MINUTES OF THE REGULAR MEETING

OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

February 24, 2009

 

 

Table of Contents

 

                Subject                                                                                                                                                

 

1.             Consent Agenda:                                                                                                                                                                 

a.        Minutes of the Regular Meeting held on January 27, 2009 and the Special Meeting held on February 3, 2009

 

b.        Power for Jobs Program – Extended Benefits - Exhibit “1b-A”

c.        Proposed Preservation Power Contract with Newton Falls Fine Paper Company – Notice of Public Hearing - Exhibit “1c-A”

 

d.        Request to Approve Extensions to the Terms of Service for Two Existing Expansion Power Customers - Exhibit “1d-A”

 

e.        Flywheel Energy Storage System Project for MTA-Long Island Rail Road – Contract Award

 

f.         Request for Increased Funding – Municipal and Rural Cooperative Electric Utilities Electric-Drive Vehicle Program

 

g.       Gas Transportation and Balancing Service Agreements with National Grid for the Small Clean Power Plants

 

h.       Banking Resolution Amendment to Reflect the Appointment of Chief Operating Officer and Change in Title of Vice President – Finance

 

i.         New York Power Authority Other Post-Employment Benefits Trust Fund: Selection of Small Cap Investment Manager

 

j.         Procurement (Services) Contract – Legal Services – Rivkin Radler LLP  

 

k.       Lease of Office Space – Clarence D. Rappleyea Building – Berman Bavero Frucco & Gouz, P.C. - Exhibit “1k-A” - “1k-B” 

                                                                                                       

l.         Partial Termination of Lease of Office Space – Clarence D. Rappleyea Building – J. P. Morgan Chase - Exhibit “1l-A”                   

                                Resolution

                                                                                                             

 

Discussion Agenda:

2.             Q&A on Reports from:

a.        President and Chief Executive Officer 

b.        Chief Operating Officer                                                                                           

c.        Chief Financial Officer - Exhibit “2c-A”

3.            Informational Item: NYPA Transmission                                                                                 

4.             Motion to Conduct an Executive Session                                                                                

5.             Motion to Resume Meeting in Open Session                                                                          

6.             Resolution – Election of Chairman                                                                                             

7.             Resolution – Election of Vice Chairman                                                                                    

8.             Resolution – Election of Corporate Secretary                                                                          

9.             Amendments to the Authority’s By-laws -Exhibit “9-A”

            Resolution

10.          Defense and Indemnification

            Resolution

 

11.      Other Business

12.        Next Meeting

Closing                                                 

           

 


 

Minutes of the Regular Meeting of the Power Authority of the State of New York held via videoconference at the following participating locations at 11:59 a.m.:

1)                   New York Power Authority, 123 Main Street, White Plains, NY

2)                   King Reporting Service, 14 Sun Tree Place, Suite 101, Melbourne, FL

                The Members of the Board were present at the following locations:

 

                                Michael J. Townsend, Acting Chairman, (White Plains, NY)

                                D. Patrick Curley, Trustee, (White Plains, NY)

                                Elise M. Cusack, Trustee, (White Plains, NY)

                                Jonathan F. Foster, Trustee, (White Plains, NY)

                                Eugene L. Nicandri, Trustee, (Melbourne, FL)

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Richard M. Kessel                               President and Chief Executive Officer

Gil C. Quiniones                                   Chief Operating Officer

Terryl Brown Clemons                        Executive Vice President and General Counsel

Joseph Del Sindaco                             Executive Vice President and Chief Financial Officer

Edward A. Welz                                   Executive Vice President and Chief Engineer – Power Supply

Steven J. DeCarlo                                 Senior Vice President – Transmission

Paul F. Finnegan                                  Senior Vice President – Public and Governmental Affairs

William J. Nadeau                                Senior Vice President – ERM and Strategic Planning

Donald A. Russak                                Senior Vice President – Corporate Planning and Finance

Joan Tursi                                             Senior Vice President – Enterprise Shared Services

James H. Yates                                     Senior Vice President – Marketing and Economic Development

Arnold M. Bellis                                   Vice President and Controller

Thomas A. Davis                                 Vice President – Energy Risk Assessment and Control

Thomas P. DeJesu                               Vice President – Government Relations

John M. Kahabka                                 Vice President – Environment, Health and Safety

Lesly Y. Pardo                                      Vice President – Internal Audit

Dennis T. Eccleston                            Chief Information Officer

Arthur T. Cambouris                           Deputy General Counsel

Joseph J. Carline                                  Assistant General Counsel – Power and Transmission

Anne B. Cahill                                      Corporate Secretary

Angela D. Graves                                 Deputy Corporate Secretary

Albert Swansen                                    First Deputy Inspector General

Joseph Leary                                        Executive Director – Corporate Community Affairs

Thomas J. Concadoro                         Director – Accounting

Mark D. O’Connor                               Director – Real Estate

James F. Pasquale                                Director – Marketing Analysis and Administration

Michael A. Saltzman                            Director – Media Relations

Victoria Simon                                      Director – Special Projects and Business Integration

Jennifer Becker                                     Chief Sustainability Manager – Special Projects and Business

Thomas J. Shust                                   General Manager – Clark Energy Center

John M. Markowitz                              Electric Transportation Engineer II – Research and Technology Development

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

Mary Jean Frank                                  Associate Corporate Secretary
Lorna M. Johnson                               Assistant Corporate Secretary

Charles Haddon                                   Managing Director – Navigant Consulting

Bert Cunningham

 

 


 

Acting Chairman Townsend presided over the meeting.  Corporate Secretary Cahill kept the Minutes.


 

1.                     Consent Agenda

 

Trustee Jonathan Foster said items 1b (Power for Jobs Program – Extended Benefits), 1c (Proposed Preservation Power Contract with Newton Falls Fine Paper Company – Notice of Public Hearing) and 1d (Request to Approve Extensions to the Terms of Service for Two Existing Expansion Power Customers) did not include consistent metrics on how the jobs-per-kilowatt figures were calculated.  According to Trustee Foster, the company in item 1d has committed to having 1,600 jobs but only has 1,000 jobs now; the item does not show how the company will increase its job count.  President Richard Kessel said that Trustee Foster’s point was well taken and asked Mr. Gil Quiniones to work with Trustee Foster on this issue.  Mr. Quiniones said that a cost-benefit analysis would be included in future Trustee items of this sort.  President Kessel added that the Trustees would soon receive a draft plan for the Authority’s economic development power programs that addresses such concerns.

 

                President Kessel said that he had not been involved in the Long Island Power Authority issue that was the subject of item 1j (Procurement (Services) Contract – Legal Services – Rivkin Radler LLP).

 

                Chairman Michael Townsend said that the Economic Development Power Allocation Board had recommended that the Authority’s Trustees approve item 1b (Power for Jobs Program – Extended Benefits) at their meeting of February 23, 2009.


 

1a.           Approval of the Minutes

               The Minutes of the Regular Meeting held on January 27, 2009 and the Special Meeting held on February 3, 2009 were unanimously adopted.


 

1b.           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 75 Power for Jobs (‘PFJ’) customers as listed in Exhibit ‘1b-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 received three-year contracts for PFJ electricity.

 

“The PFJ program originally made 400 megawatts (‘MW’) of power available and was to be phased in over three years.  As a result of the initial success of the program, the Legislature amended the PFJ statute to accelerate the distribution of the power and increase the size of the program to 450 MW.  In May 2000, legislation was enacted that authorized additional power to be allocated under the program.  Legislation further amended the program in July 2002.

 

                “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.  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.  Chapter 645 of the Laws of 2006 included provisions extending program benefits until June 30, 2007.  Chapter 89 of the Laws of 2007 included provisions extending program benefits until June 30, 2008.  Chapter 59 of the Laws of 2008 included provisions extending the program benefits until June 30, 2009.

 

“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. 

 

DISCUSSION

 

“At its meeting on February 23, 2009, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 75 businesses listed in Exhibit ‘1b-A.’  Collectively, these organizations have agreed to retain more than 90,000 jobs in New York State in exchange for the rebates.  The rebate program will be in effect until June 30, 2009, the program’s sunset.

 

                  “The Trustees are requested to approve the payment and funding of rebates for the companies listed in Exhibit ‘1b-A’ in a total amount currently not expected to exceed $8 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 for other rebate months.

 

FISCAL INFORMATION

 

“Funding of rebates for the companies listed on Exhibit ‘1b-A’ is not expected to exceed $8 million.  Payments will be made from the Operating Fund.  To date, the Trustees have approved $160.4 million in rebates.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Financial Officer and the Director – Marketing Analysis and Administration recommend that the Trustees approve the payment of electricity savings reimbursements to the Power for Jobs customers listed in Exhibit ‘1b-A.’

 

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

 

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

 

WHEREAS, the Economic Development Power Allocation Board (“EDPAB”) has recommended that the Authority approve electricity savings reimbursements to the Power for Jobs (“PFJ”) customers listed in Exhibit “1b-A”;

 

NOW THEREFORE BE IT RESOLVED, That to implement such EDPAB recommendations, the Authority hereby approves the payment of electricity savings reimbursements to the companies listed in Exhibit “1b-A,” and that the Authority finds that such payments for electricity savings reimbursements are in all respects reasonable, consistent with the requirements of the PFJ program and in the public interest; and be it further

 

RESOLVED, That based on staff’s recommendation, it is hereby authorized that payments be made for electricity savings reimbursements as described in the foregoing report of the President and Chief Executive Officer in the aggregate amount of up to $8 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 his 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 Acting Chairman, the President and Chief Executive Officer, the Chief Operating 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.


 


 


 

1c.           Proposed Preservation Power Contract with Newton Falls Fine Paper Company – Notice of Public Hearing                                      

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to authorize a public hearing, pursuant to Section 1009 of the Public Authorities Law, on a new contract (‘Contract’) for the sale of 2,000 kW of Preservation Power to Newton Falls Fine Paper Company (‘Newton Falls’).

 

BACKGROUND

 

“In 2005, the New York State Legislature enacted, and the Governor signed, Chapter 313 of the Laws of 2005, which established the Preservation Power program set forth in Section 1005(13) of Public Authorities Law.  Preservation Power allows businesses in northern New York State to be served with low-cost hydroelectric power from the Authority’s St. Lawrence/FDR Power Project.  This program governs the allocation of any power relinquished from the block of 490 MW of St. Lawrence/FDR Project firm and interruptible power currently sold to Alcoa and General Motors – Powertrain.  The law authorizes allocation of power to businesses in Franklin, Jefferson and St. Lawrence counties and applies the same allocation criteria as pertain to allocations of Replacement and Expansion Power.

 

“Each application for an allocation of Preservation Power must be evaluated under criteria that include, but need not be limited to, those set forth in Public Authorities Law Section 1005(13)(a), which sets forth general eligibility requirements.

