6. 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 43 Power for Jobs (‘PFJ’) customers as listed in ‘6-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 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“The PFJ program originally made 400 megawatts (‘MW’) of power available.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 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 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 June 25, 2007, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 43 businesses listed in Exhibit ‘6-A.’ Collectively, these organizations have agreed to retain more than 31,000 jobs in New York State in exchange for the 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 ‘6-A’ in a total amount currently not expected to exceed $4.2 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 ‘6-A’ is not expected to exceed $4.2 million. Payments will be made from the Operating Fund. To date, the Trustees have approved $81.7 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 ‘6-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.”

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

WHEREAS, the Economic Development Power Allocation Board has recommended that the Authority approve electricity savings reimbursements to the Power for Jobs customers listed in Exhibit “6-A”;

NOW THEREFORE BE IT RESOLVED, That to implement such Economic Development Power Allocation Board recommendations, the Authority hereby approves the payment of electricity savings reimbursements to the companies listed in Exhibit “6-A,” and that the Authority finds that such payments for electricity savings reimbursements are in all respects reasonable, consistent with the requirements of the Power for Jobs 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 $4.2 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, 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. Transfers of Industrial Power

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the transfer of power allocations for eight existing customers that have either changed their names for various business reasons and/or moved the location of their business.

BACKGROUND

“Four companies have requested that the Authority grant approval of their requests for the continued delivery of Authority power allocations to facilities that have all gained prior approval for an allocation with pre-existing company names and/or ownership. The present owners of these same facilities are now requesting that the Authority authorize the continuation of the power allocations granted to the previous company names and ownership associated with these facilities. One company requested that the Authority grant approval of its request to transfer its allocation to a company that was completely spun off. One company requested that the Authority grant approval of its request to transfer its allocation to a company that is a wholly owned subsidiary. Two companies requested that the Authority grant approval of their request to transfer their allocations to another facility. The reasons for such transfers are described below.

“The Trustees have approved transfers of this nature at past meetings.

DISCUSSION

“The proposed transferees are as follows:

“Ademco Group (‘Ademco’), located in Syosset, is the world leader in designing, engineering and manufacturing wired and wireless electronic security products for commercial and residential applications, with design and engineering taking place at the company’s Syosset facility. The company was originally awarded a 900 kW Power for Jobs (‘PFJ’) allocation for 605 jobs by the Trustees at their meeting of May 30, 2003 and was reduced for PFJ Extended Benefits to a 650 kW allocation for 441 jobs by the Trustees at their meeting of April 28, 2006. In 2006, Honeywell purchased Ademco Group, with the company using the Honeywell name and manufacturing the same products. Honeywell has agreed to honor all terms and commitments with the Authority.

“Automatic Data Processing (‘ADP’), located in Edgewood, has many products. The company is responsible for mailing and tabulating proxy solicitation material, quarterly reports and other issuer communications to shareholders of publicly held entities on behalf of 800 bank and broker clients. At their March 31, 1998 meeting, the Trustees approved a 1,000 kW PFJ allocation for 1,298 jobs for Automatic Data Processing. At their October 24, 2006 meeting, the Trustees approved a PFJ Extended Benefits allocation of 1,000 kW for 1,329 jobs. In August 2006, ADP spun off its brokerage services group into an independent company. The company is named Broadridge Financial Solutions, Inc. The new company agrees to comply with all obligations associated with its allocation and will continue to provide the same or similar services.

“Dunkirk Specialty Steel, LLC (‘Dunkirk’), located in Dunkirk, manufactures round and shaped bards, coiled rod and wire products from stainless steel billets, primarily for the tool industry. At their meeting on January 29, 2002, the Trustees transferred two Expansion Power (‘EP’) allocations, 2,800 kW and 4,000 kW, from Empire Specialty Steel, Inc., as a 6,800 kW allocation to Dunkirk Acquisition Corporation, a wholly-owned subsidiary of Universal Stainless & Alloy Products, Inc., the proposed new owner of the facility assets to be bought out of foreclosure, contingent on completion of the purchase. While Empire Specialty Steel had an employment commitment of 400 jobs, Dunkirk Acquisition could only guarantee 100 base jobs and 150 created jobs. Dunkirk Acquisition planned to invest $10 million in restoring the facility’s full range of operations. Later, in 2002, the assets purchase was completed, the plant opened and the company was renamed Dunkirk Specialty Steel, LLC. Dunkirk has been working in good faith to meet its contractual obligations associated with the EP allocation.

“Engelhard Corporation (‘Engelhard’), located in Peekskill, manufactures pigments for coatings, cosmetics and plastics. The Trustees approved a 1,700 kW Municipal Distribution Agency (‘MDA’) power allocation in return for 405 jobs at their meeting of January 31, 1989 and further approved another 1,300 kW MDA allocation for 380 jobs at their meeting of September 23, 2003. At their meeting of October 19, 2005, the Trustees reduced Engelhard’s allocations to 1,225 kW and 1,000 kW, respectively, both having an employment commitment of 292 jobs, due to the company’s participation in the Economic Cost Savings Benefits (‘ECSB’) program. At their meeting of October 24, 2006, in accordance with the ECSB program, the Trustees adjusted Engelhard’s employment commitment to 300 jobs for each allocation. Also in 2006, BASF Catalysts LLC, a wholly-owned subsidiary of BASF Corporation, the North American affiliate of BASF AG, Germany, purchased all the outstanding shares of Engelhard common stock. The new company, which will use the BASF Catalysts LLC name and remain at the same location, will continue to manufacture the same or similar products, as well as honor all commitments associated with its MDA allocations.

“ICM Controls Corporation (‘ICM’), located in Cicero and in business since 1984, is a vertically integrated designer and manufacturer of electronic controls for the HVAC market. The Trustees approved a 500 kW Economic Development Power (‘EDP’) allocation in return for 200 base jobs and 100 created jobs at their meeting of June 24, 2003. On July 30, 2007, the company will move its facility from Cicero to North Syracuse. The company will honor all commitments associated with its EDP allocation.

“IPAC, Inc. (‘IPAC’), located in Niagara Falls manufactures condensed air coolers, air cooled heat exchangers, water cooled heat exchangers, centrifugal separators, as well as, designs and performs custom sheet metal fabrication. The Trustees approved a 325 kW Power for Jobs (‘PFJ’) allocation in return for 54 jobs at their meeting of March 28, 2000. At the December 13, 2005 Trustees meeting the allocation was extended through the end of 2006, but was reduced to 200 kW with and employment commitment of 33 jobs. The company received a further allocation extension through June 2007, at the October 24, 2006 Trustees meeting. Effective June 1, 2007, the company moved its facility from a leased space in Niagara Falls to an owned space in Amherst. The company will honor all commitments associated with its PFJ allocation.

“Monofrax Inc. (‘Monofrax’), located in Falconer, uses an electric furnace ceramic foundry to manufacture fused cast refractories primarily used to line melting furnaces for glass product manufacturing. The Trustees approved a 2,082 kW EP allocation in return for 380 jobs at their meeting of September 30, 1997. On February 1, 2007, Monofrax sold and conveyed substantially all of its operating assets at the site to RHI Monofrax PPE LLC, an affiliate of RHI Monofrax, Ltd., a subsidiary of RHI AG of Austria. RHI Monofrax, Ltd. in turn leased the assets from RHI Monofrax PPE LLC and hired Monofrax’s employees. The company will continue to operate at the site and manufacture the same products under the name RHI Monofrax, Ltd. The company will honor all commitments associated with its EP allocation, except that it will maintain an employment commitment consistent with the current level of employment.

“Upstate Farms Cooperative, Inc. (‘Upstate’), located in Buffalo and in business since the 1930s, produces dairy products such as milk, cream, buttermilk, ice cream and flavored milks and processes orange juice and fruit drinks, primarily for the western New York market. The Trustees approved a 600 kW PFJ allocation for 160 jobs at their meeting on January 25, 2000. Starting in 2006 and continuing in 2007, Upstate opted to take the rebate rather than the contract extension option when the Authority offered PFJ Extended Benefits. At their meeting of May 25, 2004, the Trustees approved a 1,000 kW EP allocation in exchange for 127 base jobs and 7 created jobs. On July 1, 2006, Upstate combined in a reverse triangular merger with Niagara Milk Cooperative, Inc., with Niagara Milk Cooperative, Inc. becoming a wholly-owned subsidiary of Upstate Farms Cooperative, Inc. The parent company has changed its name to Upstate Niagara Cooperative, Inc. The company will continue to use pre-combination brand names, such as Upstate Farms and Bison Foods. The company agrees to honor all terms of its agreements with the Authority.

RECOMMENDATION

“The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees approve the transfer of power allocations for four existing customers that have changed their names or transferred their allocations for various business reasons, approve the transfer of one customer’s existing allocation to its spun-off entity, approve the transfer of one customer’s existing allocation to its wholly-owned subsidiary and approve the transfer of two customers’ existing allocations to their new facilities.

“The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development, 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.

RESOLVED, That the Authority hereby authorizes the transfers of eight industrial power allocations in accordance with the terms described 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.

9. Productivity Improvement Request Reduction – General Motors – Powertrain

The President and Chief Executive Officer submitted the following report:

SUMMARY

“It is requested that the Trustees approve reductions to the employment commitments for General Motors Corporation – Powertrain (‘GM’), as listed in Exhibit ‘9-A.’ This customer has a clause in its contracts that allows it to request a reduction in its commitments if the reduction is due to productivity improvements. For GM to receive such a reduction to its commitments, the productivity improvement had to meet the appropriate criteria.

BACKGROUND

“Business power contracts contain employment commitments to retain or add a specific number of jobs. However, in some cases, a company may request a productivity review to have its job commitment reduced if the reduction in employment is due to increased efficiency, improved technology and/or it negotiated reductions in labor agreements or work rules that increase worker productivity. Relocation of specific activities away from the facility will not be considered an increased efficiency, improved technology or productivity improvement. Employment reductions made due to reduced production or sales volume will not be considered as an increased efficiency, improved technology or productivity improvement.

“A recommendation to lower a customer’s job commitment due to productivity improvements is made when:

The customer submits documentation of procedural or operational change; and/or

2. The customer submits documentation of negotiated changes in labor agreements or work rules that increase worker productivity; and

3. Staff conducts a site visit to verify the improvement(s) and the resulting reduction(s) in jobs.

DISCUSSION

“Staff recommends that the Trustees approve action regarding GM meeting the productivity improvement requirement for a reduction to its employment commitments in five contracts.

“At their meeting of April 24, 2007, the Trustees deferred action for one year for six customers in the automotive industry. GM’s allocations were included in this group. However, due to special circumstances, GM will be addressed in this item rather than in the 2007 annual review of jobs.

“A summary of all contracts discussed in this item is provided as Exhibit ‘9-A.’

