-A.’

 

BACKGROUND

 

                “The existing 50-year license issued to the Authority under the Federal Power Act for the Project expires on August 31, 2007.  At their meeting of June 28, 2005, the Trustees authorized the President and Chief Executive Officer (and his designees) to file an Application for a New License (‘Application’) with the Federal Energy Regulatory Commission (‘FERC’) for the Project; to file related applications with the New York State Department of State and the New York State Department of Environmental Conservation and an Offer of Settlement with FERC (‘Offer of Settlement’); to enter into and execute settlement agreements and to execute such other documents and take such other actions as may be necessary or convenient in connection with such actions.  The Application was filed with FERC on August 18, 2005 and the Offer of Settlement was filed with FERC the following day.

 

                “The Offer of Settlement included four separate settlement agreements reached by the Authority with parties participating in the Alternative Licensing Process (‘ALP’) commenced by the Authority in 2002 in accordance with FERC regulations.  The Relicensing Settlement Agreement Addressing New License Terms and Conditions was executed by the State and federal agencies involved in the relicensing process and by certain public and private entities concerned with ecological issues; the Host Community Relicensing Settlement Agreement Addressing Non-License Terms and Conditions was executed by the Project ‘Host Communities,’[2] the Relicensing Settlement Agreement between the Power Authority of the State of New York and the Tuscarora Nation was executed by the Tuscarora Nation and the Relicensing Settlement Agreement Addressing Allocation of Niagara Project Power and Energy to Neighboring States was executed by the Authority’s out-of-state hydropower customers. 

 

“Since its filing, the Offer of Settlement has been supplemented twice with the NURSA and the Erie County/City of Buffalo Relicensing Settlement Agreement.  These Agreements were filed with FERC on May 26, 2006 and June 30, 2006, respectively, after being approved by the Trustees at their meetings of May 23, 2006 and June 27, 2006, respectively.

 

“During the course of the ALP, the University raised a number of issues generally arising out of the proximity of the campus to the Project, and settlement negotiations between the University and the Authority commenced in December 2004.  These negotiations resulted in the NURSA, which includes an allocation of up to 3 MW of Project power to the University.  The NURSA represents complete settlement of all issues raised by the University during the relicensing proceeding. 

 

 

 

 

 

DISCUSSION

 

“The proposed contract would make available up to 3 MW of Project power and energy to the University.  If the University’s electric usage exceeds 3 MW, it must procure the additional power and energy from a third party.  The proposed contract contemplates delivery of power and energy to the University at the Project switchyard.  It will be the University’s responsibility to arrange for delivery to its meter(s). 

 

“The NURSA provides that the University will pay rates equivalent to the lowest production rate charged by the Authority (directly or indirectly) to an entire class of Western New York hydropower business customers (including for example, Replacement or Expansion Power customers) plus any charges assessed or imposed in connection with such supply by the New York Independent System Operator (‘NYISO’).  The Authority will provide Unforced Capacity (a measure of a generator’s installed capacity that is a function of its availability on-peak) in the amounts necessary to meet the University’s Unforced Capacity obligations associated with the
up-to-3-MW allocation in accordance with the rules and tariffs of the NYISO.  Neither ancillary services nor renewable or ‘green’ attributes are included in such allocation.

 

“The Authority’s obligation to sell power and energy to the University pursuant to the NURSA shall become effective on the latest of: (1) the first day after the date of the ‘Acceptance of the New License,’[3] (2) the date on which the Authority and the University execute a contract for the sale of power and energy or (3) September 1, 2007.  The proposed contract runs through September 1, 2025, the same as the current Niagara contracts with the municipal and rural electric cooperative customers and the Neighboring States.  A successor contract will be required to meet the terms of the NURSA.  

 

“The Authority agreed to commence the statutory contract approval process for the new proposed contract now, with the expectation that the process would be concluded in early 2007, to take effect as stated above.  If the license is not granted to the Authority, the contract would be of no force and effect. 

 

FISCAL INFORMATION

 

“The 3 MW of Project power and energy that will be sold to the University under the proposed contracts will be sold at the then-effective Replacement/Expansion Power rate that fully recovers the Authority’s costs. 

 

RECOMMENDATION

 

“The Executive Director of Hydropower Relicensing recommends that the Trustees authorize a public hearing on the proposed contracts with Niagara University to be held at a time and date authorized by the Chairman.  It is further recommended that, pursuant to Section 1009 of the Public Authorities Law, the Corporate Secretary be authorized to transmit copies of the proposed contracts to the Governor and legislative leaders.

 

“The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development, the Senior Vice President – Public and Governmental Affairs and I concur in the recommendation.” 

 

Mr. Vattimo presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman McCullough, Mr. Vattimo said that these contracts were subject to the Authority’s obtaining a new license to operate the Niagara power project.

 

 

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the Authority hereby authorizes a public hearing on the terms of the proposed contract for the sale of hydroelectric power and energy generated by the Authority to Niagara University substantially in the form attached hereto as Exhibit “14-A,” to be held at a subsequent time and date authorized by the Chairman; and be it further

 

RESOLVED, That the Corporate Secretary be, and hereby is, authorized to transmit copies of the proposed contract to the Governor, the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Committee on Ways and Means, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee pursuant to Section 1009 of the Public Authorities Law; and be it further

 

RESOLVED, That the President or his designee be, and hereby is, authorized, subject to the approval of the form thereof by the Executive Vice President and General Counsel, to enter into such other agreements, and to do such other things as may be necessary or desirable to implement sales to Niagara University as required by the Niagara University Relicensing Settlement Agreement filed with the Federal Energy Regulatory Commission in support of the anticipated new Niagara Project license and as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 

 


 

15.          Lease of Office Space in the Clarence D. Rappleyea Building to Thomas M. Bona, P. C. 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize the execution of a lease of approximately 10,656 square feet of office space on the 6th floor of the Clarence D. Rappleyea Building (‘Building’), White Plains, as shown on Exhibit ‘15-A’ attached hereto, by the Authority as landlord to Thomas M. Bona, P. C. (‘Bona’) as tenant.  The proposed lease is for a term of 10 years at an average annual base rent of $24.70 per square foot, plus electricity at an average annual rate of $2.78 per square foot and adjustments to recover increases in taxes and operating expenses over a base year as more specifically described in Exhibit ‘15-B’ attached hereto.

 

BACKGROUND

 

“By deed dated July 10, 1991, the Authority acquired the Building, a commercial office building containing approximately 420,195 rentable square feet (‘rsf’).  Currently, the Authority is leasing approximately 167,300 rsf of the Building to various tenants.  Bona has an existing lease with the Authority for the 10,656 square feet of office space on the 6th floor.  The existing lease provided for an extension term of five years upon written notice nine months prior to the expiration date.  Since Bona decided not to exercise his extension term and the existing lease will expire as of June 30, 2007, he has instead requested a new, longer-term lease with the Authority that will result in up to five additional years of rent revenue estimated to be in excess of $1.2 million.

 

DISCUSSION

 

“Thomas Bona started the firm in 1988, with a primary focus on representing insurance companies.  Bona has requested that the Authority enter into a new lease for the approximately 10,656 square feet of office space.  Preliminary negotiations on this space have resulted in the basic lease terms set forth in Exhibit ‘15-B.’  The existing lease would have only provided for a five-year extension had Bona exercised his option.  The new lease provides for a term of 10 years, which is more beneficial to the Authority.  It should be noted that this new lease with Bona, an existing tenant, is significantly more beneficial than a lease with a new tenant.  A lease with a new tenant would involve a period of free rent (up to 10 months) and a much higher allowance (probably a minimum of $35 rsf) for building out new space.  The new lease with Bona will not involve any free rent and will result in an allowance of less than $10 rsf for painting and re-carpeting.

 

“Title 5A of Article 9 of the Public Authorities Law (‘Act’) and the Guidelines for Disposal of Real Property (‘Guidelines’) require that the purpose and terms of such disposal be documented in writing and approved by resolution of the Trustees.  Further, the Act and the Guidelines require that an explanatory statement be prepared concerning the circumstances of each such disposal for real property leased for a term of more than five years if the total estimated rent over the term is in excess of $100,000.  Such statement shall be transmitted to the New York State Comptroller, the Director of the New York State Division of the Budget, the Commissioner of the New York State Department of General Services and the New York State Legislature not less than 90 days in advance of the disposal.  Accordingly, this transfer is subject to approval by the Trustees and the timely filing of the required statement.  This Trustee item, if adopted, would constitute the foregoing required explanatory statement and Trustee action.

 

“In order to fulfill these requirements, staff is recommending that the Authority enter into a short-term (three-month) bridge agreement to fulfill the notification requirements under the Act and then, on the expiration of the bridge agreement, enter into the Lease for a term of nine years and nine months.

 

FISCAL INFORMATION

 

“Payment for tenant improvements as set forth in Exhibit ‘15-B’ will be made from the Operating Fund.

 

 

RECOMMENDATION

 

“The Vice President – Procurement and Real Estate, the Director – Real Estate and the Director – Corporate Support Services recommend that the Trustees approve entering into a lease agreement with Thomas M. Bona, P. C. for commercial office space in the Clarence D. Rappleyea Building in White Plains, on terms substantially in accordance with the foregoing and Exhibit ‘15-B’ attached hereto.

 

“The Executive Vice President and General Counsel, the Executive Vice President – Corporate Services and Administration and I concur in the recommendation.”

 

Mr. Hoff presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman McCullough, Mr. Hoff said that by this action the Trustees would be approving a three-month bridge contract and then a nine-year and nine-months lease for the remainder of the term.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the President and Chief Executive Officer, the Executive Vice President – Corporate Services and Administration or the Vice President – Procurement and Real Estate be, and hereby is, authorized to enter into a lease agreement for office space in the Clarence D. Rappleyea Building, White Plains, with Thomas M. Bona, P. C. on substantially the terms set forth in the foregoing report of the President and Chief Executive Officer and Exhibit “15-B,” subject to approval of the lease documents by the Executive Vice President and General Counsel; and be it further

 

RESOLVED, That the Executive Vice President – Corporate Services and Administration, the Vice President – Procurement and Real Estate or the Director – Real Estate be, and hereby is, authorized on behalf of the Authority to execute any and all other agreements, papers or instruments that may be deemed necessary or desirable to carry out the foregoing, subject to the approval by the Executive Vice President and General Counsel; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 

 


 

16.          Sublease of Office Space in the Paramount Building, 1633 Broadway, New York City, to Cellfish Media, LLC

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize the execution of a sublease of approximately 9,000 square feet of office space on the 20th floor of the Paramount Building (‘Building’), 1633 Broadway, New York City, as shown on Exhibit ‘16-A’ attached hereto, by the Authority as sublandlord to Cellfish Media, LLC (‘Cellfish’) as subtenant.  The proposed sublease is for a term of approximately two years at an annual base rent of $45 per square foot plus electricity at an annual rate of $2.25 per square foot and adjustments to recover increases in taxes and operating expenses over a base year as more specifically described in Exhibit ‘16-B’ attached hereto.

