MINUTES OF THE REGULAR MEETING

Minutes of the Regular Meeting of the Power Authority of the State of New York held at the Niagara Power Project, Lewiston, New York, at 11:00 a.m.

Present: Frank S. McCullough, Jr., Chairman

Michael J. Townsend, Vice Chairman

Joseph J. Seymour, Trustee

Elise M. Cusack, Trustee

Robert E. Moses, Trustee

Thomas W. Scozzafava, Trustee

Leonard N. Spano, Trustee

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Timothy S. Carey President and Chief Executive Officer

Thomas J. Kelly Executive Vice President and General Counsel

Joseph Del Sindaco Executive Vice President and Chief Financial Officer

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

Steven J. DeCarlo Senior Vice President – Transmission

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

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

Brian Vattimo Senior Vice President – Public and Governmental Affairs

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

Daniel Wiese Inspector General and Vice President – Corporate Security

Anne B. Cahill Corporate Secretary

Angela D. Graves Deputy Corporate Secretary

Frederick E. Chase Executive Director – Hydro Relicensing

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

Keith G. Silliman Director – Hydro Relicensing

Horace Horton Regional Manager – Western New York

Daniel J. Elmer Staff Sargeant

Mary Jean Frank Associate Corporate Secretary

Jamie Gilbert School Coordinator – Niagara Wheatfield/Tuscarora Nation

Brooke Patterson Tuscarora Nation – Scholarship Winner

Mrs. Smiedala Tuscarora Nation – Mother of Nicholas Smiedala

Nicholas Smiedala Tuscarora Nation – Scholarship Winner

Judith Patterson Tuscarora Nation – Grandmother of Brooke Patterson

Leander (Rusty) Patterson Tuscarora Nation – Father of Brooke Patterson

Kay Brayley Community Health Coordinator – Tuscarora Nation

Aaron Besecker Reporter – Niagara Gazette

Jim Heaney Reporter – Buffalo News

Bill Michelmore Reporter – Buffalo News

Al Vaughters Reporter – WIVB Buffalo

John Carroll Photographer – WIVB-TV

Charles Lewis Photographer – Buffalo News

James Neiss Photographer – Niagara Gazette

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

1. Approval of the Minutes

The Minutes of the Annual Meeting of April 24, 2007 were unanimously adopted

2. Presentation to Scholarship Winners

Chairman McCullough introduced Brooke Patterson and Nicholas Smiedala, winners of the first Niagara Power Project Relicensing Scholarships for Members of the Tuscarora Nation. He said that he and President Carey had been privileged to meet with Ms. Patterson, Mr. Smiedala and their parents and grandparents prior to the Trustees’ Meeting. Chairman McCullough said that Ms. Patterson and Mr. Smiedala had been chosen as the first recipients of the annual full-tuition scholarships to any school in the State University of New York system by the Tuscarora Scholarship Committee. The scholarship awards are based on the students’ academic excellence and community service.

Ms. Patterson graduated from Niagara Wheatfield High School in 2001. She was inspired to study radiology at Niagara County Community College by her mother, who died of cancer earlier this year and encouraged her to apply for the scholarship. Ms. Patterson works with the Community Health Workers Program, a health clinic, making deliveries from the clinic to the community.

Mr. Smiedala, who is about to graduate from Niagara Wheatfield High School, will major in digital media at Niagara County Community College. His community project will involve developing a web page and brochures for the Tuscarora Nation.

After Ms. Patterson and Mr. Smiedala were given an ovation by everyone in attendance at the meeting, Chairman McCullough wished them every success. He also thanked Ms. Jean Gilbert, chairperson of the Tuscarora Scholarship Committee, for all of her help and said that the Authority greatly appreciated the Tuscarora Nation’s constructive participation in the Niagara relicensing process.

3. Financial Reports for the Four Months Ended April 30, 2007

Mr. Del Sindaco provided the Financial Reports for the four months ended April 30, 2007.

4. Report from the President and Chief Executive Officer

President Carey said that a report on the Authority’s sustainability efforts would be presented at the June Trustees’ Meeting, along with a thorough briefing on the strategic planning process, which is progressing well. He said that the warehouse plan is moving forward and that the consultants are working with Power Generation staff to implement it by the end of the year.

Chairman McCullough said that all of the Trustees were encouraged to attend the strategic planning session in June on the afternoon of and the day following the Trustees’ Meeting. He praised the terrific effort being made by President Carey and staff on this process, which has been much different from previous strategic planning efforts, particularly with its focus on long-term goals.

5. Allocation of 2,350 kW of Hydro Power

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve six allocations of available Replacement Power (‘RP’) or Expansion Power (‘EP’) totaling 2,350 kW to six industrial companies.

BACKGROUND

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

“Under Section 1005 (13) of the Power Authority Act, as amended by Chapter 313, the Authority may contract to allocate or reallocate directly, or by sale for resale, 250 MW of firm hydroelectric power as EP and up to 445 MW of RP to businesses in the State located within 30 miles of the Niagara Power Project, provided that the amount of power allocated to businesses in Chautauqua County on January 1, 1987 shall continue to be allocated in such county.

DISCUSSION

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

“Based on the Advisory Group’s discussions, staff recommends that the available power be allocated to six companies as set forth in Exhibits ‘5-A’ and ‘5-B.’ The Exhibits show, among other things, the amount of power requested, the recommended allocations and additional employment and capital investment information. These projects will help maintain and diversify the industrial base of Western New York and provide new employment opportunities. It is projected to result in the creation of 79 jobs.

RECOMMENDATION

“The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees approve the allocation of 2,350 kW of hydro power to the companies listed in Exhibits ‘5-A’ and ‘5-B.’

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

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

RESOLVED, That the allocation of 1,950 kW of Replacement Power and 400 kW of Expansion Power, as detailed in Exhibits “5-A” and “5-B,” be, and hereby is, approved on the terms set forth in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, 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.

New York Power Authority									Exhibit “5-A"
Replacement Power									May 22, 007
Recommendations for Allocations




Exhibit				Power Requested	New	Estimated Capital	New Jobs Avg. Wage	Power Recommended	Contract
Number	Company Name	City	County	(kW)	Jobs	Investment	Benefits	(kW)	Term
A-1	Allegheny Technologies, Inc	Lockport	Niagara	1,400	3	$4,000,000	$82,200	300	Five Years
A-2	Noble Metal Processing - New York, Inc	Tonawanda	Erie	260	14	$1,500,000	$55,000	250	Five Years
A-3	Precious Plate, Inc.	Niagara Falls	Niagara	800	19	$1,395,000	$44,000	400	Five Years
A-4	Saint Gobain, Inc - Advanced Ceramics	Niagara Falls	Niagara	1,600	17	$3,000,000	$55,000	1,000	Five Years
	Total RP Recommended				53	$9,895,000		1,950

New York Power Authority									Exhibit “5-B"
Expansion Power									May 22, 2007
Recommendations for Allocations



							New Jobs
Exhibit				Power Requested	New	Estimated Capital	Avg. Wage	Power Recommended	Contract
Number	Company Name	City	County	(kW)	Jobs	Investment	Benefits	(kW)	Term
B-1	Enidine, Inc	Orchard Park	Erie	200	20	$2,550,000	$43,400	200	Five Years
B-2	Mayer Brothers Apple Products, Inc.	West Seneca	Erie	226	6	$525,000	$30,250	200	Five Years
	Total EP Recommended				26	$3,075,000		400

APPLICATION SUMMARY

Replacement Power

Company: Allegheny Technologies Inc. (Allvac)

Location: Lockport

County: Niagara

IOU: New York State Electric and Gas Corporation

Business Activity: Specialty steel melting facility

Project Description: The project will increase primary melting capacity by installing a new 36" Vacuum Arc Remelt furnace and associated equipment, including vacuum and water pumps and controls. The project includes building out steel mezzanine structure and foundation work to accommodate new furnace and process equipment.