Allocations to Continue with Job Commitment Changes for Productivity Improvements

General Motors Corporation - Powertrain, Buffalo, Erie County

Allocation: 13,800 kW, 1,100 kW and 800 kW of EP and 2,000 kW and 725 kW of RP

Jobs Commitment: 3,124 (for 13,800 kW, 1,100 kW, 800 kW and 725 kW allocations), and 3,124 base jobs and 44 created jobs (for 2,000 kW allocation)

Background: General Motors Corporation – Powertrain (‘GM Powertrain’) manufactures engines for several of GM’s automobile models, including the Chevy Cobalt, Pontiac G6, Saturn Ion and Chevy Colorado and Canyon pick-ups. The company requested a productivity improvement reduction of its jobs commitment by 108 jobs. The bulk of GM’s reduction comes from replacing an old engine line with the world’s most advanced engine manufacturing facilities and processes for the new engines, as well as from rebalancing job duties along the assembly lines, automation and new manufacturing processes. For the past year, GM – Powertrain averaged 2,409.50 jobs, i.e., 76.06% of its contractual commitment for the 2 MW RP allocation and 77.13% of its contractual commitment for the other allocations.

While operational/procedural productivity improvements help GM attain an employment base closer to its actual needs and situation, it is not enough to cover reductions required by the structural changes to the auto industry. The company negotiated a new labor agreement with its union that covers the increased worker efficiencies required to adjust to the structural changes to the industry. Some stability has come to GM in the form of recent awards of a $300 million project to build the company’s new ultra-high-tech luxury V-8 engine, as well as a $150 million project to build next-generation diesel engines. However, the awards are contingent on a reduced work force and no reduction in any hydro allocations. GM must restructure in response to global pressures to remain open and competitive.

Recommendation: Staff recommends that for 2007 the Trustees reduce GM Powertrain’s EP and RP allocation employment commitment by 108 jobs to a base of 3,016 positions. The RP allocation that still has time to create jobs will have its employment commitment reduced to 3,016 base jobs, with 44 created jobs (3,060). Staff recommends that for 2008 through 2010, GM’s EP and RP allocations contained in this item have their employment commitments refreshed to 1,600 positions.

RECOMMENDATION

“The Director - Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees adjust the job commitments for one customer with five contracts due to productivity improvements as described above and set forth in Exhibit ‘9-A.’

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

RESOLVED, That the Authority hereby approves adjustment of the future job commitment levels for one customer (with five contracts) that made productivity improvements as described in the foregoing report of the President and Chief Executive Officer and as set forth in Exhibit “9-A”; and be it further

RESOLVED, That the Director - Business Power Allocations, Compliance and Municipal and Cooperative Marketing is hereby authorized to provide written notice to this company whose job commitments are being reduced; 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.

10. Governmental Customers – Consolidation of Service Tariffs – Notice of Proposed Rule Making

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve a Notice of Proposed Rule Making (‘NOPR’) to consolidate the Authority’s current production and delivery service tariffs applicable to New York City Governmental Customers and Westchester County Governmental Customers (collectively, ‘Governmental Customers’) into two consolidated single tariffs (each a ‘Single Tariff’ and collectively ‘Single Tariffs’). One Single Tariff would be for the New York City Governmental Customers and the other would be for the Westchester County Governmental Customers.

“The Trustees are also requested to authorize the Corporate Secretary to publish the NOPR in the New York State Register, in accordance with the requirements of the State Administrative Procedure Act (‘SAPA’). Authority staff will address any comments received on the NOPR and return to the Trustees at a later date to seek final action on each Single Tariff.

BACKGROUND

“Authority staff undertook a comprehensive review of the Authority’s current tariff construct in an effort to: (1) update the Authority’s production and delivery tariffs for its Governmental Customers to account for certain changes that have occurred over time, (2) make the tariffs more consistent with other utilities’ tariffs and (3) make the tariffs more readable and understandable for the Authority and its Governmental Customers (especially with respect to the calculation of customer bills). At present, the Authority’s Governmental Customers are served under 11 production tariffs (Service Tariff Nos. 11 through 18, 55, 71 and 77) and 12 delivery service appendices to these production tariffs (Appendices A through L). In addition, two Service Tariff Riders are in effect: Rider A for Back-up and Maintenance Power and Rider B for the John F. Kennedy International Airport Cogeneration Plant Production Services. These Riders are supplements to the production tariffs.

“The production service tariffs and their delivery service appendices all have essentially the same format and share the same general and special provisions, with the exception of their rates. Therefore, Authority staff felt it appropriate to combine into one Single Tariff the production and delivery service rates applicable to the New York City Governmental Customers, and to combine into a second Single Tariff the production and delivery service rates applicable to the Westchester County Governmental Customers. Additionally, some requirements agreed to in energy supply agreements between the Governmental Customers and the Authority (such as the 2005 Long Term Agreement with the major New York City Governmental Customers) will also be incorporated by reference into the Single Tariffs.

“Rider A and Rider B, with editorial changes to Rider A, were included in the Single Tariff applicable to the New York City Governmental Customers. Only Rider A, with editorial changes, will be included in the Single Tariff applicable to the Westchester County Governmental Customers.

“Service Classification 88, which had been applicable to the World Trade Center buildings served by the Authority under Service Tariff No. 15, is no longer in use and is therefore noted as such in the Single Tariff applicable to New York City Customers.

DISCUSSION

“Authority staff examined other utility tariffs and incorporated the best features of such tariffs into the proposed Single Tariffs. Each Single Tariff is arranged by service classification, showing production and delivery rates applicable to that service classification. Common, general and special provisions are identified.

“Other than reformatting the documents for easier reading, staff proposes streamlining certain information, grouping provisions that relate to each other and adding some new features such as a section on bill components and bill computation (to allow Governmental Customers to calculate a bill). Frequently used abbreviations and terms will also be added.

“Consistent with the Authority’s desire to work with its Governmental Customers as partners, staff has provided a draft copy of the Single Tariffs to a select number of Governmental Customers to solicit their comments and feedback. General feedback received from the Governmental Customers is that the proposed Single Tariffs are more ‘user-friendly’ and easier to understand.

“The proposed Single Tariffs for Governmental Customers are attached as Exhibits ‘10-A’ and ‘10-B.’

FISCAL INFORMATION

“Adoption of the proposed Single Tariffs has no financial impact. The changes proposed are administrative changes and have no effect on current production or delivery service rates.

RECOMMENDATION

“The Manager – Power Contracts recommends that the Trustees authorize the Corporate Secretary to file a Notice of Proposed Rule Making in the New York State Register for the adoption of the Single Tariffs for the Authority’s Westchester County and New York City Governmental Customers.

“The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President of 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 Chairman McCullough, Mr. Pasquale said that the Trustees were being asked to approve the initiation of the State Administrative Procedure Act process required to consolidate the service tariffs.

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

RESOLVED, That the Trustees approve the issuance of a Notice of Proposed Rule Making to consolidate the Authority’s current production and delivery services tariffs applicable to its Governmental Customers, as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to publish a Notice of Proposed Rule Making in the New York State Register in accordance with the State Administrative Procedure Act and to submit such other notice(s) as may be required by statue or regulation concerning the proposed tariff consolidation; 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.

11. 2007 Revolving Credit Agreement

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve a $150 million Revolving Credit Agreement with The Bank of Nova Scotia, New York Agency (‘Scotiabank’) for an initial term extending to September 1, 2015, to replace an expiring agreement that provides liquidity support for the Authority’s Adjustable Rate Tender Notes (‘ART Notes’) and to authorize an extension of such agreement not to exceed September 1, 2016.

BACKGROUND

“ART Notes in the amount of $200 million were issued in 1985 to finance a portion of the Marcy-South Project. The ART Notes are supported by a revolving line of credit equal to the amount of the Notes outstanding, presently $150 million. The line of credit in place at this time will terminate on September 4, 2007.

“The terms of the ART Notes allow rate periods to be set for six months or in six-month increments up to a maximum five-year period. A new rate period for the ART Notes will commence on September 4, 2007.

DISCUSSION

“Staff recommends that the Authority replace the expiring line of credit with a new line to be in place one month prior to the new ART Note rate period. The Authority invited 11 banks with ‘AA’ ratings from at least one rating agency to submit proposals for the line for terms of 13, 25, 37, 61 and 97 months, with the Authority having the option to extend for one additional year. Seven proposals were received and analyzed by the Authority. With liquidity fees being extremely inexpensive due to increased competition among liquidity providers, staff recommends a new line with a term of 97 months so that the Authority may lock into these attractive rates. The term of the new line, with the one-year optional extension, would match the term of the ART Notes swap approved by the Trustees at their meeting of July 25, 2006.

“The proposals were analyzed for total cost over the term of the line based on the commitment fees and up-front annual fees. On this basis, Scotiabank submitted the lowest-cost proposal on a term of 97 months as summarized below:

Credit Commitment Fee Total Cost

Bank Rating (97 months) ‘bps’ over Term

Scotiabank ‘Aa1/AA-’ 13.0 $1,318,643

LBBW ‘Aa1/A+’ 13.0 $1,325,643

Dexia Credit Local ‘Aa1/AA’ 15.0 $1,474,494

Bayerische Landesbank ‘Aa2/A’ 15.5 $1,551,144

JPMorgan Chase ‘Aaa/AA’ 17.0 $1,697,918 Wachovia Bank ‘Aa2/AA’ 18.0 $1,814,393

RBC Capital Markets ‘Aaa/AA-’ No Bid No Bid

Scotiabank is a very large Canadian bank that provides a wide range of banking and financial services in 50 countries, including the United States where it has conducted business for many years. The bank will act through its New York Agency in providing the liquidity support for the ART Notes.

“The commitment fee payable on the unused amount of the line, 13.0 basis points (13.0/100 of 1%), would equal a maximum of $191,615 per annum. In the event the Authority has to draw on the line, the interest rates would be: (i) the higher of Scotiabank’s Base Rate (the banks U.S. Prime Rate) or the Federal Funds Rate plus 0.50 % for the first 90 days and (ii) the higher of Scotiabank’s Base Rate or the Federal Funds Rate plus 1.50 % for 91 to 180 days. After 180 days the loan would convert to a three year term loan at the higher of Scotiabank’s Base Rate or the Federal Funds Rate plus 2.00 %. The Trustees are also requested to authorize the Executive Vice President and Chief Financial Officer, the Vice President – Finance or the Treasurer to execute an extension of such agreement not to exceed September 1, 2016.

FISCAL INFORMATION

“The annual cost of the proposed line would not exceed $191,615, with an additional maximum payment at the time of closing of $23,000. Commitment fees and expenses will be paid from the Operating Fund.

RECOMMENDATION

“The Treasurer recommends that the Trustees (1) approve the execution of the 2007 Revolving Credit Agreement with The Bank of Nova Scotia, New York Agency with such Revolving Credit Agreement having such terms and conditions as the Treasurer deems necessary or advisable, subject to the approval of the form thereof by the Executive Vice President and General Counsel, provided that the initial term of such Agreement shall not exceed September 1, 2015 and the borrowing capacity shall not exceed $150 million, and (2) authorize an extension of such agreement not to exceed September 1, 2016.

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

Mr. Russak presented the highlights of staff’s recommendations to the Trustees. In response to a question from Chairman McCullough, Mr. Russak said that the Authority has previously done business with Scotiabank.

