MINUTES OF THE REGULAR MEETING

OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

September 28, 2010

 

 

Table of Contents

 

                Subject                                                                                                                                                

 

1.    Consent Agenda:

 

a.       Minutes of the Regular Meeting held on June 29, 2010 and Special Meetings held on July 22, and August 30, 2010

 

b.       Power for Jobs Program – Extended Benefits, Exhibition - “1b-A”;  “1b-B-1”; “1b-B-2”

        Resolution

                                                                                                                                                               

c.        Proposed Expansion Power Contract with Yahoo! Inc. – Transmittal to the Governor, Exhibition - “1c-A”; “1c-B”

        Resolution
                                                                                                          

d.       Preservation Power  Contract to Florelle Tissue Corporation – Transmittal to the Governor, Exhibition - “1d-A”

        Resolution   

 

e.        Proposed Long-Term Contract Extensions for the Sale of Western New York Hydropower –
Transmittal to the Governor, Exhibit -  “1e-A”; “1e-A-1”; “1e-B”; “1e-C-1”; “1e-C-2”

        Resolution

 

f.        Hydropower Contracts with Upstate Investor-Owned Utilities for the Benefit of Rural and Domestic
Consumers – Notice of Public Hearing, Exhibition - “1f-A” – “1f-C”

        Resolution

 

g.       Increase in New York City Governmental Customer Rates – Notice of Proposed Rulemaking

 

h.       Decrease in Westchester County Governmental Customer  Rates – Notice of Proposed Rule Making
   

i.         Extension of Temporary North Country Discount Program                            

j.         Power Contract with the Town of Massena – Massena Electric Department, Exhibition - “1j-A” – “1j-B”

        Resolution

   

k.       Procurement (Services) Contracts – Business Units and  Facilities – Awards and Extensions, Exhibition - “1k-A” – “1k-B”
Resolution

 

l.         Approval of Revised Governing Policy for Risk Management, Exhibition - “1l-A”
Resolution

m.     Selection of Fixed Income Managers for the Authority’s Nuclear Decommissioning Trust Fund

 

n.       Selection of Firms to Serve as Authority Underwriters, Exhibition - “1n-A”
Resolution                                                                                                                                       

Discussion Agenda:

2.                   Transmission System – Life Extension and Modernization and Condition Assessment – Contract Award
Resolution                                 

   

3.                   Procurement (Construction) Contract – Niagara Power Project Relicensing, Compliance and Implementation –
Reservoir State Park Rehabilitation – Award –

Resolution

4.                   Authorization to Execute Power Purchase Agreement to Provide Environmental Attributes for Port Authority of New York and New Jersey

 Resolution

5.                   Q&A on Reports from:

a.       President and Chief Executive Officer                                                                 

b.       Chief Operating Officer, Exhibition - “5-B”
Resolution

c.        Chief Financial Officer, Exhibition - “5-C”
Resolution

6.                   Motion to Conduct an Executive Session                                                                           

7.                   Motion to Resume Meeting in Open Session                                                                      

8.                   Next Meeting                                                                                                                           

9.                    Closing                                                                                                                                                                


 

Minutes of the Regular Meeting of the Power Authority of the State of New York held via videoconference at the following locations: Sheraton Syracuse University Hotel and Conference Center, Syracuse, NY; 95 Perry Street, Buffalo, NY and 1880 JFK Boulevard, Philadelphia, PA, at approximately 11:30 a.m.

Members of the Board present were at the following locations:

                                Michael J. Townsend, Chairman – Syracuse, NY

                                Jonathan F. Foster, Vice Chairman – Philadelphia, PA

                                D. Patrick Curley, Trustee – Buffalo, NY

                                Eugene L. Nicandri, Trustee – Syracuse, NY

                                Mark O’Luck, Trustee – Syracuse, NY

 

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Richard M. Kessel                               President and Chief Executive Officer

Gil C. Quiniones                                   Chief Operating Officer

Terryl Brown                                        Executive Vice President and General Counsel

Francine Evans                                    Executive Vice President, Chief Administrative Officer

                                                                    and Chief of Staff

Elizabeth McCarthy                           Executive Vice President and Chief Financial Officer

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

Bert J. Cunningham                            Senior Vice President – Corporate Communications

Steve DeCarlo                                      Senior Vice President – Transmission

Angelo Esposito                                   Senior Vice President – Energy Efficiency and Technology

Paul Finnegan                                      Senior Vice President – Public, Governmental and Regulatory Affairs

James F. Pasquale                               Senior Vice President – Marketing and Economic Development

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

Paul Belnick                                         Vice President – Energy Services

Jordan Brandeis                                   Vice President – Power Resource Planning and Acquisition – WPO

John L. Canale                                     Vice President – Project Management

Dennis Eccleston                                 Vice President – Information Technology/Chief Information Officer – WPO

Michael Huvane                                  Vice President – Marketing

Joseph Leary                                        Vice President – Community and Governmental Relations

Patricia Leto                                         Vice President – Procurement – WPO

Christine Pritchard                               Vice President – Media Relations and Corporate Communications

Scott Scholten                                      Vice President and Chief Risk Officer

John Suloway                                       Vice President – Project Development, Licensing and Compliance

Karen Delince                                      Corporate Secretary

Angela Graves                                      Deputy Corporate Secretary

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

Andrew McMahon                              Superintendent – Massena Electric Department

Robert Mc Neil                                     Chairman – River Valley Redevelopment Agency

Barbara Brenner                                  Partner – White Brenner Group

Tony Modaffer                                    Executive Director – MEUA

William Babey                                     Consultant – IEEP

Earl Wells                                              President – EZCommunications

Walter Dixie                                          Executive Director – Jubilee Homes of Syracuse

Mike Gettings                                       Senior Partner – Energy Risk Management

 


 

Chairman Townsend presided over the meeting.  Corporate Secretary Delince kept the Minutes.


 

1.                     Consent Agenda

               

                Chairman Michael Townsend said that item 1b (Power for Jobs Program – Extended Benefits) had been recommended for approval by the Economic Development Power Allocation Board at its meeting on September 27, 2010.

                Trustee D. Patrick Curley said that he needed to recuse himself from the vote on item 1e (Proposed Long-Term Contract Extensions for the Sale of Western New York Hydropower – Transmittal to the Governor) with respect to the following companies: Brunner, Inc.; Carleton Technologies Inc.; I Squared R Element Co., Inc.; International Imaging Materials, Inc. (3); Mayer Brothers Apple Products (2); Moog Inc. (3); Quebecor World Buffalo; and Servotronics,  Inc.

                Trustee Eugene Nicandri said that Andrew McMahon from Massena Electric Department and Robert McNeil from the River Valley Redevelopment Agency were present at the meeting because of item 1j (Power Contract with the Town of Massena, Massena Electric Department).

 

a.       Approval of the Minutes

 

                The Minutes of the Regular Meeting held on June 29, 2010 and Special Meetings held on July 22, and August 30, 2010 were unanimously adopted.

 

b.                   Power for Jobs Program – Extended Benefits

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve electricity savings reimbursement payments (rebates) for 79 Power for Jobs (‘PFJ’) customers listed in Exhibit ‘1b-A.’  The rebates are calculated for historical periods only.  These customers have been recommended to receive such rebates by the Economic Development Power Allocation Board (‘EDPAB’).  In addition, the Trustees are requested to approve payments for PFJ Restitution to the companies listed in Exhibit ‘1b-B-1.’   These companies have been evaluated for Restitution and are due a payment.  The Trustees have approved similar extended benefit payments at past Trustees’ meetings. 

 

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.  Chapter 217 of the Laws of 2009 included provisions extending the program benefits until May 15, 2010.  An ‘extender’ law was enacted in 2010 modifying the expiration of the program to June 2, 2010.  In 2010, Chapter 311 of the Laws of 2010 included provisions extending the program benefits until May 15, 2011.

 

“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. 

 

                                “PFJ Restitution was created by Chapter 645 of the Laws of 2006, which extended the PFJ program for six months to June 2007; the law states: ‘for the period beginning January 1, 2006, for recipients who choose to elect a contract extension, and whose unit cost of electricity under the contract extension exceeds the unit cost of electricity of the electric corporation, the Power Authority shall reimburse the recipient for all dollars paid in excess of the unit cost of electricity of the electric corporation.’  Customers eligible to apply for restitution are those that chose to extend their PFJ electric service contract beyond January 1, 2007 but terminated their service on June 30, 2007, June 30, 2008 or on or after June 30, 2009.

 

DISCUSSION

 

“At its meeting on September 27, 2010, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 79 businesses listed in Exhibit ‘1b-A.’  Collectively, these organizations have agreed to retain more than 79,000 jobs in New York State in exchange for the rebates.  These recommended payments are for rebate periods through May 2010, associated with last year’s extended benefits legislation and prior to the program’s recent extension.  All PFJ rebate customers are eligible for payments through the program’s new expiration date of May 15, 2011.

 

                “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 $11.3 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.

 

                “Restitution is based on whether the net amount paid by the customer for PFJ service exceeded the ‘unit cost of electricity’ of the host utility over the measurement period for the same quantity of electricity.  Under current law, the measurement period begins January 1, 2006 and ends with the date that the eligible customer ceases to be in the PFJ electricity program.

 

                                “The host utilities, in conjunction with the Authority and the Public Service Commission, determine what the otherwise applicable full-service electric rates of the host utility would have been for service throughout the measurement period, calculate what the customer charges would have been under those rates, compare that total to the total actual charges paid by the customer for PFJ and determine whether the customer had net savings overall in the PFJ program or is due a Restitution payment.