Prior Application: Yes

Existing Allocations: 1,200 kW Expansion Power (200 kW - March 2005; 1,000 kW - January 2006)

Power Request: 1,400 kW

Power Recommended: 300 kW

Job Commitment:

Existing 60 jobs

Prior Allocation 6 jobs still to be added from prior recent allocation

New 5 jobs

New Jobs/Power Ratio: 17 jobs/ MW

Total Jobs/Power Ratio 47 jobs/MW (all allocations)

New Jobs -

Avg. Wage and Benefits $82,200

Capital Investment: $4 million investment includes $0.75 million in structure and foundation and $3.25 million in engineering and equipment

Capital Investment per MW $13.3 million/MW

Summary: The project will bring more capital investment to Lockport instead of to sister plants that are out of state or in England, solidifying the plant’s existence in Western New York and enhancing the outlook for future growth opportunities.

This new hydro allocation will have an immediate impact on the plant, enabling the company to add melt capacity to meet the growing demand for rotating grade steel used by aerospace engine manufacturers. The overall Authority allocations and job commitments will bring the company to 47 jobs per MW.

APPLICATION SUMMARY

Replacement Power

Company: Noble Metal Processing – New York, Inc.

Location: Tonawanda

County: Erie

IOU: National Grid

Business Activity: Laser welding automobile parts

Project Description: The project will include purchasing and installing a laser welding system entry at a Tonawanda site. This would include welding machinery, semi-automated laser weld system, air compressor, facility lighting, HVAC, air-makeup system and offices.

Prior Application: None

Existing Allocation: None

Power Request: 260 kW

Power Recommended: 250 kW

Job Commitment:

Existing: 0 jobs

New: 14 jobs

New Jobs/Power Ratio: 56 jobs/MW

New Jobs -

Avg. Wage and Benefits: $55,000

Capital Investment: $1.5 million

Capital Investment $6 million/MW

Per MW

Summary: This allocation would make it cost effective for Noble to locate and set up its first facility in New York State. The company is the world’s leading laser weld and auto part solution provider. The company’s primary business is providing laser-welded blanks to automotive original equipment. Noble’s process allows steel blanks of different thicknesses to be welded together without the brittleness or lack of strength that occurs with traditional welding methods. The process allows automobiles to use less steel, creating lighter, more fuel-efficient vehicles. The company has applied for Empire Zone tax incentives from the Town of Tonawanda. The company’s Stow, Ohio facility is also under consideration for this expansion.

APPLICATION SUMMARY

Replacement Power

Company: Precious Plate, Inc.

Location: Niagara Falls

County: Niagara

IOU: National Grid

Business Activity: Electroplating services

Project Description: The project will include adding a new power room to the facility. In addition, the company will be procuring and installing three new electroplating machines and various ancillary equipment such as exhaust systems and wastewater treatment equipment for its various electroplating machines.

Prior Application: Yes

Existing Allocation: 800 kW of Replacement Power and 235 kW of Power for Jobs

Power Request: 800 kW

Power Recommended: 400 KW

Job Commitment:

Existing: 145 jobs

New: 19 jobs

New Jobs/Power Ratio: 48 jobs/MW

New Jobs -

Avg. Wage and Benefits: $44,000

Capital Investment: $1.395 million

Capital Investment $3.48 million/MW

Per MW

Summary: Precious Plate produces electroplated connectors, lead frames and solid strips used in the telecom, datacom, automotive and aerospace industries. This investment is needed to enable the company to expand and stay competitive with electroplaters in other states, Mexico and Canada. Approximately 60% of the equipment the company will be installing for this expansion project will be purchased from companies located in New York State. The allocation will help the company retain its job base and create new jobs. If this allocation goes forward, the company’s overall Authority hydro allocations and job commitments will be at 137 jobs per MW.

APPLICATION SUMMARY

Replacement Power

Company: Saint-Gobain, Inc. - Advanced Ceramics

(Structural Ceramics Group)

Location: Niagara Falls

County: Niagara

IOU: National Grid

Business Activity: Manufacturer of silicon carbide products

Project Description: The project will create the facility’s capability to produce performance-advantaged products for the armor market segment, specifically to satisfy a large near-term and growing opportunity for the military. The company will purchase and install a new furnace, controls, loaders, pre-mixers and other equipment.

Prior Application: Yes

Existing Allocation: 5,156 kW of Replacement Power, 1,400 kW of which was allocated in January 2007

Power Request: 1,600 kW

Power Recommended: 1,000 kW

Job Commitment:

Existing: 172 jobs

Prior Allocation: 10 jobs still to be added from prior recent allocation

New: 17 jobs

New Jobs/Power Ratio: 17 jobs/MW

Total Jobs/Power Ratio: 32 jobs/MW (all allocations)

New Jobs -

Avg. Wage and Benefits: $55,000

Capital Investment: $3 million

Capital Investment $2.5 million/MW

Per MW

Summary: This investment is needed to enable the company to satisfy a near-term and growing opportunity for military armored products. Saint-Gobain’s material has been identified as superior for this application. The hydro allocation is critical to this facility’s ability to bring the project to Niagara Falls.

APPLICATION SUMMARY

Expansion Power

Company: Enidine, Inc.

Location: Orchard Park

County: Erie

IOU: New York State Electric and Gas Corporation

Business Activity: Designs and manufactures shock absorption and vibration isolation devices for aerospace and industrial applications

Project Description: This project would add a 12,500-sq.-ft. building expansion. Existing finished goods and warehousing areas would be moved to the new building, freeing up floor space for new manufacturing equipment to be installed. The new equipment would include lathes, pumps, HVAC and multitasking machine tools.

Prior Application: None

Existing Allocation: None

Power Request: 200 kW

Power Recommended: 200 kW

Job Commitment - Existing: 290 jobs

New: 20 jobs

New Jobs/ MW Ratio: 100 jobs/MW

New Jobs

Avg. Wage and Benefits: $43,400

Capital Investment: $2.55 million investment includes $1.5 million for a building expansion and $1.05 for machinery and equipment

Capital Investment / MW: $12.8 million/MW

Summary: Space limitations are hindering the growth potential Enidine needs to stay competitive. The company has the option of expanding at its sister operation in South Carolina or in Orchard Park. Enidine expects that the hydro allocation for this project will reduce its cost of doing business, enabling it to add jobs and grow in Western New York rather than relocating work out of the area. The company applied for and received economic development assistance from the Empire State Development Corporation and the Erie County Industrial Development Agency.

APPLICATION SUMMARY

Expansion Power

Company: Mayer Brothers Apple Products, Inc.