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

RESOLVED, That the Trustees authorize the execution by the Executive Vice President and Chief Financial Officer, the Vice President – Finance or the Treasurer, subject to approval of the form thereof by the Executive Vice President and General Counsel, on behalf of the Authority, of the 2007 Revolving Credit Agreement between the Authority and The Bank of Nova Scotia, New York Agency with such Agreement having such terms and conditions as the executing officer deems necessary or advisable, including a designation of the notes issued pursuant to such Agreement as Parity Debt under the Authority’s General Resolution Authorizing Revenue Obligations, such execution to be conclusive evidence of such determinations, provided that such Agreement shall have an initial term not exceeding September 1, 2015 and shall not exceed $150 million in borrowing capacity; and be it further

RESOLVED, That the Executive Vice President and Chief Financial Officer, the Vice President – Finance or the Treasurer are, and each hereby is, authorized to execute an extension of the 2007 Revolving Credit Agreement, provided that such extension shall not in the aggregate extend the 2007 Revolving Credit Agreement beyond September 1, 2016; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Vice President – Finance, the Treasurer and the Deputy Treasurer, are, and each 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 resolutions; 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.

12. Purchase of Interest Rate Cap Relating to Series 1 Commercial Paper Notes

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the Authority’s entry into one or more interest rate cap agreements with the objective of limiting exposure to rising interest rates relating to the Series 1 Commercial Paper Notes issued to support the Energy Services program. The interest rate cap agreements would replace the cap agreement terminating July 1, 2007 and would be in an aggregate notional amount not to exceed $400 million, with such caps having a termination date of not later than July 1, 2012. The interest rate on the cap agreements would not exceed 6.0%.

BACKGROUND

“The Authority currently finances Energy Services projects with the issuance of Series 1 Commercial Paper Notes. Presently, the borrowings under the program total approximately $276 million. The Series 1 Commercial Paper Program allows the Authority to borrow up to $400 million for Energy Services projects.

“The Commercial Paper borrowings finance Energy Services projects, with the cost of such projects scheduled to be recovered from program participants typically over a period of up to ten years, and in certain limited circumstances, up to a 20-year period. Due to pre-payments (‘lump-sum payments’) from some program participants, the average outstanding period for a tranche of notes has been approximately four years. By regularly entering into interest rate caps, interest rate risk related to the Series 1 Commercial Paper Notes has been mitigated for the Authority, as well as for the program participants.

DISCUSSION

“Staff has projected that the current receivables from Energy Services program participants that support the Authority’s borrowings of approximately $276 million under the Series 1 Commercial Paper Program will be repaid over the next four years. Based on this estimate, staff is recommending that the Authority enter into one or more interest rate cap agreements relating to the Series 1 Commercial Paper Notes. Under such an agreement, the Authority would pay a fixed premium to the counterparty in return for which the counterparty would be obligated to pay to the Authority a sum of money if the Securities Industry and Financial Markets Association Municipal Swap Index (‘SIFMA Index’, formerly the BMA Index) rose above 6%, as described further below. The sum to be paid to the Authority would equal the excess of the SIFMA Index over 6%. The result of this would be to effectively ‘cap’ the Authority’s exposure under the Series 1 Commercial Paper Notes to 6%, or a rate very close to 6%, depending on how closely the SIFMA Index corresponds to the actual Series 1 Commercial Paper Note rate. Presently, the Series 1 Commercial Paper Note rate is approximately five basis points below the SIFMA Index.

“The risks involved in this type of transaction generally are twofold: (1) the counterparty fails to provide the payment promised under the agreement, and (2) as noted above, market conditions develop in which the SIFMA Index is lower than the actual Series 1 Commercial Paper Note rate. This latter risk, referred to as basis risk, would involve circumstances where the Series 1 Commercial Paper Note rate rises above 6% and the SIFMA Index stays below 6%. Under that scenario, no sums would be paid to the Authority. By selecting creditworthy counterparties, the risk associated with failed payment to the Authority is minimal. In addition, due to the close historical trading relationship between the SIFMA Index and the Series 1 Commercial Paper Note rate, staff believes that basis risk is minimal. Accordingly, staff believes that both risks are manageable and acceptable given the benefits to be derived from this type of transaction.

“The interest rate cap agreements would have terms of between three and five years with an aggregate notional amount not to exceed $400 million. The total cost of such agreements would not exceed five basis points per year ($200,000 per year on a notional amount of $400 million). The interest rate caps would be competitively bid among the Authority’s qualified swap providers and entered into under existing Master ISDA Agreements. The caps will limit the Authority’s borrowing cost under this program to no more than 6% in any time period as the cap provider will pay the Authority any time the quarterly average for the SIFMA Index exceeds 6% in return for the cost of the cap (the premium of no more than 5 basis points) paid by the Authority to the provider.

“Staff believes that, in light of current interest rates, these agreements will limit the Authority’s exposure to possible rising interest rates at a very reasonable cost. In addition, the Authority currently has $1 billion of variable-rate debt, representing about 48% of total debt. A cap would serve to fix a portion of this variable-rate debt and lessen the Authority’s exposure to rising rates. The cap, coupled with other existing hedging instruments used to limit interest rate exposure, would reduce the Authority’s overall level of variable rate exposure to less than 10%. This is a level at which the investment community has been comfortable.

FISCAL INFORMATION

“The annual cost of the proposed caps would not exceed $200,000; it will initially be paid from the Operating Fund either on an annual basis or as an upfront premium and it will be recovered from Energy Services program participants.

RECOMMENDATION

“The Treasurer recommends that the Trustees approve the Authority’s execution of one or more interest rate cap agreements, based on a cap rate of no more than 6% on an aggregate notional amount of Series 1 Commercial Paper Notes not to exceed $400 million, having a term not to exceed five years and at an aggregate cost not to exceed five basis points annually.

The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Vice President – Finance 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 authorize the execution by the Executive Vice President and Chief Financial Officer, the Vice President – Finance or the Treasurer, subject to approval of the form thereof by the Executive Vice President and General Counsel, on behalf of the Authority, of one or more interest rate cap agreements provided that: (1) such agreements shall be entered into as a result of a competitive bidding procedure; (2) the aggregate notional amount of Series 1 Commercial Paper Notes that such agreements apply to shall not exceed $400 million; (3) the interest rate cap in such agreements shall be no more than 6%; (4) the term of each such agreement shall not exceed five years; (5) the annual cost to the Authority under each such agreement shall not exceed five basis points annually based on the amount to which such agreement applies and (6) each agreement shall have such terms and conditions, not inconsistent with those set forth in clauses (1) – (5) above, as the executing officer deems necessary or advisable, such execution to be conclusive evidence of such approval; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Vice President – Finance, the Treasurer and the Deputy Treasurer, are, and each 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; 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.

13. Procurement (Services) 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 ‘13-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 $3,000,000, as well as personal services contracts in excess of $1,000,000 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 $20,000 to $105,000,000. 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:

Business Services

“Due to the need to commence services, the contract with Capital Printing Systems, Inc. (4600001805) became effective on May 23, 2007, 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 financial printing services for the Authority’s Official Statement and associated documents in connection with its securities. Services include the printing, editing and dissemination of documents required as part of the Authority’s bond transactions. Since the existing contract for such services was expiring, and the need for such services continues, staff prepared a Request for Proposals (Q02-4027) for the award of a new contract. To this end, bid documents were downloaded electronically from the Authority’s Procurement website by six firms, including those that may have responded to a notice in the New York State Contract Reporter. Two proposals were received and evaluated. After a thorough review, staff recommended award of the subject contract to Capital Printing, the lowest-priced bidder that was determined to be 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 amount expected to be expended for the term of the contract, $360,000.

Corporate Services and Administration

“The three contracts with Angela McRae (‘McRae’), Harrison I. Getz, Jr. (‘Getz’) and Russell Brod (‘Brod’) (Q02-4048; PO#s TBA) would become effective on July 1, 2007 (McRae), August 10, 2007 (Brod), and November 1, 2007 (Getz), respectively, subject to the Trustees’ approval. The purpose of these contracts is to provide for computer design and production services for print materials including, but not limited to, the Authority’s Annual Report, corporate collateral materials, marketing and promotional brochures, newsletters, posters, advertising materials, presentations and exhibits. Such services will be performed on-premises at the Authority’s White Plains Office. Bid documents were downloaded electronically from the Authority’s Procurement website by 12 firms, including those that may have responded to a notice in the New York State Contract Reporter. Eight proposals were received and evaluated. Staff recommends award of contracts to McRae, Getz and Brod, the lowest-priced bidders that are qualified to perform such services. The intended term of these contracts is 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, $459,375.

“The contract with Infotech Global, Inc. (‘IGI’; Q02-4039; PO# TBA) would become effective on June 27, 2007, subject to the Trustees’ approval. The purpose of this contract is to provide for third-party flexible benefits administration services for the Authority’s Flexible Benefits Administration open enrollment program for salaried employees. Services include, but are not limited to: programming and generating personalized annual enrollment forms; programming and administering a web-based enrollment system; printing, postage and mailing costs and services; preparation of annual benefit statements for all Authority employees; and other related tasks, as may be required. 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. Three proposals were received and evaluated. Staff recommends award of a contract to IGI, the lowest-priced bidder that is qualified to provide 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 amount expected to be expended for the term of the contract, $450,000.

“Due to the need to commence services, the contract with Surplus Asset Sales Company, Inc. (‘SAS’) (Q02-4003; PPD-07-03) became effective on June 1, 2007, 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 off-site surplus or obsolete asset sales/auctions for such items as utility/business office equipment and surplus stock, parts and material, as well as fair market value appraisal estimates for surplus or obsolete Authority equipment and material valued at more than $15,000. (Such assets do not include real property, personal vehicles or construction/maintenance rolling stock vehicles and machinery.) A limited number of firms in the Northeast and northern Mid-Atlantic region is capable of providing sale and auctioning services at their own facilities. The Authority’s Request for Proposals required that any firm wishing to provide these services be located in the specified regions to preclude extensive overhead costs to the Authority for shipments to a facility in the Midwest or South. Bid documents were downloaded electronically from the Authority’s Procurement website by three firms (of the four that had been identified for a bidders’ list), including those that may have responded to a notice in the New York State Contract Reporter. One proposal was received and evaluated. SAS had a previous contract with the Authority and had performed satisfactorily. The company works on a percentage of the gross selling price. As part of the fee, SAS provides all sorting and staging for the sales/auctions at its facility at periodic intervals throughout the year. The company pays for all advertising for its sales, including ads in trade publications and on the Internet, direct mailings and distribution of its own material. On a graduated scale, SAS’s fee percentage ranges from 30% of the gross selling price for a single item selling for less than $10,000 to 15% of the gross selling price for items selling for more than $75,000. The vast majority of items will fall within the 30% range. It is anticipated that many of these items will be surplus stock items, some beyond their shelf-life requirements, which may ultimately have a reduced market value. It should be noted that the contract also requires SAS to provide fair market value appraisal estimates for items potentially valued at more than $15,000, with required advertising, in accordance with the Public Authorities Accountability Act and the Authority’s Guidelines and Procedures for the Disposal of Personal Property. Based on its qualifications, experience, ability to provide the services and reasonable rates, staff recommended award of the subject contract to SAS, the sole responding bidder that is qualified to perform such services. The intended term of this contract is four years, subject to the Trustees’ approval, which is hereby requested. This is expected to be a ‘no cost’, revenue-generating contract. There will typically be no direct payments made by the Authority to SAS, and any fees SAS earns will be a percentage of the sales prices, as previously noted, with the remaining amounts paid to the Authority, all fully documented and subject to audit by the Authority.