 

                                “Staff has evaluated seven additional customers for Restitution.  Of those, six customers are eligible for Restitution payment and are presented for approval as listed in Exhibit ‘1b-B-1.’  The one customer listed in Exhibit ‘1b-B-2’ had overall PFJ program savings; therefore, no payment is required.  Additional requests will follow based on subsequent evaluation of other Restitution-eligible customers.

 

FISCAL INFORMATION

 

“Funding of rebates for the companies listed in Exhibit ‘1b-A’ is not expected to exceed $11.3 million.  Payments will be made from the Operating Fund.  To date, the Trustees have approved $225.2 million in rebates, excluding the approvals requested in this item.

 

“Funding of Restitution payments to the companies listed in Exhibit ‘1b-B-1’ is not expected to exceed $750,000.  Payments will be made from the Operating Fund.  This is the ninth payment request to date, which will bring the total approved for PFJ Restitution payments to $7.5 million.

 

RECOMMENDATION

 

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

 

               


 

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 $11.3 million, and it is hereby found that amounts may properly be withdrawn from the Operating Fund to fund such payments; and be it further

 

RESOLVED, That based on staff’s recommendation, it is hereby authorized that payments be made to the companies listed in Exhibit “1b-B-1” for PFJ Restitution as described in the foregoing report of the President and Chief Executive Officer in the aggregate amount of up to $750,000 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 Senior Vice President – Corporate Planning and 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 Chairman, the Vice 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.

 


 


 


 


 


 

 

 


 

c.                    Proposed Expansion Power Contract with Yahoo! Inc.  – Transmittal to the Governor

 

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve the proposed agreement (‘Agreement’) for the sale of Expansion Power to Yahoo! Inc. (‘Customer’) and to authorize its transmittal to the Governor for approval.  The Agreement with the Customer and the proposed service tariffs are attached as Exhibit ‘1c-A.’

 

BACKGROUND

 

“On May 19, 2009, the Trustees approved an allocation of 15 MW of Expansion Power (‘EP’) to the Customer.  At their meeting of July 22, 2010, the Trustees authorized a public hearing, pursuant to §1009 of the Public Authorities Law (‘PAL’), on the proposed contract to effectuate the sale of power and energy for the allocation to the Customer.

 

“On March 15, 2010, the Authority and the Customer signed an ‘Interim Agreement for the Sale of Expansion Power and Energy.’  The purpose of the Interim Agreement was to enable the Customer to accept delivery of its EP allocation at the startup of its Datacenter operation on April 1, 2010.  Also included in the Agreement was an Appendix co-signed by the Authority, the Customer and the delivering utility, New York State Electric and Gas Corporation (‘NYSEG’), to effectuate an April 1, 2010 delivery arrangement.  The ability to execute the Interim Agreement was based on PAL §1005(11) which authorizes the Authority to exercise all power necessary to effectuate the provisions to sell electric power.  Additionally, upon approval of the allocation on May 19, 2009, the Trustees provided that any and all action be taken to execute agreements to effectuate the approval of the allocation.  The Interim Agreement expires the earlier of December 31, 2010, or upon execution of a long-term contract, which is the Agreement now before the Trustees.

 

“The Agreement follows the format of the proposed Western New York contract extensions presented to the Trustees under a separate item.  As with the Western New York contracts, the Authority will provide firm electric service from the Niagara plant, consisting of firm power and energy, subject to pro-rata curtailment when there is insufficient generation at the Niagara and St. Lawrence/FDR facilities.  The power and energy will be sold on a direct-sale basis and the Authority will bill the Customer directly.  Delivery will be provided by the local utility, NYSEG, and billed directly by NYSEG to the Customer.

 

“In return for the 15 MW allocation, and as per the Trustees’ approval, the Agreement commits Yahoo! to spend $150 million to build the datacenter and to create 125 new jobs.  The allocation amount will be subject to an enforceable employment commitment of 125 jobs, and includes the annual job reporting requirements and job compliance threshold of 90%.  Should the Customer’s actual jobs reported fall below the compliance threshold, the Authority has the right to reduce the allocation on a pro-rata basis.  The rates, terms and conditions for the sale are contained in the relevant service tariffs.  Specifically, Service Tariff EP-1 (Exhibit ‘1c-A-1’) is effective through June 30, 2013 and Service Tariff WNY-1 (Exhibit ‘1c-A-2’) from July 1, 2013 until the expiration of the allocation in March 31, 2025.  The Agreement requires that an energy efficiency audit be conducted not less than once every five years during the term of electric service.

 

DISCUSSION

 

                “A public hearing was held on September 8, 2010 at 3:00 p.m. at the Niagara Power Project’s Power Vista Visitors’ Center (‘Visitors’ Center’).  Four relevant comments were submitted for the record in support of the Agreement.  (An additional party’s comments were extraneous to the Agreement.)  The official transcript of the public hearing is attached as Exhibit ‘1c-B.’  The parties and a summary of the comments follow:

 

                “Richard E. Updegrove, Chairman, Niagara County Legislature’s Economic Development Committee, stated that the County has supported the effort to bring Yahoo! into the area from the beginning of the siting process.  While a team of regional professionals came together to support the project, it was the allocation of ‘NYPA hydropower that prompted Yahoo! to choose Niagara County.’  By attracting Yahoo!, the area can now boast that it is the host to the world’s largest network of integrated services, which will help serve as a magnet for other high tech companies.

 

                “David R. Kinyon, Chief Executive Officer, Town of Lockport Industrial Development Agency, stated that the Town owns the industrial park that sold a 30-acre parcel to Yahoo! as part of the overall incentive package.  In addition, the availability of EP was a major incentive that factored into bringing Yahoo! to Western New York.  Since the allocation was awarded, Yahoo! has demonstrated its commitment to the economy by completing its Phase I business plan and by commencing with Phase II for its 180,000-sq.-ft. facility.

 

                “Senator George Maziarz is in favor of the allocation since Yahoo! ‘is just the right type of company that should be getting low-cost hydropower.’

 

                “Scott Noteboom, Yahoo!’s Vice President of Operations, noted that there are several Yahoo! data centers in the world.  Growing up in Detroit in a family of auto workers, he can sense the same work ethic in Buffalo as in Detroit.  Mr. Noteboom searches for places where productivity is highest and Buffalo/Lockport is among the most productive in the world.  Yahoo! will continue to grow, having completed Phase I and now entering Phase II.  In conclusion, he stated that ‘we want to make this a long term place to do business.’  

 

RECOMMENDATION

 

The Vice President – Marketing recommends that the Trustees approve the proposed Agreement for the sale of Expansion Power to Yahoo!, Inc. and authorize the transmittal of the Agreement to the Governor for his approval.

 

“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 Expansion Power Agreement for the sale of hydroelectric power and energy generated by the Authority for sale to Yahoo!, Inc. is in the public interest and should be submitted to the Governor for approval, and that it, along with the record of the public hearing thereon, be forwarded to the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee; and be it further

 

RESOLVED, That the Chairman and the Corporate Secretary be authorized and directed to execute such agreement in the name of and on behalf of the Authority after it has been approved by the Governor; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development, 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 negotiate and execute any and all documents necessary or desirable to implement the agreement with the Customer as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the Vice 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.

 


 

d.                   Preservation Power Contract with Florelle Tissue Corporation – Transmittal to the Governor 

 

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve the proposed agreement (‘Agreement’) for the sale of Preservation Power (‘PP’) to Florelle Tissue Corporation (‘Florelle’) and to authorize its transmittal to the Governor.  The proposed agreement with Florelle and the proposed Service Tariff No. ST-10 (‘ST-10’) are attached as Exhibit

‘1d-A.’

 

BACKGROUND

 

“At their meeting of June 29, 2010, the Trustees approved a 1,300 kW allocation of PP to Florelle and authorized a public hearing on the proposed contract and accompanying tariff (ST-10) on August 23, 2010.   Florelle is a Canadian company that plans to reopen a dormant paper mill in Jefferson County.  More than 60 people were employed at the plant when it closed in mid-2008.  Florelle would produce paper products for export to the Canadian market and plans to invest $3.5 million at the site and eventually create 75 jobs.  The facility’s reopening under Florelle Tissue would help reinvigorate the local economy and provide jobs to the displaced workers previously employed at the mill.

 

“The 1,300 kW PP allocation will be subject to an enforceable employment commitment of 75 jobs after three years of operation, and continuing over the term of the Agreement, which includes an annual job report to be submitted by Florelle to the Authority.  A job compliance threshold of 90% will apply.  Should Florelle’s actual jobs reported fall below the compliance percentage, the Authority has the right to reduce the hydropower allocation on a pro-rata percentage basis.  The firm electric service under the contract will be equivalent to that provided to all other Authority firm hydropower customers and is 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 rates for PP are also contained in Exhibit ‘1d-A’ (‘Schedule of Rates for Sale of Firm Power to Preservation Power Customers Service Tariff No. 10’).  The PP base rates are established through Rate Year 2013 (July 1, 2013 through June 30, 2014).  Consistent with the tariffs applicable to the Western New York hydropower customers, beginning in Rate Year 2014 (July 1, 2014), the base rates will be determined by an Annual Adjustment Factor (‘AAF’).  The AAF is composed of three indices measuring inflation.  The indices are:  (1) Industrial Power Price (Bureau of Labor Statistics); (2) Average Industrial Power Price (Energy Information Administration) and (3) Industrial Commodities Price Less Fuel (Bureau of Labor Statistics).