 

“Among the factors to be considered when evaluating a request for an allocation of hydropower are the number of jobs created as a result of the allocation; the business’ long-term commitment to the region as evidenced by the current and/or planned capital investment in the business’ facilities in the region; the ratio of the number of jobs to be created to the amount of power requested; the types of jobs created, as measured by wage and benefit levels, security and stability of employment and the type and cost of buildings, equipment and facilities to be constructed, enlarged or installed.

 

“On November 24, 2008, the Authority, National Grid, Empire State Development Corporation and Franklin, Jefferson and St. Lawrence counties signed a Memorandum of Understanding (‘MOU’) that outlines the process to coordinate marketing and allocating Preservation Power.  The entities noted above have formed the Northern New York Advisory Group (‘Advisory Group’) with the intent of better using the value of this resource to improve the economy of Northern New York and the State of New York.  Nothing in the MOU changes the legal requirements applicable to the allocation of Preservation Power and the Authority Trustees are the sole decision-makers regarding allocations of Preservation Power, subject only to the Governor’s contract approval role under Section 1009 of the Public Authorities Law. 

 

DISCUSSION

 

                “Newton Falls Paper Mill was originally opened in 1894 by the Newton family.  Appleton Paper bought the mill in 1995 to provide entry into the coated paper market.  In 1999, the company moved the manufacturing of this product to its Wisconsin facility, which eliminated 150 jobs in New York State.  After being closed for eight years, the Newton Falls Paper Mill was purchased by Newton Falls Fine Paper Company, LLC.  By 2007, the mill had resumed full operations and hired more than 100 employees.  In less than one year, plant output increased 54%.  With its reopening, the mill is helping to reinvigorate the North Country economy.  An allocation of Preservation Power will be a major factor in any decision regarding future capital investment and the restart of additional machines. 

 

 “Authority staff has completed their review of Newton Falls’ application for Preservation Power.  Staff recommends a 2,000 kW allocation of power to Newton Falls.  This allocation is supported by the Advisory Group.  The proposed Contract is attached as Exhibit ‘1c-A.’

               

                “The allocation of Preservation Power is in consideration of Newton Falls’ agreement to invest $4.5 million to expand its plant.  The company plans to expand the mill’s capacity by 40% to position the company for future growth, secure new contracts and expand into new markets. In addition to plant renovation necessary for increased capacity, the company will re-commission the existing paper machine in the mill, which has been idle since 1999.  Re-commissioning the production line is a complex project that will include reconstruction of the paper machines and part testing and replacement.  In addition, the company agrees to retain 118 jobs and add 54 new positions as a result of this expansion.  The key elements of the Contract are as follows:

 

                Power Allocation Quantity

 

                “The recommended allocation is 2,000 kW of Preservation Power.  The firm service will be equivalent to that provided to all other Authority firm hydropower customers and subject to pro-rata curtailment when there is insufficient generation at the Niagara and St. Lawrence/FDR facilities to meet the energy requirement of the firm hydropower customers.

 

                “The total amount of hydropower will be subject to an enforceable employment commitment of 118 existing jobs and 54 new jobs over the term of the Contract, which includes an annual job report to be submitted by Newton Falls to the Authority.  A job compliance threshold of 90% will apply.  Should Newton Falls’ actual jobs reported fall below the compliance percentage, the Authority may reduce the amount of hydropower allocated to the company on a pro-rata percentage basis.

 

Rates 

 

                “Preservation Power rates will apply.

 

                Term

 

                “The Contract will have a five-year term from the initial start of power takedown.

 

RECOMMENDATION

 

“The Director – Marketing Analysis and Administration recommends that the Trustees approve a public hearing on the Preservation Power Contract with Newton Falls Fine Paper Company to be held at the Frank S. McCullough, Jr. Hawkins Point Visitors Center at the St. Lawrence/FDR Project in Massena, New York on Wednesday, April 8, 2009 at 11:00 a.m.  It is further recommended that, pursuant to Section 1009 of the Public Authorities Law, the Corporate Secretary be authorized to transmit copies of the proposed contract to the Governor and legislative leaders, and to arrange for the publication of a notice of public hearing in six newspapers throughout the State in accordance with the Public Authorities Law.

 

“The Chief Operating Officer, the Executive Vice President and General Counsel, the Senior Vice President – 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 Trustees hereby authorize a public hearing on the terms of the proposed contract for the sale of Preservation Power to Newton Falls Fine Paper Company to be held at the Frank S. McCullough, Jr. Hawkins Point Visitors’ Center at the St. Lawrence/FDR Project in Massena, New York on Wednesday, April 8, 2009 at 11:00 a.m.; and be it further

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

 

RESOLVED, That the Corporate Secretary  be, and hereby is, authorized to arrange for the publication of a notice of public hearing in six newspapers throughout the State, all done in accordance with the provisions of Section 1009 of the Public Authorities Law; and be it further

 

RESOLVED, That the Chief Operating Officer or his designee be, and hereby is, authorized, subject to the approval of the form thereof by the Executive Vice President and General Counsel, to enter into such agreements, and to do such other things, as may be necessary or desirable to implement the contract with Newton Falls Fine Paper Company as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Acting Chairman, the President and Chief Executive Officer, the Chief Operating 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.

 

 

 

1d.           Request to Approve Extensions to the Terms of Service for Two Existing Expansion Power Customers

 

The President and Chief Executive Officer submitted the following report:

 

Summary

 

“The Trustees are requested to approve extensions to the terms of service for two allocations of Expansion Power (‘EP’), totaling 14,300 kW, to the two companies listed in Exhibit ‘1d-A,’ both of which are existing customers. 

 

BACKGROUND

 

“Under Section 1005(13) of the Power Authority Act, the Authority may contract to allocate or reallocate directly, or by sale for resale, 250 MW of firm hydroelectric power as EP to businesses within the State that are located within 30 miles of the Niagara Power Project (‘Project’), provided that the amount of power allocated to businesses in Chautauqua County on January 1, 1987 (19,732 kW) continues to be allocated in such county.

 

“Each application for an EP allocation must be evaluated under criteria that include, but need not be limited to, those set forth in Public Authorities Law Section 1005(13)(a), which sets forth eligibility criteria, and (b), which sets forth revitalization criteria.

 

DISCUSSION

 

General Motors, Tonawanda, Erie County

 

“General Motors’ (‘GM’) Powertrain Tonawanda Engine Plant was initially built in 1937.  The original building was 1 million square feet.  The facility has since been expanded on several occasions to bring the site to its current 3.45 million square feet.  The plant produces four types of engines used in many products, both within and outside GM.  Engine production for 2008 was just under 750,000, with sales of $1.9 billion.

 

“GM needs its EP allocation to remain competitive and keep its costs low and stable.  Without EP, GM’s costs would be higher and much less certain, as prices in the New York State electricity market are highly volatile, while EP rates are relatively stable.  Uncertain rates not only add to production cost but also greatly disadvantage the plant when trying to attract future product programs.  In addition, the plant sources material and resources from more than 90 suppliers throughout New York State.

 

“EP has been an important tool in bringing investment and employment to the plant over the last 15 years and is a critical component of its continued viability and future success.  In 2004, more than $300 million was invested to bring the high-valve engine program to the site.  In addition, more than $75 million will be spent modernizing the L850 engine line in 2009 and 2010.  The plant has also made significant productivity improvements over the last five years, which have made it much more competitive in the global environment.

 

                “Since GM’s contract for 13,800 kW expired on January 31, 2009, the company is receiving EP on a month-to-month basis.  The allocation has an associated job commitment of 1,600; less than 1,000 employees work at the facility.  Staff will not ask the Trustees to reduce the job commitment until a review of all of the Authority’s auto industry customers is completed. 

 

“Staff recommends that the Trustees approve an extension to the term of service for the 13,800 kW EP allocation for four years, until January 31, 2013, with an employment commitment of 1,600 jobs.

               


 

Nestle Purina Pet Care, Dunkirk, Chautauqua County

 

“Nestle, which began operations at this plant in 1972, is the only major pet food manufacturer in New York State.  The company has invested $106 million in modern machinery during the past six years, including a large 200,000-square-foot expansion of its warehouse that was completed in 2007.  Nestle has also made investments in its high-voltage electric substation, two 300-horsepower air compressors and a new dog treat production line.  Together, these investments have set the stage for a promising future at this location.  The company would not have made these investments without the active involvement, commitment and support of its local utilities and economic development agencies.

 

“An extension of Nestle’s EP allocation is essential to its business as the company seeks to preserve its cost structure.  With the renewal of the hydropower allocation, the possibility of losing volume and jobs to out-of-state competitors and other Nestle Pet Care facilities is certainly diminished. 

 

“The EP contract extension is considered a necessity from Nestle’s perspective to maintain a favorable manufacturing position for its Western New York facility.  With low-cost EP, the company can stabilize electricity costs and help secure the facility’s future.  The contract for Nestle’s 500 kW EP allocation, with an associated commitment for 284 jobs, expires on April 30, 2009.  The company has since added jobs and is willing to commit to an increased number of jobs in return for an extension of its contract.

 

“Staff recommends that the Trustees approve an extension to the term of service for the 500 kW EP allocation for four years, until April 30, 2013, with an employment commitment of 328 jobs.

 

“The extensions requested above will help maintain costs and enable these two companies to compete more effectively.  In addition, they will further secure employment levels in Western New York.

 

                “The requests were reviewed in accordance with the applicable criteria set forth in Part 460 of the Authority’s Rules and Regulations governing the Allocation of Industrial Power (21 NYCRR Part 460 (1988)).

 

RECOMMENDATION

 

“The Director – Marketing Analysis and Administration recommends that the Trustees approve extensions to the terms of service for two allocations of Expansion Power totaling 14,300 kW to the two companies listed in Exhibit ‘1d-A.’

 

“The Chief Operating Officer, the Executive Vice President and General Counsel, the Senior Vice President – 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 Trustees find that staff’s review supports the extension of contracts for 14,300 kW of Expansion Power, as detailed in Exhibit “1d-A,” which is hereby approved on the terms set forth in the foregoing report of the President and  Chief Operating Officer; and be it further 

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development or his 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 Acting Chairman, the President and Chief Executive Officer, the Chief Operating 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.

 

 


 


 

                1e.           Flywheel Energy Storage System Project for MTA-Long Island Rail Road – Contract Award

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award of a contract in the amount of up to $4.6 million to Pentadyne Power Corporation (‘Pentadyne’) for the design, engineering, equipment procurement, installation and financing of a 2.5 MW Flywheel Energy Storage System for the Metropolitan Transit Authority (‘MTA’) - Long Island Rail Road’s (‘LIRR’) West Hempstead line.  The installation will be owned and operated by LIRR.  The total project cost will be $5.2 million and financing will come from the Statewide Energy Services Program (‘ESP’) previously approved by the Trustees.