“Due to the need to commence services, the contract with Technical Building Services, Inc. (‘TBS’; Q02-4041, 4500141361) became effective on May 23, 2007, 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 the maintenance and upgrade of the Energy Management System (‘EMS’) at the Authority’s Clarence D. Rappleyea Building in White Plains. The EMS controls and monitors the HVAC system in the building. Services include, but are not limited to: preventive maintenance (comprising database backup and verification, hardware system support and application software support); emergency services, repairs and 24-hour technical support; repair/replacement of worn parts and system training. Bid documents were downloaded electronically from the Authority’s Procurement website by 12 firms, including those that may have responded to a notice in the New York State Contract Reporter. One proposal was received and evaluated. Staff recommends award of a contract to TBS, the sole responding bidder that is 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 amount expected to be expended for the term of the contract, $75,000.

Energy Services and Technology

“The Authority provides engineering, design, procurement and project management services to many of its customers to promote cost savings through efficient energy usage. Such services include, but are not limited to, various mechanical, electrical and lighting improvements, as well as energy audits, boiler and chiller replacements, and installation of onsite power generation equipment in the customers’ facilities. The two contracts with AVF Design, Inc. (‘AVF’) and L.J. Gonzer Associates (‘Gonzer’) (Q02-4049; PO#s TBA) would become effective on July 1, 2007, subject to the Trustees’ approval. The purpose of these contracts is to provide for computer-assisted drafting (‘CAD’) and design support services to supplement the Authority’s in-house staff in support of such Energy Services projects. Bid documents were downloaded electronically from the Authority’s Procurement website by six firms, including those that may have responded to a notice in the New York State Contract Reporter. Five proposals were received and evaluated. Staff recommends award of two contracts to AVF and Gonzer, the lowest-priced bidders that are qualified to provide such services, in order to obtain the depth of service and flexibility that a single firm cannot provide. 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 total estimated combined amount expected to be expended for the term of the contracts, $150,000. It should be noted that all costs will be recovered by the Authority.

“Due to the need to commence services, the contract with V&R Energy Systems Research, Inc. (‘V&R’; 4500140058) became effective on January 1, 2007, 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 the continuation of program maintenance, user support and upgrades for Physical and Operational Margin (‘POM’) software applications used to more accurately assess transmission grid reliability under restructured market conditions. This contract was awarded on a sole source basis, since V&R is the developer of the POM software and, as such, is the only qualified provider of the required maintenance and support services and associated upgrades. A notice of the Authority’s intent to enter into a sole source contract with V&R for such services was published in the New York State Contract Reporter. The intended term of this contract is two 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, $30,000.

Marketing, Economic Development and Supply Planning

“Due to the need to commence services, the contract with APOGEE Interactive, Inc. (‘APOGEE’; 4500140099) became effective on May 7, 2007, 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 web-based Energy Analysis Toolset software, licensing, implementation, training and related services. The toolset will be used by Authority customers to assist them in effectively managing their energy use, by enabling customers to perform online end-use analysis of their industrial and commercial buildings, analyze the impact of various energy options or scenarios, and analyze energy consumption by comparing actual versus predicted energy usage, and also by providing useful energy tips, online training courses and web-based seminars. Bid documents were downloaded electronically from the Authority’s Procurement website by 23 firms, including those that may have responded to a notice in the New York State Contract Reporter. The original bids were rejected and services were rebid accordingly. Two proposals were received and evaluated. Staff recommended award of a contract to APOGEE, the lowest-priced bidder that meets the bid requirements and is qualified to provide such services. The intended term of this contract is three years (measured from the date of acceptance by the Authority of the Building and Option Analysis and Consumption Analysis applications) and approximately four months lead time for initial implementation, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total estimated amount expected to be expended for the three-year term of the contract, $497,800.

Power Generation

“Due to the need to commence services, the contract with AquatiPro LLC (4500139694) became effective on May 1, 2007, 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 maintenance services for online process chemistry panel analyzers for the 500 MW Combined Cycle Plant. Services include quarterly preventive maintenance for pH, conductivity, silica, phosphate, and dissolved oxygen and sodium analyzers. Bid documents were downloaded electronically from the Authority’s Procurement website by four firms, including those that may have responded to a notice in the New York State Contract Reporter. One proposal was received and evaluated. Staff recommended award of the subject contract to AquatiPro, the sole responding bidder with reasonable pricing that 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, $100,000.

“Due to the need to commence services, the contract with Bay Crane Service, Inc. (‘Bay Crane’; 4500138552) became effective on March 23, 2007, 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 crane rental with operator services for the Charles Poletti, 500 MW and Small Clean Power Plants. 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. One proposal was received and evaluated. Staff recommended award of the subject contract to Bay Crane, the sole responding bidder with reasonable pricing that is qualified to provide such services. The intended term of this contract is up to 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, $300,000.

“Due to the need to commence services, the contract with Cemtek Systems Inc. (‘Cemtek’; 4500138496) became effective on March 23, 2007, 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 maintenance services for three Continuous Emissions Monitoring Systems, of which two are associated with the 500 MW Combined Cycle Plant and one with the Charles Poletti Power Plant. Bid documents were downloaded electronically from the Authority’s Procurement website by seven firms, including those 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 Cemtek, the lowest-priced bidder that is qualified to perform the work. The intended term of this contract is up to 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, $300,000.

“Due to the need to commence services, the contract with Eaton Electrical Services (‘Eaton’; Q02-4040; 4600001806) became effective on May 31, 2007, 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 the replacement and installation of two 345kV SF6 circuit breakers (CB3102 and CB3302), as part of the breaker replacement program at the Blenheim-Gilboa Project. Bid documents were downloaded electronically from the Authority’s Procurement website by 14 firms, including those 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 Eaton, the lowest-priced bidder that is qualified to perform the work. The intended term of this contract is approximately 19 months, 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, $785,431.

“The three contracts with General Research, HEPCO, Inc. and Rotator Staffing Services, Inc. (‘Rotator’) (Q02-4032; PO#s TBA) would become effective on July 1, 2007, subject to the Trustees’ approval. The purpose of these contracts is to provide for temporary design and drafting personnel to support the Authority’s Power Generation engineering disciplines on an ‘as needed’ basis. Services may include, but are not limited to: developing drawings, designs and calculations; performing field verification and drawing update activities; document control activities and data acquisition and input activities. Although such personnel will perform these services at the Authority’s White Plains Office, under the direction and supervision of Authority staff, services may apply to any and all of the Authority’s facilities. Bid documents were downloaded electronically from the Authority’s Procurement website by 22 bidders, including those that may have responded to a notice in the New York State Contract Reporter. Four proposals were received and evaluated. Based on their qualified staffing resources, experience, ability to perform such services and reasonable pricing, staff recommends the award of contracts to the three lowest-priced bidders: General Research, HEPCO and Rotator. In addition, two of the three firms have provided temporary design/drafting personnel to the Authority under previous contracts in a timely and satisfactory manner. 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 estimated combined total amount that may be expended for the term of the three contracts, $6,502,750.

“The Authority has scheduled the dewatering of the upper reservoir for three intermittent periods during full plant outages in 2007 - 2009, as part of the life extension and modernization program at the Blenheim-Gilboa Project. Such dewatering includes the vertical shaft intake and penstock tunnels and is required in order to replace each of the three remaining spherical valves in the penstocks. High capacity emergency and dewatering pump systems, as well as Authority-supplied HDPE piping, will be installed in the upper reservoir to control water levels while the spherical valves are replaced. To this end, the contract with Gerace Construction, Inc. (‘Gerace’; Q02-4058; 4600001807) would become effective on June 27, 2007, subject to the Trustees’ approval. The purpose of this contract is to provide for the aforementioned Upper Reservoir Dewatering pump systems and services, including site preparation work. Bid documents were downloaded electronically from the Authority’s Procurement website by 28 firms, including those that may have responded to a notice in the New York State Contract Reporter. Two proposals were received and evaluated. Staff recommended award of the subject contract to Gerace, the lowest-priced bidder that is qualified to perform the work. The intended term of this contract is 2.5 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, $1,540,276.

“The contract with Henry Brothers Electronics, Inc. (‘HBE’; Q02-3987; PO# TBA) would become effective on July 1, 2007, subject to the Trustees’ approval. The purpose of this contract is to provide for construction services in connection with an enhancement of the existing security system at the Charles Poletti Power Project and the 500 MW Combined Cycle Plant sites. Such upgrade includes establishing a fence-mounted intrusion detection system, CCTVs, intercom, access control and alarm monitoring, video transmission/display/recording, lighting, and replacement and relocation of the existing security console, as well as software upgrades. Bid documents requesting qualification statements were downloaded electronically from the Authority’s Procurement website by potential bidders, including those that may have responded to a notice in the New York State Contract Reporter. The responses were evaluated and, after background investigation screenings were performed and mandatory confidentiality agreements were signed, twelve pre-qualified firms were invited to submit proposals. Four bids were received and evaluated. A post-bid addendum was issued to minimize the excavation and reduce the cost of the contract. Based on a thorough review and evaluation of the proposals, staff recommends award of a contract to HBE, the lowest-priced bidder that is technically acceptable and qualified to provide such services. The intended term of this contract is approximately one year. Approval is requested for the total estimated amount expected to be expended for the term of the contract, $8,350,000, including contingency of approximately 10%. The project will be funded from the Security Enhancement Project - Phase II, which was authorized by the Trustees in December 2005.

“Due to the need to commence services, the contract with Maverick Technologies Inc. (‘Maverick’; 4500140214) became effective on May 1, 2007, 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 engineering support for the Mark VI turbine control tuning at the Authority’s 500 MW Combined Cycle Plant, in accordance with the Authority’s specifications. 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. Two proposals were received and evaluated. Staff recommended award of the subject contract to Maverick, the lowest-priced bidder that 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, $300,000.

“Due to the need to commence services, the two contracts with Niagara County Community College (‘NCCC’; 4600001774) and The Safety & Health Center (‘S&HC’, 4600001773) became effective on March 1, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs. The purpose of these contracts is to provide for offsite initial and refresher training for asbestos handling and other related training, as needed, for the Niagara Power Project, in compliance with New York State Department of Health requirements. Bid documents were sent to four firms, including those that may have responded to a notice in the New York State Contract Reporter. Four proposals were received and evaluated. Staff recommended award of the subject contract to NCCC and S&HC, the two lowest-priced evaluated bidders that are qualified to perform the work. (A secondary vendor was selected in the event that the primary vendor cannot meet a particular training need or schedule.) The intended term of these contracts is four years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the terms of the contracts, $50,000 for S&HC and $20,000 for NCCC.

“The contract with Saratoga Safety Inc. (‘SSI’; BG-23951; PO# TBA) would become effective on July 1, 2007, subject to the Trustees’ approval. The purpose of this contract is to provide for on-site initial and refresher emergency spill response training, in accordance with regulatory requirements, at the Blenheim-Gilboa Project. A notice of the Authority’s intent to enter into a sole source contract with SSI for such services was published in the New York State Contract Reporter, which resulted in the identification of a second firm that could provide such services. Two proposals were received and evaluated. Staff recommends award of the subject contract to SSI, the lowest-priced evaluated bidder that is qualified to perform such services. The intended term of this contract is 2.5 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, $45,000.