 

DISCUSSION

 

                “A public hearing was held on August 23, 2010 from 2:00 to 4:00 p.m. and 7:00 to 9:00 p.m. at the Frank S. McCullough, Jr. Hawkins Point Visitors’ Center at the St. Lawrence/FDR Power Project in Massena.  There were no oral statements made at the public hearing.  Written comments were submitted by two parties in support of the contract, the Jefferson County Industrial Development Agency (‘JCIDA’) and Florelle Tissue.  JCIDA encouraged the Authority to proceed with the Agreement and stated that this is the ‘first opportunity to utilize the Preservation Program.’  Continuing, JCIDA stated that ‘the cost savings afforded…will enhance [Florelle’s] cash flow to ensure their success.’  Florelle stated:  ‘Incentives of this type are an essential part of our manufacturing facility.’ 

 

RECOMMENDATION

 

The Vice President – Marketing recommends that the Trustees approve the proposed Agreement for the sale of Preservation Power to Florelle Tissue and authorize the transmittal of the Agreement to the Governor for approval.

 

“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 Preservation Power Agreement for the sale of hydroelectric power and energy generated by the Authority for sale to Florelle Tissue is in the public interest and should be submitted to the Governor for approval, and that it, along with the record of the public hearing thereon, be forwarded  to the  Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee; and be it further

 

RESOLVED, That the Chairman and the Corporate Secretary be authorized and directed to execute such agreement in the name of and on behalf of the Authority after it has been approved by the Governor; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development, 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 negotiate and execute any and all documents necessary or desirable to implement the agreement with the Customer as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the Vice 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.


 

e.                    Proposed Long-Term Contract Extensions for the Sale of Western New York Hydropower – Transmittal to the Governor

 

                               

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve the proposed contracts (‘Contracts’) to extend service applicable to the Western New York Replacement Power (‘RP’) and Expansion Power (‘EP’) customers (‘Customers’) and to authorize their transmittal to the Governor for approval.  The form of the Contracts, comprising an agreement for the sale of power and energy to the Customers (‘Agreement’) and the proposed Service Tariff No. WNY-1 (‘ST WNY-1’), is attached as Exhibit ‘1e-A.’

 

BACKGROUND

 

“At their meeting of May 26, 2010, the Trustees authorized a public hearing on the proposed long-term contract extensions for the sale of Western New York hydropower (RP and EP).  The initiative to extend contract terms was the result of two unrelated considerations.  The first consideration was the Customers’ recurring requests for long-term supply commitments beyond the terms of their current contracts.  The second consideration was the expiration of the sale-for-resale agreements that the Authority has with the delivering utilities, New York State Electric & Gas Corporation (‘NYSEG’) and National Grid.  (National Grid’s RP delivery agreement is scheduled through December 31, 2011, but is expected to be renewed through June 30, 2013; the EP resale agreements with both delivering utilities expire on June 30, 2013.)  With the termination of the sale-for-resale agreements anticipated on July 1, 2013, the Authority will implement, pursuant to the proposed contract extensions, direct billing for the power and energy provided to the Customers.  They will be charged separately for delivery services by the applicable delivering utility.

 

“As part of the contract extension evaluation process, Authority staff, with the assistance of the Empire State Development Corporation, developed a Request Form soliciting detailed information on the Customers’ wages and capital plans, among other things.  The Forms were evaluated in collaboration with the Center for Governmental Research.  The evaluation contained three general criteria:  jobs, public benefit and private benefit.  The results showed that the Customers represent a diverse spectrum of industries and bring valuable and varied economic benefits to New York State.

 

“The major features of the Agreement relate to both Customer commitments and enhanced compliance.  Specifically, there will be annual capital commitments during the life of the contract.  If these capital expenditures, based on historic levels, are not met, the Authority has the ability to reduce the Customer’s allocation.  Similarly, the job commitment threshold will be standardized to 90% of base employment levels, and allocations may be reduced if employment levels are not met.  For efficient contract administration, there will now be just one contract for those customers who have more than one allocation at their facility.  If a Customer receives an additional allocation, a schedule in the contract will be updated, rather than an entirely new contract being issued. 

 

“Accompanying the Agreement in Exhibit ‘1e-A’ is the proposed ST WNY-1.  Consistent with the delivery arrangements described above, ST WNY-1 reflects the direct-sale nature of the Contracts.  ST WNY-1 becomes effective July 1, 2013, and will replace the three existing Authority service tariffs that currently govern RP and EP.

 

“ST WNY-1 attains a measure of consistency with the Authority’s other proposed hydropower tariff, ST-10, relating to Preservation Power sales.  They both establish new base rates on July 1, 2013 and contain the same Annual Adjustment Factor, effective initially on July 1, 2014, and then every July thereafter. 

 

“The Authority sent the Contracts and a Letter of Acknowledgement (‘Letter’) to each Customer for their review and signature in March 2010.  The Letter stated that they accepted the terms and conditions of the extensions, and will execute the Contracts upon final approval by the Governor.  Of the 108 Customers offered extensions, 106 agreed to the terms and signed the Letter.  The other two, for business reasons, have chosen to let their allocations expire at the end of their current terms. 

 

“On March 25, 2010, the Authority’s Vice President – Marketing gave presentations on the contract extension initiative to the Customers at the Niagara Project Power Vista Visitors’ Center (‘Visitors’ Center’) and in Chautauqua County.  The presentation covered the contract terms, the rate phase-in, the public hearing process and the importance of Customers providing their historic capital investments.  Subsequent to the meetings, Authority account executives met with each Customer to discuss the terms of their individual proposed contract extension offering.

 

“The Customers accepting the Contracts to extend their allocations are shown in Exhibit ‘1e-B.’  There are 185 allocation extensions, comprising 85 EP allocations totaling 205,775 kW, and 100 RP allocations totaling 369,397 kW.  The 185 allocations represent 106 Customers, 104 of which have been offered seven-year contract extensions; two have been offered longer terms due to their extraordinary capital investments.  These 106 Customers have committed to retain and/or create 28,472 jobs.  Under the new capital expenditure commitment, the Customers have also agreed to spend $150 million/year for capital improvements and facility maintenance.  The capital investment and employment commitments provide a major benefit to New York State in return for the hydropower.

 

DISCUSSION

 

                “A public hearing was held on July 15, 2010 from 2:00 to 4:00 p.m. and 7:00 to 9:00 p.m. at the Visitors’ Center.   In total, oral statements were given by individuals representing 20 Customers and 23 organizations or elected officials.  The transcript of the public hearing is attached as Exhibit ‘1e-C.’  The participants may be categorized in seven distinct groups: (1) RP/EP hydro Customers; (2) labor unions; (3) non-hydro Customer businesses; (4) elected officials; (5) business interest groups; (6) non-profits and (7) delivering utility.  The specific companies/groups under each of the seven categories are listed in Table I.

 

                “Given the diversity of commenters’ interests, there was a remarkable commonality of opinion.  All parties agreed that the contract extensions should be approved, with the consensus that hydropower is the lifeblood of the Western New York region.  The first common point was the number of high-quality jobs created by the hydropower allocations.  The numerous labor unions supporting the contracts emphasized this observation.  Marc Ferguson from The Business Council of New York State cited the average manufacturing job wages for the five counties in Western New York as being 54%, or $18,672/year, higher than non-manufacturing jobs ($53,000 versus $34,300).  Many speakers also cited the role of low-cost hydropower in enabling the Customers to compete in both regional and global markets.  Several mentioned that their competition is from two sources, including other facilities within the same parent company.  If manufacturing costs are too expensive in Western New York, operations can be shifted to sister plants located elsewhere.  Intense global competition is evidenced by their competitors that operate plants in low-cost regions, such as Asia, that have distinct cost advantages; low-cost hydropower helps to equalize the disparate cost structures. 

 

                “Speakers also cited the significant positive impact of hydropower Customers in their support of other local businesses and non-profits.  Eight non-hydro businesses voiced their support of the contract extensions, since the hydro Customers are purchasers or customers of their services.  The Power for Economic Prosperity (‘PEP’) group, a business consortium comprising some of the larger hydropower Customers,  provided a chart that illustrates this inter-dependency.  The chart shows the business relationships among 13 different PEP companies.  One Customer, Praxair, is a supplier to eight PEP companies, and is, in turn, a customer of two PEP companies.   Finally, several Customers commented on their sizable contributions to charitable institutions.  Two non-profits, the United Way of Buffalo and Erie County and the United Way of Greater Niagara, spoke in favor of the contract extensions, with the latter reporting that 15% of its annual campaign contributions are made by hydropower companies in Niagara County.

 

                “In conclusion, there was universal support for the proposed contract extensions for the above-stated reasons.  PEP provided a summary of the role of the hydropower allocations in the Western New York  region by stating, ‘These businesses, their employees, and their suppliers are the economic backbone of the region.  Quite simply, the Replacement and Expansion Power companies buy locally, sell globally and pay good family sustaining wages and benefits.’

 

 

FISCAL INFORMATION

 

                “As stated above, ST WNY-1, applicable beginning July 1, 2013, specifies a three-year rate phase-in to a target rate, which is based on the proposed Preservation Power rate.  The impact of the fully implemented phase-in, absent the effects of the AAF, would produce additional annual revenues of approximately $38.7 million.

 

RECOMMENDATION

 

The Vice President – Marketing recommends that the Trustees approve the proposed Contracts for service extension and authorize their transmittal to the Governor for approval.

 

The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President – Corporate Planning and Finance, 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 contract extensions for the sale of hydroelectric power and energy generated by the Authority for sale to the Replacement Power and Expansion Power Customers are in the public interest and should be submitted to the Governor for approval, and that they, along with the record of the public hearing thereon, be forwarded  to the  Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee; and be it further

 

RESOLVED, That the Chairman and the Corporate Secretary be authorized and directed to execute such contract extensions in the name of and on behalf of the Authority after the agreements have been approved by the Governor; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development, 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 negotiate and execute any and all documents necessary or desirable to implement the contract extensions with the Customers as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the Vice 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.