Location: West Seneca

County: Erie

IOU: New York State Electric and Gas Corporation

Business Activity: Processing, bottling and distribution of fresh fruit juices, filtered waters and related beverage products

Project Description: The project involves installing new distillation equipment to produce bottled water with specialty ingredients. A Bottled Water Vapor Compressor Distillation Unit will be installed to meet growing demand for bottled water products. The project will be able to tap into currently unused capacity of the company’s five bottling lines.

Prior Application: Power for Jobs

Existing Allocation: 400 kW Power for Jobs (expiring 6/30/07)

Power Request: 226 kW

Power Recommended: 200 kW

Job Commitment - Existing: 107 jobs

New: 6 jobs

New Jobs/ MW Ratio: 30 jobs/MW

New Jobs

Avg. Wage and Benefits: $30,250

Capital Investment: $525,000

Capital Investment / MW: $2.6 million/MW

Summary: Mayer Brothers Apple Products’ principal services include processing, bottling and distribution of fresh fruit juices, filtered water and related beverage products. The company is looking to increase its bottled water capacity by purchasing new distillation processing equipment. The project also increases overall plant efficiency by taking up the slack in its existing bottling line capacity. This project will enable Mayer Brothers to meet the growing demand from a major customer that the company supply located in Whitestone, New York, rather then have the customer buy its supply from an out-of-state vendor.

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 40 Power for Jobs (‘PFJ’) customers as listed in Exhibit ‘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 May 21, 2007, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 40 businesses listed in Exhibit ‘6-A.’ Collectively, these organizations have agreed to retain more than 60,000 jobs in New York State in exchange for rebates. The rebate program will be in effect until June 30, 2007, the program’s sunset.

“The Trustees are requested to approve the payment and funding of rebates for the companies listed in Exhibit ‘6-A’ in a total amount currently not expected to exceed $5,300,000. 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 $5,300,000. Payments will be made from the Operating Fund. To date, the Trustees have approved $76.5 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.”

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees. Chairman McCullough said that the Power for Jobs (“PFJ”) program is scheduled to end on June 30, 2007. He said that bills to extend the program are pending in both houses of the State Legislature, but that no action has been taken yet. Chairman McCullough said that staff is prepared to implement a program extension as soon as it is enacted into law, but that the program is likely to lapse for at least a month due to the 30-day notice requirements for the customers’ investor-owned utilities. President Carey said that he had sent letters to the Governor, the legislative leaders and the PFJ customers alerting them to this concern.

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 $5.3 million, and it is hereby found that amounts may properly be withdrawn from the Operating Fund to fund such payments; and be it further

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

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

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

7. Petroleum Overcharge Restitution (“POCR”) Funds – Transfer of Funds to the State of New York and Authorization of POCR Programs

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize the transfer of up to $700,000 to the State of New York (‘State’) in exchange for an equal amount in Petroleum Overcharge Restitution (‘POCR’) funds from the State, upon execution of an agreement between the State and the Authority memorializing the understandings between the State and the Authority concerning such transfer.

“The Trustees are also requested to authorize the Senior Vice President – Energy Services and Technology to develop and implement the various programs using POCR funds authorized by the 2007 legislation discussed below.

BACKGROUND

“The SFY 2006-07 State budget bill enacted in June 2006 provided for, among other things, the State to transfer $700,000 of POCR monies to the Authority and the Authority to transfer an equal amount of funds to the State. At their meeting of September 26, 2006, the Trustees authorized such transfer together with the development and implementation of programs using the POCR funds.

“Because of a technical deficiency in the SFY 2006-07 budget bill language, the State was unable to transfer the $700,000 in POCR funds to the Authority and the Authority did not transfer the like amount by the end of SFY 2006-07. As a consequence, the Legislature passed, and on April 9, 2007 the Governor approved, new language in the SFY 2007-08 State Budget legislation, Chapter 59 of the Laws of 2007 (‘Chapter 59’; Exhibit ‘7-A’) which corrected this deficiency. Sections 2 and 3 of Chapter 59 authorize the Authority to transfer $700,000 to the State and the State to transfer to the Authority a like amount of POCR funds. The monies will be used by the Authority as specified in Sections 4-6 of Chapter 59.

“Section 4 of Chapter 59 authorizes the Authority to use $233,333 in POCR funds for existing programs of the Authority that are eligible under federal guidelines to use POCR funds.

“Section 5 of Chapter 59 authorizes the Authority to use $233,333 in POCR funds to implement energy service projects. Section 6 of Chapter 59 authorizes the Authority to use $233,333 in POCR funds to implement energy projects that are eligible under POCR guidelines and that include, but are not limited to, energy conservation, energy efficiency, weatherization, alternative fuels, other non-electric energy projects, flexible technical assistance, technology transfer and/or renewable or innovative energy projects. Under Sections 5 and 6, the Authority may supplement the POCR funds with any or all monies available from the Authority’s Energy Services Program to implement projects.

“At their meeting of January 30, 1996, the Trustees approved five POCR-funded programs: a Solar Electric Grant Program, an MTA Hybrid Bus Program, a Pilot Coal Conversion Program, an Independent College and University Energy Assistance Loan Program and a High Efficiency Lighting Program (‘HELP’) Revolving Loan Program.

“At their meetings of December 17, 1996 and December 16, 1997, the Trustees approved the continuation of these programs and several new POCR-funded grant initiatives, including a statewide energy efficiency program for primary and secondary public schools and public facilities and the reinstatement of the furnace and boiler demonstration program established by Section 21 of Chapter 598 of the Laws of 1993.

“At their meeting of December 15, 1998, the Trustees approved the continuation of: (a) the independent college and university energy assistance loan program; (b) the HELP programs of the Authority; and (c) several new POCR-funded grant initiatives, including energy efficiency improvements in public facilities.

“At their meeting of December 14, 1999, the Trustees approved various energy-related programs established by Sections 1-9 of Chapter 413 of the Laws of 1999.

“At their meeting of December 20, 2000 and September 17, 2002, the Trustees approved the continuation of various energy-related programs established by Sections 1-8 of Chapter 61 of the Laws of 2000 and Sections 1-9 of Chapter 84 of the Laws of 2002.

DISCUSSION

“Before the State can disburse the POCR funds, the Authority is required to develop the various energy-related programs that would use the POCR funds. With the assistance of the New York State Energy Research and Development Authority, the Authority must apply to the U. S. Department of Energy (‘DOE’) for approval of the programs. POCR funds cannot be used for purposes or programs that DOE does not approve.

“Judicial decisions and federal regulations that apply to POCR funds (both principal and interest) require that the funds not be used for general Authority purposes; they must ultimately be used for consumer restitution through energy-related programs. The use of any interest earned from POCR funds can only be used for approved POCR programs and for the administration of these programs.

“If approved by the Trustees, the payment by the Authority of the $700,000 in funds matching the POCR funds identified in Chapter 59 would be reasonable and consistent with the Authority’s mission and statute.

“The POCR funds that the Authority receives as a part of the understanding with the State will be used for energy efficiency projects throughout the State. Accordingly, the Trustees are also requested to authorize the Senior Vice President – Energy Services and Technology to develop and implement the various programs using POCR funds authorized by the 2007 legislation.