“The Authority’s 500 MW Combined Cycle Plant (‘Plant’) became commercially operational on December 31, 2005. A Request for Proposals for an Extended Parts and Services Agreement (‘EPSA’) was developed and issued in April 2006. This agreement would provide the majority of requisite parts and services for maintaining the Plant’s two General Electric 7FA combustion turbines and one General Electric steam turbine. The term of this contract would cover a period of up to 15 years, and include the Plant’s first two major maintenance cycles, or approximately 96,000 factored fired hours of operation. Pricing was also requested to be provided for the first maintenance inspection of both gas turbines to be conducted in 2007, including refurbishment of certain parts. The Authority also contracted with an outside consulting firm, IEM Energy Consultants (‘IEM’), which specializes in reviewing proposals for work of this nature, to assist the Authority in negotiating an EPSA. In addition, the law firm of Troutman Sanders, LLP was also retained to assist the Authority’s internal staff with negotiating the terms and conditions of an EPSA. In response to the RFP, three bids were received from: General Electric (‘GE’), Pratt & Whitney Power Systems (‘Pratt & Whitney’) and Wood Group Integrated Plant Solutions (‘the Wood Group’). While GE is the original equipment manufacturer (‘OEM’) of this equipment, both the Wood Group and Pratt & Whitney have the qualifications and resources necessary to provide these services, refurbish existing parts and purchase new parts, as required.

“The Evaluation Team, with assistance from IEM and Troutman Sanders, reviewed the proposals in detail, considering pricing, qualifications, exceptions to terms and conditions and other salient factors. It became evident during this review that Pratt & Whitney’s proposal was the highest-priced over the entire duration of the contract, and therefore it was not considered further. The review of proposals from GE and the Wood Group resulted in the following conclusion by the Evaluation Team:

(1) PRICING: A Net Present Value (‘NPV’) analysis was performed of each bidder’s initial offering, excluding estimated escalation of labor and materials. The result of the estimated NPVs of each proposal is as follows:

Nominal $s NPV

(1) Wood Group $85.5M $55.8M

(2) General Electric $88.9M $60.2M

(3) Pratt & Whitney $99.4M $66.9M

As a result of the foregoing initial pricing analysis, the proposals of the two lowest-priced evaluated bidders were further evaluated.

(2) QUALIFICATIONS: General Electric is the manufacturer of the plant gas and steam turbines, and has developed significant resources to operate, maintain and repair such equipment. The Wood Group is a multinational company and its capabilities now include a portfolio of companies that can compete with GE in their product offering. The Wood Group is currently in the process of re-engineering the capital parts necessary to support this work and in the interim is able to meet customer requirements by purchasing the necessary parts through the aftermarket. The Wood Group has a well-established field service organization and a new component repair facility and rotor shop in East Windsor, CT. Both GE and the Wood Group are technically qualified to perform this work.

(3) EXCEPTIONS TO TERMS AND CONDITIONS: The Authority included in its RFP a sample contract for the ESPA for review and comment by all bidders. While all bidders furnished comments and exceptions to some of these proposed contract provisions, the exceptions taken by GE were more extensive, and, based on a multitude of prior discussions with GE, GE was much less willing, in staff’s opinion, to negotiate a resolution that was equitable to the Authority. On the other hand, the Wood Group has demonstrated more flexibility and willingness to resolve these issues in a manner resulting in less exposure and enhanced potential remedies available to the Authority. For example, the schedule duration for combustion inspection, hot gas path inspection and a major inspection of the gas turbines is less for the Wood Group than those quoted by GE, and the Wood Group agrees to use its best efforts to meet those durations, while GE did not offer such blanket assurance. GE would provide the Authority with the right to terminate the EPSA for convenience only after the completion of the first major inspection of the gas turbine (estimated to occur in September 2012), and then only on payment of a termination fee. On the other hand, the Wood Group agrees that the Authority could terminate the EPSA at any time upon 30 days’ written notice, with the Authority responsible for only reasonable and demonstrable costs and expenses related to terminating its subcontracts and canceling any work in progress. In addition, the limitation-of-liability provisions proposed by GE would have an annual cap of $20 million, with an aggregate cap of the contract price. The Wood Group’s overall aggregate liability cap is $84 million, with no annual cap. GE would also require a waiver of the Authority’s right to recovery for damages to the Authority’s property (except potentially for a smaller deductible to be agreed upon), while the Wood Group has agreed to no such waiver of recovery. Even more significantly, GE has insisted in the past that any general indemnification provision would have to include a provision that both parties would be responsible for their own negligence, which, based on experience, would result in the Authority having to first demonstrate that GE was negligent before GE and its insurance provider would accept responsibility for a third-party claim, for example, by one of its workers. The indemnification provision negotiated with the Wood Group does not include such a provision and is considered much more equitable to the Authority. The procurement, legal, operational and insurance representatives on the Evaluation Team consider the terms and conditions offered by the Wood Group to be significantly more equitable to the Authority than those offered by GE. One major third-party claim by a GE worker against the Authority could expose the Authority to a multimillion dollar claim if GE rejects responsibility for such an event and insists the Authority first demonstrate negligence on GE’s behalf.

(4) EXPERIENCE ON OTHER AUTHORITY CONTRACTS: GE has provided major equipment and services in support of the Authority’s operating and capital construction projects for many years. However, the Authority’s experience with GE’s design and engineering of the 500 MW Combined Cycle Plant and furnishing all major equipment was not a satisfactory one. Countless design and engineering changes resulted in significant re-work during the construction phase of the Project, exposing the Authority to significant additional costs and delays in constructing the Plant. The Authority has significant claims against GE for such additional costs, which still remain unresolved. The Authority is still dealing with design and engineering problems caused by GE relating to the Plant’s gas compressors, fuel transfer system and inlet chiller system, among other outstanding issues. Correction of these deficiencies will expose the Authority to additional significant costs, and to date GE has not agreed to reimburse the Authority for such cost. The experience with the Wood Group, while more limited, has been positive to date. With the approval of the President and Chief Executive Officer, the Wood Group (4500133486) was authorized to perform the initial inspection of one gas turbine in January 2007, and a second in April 2007, in the initial approved amount of $1.4 million. They have also provided maintenance work at the Flynn Plant, meeting accelerated schedule requirements. The Wood Group’s work has been satisfactory, and the company has shown an attitude of cooperation and willingness to resolve outstanding issues and meet the Authority’s expectations regarding its performance. Staff considers the Wood Group to be a qualified contractor that has performed satisfactorily to date. Based on the foregoing, staff therefore recommends the award of an EPSA to the Wood Group for an intended term of up to 15 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, $105,000,000, which includes contingency for estimated escalation of materials and labor and potential additional work not covered by the EPSA.

Transmission

“Due to the need to commence services, the contract with Public Utilities Maintenance, Inc. (‘PUM’; 4600001802) became effective on May 14, 2007, 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 surface preparation and painting services for approximately 100 transmission steel structures (towers) on the Authority’s Coopers Corners – Rock Tavern double-circuit 345 kV transmission line in Orange and Sullivan counties. Bid documents were downloaded electronically from the Authority’s Procurement website by 34 firms, including those 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 PUM, the lowest-priced bidder that meets the bid requirements and is qualified to perform the work. The intended term of this contract is approximately 16 months, 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, $912,650.

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. Payment for the contract in support of Energy Services Programs 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 Senior Vice President – Public and Governmental Affairs, the Vice President – Procurement and Real Estate, the Vice President – Engineering, the Vice President – Project Management, the Vice President – Corporate Security and Inspector General, the Vice President – Environment, Health and Safety, the Vice President – Finance, the Treasurer, the Chief Information Officer, the Director – Corporate Support Services, the Director – Employee Benefits, the Director – Energy Services, the Chief Technology Development Officer, the Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing, the Regional Manager – Northern New York, the Regional Manager – Western New York, the Regional Manager – Central New York, the Regional Manager – Southeastern New York and the Transmission Superintendent recommend the Trustees’ approval of the award of multiyear procurement contracts to the companies listed in Exhibit ‘13-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 – Marketing and Economic Development, the Senior Vice President – Energy Services and Technology, the Senior Vice President and Chief Engineer – Power Generation, the Senior Vice President – Transmission 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 the Wood Group performed the gas turbine combustion inspections at the 500 MW Combined Cycle Plan earlier this year and performed that work satisfactorily, and that the company services approximately 17 gas turbines throughout the U.S. Responding to a question from Mr. Kelly, Mr. Hoff said that the Authority will be able to terminate the contract with the Wood Group on 30 days’ notice, with liability only for the work performed up to that time. President-Elect Kelley said that the Wood Group is well known in the utility industry as a reasonable alternative to General Electric.

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 “13-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.

14. 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 ‘14-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 Siemens Power Generation, 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

“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 $1,000,000.

DISCUSSION

“Although the firms identified in Exhibit ‘14-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 ‘14-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:

Energy Services and Technology

“The contract with Associated Boiler Line Co., Inc. (‘ABLE Company’) (4500126941) provides for the furnishing, delivery and installation of energy-efficient boiler combustion controls, burner upgrade and SCADA system for existing boilers at the New York City Transit Coney Island Train Yard, as part of the Authority’s Southeastern New York (‘SENY’) Governmental Customers’ Energy Services Program. Services include furnishing all labor and ancillary equipment required to successfully complete the installation of, and make fully operational, the installed system(s), in accordance with all specifications and codes. The original award, which was competitively bid, became effective on July 17, 2006 for a term of one year. Due to unanticipated delays related to the unusually warm weather conditions in the last quarter of 2006, the initial load test of existing boilers under cold weather conditions could not be performed until well into the heating season; this, in turn, necessitated the rescheduling of all remaining work until after the heating season, which caused an additional delay. Consequently, the work could not be completed within the originally anticipated term. A six-month extension is therefore requested in order to allow sufficient time to complete all work under this contract, including additional work requested by the customer (e.g., insulation for boiler breeching, graphite alloy bearing for boiler dampers, safety proof switch replacement, etc.). The current contract amount is $515,889; it is anticipated that an additional $65,000 will be required for the extended term. The Trustees are requested to approve the extension of the subject contract through December 31, 2007, as well as for additional funding requested. It should be noted that all costs will be recovered by the Authority.

“The contract with Banner Electrical Contracting Corp. (4500127676) provides for high efficiency lighting and sensor installation services for four New York City Department of Transportation (‘DOT’) sites, including a DOT sign shop in Maspeth, a parking ticket payment facility at Bronx 1400, a workshop for DOT materials at Kent Street and a DOT truck repair facility at Flatlands in Brooklyn, New York. The original award, which was competitively bid, became effective on August 21, 2006 for a term of one year. The New York City Department of Citywide Administrative Services (‘DCAS’) approved only two of the four projects for construction last year; the Bronx 1400 and Flatlands sites are now complete. The DCAS has had a hold on the other two projects and only approved the Kent Street project to move forward in May of this year; the Maspeth project still remains on hold. The reason for the delays lies with a new approval process at the DCAS, which now funds such projects on a capital budget basis and also requires the approval of the New York City Office of Management and Budget. A one-year extension is therefore requested in order to allow for sufficient time to complete the original work scope for the remaining two projects. The current contract amount is $125,050; 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 August 20, 2008, with no additional funding requested. It should be noted that all costs will be recovered by the Authority.