 


 

TABLE I

 

Hydro Customers

E. I. Dupont                                                    Moog

FMC Corp.                                                    Niacet

Ford Motor Co.                                              Occidental Chemical Corp.

General Mills                                                   Olin

GM Components Holdings                             Praxair

General Motors                                              Saint Gobain

Goodyear Dunlop                                           Steuben Foods

Ingram Micro                                                  Treibacher Schleifmittel

Linde                                                              Unifrax

Luvata Buffalo                                                 Washington Mills

 

Labor Unions representing Hydro Customers
Ford Motor Co.                                            Occidental Chemical Corp.

General Mills                                                 Olin

General Motors                                             Praxair

Linde                                                            Saint Gobain

Luvato Buffalo                                              Unifrax

Niacet 

 

Non-Hydro Businesses                              

Charlie the Butcher                                         LaFayette Machine

Davis Ulmer Sprinkler                                    National Fuel

Dival Saftey Equipment                                  Conestoga-Rovers & Associates

Felton Machine                                              Cintas

Ferguson Electric

 

Elected Officials

Senator Bill Stachowski                                  Assemblyman Jack Quinn

Assemblywoman Francine Delmote                 Mayor Adam Tabelski

Senator George Maziarz

 

Business Interest Groups                               

Power for Economic Prosperity                      Buffalo Niagara Partnership

The Business Council of New York State       Citizen’s Advisory Council

Niagara US Chamber of Commerce               Niagara Co. Legislature’s Econ. Devel. Committee

 

Non-Profits

United Way of Buffalo & Erie Co.                United Way of Greater Niagara

 

IOU

National Grid

 


 

f.                    Hydropower Contracts with Upstate Investor-Owned Utilities for the Benefit of Rural and Domestic Consumers –

                Notice of Public Hearing  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

“The Trustees are requested to authorize two public hearings, pursuant to Section 1009 of the Public Authorities Law, on contract extensions for sale to National Grid (formerly Niagara Mohawk Power Corporation), New York State Electric and Gas Corporation (‘NYSEG’) and Rochester Gas and Electric Corporation (‘RGE’) (hereinafter referred to collectively as the ‘Utilities’) of up to a total of 455 MW of firm and 360 MW of firm peaking hydropower currently being sold to the Utilities for the benefit of rural and domestic consumers. The proposed contract extensions are attached as Exhibit ‘1f-A’ (National Grid), Exhibit ‘1f-B’ (NYSEG) and Exhibit ‘1f-C’ (RGE).

BACKGROUND

“The Utilities received a total of 553 MW of firm power from the St. Lawrence/FDR and Niagara Power Projects and 360 MW of firm peaking hydropower from the Niagara Project for the benefit of rural and domestic consumers under contracts signed in 1990 that expired on August 31, 2007 (the ‘Hydro Contracts’).  At their meeting of July 31, 2007, the Trustees approved an extension of the Hydro Contracts (the ‘2007 Contract Extensions’).  The 2007 Contract Extensions reflected a reduction in the amount of firm hydropower to be sold to the Utilities from 553 MW to 455 MW. The allocations of firm peaking hydropower remained unchanged.  The power is purchased at the cost-based hydropower rate and the benefits are passed on to the Utilities’ residential and small farm customers (the rural and domestic, or ‘R&D,’ customers) without markup under Public Service Commission tariffs. The 2007 Contract Extensions expired on June 30, 2008.

At their meeting of June 24, 2008, the Trustees approved an extension of the 2007 Contract Extensions (the ‘2008 Contract Extensions’).  The 2008 Contract Extensions continued the sale of firm and firm peaking hydropower to the Utilities in the amounts approved by the Trustees at their meeting of July 31, 2007: a total of 455 MW of firm and 360 MW of firm peaking. The 2008 Contract Extensions expired on December 31, 2009.

“At their meeting of July 28, 2009, the Trustees approved an extension of the 2008 Contract Extensions (the ‘2009 Contract Extensions’).  The 2009 Contract Extensions continue the sale of firm and firm peaking hydropower to the Utilities in the same amounts approved in the respective 2007 and 2008 extensions a total of 455 MW firm and 360 MW firm peaking. TheText Box:  
 2009 Contract Extensions have a term of 12 months to December 31, 2010, subject to earlier termination by the Authority on 30 days’ advance written notice.

Chapter 59 of the Laws of 2006 (Part U) authorized the creation by the Governor of a ‘Temporary State Commission on the Future of New York State Power Programs for Economic Development’ (‘Commission’). The charge to the Commission was to recommend to the Governor and the Legislature on or before December 1, 2006 ‘whether to continue, modify, expand or replace the state's economic development power programs, including but not limited to the power for jobs program and the energy cost savings benefit program...’

On December 1, 2006, the Commission issued its report, which included an array of findings and recommendations.  A key recommendation of the report was that, among other things, hydropower now sold to the Utilities be ‘redeployed’ for economic development purposes.

DISCUSSION

Since the 2009 Contract Extensions are scheduled to expire December 31, 2010, new Contract Extensions with the Utilities are necessary so that the benefits of low-cost hydropower can continue to flow to the Utilities’ R&D customers until such time as new legislation is enacted that redeploys this hydropower for other purposes. Should the Governor reject the Contract Extensions, the current contracts will expire on December 31, 2010.

The 2010 Contract Extensions would continue the sale of firm and firm peaking hydropower to the Utilities in the amounts approved by the Trustees at their July 28, 2009 meeting.  Specifically, for National Grid, 189 MW of firm and 175 MW of firm peaking, for NYSEG, 167 MW of firm and 150 MW of firm  peaking and for RGE, 99 MW of firm and 35 MW of firm peaking. The 2010 Contract Extensions would have a term of 12 months to December 31, 2011, subject to earlier termination by the Authority on 30 days’ advance written notice.

In addition to the termination provision specified above, the Authority may reduce or terminate service if it is determined to be necessary to comply with any ruling, order or decision by a regulatory or judicial body or the Trustees relating to hydropower and energy allocated under the proposed contracts.

FISCAL INFORMATION

The 2010 Contract Extensions provide that the Utilities continue to pay for hydropower at the same rates they are currently charged, that is, determined in accordance with the ratemaking principles incorporated in the Auer Settlement and subsequent rate settlements. Accordingly, no fiscal impact is associated with this contract extension.

RECOMMENDATION

The Director – Marketing Analysis and Administration recommends that the Trustees authorize two public hearings on the 2010 Contract Extensions with National Grid (formerly Niagara Mohawk Power Corporation), New York State Electric and Gas Corporation and Rochester Gas and Electric Corporation to be held at the Power Vista Visitors’ Center at the Niagara Power Project on Wednesday, November 3, 2010 from 3:00 p.m. to 7:00 p.m; and at Syracuse City Hall on Thursday, November 4, 2010 from 3:00 p.m. to 7:00 p.m, or at such other place and time designated by the Chairman.  It is further recommended that, pursuant to Section 1009 of the Public Authorities Law, the Corporate Secretary be authorized to transmit copies of the proposed contracts to the Governor and legislative leaders.

 

The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, 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 two public hearings on the terms of the contract extensions for the sale of hydroelectric power and energy generated by the Authority for sale to National Grid, New York State Electric and Gas Corporation and Rochester Gas and Electric Corporation to be held at the Power Vista Visitors’ Center at the Niagara Power Project on Wednesday, November 3, 2010 from 3:00 p.m. to 7:00 p.m.; and at Syracuse City Hall on Thursday, November 4, 2010 from 3:00 p.m. to 7:00 p.m., or such other place determined by the Chairman; and be it further

 

RESOLVED, That the Corporate Secretary be, and hereby is, authorized to transmit copies of the contract extensions 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 President and Chief Executive Officer or his designee be, and hereby is, authorized, subject to approval of the form thereof by the Executive Vice President and General Counsel, to enter into such other agreements, and to do such other things as may be necessary or desirable to implement the contract extensions with National Grid, New York State Electric and Gas Corporation and Rochester Gas and Electric Corporation as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the Vice 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.


 

g.                   Increase in New York City Governmental Customer Rates – Notice of Proposed Rulemaking 

The President and Chief Executive Officer submitted the following report:
 

SUMMARY

                “The Trustees are requested to authorize a Notice of Proposed Rulemaking (‘NOPR’) to increase the Fixed Cost component of the production rates by $1.3 million to be charged in 2011 to the New York City Governmental Customers (‘Customers’).

                     “In addition, the Trustees are requested to direct the Corporate Secretary to file the NOPR with the New York State Department of State for publication in the New York State Register in accordance with the requirements of the State Administrative Procedure Act (‘SAPA’). 
 

BACKGROUND

                “In 2005, the Authority and the Customers entered into supplemental agreements for the purchase of electric service through December 31, 2017.  These agreements (the 2005 ‘Long- Term Agreements,’ or ‘LTAs’) replaced prior agreements entered into during the mid-1990s with these Customers.  The LTAs established a new relationship between the Authority and the Customers that reflects the costs of procuring electricity in the marketplace managed by the New York Independent System Operator (‘NYISO’).  The LTAs define specific cost categories with respect to providing electric service, and prescribe a collaborative process for acquiring resources, managing risk and selecting a cost-recovery mechanism.

             “The LTAs separate all costs into two distinct categories: Fixed Costs and Variable Costs. Fixed Costs include Operation and Maintenance (‘O&M’), Shared Services, Capital Cost, Other Expenses (i.e., certain directly assignable costs) and a credit for investment and other income. Under the LTAs, the Authority must establish Fixed Costs based on Cost-of-Service (‘COS’) principles and make changes only under a rate case filing in accordance with SAPA requirements.  In addition, the LTAs contemplate that year-to-year changes in Fixed Costs will be reviewed by the Customers in advance of the filing made under SAPA; Authority staff must consider the Customers’ concerns before presenting any proposed changes to the Fixed Costs to the Trustees or issuing proposed changes for public comment.