 

BACKGROUND

 

“At their meeting of September 29, 1987, the Trustees approved the execution of a lease for 169,234 square feet of office space at the Building as the new site for the Authority’s New York City office.  The term of that lease was for 20 years.  The premises under lease initially included the entire 19th, 21st and 22nd floors and approximately 45% of the 20th floor.  It was further agreed that Paramount, the landlord, would vacate the balance of the 20th floor, consisting of approximately 23,369 square feet, within five years from the date of the lease and this additional space would then be included in the Authority’s Lease.  This additional space was turned over to the Authority by Paramount on June 21, 1993 and the Authority’s obligation to pay rent on this additional space commenced November 21, 1993.

 

DISCUSSION

 

“Anticipating the turnover of this space and recognizing the downsizing of the Authority’s staff and diminished space needs, the Authority in December 1992 actively marketed to sublease a significant portion of the space on the 20th floor of the Building.  By subsequent meeting of November 30, 1993, the Trustees approved the execution of a sublease for 12,423 rentable square feet (‘rsf’) of office space in the Building to Mendelsohn, Kary, Bell & Natoli, P. C. (‘Mendelsohn’), to expire on June 30, 2004.  The sublease provided for an option to extend for a period of approximately five years.  By First Amendment of Sublease dated March 20, 2002, the sublease was amended in certain respects to provide for a reduction of 3,423 rsf and the extension of the term for approximately four years and six months to December 30, 2008.

 

“Mendelsohn contacted the Authority and advised that due to the retirement of two of its senior partners, its business has decreased and virtually all of its partners and staff will be joining other firms as of January 1, 2007.  Mendelsohn has requested to negotiate a reasonable financial arrangement in consideration of terminating its lease as of December 31, 2006.

 

“The Authority was contacted by Newmark Knight Frank with a proposal to sublease the 9,000 rsf to Cellfish, formerly known as Lagardere Active North. Cellfish is a new digital content, marketing and distribution group that creates original branded content such as music ringtones, wallpapers, animations, games and community applications aimed at the mobile generation.

 

“Preliminary negotiations with Cellfish have resulted in the proposed basic lease terms that are set out as Exhibit ‘16-B.’  The proposed sublease with Cellfish will offset the obligation of Mendelsohn for the remaining two years of its sublease.

 

FISCAL INFORMATION

 

“The Authority currently pays its lease obligations out of the Operating Fund.  By recouping fixed rents under this proposed lease of $47.25 per square foot, the Authority will substantially offset its existing liability.

 

RECOMMENDATION

 

“The Vice President – Procurement and Real Estate, the Director – Real Estate and the Director – Corporate Support Services recommend that the Trustees approve entering into a sublease agreement with Cellfish Media, LLC for commercial office space in the Paramount Building at 1633 Broadway, New York City, on terms substantially in accordance with the foregoing and Exhibit ‘16-B’ attached hereto.

 

“The Executive Vice President and General Counsel, the Executive Vice President – Corporate Services and Administration and I concur in the recommendation.”

 

Mr. Hoff presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Trustee Seymour, Mr. Hoff said that this transaction was not subject to the requirements of the Public Authorities Accountability Act because the Authority’s original lease with the owners of the building had been signed in 1988, with the sublease signed in 1994.  Mr. Kelly added that legal staff had reviewed this and determined that this transaction did not involve the disposal of an interest in Authority real property because the Authority does not own the building.  Mr. Hoff said that the new sublease would be subject to the approval of the building owner.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the President and Chief Executive Officer, the Executive Vice President – Corporate Services and Administration or the Vice President – Procurement and Real Estate be, and hereby is, authorized to enter into a sublease agreement for office space in  the Paramount Building, 1633 Broadway, New York City, with Cellfish Media, LLC  on substantially the terms set forth in the foregoing report of the President and Chief Executive Officer and Exhibit “16-B,” subject to the approval of the sublease documents by the Executive Vice President and General Counsel; and be it further

 

RESOLVED, That the Executive Vice President – Corporate Services and Administration, the Vice President – Procurement and Real Estate or the Director – Real Estate be, and hereby is, authorized on behalf of the Authority to execute any and all other agreements, papers or instruments that may be deemed necessary or desirable to carry out the foregoing, subject to the approval of the form thereof by the Executive Vice President and General Counsel; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 

 


 

17.          Informational Item:  Permit for Temporary Use of Office Space in the Clarence D. Rappleyea Building to Westchester County Narcotics Initiative and Westchester
County Office of the District Attorney 

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize two separate permit transactions.  The first is a permit amendment for the Westchester County Narcotics Initiative (‘Westchester Narcotics’) for the use of approximately 2,052 rentable square feet (‘rsf’) of office space on the 7th floor of the Clarence D. Rappleyea Building (‘Building’) in White Plains.  This amendment would extend the term of the current permit for an additional two years to December 31, 2008 and increase the consideration for the permit to $30,780, inclusive of electricity, effective as of January 1, 2007.

 

“The second transaction is to amend a permit with the Westchester County Office of the District Attorney (‘DA’) for the use of approximately 1,506 rsf of office space on the 7th floor of the Building.  This amendment would extend the current permit, which expires on July 31, 2007, for an additional 17 months until December 31, 2008 and increase the consideration for the permit to $22,590, inclusive of electricity.

 

BACKGROUND

 

“By deed dated July 10, 1991, the Authority acquired the Building, a commercial office building containing approximately 420,195 rsf.  Currently, the Authority is leasing approximately 167,300 rsf of the Building to various tenants.  Westchester Narcotics has had a Temporary Use Permit since February 1999 subject to revocation at any time and for any reason at the sole discretion of the Authority upon 30 days’ written notice.  Additionally, the DA has had a permit with the Authority for office space since August 2002 with the same 30-day revocation notice provision.

 

DISCUSSION

 

“At the request of the DA, the Authority entered into Temporary Use Permits to assist the DA’s office in obtaining additional office space at reasonable rates for two of its departments.  This additional space reduces the County’s costs and provides for additional staffing requirements to further the public health, safety or welfare of the citizens of Westchester County.

 

                “The Authority has not determined this property to be surplus to the Authority’s needs and the permits are revocable on 30 days’ prior written notice.  Therefore, these two transactions do not fall within the Authority’s guidelines and procedures for disposal of real property and are not subject to the Public Authorities Accountability Act of 2005.”

 

Mr. Hoff presented the highlights of staff’s recommendations to the Trustees.  He said that this transaction was not considered a transfer of an interest in real property under the Public Authorities Accountability Act.


 

18.          Motion to Conduct an Executive Session

               

“Mr. Chairman, I move that the Trustees conduct an Executive Session pursuant to Section 105 of the Public Officers Law, in connection with discussions relating to proposed, pending and current litigation and matters concerning the appointment, employment, promotion, demotion, dismissal or removal of particular persons or corporations.”  Upon motion moved and seconded, an Executive Session was held.

 

 


 

19.          Motion to Resume Meeting in Open Session

“Mr. Chairman, I move to resume the meeting in Open Session.”  Upon motion moved and seconded, the meeting resumed in Open Session.

 

 


 

20.          Procurement (Services) and Other Contracts – Business Units and Facilities – Awards 

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award and funding of the multiyear procurement contracts listed in Exhibit ‘20-A’ for the Authority’s Business Units/Departments and Facilities.  Detailed explanations of the nature of such services, the bases for the new awards if other than to the lowest-priced bidders and the intended duration of such contracts are set forth in the discussion below.

BACKGROUND

“Section 2879 of the Public Authorities Law and the Authority’s Guidelines for Procurement Contracts require the Trustees’ approval for procurement contracts involving services to be rendered for a period in excess of one year.

“The Authority’s Expenditure Authorization Procedures (‘EAPs’) require the Trustees’ approval for the award of non-personal services, construction or equipment purchase contracts in excess of  $3 million, as well as personal services contracts in excess of $1 million if low bidder, or $500,000 if sole source or non-low bidder.

DISCUSSION

“The terms of these contracts will be more than one year; therefore, the Trustees’ approval is required.  Except as noted, all of these contracts contain provisions allowing the Authority to terminate the services for the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  Approval is also requested for funding all contracts, which range in estimated value from $30,000 to $30 million.  Except as noted, these contract awards do not obligate the Authority to a specific level of personnel resources or expenditures.

“The issuance of multiyear contracts is recommended from both cost and efficiency standpoints.  In many cases, reduced prices can be negotiated for these long-term contracts.  Since these services are typically required on a continuous basis, it is more efficient to award long-term contracts than to re-bid these services annually.

Contracts in Support of Business Units/Departments and Facilities:

Corporate Services and Administration

“The five contracts with CSL Enterprises, Inc. dba  Reel Vision Productions (‘CSL’; Q02-3950), Derek LaRock (‘LaRock’; Q02-3949-1), EMSTAR Media, Inc. (‘EMSTAR’; Q02-3948), Pioppi Video Entertainment Corp. (‘Pioppi’; Q02-3947) and Yuk (Tommy) Ng (‘Ng’; Q02-3951) (PO#s TBA) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of these contracts is to provide for various video-related services for the Authority.  Services include videography, video editing, video producer-director-editor services, video systems maintenance engineer and video production assistant/technician.  The five bid documents were downloaded electronically by numerous firms, including those that may have responded to a notice in the New York State Contract Reporter.  One proposal was received in response to each Request for Proposals (‘RFP’) and evaluated.  It should be noted that these services are performed on an ‘as needed’ basis, and certain bidders cannot commit to furnishing such experienced personnel on that basis, thus limiting the bid response.  Based on their ability to perform such work, as well as reasonable pricing, staff recommends the award of contracts to five firms:  CSL, LaRock, EMSTAR, Pioppi and Ng, the sole responding bidders to each respective RFP, which are qualified to perform such services.  The intended term of these contracts is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the combined total amount expected to be expended for the term of the contracts, $750,000.

“The Tri-Lakes Reliability Project (the ‘Project’) consists of upgrades to Niagara Mohawk Power Corporation’s (‘NMPC’) transmission system, including the installation of Static Var Compensators at Tupper Lake and Lake Colby in 2007 and construction of a new overhead 46 kV transmission line by 2008.  NMPC (a wholly owned subsidiary of National Grid) will be responsible for the design, engineering, procurement, construction, installation, testing and overall management of the Project, subject to oversight by the Authority.  The Authority will finance their shares of the total cost for both NMPC and the Villages of Tupper Lake and Lake Placid, and will be reimbursed for such costs.  In order to monitor the Project effectively from both a cost and implementation perspective, the Authority requires strong oversight of the Project and has established requirements for an independent review of the Project.  Such review will be performed by an owner’s representative that will perform a systematic verification that the critical components are designed, constructed, installed and functioning in a manner consistent with the performance requirements of the Project.  To this end, a Request for Proposals (Q02-3863) was prepared and bids were solicited; the original bids were rejected.  As a result of re-bidding, the 25 firms that had downloaded the original bid documents were invited to submit new proposals for the re-bid of the revised bid document.  The original solicitation was noticed in the New York State Contract Reporter and re-bidding occurred within 45 days.  Four proposals were received (of which one was subsequently rescinded).  The remaining three proposals were evaluated and the highest-cost proposal was not considered further.  The remaining two proposals were evaluated in detail, based on criteria that included: qualifications, composition and organization of the proposed team; experience as an owner’s representative in reviewing transmission line design and construction specifications and construction inspection and oversight; responses to the Request for Proposal Exhibits; schedule compatibility and clarity of proposal.  Based on a detailed review of both proposals and interviews with both firms, the evaluation panel determined that although both firms were qualified to perform the services, E-PRO submitted the more technically responsive and lower-cost proposal.  Staff therefore recommended award of the subject contract to E-PRO Engineering & Environmental Consulting, LLC (‘E-PRO’; 4500133754).  Due to the need to commence services, the contract became effective on or about December 13, 2006, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for owner’s representative services for the Project, as more fully described above.  Services include, but are not limited to, design review and analysis, inspection services, value analysis, construction monitoring, monthly reports and other tasks.  The intended term of this contract is approximately two years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $653,000, including contingency.