“Since 2000, the Authority has been collaborating with IRIS Power LP (formerly IRIS Power Engineering, Inc.) on the development and implementation of an online hydro-generator diagnostic expert system (‘HydroX’) in support of the St. Lawrence/FDR Power Project (‘Project’) life extension and modernization effort. HydroX processes and diagnoses the electrical and mechanical performance of the turbine-generator at a hydro power plant based on dynamic and static sensor measurements. The goal is to help the plant protect its assets, reduce the cost of operations, transition from preventative to condition-based maintenance, extend machine life, reduce forced outages, avoid catastrophic failures and implement the recommendations of the Reliability Centered Maintenance study. A pilot noncommercial beta version of HydroX was developed and installed on Unit 18 at the Project, under the original contract with IRIS (4500033523), as approved by the Trustees at their meetings of December 19, 2000 and June 25, 2002, respectively. At their meeting of March 28, 2006, the Trustees approved the award of a second multiyear contract to IRIS Power (4500121437) to complete the development of a commercial version of HydroX RulePac and to install, configure and deploy such version on the remaining 15 hydro-generator units at the Project (as well as to replace/upgrade the existing beta version of Unit 18 with the commercial version), in the amount of $300,000, for an intended term of six years. Earlier this year, IRIS Power subcontracted work to GE - Bently Nevada, with the Authority’s approval, for the commercialization of HydroX and to provide a channel to market the product. An extension through December 31, 2014 was therefore subsequently authorized, subject to the Trustees’ approval, in order to make this contract coterminous with the commercialization agreement between IRIS and GE – Bently Nevada, which also runs through December 31, 2014. Because the original HydroX development contract includes all technical work that will ultimately result in a commercialized product, and the HydroX RulePac derives from HydroX, staff strongly recommends the extension of both contracts with IRIS, in order to provide for completion of all work under each respective contract and also to protect the Authority’s royalty rights. The previously approved contract amounts are $1,360,416 and $300,000, respectively; it is anticipated that no additional funding will be required for the extended term of either contract. While the Authority’s policy is to typically limit the term of personal services contracts to five years, based on the foregoing reasons, the Trustees are therefore requested to approve the extension of the original contract through December 31, 2014, as well as to ratify and approve the previously authorized extension of the second contract through December 31, 2014, with no additional funding requested. It should be noted that the Authority owns the HydroX technology and, under this agreement, will continue to license the product to IRIS for commercialization. Royalty provision negotiations for the Authority to receive 10% from the sale of each HydroX unit through 2014 (to be adjusted to 5% thereafter) have been successful. In addition, the Authority will benefit from free upgrades and use of HydroX technology at its other hydro facilities.

Power Generation

Increase in Compensation Ceiling:

“At their meeting of March 20, 2003, the Trustees approved a contract award in the estimated amount of $24 million to Siemens Westinghouse Power Corp. (now Siemens Power Generation, Inc.; 4600001092) to provide outage support and operating plant services for the Richard M. Flynn Power Plant (‘Flynn’). This long-term Operating Plant Service Agreement (‘OPSA’) was approved for an intended 12-year term through April 15, 2015. Siemens is the original equipment manufacturer (‘OEM’) for the Flynn gas turbine and other plant equipment, and is uniquely qualified to perform such services and modifications and to provide replacement parts. In March 2007, as a result of testing the gas turbine generator rotor during a routine outage, it was noted that the rotor was experiencing electrical shorts in the rotor end turns and other electrical problems. The rotor was disassembled and transported to Siemens’ (the OEM) shop in Charlotte, North Carolina. As a result of the inspection at Siemens’ facility, it was ultimately determined that a complete rewind of the rotor was required. On an emergency basis, a sole source release was issued to Siemens to complete this work, as part of the OPSA contract with Siemens. Staff determined that it would be prudent to perform the steam turbine inspection, originally scheduled for the October outage, while the Flynn plant was already in this outage; accordingly, such work was also authorized. This work is now complete at a final cost of approximately $3.2 million (comprising $1.8 million for the rotor work and $1.4 million for the steam turbine inspection), and was approved in accordance with the Authority’s EAPs. Since this work was not anticipated at the time of approval by the Trustees of the Siemens contract in March 2003, it is requested that the Trustees approve the additional funding of $1.8 million, thereby increasing the compensation ceiling of the subject contract from $24 million to $27.2 million, to cover the foregoing work.

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 (‘CEAR’). Payment for the contract in support of the Energy Services Program 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 Vice President – Procurement and Real Estate, the Director – Energy Services, the Chief Technology Development Officer, the Regional Manager – Northern New York, the Regional Manager – Southeast New York and the Director of Operations - Flynn recommend the Trustees’ approval of the extensions, additional funding and an increase in compensation ceiling of the procurement contracts discussed within the item and/or listed in Exhibit ‘14-A.’

“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 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 “14-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 Siemens Power Generation, 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 Projected

(Increase in Closing

O & M Compensation Ceiling) Date

Provide for outage support

and operating plant services

for the Flynn plant under a

long-term Operating Plant

Service Agreement (“OPSA”):

Siemens Power Generation, Inc.

4600001092

Previously approved amount $24,000,000

Additional amount authorized $ 3,200,000 04/15/15

REVISED COMPENSATION CEILING $27,200,000

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.

17. Power for Jobs Extended Benefits, Energy Cost Savings Benefit Awards and Economic Development Power Program Contract Extensions

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Legislature and the Governor agreed in a public conference on a one-year extension of the Power for Jobs (‘PFJ’) and the Energy Cost Savings Benefit (‘ECSB’) Programs, through June 30, 2008. As of today, there are identical bills in the Senate and Assembly concerning extension of the programs (‘Proposed Legislation’). It is expected that the Governor will sign the Proposed Legislation or similar legislation authorizing a one-year extension on terms set forth in the bills. In anticipation of the enactment of the extension, the Economic Development Power Allocation Board (‘EDPAB’) has recommended to the Authority that the Trustees approve the extension of PFJ and ECSB program benefits through June 30, 2008. It is therefore recommended that, subject to enactment of legislation substantially the same as the Proposed Legislation, the Trustees approve such extensions as recommended by EDPAB and also, as necessary, extension of contracts for High Load Factor and Municipal Distribution Agency power through June 30, 2008, to coincide with the term of extended ECSB benefits to such entities.

BACKGROUND

“In July 1997, the New York State Legislature and the Governor 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 the Governor 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.

“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.

Discussion

Power for Jobs

“The Proposed Legislation concerning further extension of the PFJ program would allow PFJ recipients to continue with existing elections (i.e., power contracts or rebates) for an additional year through June 30, 2008, with the program benefits administered as in current law. In addition, the Proposed Legislation would, in effect, extend for another year the availability of ‘restitution’ for those PFJ power contract customers that incur aggregate higher costs in the program as opposed to taking service from their local utilities under standard tariff provisions.

“Under the Economic Development Law, as would be amended by the Proposed Legislation, EDPAB may prescribe a simplified form and content for an application for such extended PFJ benefits. An applicant is eligible for extended PFJ 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 PFJ contract, or such other commitments ‘as the board deems reasonable.’ However, in light of the need to avoid disruption in receipt of such benefits, the Proposed Legislation requires that EDPAB expedite the award of extended PFJ benefits and defer the review of compliance with job commitments until after the applicant has been awarded extended benefits.

“In light of this legislative goal that current PFJ program participants receive PFJ extended benefits with minimal disruption, EDPAB recommends that review of compliance matters be deferred until on or before September 30, 2007. EDPAB recommends that the Authority approve such extensions for all PFJ program participants, subject to receipt of proper documentation requesting such extensions and agreement to the requisite commercial terms.

“It should be noted that due to the requirements of the host utilities and the late consideration by the Legislature of the Proposed Legislation there could be unavoidable gaps in the continuation of PFJ contract service. There will likely not be disruption in the provision of PFJ rebates since they are calculated after the fact.

“The Trustees are requested to approve contract extensions for the companies listed on Exhibit ‘17-A.’ The payment and funding of rebates for the companies listed on Exhibits ‘17-A’ through June 30, 2008 will continue to be brought before the Trustees for approval generally each month, and any such recommendations will be subject to the financial considerations contained in the Fiscal Information section below. The total cost of the extended rebate program is estimated to be about $45 million at current market prices.

Contract Extensions and ECSB Awards

“There are 66 High Load Factor, Economic Development Power and Municipal Distribution Agency program customers’ whose underlying power contracts have terms ending on June 30, 2007, or on other dates before June 30, 2008. In order for such customers to receive an extension or initial award of ECSB benefits, it is necessary to extend their underlying power contracts. Pursuant to the Economic Development Law, EDPAB has recommended extension of Economic Development Power contracts, as necessary, so that such businesses will be able to receive ECSB benefits through the end of the Proposed Legislation’s extension period on June 30, 2008. These customers are listed on Exhibit ‘17-B’.

“ECSB awards serve to moderate rates for businesses served under the High Load Factor, Economic Development Power and Municipal Distribution Agency programs. Under the proposed new legislation EDPAB is authorized to approve extensions of ECSB awards through June 30, 2008. The Proposed Legislation would extend availability of ECSB benefits to entities that are currently receiving such benefits and businesses under these programs whose rates would be subject to increase on or before June 30, 2008. For entities currently receiving ECSB awards, the Proposed Legislation provides for continuation of the existing level of benefits for another year while allowing the Authority to continue to use up to 70 MW of unallocated Replacement Power to fund the ECSB awards, provided that any such Replacement Power must be made available for allocation in Western New York during the extension period. The group of customers that are not now receiving ECSB benefits but whose prices are subject to increase after June 30, 2007 includes 37 businesses that have so-called ‘Option Five’ pricing contracts with the Authority that expire on October 30, 2007. Under the Proposed Legislation these firms will be eligible to receive ECSB awards on a par with those received by existing ECSB program beneficiaries. Thus, the rates for the ‘Option Five’ customers will increase by approximately 11% effective November 1, 2007.

“As under current law, applications for extensions of ECSB awards are to be in the form and contain such information, exhibits and supporting data as EDPAB may prescribe. EDPAB is to review the applications received and determine the applications that best meet the criteria established for the ECSB awards and recommend such applications to the Authority with ‘such terms and conditions as it deems appropriate.’ In order to avoid disruption in the delivery of ECSB benefits, the bill directs EDPAB to expedite the award of ECSB and to defer the review of compliance with job commitments until after applicants have been awarded ECSB.

“In light of the requirement of the Proposed Legislation that current recipients receive extended ECSB benefits with minimal disruption subject to later review of compliance matters, EDPAB has recommended that the Authority approve extensions for all current ECSB program participants, subject to receipt of proper documentation requesting such extensions and agreement on the requisite commercial terms. In light of the legislative goal that current ECSB Program participants receive extended benefits with minimal disruption, EDPAB recommends that review of compliance matters be deferred until on or before September 30, 2007.

“It is recommended that subject to enactment of legislation substantially in the form of the Proposed Legislation, Legislation and subject to the financial considerations contained in the Fiscal Information section below, the Trustees approve ECSB awards to companies listed on Exhibit ‘17-C’, through June 30, 2008, the cost of which is currently not expected to exceed $25 million, assuming that the net of receipts from the sale of unallocated Replacement Power as allowed by the Proposed Legislation remain available. Staff recommends that the Trustees authorize a withdrawal of monies from the Operating Fund for the payment of such amounts, 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.