 

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.

 

                “In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services or equipment contracts in excess of $3 million requires the Trustees’ approval.

 

“LIRR is experiencing sag or reduction in the DC track voltage on the West Hempstead line, which forces commuter trains to be operated periodically in a low-speed mode, resulting in problematic scheduling delays for LIRR and its passengers.  One possible solution to this voltage problem would be to install a new substation at an estimated cost of $12 million.  A lower-cost option would be to install an energy storage system such as a high-speed flywheel.  Because of their high power ratings, rapid response time and ability to withstand millions of operating cycles, flywheels are ideal for electric transit applications.

 

“In 2002, the Authority completed the testing of a pilot 1 MW Flywheel Energy Storage System on the MTA-New York City Transit Authority’s Far Rockaway line.  This project, the first of its kind in the United States, successfully demonstrated the use of flywheel energy storage on a transit system.  Over the course of 12 months, the system was tested under a variety of conditions and performed to the Transit Authority’s expectations. 

 

“Energy storage systems can be configured to offer a railroad several energy management benefits in addition to DC track voltage support.  By placing energy storage systems at key locations, the resistive losses of the tracks can be minimized, thus improving energy efficiency.  Many railroads pay high demand charges due to the peak-intensive nature of their electrical load.  Energy storage systems can be used to manage these costs through peak shaving strategies.  In the event of a power failure, an energy storage system can be used in emergency recovery efforts by powering trains in a limp mode just long enough to discharge passengers at the nearest station.  However, the most promising saving enabled by flywheel energy storage is the recapture of regenerative braking energy. 

 

  “LIRR is currently in the process of replacing its existing trains with new trains capable of recovering (regenerating) energy during braking.  In transit systems without sufficient energy storage capability, the braking energy is usually wasted as heat.  This project, in addition to providing DC track voltage support, will enable LIRR to gain experience in storing regenerated energy with a trackside energy storage system as the new trains enter into service.

 

“LIRR’s 2.5 MW Flywheel Energy Storage System will operate in parallel with LIRR’s electric power supply and will be installed in a prefabricated enclosure that could be moved to an alternate location, if required.

 


 

DISCUSSION

 

“In April 2008, the Authority solicited bids for procurement and installation of a 2.5 MW flywheel energy storage system for LIRR.  Two bids were received on July 11, 2008, one from Pentadyne and one from Eaton Corporation.  Authority staff reviewed the two bids in cooperation with LIRR and the New York State Energy Research and Development Authority (‘NYSERDA’), one of the project co-funders.  Pentadyne was the lowest bidder.  Pentadyne has extensive experience in designing and installing flywheel energy storage systems. 

 

“Subject to the Trustees’ approval, the Authority will enter into a contract with Pentadyne to design, permit and install the flywheel energy storage system, as well as to provide maintenance services for the system for a period of 36 months through an extended warranty.  The extended warranty provision will allow LIRR to become familiar with flywheel energy storage system operation and maintenance practices and ensure a successful and safe demonstration program.

 

“The flywheel energy storage project is subject to a site installation agreement between the Authority and LIRR.  This site agreement will be fully authorized prior to awarding a contract to Pentadyne.  The Authority will pay for and finance the capital costs associated with this project.  Upon installation, LIRR will assume ownership of the flywheel energy storage system.

 

“The flywheel energy storage system, once put into operation, will represent one of the largest flywheel energy storage demonstration projects in the world for transit operations.  The Authority and LIRR have applied for and received an award of $1 million in NYSERDA co-funding for this initiative that will be used to reduce project capital costs.  In addition, the Authority is providing a $200,000 energy services grant.

 

“The Authority will be responsible for overall project implementation and oversight.  Upon completion of the installation and commissioning, LIRR will take over ownership of the equipment and be responsible for ongoing operation and maintenance of the Flywheel Energy Storage System.

 

FISCAL INFORMATION

 

                “Financing for the overall Project will be provided by previously approved funds in the ESP.  This funding will be from proceeds of the Authority’s Commercial Paper Notes and/or its Operating Fund.  A $1 million grant will be provided by NYSERDA, along with a $200,000 energy services grant from the Authority and a $60,000 grant from the Petroleum Overcharge Restitution (‘POCR’) Fund.  POCR funds have been/are appropriated to the Authority by the State Legislature for implementation of energy services projects.  The costs of the remainder of the project (i.e., excluding the $1 million NYSERDA grant, the $200,000 Authority grant and the $60,000 POCR grant) will be recovered from LIRR consistent with the terms of the ESP agreement.

RECOMMENDATION

 

“The Senior Vice President – Energy Services and Technology and the Chief Technology Development Officer recommend that the Trustees approve a contract award in the amount of $4.6 million to Pentadyne Power Corporation for the flywheel project.

“The Chief Operating Officer, the Executive Vice President and Chief Financial Officer, the Acting Executive Vice President – Corporate Services and Administration, the Senior Vice President – Marketing and Economic Development, the Acting Vice President – Procurement 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 and the Authority’s Expenditure Authorization Procedures, the Trustees hereby authorize the award of a contract in an amount up to $4.6 million to Pentadyne Power Corporation (“Pentadyne”) for design, engineering, equipment procurement, installation and financing of a 2.5 MW Flywheel Energy Storage System for the Metropolitan Transportation Authority - Long Island Rail Road’s (“LIRR”) West Hempstead line; and be it further

 

RESOLVED, That Commercial Paper and/or Operating Fund monies will be used to finance contract costs in the amounts and for the purposes listed below:

 

Commercial Paper,                                             Expenditure Authorization

Operating Funds/POCR                                                    (not to exceed)

 

Design, engineering, equipment

procurement, installation and

Authority overhead and financing                                    $4,600,000

 

AND BE IT FURTHER RESOLVED, That the Authority’s Commercial Paper Notes, Series 1, Series 2 and Series 3, may be issued and Operating Fund monies may be used to finance the Project costs; and be it further

 

RESOLVED, That the Senior Vice President – Energy Services and Technology is authorized to determine which projects in the Statewide Energy Services Program will be deemed to be energy services projects within the meaning of Section (7) of Part P of Chapter 84 of the Laws of 2002 (the “Section (7) Petroleum Overcharge Restitution Legislation”) to be funded in part with Petroleum Overcharge Restitution Funds allocated pursuant to the Section (7) Petroleum Overcharge Restitution legislation; and be it further

 

RESOLVED, That Petroleum Overcharge Restitution funds allocated to the Authority by Section (7) Petroleum Overcharge Restitution Legislation may be used to the extent authorized by such legislation, in such amounts as may be deemed necessary or desirable by the Senior Vice President – Energy Services and Technology to finance Statewide Energy Services Program projects; and be it further

 

RESOLVED, That the Trustees authorize the President and Chief Executive Officer, the Senior Vice President – Energy Services and Technology or such other officer designated by the President and Chief Executive Officer to execute agreements and other documents between the Authority and LIRR, and to execute agreements and other documents as required, having such terms and conditions as such executing officer deems advisable, subject to the approval of the form of such agreement by the Executive Vice President and General Counsel, as necessary or advisable for the development and implementation of the project; and be it further

 

RESOLVED, That the Acting Chairman, the President and Chief Executive Officer, the Chief Operating 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.


 

1f.           Request for Increased Funding – Municipal and Rural Cooperative Electric Utilities Electric-Drive Vehicle Program

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize increased funding in the amount of $1.8 million for the Municipal and Rural Cooperative Electric Utilities Electric-Drive Vehicle Program (‘Muni-Coop E-D Program’).  This program is for all Municipal (‘Muni’) and Rural Electric Cooperative (‘Coop’) utilities served by the Authority.  The program has enabled the Munis and Coops to purchase various electric and hybrid-electric vehicles for use in their municipal fleets and has furthered the Governor’s efforts to encourage the use of electric-drive vehicles in order to reduce air and noise pollution in New York State and to lessen reliance on imported oil.  The amount requested is in addition to the $1.2 million previously approved by the Trustees at their May 20, 2003 meeting.

 

BACKGROUND

 

                “Since the 1980s, through its Energy Services Programs (‘ESP’), the Authority has offered various types of energy services and clean energy technology programs to participants throughout the State to help them lower their energy usage and/or achieve cleaner and more energy-efficient use of energy and natural resources. 

 

“At their meeting of May 20, 2003, the Trustees authorized $1.2 million to finance the Muni-Coop E-D Program, a new partnership between the Authority and the Munis/Coops.  This program facilitated the purchase of electric and hybrid-electric vehicles for the Muni/Coop systems’ municipal fleets.  As of December 2008, 31 such vehicles had been placed with 15 municipal systems, resulting in a savings of more than 13,000 gallons of imported fossil fuel and a reduction in greenhouse gases of more than 92 tons.               

 

                “At their meeting of May 23, 2006, the Trustees authorized the inclusion of the Authority’s 51 Muni and Coop customers in the Statewide ESP program for the purpose of working with each Muni and Coop to launch and administer its own energy efficiency programs.

 

“At their meeting of September 23, 2008, the Trustees approved up to $5 million in funding to provide home weatherization kits for low-income residential customers of the Munis/Coops.  The Authority purchased these kits and provided free distribution to eligible customers to help mitigate home heating costs for the winter of 2008-09.  It is anticipated that more than 18,000 kits will be distributed by the end of February 2009.

 

DISCUSSION

 

“The current Muni-Coop E-D Program is available to all Munis and Coops.  The Munis and Coops apply to the Authority for funding to purchase on-road passenger vehicles such as the Honda Civic and the Toyota Prius hybrid-electrics; heavy-duty work vehicles such as the International hybrid-electric utility bucket truck or off-road work vehicles such as the Taylor-Dunn Electruck and the John Deere E-Gator.  The vehicles are used by the Munis/Coops personnel and/or their affiliated municipal agencies to carry out their functions.  The funds made available to the Munis and Coops for purchasing these vehicles are recovered over three years through a monthly bill to the participating utility.  

 

“In addition, the Trustees have authorized that full-requirements Muni/Coop customers, which are regulated by the Authority, be permitted to recover from their retail customers all costs associated with the electric-drive vehicle finance program, as well as any other Authority energy efficiency programs and initiatives.  Recovery of these costs will be through the Purchased Power Adjustment Charge (‘PPAC’).  The partial-requirements systems, which are regulated by the New York State Public Service Commission (‘PSC’), will request similar permission from the PSC to recover costs associated with the vehicle purchase and other energy efficiency programs from their customers.

 

“If approved by the Trustees, the additional funding will enable the Authority to continue its successful partnership with the Munis and Coops to expand the integration of electric-drive vehicles into their municipal fleets.