“The contract with Joanne Darcy Crum, LS, a New York State certified Woman-Owned Business Enterprise (‘Crum’; Q02-3935; PO# TBA), would become effective on March 7, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for routine land surveying support services for the Engineering, Licensing and Real Estate divisions, including hydro project relicensing compliance and various other efforts, and also to perform work associated with ongoing maintenance and management of the Geographic Information System (‘GIS’), under the direction and supervision of Authority staff.  Bid documents were downloaded electronically from the Authority’s Procurement website by 25 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommends award of a contract to the Crum firm, the lower-priced bidder qualified to perform such work.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $321,000.

“The contract with Laro Service Systems, Inc. (‘Laro’; Q02-3957; PO# TBA) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for air-conditioning maintenance services for the 8th and 9th floors of 501 Seventh Avenue, New York City (housing the Authority’s New York Office and the New York State Office of Alcoholism and Substance Abuse Services).  Services include monthly preventive maintenance, as well as quarterly coil cleaning and service for variable air-valve boxes, as needed.  Bid documents were downloaded electronically from the Authority’s Procurement website by eight firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommends award of a contract to Laro, the lower-priced bidder qualified to perform such services.  The intended term of this contract is up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $150,000.

“The two contracts with Parkway Exterminating Company, Inc. and Superior Pest Solutions (‘Parkway’ and ‘Superior’) (Q02-3937; PO#s TBA) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of these contracts is to provide for pest control services for the Clarence D. Rappleyea building in White Plains, as well as the 8th and 9th floors of 501 Seventh Avenue in New York City (housing the Authority’s New York Office and space leased to the New York State Office of Alcoholism and Substance Abuse Services), respectively.  Bid documents were sent to six firms, including those that may have responded to a notice in the New York State Contract Reporter.  Five proposals were received and evaluated.  Based on their ability to perform such work, as well as reasonable pricing, staff recommends the award of contracts to two firms, Parkway (the lowest-priced bidder for the Rappleyea building/garage) and Superior (the lowest-priced bidder for 501 Seventh Avenue).  The intended term of these contracts is up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the combined total amount expected to be expended for the term of the contracts, $55,000.

“The Authority’s B-350 King aircraft was purchased in June, 2000 for $5,582,350.  The Authority’s B-350 serves at the Authority’s single corporate aircraft and on average logs more than 50% more flight hours annually than the typical B-350 in operation elsewhere.  This reflects the multitude of trips made by Authority staff to the Authority’s various facilities throughout New York State.  While the aircraft has performed well, it is now six years old and the future cost of maintenance and recommended technology upgrades, including overhaul of both engines and replacement of the avionics system, will dramatically increase the Authority’s operating costs.  These additional costs are expected to be approximately $2 million over the next several years.  Given the foregoing, it is prudent to consider replacing the existing B-350 King aircraft with a new B-350 that is built to a higher safety and operational standard than the present aircraft and includes the desired technology upgrpades.  Given the fact that the Authority’s pilots are trained on the B-350 aircraft, and have only flown Beechcraft aircraft such as the B-350 for the Authority, from a standardization and safety perspective, purchasing a new B-350 as the replacement aircraft is the most practicable option.  Given the relatively short distances by nautical miles between the Authority’s facilities and headquarters location, the purchase of a small jet is not practical, and could not be accommodated at some of the airports that the Authority’s corporate aircraft flies into.  The estimated cost of a new B-350 King aircraft, with custom modifications, is approximately $6.5 million.  Given the anticipated amount of flight hours and cycles that the Authority’s current B-350 will have in 2007, it has an expected trade-in or resale value of approximately $2.6 or $2.7 million.  The Authority has evaluated the options of leasing over a five-year period versus direct purchase of a new B-350 aircraft and has determined that purchase of a new aircraft is the optimal course of action from a financial perspective.  The Trustees are requested to delegate authorization to the President and Chief Executive Officer to approve the direct purchase of a new King aircraft.  A sole source contract will be negotiated with the aircraft supplier, Raytheon Aircraft Company (PO# TBA).  The replacement aircraft will assure the Authority’s continued safe and reliable flight operations.

“The contract with S. A. Comunale Company, Inc. (Q02-3936; PO# TBA) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for maintenance services for the sprinkler system at the Authority’s Clarence D. Rappleyea Building and garage.  Services include repairs of leaking, rusted or worn-out sprinkler pipes and valves and replacement parts.  Bid documents were sent to four firms, including those that may have responded to a notice in the New York State Contract Reporter.  Staff recommends award of a contract to S. A. Comunale, the sole responding bidder, which is qualified to perform such work.  The intended term of this contract is up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $200,000.

“The contract with Valco Energy Systems, Inc. (‘Valco’; Q02-3933; PO# TBA) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for maintenance and minor repair services for two Cleaver Brooks boilers (150hp) that heat the Authority’s Clarence D. Rappleyea building in White Plains.  Services include: comprehensive emergency service (e.g., for burners, controls, boiler feedwater pumps and fuel oil transfer pumps) by a qualified field engineer on a ‘24/7’ basis, with a three-hour response time; annual complete boiler cleaning and inspection and monthly preventive maintenance and fine-tuning services.  Bid documents were sent to six firms, including those that may have responded to a notice in the New York State Contract Reporter.  Four proposals were received and evaluated.  Staff recommends award of a contract to Valco, the lowest-priced bidder, which is qualified to perform such work.  The intended term of this contract is up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $150,000.

Power Generation

“The two contracts with Abscope Environmental, Inc. and Empire Control Abatement, Inc. (‘Abscope’ and ‘Empire’) (Q02-3917; PO#s TBA) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of these contracts is to provide for planned and emergency response asbestos abatement services at Authority facilities in the Albany/Central New York and downstate/Southeastern New York (‘SENY’) geographic regions, respectively.  Such services include asbestos abatement, transport and disposal services and emergency response services for asbestos removal, repair, encapsulation, enclosure or cleanup, on an ‘as needed’ basis, at Authority facilities in the aforementioned geographic regions.  The work will be performed by licensed asbestos contractors, in accordance with all applicable federal, State and local regulations and Authority specifications, and within a response time to each Authority facility of not more than three hours.  Bid documents were downloaded electronically from the Authority’s Procurement website by 20 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Five proposals were received (of which one was subsequently rescinded); four bids were evaluated (two were for the Albany/Central New York region and two were for the downstate/SENY region).  Each bidder was determined to be technically qualified and able to perform such work; each bidder’s cost proposal, which was based on a predetermined formula that weighted each bid item as an estimated percentage of projected use, was then assessed.  The bid items for each bidder were tabulated and a weighted average bid number was generated.  The lowest-weighted-average bid was determined to be the lowest-priced bidder.  Staff therefore recommends the award of contracts to the following firms:  (1) Abscope, the lowest-priced bidder for the Albany/Central New York Region, and (2) Empire, the lowest-priced bidder for the downstate/SENY Region.  The intended term of these contracts is up to two years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the combined total amount expected to be expended for the term of the contracts, $500,000.

“The contract with The Aulson Company, Inc. (‘Aulson’; Q02-3914; PO# TBA) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for the labor, equipment and materials to transport, clean/sandblast, repair (as needed) and paint a total of 160 wicket gates for the overhaul of eight turbine units at the St. Lawrence/FDR Power Project as part of the Life Extension and Modernization Program.  After cleaning and painting, the wicket gates will be sent to the Clark Energy Center for machining by Authority staff before being returned to St. Lawrence for reassembly.  Bid documents were downloaded electronically from the Authority’s Procurement website by nine firms, including those that may have responded to a notice in the New York State Contract Reporter.  One proposal was received and evaluated.  (The firms that did not submit proposals cited factors such as lead abatement requirements, other work for electric utilities or lack of experience as reasons why they did not respond to this Request for Proposals.)  Based on its qualifications and ability to perform such work (as confirmed by a site visit to its shop), in addition to its reasonable pricing and ability to meet schedule requirements, staff recommends award of a contract to Aulson, the sole responding bidder, which is qualified to perform such services.  The intended term of this contract is five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $439,000, including contingency.

“Due to the need to commence pre-planning services required for the 500 MW plant outage, currently scheduled for January 2007, a Letter of Intent, as authorized by the President and Chief Executive Officer, was issued to Day & Zimmermann NPS, Inc. (‘D&Z NPS’; Q02-3882; 4600001730), notifying it of this award of contract effective January 1, 2007, subject to formal approval by the Trustees at their December 2006 meeting.  The purpose of this contract is to provide for general maintenance support services at the Charles Poletti, 500 MW and Richard M. Flynn Power Plants.  Such services will generally consist of providing skilled craft labor to supplement and assist the Authority’s plant employees during periods of routine maintenance, scheduled outages, emergency shutdown or technical inspections, as directed by Authority management at the three facilities.  The following categories of work may be required: general plant maintenance, plant modifications and corrections and retrofit work.  Bid documents were downloaded electronically from the Authority’s Procurement website by 39 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Six proposals were received and evaluated.  Based on their qualifications, extensive experience and ability to perform such work, in addition to their competitive pricing, staff recommended award of the subject contract to D&Z NPS, the lowest-priced qualified bidder.  Another bidder with comparable pricing to that of D&Z NPS was not considered acceptable due to its financial condition.  In addition, the D&Z NPS rates for Workers’ Compensation, liability insurance percentages and overhead and fee percentages will remain firm for the duration of the contract; the only increases will be in the actual craft labor rates as determined by increases in the New York State Prevailing Wage Rates and applicable collective bargaining agreements.  The intended term of this contract is up to four years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $9 million.