“It should be noted that due to the requirements of the host utilities and the late consideration by the Legislature of the Proposed Legislation, there could be unavoidable gaps in the continuation of service to certain power program customers that request ECSB benefits.

FISCAL INFORMATION

“As set forth above, the total net cost to the Authority of a one-year extension of PFJ rebates and ECSB benefits is expected to be about $70 million.

“At the meeting of December 19, 2006, the Trustees, in addressing the six month extension of PFJ rebates and the ECSB program from January 1, 2007 to June 30, 2007, indicated at that time that the total amount of Authority monies to be applied to the estimated cost of the extension of such programs and a state fiscal year 2006-07 voluntary contribution to the general fund be limited to an aggregate amount of $100 million. The cost to the Authority of fully funding these latest extensions through June 30, 2008, combined with the cost of the prior extension, should total approximately $100 million, assuming the continued availability of the unallocated Replacement Power and assuming market prices remain at today’s levels in general. It is recommended that the foregoing authorizations to fund the extensions of the programs be limited at this time to the $100 million amount previously authorized. To the extent the costs associated with these program extensions were to exceed $100 million, staff will return to the Trustees for their consideration given the financial standing of the Power Authority at that time. Accordingly, any additional voluntary contributions to the State in connection with costs to the State for PFJ contract customers may be the subject of a separate resolution at a later date.

Recommendation

“The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing and the Vice President Finance recommend that the Trustees approve the extended Power for Jobs and Energy Cost Savings Benefits and the contract extensions as set forth above.

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees. In response to a question from Chairman McCullough, Mr. Pasquale said that review of compliance matters related to the Power for Jobs contracts would be deferred until on or before September 30, 2007.

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

WHEREAS, the Economic Development Power Allocation Board has recommended that the Authority approve contract extensions and electricity savings reimbursements to the Power for Jobs customers listed in Exhibit “17-A”; and

WHERAS, the Economic Development Power Allocation Board has recommended that the Authority approve contract extensions to the Economic Development Power program customers listed in Exhibit “17-B”; and

WHEREAS, the Economic Development Power Allocation Board has recommended that the Authority approve the award of Energy Cost Savings Benefit Awards to the customers listed on Exhibit “17-C”;

NOW THEREFORE BE IT RESOLVED, That subject to enactment of legislation substantially in the form described in the foregoing report of the President and Chief Executive Officer, the Authority implement such Economic Development Power Allocation Board recommendations, and the Authority hereby approves Power for Jobs contract extensions through June 30, 2008 for those companies listed on Exhibit “17-A”, and authorizes the continued payment of Power for Jobs electricity savings reimbursements to the companies listed in Exhibit “17-A” as submitted to this meeting, subject to the terms set forth in the foregoing report of the President and Chief Executive Officer, and that the Authority finds that such extensions are in all respects reasonable, consistent with the requirements of the Power for Jobs program and in the public interest; and be it further

RESOLVED, That subject to enactment of legislation substantially in the form described in the foregoing report of the President and Chief Executive Officer, the Trustees approve Energy Cost Savings Benefit Awards to the companies listed on Exhibit “17-C”, for the period through June 30, 2008, the cost of which is currently not expected to exceed $25 million net of receipts from the sale of unallocated Replacement Power as allowed by the Proposed Legislation; and be it further

RESOLVED, That subject to enactment of legislation substantially in the form described in the foregoing report of the President and Chief Executive Officer, the Authority approves contract extensions for the Economic Development, High Load Factor and Municipal Distribution Agency customers set forth on Exhibit “17-B,” provided the Authority receives proper documentation requesting such extensions and agreement on the requisite commercial terms; and be it further

RESOLVED, That based on the recommendation of staff, it is hereby authorized that payments be made for electricity savings reimbursements and ECSB benefits as described in the foregoing report of the President and Chief Executive Officer in the aggregate amount of up to $100 million for all extensions of such programs after January 1, 2007 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; and be it further

18. Approval of Hedge Transaction Authority for 2008 Long-Term Energy Supply Agreements with New York City Governmental Customers

The President and Chief Executive Officer submitted the following report:

SUMMARY

“In anticipation of the receipt of the ‘Hedging Plan Implementation’ letter from the Governmental Customers, which is due by June 15, 2007, the Trustees are requested to authorize the Senior Vice President – Energy Resource Management and Strategic Planning, with the concurrence of the Executive Vice President and Chief Financial Officer, the Senior Vice President and Chief Engineer – Power Generation and the Vice President – Chief Risk Officer, to execute fuel- and energy-related hedging transactions (‘Hedge Transactions’) for the 2008 energy cost-recovery option selected by the New York City governmental customers (‘Governmental Customers’) under the long-term energy supply agreements with the Authority (‘Agreements’), specifically Energy Charge Adjustment (‘ECA’) with Hedging Pricing Options, provided that the aggregate nominal value of all Hedge Transactions does not exceed the monetary cap for ECA with Hedging Pricing Options.

BACKGROUND

“At their meeting of February 9, 2005, the Trustees approved Agreements between the Authority and the Governmental Customers, effective 2005 for annual rate years commencing 2006 through December 31, 2017, unless terminated earlier. By executing the Agreements, each of the Governmental Customers agreed to be a full-requirements electricity customer of the Authority and to support and pay for its share of the Authority’s supply portfolio dedicated to the Governmental Customers. The Agreements require that the Authority and the Governmental Customers engage in an ‘Annual Process’ prior to the next calendar year (‘Rate Year’) to determine the fixed and variable costs of service, future energy and fuel market risks, hedging strategies, submission of load forecasts and supply resource planning. During this process, the Governmental Customers are obligated to propose three cost-recovery options for analysis by the Authority. The Authority must develop estimated costs for the cost-recovery options in accordance with the specified criteria and offer them to the Governmental Customers for selection. The Governmental Customers are required by the Agreements to select one of the energy cost-recovery options by June 15 of the year preceding the applicable Rate Year. In the event the Governmental Customers are not able to agree on and/or do not select an option by June 15, the Authority implements the Default Option.

“Once the option is determined, the Authority is obligated to obtain market prices for the Hedge Transactions components of the selected option. If the option is an ECA with Hedging Option and the prices of the option are within a 5% tolerance of the prices contemplated by the option, the Authority is authorized to proceed with the execution of the Hedge Transactions. Should the actual cost exceed 5%, the Authority cannot proceed without the consent of the Governmental Customers, and in the event there is no consent within 10 days, the Authority will implement the Default Option. An ECA option, which is applicable for 2008, is a full variable-cost pass-through option using an ECA, and, once selected, is the only type of option permitted by the Agreements for at least two consecutive Rate Years. An ECA with Hedging Pricing Options was selected for 2007; therefore, an ECA with Hedging Pricing option is the only selection available for the 2008 Rate Year.

“Generally, Hedge Transactions serve to fix the price paid for actual purchases of energy or fuel in the future. For example, if the Authority entered into an energy swap where it paid $80 per MWH and the counterparty paid the market price, and the price fell to $70 per MWH, the Authority would have to pay $10 per MWH to the counterparty. However, at the same time, the Authority would be buying energy in the market at the price of $70 per MWH. If one adds the $10 per MWH payment made to the counterparty to the $70 per MWH price paid by the Authority for the physical purchase of energy, the effective price paid for the energy is $80 per MWH, thereby fixing the Authority’s price. A similar result would result if market prices went above the Authority’s fixed price and the Authority would then be paid the difference between the fixed price and the market sale amount by the counterparty. That payment would then be used by the Authority to offset physical purchases in the market at the higher price.

“For the 2006 Rate Year, the Governmental Customers did not select one of the cost-recovery options defined by them, so the Default Option designed and developed by the Authority was implemented. For the 2007 rate year, the Governmental Customers collectively elected an ECA with Hedging Pricing Options, which, under the terms of the Agreements, must be applicable for at least two consecutive rate years.

DISCUSSION

“For the 2008 Rate Year, the Governmental Customers proposed an ECA with Hedging Pricing Options as required by their 2007 Rate Year election. Through a consultative process, the Authority will collaborate with the Governmental Customers during the implementation of the anticipated hedging strategy to achieve the best outcome. Because the Hedge Transactions are market based and could influence the market, a summary analysis of the Hedge Transactions associated with, and presently contemplated by, ECA with Hedging Pricing Options will be presented to the Trustees for discussion in executive session. The monetary cap that needs to be authorized to implement ECA with Hedging Pricing Options is included in the summary analysis. In the event the cost of ECA with Hedging Pricing exceeds the anticipated cost by 5%, the Authority will require consent from the Governmental Customers before continuing with the implementation.

“As with the 2007 Rate Year, multiple and varied hedges will be necessary to implement the hedging strategy option selected by the Governmental Customers. The need for timely implementation of the hedging strategy and the dollar value of the individual Hedge Transactions will likely exceed the maximum individual transactional authority granted to Authority officers by the Trustees at their meeting of January 31, 2006. Since delay in executing the Hedge Transactions could be very costly, it is critical for the Authority to have the flexibility to immediately proceed in executing fiscally advantageous Hedge Transactions.

“The expanded authority would essentially permit the Senior Vice President – Energy Resource Management and Strategic Planning to approve Hedge Transactions that exceed both (i) the fuel and electric per-transaction limits for financial hedge transactions and (ii) the spot trade limits for physical transactions established by the Trustees at their January 31, 2006 meeting. The aggregate nominal value of the Hedge Transactions will be limited to the monetary cap for Hedge Transactions set forth to meet ECA with Hedging Pricing Option, the selected hedging strategy option for the Governmental Customers’ 2008 rate year. The Hedge Transactions will include both purchases and sales and involve significantly lower net outlays for the cost-recovery options than the monetary cap for the authorized Hedge Transactions.

“While the cumulative authority sought represents a significant commitment, the value of the commitment does not give rise to a dollar-for-dollar financial exposure for the Authority. As explained earlier, the Authority’s financial exposure created by the proposed authorization for Hedge Transactions (most typically swaps and NYMEX contracts) would be measured by the difference between the fixed price the Authority would pay and the floating price to be paid by the counterparty. If the market price rises above the fixed price, payments would be made to the Authority based on the difference. If the market price falls below the fixed price, the Authority would make payments based on the difference. It is these differences that will determine the Authority’s (and counterparties’) financial obligations. The costs associated with the Governmental Customers’ selected hedging strategy will be recovered in their 2008 rates.

“The Senior Vice President – Energy Resource Management and Strategic Planning will report to the Trustees on the implementation of ECA with Hedging Pricing Options upon final execution of all transactions comprising the elements of ECA with Hedging Pricing Options for the 2008 Rate Year, or as may otherwise be requested by the Trustees.

FISCAL INFORMATION

“Since the costs associated with the Authority’s implementation of hedging strategy ECA with Hedging Pricing Option will be fully recovered in the Governmental Customers’ 2008 rates, there will be no costs to the Authority for implementation of ECA with Hedging Pricing Options.