                  “Also, pursuant to the LTAs, the Authority develops the Variable Costs on an annual basis.  These costs are the costs the Authority expects to incur to serve the Customers in the upcoming Rate Year, specifically for fuel and purchased power, risk management, NYISO ancillary services and O&M reserve, less a credit for NYISO revenues from generation dedicated to these Customers.  The Variable Costs are subject to the Customers’ review and comment.  The cost-recovery mechanisms for the upcoming year’s Variable Costs are selected by the Customers from among the choices set forth in the LTAs.  These cost-recovery mechanisms were previously approved by the Trustees and therefore are not a matter for the Trustees’ approval.

                “In the rate-setting process for the 2011 Rate Year, the Customers selected an ‘Energy Charge Adjustment (‘ECA’) with Hedging’ cost-recovery mechanism.  Under this mechanism, all Variable Costs are passed on to the Customers (i.e., the charges for electric service during the Rate Year are subject to adjustment based on the difference between the Variable Costs actually incurred to serve the Customers and the Variable Costs recovered by the Authority under its tariffs in the Rate Year; costs associated with hedging instruments purchased for the purpose of reducing potential volatility are assigned to the base Variable Costs).

DISCUSSION

“Based on the Preliminary 2011 COS, a Fixed Costs increase of $1.3 million is proposed for the Customers.  Collectively, the Fixed Costs are projected to be $161.8 million in 2011 versus $160.5 million in 2010.  Contributors to the additional Fixed Costs are increases in O&M ($1.7 million), Capital Costs ($1.7 million) and Shared Services ($0.3 million) offset by a reduction in Other Expenses ($2.3 million).  The $1.3 million represents an 0.8% increase.  The projected Variable Costs are expected to increase 8.5% from 2010 levels and are subject to change depending on the selected hedging strategies.  The current estimate of the 2011 production rate, combining the Fixed and Variable Costs, is projected to increase by about 7.7%.    

                “Under the LTAs, any proposed increase in the Fixed Costs component of the Customers’ production rates must be done in accordance with a SAPA proceeding.  The Customers will have opportunity to file comments in accordance with SAPA after the issuance of the NOPR.  After closure of the 45-day statutory comment period concerning the proposed rate action, Authority staff will take into consideration concerns that have been raised and will return to the Trustees at their meeting on December 13, 2010 to seek final adoption of the Fixed Costs rate.  Subsequent to such final adoption, staff will incorporate the approved Fixed Costs and the final Variable Costs that are determined in the rate-setting process with the Customers into new production rates to become effective with the January 2011 billing cycle.

                “All of the Customers would be subject to this proposed increase in the Fixed Costs component of their production rates.  This proposed action does not affect Westchester County and other local governmental entities in Westchester County, which are the subject of a separate Trustees’ action.                         

FISCAL INFORMATION

                 “The adoption of this proposal concerning the increase in Fixed Costs applicable to the Customers under the LTAs would result in the recovery of approximately $1.3 million in additional revenues to the Authority over current rates.  These new revenues are necessary to offset corresponding projected increases in the costs of serving the Customers.

RECOMMENDATION

                 “The Director – Market Analysis and Administration recommends that the Trustees authorize the Corporate Secretary to file a Notice of Proposed Rulemaking in the New York State Register for the adoption of an increase in the Fixed Cost component of the production rates by $1.3 million to be charged in 2011 to the New York City Governmental Customers.

                “It is also recommended that the Senior Vice President – Marketing and Economic Development, or his designee, be authorized to issue written notice of the proposed action to the affected Customers under the provisions of the Authority’s tariffs.

                “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, the Senior Vice President – Marketing and Economic Development, the Vice President – Controller and I concur in the recommendation.”

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

 

RESOLVED, That the Authority projects an increase in the Fixed Costs of serving the New York City Governmental Customers when comparing those costs contained in current rates to 2011 projected costs; and be it further

 

RESOLVED, That the Authority has entered into supplemental Long-Term Agreements with the New York City Governmental Customers and those agreements provide for the recovery of additional Fixed Costs through a rate filing under the State Administrative Procedure Act; and be it further

 

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

 

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

 

RESOLVED, That the Chairman, the Vice 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.

 

 

h.                   Decrease in Westchester County Governmental Customer Rates –Notice of Proposed Rulemaking

             The President and Chief Executive Officer submitted the following report:

 SUMMARY

                “The Trustees are requested to approve a Notice of Proposed Rulemaking (‘NOPR’) to decrease production rates by 16.37% as compared to 2010 rates for the Westchester County Governmental Customers (‘Customers’).

                     “In addition, the Trustees are requested to direct the Corporate Secretary to file the NOPR with the New York State Department of State for publication in the New York State Register in accordance with the requirements of the State Administrative Procedure Act (‘SAPA’).

BACKGROUND

“The Authority provides electricity to 104 governmental customers in Westchester County, which includes the County of Westchester, school districts, housing authorities, cities, towns and villages.  The County of Westchester is the largest single customer, accounting for about a third of sales.

“The basis of providing service is contained in the Supplemental Electricity Agreements (‘Agreements’) with the Customers.  The Agreements were approved by the Trustees at their meeting of December 19, 2006, and were signed by each of the 104 Customers.  Among other things, the Agreements permit the Authority to modify the Customers’ rates (for Rate Years subsequent to 2007) at any time based on a fully supported pro forma cost-of-service (‘COS’) subject to customer review and comment and compliance with the SAPA process; permit the Customers to fully terminate service on one year’s written notice, to be effective no earlier than January 1, 2012 and allow the Authority to apply an Energy Charge Adjustment (‘ECA’) mechanism to the Customers’ bills.

“The current 2010 base production rates were adopted by the Trustees at their meeting of December 15, 2009 when they approved a 14.17% decrease over 2009 rates.  Staff is now proposing a 2011 rate decrease which reflects the continuing reduction in the power supply costs as contained in the currently effective 2010 rates.  Through 2010, the power supply cost reductions have been reflected in monthly negative ECA and the 2011 rate decrease in base rates will reset the ECA to zero.

DISCUSSION

                “Consistent with the Authority’s past rate-making practices and with the rate-setting process set forth in the Agreements, the proposed production rate decrease is based on a pro forma cost-of-service for next year.  The Preliminary 2011 Cost of Service (‘COS’) for the Customers is $39.76 million.  The primary cost element, energy purchases, is $33.43 million and accounts for 84% of the total production costs.  Because these Customers have no dedicated generation facility, energy requirements are purchased from the market (in New York Independent System Operator Zones ‘G’ (Hudson Valley) and ‘A’ (Western New York).  The projected 2011 prices for these two zones are expected to be slightly lower than those that were projected for 2010 and incorporated into the rates that are currently in effect.  Further analysis shows that under current rates combined with a forecast of Customer purchases in 2011, the projected revenues would be $47.55 million, resulting in an over-collection of $7.78 million from Customers. 

“Therefore, staff is proposing a 16.37% reduction in base production rates to reflect the continued reduction in the power supply costs as contained in the currently effective 2010 rates.    However, it is very important to note that, through 2010, the power supply cost reductions have already been passed on to Customers via significantly negative monthly Energy Charge Adjustments and the proposed 2011 base production rate decrease will effectively reset the ECA to zero.  In other words, Customers’ production portion of their electricity bill from the Authority is expected to remain virtually the same as that for 2010.

        “Under the Agreements, the Authority must provide at least 30 days’ notice to the Customers of any proposed modification of rates and the proposed modification is subject to their review and comment.  Notification of the rate action was transmitted to the Customers on August 31, 2010.  Subsequent to the approval of this proposed action by the Trustees, the Customers will be mailed the Staff Report containing the Preliminary 2011 COS.

                “Following the notice period, there will be a 45-day statutory comment period (pursuant to SAPA rules) during which Authority staff will address any concerns raised by the Customers and interested parties or otherwise submitted to the Authority.  Staff will make any necessary changes to the proposed rate decrease and return to the Trustees at their meeting of December 13, 2010 to request approval of the final rate modification for 2011.              

FISCAL INFORMATION

                 “The proposed rate decrease is expected to reduce revenues collected through the base production rates by $7.78 million from the Customers for 2011, which will in turn stabilize the negative ECA charge and will ultimately cover the energy-serving costs. 

 RECOMMENDATION

                 “The Director – Market Analysis and Administration recommends that the Trustees authorize the Corporate Secretary to file a Notice of Proposed Rulemaking with the New York State Department of State for publication in the New York State Register for the adoption of a production rate decrease applicable to the Westchester County Governmental Customers.

                “It is also recommended that the Senior Vice President – Marketing and Economic Development, or his designee, be authorized to issue written notice of the proposed action to the affected Customers under the provisions of the Authority’s tariffs.

                “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, the Senior Vice President – Marketing and Economic Development, the Vice President – Controller and I concur in the recommendation.”

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

 

RESOLVED, That the Authority proposes a decrease in the production rates applicable to the Westchester County Governmental Customers as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development, or his designee, be, and hereby is, authorized to issue written notice of this proposed action to the affected Customers; and be it further

 

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

 

RESOLVED, That the Chairman, the Vice 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 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.


 

                                                                                                                                               

i.                     Extension of Temporary North Country Discount Program

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve an extension of the Temporary North Country Electricity Stimulus Plan (‘Plan’) covering the use of up to $10 million of the net margins produced by the sale of hydropower, temporarily turned back to the Authority, to provide electric bill discounts for up to one year to businesses located in the region of the State designated in State Law as the Preservation Power area.