FISCAL INFORMATION

“The funds to be paid to the State, as described above, will be disbursed from the Operating Fund, 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.

RECOMMENDATION

“The Senior Vice President – Energy Services and Technology recommends that the Trustees authorize the payment to the State of New York for the purposes, and under the conditions, described above, and that the Trustees authorize the implementation of Petroleum Overcharge Restitution programs as described above.

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

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

RESOLVED, That the payment to the State of New York of up to $700,000 for the purpose described in the foregoing report of the President and Chief Executive Officer, is hereby authorized, contingent on the execution of an agreement between the Authority and the State relating to such payment, and that the Chairman, the President and Chief Executive Officer, the Treasurer or such other officer designated by the President and Chief Executive Officer, are, and each hereby is, authorized to execute such agreement with the State having such terms and conditions as such officer deems necessary or desirable, subject to the approval of the form thereof by the Executive Vice President and General Counsel; and be it further

RESOLVED, That it is hereby authorized that up to $700,000 of the Operating Fund monies be withdrawn from such Fund and used for making the payment specified in the foregoing report of the President and Chief Executive Officer, provided, however, that such withdrawal be conditioned on a certification by the Executive Vice President and Chief Financial Officer, the Vice President – Finance, the Treasurer or Deputy Treasurer that such amounts to be withdrawn from the Operating Fund are not then required for any of the purposes specified in Paragraphs (a)-(c) of Section 503 (1) of the General Resolution Authorizing Revenue Obligations adopted on February 24, 1998, as supplemented; and be it further

RESOLVED, That the Senior Vice President – Energy Services and Technology is hereby authorized to develop and implement the various programs using Petroleum Overcharge Restitution funds authorized by the 2007 legislation discussed in the foregoing report of the President and Chief Executive Officer, including the use of such funds to finance programs under the Authority’s Energy Services Program, provided that such programs shall be implemented only upon approval by the U. S. Department of Energy and by any other agency or court having jurisdiction over such programs; and be it further

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

POCR PROVISIONS OF CHAPTER 59

OF THE LAWS OF 2007

§ 1. Funds appropriated from the statewide energy improvement account, special revenue fund - other, for services and expenses of the power authority of the state of New York, shall be available for the implementation of restitutionary programs. The use of these funds is not intended to limit the right or obligation of the power authority of the state of New York to comply with the provisions of any contract, including any existing contract with or for the benefit of the holders of any obligations of the power authority.

§ 2. The power authority of the state of New York shall transfer $700,000 to New York State on or before March 31, 2008.

§ 3. Notwithstanding section 1010-a of the public authorities law, the comptroller is hereby authorized and directed to transfer to the power authority of the state of New York $700,000, constituting monies appropriated to the statewide energy improvement account for the power authority of the state of New York pursuant to a chapter 55 of the laws of 2007 and the power authority of the state of New York is authorized to hold such monies for the purposes specified in a chapter of the laws of 2007.

§ 4. The power authority of the state of New York is authorized to use $233,333 in petroleum overcharge restitution funds made available to the authority in fiscal year beginning April 1, 2007 for programs of the power authority of the state of New York which are eligible under federal guidelines governing petroleum overcharge restitution funds; and which also may include a suballocation to the energy research and development authority or other public authority or public benefit corporation for energy conservation purposes.

§ 5. The power authority of the state of New York is authorized to use $233,333 in petroleum overcharge restitution funds made available to the authority in fiscal year beginning April 1, 2007 to implement energy service projects. The authority may supplement these funds with any or all monies available from the power authority’s Energy Service Program to implement projects.

§ 6. The power authority of the state of New York is authorized to use $233,334 in petroleum overcharge restitution funds made available to the authority in the fiscal year beginning April 1, 2007 to implement energy projects, which are eligible under federal guidelines governing petroleum overcharge restitution funds and which include, but are not limited to, energy conservation, energy efficiency, weatherization, alternative fuels, other non-electric energy projects, flexible technical assistance, technology transfer and/or renewable or innovative energy projects. The authority may supplement these funds with any or all monies available from the power authority’s Energy Service Program to implement projects.

§ 7. This act shall take effect immediately and shall be deemed to have been in full force and effect on and after April 1, 2007.

8. Proposed Hydropower Contracts for Niagara Power Project Relicensing Settlements – Transmittal to the Governor

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the attached hydroelectric power contracts (the ‘Proposed Contracts’) with seven Host Communities[1], Niagara University (the ‘University’) and the Tuscarora Nation (the ‘Nation’) and authorize their transmittal to the Governor for his approval. The Proposed Contracts will take effect on September 1, 2007 and will expire on September 1, 2025.

BACKGROUND

“The Authority’s existing 50-year license for the Niagara Power Project, originally issued under the Federal Power Act, expires on August 31, 2007. In 2002, pursuant to Federal Energy Regulatory Commission (‘FERC’) regulations, the Authority commenced the Alternative Licensing Process (‘ALP’). At a meeting held on June 28, 2005, the Trustees authorized the President and Chief Executive Officer (and his designees) to: file an Application for a New License with FERC, file related applications with the New York State Departments of State and Environmental Conservation and an Offer of Settlement with FERC (‘Offer of Settlement’), enter into and execute settlement agreements and execute such other documents and take such other actions as may be necessary or convenient in connection with such actions. On August 18, 2005, the Authority filed its Application for a New License with FERC.

“The Offer of Settlement, filed at FERC on August 19, 2005, included four separate settlement agreements reached by the Authority with parties participating in the ALP. Two of these agreements were with the Host Communities and the Tuscarora Nation and are described in more detail below. The Offer of Settlement was supplemented by two more agreements, one of which is with the University, also described in more detail below.

“In 2004, the Authority began negotiations with the Host Communities, which raised a number of issues relating to the loss of taxable land as a result of the Project. These negotiations resulted in the Host Communities Relicensing Settlement Agreement (‘HCRSA’), which includes an allocation of 25 MW of Project power to the Host Communities. The HCRSA represents complete settlement of all issues raised by the Host Communities during the relicensing proceeding. In accordance with the HCRSA, the Authority negotiated contracts for the sale of hydroelectric power from the Project with each individual Host Community. These contracts were approved by the Trustees at their meetings on February 27 and March 27, 2007. The amount of hydroelectric power allocated to each Host Community is listed in Exhibit ‘8-A’ and the contracts themselves are attached hereto as Exhibits ‘8-B’ through ‘8-H.’

“During the course of the ALP, the University raised a number of issues generally arising out of the proximity of the campus to the Project, and settlement negotiations between it and the Authority commenced in December 2004. These negotiations resulted in the Niagara University Relicensing Settlement Agreement (‘NURSA’) which includes an allocation of up to 3 MW of Niagara Project power to the University. The NURSA, which was filed at FERC on May 23, 2006, represents complete settlement of all issues raised by the University during the relicensing proceeding. Pursuant to the NURSA, the Authority negotiated an agreement with the University for the sale of 3 MW of hydroelectric power from the Project. This contract was approved by the Trustees on December 19, 2006 and is attached hereto as Exhibit ‘8-I.’