RECOMMENDATION

“The Vice President – Chief Risk Officer recommends that the Trustees grant authority to the Senior Vice President – Energy Resource Management and Strategic Planning, with the concurrence of the Executive Vice President and Chief Financial Officer, the Senior Vice President and Chief Engineer – Power Generation and the Vice President – Chief Risk Officer, to execute Hedging Transactions consistent with ECA with Hedging Pricing Options elected by the Governmental Customers and integral to the Authority’s hedging strategy obligations under the Agreements with the Governmental Customers.

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

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

RESOLVED, That the Senior Vice President – Energy Resource Management and Strategic Planning, with the concurrence of the Executive Vice President and Chief Financial Officer, the Senior Vice President and Chief Engineer – Power Generation and the Vice President – Chief Risk Officer, is hereby authorized to approve and enter into, on behalf of the Authority, in connection with Energy Charge Adjustment (“ECA”) with Hedging Pricing Options, the Governmental Customers’ elected cost-recovery hedging strategy option under the New York City Governmental Customers’ Long-Term Agreements for 2008:

(1) hedging transactions relating to energy and fuel, including, but not limited to, swaps, including contracts for differences, calls, puts, covered calls, covered puts, swap options, covered call options, transmission congestion contracts, NYMEX contracts , other Over the Counter (“OTC”) hedging instruments and options on NYMEX or OTC contracts; and

(2) fuel-related transactions, including, but not limited to the physical purchase of natural gas and oil;

that may (i) exceed the fuel and electric per-transaction limits for financial hedge transactions and (ii) the spot-trade limits for physical transactions established by the Trustees at their meeting of January 31, 2006, provided, however, that, in addition to any other cumulative or per-day limits, the aggregate nominal value of all such transactions outstanding at any one time shall not exceed the monetary cap for ECA with Hedging Pricing Options, the Governmental Customers selected hedging strategy option, with the term ‘nominal value’ meaning, for the purposes of this limitation, as applied to a particular transaction, (1) the aggregate amount of the hedging transactions executed by the Authority determined as of the date of entry into the transaction by the Senior Vice President – Energy Resource Management and Strategic Planning, (2) in the case of a NYMEX contract, the value of the contract based on the price per dekatherm of the contract on the date of execution of the contract and (3) in the case of option contracts (e.g., puts or calls), the cost of the premium associated with the transaction; and be it further

RESOLVED, That the Senior Vice President – Energy Resource Management and Strategic Planning is hereby authorized to execute agreements and to authorize his designees to execute agreements to effectuate transactions approved by the Senior Vice President – Energy Resource Management and Strategic Planning pursuant to the foregoing resolution, including ISDA Master Agreements and schedules and confirmations relating to such new or existing Master Agreements, having such terms and conditions as the Executive Vice President and Chief Financial Officer, Vice President – Energy Resource Management and Vice President – Chief Risk Officer deem necessary or advisable, subject to the approval of the form of such agreements 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, take any and all actions and execute and deliver any and all certificates, documents and agreements to effectuate the foregoing resolutions, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

19. Informational Item: Revised Community Support Policy

The President and Chief Executive Officer submitted the following report:

“As reported to the Board on April 28, 2006, the Authority decided to hire an independent auditor to examine its community support contributions and the policies under which they are administered. As a result of that effort and the recommendations of that audit, a new community support policy (Corporate Policy No.11-1) has been issued, a copy of which is attached as Exhibit ‘19-A.’ This policy strengthens in several important respects the guidelines for selecting the appropriate applicants and assuring that those applicants are accountable for the funds they receive.

“In the first place, the new policy outlines the following five separate categories eligible for Authority grants: Economic Development; Education and Cultural; First Responders; Community and Local and State Government Support; and State Assistance. In addition, the new policy contains safeguards which will maintain the fairness and accountability of the Authority’s community support programs. These include:

Internal controls providing for appropriate and conflict-free grant approvals, barring use of Authority credit cards for issuance of grants and requiring payments directly to the requesting organization.

Standardizing the application form and requiring each requesting organization to file a report demonstrating that the Authority funds were expended in a manner consistent with the purpose of the grant.

“In short, the new policy will allow the Authority to continue to provide support for the communities of which the Authority is a part while, at the same time, enhancing the public’s confidence in the process.”

Mr. Kelly presented an overview of the new community support policy. In response to a question from Trustee Cusack, Mr. Kelly said that staff created a database for the Authority’s community support programs with the help of an outside consultant. President Carey said that the new system would better enable the Authority to properly account for and categorize community support expenditures. Chairman McCullough said the new system would also allow the Authority to monitor the use of community support funds after they are awarded. Mr. Kelly said that additional changes may be made to the system as the Authority goes forward with implementing it. Chairman McCullough asked that a copy of the final policy, along with the attachments and a cover memo listing a contact person, be sent to the Trustees. He said that staff had done a good job on this and that creating this database was long overdue.

20. 2007-2012 Sustainability Action Plan

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the Authority’s 2007-2012 Sustainability Action Plan, attached as Exhibit ‘20-A.’

BACKGROUND

“At their meeting of January 30, 2007, the Trustees ratified a contract award that resulted from competitive bidding and was previously approved by the President and Chief Executive Officer, to the firm of Ove, Arup and Partners (‘Arup’) to work with Authority staff to develop a comprehensive Sustainability Plan. Sustainability is the ‘lens’ through which both risks and opportunities are identified while making good decisions that take into account the triple bottom line of financial, social and environmental responsibility. Major companies such as GE and Wal-Mart, and governmental entities such as New York State and New York City, have embraced the concept of sustainability. In fact, New York State has begun the process of developing a Sustainability program within the Department of Environmental Conservation (‘DEC’).

“An internal team of Authority staff from the various Business Units was assembled as the Sustainability Integration Review Team (‘SIRT’). Working together, Arup and SIRT have developed a comprehensive Sustainability Plan and a Sustainability Action Plan for 2007-2012 detailing focus areas with specific goals, strategies and high-performance indicators to gauge actual performance in attaining such goals. In addition, the Authority’s Executive Management Committee has been participating in review sessions of the proposed Plan. A separate Committee of external stockholders representing Authority customers, other state agencies such as the New York State Energy Research and Development Authority and DEC and the Tuscarora Nation has also been participating in the Plan’s development and providing valuable input. The Sustainability Plan is divided into five themes with different Focus Areas, as delineated in Exhibit ‘20-B.’

DISCUSSION

“A baseline assessment of the Authority’s operational and administrative processes was conducted by Arup, and a comparison with the best sustainability practices of other global corporations and utilities was made. Overall, the Authority has a good track record of sustainability practices ranging from energy efficiency programs to power production using renewable hydropower. There were also areas of opportunities identified for increased focus from a sustainability perspective, including supply chain management, climate change, water, habitat management, development of a sustainability culture at the Authority and diversity. A key focus area will be development of a sustainability culture whereby each employee understands the Authority’s role in sustainable development and how they can contribute to achieving a more sustainable future. This requires a commitment from executive management and staff throughout the organization. While the Authority has been displaying many elements of what it means to be a sustainable entity, the development of a formal comprehensive Sustainability Plan is but a first step in the process of achieving the vision of becoming a leader in sustainability among electric utilities in the U.S. In fact, the Authority will be among the first U.S. electric utilities to develop such a comprehensive Sustainability Plan.

“Developing a sustainability culture at the Authority is a long-term process, beginning with a formal training program and orientation sessions in September 2007 regarding sustainability principles, what sustainability means for employees both at the Authority and in their personal lives and specific aspects of the Authority’s Sustainability Plan as they affect various Business Units, operating facilities and departments. There will be additional reporting requirements using the Authority’s Balanced Scorecard process, and potential reporting to external sustainability organizations such as the Global Reporting Institute (‘GRI’).

“In order to implement a culture of sustainability at the Authority over the long term, Arup has recommended that a new position of Director of Sustainability be created within the office of Environment, Health and Safety, reporting to the Vice President of such business unit. The Director of Sustainability will be responsible for developing sustainability institutional capacity at the Authority; providing annual updates and changes to the Sustainability Plan; providing annual Sustainability Reports to executive management, the Trustees and potentially New York State and external reporting entities such as GRI. The Director will also be responsible for providing training and designing sustainability workshops for all Authority employees directly affected by the Sustainability Plan and future changes to the Plan, and providing updates to all Authority staff regarding new sustainability developments.

FISCAL INFORMATION

“Any funding required for implementing the Sustainability Action Plan will be from the respective O&M budgets for 2007 through 2012.

RECOMMENDATION

“The Vice President – Procurement and Real Estate and the Vice President – Environment, Health and Safety recommend that the Trustees approve the 2007-2012 Sustainability Action Plan.

Mr. Hoff presented the highlights of staff’s recommendations to the Trustees. Chairman McCullough said that everyone who had been involved in developing this plan should be commended for their efforts and that this would be an ongoing effort of the Trustees as well. President Carey said that this plan was a hallmark of his efforts to implement the greening of the Authority. He said that sustainability was another prism through which the Authority could view its programs to ensure that what it is doing will benefit the economy, the environment and society. President Carey said that carbon will be the #1 issue, since no one has any idea yet what the federal government is going to do in that regard. He said that Governor Spitzer has appointed a sustainability czar at the Department of Environmental Conservation and that the Authority is leading the industry and the country in its sustainability efforts.

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

WHEREAS, the Authority has a long history of sustainable practices, including producing low-cost renewable hydropower, expending more than $1 billion on energy efficiency projects for governmental and other customers throughout New York State and operating the cleanest low-emission electric generating plants in New York City; and

WHEREAS, the Authority desires to build on this past history and be considered among the most sustainable electric utilities; and

WHEREAS, the Authority has developed an initial comprehensive Sustainability Plan and a Sustainability Action Plan for 2007-2012;

NOW THEREFORE BE IT RESOLVED, That the Authority’s 2007-2012 Sustainability Action Plan as delineated in Exhibit “20-A” is hereby submitted for further consideration and development of a final Sustainability Action Plan; 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.

Table of Contents

SUMMARY

DISCUSSION

RECOMMENDATION

Industrial SC 3

Street Lights – Town SC 4

Street Lights – Village SC 5

$ .1022 Energy Charge, per kWh. $ .1151

Outdoor Lighting – SC 6

Charge per lamp, per month)

Allocations to Continue with Job Commitment Changes for Productivity Improvements

SUMMARY

BACKGROUND

DISCUSSION

RECOMMENDATION

RECOMMENDATION

SUMMARY

FISCAL INFORMATION

RECOMMENDATION

Company	Location	Date of Trustee Approval	Type of Power	Allocation kW	Employment Commitment (# of jobs)	Average 2006 Jobs	Average Annual % Achieved	Revised Jobs 2007	Revised Jobs 2008+
G. M. Powertrain - Tonawanda Plant	Buffalo	Sep 97	EP	1,100	3,124	2,409.50	77.13	3,016	1,600
G. M. Powertrain - Tonawanda Plant	Buffalo	Jun. 96	EP	800	3,124	2,409.50	77.13	3,016	1,600
G. M. Powertrain - Tonawanda Plant	Buffalo	Aug 97	RP	725	3,124	2,409.50	77.13	3,016	1,600
G. M. Powertrain - Tonawanda Plant	Buffalo	Jan 94	EP	13,800	3,124	2,409.50	77.13	3,016	1,600
G. M. Powertrain - Tonawanda Plant	Buffalo	Jun 00	RP	2,000	3,168	2,409.50	76.06	3,060	1,600