“The Authority’s operating projects, through the course of their normal operating practices, generate hazardous and other regulated waste materials.  In order to act in an environmentally responsible manner and to limit the Authority’s potential long-term liability for costly remediation of contaminated disposal facilities and associated litigation, the Authority’s environmental staff has instituted a program of stringent review, inspection and evaluation of solid and hazardous waste treatment, disposal, recycling and transportation vendors and facilities.  To this end, the Authority from time to time solicits qualification statements in the New York State Contract Reporter from potential providers of regulated/hazardous waste disposal services, as well as reviewing such potential providers as may become known to the Authority’s environmental staff.  The approval process consists of a multimedia environmental audit of individual facilities, discussions with appropriate federal and State regulatory agencies concerning each facility’s compliance record and an evaluation of available financial and insurance records.  Depending on the type of material handled, the audit covers various environmental areas, including air, water, hazardous waste, chemical and oil bulk storage and emergency response.  The purpose of the audit is to determine compliance with applicable laws and regulations, and to assess the level of risk of site contamination that could result from the facility’s waste management practices.  Facility approval is based on an evaluation of these elements and subsequent determination by the Authority’s environmental staff that the potential for harm to the environment from facility operations is minimal, and, therefore, that risk of liability to the Authority is minimal.  Standard ‘framework’ contracts are established with vendors that have been approved through the process described above.  Appropriate environmental audits will continue to be conducted during the contract term, and any decline in service quality will result in termination of the contract.  As a result of such solicitation, evaluation of qualification statements and facility audits by the Authority’s environmental staff, the award of two contracts to the firms DuPont Secure Environmental Treatment (‘DuPont SET’; 4600001740) and TCI of NY, LLC (‘TCI’; 4600001738) is recommended.  The proposed contracts would provide for regulated/hazardous waste disposal services for Authority facilities statewide, specifically, DuPont SET for wastewater treatment services and TCI for the transportation and recycling of transformers containing less than 50 parts per million of polychlorinated biphenyls.  Currently, the Authority has an existing contract with an approved wastewater treatment facility and with an approved transformer recycling facility, respectively.  The addition of DuPont SET and TCI to the existing Authority-approved disposal facilities will provide the Authority with more flexibility and competitiveness.  Both contractors and their respective facilities have been audited by the Authority’s environmental staff and have met their stringent review, inspection and audit standards; both hold the proper permits, meet insurance requirements and are financially viable.  The proposed contracts would become effective on December 20, 2006 for an intended term of four years, subject to the Trustees’ approval, which is hereby requested.  (They will be coterminous with the other environmental waste disposal contracts previously approved by the Trustees at their meeting of December 13, 2005.)  Funding for these contracts will be drawn from the previously approved total aggregate amount of $5 million for all such environmental waste disposal contracts.

“Due to the need to commence services, the contract with Envirologic of New York, Inc. (‘Envirologic’; 4600001680) became effective on July 26, 2006, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for on-call lead and asbestos services for the St. Lawrence/FDR Project.  Services include, but are not limited to, inspection, sampling, abatement design and project monitoring, as well as all supervision, labor, equipment and material to perform such services.  Bid documents were sent to 15 firms, including any that may have responded to a notice in the New York State Contract Reporter.  Eight proposals were received and evaluated.  Staff recommended award of the subject contract to Envirologic, the lowest-priced bidder, which is qualified to perform the work.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $30,000.

“Due to the need to commence services, the contract with Life Science Laboratories Inc. (‘LSL’; 4600001646) became effective on June 5, 2006, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for analytical laboratory and sampling services for various outfalls at the St. Lawrence/FDR Project.  Such environmental analyses also include the identification of contaminants in drinking water, wastewater, waste oils, soil samples and hazardous waste, as needed.  Services are conducted by this certified laboratory in accordance with specified New York State Department of Health and Department of Environmental Conservation methodologies, and also include State Pollutant Discharge Elimination System analyses.  Bid documents were sent to 15 firms, including any that may have responded to a notice in the New York State Contract Reporter.  Three proposals were received and evaluated.  Staff recommended award of the subject contract to LSL, the lowest-priced bidder, which is qualified to perform the work.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $90,000.

“Due to the need to commence services, the contract with Longo Electrical-Mechanical, Inc. (‘Longo’; 4600001706) became effective on October 1, 2006, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for inspection, repair and rewind services for various-size motors (ranging from 100 to 10,000 horsepower) at the power plants in the Authority’s SENY region.  Bid documents were sent to 11 firms, including any that may have responded to a notice in the New York State Contract Reporter.  Staff recommended award of the subject contract to Longo, the sole responding bidder, which is qualified to perform the work.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $450,000.

“Due to the need to commence services, the contract with Modern Disposal Services, Inc. (‘MDS’; 4600001709) became effective on November 1, 2006, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for disposal services for non-hazardous waste (i.e., construction and demolition materials), used tires, recyclable paper and other acceptable non-hazardous solid waste, for the Niagara Power Project.  Services include, but are not limited to, disposal of Authority-delivered materials at the vendor’s landfill, container services and disposal of used tires and other acceptable solid wastes.  Bid documents were sent to five firms, including any that may have responded to a notice in the New York State Contract Reporter.  Staff recommended award of the subject contract to MDS, the sole responding bidder, which is qualified to perform the work.  The intended term of this contract is four years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $200,000.

“The contract with North American Energy Services (‘NAES’; Q02-3896; PO# TBA) would become effective on or about December 20, 2006, subject to the Trustees’ approval.  The purpose of this contract is to provide for operations and maintenance (‘O&M’) support services for 10 gas turbine units (LM6000s) and related equipment installed as part of the Small Clean Power Plants Project at six locations in New York City.  (The Brentwood unit is operated and maintained by Authority personnel from the Richard M. Flynn Power Plant.)  O&M support continues to be required on a daily basis to provide ongoing daily operating and prevention and maintenance activities, verify site integrity, troubleshoot problems and related activities; to support outage-related activities and to provide additional support during the peak summer season, as may be required, since the Authority does not have sufficient staffing resources to perform such services.  Bid documents were downloaded electronically from the Authority’s Procurement website by 17 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Four proposals were received and evaluated.  Based on its qualifications, resources, experience and ability to perform the work, as well as the lowest overall quoted compensation terms, including the annual management fee, staff recommends award of a contract to NAES, the lowest-priced bidder.  The intended term of this contract is five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $30 million (which includes estimated adjustment for labor cost increases, inflation and unforeseen contingencies).

“Due to the need to commence services, the contract with Professional Health Services, Inc. (‘PHS’; 4600001694) became effective on August 28, 2006, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for annual physical examinations, as well as respirator clearance and fit tests, where applicable, for approximately 200 employees at the St. Lawrence/FDR Project, as required by all applicable safety and health standards, federal and State requirements and Authority policy.  Bid documents were sent to three firms, including any that may have responded to a notice in the New York State Contract Reporter.  Staff recommended award of the subject contract to PHS, the sole responding bidder, which is qualified to perform such services.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $132,900.

“The contract with the State University of New York at Stony Brook, Division of Occupational and Environmental Medicine (‘SUNY Stony Brook’; Q02-3910; PO# TBA) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for annual physical examinations and miscellaneous medical services for approximately 25 employees at the Richard M. Flynn Plant, as required by all applicable safety and health standards, federal and State requirements and Authority policy.  Services include, but are not limited to, annual physical examinations and records management services, as well as respirator clearance tests, where applicable, and additional testing for crane operators and various occupational/industrial exposures, such as asbestos and high noise.  Bid documents were retrieved electronically from the Authority’s Procurement website by nine firms, including those that may have responded to a notice in the New York State Contract Reporter.  Staff recommends award of a contract to SUNY Stony Brook, the sole responding bidder, which is qualified to perform such services.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $35,000.

Transmission

“The contract with Areva T&D Inc. (‘Areva’; 4600001726) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for the refurbishment of three Cogenel air blast breaker units at the Clark Energy Center.  The breakers are used for voltage control on the 765 kV transmission line.  Although the breakers have been inspected and maintained at regular intervals during the more than 20 years they have been in service, no major overhaul has ever been performed.  An evaluation of internal and external breaker components, as well as refurbishment services, is now recommended.  The proposed award is made on a sole-source basis, since Areva is the original equipment manufacturer and, as such, has access to all design and manufacturing specifications, and is the only known source that can rebuild the breaker to original manufacturer’s specifications and certify the rebuild.  A notice of the intended sole source award was also published in the New York State Contract Reporter; there were no respondents.  Staff therefore recommends award of the subject contract to Areva, which is uniquely qualified to perform such work.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $600,000.

“The contract with Global Energy Decisions Inc. dba Henwood Energy Services (‘Global’; 4600001725) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for the continuation of maintenance services for GimsPlus software installed at the Energy Control Center (‘ECC’).  This proprietary software provides the communication link between the ECC’s Energy Management System and the New York Independent System Operator’s (‘NYISO’) Market Information System (‘MIS’).  Services include program improvements, changes and/or debugging and new versions of the program developed by the licensor in an effort to improve software performance and to keep up with NYISO MIS changes and requirements.  The proposed award is made on a sole-source basis, since Global acquired the GimsPlus application in 2005 and is therefore considered the original equipment manufacturer and software licensor.  A notice of the intended sole source award was also published in the New York State Contract Reporter; there were no respondents.  Staff therefore recommends award of the subject contract to Global, which is uniquely qualified to provide such software and services.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $220,000.

“The contract with Siemens Power Transmission & Distribution, Inc. (‘Siemens’; Q02-3961; PO# TBA) would become effective on January 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for the continuation of a Software Subscription Agreement (‘SSA’) and Maintenance Service Agreement (‘MSA’) in support of the proprietary Spectrum software that is the core of the upgraded Siemens Energy Management System installed at the ECC.  The SSA services include base software releases and patches developed by the licensor.  The MSA services include consultation on software applications, software fault analysis, installation of software patches, technical support on a ‘24/7’ basis and third-party software license maintenance fees.  The proposed award is made on a sole-source basis, since Siemens is the original equipment manufacturer and the developer of the Spectrum software installed at the ECC.  A notice of the intended sole source award was also published in the New York State Contract Reporter; there were no respondents.  Staff therefore recommends award of a contract to Siemens, which is uniquely qualified to provide such software and services.  The intended term of this contract is six years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $1,562,800 (comprising a firm commitment of $962,800 for the MSA/SSA and third-party software license renewals for six years and an estimated $600,000 for projected additional/emergent support services, as may be required).

FISCAL INFORMATION

“Funds required to support contract services for various Business Units/Departments and Facilities have been included in the 2007 Approved O&M Budget.  Funds for subsequent years, where applicable, will be included in the budget submittals for those years.  Payment will be made from the Operating Fund.

“Funds required to support contract services for capital projects have been included as part of the approved capital expenditures for those projects and will be disbursed from the Capital Fund in accordance with the project’s Capital Expenditure Authorization Request.

RECOMMENDATION

“The Deputy General Counsel, the Vice President – Procurement and Real Estate, the Vice President – Environment, Health and Safety, the Vice President – Project Management, the Executive Director – Licensing, Implementation and Compliance, the Director – Corporate Support Services, the Regional Manager – Northern New York, the Regional Manager – Western New York, the Regional Manager – Central New York, the Regional Manager – Southeastern New York, the General Manager – Clark Energy Center and the Director of Operations – Flynn recommend the Trustees’ approval of the award of multiyear procurement contracts to the companies listed in Exhibit ‘20-A’ for the purposes and in the amounts set forth above.

“The Executive Vice President and General Counsel, the Executive Vice President – Corporate Services and Administration, the Executive Vice President – Chief Financial Officer, the Senior Vice President – Energy Services and Technology, the Senior Vice President and Chief Engineer – Power Generation, the Senior Vice President – Transmission, the Senior Vice President – Public and Governmental Affairs and I concur in the recommendation.”