“The Authority commenced negotiations with the Nation in 2004 in response to a number of issues raised by the Nation regarding the proximity of its land to the Project. These negotiations resulted in the Tuscarora Nation Agreement (‘TNA’), which includes an allocation of 1 MW of Project power to the Nation. The TNA represents complete settlement of all issues raised by the Nation during the relicensing proceeding. Accordingly, the Authority negotiated a contract with the Nation for the sale of 1 MW of hydroelectric power from the Project. This agreement was approved by the Trustees on March 27, 2007 and is attached hereto as Exhibit ‘8-J.’

“The Project power for the Proposed Contracts will come largely from the block of Niagara Project power now sold to the three upstate investor-owned utilities (National Grid, New York State Electric and Gas Corporation and Rochester Gas and Electric Corporation) for the benefit of their domestic and rural consumers under contracts that expire on August 31, 2007. The remainder of the power will come from the non-preference part of the power produced by the Niagara Project upgrade. The Proposed Contracts contemplate delivery of power and energy at the Project switchyard. It will be the responsibility of the Host Communities, the University and the Nation to arrange for delivery of the power or the benefits of the power to the ultimate users.

“Consistent with current local laws and other legal requirements, the contracts with the Town of Niagara, the Niagara Wheatfield School District and the Lewiston-Porter School District will be administered in conjunction with the County of Niagara, which will be a party to the contracts with these entities. Likewise, the contract with the City of Niagara Falls School District will be administered in conjunction with the City of Niagara Falls, which will be a party to the contract with the School District. The agreements reflect these arrangements and allow for changes in the way the contracts are administered in the future depending on local law and other legal requirements.

“The Authority’s obligation to sell hydroelectric power pursuant to the terms of the Proposed Contracts becomes effective on September 1, 2007. The Proposed Contracts will expire on September 1, 2025. Successor contracts will be required to meet the terms of their respective settlement agreements and will be provided for the remainder of the 50-year term of the new Niagara license.

DISCUSSION

“At their meeting on March 27, 2007, the Trustees authorized the holding of a public hearing, pursuant to Section 1009 of the Public Authorities Law, on the Proposed Contracts. Copies of the proposed form of the contracts were transmitted to the Governor and the leaders of the State Legislature. In accordance with Section 1009, notice of such public hearing was published once each week for at least 30 days in at least six newspapers throughout the State. During that period, copies of the form of the contracts were made available for public inspection in the offices of the Authority and at other places throughout the State designated by the Authority, as well as on the Authority’s website.

“The public hearing on May 7, 2007 was held at the Project. At the hearing, representatives from the Town of Lewiston, the Niagara Power Coalition and Niagara University presented statements in support of the Proposed Contracts. No party expressed opposition to the Proposed Contracts. The final transcript of the hearing is attached hereto as Exhibit ‘8-K.’

“Subsequent to the public hearing, the Proposed Contracts were modified slightly to clarify the method of distributing the benefits of the Authority’s allocations. Staff believes that the Proposed Contracts are in the public interest and should be forwarded to the Governor with the recommendation that they be approved.

FISCAL INFORMATION

“All costs associated with the hydroelectric power allocated in the Proposed Contracts will be recovered and therefore will have no revenue impact on the Authority.

RECOMMENDATION

“The Director – Supply Planning, Pricing and Power Contracts and the Executive Director of Hydropower Relicensing recommend that the Trustees authorize the transmittal of the Proposed Contracts to the Governor for his approval.

“The Executive Vice President and General Counsel, the Senior Vice President and Chief Engineer – Power Generation, the Senior Vice President – Marketing and Economic Development and I concur in the recommendation.”

WHEREAS, on March 15, 2007, the Federal Energy Regulatory Commission (“FERC”) issued the Authority a new 50-year license for the Niagara Project that will take effect on September 1, 2007; and

WHEREAS, in connection with its application to FERC for the new license for the Niagara Project, the Authority has negotiated nine Proposed Contracts under which hydro power from the Niagara Project would be sold and delivered, beginning September 1, 2007, to Niagara University, the Tuscarora Nation and each of the following seven municipal entities known as the Host Communities: City of Niagara Falls, Town of Niagara, City of Niagara Falls School District, Niagara Wheatfield School District, Lewiston-Porter School District, Town of Lewiston and County of Niagara; and

WHEREAS, copies of such proposed contracts have been transmitted to the Governor, the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee and have been made available for public inspection during a 30-day period at the offices of the Authority, at other locations throughout the State and on the Authority’s website; and

WHEREAS, on May 7, 2007, the Authority held a public hearing on the terms of the Proposed Contracts upon 30 days’ notice given by publication once each week during such period in at least six newspapers within the State of New York; and

WHEREAS, no party expressed opposition to the Proposed Contracts at the May 7, 2007 public hearing; and

WHEREAS, the terms of the Proposed Contracts were modified to clarify the method of distribution of the benefits of Authority’s allocations; and

NOW, THEREFORE, BE IT RESOLVED, That the Proposed Contracts are in the public interest and should be forwarded together with a recommendation that they be approved, along with the record of the public hearings thereon, to the Governor, the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee; and be it further

RESOLVED, That the Chairman and the Corporate Secretary be authorized and directed to execute such proposed contracts in the name of and on behalf of the Authority whenever the agreements shall be approved by the Governor; 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 such Proposed Contracts; and be it further

9. Motion to Conduct an Executive Session

“Mr. Chairman, I move that the Authority conduct an Executive Session for the purpose of discussing matters regarding the GE and Entergy litigation.” On motion duly made and seconded, an Executive Session was held.

10. Motion to Resume Meeting in Open Session

“Mr. Chairman, I move to resume the meeting in Open Session.” On motion duly made and seconded, the meeting resumed in Open Session.

11. Operations and Maintenance Payments for New York State Parks

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize payments totaling up to $8 million from the Operating Fund for expenditures of the New York State Office of Parks, Recreation and Historic Preservation (‘OPRHP’) in New York State fiscal year (‘SFY’) 2007-08. The funds are to be used for operation and maintenance of Robert Moses State Park (‘Robert Moses’), Coles Creek State Park (‘Coles Creek’), Art Park and Niagara Reservation (including Reservoir, Whirlpool, DeVeaux Woods and Devil’s Hole State Parks and the Niagara Gorge Trails) (‘Niagara Reservation’). Robert Moses and Coles Creek are directly associated with the St. Lawrence/ FDR Power Project and have been incorporated into the Federal Energy Regulatory Commission (‘FERC’) project license issued in October 2003. Art Park and Niagara Reservation, although not part of the FERC-licensed project, are associated with the Niagara Power Project.

“The Trustees are further requested to authorize the President and Chief Executive Officer, or his designee, to sign any documents or enter into any agreements necessary to effectuate such payment, subject to approval as to the form thereof by the Executive Vice President and General Counsel.

BACKGROUND

“Commencing with the SFY 2003-04 Executive Budget, the Authority agreed to a special Revenue-Other State Operations appropriation of up to $8 million, reflecting the Authority’s assumption of responsibility for operations expenses at four New York State parks, including Art Park, Robert Moses, Coles Creek and Niagara Reservation. The approved New York State Budget for SFY 2003-04 adopted the Governor’s recommendations. At their meeting of June 24, 2003, the Trustees were advised that such annual payments were expected to continue through the end of the current federal license for the Niagara Power Project in August 2007[3].