 

BACKGROUND

 

                “The thirteenth paragraph of Section 1005 of the Public Authorities Law (‘PAL’), directs the Authority to sell hydropower from the St. Lawrence/FDR Power Project as Preservation Power (490 MW) to qualifying businesses in Franklin, Jefferson and St. Lawrence counties.  A portion of this power has been temporarily turned back to the Authority by one of its customers, Alcoa, as a result of the temporary curtailment of operations at its East Plant in St. Lawrence County.  At their meeting of May 19, 2009, the Trustees authorized the use of up to $10 million of the net margins produced by the sale of the returned hydropower to provide electric bill discounts for up to one year to businesses located in the region. 

 

                “For purposes of this Plan, net margins are defined as total wholesale market revenues derived from hydropower energy formerly sold to New York businesses as Preservation Power minus the Authority’s industrial rate for these types of power sales minus any costs incurred by the Authority to implement the Plan’s temporary arrangements.

 

DISCUSSION

 

                “The condition of the current economy continues to place added strain on many New York State businesses.  This Plan has provided welcome relief for the affected customers. 

 

“Staff recommends that some of the net margins produced by this sale into the market continue to be used temporarily to lower the prices of power paid by businesses located in the region served by allocations of Preservation Power.

 

                “Staff has reviewed the potential cost of extending the Plan against the Authority’s expected cash flow, cash position and reserve requirements, which are the primary business criteria staff uses to evaluate the feasibility of any initiatives such as the proposed Plan.  Based on this review, staff estimates that as much as $10 million may be made available over the next 12 months to distribute pursuant to the Plan and that the release of such amount by the Authority would not violate the above criteria, assuming the Authority achieves all of its other financial and operating goals during this period.

 

“Staff will update the Trustees regarding the Plan and the status of fund availability as needed.  Among other factors, fund availability may be affected by future allocations or renewed use of the power that is currently not being used by eligible businesses.

 

                “The Authority provided approximately $9.6 million to North Country businesses during the first year of the program.

 

FISCAL INFORMATION

 

                “Based on staff’s current projections, up to $10 million in funds will be made available to support the proposed Plan for up to 12 months.

RECOMMENDATION

 

                “The Senior Vice President – Marketing and Economic Development and the Senior Vice President – Corporate Planning and Finance recommend that the Trustees extend the Temporary North Country Electricity Stimulus Plan funded from unplanned net margins from the sale of hydropower at market prices for a period of the lesser of one year or the duration of the temporary curtailment of operations at the Alcoa facility and in an amount no greater than $10 million.

 

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 Authority hereby approves the extension of a Temporary North Country Electricity Stimulus Plan for the use of up to $10 million in net margins from the unplanned sale of Preservation Power at wholesale market prices to provide electric bill discounts to businesses located in the Preservation Power counties of Franklin, Jefferson and St. Lawrence for a period of the lesser of one year or the duration of the temporary curtailment of operations at the Alcoa East Plant in Massena, as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

                RESOLVED, That as a condition to making available the amount specified in the foregoing report of the President and Chief Executive Officer, the Senior Vice President – Corporate Planning and Finance or the Treasurer shall certify that such monies are not needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

 

                RESOLVED, That the Chairman or his designee be, and hereby is, authorized to execute any and all documents necessary or desirable to extend  such Temporary North Country Electricity Stimulus Plan; and be it further

 

                RESOLVED, That the Chairman, the Vice 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.


 

                                                                                                                                                               

j.                     Power Contract with the Town of Massena – Massena Electric Department  

                    

The President and Chief Executive Officer submitted the following report:

 

 

SUMMARY

 

                “The Trustees are requested to authorize the proposed power contract with the Town of Massena, Massena Electric Department (‘MED’) for the sale of 20 megawatts (‘MW’) of Authority hydropower.  The form of the agreement with MED (‘Agreement’) generally follows a standard form and is attached as Exhibit ‘1j-A,’ along with the accompanying proposed Service Tariff No. HC-2.  This request follows the public hearing and comment period authorized by the Trustees at their May 26, 2010 meeting.  A public hearing was held on July 22, 2010.

 

BACKGROUND

 

                “As part of the St. Lawrence/FDR Project relicensing, the Authority successfully negotiated a return to New York State of 33.5 MW of the 68 MW of Project power that under the prior license had been sold to certain neighboring states.  The Authority has, since the conclusion of the relicensing process, supported the use of some of this ‘recaptured’ power to provide 20 MW of hydropower for economic development purposes in the vicinity of the Project; 17.2 MW of the ‘recaptured’ power is available for this purpose.  With 2.8 MW of St. Lawrence/FDR power available for withdrawal from the three upstate investor-owned utilities, the Authority can provide the 20 MW to the North Country to be used for economic development under the proposed power contract.

 

DISCUSSION

 

                “The proposed Agreement generally follows the Authority’s standard form and is attached as Exhibit ‘1j-A,’ along with the accompanying proposed Service Tariff No. HC-2.  The Agreement provides for the sale of up to 20 MW of hydropower at the Authority’s cost-based rate to MED, which is authorized by New York law to engage in the purchase from the Authority and resale of St. Lawrence/FDR power for economic development purposes.  MED currently purchases Niagara Project preference hydropower to serve all classes of retail customers in the Town of Massena and surrounding areas comprising its service area.  Under the proposed Agreement, MED will separately purchase and distribute the 20 MW of power for economic development purposes within its service area and, through means to be determined, to businesses outside its service area but within St. Lawrence County.  MED’s economic development program description, allocation criteria and methodology will be submitted to the Authority for approval prior to MED’s distribution of this hydropower.  MED’s program must be consistent with the principles for approving economic development proposals as established under the multiparty agreement authorized by the Trustees at their May 26, 2010 meeting among the St. Lawrence River Valley Redevelopment Agency members, the St. Lawrence County Industrial Development Agency and the Authority.  The initial term of the Agreement is through 2025 with a commitment to negotiate a new contract with a term through the end of the current St. Lawrence/FDR license in 2053. 

 

“This proposed contract is subject to a public hearing and approval by the Governor as set forth in Public Authorities Law (‘PAL’) §1009.  A public hearing was held in accordance with PAL §1009 on July 22, 2010 at the Frank S. McCullough, Jr. Hawkins Point Visitors’ Center at the Authority’s St. Lawrence/FDR Power Project in Massena from 2-4 p.m. and 7-9 p.m.  Following review of the comments on the public record, which are attached as Exhibit ‘1j-B,’ along with the transcript of the public hearing itself, it has been determined that no additional items need to be addressed. 

 

FISCAL INFORMATION

 

                “The power sale will be at the Authority’s cost-based rates and thus will recover the Authority’s cost of production.

 

RECOMMENDATION

 

                “The Senior Vice President – Marketing and Economic Development recommends that the Trustees approve the terms of the proposed Agreement with the Town of Massena, Massena Electric Department.  It is further recommended that, pursuant to PAL §1009, the Corporate Secretary be authorized to transmit a copy of the contract to the Governor for approval.

 

“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 hereby authorize for transmittal to the Governor the proposed Agreement for the sale of 20 MW of Authority hydropower and energy to the Town of Massena, Massena Electric Department; and be it further

 

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

 

RESOLVED, That the President and Chief Executive Officer and the Chief Operating Officer, or their designees, be, and each of them 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 Agreement with the Town of Massena, Massena Electric Department as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the Vice 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.

 


 

k.                   Procurement (Services) Contracts – Business Units and Facilities – Awards and Extensions  

 

The President and Chief Executive Officer submitted the following report:

 

 

SUMMARY

“The Trustees are requested to approve the award and funding of the multiyear procurement contracts listed in Exhibit ‘1k-A,’ as well as the continuation and funding of the procurement contracts listed in Exhibit ‘1k-B,’ in support of projects and programs for the Authority’s Business Units/Departments and Facilities.  Detailed explanations of the recommended awards and extensions, including the nature of such services, the bases for the new awards if other than to the lowest-priced bidders and the intended duration of such contracts, or the reasons for extension, the additional funding required and the projected expiration dates, are set forth in the discussion below.

BACKGROUND

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

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

“The Authority’s EAPs also require the Trustees’ approval when the cumulative change- order value of a personal services contract exceeds the greater of $500,000 or 25% of the originally approved contract amount not to exceed $500,000, or when the cumulative change-order value of a non-personal services, construction, equipment purchase or non-procurement contract exceeds the greater of $1 million or 25% of the originally approved contract amount not to exceed $3 million.

DISCUSSION

Awards

“The terms of these contracts will be more than one year; therefore, the Trustees’ approval is required.  Except as noted, all of these contracts contain provisions allowing the Authority to terminate the services for the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  Approval is also requested for funding all contracts, which range in estimated value from $285,600 to $15 million. Except as noted, these contract awards do not obligate the Authority to a specific level of personnel resources or expenditures.

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

Extensions

 

                “Although the firms identified in Exhibit ‘1k-B’ have provided effective services, the issues or projects requiring these services have not been resolved or completed and the need exists for continuing these contracts.  The Trustees’ approval is required because the terms of these contracts will exceed one year including the extension, the term of extension of these contracts will exceed one year and/or because the cumulative change order limits will exceed the levels authorized by the EAPs in forthcoming change orders. The subject contracts contain provisions allowing the Authority to terminate the services at the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  These contract extensions do not obligate the Authority to a specific level of personnel resources or expenditures.

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

                “The following is a detailed summary of each recommended contract award and extension.