 

FISCAL INFORMATION

 

“The total cost to the Authority for the program is not to exceed $3 million.  This cost, including any financing costs, will be recovered directly from the participants in the program.  Except for the Petroleum Overcharge Restitution (‘POCR’) funds, discussed below, the funds will be recovered over a period of up to three years through an electric bill surcharge.

 

“The program will be funded from Commercial Paper Note proceeds and/or Operating Fund monies.  A small portion of the funding will be supplemented by POCR funds allocated to the Authority by the New York State Legislature, in such amounts as the Senior Vice President – Energy Services and Technology deems advisable.    

 

RECOMMENDATION

 

“The Senior Vice President – Energy Services and Technology and the Senior Vice President – Marketing and Economic Development recommend that the Trustees authorize an additional $1.8 million in funding for implementation of the Municipal and Rural Cooperative Electric Utilities Electric-Drive Vehicle Program and continue the use of the Purchased Power Adjustment Charge to allow the full-requirements Municipal and Rural Cooperative Electric Utilities regulated by the Authority to recover their costs for the program.

 

“The Chief Operating Officer, 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 Trustees, having earlier authorized $1.2 million, hereby authorize $1.8 million in additional funding to continue the Municipal and Rural Cooperative Electric Utilities Electric-Drive Vehicle Program, as described in the foregoing report of the President and Chief Executive Officer; and be it further

 

                RESOLVED, That the Municipal and Rural Cooperative Electric Utilities Electric-Drive Vehicle Program may be funded with the proceeds of Series 1, 2 or 3 Commercial Paper Notes, Operating Fund monies and/or Petroleum Overcharge Restitution (“POCR”) funds allocated to the Authority by the New York State Legislature, with such POCR funding being in amounts deemed advisable by the Senior Vice President – Energy Services and Technology; and be it further

 

                RESOLVED, That the Trustees hereby authorize the full-requirements Municipal and Rural Electric Cooperative systems served by the Authority to continue to recover costs for this  program through the Purchased Power Adjustment Charge; and be it further

 

                RESOLVED, That the Acting Chairman, the President and Chief Executive Officer, the Chief Operating 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.


 

                1g.          Gas Transportation and Balancing Service Agreements with National Grid for the Small Clean Power Plants  

 

The Chief Operating Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to authorize execution of two Gas Transportation and Balancing Service Agreements (‘Agreements’) between the Authority and The Brooklyn Union Gas Company d/b/a National Grid NY (‘National Grid’) (formerly ‘KeySpan Energy Delivery New York’) and KeySpan Gas East Corporation d/b/a National Grid (‘National Grid’) (formerly ‘KeySpan Energy Delivery Long Island’).  Such Agreements would provide for the transportation and balancing of Authority-owned natural gas to the five Small Clean Power Plants (‘SCPPs’) located in National Grid’s service territories.     

 

BACKGROUND

 

                “On March 1, 2004, the Authority entered into agreements with KeySpan Energy Delivery New York (‘KeySpan-NY’) and KeySpan Energy Delivery Long Island (‘KeySpan-LI’) providing for local gas transportation and balancing services to the four SCPPs located in the KeySpan-NY service territory and the one SCPP located in the KeySpan-LI service territory.  The expiration of these agreements on February 28, 2009 requires that new Agreements be secured with National Grid, the only source of these services, which are required on an ongoing basis to support the Authority’s generating assets.  Prior to March 1, 2004, the Authority satisfied its transportation and balancing service requirements for the SCPPs under Agreements with KeySpan-NY and KeySpan-LI dated June 26, 2001.  The SCPPs went into commercial operation in July and August of 2001.

 

DISCUSSION

 

                “The proposed Agreements are essentially a continuation of the existing gas transportation and balancing services and are based on the same cost components currently in place, which were approved by the Public Service Commission (‘PSC’).  In addition to local gas transportation, National Grid would also provide the Authority with balancing services that accommodate differences in the amount of daily gas scheduled versus the amount of gas consumed (‘imbalances’).  Daily imbalances would be reconciled (or ‘cashed out’) through the sale or purchase of imbalance gas by the Authority under pricing provisions corresponding to specific imbalance threshold levels set forth in the proposed Agreements.     

 

                “Consistent with PSC-approved tariff provisions for electric generators, National Grid would continue to retain the right, in its sole discretion, to interrupt or curtail transportation service to the Authority, in whole or in part, for up to 720 hours each year.  Based on historical experience, the likelihood of interruptions or curtailments is considered very small, particularly during the summer period when transportation capacity typically exceeds demand.  In the event such curtailments or interruptions do occur, however, the Authority would have a maximum of two hours within which to reduce or discontinue gas usage.

 

                “One of the benefits contained in the proposed Agreements is a provision for aggregating the Authority’s daily scheduled gas supplies for all generating units within National Grid’s New York service territory.  The ability to aggregate supplies and use gas interchangeably among units provides the Authority with improved operating flexibility, helping to mitigate against costly imbalance penalties.  Imbalance penalties occur when scheduled gas deliveries deviate from actual usage.

 

                “The term of the Agreements would be five years, commencing on March 1, 2009 and expiring on February 28, 2014.  

 

                “The prices, quantities and other relevant commercial terms and conditions of the Agreements have been summarized in a Term Sheet provided under separate cover to the Trustees.  

 


 

FISCAL INFORMATION

 

                “Expenditures under the proposed Agreements are estimated to be $1.265 million per year for services provided by National Grid in its New York service territory and $775,000 per year for services provided by National Grid in its Long Island service territory, for a total estimated annual expenditure of $2.040 million.  Actual expenditures incurred will vary based on quantities of gas delivered and balanced on behalf of the Authority, including applicable fixed and variable costs associated with such services.  Expenditures under the proposed Agreements will be made from the Operating Fund.

 

RECOMMENDATION

 

                “The Senior Vice President – Energy Resource Management and Strategic Planning and the Director – Fuel Planning and Operations recommend that the Trustees authorize the execution of the proposed Gas Transportation and Balancing Service Agreements between the Authority and National Grid, having terms and conditions substantially consistent with those set forth in the Term Sheet provided to the Trustees and the discussion above. 

 

“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 Chief Operating Officer, was unanimously adopted.

 

                RESOLVED, That the Acting Chairman, the Chief Operating Officer, the Executive Vice President and Chief Financial Officer and the Senior Vice President – Energy Resource Management and Strategic Planning are, and each hereby is, authorized on behalf of the Authority to execute the Gas Transportation and Balancing Service Agreements with National Grid and the Authority having terms and conditions that are substantially consistent with those set forth in the Term Sheet provided to the Trustees, with such modifications, additions and deletions as he or she may deem necessary or desirable and as are consistent with the foregoing report of the Chief Operating Officer, subject to the approval of the form thereof by the Executive Vice President and General Counsel; and be it further 

 

                RESOLVED, That the Acting Chairman, the Chief Operating Officer, the Executive Vice President and Chief Financial Officer and the Senior Vice President – Energy Resource Management and Strategic Planning 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. 

 


 

1h.          Banking Resolution Amendment to Reflect Appointment of Chief Operating Officer and Change in Title of Vice President – Finance  

 

The President and Chief Executive Officer submitted the following report:

SUMMARY

 

                “The Trustees are requested to approve the attached Resolution, which amends the Banking Resolution adopted by the Trustees on September 26, 2006, to reflect the appointment of the Chief Operating Officer and the change in title from Vice President – Finance to Senior Vice President – Corporate Planning and Finance.

BACKGROUND

 

                “The Banking Resolution adopted by the Trustees on September 26, 2006 establishes (1) procedures and specifies those individuals by title who may, among other things, establish bank accounts, sign checks, invest Authority funds and execute agreements and other documents on behalf of the Authority, and (2) what individuals may authorize other individuals within the Authority to sign checks, deposit money and transfer and invest funds on behalf of the Authority.

 

“The proposed amendments would reflect the appointment of the Chief Operating Officer and the position title change of Vice President – Finance to Senior Vice President – Corporate Planning and Finance, and would transfer functions previously assigned to the Vice President – Finance to the Senior Vice President – Corporate Planning and Finance.

 

“The proposed Resolution has been reviewed and approved by both the Authority’s Vice President – Controller and its Vice President – Internal Audit.

 

FISCAL INFORMATION

 

                “There is no fiscal impact associated with this action.

RECOMMENDATION

 

                “The Treasurer recommends that the Trustees approve the attached proposed Resolution. 

 

                “The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President – Corporate Planning and 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 resolution adopted by the Trustees at their meeting of September 26, 2006 relating to the Management of Authority Banking Relationships is hereby amended in its entirety to read as follows (added material in italics):

 

RESOLVED, That the following authorizations are established with respect to the national or state banks (hereinafter referred to individually as the “Bank”) or trust companies organized under the laws of any state (hereinafter referred to individually as the “Trust Company”) that may be designated as a depository of the Authority and the execution of account-related agreements or documents on behalf of the Authority:

 

1.             The establishment, maintenance or closing of bank accounts, including depository and custody accounts, for and in the name of the Authority with any Bank or Trust Company shall be authorized by the Senior Vice President – Corporate Planning and Finance, the Treasurer or the Deputy Treasurer with concurrence by one of the following: the Chairman, the President and Chief Executive Officer, the Chief Operating Officer or the Executive Vice President and Chief Financial Officer;

 

2.             The Executive Vice President and Chief Financial Officer, the Senior Vice President – Corporate Planning and Finance, the Treasurer and the Deputy Treasurer, or such other individual(s) as may be designated by the Treasurer with the concurrence of the Executive Vice President and Chief Financial Officer, are hereby authorized to: (i) sign checks, drafts and other items for withdrawal or deposit of monies for and on behalf of the Authority, and (ii) initiate the transfer of monies by wire or otherwise for the payment or withdrawal of funds, for and on behalf of the Authority;

 

3.             The Executive Vice President and Chief Financial Officer, the Senior Vice President – Corporate Planning and Finance and the Treasurer are hereby authorized to sign checks with a facsimile signature for the withdrawal of monies from Authority accounts;

 

4.             The Executive Vice President and Chief Financial Officer, the Senior Vice President – Corporate Planning and Finance, the Treasurer and the Deputy Treasurer or such other individuals as may be designated by the Treasurer, are authorized to invest and reinvest monies in the account for, and on behalf of, the Authority; and

 

5.                   Execution of agreements, certificates, indemnities and other documents related to conducting business with the Bank or Trust Company may be authorized by the Senior Vice President – Corporate Planning and Finance, the Treasurer or the Deputy Treasurer with the concurrence of one of the following:  the Chairman, the President and Chief Executive Officer, the Chief Operating Officer or the Executive Vice President and Chief Financial Officer.

 

AND IT BE FURTHER RESOLVED, That the Acting Chairman, the President and Chief Executive Officer, the Chief Operating 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.