“The Trustees have annually authorized payments of up to $8 million to the OPRHP Patron Services Account for SFY 2003-04, SFY 2004-05, SFY 2005-06, and SFY 2006-07. Payments were subsequently made in conformance with such authorizations.

“Provisions of the enacted SFY 2007-08 State Budget (Chapter 55 of the Laws of 2007) include a special Revenue-Patrons Fund account appropriation of $69.404 million, which contemplates an $8 million contribution from the Authority for operations expenses at Art Park, Robert Moses, Coles Creek and Niagara Reservation.

DISCUSSION

“Payments made by the Authority would be used for OPRHP operating costs including, but not limited to, personal services, fringe benefits and non-personal services costs directly related to the operation of Art Park, Robert Moses, Coles Creek and Niagara Reservation.

“Payments would be made to the OPRHP Patron Services Account in three installments. An initial payment of $4 million for the first and second quarters of SFY 2007-08 would be made immediately upon the Trustees’ approval and a finding by the Senior Vice President and Chief Financial Officer, the Vice President – Finance or the Treasurer that such amount is not needed for any of the purposes set forth in Section 503(1) (a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented. Subsequent payments of $2 million each would be made at the beginning of the third and fourth quarters of the SFY conditioned on the Section 503(1) certification discussed above. All such payments would be subject to reconciliation based on OPRHP’s actual O&M expenditures for such parks.

“Payments would be made pursuant to an annual spending plan approved by the New York State Division of the Budget and a quarterly reconciliation report documenting all costs to be provided by OPHRP to the Authority within 45 days of the end of the third and fourth quarters (November 15 and February 15). The payments for SFY 2007-08 would be the final payments for OPRHP pursuant to the 2003 Budget agreement to provide such funding for a five-SFY period.

FISCAL INFORMATION

“Payments pursuant to this authorization will be made from the Authority’s Operating Fund.

RECOMMENDATION

“The Senior Vice President – Public and Governmental Affairs and the Vice President – Governmental Affairs and Policy Development recommend that the Trustees approve operating fund expenditures of up to $8 million for payment to the New York State Office of Parks, Recreation and Historic Preservation Patron Services Account for the operation and maintenance of Art Park, Robert Moses State Park, Coles Creek State Park and the Niagara Reservation (including Reservoir, Whirlpool, DeVeaux Woods and Devil’s Hole State Parks and the Niagara Gorge Trails) in New York State fiscal year 2007-08.

“The Executive Vice President and General Counsel, 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 Operating Fund expenditures of up to $8 million be made to the Special Revenue-Other Account (New York State Office of Parks, Recreation and Historic Preservation Patron Services Account) for the operation and maintenance of Art Park, Robert Moses State Park, Coles Creek State Park and the Niagara Reservation (including Reservoir, Whirlpool, DeVeaux Woods and Devil’s Hole State Parks and the Niagara Gorge Trails), as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That such amounts shall be paid from the Operating Fund upon a certification by the Executive Vice President and Chief Financial Officer, the Vice President –Finance or the Treasurer that such amounts are not needed for any of the purposes set forth in Section 503(1) (a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

RESOLVED, That the President and Chief Executive Officer, or his designee, be and hereby is, authorized to sign any documents or enter into any agreements necessary to effectuate such payment, subject to approval as to 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 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. Increase in Operating Reserve and Authorization to Use Operating Funds to Retire Authority Debt

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve an increase of $25 million in the Operating Reserve to a total of $175 million to better reflect the risk exposure of the Authority in the conduct of its business in today’s environment. The Trustees are also requested to approve the use of up to $100 million of additional Operating Fund monies through 2008 for the purpose of the payment, purchase, defeasance and/or redemption of Revenue Bonds, Subordinate Revenue Bonds, Commercial Paper Notes and Extendible Municipal Commercial Paper Notes.

BACKGROUND

“Pursuant to Subsection 1(a) of Section 503 of the Authority’s General Resolution Authorizing Revenue Obligations, as amended, the Authority shall accumulate ‘in the Operating Fund as a reserve for (i) working capital, (ii) for such Operating Expenses the payment of which is not immediately required, including but not limited to amounts determined by the Authority to be required as an operating reserve in accordance with subsection 2 of this Section 503 or (iii) deemed necessary or desirable by the Authority to comply with orders or other rulings of an agency or regulatory body having lawful jurisdiction.’

“Subsection 2 of Section 503 of such Resolution further provides that the ‘Authority shall from time to time, and in all events prior to any withdrawal of moneys from the Operating Fund pursuant to paragraph (e) of subsection 1 of this Section 503, determine (i) the amount, to be held as a reserve in the Operating Fund, which in the judgment of the Authority is adequate for the purpose of providing for the costs of emergency repairs or replacements essential to restore or prevent physical damage to, and prevent loss of Revenues from, any Project and (ii) the amount, to be held as a reserve in the Operating Fund, which in the judgment of the Authority is adequate to meet the costs of major renewals, replacements, repairs, additions, betterments and improvements with respect to any Project necessary to keep the same in operating condition or required by any governmental agency having jurisdiction over such Project and to provide a reserve for the retirement from service, decommissioning or disposal of facilities comprising either a Project or a part of a Project.’

“Taken together, these sections of the Authority’s covenant with its bondholders provide for the establishment of a reserve to protect the Authority and its bondholders from the business risks the Authority may encounter in its day-to-day activities.

DISCUSSION

“At their meeting of April 28, 1998, the Trustees established the Operating Reserve at a level of $150 million, which represented at that time an amount that would have been necessary to support Authority operations for a period of one-and-a-half years if one the Authority’s then-owned nuclear plants were to have become inoperative and require major expenditures to restore operations. After the sale of the plants in 2000, and subsequent to the start-up of the new market environment under the New York Independent System Operator (‘NYISO’), staff revisited the Operating Reserve level and, at the time, found it to provide adequate protection for the ongoing financial security of the Authority’s operations taking into account the Authority’s shifting risk profile from an organization concerned with nuclear operating risk to one facing market/ commodity risk.

“Staff has again undertaken a review of the operations of the Authority and the adequacy of the Operating Reserve level. This review has taken into account the same operational and market risks considered in the past. One noteworthy observation is the increase not only in underlying natural gas and electric prices in recent years but also in price volatility as well. In addition, staff has considered the broader range of business risks to which the Authority is exposed. These include such items as the effects of customer non-payment of bills, rising interest rates, ratings downgrades, etc. On the basis of this review, staff is recommending an increase in the Operating Reserve level to $175 million, an increase of $25 million from the previously established level.

“The Trustees are also requested to expand the authorizations previously granted by the Trustees in February and October 1998, July 2000, September 2001, February 2003, January and November 2004 and November 2006 that allowed for the use of Operating Fund monies for the payment, purchase and/or defeasance of Revenue Bonds, Subordinate Revenue Bonds, Commercial Paper Notes and Extendible Municipal Commercial Paper Notes.