 

Contract Awards in Support of Business Units/Departments and Facilities:

Business Services

Finance – Insurance Management

“The Authority has been self insured for Workers’ Compensation since 1995 and has awarded contracts, as a result of competitive bidding at five-year intervals, to provide third-party administrative (‘TPA’) services for its Workers’ Compensation program. Since the current contract for such services expires in December 2010, bid documents (Q10-4775) were prepared by staff and downloaded electronically from the Authority’s Procurement Web site by 35 firms, including those that may have responded to a notice in the New York State Contract Reporter; two additional firms obtained the bid documents without downloading.  Eleven proposals were received and evaluated.  Six of the responding bidders were eliminated based on a review of their respective proposals, which did not meet the Authority’s needs (e.g., some claims adjuster caseloads far exceeded a manageable level and some firms lacked the requisite reporting or electronic capabilities, among other factors). Four of the five remaining bidders were invited to make presentations to further explore their qualifications; the fifth bidder was the incumbent, which was deemed qualified without a presentation. Staff determined that only one of the four firms that made presentations offered the technology, funding methodology, fees, claims- handling procedures and dedicated staff resources to meet the Authority’s needs and was deemed to be qualified. The two qualified bidders were then evaluated further, based on comparative pricing. Based on the foregoing, staff recommends the award of a contract to PMA Management Corp., the lowest-priced qualified bidder, which meets the bid requirements. Since the contract is not being awarded to the incumbent provider, a transition period is required for the transfer of personnel files and to set up accounts and program files prior to the commencement of actual third-party administrative services on January 1, 2011.  In order to allow sufficient lead time for the new vendor to prepare for the January 1 cut-over date, the contract would become effective on or about October 1, 2010, for an intended term of up to five years and three months, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $780,000.  It should be noted that this amount does not include actual claims funding.

Energy Services and Technology (‘ES&T’)

         Engineering and Design

                “The contract with FRA Engineering, Architecture & Land Surveying, P. C. (‘FRA’), a T.Y. Lin International Company, (Q10-4777; PO# TBA), would provide for on-call services of code compliance engineers to support Energy Services projects at various Authority customer facilities throughout New York State, as needed.  Services include, but are not limited to, performing plan reviews of construction drawings and project specifications, code review of engineering and design documents and construction field inspections, as well as code research and analyses, in compliance with all applicable federal, state and local codes, standards and regulations. Such plan review and construction field inspection services are required in connection with the construction permitting process for such projects. One Authority customer, the New York State Office of General Services (‘OGS’), typically performs its own construction permitting. However, due to the impact of budget constraints, OGS has requested the Authority to provide this service for its Energy Services projects at OGS facilities, in order to meet project schedules. To that end, Authority staff prepared a Request for Proposals for the services of code compliance engineers to support Energy Services projects at both OGS and other Authority customer facilities. Bid documents were downloaded electronically from the Authority’s Procurement Web site by 69 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Eight proposals were received and evaluated; of this number, one proposal was incomplete and was not considered further. The remaining seven bids were evaluated in detail, based on criteria that included, but were not limited to, code enforcement certification, plan review experience, mechanical/electrical/plumbing background and competitive pricing. Pricing clarifications were also requested from and provided by one of the bidders.  Based on the firm’s qualifications, experience and composite hourly rate, staff recommends the award of a contract to FRA, the lowest-priced and most technically qualified bidder, which meets or exceeds the bid requirements. The contract would become effective on or about October 1, 2010 for an intended term of up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $425,000.  All costs will be recovered by the Authority.

                “The contracts with Municipal Testing Laboratory, Inc. (‘Municipal’) and Universal Testing & Inspection Services, Inc. (‘Universal’) (Q10-4767; PO# TBA) would provide for special inspection and laboratory testing services for Energy Services projects at various customer facilities in New York City, on an ‘as needed’ basis.  Such services are required for compliance with New York State (‘NYS’) and New York City (‘NYC’) Building Codes; new rules in NYC require that the Authority hire firms providing special inspection and laboratory services directly.  Services may include, but are not limited to:  performing special inspections of selected materials, equipment, installation, methods of construction, fabrication, erection or placement of components and connections to ensure compliance with code and approved construction documents, as regulated by the NYS and NYC Building Codes and in compliance with all other applicable codes and regulations;  performing material testing, field, plant and laboratory sampling, measurements, observations, testing, analyses, interpretations and recommendations; as well as testing and inspection of elevators, progress inspection items, electrical, plumbing and drainage, chemical analysis and other services as may be required. Such Special Inspection firms, including testing and calibration laboratories, must also be approved by the New York City Department of Buildings (‘NYCDOB’) and accredited by International Accreditation Services or an equivalent agency.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 34 firms, including those that may have responded to a notice in the New York State Contract Reporter. Three proposals were received and evaluated. Staff reviewed the bids in detail and determined that each of the bidders is qualified. The cost of a typical project was also calculated using each bidder’s rates.  Based on the foregoing, staff recommends the award of contracts to two firms, Municipal and Universal, the lowest-priced bidders, which are qualified to perform such services, meet the bid requirements and provide competitive pricing.  The award of contracts to two firms is recommended to ensure adequate coverage for all such projects, especially during peak workload periods. Assignments will be made on the basis of available resources and performance. Due to the need to commence services and support ongoing projects, interim approval was obtained in accordance with the Authority’s Guidelines for Procurement Contracts and EAPs to award a contract to Municipal (4600002321), effective August 26, 2010, in the initial amount of $100,000, subject to the Trustees’ ratification and approval at their next scheduled meeting.  The Trustees are hereby requested to ratify and approve award of the subject contract with Municipal and to approve the award of a contract to Universal, which would become effective on or about October 1, 2010, for an intended term of up to five years.  Approval is also requested for the total aggregate amount expected to be expended for the term of the contracts, $5 million.  Such contracts will be closely monitored for utilization levels, available approved funding and combined total expenditures.  All costs will be recovered by the Authority.

Enterprise Shared Services (‘ESS’)

Information Technology

                “The Authority uses contractors to augment its technical staff to support various IT efforts and initiatives related to the SAP enterprise-wide financial/business management system, as necessary.  In an effort to prequalify firms to provide the services of temporary programming personnel for specialized SAP-related tasks and projects to support human resources, materials management, business intelligence and other areas, bid documents (Q10-4731) were prepared by staff and were downloaded electronically from the Authority’s Procurement Web site by 119 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Thirty-four proposals were received and evaluated to identify a ‘short list’ of prequalified firms providing specialized SAP temporary programming personnel.  The evaluation process included, but was not limited to, the following criteria as primary considerations:  the bidder’s depth of SAP practice and company resources; experience in the tri-state area, as demonstrated by the references provided; understanding of the SAP skill set based on the quality of résumés submitted; responsiveness (completeness) of the bidder’s proposal and competitive rates.  Based on a thorough review of the proposals, the following 12 firms were identified as a result of the prequalification selection process: Randstad Professionals US, LP dba ACSYS, Inc., BayForce Technology Solutions, Inc., Carlyle Consulting Services, Inc., Datrose, Inc., *Eclaro International, Inc., Mitchell/Martin Inc., RCG Information Technology, Inc., *Sage Group Consulting, Inc., *Sapta Global, Inc., *Sierra Infosys, Inc., Tata America International Corp. dba TCS America and *Unique Comp, Inc. (PO#s TBA). These firms were the most technically qualified bidders that meet or exceed the aforementioned evaluation criteria and bid requirements.  As specific positions are required, the Authority will request résumés of candidates based on the requirements and experience required for each position from all 12 prequalified firms. Contracts will only be awarded to those firms that successfully place a candidate, as each required position is bid among the entire prequalified group and the best candidate is selected.  Competition among the group is expected to provide qualified talent from a wide variety of firms.  Contracts would become effective on or about October 1, 2010 for an intended term of up to two years, subject to the Trustees’ approval, which is hereby requested.  All contracts will expire on September 30, 2012, regardless of their duration.  Approval is also requested for the aggregate total amount expected to be expended for the term of the contracts, $3 million. Commitments will be made through individual purchase order releases against master outline agreements with the successful firms, as positions are required; total commitments and expenditures for all such awarded contracts will also be tracked against the approved aggregate total. It should also be noted that five of these firms, identified by an asterisk preceding the respective company name, are New York State-certified Minority/Women-owned Business Enterprises (‘M/WBEs’).

Marketing and Economic Development

 

Customer Load Forecasting

 

                “The contract with KEMA, Inc. (‘KEMA’) (Q10-4823; PO# TBA) would provide for load research, forecasting and evaluation consulting services, as well as demand response program analysis. The latter may include, but  not be limited to, assisting Authority staff with analysis of facility load data and surveys at the facility level and in aggregate, development or evaluation of demand response verification methodologies, peak load reduction event performance potential and actuals or generator permitting assistance.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 17 firms, including those that may have responded to a notice in the New York State Contract Reporter.  One proposal was received and evaluated. The proposal demonstrated the strengths and abilities that KEMA has in house to provide high-quality load research, forecasting and evaluation services to the Authority.  Procurement staff followed up with firms that declined to bid; their principal reasons for not bidding included, but were not limited to, the work/project requirements not being in their area of expertise, scope of work or skill set, resources were not available, didn’t have the time for a best effort or they had downloaded the bid documents for information purposes only.  Based on the firm’s collective qualifications, extensive experience and reasonable pricing, staff recommends award of a contract to KEMA, which is eminently qualified to perform such services, meets or exceeds the bid requirements and has provided satisfactory services under a prior contract for such work.  The new contract would become effective on or about January 1, 2011 for an intended term of up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $2.5 million.