 

1i.           New York Power Authority Other Post-Employment Benefits Trust Fund: Selection of Small Cap Investment Manager  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award of a multiyear procurement contract to Fiduciary Management, Inc. relating to professional small cap investment management services in connection with the Authority’s Other Post-Employment Benefits (‘OPEB’) Trust Fund.

 

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.  Moreover, the Authority’s Expenditure Authorization Procedures require the Trustees’ approval for the award of personal services contracts in excess of $1 million if low bidder, or $500,000 if sole source or non-low bidder.  The term of the contract considered herein is for more than one year and, therefore, Trustee approval is required.

 

“Certain Governmental Accounting Standards Board (‘GASB’) standards[1] issued in 2004 require governmental employers to account for OPEB liabilities on an ‘accrual’ basis, i.e., as the benefits are earned during the working career of the employee, rather than a ‘pay-as-you-go’ basis, where costs are recorded as the benefits are paid during the employee’s retirement. 

 

                “At their meeting of December 19, 2006, the Trustees authorized staff to initiate certain actions to establish a separately managed Trust for OPEB, which included: establishing the parameters of a trust; developing investment guidelines and competitively searching and/or soliciting for a financial management consultant, investment manager(s) and Trustee Custodian.

 

                “At their July 31, 2007 meeting, the Trustees:  (1) approved the creation of the New York Power Authority Other Post-Employment Benefits Trust; (2) adopted the Trust Investment Policy Statement; (3) appointed The Bank of New York – Mellon as Trustee Custodian and (4) approved an initial $225 million funding plan.

 

                “At their meeting of October 30, 2007, the Trustees approved the award of nine multiyear procurement contracts relating to a diversified group of professional investment management services in connection with the Trust.  Staff successfully negotiated agreements with all of the recommended investment managers with the exception of the manager for the small cap asset class, Denver Investment Advisors, LLC.  Provisions related to brokerage and custodial services were unsatisfactory to the Authority and therefore the decision was made to re-bid for these services.

 

DISCUSSION

 

                “On August 18, 2008, staff solicited proposals for professional small cap investment management services by notice to a number of firms providing such services and advertisement in the New York State Contract Reporter.  On or before September 19, 2008, the Authority received a total of 13 proposals. 

 

 

“Staff, with the support of its financial advisor, PFM Advisors, evaluated each proposal according to various criteria, including, but not limited to, performance, performance consistency and volatility, correlation to market, schedule of fees and supporting organizational capabilities.  Based on this evaluation, staff is recommending the award of a procurement contract to Fiduciary Management, Inc. for management of the small cap asset class.

 

                “The recommended manager has shown steady performance against its respective benchmark averages over the past seven years.  Overall risk-adjusted returns showed solid results and Fiduciary Management, Inc. is backed by appropriate research support.  On the basis of the evaluation criteria established for this review by staff and its financial advisor, Fiduciary Management, Inc. scored at the top.  In order to achieve consistency and stability in the management of the Trust’s assets, it is recommended that Fiduciary Management, Inc. be awarded a five-year contract, subject, however, to early termination at any time by the Authority on 60 days’ notice.

 

FISCAL INFORMATION

 

                “The fees for the small cap investment management services will be 90 basis points (a basis point is equal to one 1/100th of 1 percent, or 0.01%) and will be paid from OPEB Trust assets.  The fees should equal about $125,000 per year, growing as the Fund’s assets grow.  Over the course of the recommended five-year term of the investment management contract, fees are estimated to total approximately $725,000, assuming a 7.0% growth rate in the Fund’s Assets.

 

RECOMMENDATION

 

“The Treasurer recommends the Trustees’ approval of the award of a multiyear service contract to Fiduciary Management, Inc. for management of the small cap asset class for the New York Power Authority Other Post-Employment Benefit Trust Fund.

 

The Chief Operating Officer, the Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President – Corporate Planning and Finance 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 and the Authority’s Expenditure Authorization Procedures, the award and funding of the multiyear investment management service contract with Fiduciary Management, Inc. to manage small cap assets for the New York Power Authority Other Post-Employment Benefits Trust (“Trust”) is hereby approved and its execution by the Executive Vice President and Chief Financial Officer or his designee is approved, subject to approval of the form thereof by the Executive Vice President and General Counsel, on behalf of the Authority, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

               RESOLVED, That the Acting Chairman, the President and Chief Executive Officer, the Chief Operating 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.

 

1j.           Procurement (Services) Contract – Legal Services – Rivkin Radler LLP

 

The Chief Operating Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to extend the contract for legal services with Rifkin Radler LLP through December 31, 2010 and to approve additional funding for the contract in the amount of $45,000, which is to be reimbursed by Long Island Power Authority (‘LIPA’).   

 

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.

 

“Rivkin Radler was retained on January 30, 2008 to represent the authority in connection with the pending litigation In the Matter of the Application of Steel Los III, LP and Associated Brook Corp. v. Power Authority of the State of New York (‘Steel Los’), Index No.: 5662/05 (Sup. Ct. Nassau Co.).  The retention of Rivkin Radler was pursuant to a one-year legal services contract effective January 18, 2008 for an amount not to exceed $200,000, which was recently extended to February 29, 2008 by memorandum of the Executive Vice President and General Counsel to Procurement.

 

“This litigation involves an Article 78 proceeding challenging a condemnation by the Authority.  A related Court of Claims proceeding for $14 million in compensation as a result of this taking is also pending, as are related federal court actions.  The Court of Claims and federal court actions have been stayed until the Supreme Court matter is resolved. 

 

“The Authority condemned the property at LIPA’s request, pursuant to an Authority authorizing resolution dated June 29, 2004, as well as a Memorandum of Understanding (‘MOU’) dated July 6, 2004, as amended on October 19, 2005, between the Authority and LIPA.  The MOU provides for the Authority to be fully indemnified for its costs of services and litigation associated with the condemnation through termination of the litigation.

 

“By order of the Supreme Court dated September 15, 2008, the Authority’s condemnation of the property was deemed unauthorized and set aside.  The request for judgment declaring the eminent domain taking procedures unconstitutional and the request for an award of counsel fees were denied. 

 

“The Authority has filed a notice of appeal and Petitioners filed a cross-appeal.  In the meantime, the parties have begun settlement negotiations which, if not concluded in the next month or so, will necessitate the Authority perfecting the appeal in March 2009.  It is estimated that the appellate process will be completed by December 2010 and that an additional $45,000 will be required for legal services and fees associated with the appeal.

 

FISCAL INFORMATION

 

“There will be no fiscal impact, as funds will be reimbursed by LIPA.

 

RECOMMENDATION

 

“The Executive Vice President and General Counsel recommends approval of the extension of the legal services contract with Rivkin Radler LLP and the additional $45,000 in funding.

 

“I concur in the recommendation.”

 

               

The following resolution, as submitted by the Chief Operating Officer, was unanimously adopted.

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the contract for legal services with Rivkin Radler LLP be extended through December 31, 2010 and additional funding for the contract in the amount of $45,000 is approved; and be it further

 

RESOLVED, That the Acting Chairman, the Chief Operating 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.

 

 

1k.          Lease of Office Space – Clarence D. Rappleyea Building – Berman Bavero Frucco & Gouz, P. C.

                                   

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

“The Trustees are requested to authorize a Second Amendment of Lease (hereinafter ‘Amendment’) with an existing tenant, Berman Bavero Frucco & Gouz, P. C. (hereinafter ‘Berman’).  Berman currently leases approximately 7,814 rentable square feet (‘rsf’) on the 17th floor of the Clarence D. Rappleyea Building (‘Rappleyea Building’) at 123 Main Street, White Plains, as shown on Exhibit ‘1k-A.’  This Amendment would extend the term of the lease an additional five years to September 30, 2014 at an average annual rent of $26.85 per square foot, including electricity and adjustments to recover increases in taxes and operating expenses over a base year, as more specifically discussed in Exhibit ‘1k-B.’

 

BACKGROUND

“By deed dated July 10, 1991, the Authority acquired the Rappleyea Building, a commercial office building containing approximately 420,195 rsf.  Currently, the Authority leases approximately 160,784 rsf.  Berman, whose current lease expires on September 30, 2009, has requested that the lease be extended an additional five years. 

 

DISCUSSION

“Berman’s law practice has been located in the Rappleyea Building since September 1, 1998.  Preliminary negotiations with Berman have resulted in the basic lease terms set forth in Exhibit ‘1k-B.’

 

“A review of local market conditions indicates that this transaction compares favorably with other space being offered in downtown White Plains and the Rappleyea Building.

 

FISCAL INFORMATION

 

“There will be no fiscal impact.

 

RECOMMENDATION

 

“The Director – Real Estate and the Director – Corporate Support Services recommend that the Trustees approve entering into a lease amendment with Berman Bavero Frucco & Gouz, P.C. on terms substantially in accordance with the foregoing and with Exhibit ‘1k-B’ attached hereto.

 

“The Executive Vice President and General Counsel, the Senior Vice President – Enterprise Shared Services and I concur in the recommendation.”

 

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

 

RESOLVED, That the President and Chief Executive Officer or the Senior Vice President – Enterprise Shared Services be, and hereby is, authorized to enter into a lease amendment for office space in the Clarence D. Rappleyea Building with Berman Bavero Frucco & Gouz, P.C. on substantially the terms set forth in the foregoing report of the President and Chief Executive Officer and Exhibit “1k-B,” subject to approval of the lease documents by the Executive Vice President and General Counsel or her designee; and be it further

 

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

 

  RESOLVED, That the Acting Chairman, the President and Chief Executive Officer, the Chief Operating 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.

 


 

                1l.           Partial Termination of Lease of Office Space – Clarence D. Rappleyea Building – J. P. Morgan Chase

 

The President and Chief Executive Officer submitted the following report:

               

SUMMARY

 

                “The Trustees are requested to authorize a partial termination of lease agreement whereby J. P. Morgan Chase, National Association (‘Chase’), a subsidiary of J. P. Morgan Chase & Co., as assignee and successor tenant of the Bank of New York (‘BNY’), surrenders all of its remaining leasehold interest in and to the entire 5th floor (approximately 29,401 rentable square feet, or ‘rsf’) of the Rappleyea Building (‘Building’) at 123 Main Street, White Plains, to the Authority on the terms and conditions set out below.

 

BACKGROUND

 

                “At their meeting of March 26, 1991, the Trustees approved the purchase of the Building.  At the time of the purchase, the Building had several tenants, the largest of which was ‘BNY’, which occupied approximately 58,801 rsf on the entire 4th and 5th floors.  The original lease was for a period of 20 years commencing on August 1, 1981, and terminating on July 31, 2001.  The lease contained two five-year options to extend the term.  Pursuant to these terms, the lease was extended from August 1, 2001 to July 31, 2006 and then again from August 1, 2006 to July 31, 2011.  The current annual rental is $1,264,222 plus adjustments to recover increases in taxes and operating expenses.