“To date, all but approximately $54 million of the authorizations have been used. These prior authorizations have enabled the Authority to better align its cost structure for the rigors of the competitive market. While these efforts are largely concluded, there may be other opportunities to provide savings for Authority customers and/or for the Authority to continue to control its cost structure. Accordingly, the Trustees are requested to authorize the use of up to an additional $100 million of Operating Fund monies through 2008 for the payment, purchase, defeasance and/or redemption of debt as specified above and to extend the prior authorizations through 2008. Before any withdrawal is made for such purpose, staff would determine that the funds to be withdrawn are not needed to pay for operating expenses, debt service or any of the other purposes specified in Section 503 (1)(a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended, and that such withdrawal will not cause the Operating Reserves to fall below the established levels. Furthermore, staff would obtain approval of such withdrawal from the Chairman and the President and Chief Executive Officer.

FISCAL INFORMATION

“The funds required for this new Operating Reserve level are already deposited in the Operating Fund. The Authority’s Operating Reserves are invested in accordance with the Authority’s Investment Guidelines and the earnings on such funds are available for any Authority corporate purposes.

RECOMMENDATION

“The Vice President – Finance recommends that the Trustees approve: (1) an increase in the Operating Reserve level referenced in Section 503 of the Authority’s General Resolution Authorizing Revenue Obligations, as amended, to $175 million and (2) the use of up to $100 million of additional Operating Fund monies through 2008 for the payment, purchase, defeasance and/or redemption of Revenue Bonds, Subordinate Revenue Bonds, Commercial Paper Notes and Extendible Municipal Commercial Paper Notes, and an extension through 2008 the specified prior authorizations for such use of Operating Fund monies.

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

Mr. Del Sindaco presented the highlights of staff’s recommendations to the Trustees. In response to a question from Chairman McCullough, Mr. Del Sindaco said that the Authority’s cash reserves are now greater than $370 million. President Carey said that this is the first time since 1998 that the Trustees have been asked to authorize an increase in the Authority’s operating reserve.

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

RESOLVED, That the Trustees hereby increase the Operating Reserve in the Authority’s Operating Fund to $175 million; and be it further

RESOLVED, That the Trustees hereby authorize the use of up to $100 million in Operating Fund monies through 2008 for the payment, purchase, defeasance and/or redemption of Revenue Bonds, Subordinate Revenue Bonds, Commercial Paper Notes and Extendible Municipal Commercial Paper Notes, and such authorization shall be in addition to the authorizations set forth in the prior resolutions adopted by the Trustees as outlined in the foregoing report of the President and Chief Executive Officer, with such authorizations hereby being extended through 2008; and be it further

RESOLVED, That as a prerequisite to any withdrawal pursuant to the foregoing resolution, the Treasurer or the Vice President – Finance shall obtain the approval of such withdrawal from the Chairman and the President and Chief Executive Officer and shall certify that such 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 be it further

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

13. Niagara Power Project Relicensing – New FERC License, SEQRA Findings and Surplus Lands Transfer

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to: (a) authorize acceptance of the new license issued by the Federal Energy Regulatory Commission (‘FERC’) for the Niagara Power Project (‘Project’); (b) approve, adopt and ratify the State Environmental Quality Review Act (‘SEQRA’) Findings Statement attached hereto as Exhibit ‘13-A’, and (c) approve the transfer of ownership of surplus lands (Exhibit ‘13-B’) as set forth in settlement agreements and resolutions previously approved by the Trustees.

BACKGROUND

“The original Project license issued to the Authority pursuant to the Federal Power Act will expire by its terms on August 31, 2007. At their meeting of June 28, 2005, the Trustees authorized the filing with FERC of an application for a new 50-year license for the Project pursuant to the Federal Power Act (the ‘Application’), certain related applications and an ‘Offer of Settlement’ consisting of four settlement agreements entered into by the Authority and a number of governmental and non-governmental entities participating in the relicensing process together with an accompanying ‘Explanatory Statement.’ The Offer of Settlement was supplemented twice while under review by FERC, pursuant to actions taken by the Trustees at their meetings of May 23, 2006 and June 27, 2006.

DISCUSSION

License Acceptance

“On March 15, 2007, the FERC commissioners approved the issuance of a new 50-year license for the Project. Staff has reviewed the issuing order and has concluded that it is generally consistent with the Application and poses no obstacle to the implementation of the Settlement Measures. Two timely requests for rehearing were filed with FERC, one by the Public Power Coalition and the Eastern Niagara Public Power Association and a second by the Niagara Improvement Association. In addition, a ‘request for clarification’ was filed by the out-of-state governmental and quasi-governmental entities that receive allocations of Project power pursuant to the terms of the federal Niagara Redevelopment Act. By Order dated May 14, 2007, FERC granted rehearing ‘for the limited purpose of further consideration’ by the Commission.

“Staff recommends that the Authority accept the new license. In view of the possibility that the new license, as a consequence of one or more of the filed rehearing requests, may be amended in a fashion that is unacceptable to the Authority, staff recommends that this acceptance be made subject to a reservation of authority to reconsider this action pending the outcome of any and all requests for rehearing filed with FERC and any subsequent judicial review of FERC’s disposition of such requests and that, when filing its acceptance with FERC, the Authority note such reservation.

SEQRA Findings

“On July 14, 2006, as part of its review of the Application, and pursuant to the National Environmental Policy Act, FERC issued a draft Environmental Impact Statement (‘EIS’). Thereafter, on December 19, 2006, FERC issued a final EIS. The final EIS includes an analysis of the impacts of all actions to be taken by the Authority pursuant to the agreements submitted to FERC in connection with the Offer of Settlement (‘Settlement Measures’), whether or not a particular action is to be included as a term or condition of the new Project license.

“However, the Good Neighbor Agreement between the Authority and Niagara University (authorized by the Trustees on May 23, 2006) was not part of the Application and thus not reviewed in the final EIS. As such, the Good Neighbor Agreement is subject to the New York State Environmental Quality Review Act (‘SEQRA’) and the Authority is required to make certain ‘Findings’ that include an explicit statement that the requirements of SEQRA have been met and to the maximum extent practicable any adverse environmental effects have been minimized or avoided. To that end, the Authority’s Vice President – Environment, Health and Safety prepared a full Environmental Assessment Form; concluded that there were no significant environmental impacts; and issued a Negative Declaration regarding the Good Neighbor Agreement.

“In addition, the Authority’s Vice President – Environment, Health and Safety has prepared and submitted for Trustee consideration and action the ‘Findings Statement’ attached hereto as Exhibit ‘13-A’, which accepts the final EIS in relation to the issuance of the License by FERC and its acceptance by the Authority and which addresses the actions being taken by the Authority under the Good Neighbor Agreement.

Public Authorities Law

“The Settlement Measures include commitments by the Authority to convey certain surplus lands to adjoining landowners, which lands are shown on the schedule annexed hereto as Exhibit ‘13-B’ (the ‘Niagara Surplus Parcels’). Pursuant to Section 2897(6)(c)(v) of the Public Authorities Law (the ‘PAL’) and the Authority’s Guidelines for the Disposal of Real Property (the ‘Guidelines’), the Authority may dispose of Authority property for an amount less than the estimated fair market value and by negotiation and without resort to the public bidding procedures otherwise required by Article 9 of the PAL, provided that the disposal is intended to further the public health, safety or welfare or an economic development interest of the state and that the purpose and terms of such disposal are documented in writing and such purpose and terms are approved by a resolution of the Trustees.