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the award and funding of the multiyear procurement services contracts set forth in Exhibit “20-A,” attached hereto, are hereby approved for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.


 

21.          Procurement (Services) Contracts – Business Units and Facilities – Extensions, Approval of Additional Funding
and Increase in Compensation Ceiling 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the continuation and funding of the procurement (services) contracts listed in Exhibit ‘21-A’ in support of projects and programs for the Authority’s Business Units/Departments and Facilities.  The Trustees are also requested to approve an increase in the compensation ceiling of the contract with Crowley Webb and Associates, Inc.  Detailed explanations of the nature of such services, the reasons for extension, the additional funding required and the projected expiration dates are set forth below.

BACKGROUND

“Section 2879 of the Public Authorities Law and the Authority’s Guidelines for Procurement Contracts require the Trustees’ approval for procurement contracts involving services to be rendered for a period in excess of one year.

“The Authority’s Expenditure Authorization Procedures (‘EAPs’) require the Trustees’ approval when the cumulative change order value of a personal services contract exceeds the greater of $250,000 or 35% of the originally approved contract amount not to exceed $500,000, or when the cumulative change order value of a non-personal services, construction, equipment purchase or non-procurement contract exceeds the greater of $500,000 or 35% of the originally approved contract amount not to exceed $1 million.

DISCUSSION

“Although the firms identified in Exhibit ‘21-A’ have provided effective services, the issues or projects requiring these services have not been resolved or completed, and the need exists for continuing these contracts.  The Trustees’ approval is required because the terms of these contracts exceed one year and/or because the cumulative change order limits will exceed the levels authorized by the EAPs in forthcoming change orders.  All of the subject contracts contain provisions allowing the Authority to terminate the services at the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  These contract extensions do not obligate the Authority to a specific level of personnel resources or expenditures.

“Extension of each of the contracts identified in Exhibit ‘21-A’ is requested for one or more of the following reasons: (1) additional time is required to complete the current contractual work scope or additional services related to the original work scope; (2) to accommodate an Authority or external regulatory agency schedule change that has delayed, reprioritized or otherwise suspended required services; (3) the original consultant is uniquely qualified to perform services and/or continue its presence and re-bidding would not be practical or (4) the contractor provides a proprietary technology or specialized equipment, at reasonably negotiated rates, that the Authority needs to continue until a permanent system is put in place.

Contracts in Support of Business Units/Departments and Facilities:

Business Services

“At their meeting of March 26, 2002, the Trustees approved the award of a five-year contract to Ceridian Employer Services (4500056531), as well as funding in the amount of $1.465 million, to provide for payroll processing services for all Authority employees.  The contract, which was awarded as the result of a competitive search, became effective on April 1, 2002.  Due to the complexity of the payroll system, the conversion and transition period was extended to approximately three years.  The current authorized commitments are $1.225 million (of the total $1.465 million previously approved by the Trustees) and the approved term will expire on March 31, 2007.  Because of the customized nature of the enhancements and upgrades implemented by Ceridian to accommodate the Authority’s complex payroll processing requirements, Ceridian is considered to be uniquely qualified to perform such services and, as such, to be the sole provider of such services at this time.  A three-year extension is therefore requested to use the remaining contract funds for the full five-year period intended under the contract, with no additional funding in excess of the previously approved $1.465 million for the extended term.  The Trustees are requested to approve the additional extension of the subject contract through March 31, 2010, with no additional funding requested.

Corporate Services and Administration

Increase in Compensation Ceiling

“At their meeting of June 27, 2006, the Trustees approved the award of a contract to Crowley Webb and Associates, Inc. (4500127159) to provide for media consulting services for ‘branding’ the Authority, in order to begin a communication and education program on the Authority’s benefits to the people of New York State.  The Trustees also approved an initial award amount of $400,000, with additional funding to be requested after the media branding program was developed, for an initial term of one year, with an option to extend for one additional year.  The current contract amount is $400,000.  With the development of the media program near completion, staff anticipates that additional funding in the amount of $3 million will be required for the production of the 2007 branding campaign, including the purchase of airtime and print media.  The Trustees are requested to approve the additional funding, thereby increasing the compensation ceiling to $3.4 million.

Energy Services and Technology

“The contract with Siemens Power Transmission & Distribution, Inc. (4500116708) provides for services to implement operating performance improvements and enhancements to the Authority’s Convertible Static Compensator (‘CSC’) at Marcy, as well as to investigate the possibility of using the CSC as an ice-melting device for the MSU-1 transmission line connecting Marcy and Massena buses.  Although the CSC is mostly used for voltage control, in 2004 the New York Independent System Operator (‘NYISO’) also requested a temporary change in the operating configuration of the CSC, for the purpose of redirecting power flows in order to avert a potential system emergency.  To this end, the subject contract was awarded on a sole-source basis to the original equipment manufacturer, which is uniquely qualified to perform such services.  The contract became effective on December 15, 2005 for a term of one year.  Most of the scheduled off-site tasks have been completed; however, some on-site work, which requires that the CSC be taken out of service, is still outstanding due to scheduling delays.  NYISO has indicated that it cannot grant permission for an outage of the CSC when other voltage support equipment throughout the State is also out of service.  Therefore, an additional six-month extension is requested in order to provide sufficient time to complete all work under this contract.  The current contract amount is $190,240; it is anticipated that no additional funding will be required for the extended term.  The Trustees are requested to approve the extension of the subject contract through June 30, 2007, with no additional funding requested.

“The contract with Turner Engineering Co. (4500116711) provides for consulting services in connection with the regenerative energy braking improvement project for New York City Transit AC drive subway trains.  The original award, which was competitively bid, became effective on December 5, 2005 for a term of one year.  An interim extension through December 19, 2006 was subsequently authorized in accordance with the Authority’s Guidelines for Procurement Contracts and EAPs.  Due to delays caused by the unavailability of test trains and general outages required to complete the Phase I performance evaluation, an additional one-year extension is now requested in order to provide sufficient time to complete all required services.  In addition, the scope and associated costs for Phase II could not be determined at the time of award, since they required the results of Phase I.  The current contract amount is $650,000; it is anticipated that an estimated additional $300,000 may be required to complete Phase II services.  The Trustees are requested to ratify the previously authorized interim extension and to approve the additional extension of the subject contract through December 31, 2007, as well as the additional funding requested.  It should be noted that all costs will be recovered by the Authority.

“At their meeting of January 29, 2002, the Trustees approved the award of two contracts to the firms PB Power, Inc. and Ameresco Select, Inc. (formerly Select Energy Services, Inc.) (4600000758 and 4600000761, respectively) for program management and implementation services in support of the previously approved Energy Services Program (‘ESP’), for an initial term of three years, with an option to extend for up to two additional years with the approval of the President and Chief Executive Officer, which was subsequently exercised.  The Trustees also approved the allocation of previously approved ESP funding, totaling $100 million, to these two contracts as projects are assigned.  While many projects have been completed successfully, the progress of other projects previously assigned under these contracts has been delayed due to the following:  (1) customer delays in approving the project design and/or changes to the scope of work (e.g., City of Rome for wastewater treatment process upgrade, lighting and motors; City of Auburn for lighting, motors, boilers, HVAC and Energy Management System (‘EMS’); Office of General Services (‘OGS’) Ten Eyck for HVAC system upgrades, boilers, chillers) and (2) customer delays in approving/signing the Customer Installation Commitment (‘CIC’) (e.g., SUNY Brockport Phase 3A for HVAC upgrades, EMS, windows, lighting; OGS Suffolk State Office Building facilities for new atrium skylight and curtain wall, outdoor lighting, combined heat and power project and fuel cell; Rockland County facilities for roofing and insulation).  Staff anticipates that, should all such projects move forward, they will be completed by June 2009.  In addition, construction is currently under way on other projects, most of which are expected to be completed in 2007 (e.g., SUNY Brockport Phase 2 for HVAC, occupancy sensors, exit signs, heat exchangers and EMS; several Nassau County buildings for EMS, HVAC and motors; SUNY Buffalo for windows).  An extension of two years and five months is therefore requested to complete all such previously assigned projects.  The current contract amounts total $65 million; staff anticipates that no additional funding in excess of the previously approved $100 million combined total will be required for the extended term.  The Trustees are requested to approve the additional extension of the subject contract through June 30, 2009, with no additional funding requested.  It should be noted that all costs will be recovered by the Authority.

FISCAL INFORMATION

“Funds required to support contract services for various Headquarters Office Business Units/Departments and Facilities have been included in the 2007 Approved O&M Budget.  Funds for subsequent years, where applicable, will be included in the budget submittals for those years.  Payment will be made from the Operating Fund.

“Funds required to support contract services for capital projects have been included as part of the approved capital expenditures for those projects and will be disbursed from the Capital Fund in accordance with the Project’s Capital Expenditure Authorization Request.  Payment for contracts in support of the ESP will be made from the Energy Conservation Effectuation and Construction Fund.  All costs, including Authority overheads and the cost of advancing funds, will be recovered by the Authority, consistent with other Energy Services and Technology Programs.

RECOMMENDATION

“The Deputy General Counsel, the Vice President – Controller, the Vice President – Procurement and Real Estate, the Director – Energy Services, the Chief Technology Development Officer, the Deputy Director – Media Relations and the General Manager – Clark Energy Center recommend the Trustees’ approval of the extensions, additional funding and increase in compensation ceiling of the procurement contracts listed in Exhibit ‘21A.’

“The Executive Vice President and General Counsel, the Executive Vice President – Corporate Services and Administration, the Executive Vice President – Chief Financial Officer, the Senior Vice President – Energy Services and Technology, the Senior Vice President and Chief Engineer – Power Generation, the Senior Vice President – Transmission, the Senior Vice President – Public and Governmental Affairs and I concur in the recommendation.”

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, each of the contracts listed in Exhibit “21-A,” attached hereto, is hereby approved and extended for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That pursuant to the Authority’s Expenditure Authorization Procedures, an increase in the compensation ceiling of the contract with Crowley Webb and Associates, Inc. is hereby approved, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount and for the purpose listed below:

 

                                                                                                        Contract

                                                                                                        Approval                       

                                                                                                     (Increase in            Projected

                                                                  O & M                     Compensation            Closing

                                                                                                         Ceiling)                    Date

 

Provide for media
consulting services
for “branding” the

Authority:

 

Crowley Webb and
Associates, Inc.