 

                “Further, at their meeting of September 26, 2006, the Trustees approved the assignment by BNY and the assumption by Chase of all of BNY’s interest in its lease of the premises, whereby Chase would assume all of the obligations under the lease on and after the effective date of the assignment and assumption agreement.

 

DISCUSSION

 

                “Due to various consolidations, Chase has made very limited use of the 5th floor of the Building.  The remainder of the Building remains essentially full, between space occupied by the Authority and space occupied by private tenants, most of which are currently in long-term leases with the Authority.

 

                “Due to space constraints, Authority staff negotiated a proposal with Chase whereby Chase would release and terminate all of its right and interest in the entire 5th floor of the Building from the effective date of the partial termination of lease agreement (proposed for March 31, 2009).  Further, Chase would pay the Authority approximately $1.55 million in settlement of its remaining lease payment obligation and grant the Authority a proposed License for immediate use of a portion of the 5th floor containing approximately 4,100 rsf as shown on Exhibit ‘1l-A’ prior to the termination date of March 31, 2009.  In accordance with the proposed License, the Authority would pro-rate the rent and additional rent effective upon the date of the License agreement to the proposed termination date.  The current rent obligation without increases in taxes and operating expenses has been calculated to be approximately $1,674,632.  In consideration thereof, the Authority would accept such termination and payment therefor and there would be no further obligation between the Authority and Chase regarding the 5th floor.  The Authority would then be free to use the 5th floor in a manner consistent with its ongoing business needs.

 

FISCAL INFORMATION

 

“There is no fiscal impact from consenting to this transaction.

 

RECOMMENDATION

 

                “The Senior Vice President – Enterprise Shared Services and the Director – Corporate Support Services recommend that the Trustees approve the partial surrender and termination of the lease of the 5th floor of the Rappleyea Building, 123 Main Street, White Plains, from J. P. Morgan Chase, National Association as assignee of the Bank of New York.

 

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

 

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

 

RESOLVED, That the President and Chief Executive Officer, the Chief Operating Officer or the Senior Vice President – Enterprise Shared Services be, and hereby is, authorized to enter into a partial termination of lease agreement between the Authority and J. P. Morgan Chase, National Association, on substantially the terms set forth in the foregoing report of the President and Chief Executive Officer and subject to the approval of the documents by the Executive Vice President and General Counsel or her designee; and be it further

 

RESOLVED, That the Acting Chairman, the President and Chief Executive Officer, the Chief Operating 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.


 

Discussion Agenda

 

2a.           President and Chief Executive Officer’s Report

 

                President Kessel provided the Trustees with updates on the following:

 

Transmission Initiatives

 

                Hydro Quebec

 

·         The preliminary findings of the working group will form the basis for the Phase II study, which has begun and will identify transmission projects.  The preliminary results of Phase II will be available in March, with a draft final report due by April 15.  President Kessel commended the transmission team, including Mr. John Suloway’s group, for their efforts.

·         The Hydro Quebec project would be the biggest energy project in New York State since the 1950s construction of the Niagara and St. Lawrence projects. 

·         The working group has reached out to National Grid and Con Edison, whose involvement will be necessary for this project.

·         The project will make possible the transmission of 800 to 1,000 MW of U. S. wind power and a total of more than 2,000 MW of renewable energy.  This will be especially important to New York’s North Country.

·         The project may go forward by the second or third quarter of 2009.

 

Hudson Transmission Partners (“HTP”):

 

·         The Authority and HTP are close to agreeing to the terms of a contract, that should be in place within the next three months.

·         Navigant Consultants is conducting an independent analysis of the costs and benefits of the project.

·         This project will bring power to New York City, so management and staff have been talking with Mayor Bloomberg, Con Edison, the Metropolitan Transportation Authority and the Port Authority of New York and New Jersey.

·         It’s possible that federal stimulus money could be used for this project.

 

 

Federal stimulus plan

 

·         The Authority has been named to the Governor’s Economic Recovery and Reinvestment Cabinet and President Kessel has spoken with Mr. Timothy Gilchrist, the Governor’s Senior Advisor for Infrastructure and Transportation, about the Authority’s role.  Ms. Terryl Brown Clemons will also be working with the Authority’s Washington office on this effort.

·         The Authority has submitted a list of projects for energy efficiency, renewable energy, smart grid technology and transmission generation.  $16.8 billion is available for energy efficiency and renewable energy projects and technology.

·         The Authority’s Energy Services Program, through existing federal block grants, includes:

n       23 school efficiency retrofit projects totaling $29.8 million that could begin construction within two years with $7.5 million in federal funds.

n       175 public building retrofit projects totaling $630 million that could begin construction within two years with $158 million in federal funds.

 

In response to a question from Trustee Foster, President Kessel said that tens of millions of dollars of energy efficiency money would be made available to New York State, while the overall amount of money available would be several hundreds of millions.  He said that the Authority can make a case for funding one of its transmission projects.  President Kessel said that the Authority would be meeting with New York State’s Congressional delegation within the next couple of weeks about this topic.  In addition, President Kessel has spoken with Mr. Ashok Gupta of the National Resources Defense Council, who is going to try to get the Authority a meeting with key people at the U. S. Department of Energy.

 

Community Outreach – Upstate/Downstate:

 

                President Kessel said that he is continuing to travel around the State.  Tomorrow he will be in Rochester with Acting Chairman Townsend for a meeting with the Rochester Democrat and Chronicle editorial board, a press event in Fairport and meetings with local officials.  Recently, he met with the Newsday editorial board.  In March, he plans to be in Buffalo several times and will meet with the Buffalo/Niagara Partnership.

 

                President Kessel introduced Mr. Thomas DeJesu, the Authority’s new Vice President – Southeastern New York Public and Governmental Affairs.
2b.           Chief Operating Officer’s Report

Mr. Gil Quiniones presented the following report:

 

Generation output at Authority facilities for the month of January exceeded the projected total, while the transmission lines recorded outage-free performance during the month.1  In addition, progress continued on major initiatives in the Energy Services and Technology, Marketing and Economic Development and Corporate Services and Administration Business Groups.

 

Key Activities and Accomplishments of the Past Month

 

POWER SUPPLY

 

Plant Performance

 

                 Total net generation for January was 2,267,447 mwh, compared with the projected amount of 2,197,914 mwh.2,3  However, the system-wide unforced capacity rating of 96.3% was below the target of 98.5%.4  The target was not met because of four forced, or unplanned, outages at Blenheim-Gilboa (“B-G”), combined with the fact that the New York Independent System Operator (“NYISO”) did not call on the project to supply electricity as frequently as had been anticipated.5  The plants were available to generate electricity 92.8% of the time.  River flows at the Niagara Project in January were at historical averages, but were slightly below normal when compared with the short- and long-term forecasts.  At St. Lawrence, flows were slightly above the historical average and consistent with the forecasts.

 

Outages

 

The forced outages at B-G totaled 30 hours and were due to mechanical problems at Units 1 and 4.  There were two significant forced outages at the small clean power plants.6  A repair to the generator unit circuit breaker at the Vernon Boulevard 2 plant in Queens, which began on December 28, 2008, continued through January 12, with the plant out of service for 277 hours.7  The Harlem River 2 unit in the Bronx failed to start on January 6 because of vibration issues, resulting in an outage of 68 hours before repairs were completed.8

               

Transmission Performance

 

                With no outages, either forced or scheduled, during January, the transmission lines achieved a reliability rating of 100%, exceeding the target of 99.99%.9

 

Vegetation Management Award

 

The Authority received a Project Habitat Award for its vegetation management principles and practices in a national competition sponsored by BASF Corporation, a major chemical company with headquarters in Florham Park, N.J.  The Authority was one of three winners in the utility category.  The Authority has successfully implemented an integrated vegetation management program along its more than 1,400 circuit-miles of transmission rights-of-way.10

 

Transmission Studies

               

Authority staff and ALTRAN Solutions continued studies of how to address the transmission needs of New York State and New York City, with a focus on the effects of installing capacitor banks of various sizes and voltages at different substation locations in the State.11  Preliminary results indicate that the installation of capacitor banks at transmission levels would result in very small reductions in transmission losses and that increasing the size of the capacitor banks would not cause proportional decreases in losses at a given location.12,13  These studies complement those being conducted by the NYISO and its consultants.  The preliminary results are being shared with the NYISO to determine what additional work should be performed.

 

ENERGY SERVICES AND TECHNOLOGY

 

Energy Efficiency Investment

 

                The Authority’s energy efficiency investment for January was $5 million, while overhead cost recovery was 67%.  Although neither figure was on pace to meet the annual targets of $120 million and 104%, respectively, staff anticipates that the targets will be achieved as major projects proceed during the remainder of the year.  Among other initiatives, construction is expected to begin in the spring on a chiller and boiler plant at the Namm building at the City University of New York’s New York City College of Technology; new lighting in the Holland Tunnel, operated by the Port Authority of New York and New Jersey and chillers at the State University of New York at Buffalo and the Empire State Plaza in Albany.  Achievement of the annual cost-recovery target would enable the Authority to more than recover its administrative costs for the program.

 

Clean Energy Benefits

 

                Clean energy benefits for January totaled 21,700 mwh, including 6,700 mwh from energy efficiency and 15,000 mwh from renewable projects and the purchase of renewable energy attributes.14  The January total was on pace to exceed the annual clean energy target of 234,000 mwh. 

 

PlaNYC Projects for 2009

 

                The Authority received a list of 66 projects from the City of New York on February 9 representing the next round of approved PlaNYC energy efficiency projects to be implemented by the Authority in the City’s current fiscal year.15  Work on these sites will begin immediately.  The list includes 13 of the 22 sites at which the Authority has conducted energy audits as part of PlaNYC.  Two of those sites, already under development, are the Leonard Covello Senior Center in Manhattan and St. Mary’s Recreation Center in the Bronx.   Projects are also expected to be completed at the other nine audit sites and at the 53 additional locations designated by the City.  The City plans to provide the Authority with its list of projects for the 2009-10 fiscal year, which begins July 1, in the near future.

 

Advancing New Technologies

 

                The Authority is proceeding with a $1 million project to install an advanced 200 kw fuel cell adjacent to its White Plains office building.  The fuel cell is being fabricated by UTC Power of South Windsor, CT, and will be among the company’s first “beta” models, which will double the stack life of the previous model from 5 to 10 years.16  This will provide significant economic benefits, since the stack represents the bulk of a fuel cell’s costs.  The success of the new technology could thus make future fuel cell projects much more cost effective.  In addition to its importance as a demonstration project, the new unit, scheduled for installation in July, will meet a small part of the building’s electricity needs.