“The purposes and terms of the surplus land conveyances are set forth in the settlement agreements and the resolutions previously approved by the Trustees (the Host Communities Agreement and the Tuscarora Nations Agreement approved on June 28, 2005, the Niagara University Agreements approved on May 23, 2006 and the Erie County/City of Buffalo Agreement approved on June 27, 2006), and include such purposes as the Buffalo Waterfront Development project, enhancement of the Niagara University campus, creation of senior housing and the return of parcels to property tax rolls.

“The PAL and the Guidelines also require that an explanatory statement of the circumstances of each such disposal be prepared and transmitted to the New York State Comptroller, the Director of the Budget, the Commissioner of the Office of General Services and the State Legislature not fewer than 90 days in advance of the disposal. Accordingly, these real property transfers are subject to approval by the Trustees and the timely filing of the required statements. This Trustee action, along with the previously adopted resolutions, will serve as the required explanatory statement.

FISCAL INFORMATION

“At their meeting of October 24, 2006, the Trustees authorized $443.9 million in capital expenditures to be dedicated to costs associated with implementing the new Project license and undertaking the Settlement Measures. This action was undertaken in advance of the issuance of the new Project license so that certain planning activities associated with the anticipated requirements of the new Project license could be undertaken in a timely fashion.

“In accordance with the settlement agreements, Trustee resolutions and the foregoing, the surplus lands will be transferred without payment to the Authority.

RECOMMENDATION

“The Executive Director – Hydropower Relicensing recommends that the Trustees: (a) accept the new license issued by the Federal Energy Regulatory Commission for the Niagara Power Project; (b) approve, adopt and ratify the State Environmental Quality Review Act Findings Statement attached hereto as Exhibit ‘13-A’, and (c) approve the transfer of ownership of surplus lands as set forth in settlement agreements and resolutions previously approved by the Trustees.

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

Mr. Chase presented the highlights of staff’s recommendations to the Trustees. On behalf of all the Trustees, Chairman McCullough commended staff for their work on relicensing over the last several years culminating in this huge accomplishment. He said that the new license is a very positive thing for both the Authority and the Niagara Frontier. Mr. Chase thanked Chairman McCullough and said that this had been a real team effort.

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

RESOLVED, That the Trustees approve, adopt and ratify the State Environmental Quality Review Act Findings Statement attached hereto as Exhibit “13-A”; and be it further

RESOLVED, That the Trustees authorize acceptance of the new License for the Niagara Power Project as issued by the Federal Energy Regulatory Commission (“FERC”) on March 15, 2007, subject to the reserved authority to reconsider this action pending the outcome of any and all requests for rehearing filed with FERC and any subsequent judicial review of the FERC’s disposition of such requests; and be it further

RESOLVED, That, pursuant to Title 5-A of Article 9 of the Public Authorities Law, the Authority’s Guidelines for the Disposal of Real Property and the Power Authority Act, the Trustees hereby approve and/or reapprove the purpose and terms of the conveyances of the Niagara Surplus Parcels, attached hereto as Exhibit “13-B,” in accordance with the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That the President and Chief Executive Officer and his designees be, and hereby are, authorized to sign such other documents and take such other action or actions as may be necessary or convenient in furtherance of the actions authorized hereby, including, without limitation of the generality of the foregoing, the filing of a copy of this resolution with FERC; and be it further

Exhibit “13-A”

FINDINGS STATEMENT

WHEREAS, on March 15, 2007, the Federal Energy Regulatory Commission (“FERC”) issued a new 50-year license (the “New License”) for the Niagara Power Project (the “Project”) pursuant to the Federal Power Act; and

WHEREAS, the action taken by FERC on March 15, 2007 was informed by and based on review of a final Environmental Impact Statement (“FEIS”) prepared by FERC pursuant to the National Environmental Policy Act and released on December 29, 2006; and

WHEREAS, the Trustees of the Power Authority of the State of New York are to decide whether or not to accept the New License; and

WHEREAS, acceptance of the New License is an “action” as defined by the New York State Environmental Quality Review Act (“SEQRA”) and is subject to Article 42 of the New York State Executive Law, which is designated “Waterfront Revitalization of Coastal Areas and Inland Waterways”; and

WHEREAS, the above-referenced statutes are implemented by certain regulations that require the Authority to make specific findings, statements and certifications prior to accepting the New License; and

WHEREAS, the Authority has given consideration to the FEIS and has considered the relevant environmental impacts, facts and conclusions disclosed in the FEIS; and

WHEREAS, the Good Neighbor Agreement between the Authority and Niagara University was not reviewed by the FERC within the FEIS and is thus subject to SEQRA; and

WHEREAS, the Authority has weighed and balanced relevant environmental impacts with social, economic and other conditions with regard to the New License and the Good Neighbor Agreement; and

WHEREAS, the rationale for accepting the New License and implementing the Good Neighbor Agreement is that it is a necessary and appropriate means for the Authority to fulfill its mission, which is to provide clean, economical and reliable energy consistent with its commitment to safety, while promoting energy efficiency and innovation for the benefit of its customers and all New Yorkers;

NOW, THEREFORE, the Authority hereby:

1. FINDS, pursuant to 6 NYCRR § 461.13(b)(2), that: (a) accepting the New License and implementing the Good Neighbor Agreement is consistent with social, economic and other essential considerations among the reasonable alternatives thereto, minimizes or avoids adverse environmental effects to the maximum extent practicable, including the effects disclosed in the relevant environmental impact statement and (b) adverse environmental impacts revealed in the environmental impact statement process will be minimized or avoided, consistent with social, economic and other essential considerations, by incorporating as conditions to the action those mitigative measures that were identified as practicable.

2. CERTIFIES, pursuant to 6 NYCRR § 617.11(d), that: (a) the requirements of 6 NYCRR Part 617 have been met; (b) accepting the New License and implementing the Good Neighbor Agreement avoids or minimizes, consistent with social, economic and other essential considerations and from among the reasonable alternatives available, adverse environmental impacts to the maximum extent practicable and (c) adverse environmental impacts will be avoided or minimized to the maximum extent practicable by incorporating as conditions to the decision those mitigative measures that were identified as practicable.

3. STATES, pursuant to 6 NYCRR § 461.13(b)(3), that, in accepting the New License and implementing the Good Neighbor Agreement, it finds support therefor in each and every fact and conclusion relied on in the FEIS and bases its action on all social, economic and other factors and standards addressed therein.

4. FINDS, pursuant to 6 NYCRR § 461.13(b)(4) and 6 NYCRR § 617.11(e), that accepting the New License and implementing the Good Neighbor Agreement is consistent with the applicable policies set forth in 19 NYCRR § 600.5 and, to the extent the action extends into an area included within a local government waterfront revitalization program approved by the New York State Secretary of State, consistent to the maximum extent practicable with any and every such program.

Submitted:

____________________________

William Slade

Vice President – Environment, Health and Safety

[1] The Host Communities consist of the following seven municipal entities: City of Niagara Falls, Town of Niagara, City of Niagara Falls School District, Niagara Wheatfield School District, Lewiston-Porter School District, Town of Lewiston and County of Niagara.

[2] According to the terms of the HCRSA, if certain market conditions are met, the Town of Lewiston may receive an additional allocation of up to 3MW.

[3] On March 15, 2007, FERC approved a new 50-year license for the Niagara Power Project, effective September 1, 2007.

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