4500127159

 

Previously
approved amount                       $  400,000

 

Additional amount
requested                                    3,000,000           06/30/07*

 

REVISED
COMPENSATION
CEILING                                   $3,400,000

 

* Note: The Trustees previously approved an initial award of one year, with an option to extend for one additional year (through 6/30/08)

 

AND BE IT FURTHER RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 

 

 


 

22.          Conditional Award of Contract and Authorization to Negotiate a Strategic Alliance with NRG Energy, Inc. Regarding Proposed
Advanced Clean Coal Power Plant Facility 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize a conditional award of a contract and the negotiation of a Strategic Alliance with NRG Energy, Inc. (‘NRG’), the highest evaluated bidder in the Authority’s ‘Request for Proposals for Long-Term Supply of Advanced Clean Coal Power Plant Capacity and Energy and Other Products’ issued on September 1, 2006 (‘RFP’).  NRG submitted a bid to construct an Integrated Coal Gasification Combined Cycle (‘IGCC’) plant at the site of its existing Huntley Station in Tonawanda, NY.  NRG’s proposal was the most favorable bid submitted, but staff determined that the price of NRG’s proposal was too high to be workably competitive for the Authority, given the current market environment.  By establishing the recommended Strategic Alliance with NRG, the parties can together pursue additional support that may be available through tax credits and/or other funding sources.  If negotiating this Strategic Alliance is approved by the Trustees, the parties would work together to find an approach that would close the financial gap between the current proposal by NRG and a project that offers a purchase price more commercially acceptable to the Authority.  As discussed more fully below, this Strategic Alliance will be subject to certain time and spending limitations.

 

“If the Strategic Alliance is successful, the price to the Authority can be brought to a level more in accord with the Authority’s mission, and upon the satisfaction of the regulatory conditions precedent required for the Authority to enter into a written power purchase agreement with NRG (such as those required by the State Environmental Quality Review Act (‘SEQRA’)), the Trustees will be requested to authorize entering into negotiations with NRG for the execution of a long-term supply agreement.

BACKGROUND

                “In his 2006 ‘State of the State’ address, Governor Pataki outlined a comprehensive plan aimed at reducing the State’s dependence on foreign oil without causing irreparable damage to our natural environment.  The plan included, among other things, lending support to an advanced clean coal power plant initiative in the State utilizing our nation’s most abundant fuel without the pollution of traditional coal plants.

                ‘The Advanced Clean Coal Power Plant Initiative (‘ACCPPI’) was developed by a multi-agency team led by the Governor’s Office of Regulatory Reform (‘GORR’), and consisting of the Authority, the New York State Energy Research and Development Authority (‘NYSERDA’), Empire State Development, the Department of Environmental Conservation, the Department of Public Service, and other State agencies as required.  This ‘Shovel Ready Team’ worked together to identify sites suitable for the development of ‘clean coal’ plants and carbon dioxide (‘CO2’) sequestration, with priority consideration given to existing brownfield properties (generally, abandoned or underused industrial or commercial property considered for redevelopment, often environmentally contaminated).

“Then, as a next step, the Authority issued an RFP for the purchase of up to 600 MW of electric generating capacity and associated energy from an advanced clean coal power plant.  The RFP defined an advanced clean coal power plant as ‘a plant which will in the most efficient and cost effective manner (1) produce a substantial reduction in plant emissions from that of a new, standard design sub-critical coal plant; and, (2) be built with provisions for future capability to capture and sequester carbon dioxide emissions.’  As required in the RFP, an advanced clean coal power plant will be acting as a host site for NYSERDA research, development and deployment of technologies for capture and sequestration of CO2.  Throughout this process, the Authority clearly set forth the imperative that the power purchase agreement ‘must work within the competitive environment.’ 

 

 

 

 

 

DISCUSSION

The RFP and the Responses

 

“Issuance of the RFP and evaluation of the bids was done by the Authority’s evaluation team, comprising staff from the Business Services, Energy Services and Technology, Environment Health and Safety, Law, Power Generation and Transmission groups.  They were assisted by outside experts from the Electric Power Research Institute (‘EPRI’), NYSERDA, the engineering firm of CH2MHill/Lockwood Greene, the economic analysis firm of Quantec, LLC and Holland & Knight, the Authority’s outside transaction counsel.

 

“Before bids were received, the evaluation team developed a structured selection process.  They determined that the focus of their bid reviews would be four main evaluation criteria: the quality of resources committed to the proposed project (Team), evaluated cost of the delivered product (Economics), technical soundness of the project proposal, including capability for CO2 capture and sequestration (Technology/Sequestration) and the likelihood of permitting the project while addressing community concerns (Permitting, Licensing and Community Issues).  These four major review criteria were fully defined and each assigned a percentage weight by the evaluation team.

 

“On October 31, 2006, the Authority received responses to the RFP from four bidders, containing five separate bid options.  A summary of the bids follows:

·   AES Corporation (‘AES’) submitted two similar proposals: (1) construction of a 700 MW super-critical pulverized coal (‘SCPC’) plant at its existing Somerset facility in Somerset, Niagara County, and (2) construction of a 526 MW SCPC plant by repowering of its existing Jennison facility in Bainbridge, Chenango County.  The bids were for supercritical steam conditions at 3690psig/1050°F.  The evaluation team expressed concern that these conditions were not sufficiently advanced to comply with the RFP requirements.  In response, AES indicated in further discussions that it could advance the steam temperatures to 1100°F, which, in the opinion of the review team, would meet the minimum advanced clean coal power plant requirements. 

 

·   Competitive Power Ventures (‘CPV’) proposed a 630 MW IGCC facility in Lackawanna, in western New York. 

 

·   Empire Synfuel LLC and Project Orange Associates, LLC (‘Empire/POA’) submitted a proposal for a coal-based synthetic natural gas (SNG) project, based on the Westinghouse plasma gasification technology, to be located in DeWitt, near Syracuse, capable of producing sufficient quantities of SNG to power a 1,000+ MW power plant.  A portion of the output from this facility would be piped to an existing co-generation facility in Syracuse.  Empire/POA’s bid included 40 MW of capacity and energy from the co-generation facility and additional quantities of SNG or any combination of these products. 

 

·   NRG Energy submitted a proposal for a 680 MW IGCC facility to be located at its existing Huntley Station in Tonawanda.

 

Selection Process

 

“As a result of the initial screening, Competitive Power Ventures was eliminated as not meeting the minimum requirements of the RFP.  Among other things, CPV did not demonstrate site control (i.e., the site on which the project is to be located is owned by a third party and CPV did not show rights in such property), and it did not address the issue of carbon sequestration.

 

“The four remaining proposals (AES Bainbridge, AES Somerset, Empire/POA and NRG) were then evaluated for scoring under the evaluation criteria.  Following the initial review of the proposals, the selection team submitted questions, which the bidders responded to at on-site meetings at the Authority.  Preliminary evaluations and scores were developed following these meetings.  The leading two bidders (AES and NRG) were invited back to provide their ‘best and final offers’ and to make presentations to representatives of senior management.  After these meetings, the final evaluation meeting was held and the evaluation scores were compiled.  The proposal from NRG scored the highest and the evaluation team concluded that NRG’s proposal best met the objectives of the RFP.

 

“The decision to select NRG Energy, Inc. is supported by their scores on the evaluation criteria described above, and by the subject matter experts (Authority staff and consultants) who participated in this process.  The evaluation matrix used in this scoring process was made available to the Trustees under separate cover.

 

                “Of the proposals offered, the NRG proposal incorporates the highest efficiency, lowest emissions, minimal water use and a clear strategy for addressing community concerns.  Its proposal includes the option to design the plant to be CO2 capture ready from day one of operation.  NRG’s proposal for the CO2 capture and compression equipment is based on proven existing technologies.  The Huntley site chosen by NRG was one of the sites predefined by the Shovel Ready Team as suitable for CO2 sequestration.  The NRG project appears to be the most likely to receive permits in a timely manner, using the IGCC technology favored by interest groups opposed to conventional coal-fired generation. 

 

“The NRG proposal to build a 680 MW sequestration-ready IGCC facility at its existing Huntley Station in Tonawanda would advance the market penetration of this promising clean coal technology, contribute to the current research on carbon capture and sequestration and, according to NRG, bring more than $1 billion in investment more than 1,000 temporary construction jobs and about 100 permanent jobs to the local economy.  It would also create additional business opportunities for air separation and chemical businesses in the area.

 

Highest Evaluated Proposal:  Does It Work for the Authority?

 

“Having identified NRG’s proposal as the one with the best overall score on the evaluation matrix, there remained the threshold question: Is the power from the proposed power plant economic within the current market environment?  The conclusion at this time is that it is not.  Thus, the Authority’s ability to award a power contract to a clean coal facility at this time is not prudently achievable given the gap between the bids and the expected price in the current market environment. 

 

Additional Efforts to Achieve the Goal of the RFP

 

“One goal of the RFP, however, was to assist a new advanced clean coal technology achieve commercial feasibility.  Demonstrating the new technology’s potential, especially for the carbon capture and sequestration capability, would call for additional efforts toward a solution that is workable in the current market environment.  Instead of rejecting outright all proposals offered, it is recommended that the Authority work with NRG to exhaust all reasonable opportunities for securing financial assistance to drive down the cost of the NRG project and its output.  Such assistance may include additional federal and State support (including tax credits, tax-exempt financing and other support) and grants from non-governmental organizations.  If ample funding can be made available to offset the cost of the project, the Authority may see sufficient savings passed on in the purchase price of the product sold to the Authority to make the project economic.  If such price is acceptable to the Authority (i.e., it is consistent with the Authority’s mission of providing clean, economical energy for the benefit of its customers and the people of the State of New York), the State would reap the benefits of NRG’s innovative IGCC facility that uses an abundant domestic fuel.  Forming a Strategic Alliance with NRG is the best way to work toward this goal.

 

Strategic Alliance with NRG

               

                “Upon Trustee approval, the Authority will invite NRG to work with it in a Strategic Alliance to explore approaches, including funding opportunities, to bringing down the cost of the NRG Huntley IGCC project for the benefit of NRG and the Authority, as discussed more fully above.  If NRG concurs, the parties will negotiate an agreement setting forth the terms of such an alliance.  The Strategic Alliance shall last no longer than 18 months from the effective date of such agreement, unless both parties agree to an extension of such period.

 

Conditional Award of Contract:  Conditions Precedent to Recommended Trustee Action

 

                “If the Trustees approve negotiations with NRG for the Strategic Alliance, and the results of such Strategic Alliance are successful, subject to compliance with environmental requirements as set forth below, the Trustees will be requested to authorize entering into negotiations with NRG for a long-term supply contract for up to 600 MW from NRG’s proposed IGCC Huntley facility.

 

Environmental Discussion

 

“Because any output purchased from the proposed NRG facilities will not come from existing assets, any contract ultimately negotiated by Authority staff will, in order for the Authority to be in compliance with its obligations under SEQRA, be executed after NRG’s project has been the subject of the requisite environmental reviews, including the issuance of the appropriate findings and permits.  If the other conditions precedent to the award of a contract to NRG as set forth herein are satisfied, then NRG will be required to provide the Authority with the findings and permits or other authorizations to construct new transmission or generating facilities, which the Authority may use in completing its SEQRA evaluations and process (21 NYCRR §461.13(b)).  The Trustees will then be requested to authorize the completion of the Authority’s finding statement under SEQRA by the Vice President – Environment, Health and Safety, who will review and consider any final Environmental Impact Statement prepared for any of the facilities and, with the concurrence of the Executive Vice President and General Counsel, determine that the Authority’s SEQRA responsibilities have been fulfilled.  