               

Meanwhile, UTC Power continues to fabricate and test the first of the 12 fuel cells scheduled for installation in the Freedom Tower and three other new towers at the former World Trade Center site in lower Manhattan.  The Authority is purchasing the fuel cells, which will have a total capacity of 4.8 mw, and is financing energy efficiency measures for the Freedom Tower.

 

Clean Transportation

 

                On February 12, the Authority took delivery of a Ford Escape plug-in hybrid vehicle for a three-year trial.17  This is one of 20 prototype vehicles to be built by Ford as part of a $30 million national demonstration program in collaboration with the U. S. Department of Energy and the Electric Power Research Institute (“EPRI”).18  This project is directly in line with Governor Paterson’s call in his State of the State address for New York State to take a leading role in developing plug-in hybrid vehicles, which he described as essential to “the future of America’s energy and transportation policies.”  The Authority plans to demonstrate the vehicle in its own fleet and those of its customers and to make it available for technology workshops and additional educational events with its customers and others.  Ford and EPRI will work with the Authority and other project participants to collect vehicle data over the three-year period.  Each vehicle is equipped with a 10 kilowatt-hour lithium ion battery and will be charged from a 120-volt electric outlet.19  Gasoline-electric operation will be blended to optimize fuel efficiency, with the vehicles providing approximately 30 miles of range in electric mode.  The vehicles also feature “smart” charging capability to allow for charging schedules that avoid periods of peak utility demand.

 

Technology Transfer Award

 

                In January, the Authority received an EPRI Technology Transfer Award for its work in advancing the compressor dependability root cause analysis and maintenance guidance for General Electric FA gas turbines such as those used at the Authority’s 500 mw combined-cycle plant in Astoria, Queens.20,21  The award recognizes outstanding accomplishments and contributions in demonstrating technologies important to the power industry.  Authority employees singled out for recognition were Mr. John DeLise of the Energy Services and Technology Business Group and Mr. Paul Mitchell and Mr. Timothy Zandes of the Power Supply Business Group.

 

MARKETING AND ECONOMIC DEVELOPMENT

 

Preservation Power

 

                A Trustee item seeking a start to the approval process for the first allocation of Preservation Power from the St. Lawrence-Franklin D. Roosevelt Power Project was on today’s Consent Agenda.22  The Trustees authorized a public hearing on a contract for the sale of 2 mw to the Newton Falls Fine Paper Co. in St. Lawrence Country.  In return for the power, the company will agree to invest $4.5 million in its existing plant, create 54 new jobs and retain 118 positions.  This is a milestone in the development and implementation of a Preservation Power allocation plan, an extensive effort involving Authority staff members and State and local officials.  The allocation to Newton Falls has been unanimously recommended by the Northern New York Advisory Group formed to assist in marketing Preservation Power to businesses in St. Lawrence, Franklin and Jefferson counties. 

               

CORPORATE SERVICES AND ADMINISTRATION

 

Human Resources Study

 

                Phase 3 of the Authority’s Human Resources study, dealing with succession planning, has been completed.  Staff is beginning Phase 4, which comprises implementation of recommendations from the three completed phases.  (The first two focused on organizational design and business practices.)

 

ANTICIPATED DEVELOPMENTS IN THE NEXT SIX MONTHS

 

Federal Stimulus Bill

 

                President Obama signed the American Recovery and Reinvestment Act, a $787 billion stimulus bill, into law on February 17, 2009.  Preliminary analysis indicates that New York State could receive approximately $24.6 billion over the next two years.  A New York State Economic Recovery and Reinvestment Cabinet was established and the Authority has been named a member.  An internal Authority team was created to advance Authority projects in energy efficiency, renewables, transmission, smart grid technology and generation projects.

 

POWER SUPPLY

 

Hudson Transmission Partners Project

 

                Staff anticipates major developments in the coming months concerning the Hudson Transmission Partners (“HTP”) project, a proposed 345 kv transmission line that would carry clean, economical electricity from the Pennsylvania-New Jersey-Maryland (“PJM”) interconnection for use by the Authority’s governmental customers in New York City and other power consumers in the City.23  Staff has essentially completed negotiations on the major terms and conditions of a proposed long-term firm transmission contract with HTP, which would build the line under the Hudson River from Bergen County, New Jersey to a Con Edison substation in midtown Manhattan.  An economic assessment of the project by Navigant Consulting, Inc., which has focused on the critical issue of the cost of transmission system upgrades and interconnections in the PJM territory, is also nearing completion.  When results of this study are available, staff will meet with the governmental customers and Con Edison to determine their interest in having the Authority move forward with the HTP contract.  The Authority and HTP have worked together in lengthy negotiations with PJM that have significantly lowered the projected transmission upgrade and interconnection costs.  Staff believes there is a potential to lower these costs still further in the coming months. Staff is also seeking funds from the federal economic stimulus package to help in offsetting these expenses and ensuring that the project is beneficial to ratepayers.  Staff hopes to conclude the discussions with the governmental customers and Con Edison in early April.  Assuming that they agree to proceed, staff would then seek approval from the Trustees at a future meeting to execute the contract with HTP.

 

Life Extension and Modernization Programs

 

                Continued progress is expected in the Life Extension and Modernization (“LEM”) programs at the St. Lawrence and B-G projects.24  At St. Lawrence, the 11th of 16 units is on schedule to return to service on March 31, with work to begin the following day on Unit 12.  (Unit 11 was removed from service on August 1, 2008.)  Overall, the $281 million project is on schedule and within budget.  The $135.4 million B-G LEM program remains on schedule and on budget, with the third of four units expected to resume operation in June.  (The unit was taken out of service on September 15, 2008.)

 

MARKETING AND ECONOMIC DEVELOPMENT

 

Economic Development Legislation

 

                An Authority economic development program reform proposal is being finalized internally and will be shared with the Trustees for their feedback and recommendations.  Once the proposal has been reviewed by the Trustees, the Authority will share it with the Governor’s Office and seek guidance on next steps.

 

 

                                                             GLOSSARY

 

1Outage—Removal of a power plant or transmission line from service.  May be scheduled for purposes such as anticipated maintenance, or forced by unexpected events.

 

2Net generation—Energy generated in a given time period by a power plant or group of plants, less the amount used at the plants themselves (station service) or for pumping in a pumped storage facility.

 

3Megawatt hour—Amount of electricity needed to light 10,000 l00-watt light bulbs for 1 hour.  MW is equal to 1,000 kw and can power about 800 homes, based on national averages.

 

4Unforced capacity rating—All power plants have installed capacity (“ICAP”), meaning the amount of power they could generate under perfect conditions.  Since conditions are not always perfect and plants are shut down, a second measurement called unforced capacity (“UCAP”), which is how much power a plant actually can produce.  For NYS power plants, this measurement is influenced by the amount of time a plant is forced out of service when it is called into service through the NYISO to provide energy.

 

5New York Independent System Operator—Not-for-profit organization that operates NYS transmission system, administers State’s wholesale electricity markets and engages in planning to ensure future reliability of statewide power system.

 

6Small clean power plants—Group of 11 combustion turbines, fueled by natural gas, installed by the Authority at 7 locations in NYC and on Long Island to avert a potential power shortage in the summer of 2001.  The units have a combined output of about 460 mw and are equipped with sophisticated environmental controls.

 

7Generator unit circuit breaker—Device that connects and disconnects a generator from the electric grid.

 

8Vibration issues—Limits are set to prevent a unit from operating if excessive vibration is detected in the generator or turbine.  In the case of the Harlem River 2 unit, the vibration problem resulted from a misalignment between the generator and the turbine that was attributable to the manufacturer.

 

9Transmission reliability rating—Measurement of impact of forced and scheduled outages on statewide system’s ability to transmit power.

 

10Integrated vegetation management—System of vegetation management on power-line corridors in which cultural, biological, physical and chemical procedures are balanced to control undesirable tall-growing woody species that could interfere with operation of the lines, while at the same time promoting the growth of desirable low-growing plant communities. The overall goal is to elicit environmentally, economically and socially responsible treatment effects that lead to refined, sustainable achievement of these objectives

 

11Capacitor bank—Device placed on power system to regulate voltage; generally applied to maintain system voltage.  (Voltage is a measurement of the force that pushes electricity through a transmission line, much as water is forced through a hose.)  The performance of a transmission line, especially those of medium length or longer, depends on maintaining voltage at certain levels.  The maximum amount of power a line can transmit is reduced as voltage decreases.

 

12Transmission levels—North American Electric Reliability Corporation, which sets and enforces reliability standards for power systems in U. S. and Canada, considers transmission lines of 100 kv and above to be at transmission level.  The Authority’s system consists of transmission lines of 115, 230, 345 and 765 kv.

 

13Transmission losses—During transmission, electricity generates heat that displaces electrons, meaning that less electricity flows on the line (longer line = greater loss).  Power is also lost when it moves through substation equipment.

 

14Renewable energy attributes—Environmental, social and economic features of renewable energy that may be sold separately from energy itself; the Authority obtains such attributes on behalf of its NYC governmental customers.

 

15PlaNYC—Program developed by NYC Mayor Bloomberg’s administration to reduce energy consumption and greenhouse gas emissions in City-owned buildings and operations by 30% below 2005 levels by 2017.

 

16Fuel cell stack—Group of fuel cell components in which hydrogen is combined with oxygen to produce electricity and water in virtually emission-free process. 

 

17Plug-in hybrid vehicle—Vehicle that operates on both gasoline and electricity and that can be recharged from a standard home electrical outlet.  Rechargeable battery on board the vehicle is discharged during driving to significantly improve fuel economy. 

 

18Electric Power Research Institute (“EPRI”)—Electric power industry’s international research and technology organization.  The Authority has long been active in EPRI  and has collaborated with the organization on a number of major initiatives.

 

19Lithium ion battery—Rechargeable battery with very high energy density per unit weight and volume.  Capable of high number of charge-discharge cycles and fast charging.

 

20Compressor—Compressor section of a combustion turbine engine draws in air from the atmosphere and incrementally increases the pressure of that air.  The pressurized air is then directed to a combustion chamber, where it is mixed with fuel and ignited. 

 

21Root cause analysis—Method of evaluating a problem so that the principal causes or influencing factors are determined.

 

22Preservation Power—Block of 490 mw from St. Lawrence designated under 2005 State law for allocation to qualifying businesses in St. Lawrence, Jefferson and Franklin counties if relinquished by current recipients.  Up to 12 mw is expected to become available because of General Motors’ (“GM”) shutdown of its Powertrain plant in Massena scheduled for May 1, 2009.  GM has already give up 2 mw.

 

23Pennsylvania-New Jersey-Maryland (“PJM”) Interconnection—Regional transmission organization that coordinates movement of wholesale electricity in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and District of Columbia.

 

24Life Extension and Modernization (“LEM”) programs—Major undertakings in which all turbines at St. Lawrence and B-G are being replaced and generators and other components significantly refurbished.  Intended to ensure that projects operate at maximum efficiency far into the future. 