 

FISCAL INFORMATION

“At this time, the Authority will not be making a financial commitment to buy the output of the facility, so the fiscal impact will be limited to certain expenditures to support the effort to secure the additional financial support.  Such expenditures are to be limited to no more than $500,000 over the 18-month term of the Strategic Alliance.  Payments will be made from the Authority’s Operating Fund.

 

 RECOMMENDATION

“The Vice President – Finance and the Director – Power Resource Planning and Acquisition recommend that the Trustees authorize that NRG Energy, Inc., the highest evaluated bidder in the Request for Proposals for Long-Term Supply of Advanced Clean Coal Power Plant Capacity and Energy and Other Products issued on September 1, 2006, be conditionally awarded a power purchase agreement and that the Authority enter into negotiation of the Strategic Alliance described above.  Award of such contract would be contingent on the success of the Strategic Alliance and fulfillment of the other conditions outlined above, including receipt of subsequent approval by the Trustees to enter into negotiations with NRG Energy, Inc. for such long-term power purchase agreement.

 

“The Executive Vice President and General Counsel, the Executive Vice President – Chief Financial Officer, the Senior Vice President – Energy Resource Management and I concur in the recommendation.”

 

Mr. Brandeis presented the highlights of staff’s recommendations to the Trustees and introduced Eileen Natoli from GORR.  President Carey said that Governor Pataki had selected GORR to head up the “Shovel Ready” Team developing this project and thanked Ms. Natoli for her leadership.  He said that without her diligent efforts to issue the RFP, the project would not have progressed this far.  Chairman McCullough said that the timeframe for this first phase of the project is 18 months, with Authority spending capped at $500,000 for that period.  He said that staff would periodically update the Trustees on project progress and that both State and federal legislation, as well as grants, would be pursued to fund this worthwhile endeavor.  Trustee Cusack said it would be great for Western New York if this project came to fruition, wishing the staff good luck in their efforts to make it happen.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

WHEREAS, the Authority issued a “Request for Proposals for Long-Term Supply of Advanced Clean Coal Power Plant Capacity and Energy and Other Products” (“RFP”) for the purchase of up to 600 MW of electric generating capacity and associated energy from an advanced clean coal power plant in New York State for the purpose of promoting such technology; and

 

WHEREAS, after evaluations of the bids, NRG Energy, Inc.’s (“NRG”) Huntley Integrated Coal Gasification Combined Cycle (“ICGCC”) proposal was the highest evaluated proposal; and

 

WHEREAS, the Authority determined that the highest evaluated bids, including NRG’s, were priced at a level not consistent with the Authority’s mission of being competitive in the current market environment, and that the award of a contract to the most qualified bidder at this time must be conditioned on satisfactory resolution of such economic issues; and

 

WHEREAS, to that end, and in order to further the goals of promoting new technologies capable of reducing the State’s dependence on foreign oil without irreparably damaging the natural environment, the Authority proposes to enter into a Strategic Alliance with NRG to work together to explore approaches, including funding opportunities, that will bring down the cost of NRG’s proposed Huntley IGCC project.

 

NOW, THEREFORE, BE IT RESOLVED, That NRG, the highest evaluated bidder in the RFP issued on September 1, 2006, be conditionally awarded a power purchase agreement, contingent on success of the Strategic Alliance and satisfaction of the conditions precedent described in the foregoing report of the President and Chief Executive Officer, including receipt of subsequent approval by the Trustees to enter into negotiations with NRG for such long-term power purchase agreement; and be it further

 

RESOLVED, That the Senior Vice President – Energy Resource Management, and the Director – Power Resource Planning and Acquisition are hereby authorized on behalf of the Authority to negotiate a Strategic Alliance with NRG as described in the foregoing report of the President and Chief Executive Officer, including, but not limited to, an agreement or memorandum of understanding having such terms and conditions as are consistent with the foregoing report of the President and Chief Executive Officer, and as are deemed necessary or advisable by the Executive Vice President and General Counsel; and be it further

 

RESOLVED, That the term of such agreement shall not exceed 18 months, subject to extension as described in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Trustees authorize the expenditure of up to $500,000 in support of the efforts of the Strategic Alliance as described in the foregoing report of the President and Chief Executive Officer, which funds shall be paid from the Authority’s Operating Fund; and be it further

 

 

 

 

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer and the Executive Vice President and General Counsel are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions necessary or advisable to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 


 

23.          Authorization of Actions to Initiate the Establishment of a Trust for Other Post-Employment Benefits

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize actions to initiate the establishment of a trust for post-employment employee benefits other than pension benefits.

 

BACKGROUND

 

“In 2004, the Governmental Accounting Standards Board (‘GASB’) issued Statement No. 45, Accounting and Financial Reporting by Employers for Post-employment Benefits other than Pensions.  This standard requires governmental employers to account for ‘other post-employment benefits’ (‘OPEB’) on an ‘accrual basis’ as they are earned by the employee instead of the ‘pay-as-you-go’ costs incurred for the employee during retirement.  OPEB includes medical, prescription drug, dental, vision, life and long-term care benefits for retirees and eligible beneficiaries.  Similar GASB standards for pensions have existed since 1994.  The new rules do not mandate the funding of accrued OPEB obligations by the set-aside of monies in advance to pay benefits in the future, only recognition of the accrued OPEB liability on the employer’s financial statement.  The amount of an unfunded liability, however, could significantly impact the employer’s overall credit rating, with a concomitant impact on the cost of debt financing.  Larger government employers like the Authority are required to begin reporting accrued OPEB liabilities no later than the first financial reporting period after December 15, 2006.  The Authority began reporting its OPEB obligations in this manner in 2002.

 

“Governmental employers subject to GASB accounting must calculate and accrue an annual OPEB cost.  The cost comprises the cost of benefits earned by active employees in the current year and an amount that amortizes over a reasonable period of time the cost of benefits for employees’ prior service.  If the annual OPEB cost is paid in full each year, it would be expected to provide sufficient resources to fund both the accumulated cost of benefits earned annually by active employees and the accumulated costs of amortized benefits attributable to employees’ prior service.  An OPEB liability is recognized in the employer’s financial statements to the extent that the annually accrued OPEB costs exceed employer contributions.  To qualify as an OPEB contribution, the payments must be made directly to a trust that is (1) irrevocable, (2) dedicated to or on behalf of the employee in accordance with plan terms and (3) legally protected from creditors of the employer and plan administrator.

 

“An important factor in determining OPEB liabilities and costs is the interest rate used to discount future benefit payments to the present.  GASB rules state that the discount rate used to compute the present value of the OPEB liabilities must reflect expected returns on assets used to pay benefits.  If OPEB liabilities are not funded in advance, the discount rate would be the normal expected return on the assets of the employer.  However, if the OPEB liabilities are funded in advance in a separate trust dedicated to provide OPEB benefits, the assets may be invested in longer-term investments (and with potentially fewer restrictions) with higher expected returns.

 

DISCUSSION

 

“The Authority provides certain OPEB benefits for eligible retired employees and their dependents.  Effective January 1, 2002, the Authority implemented accrual accounting for its OPEB obligations and subsequently followed GASB 45 when it was issued in June 2004.  To date, the Authority has financed its OPEB obligations on a pay-as-you-go basis.  The Authority stated in its Financial Report for 2005 that its OPEB liability as of December 31, 2005 was approximately $322 million.  Another actuarial analysis of OPEB benefits is in the process of being completed.  It is reasonably anticipated that the OPEB liability will significantly increase given the Authority’s continued pay-as-you-go practice, calculation adjustments and increased OPEB costs.

 

“While not required, the establishment of a trust, in addition to assuring the Authority’s ability to meet its OPEB obligations in the future, would reduce the cost of the obligations by allowing investment in longer-term, less restrictive and higher-yielding investments.  Based on recent discussions with the Authority’s actuary, a 1% increase in the earnings of such a trust fund could yield a 15% decrease in the prior service liability and the annual OPEB cost.  This higher earnings rate is estimated to produce more than $70 million in present-value savings over a 30-year period.  Further, now that GASB 45 is officially applicable to government entities, rating agencies have taken into account the OPEB liability when determining credit ratings and the establishment of a manageable plan by the Authority will aid in avoiding a negative impact.  Preliminary review by staff and outside counsel indicates that the Authority can fund an irrevocable trust for OPEB obligations with general operating revenues and/or by issuing taxable commercial paper, as may be appropriate. 

 

“Given the Authority’s steadily increasing OPEB liability and the cost savings potentially associated with higher fund earnings, staff believes it would be to the Authority’s benefit to establish a trust for its funding.  To initiate the establishment of the trust, the Authority must proceed to establish its parameters; develop investment guidelines; competitively search and/or solicit for a financial consultant, investment manager(s) and trustee and obtain other approvals as may be necessary.  At this time, to prepare for funding the trust, a fiscally prudent amount up to $100 million should be designated as a reserve within the Operating Fund for payment of OPEB obligations from general operating revenues and/or funding by subsequently issuing taxable commercial paper.  It is anticipated that the Authority will seek the Trustees’ approval for, and actual funding of, the trust once the parameters of the trust document, investment management scheme and final funding plan are developed.

 

FISCAL INFORMATION

 

“There are no fiscal implications at this time other than ancillary costs associated with outside legal and financial consultants that will be paid from the Operating Fund under current contracts.

 

RECOMMENDATION

 

“The Vice President – Finance recommends that the Trustees approve the initiation of those steps necessary and reasonable to establish an other-post-employment-benefits Trust Fund and to fund the Authority’s other-post-employment-benefits obligations on an actuarially accrued basis rather than a pay-as-you-go basis, including, but not limited to, drafting a trust document, establishing investment guidelines, procuring investment managers and trustees and designating funds in a fiscally appropriate amount from general operating funds and/or taxable commercial paper, as may be determined pursuant to a funding plan. 

 

“The Executive Vice President and General Counsel and the Executive Vice President – Chief Financial Officer concur in this recommendation.”

 

Mr. Russak presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Vice Chairman Townsend, Mr. Russak said that an outside manager would oversee the trust, similar to the way the nuclear decommissioning fund is managed.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the Trustees hereby authorize actions by the Authority to initiate the establishment of a trust for employee benefits other than pension benefits by establishing the parameters of a trust; developing investment guidelines; competitively searching and/or soliciting for a financial management consultant, investment manager(s) and trustee and pursuing such other approvals as may be necessary; and be it further

 

RESOLVED, That the Trustees hereby authorize the Authority to provide for the anticipated funding of the trust by designating an amount up to $100 million as a reserve within the Operating Fund for payment of other-post-employment-benefits obligations from general operating revenues and/or providing funding by issuing taxable commercial paper; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Executive Vice President – Chief Financial Officer, the Executive Vice President and General Counsel, the Vice President – Finance, the Treasurer and the Deputy Treasurer are, and each of them hereby is, authorized to do and perform or cause to be done and performed in the name and on behalf of the Authority all other acts, to execute and deliver or cause to be executed and delivered all other notices, requests, directions, consents, approvals, orders, applications, agreements, certificates and further documents or other communications of any kind under the corporate seal of the Authority or otherwise as he, she or they may deem necessary, advisable or appropriate to effect the intent of the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 

 


 

24.          Power for Jobs and Energy Cost Savings Benefits – Chapter 645 of the Laws of 2006 – Voluntary Contributions

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the basis for determining the Authority’s voluntary contribution to New York State under Chapter 645 of the Laws of 2006 (‘Chapter 645’) associated with the State’s fiscal year (‘SFY’) 2006-07.

BACKGROUND

“On August 16, 2006, the Governor signed Chapter 645, which authorized or, in some cases, directed the Authority to make contributions to the general fund and take certain actions with respect to its Power for Jobs (‘PFJ’) and Energy Cost Savings Benefit (‘ECSB’) programs.  The Authority was previously authorized to make a voluntary contribution of not less than $75 million to the general fund for SFY 2005-06.  For SFY 2006-07, Chapter 645 authorizes, upon a finding by the Trustees that it is feasible and advisable, a contribution of $100 million, with a cap of $394 million on the total amount to be paid by the Authority for all phases of the PFJ program.  The Authority has paid none of the additional $175 million and, if the full additional amount is paid, the cap will have been met.

DISCUSSION

“Significantly, the proposed Executive Budget for SFY 2006-07 stated that the Authority’s payment of the $175 million would represent ‘the full financing of the power for jobs program from its inception …. and shall exempt the authority from any additional voluntary contributions or payments’ for the period after December 31, 2006.  While that language, if enacted, would have provided a degree of comfort to the Authority, the legislation as enacted includes no such language and staff considers it possible that the $394 million contribution ‘cap’ will be raised again as it has been several times in the past.  Payments are not mandated, but are authorized if the Trustees deem such payments ‘feasible and advisable.’  Pursuant to this legislation, the Trustees can decline to make the payments if they determine them to be ill advised and not feasible.

“At this point in time, based on the information currently available, staff recommends that the total amount of Authority monies to be applied to the estimated cost of extensions of the PFJ and ECSB programs for 2007, the related unfunded benefits created by Chapter 645 and a SFY 2006-07 voluntary contribution to the general fund be limited to an aggregate amount of $100 million.

FISCAL INFORMATION

“This has not yet been determined, but no funds will be transferred at this time.

RECOMMENDATION

“The Vice President – Controller requests that the Trustees approve the basis for determining the Authority’s voluntary contribution to New York State under Chapter 645 of the Laws of 2006 associated with the State’s fiscal year 2006-07.

“The Trustees are also requested to defer a final determination as to the amount of the voluntary contributions to the State of New York until a further evaluation of the programmatic, financial and business circumstances surrounding the Power for Jobs and Energy Cost Savings Benefit Programs and their effect on the Authority is completed.

“The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer and I concur in the recommendation.”

Mr. Bellis presented the highlights of staff’s recommendations to the Trustees.  Trustee Seymour said that he would have to recuse himself from the vote on this item and Chairman McCullough requested that the minutes reflect the fact that Trustee Seymour had abstained from voting.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

 

RESOLVED, That the Authority, in determining the amount of its 2006-07 voluntary contribution to the general fund under Chapter 645 of the Laws of 2006 (“Chapter 645”) will take into account, among other factors, the estimated cost of extensions of the Power for Jobs (“PFJ”) and Energy Cost Savings Benefit (“ECSB”) programs for 2007 and the related unfunded benefits created by Chapter 645; and be it further

 

RESOLVED, That based on the information presently available to the Authority, the total amount of Authority monies to be applied to the extensions of the PFJ and ECSB programs for 2007, the related unfunded benefits created by Chapter 645 and a voluntary contribution pursuant to Chapter 645 is expected to be $100 million in the aggregate; and be it further

 

RESOLVED, That the Authority will defer a final determination as to the amount of a voluntary contribution pursuant to Chapter 645 until a further evaluation of the programmatic, financial and business circumstances surrounding the PFJ and ECSB programs and their effect on the Authority can be completed; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 

 

 

25.          Resolution – Robert J. Deasy

Trustee Moses read the text of the resolution aloud, after which Chairman McCullough presented Mr. Deasy with a framed copy of the resolution.  Mr. Deasy said he had been overwhelmed with all of the kind words and accolades he had received in the past few weeks, including this resolution.  He said that in his 30-plus years at the Authority, he had been afforded the opportunity to work on a variety of interesting and challenging projects.  However, he said that the best part of working at the Authority had been the opportunity to work with such a talented and dedicated group of people, including Mr. Del Sindaco’s group for the past year.  Mr. Deasy thanked Chairman McCullough and President Carey in particular for their ongoing support and understanding of his work.  Chairman McCullough said that the Authority was in Mr. Deasy’s debt for a job well done and that everyone at the Authority wished Mr. Deasy the best in the future.

WHEREAS, Robert J. Deasy has played a pivotal and indispensable role in a succession of major events that have shaped the history of the New York Power Authority over the past 32 years; and

WHEREAS, in an extraordinary career spanning decades and disciplines, Mr. Deasy has distinguished himself through his singular blend of technical and financial acumen, his insatiable quest for knowledge and information and his dogged pursuit of solutions to the most intractable of problems; and

WHEREAS, Mr. Deasy’s versatility, initially manifested through his degrees in electrical engineering and business, and repeatedly evidenced by his uncommon ability to take on new challenges, has served him and the Authority well in a wide range of areas; and

WHEREAS, when Mr. Deasy joined the Authority’s Marketing staff fresh from eight years at American Electric Power, he was thrust into negotiations concerning power sales from the Indian Point 3 and Astoria 6 plants, to be acquired from Con Edison; and

WHEREAS, as his responsibilities grew, he was at the heart of demanding efforts concerning the 765-kilovolt and Marcy-South lines; purchases from Hydro-Quebec; the Sound Cable Project and expansion of the Authority’s economic development power programs; and

WHEREAS, in his 20th year at the Authority, and at a critical point for the Authority’s nuclear power plants, Mr. Deasy assumed vital new responsibilities for internal oversight of the plants, helping to achieve significant improvements and to pave the way for their eventual sale at a record price; and

WHEREAS, with the coming of a competitive utility industry, his career entered another crucial phase, focused on energy resources, fuels, the intricacies of the New York Independent System Operator markets and long-term supply planning; and

WHEREAS, the trademark thoroughness, keen insights, broad understanding of the power business and steady professionalism that he brought to this turbulent period have helped to ensure that the Authority’s interests and those of its customers will be protected in the new energy marketplace; and

WHEREAS, qualities such as these have earned Mr. Deasy the respect of his colleagues at the Authority and counterparts in the power industry, made him a valued source of guidance and leadership and helped him develop a cadre of talented employees who will contribute to his considerable legacy;  and

WHEREAS, Mr. Deasy is retiring after compiling a remarkable record of service to the Power Authority and the people of New York State;

NOW THEREFORE BE IT RESOLVED, That the Trustees of the Power Authority of the State of New York express their profound thanks to Bob Deasy for his many and varied accomplishments and convey to him, his wife Geraldine and their family sincere best wishes for many more years of health, happiness and success.

December 19, 2006

 


 

26.          Resolution – Michael E. Brady

Trustee Seymour read the text of the resolution aloud, after which Chairman McCullough presented Mr. Brady with a framed copy of the resolution.  Mr. Brady said that he wanted to echo what Mr. Deasy had said about the opportunity to work on so many interesting and challenging issues with such well-qualified and hard-working people.  He said that any manager is only as good as his team and that he had been fortunate in having such a great team with which to work.  He thanked the Trustees, President Carey and the Executive Management Committee for their support and said that his 33 years in public service had flown by.  Mr. Brady added that he appreciated all of the good wishes coming his way and that he wished everyone at the Authority every success in the future.

WHEREAS, Michael E. Brady has brought immense benefit to the New York Power Authority and its customers through his skilled and conscientious management of the Authority’s debt and investments; and

WHEREAS, Mr. Brady’s tenure of nearly a decade at the Power Authority has been the latest chapter in a distinguished 33-year career in public service on the municipal, county and State levels; and

WHEREAS, upon his arrival at the Authority in 1997, Mr. Brady quickly became an integral part of the team developing a landmark $2.6 billion debt restructuring program that has positioned the Authority for success in the competitive power industry and promises cumulative debt-service savings of more than $700 million; and

WHEREAS, following this extraordinary initiative, which earned him and his colleagues recognition as Employees of the Year, Mr. Brady further distinguished himself as a central figure in a series of major transactions that established his credentials for promotion to Acting Treasurer and then Treasurer; and

WHEREAS, in his four years in those positions, he has presided over the issuance of more than $1.5 billion in bonds and commercial paper, providing financing for vital projects and activities while at the same time reducing the Authority’s debt by about $600 million through judicious refundings and accelerated debt retirements, and achieving further savings through negotiated cuts in credit support fees; and

WHEREAS, in addition to mastering the world of variable-rate debt, derivatives, swaps and caps, with more than $900 million in such instruments successfully bid, Mr. Brady has employed his strong interpersonal skills, unfailing patience and innate sense of fairness to balance and reconcile the priorities and proposals of underwriters and financial advisers, tax and bond counsel, rating agencies and a host of other essential and demanding constituencies; and

 

WHEREAS, Mr. Brady’s careful and highly competent supervision of the Authority’s investment portfolio has led to consistently outstanding performance, with ambitious targets exceeded during each year of his time in office; and

WHEREAS, the diligence, tenacity and respect for deadlines that Mr. Brady has brought to each of his varied assignments have been matched only by his perceptive recognition of the Power Authority’s interests and his unswerving commitment to serving them; and

WHEREAS, Mr. Brady is retiring from the Power Authority, having helped to secure the Authority’s financial strength for years to come;

NOW THEREFORE BE IT RESOLVED, That the Trustees of the Power Authority of the State of New York convey their deepest thanks to Mike Brady for his many contributions to the Authority, salute him for his exemplary career as a public servant and wish him, his wife Cathy and their family a healthy, happy and rewarding future.

December 19, 2006

 

 

27.          Other Business

Chairman McCullough thanked the Trustees and the staff for their efforts in preparing for this meeting and wished everyone a happy holiday season and a healthy and happy new year.


 

28.          Next Meeting

The next meeting of the Trustees will be held on Tuesday, January 30, 2007, at 11:00 a.m., at the Clarence D. Rappleyea Building, White Plains, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.


 

Text Box: DECMINS.06

 

Closing

 

On motion duly made and seconded, the meeting was adjourned by the Chairman at approximately
12:37 p.m.

 

 

 

 

Anne B. Cahill

Corporate Secretary

                                                                                             

 


 

[1]  PA/MTA recommends the Gross Domestic Product Implicit Price Deflator.

[2]  The Host Communities consist of the seven municipal entities that would exercise taxing jurisdiction over areas encompassed by the Project boundary established by FERC if Project lands were taxable.  These communities are the City of Niagara Falls, Niagara County, the Towns of Lewiston and Niagara and three school districts:  Lewiston-Porter, Niagara-Wheatfield and the City of Niagara Falls.

2     “Acceptance of the New License” is defined in the NURSA as the date on which the Authority files its acceptance of the New License
  with FERC, or the date of the expiration of the existing original license, August 31, 2007, whichever occurs later.