 


 

2c.           Chief Financial Officer’s Report

 

                Mr. Joseph Del Sindaco presented the following report:

 

2008 Financial Report

 

Ernst & Young (“E&Y”) has given the Authority an unqualified opinion for the Authority’s 2008 financial report.  E&Y made a formal presentation of its findings to today’s Audit Committee meeting.  An item seeking the Trustees’ approval will be presented at the March meeting.  

 

Adjustments to 2009 Operating Forecast

 

After projecting 2009 Authority net revenues of $173 million in their November 2008 operating forecast, staff re-evaluated and revised this project due to several key events in December and early January:

 

·         Precipitation over the Great Lakes in December was significantly higher than the norm, with Lakes Erie and Ontario receiving 169% and 139% of their long-term averages, respectively.  An update to the net generation forecast for the year has added an additional 1.5 twh (1.5 million mwh) to the projection, which has added a net of $63 million to the budget.

 

o        Niagara is showing an increase of about $75 million due to the additional generation; however, St. Lawrence is showing a decrease of about $12 million due to the nature of the interruptible sales to Alcoa.  An increase in generation at these levels brings production levels above the curtailment point for the Alcoa interruptible, resulting in a net reduction in the Authority’s wholesale sales to the NYISO (at market rates) and an increase in interruptible sales (at the lower tariff rates).

 

·         Reduced Business Customer Sales at Niagara due to worsening economic conditions have caused an increase in the expected level of wholesale sales.  A portion of these relinquished sales will be used to off-set the costs of the Market Supply Power sector’s Energy Cost Savings Benefits (“ECSB”) program (noted below). 

 

·         Improved Results in the Market Supply Power Segment are projected due to the increased availability of hydropower used to defray the cost of purchased power for the ECSB program ($19 million).  In addition, overall lower market prices are expected to reduce the cost of Power for Jobs rebates by $7 million for a total improvement in the Market Supply Power segment of about $26 million.

 

·         Updated accounting treatment of the Authority’s voluntary contributions to the State, now based on the actual plan, more accurately reflects the proper alignment of the costs with the appropriate time period.  As a result, the portion of the contributions recognized for accounting purposes during calendar year 2009 will be reduced by $45 million.

 

The total of these adjustments will move the revised 2009 projection to $308 million from the previous $173 million.  The monthly Trustee financial reports for 2009 will be reported on this basis.

 

Reset Rate for the Authority’s Adjustable Rate Tender (“ART”) Notes

                                                                                                                                                        

In 1985, the Authority issued ART Notes to finance in part the Marcy-South transmission line.  The ART Notes’ interest rate is reset every six months.  Currently, $137.5 million in ART Notes are outstanding, with final maturities in 2016 and 2020.  This week, the ART Notes reset at 0.60% (60 basis points) for the coming March-September period, the lowest rate the Authority has seen.  The previous low was 0.90% (90 basis points) in 2003-04, while the all-time high reset rate was 6.90% in 1989.

 

By way of comparison, the current 6-month LIBOR rate is 1.78%, so the Authority’s product settled at about 33% of LIBOR.  The Authority’s ART Notes historically trade at about 2/3 of the LIBOR rate, with the last two resets at 2.10% and 1.60%.  With 6-month treasuries yielding about 50 bps and the Authority’s paper yielding about 60 bps, it is a clear indication that the “flight to quality” still abounds in the marketplace and the Authority’s “clean name” remains a beneficiary.  Recent trades in the Authority’s commercial paper reflect this as well, as some of our paper settled between 60 and 65 bps over the past several days.

 

                Acting Chairman Townsend said that he and the other Trustees appreciated the timeliness of the Chief Operating Officer and Chief Financial Officer reports.  Trustee Nicandri said that the reports were very clear and that he appreciated their conciseness.  Mr. Quiniones thanked Trustee Foster for helping staff to focus and present the reports in plain English.


 

3.             Informational Item:  NYPA Transmission

 

                Mr. Thomas Shust made a presentation on the Authority’s transmission system.  Mr. Quiniones pointed out that voltage is akin to water pressure, with Mr. Shust adding that the higher the voltage, the more power can be transferred for a given amount of current.  Responding to a question from Acting Chairman Townsend, Mr. Shust said that many of the Authority’s older transmission line poles were made of wood and are 60-70 years old.  In response to another question from Acting Chairman Townsend, Mr. Shust said that the new generation of transmission wires is dramatically better than the old copper wires.  Responding to a question from Trustee Nicandri, Mr. Shust said that the poles for the MA1 and MA2 lines are wood, and that each circuit is rated at 230 kV but can be upgraded to 345 kV within the existing right-of-way.  Mr. Quiniones said that the Authority is exploring the feasibility of using existing rights-of-way for higher-voltage lines.  President Kessel added that doing so reduces community concerns.  He also said that using superconducting cable as part of the transmission grid would allow the transmission of three to five times as much power on the same-sized wire.  Responding to a question from Trustee Curley, President Kessel said that the Authority has opposed the proposed New York Regional Interconnect (“NYRI”) project with the Public Service Commission (“PSC”), as it would interfere with the Authority’s transmission lines and rights-of-way.  He said that three of the five PSC Commissioners were opposed to the NYRI project as well and that NYRI recently indicated that if the NYISO regulation is not overturned by the federal government, NYRI will drop its plans for the line.  According to President Kessel, the final PSC decision is due by August, although it may be announced sooner than that.

 


 

4.             Motion to Conduct an Executive Session

               

                “Mr. Chairman, I move that the Authority conduct an executive session pursuant to Section 105(1)(f) of the Public Officers Law of the State of New York to discuss matters leading to the appointment, employment, promotion, discipline, suspension, dismissal or removal of a particular person or corporation.”  Upon motion made and seconded, an Executive Session was held.


 

5.             Motion to Resume Meeting in Open Session

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

 

6.                 Resolution – Election of Chairman

               The following resolution, as submitted by Trustee Foster was unanimously adopted.

 

               RESOLVED, That pursuant to §1004 of the Public Authorities Law and §169(1)(f) of the Executive Law, Michael J. Townsend of Fairport, New York, is hereby elected as Chairman, at an annual salary of $90,800, effective immediately.

 

President Kessel congratulated Chairman Townsend on his election and commended him on the extraordinary job he had done as Acting Chairman, saying that his election to Chairman shows that the other Trustees have a great deal of confidence in him. 

 

 
 

7.             Resolution – Election of Vice Chairman

The following resolution, as submitted by Chairman Townsend, was unanimously adopted.

 

               RESOLVED, That pursuant to §1004 of the Public Authorities Law, Jonathan F. Foster of New York, New York, is hereby elected as Vice Chairman, effective immediately.

 

President Kessel said that Vice Chairman Foster has the confidence of the other Trustees and Authority staff and congratulated him on his election.

 

 

8.             Resolution – Election of Corporate Secretary

The following resolution, as submitted by Chairman Townsend, was unanimously adopted.

 

               RESOLVED, That pursuant to Article IV, Section 2 of the Authority’s By-Laws, Karen Delince is hereby elected as Corporate Secretary, at an annual salary of $165,000, effective on a date to be determined, for a term expiring at the next annual meeting of the Trustees in March 2009, or until her successor is elected.

 

President Kessel thanked Ms. Anne Cahill for the terrific job she had done as Corporate Secretary.  Trustee Cusack praised Ms. Cahill’s intelligence and pleasant demeanor.  Chairman Townsend added that Ms. Cahill had her hands full keeping him out of trouble.   

 

 

9.             Amendments to the Authority’s  By-laws

The President and Chief Executive Officer submitted the following report:

 

“The Trustees are requested to amend the Authority’s By-laws to change the reporting structure of the Corporate Secretary’s Office from reporting to the Chairman and the Board of Trustees to reporting to the Chairman, the Board of Trustees and the Executive Vice President and General Counsel. 

 

“Since 2006, the Corporate Secretary’s Office has reported directly to the Chairman of the Board of Trustees with a ‘dotted-line’ reporting nexus to the Executive Vice President and General Counsel.  Previous to that time, the Corporate Secretary’s Office was part the Authority’s Law Department.  Experience has shown that many of the functions of the Corporate Secretary’s Office, such as compliance with the Freedom of Information Law and the State Administrative Procedure Act, require direct interaction with the Law Department.  In addition, the Executive Vice President and General Counsel, as counsel to both the Board of Trustees and the President and Chief Executive Officer, is ultimately responsible for overseeing the activities of the Corporate Secretary’s Office.  Indeed, in many corporations, the Corporate Secretary’s Office is part of the General Counsel’s office.  Accordingly, it makes sense from both an organizational and a governance standpoint to have the Corporate Secretary’s Office report to the Chairman, the Board of Trustees and the Executive Vice President and General Counsel.   

 

“The specific changes to the By-laws are as follows:

 

     (1)       Amend Article IV, Section 6(F) to amend the duties of the Executive Vice President and General Counsel.

 

     (2)       Amend Article IV, Section 6(G) to amend the reporting structure therein.                

 

                            “A redlined version of the amended By-laws with strikethroughs denoting deletions and underlining reflecting new language is attached as Exhibit ‘9-A.’

 

                “The Chief Operating Officer, the Executive Vice President and General Counsel and I recommend that the Trustees approve the proposed By-laws amendments.”

 

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

 

RESOLVED, That the revisions to the By-laws (originally adopted on April 9, 1954, and last amended on October 28, 2008) discussed in the attached memorandum of the President and Chief Executive Officer and attached hereto as Exhibit “9-A,” be hereby adopted; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Chief Operating 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.

 

 

10.          Defense and Indemnification

                After due consideration of the underlying circumstances disclosed during the Executive Session, and upon motion made and seconded, the following resolution, as submitted by Trustee Cusack, was unanimously adopted.

 

               RESOLVED, That pursuant to the Authority’s Corporate Policy 6-3, an eligible individual’s written request for defense and indemnification in connection with an ongoing proceeding is hereby approved.

 

 

11.          Other Business

 

                Chairman Townsend said that Authority staff are top flight and very professional and thanked them for their dedication and hard work during such difficult times.


 

12.          Next Meeting

 

The Annual Meeting of the Trustees will be held on Tuesday, March 31, 2009, at 11:00 a.m., at a location to be determined, unless otherwise designated by the Chairman with the concurrence of the Trustees.

 

 

Closing

                On motion made and seconded, the meeting was adjourned by the Chairman at approximately

3:09 p.m.

 

 

 

 

Anne B. Cahill

Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FEBMINS.09


 

[1] These standards include Statement No. 43 – Financial Reporting for Post-employment Benefit Plans Other Than Pension Plans and Statement No.45 – Accounting and Financial Reporting by Employers for Post-employment Benefits Other than Pensions.