Power Supply

                “The contract with Colden Corp. (Q10-4789; PO# TBA) would provide for industrial hygiene, occupational health and safety services to all Authority operating facilities and offices statewide, on an ‘as needed’ basis.  Services include field work, laboratory sample analyses and consulting/audit services, as well as training, and may also include investigative/evaluative services regarding employee exposure/risk assessments, indoor air quality and ergonomic concerns, as may be requested.  Analyses of air and bulk samples for various fixed or airborne contaminants include, but are not limited to:  organic and inorganic solvents, pesticides and herbicides, PCBs, asbestos, silica, metals, dust, fumes, microbials, etc.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 22 firms, including those that may have responded to a notice in the New York State Contract Reporter. Three proposals were received and evaluated in detail, based on criteria that included, but were not limited to, the following: staffing levels (per job classification and respective geographic location), credentials/certifications (individual and organizational), services available (and whether in house or subcontracted), expertise, experience, equipment rental fees, transportation methods, estimated labor costs (hourly rates), etc.  Based on the firm’s qualifications, experience, professionally diversified and credentialed staffing, ability to perform the work and to meet the Authority’s needs in a timely and cost-effective manner and reasonable pricing, as well as its responsiveness to the Authority’s specifications, staff recommends award of a contract to Colden Corp., the lowest-priced qualified bidder, which meets or exceeds the bid requirements and has provided excellent, reliable service under an existing contract for such work. Colden is also capable of providing epidemiological and regulatory research and compliance support.  Furthermore, staff resources are strategically located in New York State (East Syracuse and the Albany/New York City metropolitan area), as well as in Philadelphia, Pennsylvania, ensuring a timely and cost-effective response to all Authority facilities.  Additionally, Colden’s close proximity to its contracted laboratories ensures rapid transfer of collected samples for analyses.  (The firm with the lowest labor rates demonstrated experience primarily in environmental remediation and asbestos/lead/mold abatement services, but lacked the requisite industrial hygiene, occupational health and safety experience to meet the Authority’s needs.  Additionally, lack of proximity to the Authority’s upstate facilities was also a concern with regard to emergency response time, as well as additional costs; and the firm’s proposal was not fully responsive to several other requirements set forth in the bid documents. The third proposal was generally unresponsive, with labor costs that were considerably higher than those submitted by the other two firms.)  The new contract with Colden would become effective on or about October 1, 2010 for an intended term of up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $2.2 million.

                “The contract with Day & Zimmermann NPS, Inc. (‘DZNPS’) (Q10-4784; PO# TBA) would provide for general maintenance support services for the Southeastern New York (‘SENY’) plants (including the 500 MW and Flynn Plants, as well as the Small Clean Power Plants, ‘SCPPs’).  Such services would generally consist of providing skilled craft labor to supplement and assist the Authority’s plant employees during periods of routine maintenance, scheduled outages, emergency shutdown or technical inspections, as directed by Authority management at the respective SENY facilities.  The following categories of work may be required:  general plant maintenance, plant modifications and corrections and retrofit work. Bid documents were downloaded electronically from the Authority’s Procurement Web site by 79 firms, including those that may have responded to a notice in the New York State Contract Reporter. Two proposals were received and evaluated.  Based on its qualifications, extensive experience and ability to perform such work, in addition to competitive pricing, staff recommends award of a contract to DZNPS, the lowest-priced bidder, which is qualified to perform such services, meets the bid requirements and has provided satisfactory services under an existing contract for such work. In addition, the craft markup fee will remain firm for the duration of the contract; the only increases will be in the actual craft labor rates as determined by increases in the New York State Prevailing Wage Rates and applicable collective bargaining agreements, as well as any government-mandated changes to FICA, FUI, SUI and MTA or any specialty or additional federal, state or local taxes. The new contract would become effective on or about November 1, 2010 for an intended term of up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $15 million.

                “The contract with EPIC Contracting of Orchard Park, Inc. (‘EPIC’) (Q10-4805; PO# TBA) would provide for long-term asbestos abatement services for the Niagara Power Project (‘Project’). Certain areas within the Project contain a significant amount of asbestos piping and ductwork insulation, which has deteriorated over time, representing a regulatory liability. This project will abate remaining asbestos from designated areas 10 feet up from the floor to eliminate the potential for further damage and to remove the restrictive conditions associated with working on and around asbestos-containing material. In addition, several areas to be abated are coated with paint containing high levels of heavy metals and PCBs, which will be properly removed and disposed of at an approved site, thereby reducing the overall liability at the Project. Contract services would include all labor, supervision, materials and equipment (except those specified in the Contract documents to be provided by others), insurance, permits, all other forms of governmental approval and any other services necessary to perform all operations required for the abatement and remediation of areas known to contain asbestos-containing materials, as well as re-insulation and painting, as further set forth in the specifications. Bid documents were downloaded electronically from the Authority’s Procurement Web site by 48 firms, including those that may have responded to a notice in the New York State Contract Reporter. Three proposals were received and evaluated.  Based on the contractor’s qualifications, experience and competitive pricing, staff recommends award of a contract to EPIC, the lowest-priced bidder, which is qualified to perform such services and meets the bid requirements. The contract would become effective on or about October 1, 2010 for an intended term of up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $775,000.

                “The contract with McQuay International (‘McQuay’) (RFQ 6000113018; PO# TBA) would provide for preventive maintenance and repair services for 11 centrifugal chillers at the SCPPs, including Brentwood.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 21 firms, including those that may have responded to a notice in the New York State Contract Reporter. Three proposals were received and evaluated. Based on its qualifications, experience and reasonable pricing, staff recommends award of a contract to McQuay, the lowest-priced bidder, which is uniquely qualified to perform such services as the Original Equipment Manufacturer, meets the bid requirements and has provided satisfactory service under prior contracts for such work. The new contract would become effective on or about October 1, 2010 for an intended term of up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $500,000.

                “The contract with OP-TECH Environmental Services, Inc. (‘OP-TECH’) (Q10-4826; PO# TBA) would provide for on-site cleaning and abatement services of lead and PCB-containing paint on rotor pole assembly equipment, including priming and repainting, as part of the Life Extension and Modernization (‘LEM’) program at the St. Lawrence / FDR Power Project.  Contract services will include all labor, supervision, materials and equipment (except those specified in the Contract documents to be provided by others), insurance, permits and any other services necessary to perform all operations required for the abatement and cleaning of lead/PCBs, as further set forth in the specifications.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 36 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Four proposals were received and evaluated, of which one was non-responsive and was not considered further.  Based on the contractor’s qualifications, experience and competitive pricing, the staff recommends the award of a contract to OP-TECH, the lowest-priced bidder, which is qualified to perform such services and meets the bid requirements.  The contract would become effective on or about October 1, 2010 for an intended term of up to two years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $285,600.

Contract Extensions and/or Additional Funding:

Energy Services and Technology

 Research and Technology Development

                “The contract with CEATI International, Inc. (‘CEATI,’ Centre for Energy Advancement through Technological Innovation) (4500101572) provides for membership and participation in CEATI research and development programs and the projects related to those programs.  CEATI brings electrical industry professionals together, through focused interest groups and collaborative projects, to identify and address technical issues that are critical to their respective organizations. Participants can undertake projects that respond to their strategic goals at a fraction of the cost of doing so independently.  To that end, at their meetings of December 14, 2004 and December 18, 2007, respectively, the Trustees approved the award, funding and subsequent extension through December 31, 2010 of a contract with CEATI to provide for the continuation of the Authority’s membership and participation in the activities of 11 Interest Groups. Such membership and project participation, ongoing since 1999 under previously issued contracts, provide the Authority with an opportunity to collaborate with Canadian and other participating utilities and to identify technology issues and challenges of common concern and work cooperatively to find cost-effective solutions. The Authority participates in the following Interest Groups: Dam Safety, Hydraulic Plant Life, Water Management, Strategic Options for Sustainable Power Generation, Life Cycle Management of Substation Equipment and Apparatus, Power System Planning and Operation, Transmission Line Asset Management, Overhead Line Design Issues and Wind and Ice Storm Mitigation, Transmission Underground Cables, Transmission Infrastructure Protection and Customer Energy Solutions, and has also joined the Grounding and Lightning Task Force. These groups bring together leading experts from nearly 100 participating utilities representing both large and small Canadian, other North American, European and Asian utilities.  Continuing involvement with these Interest Groups provides significant benefits to the Authority by providing access to the latest technical information available in the field, as well as co-funding opportunities for various Authority-sponsored projects.  The existing contract became effective on January 1, 2005.  A three-year extension is now requested in order to provide for the continuation of the aforementioned membership and project participation.  For administrative purposes, staff recommends issuing a Change Order to the existing contract rather than issuing a new sole-source award.  The current contract amount is $1,617,495 (of the $1,618,675 previously approved by the Trustees); staff anticipates that additional funding in the amount of $895,000 will be required for the extended term, to include Interest  Group participation fees, certain Technology Watch fees and specific project participation in the CEATI programs. The Trustees are requested to approve the extension of the subject contract through December 31, 2013, as well as the additional funding requested, thereby increasing the total approved contract value to $2,513,675 over the course of the total nine-year term.

Power Supply

Project Development, Licensing and Compliance

                “The contract with Kleinschmidt Associates, PA, PC (‘KA’) (4600001840) provides for engineering design services for the Nichols Island and Little Sucker Brook Habitat Improvement Projects (‘HIPs’) at the St. Lawrence/FDR Power Project, in compliance with the requirements set forth in the New License and the Comprehensive Relicensing Settlement Accord.  The contract, which was competitively bid, became effective on October 1, 2007 for a term of up to 3.25 years, in the amount of $579,000.  The original contract term assumed a very aggressive schedule to design, permit, construct and complete these two HIPs.  The schedule was extended due to several factors; foremost among these were the need for additional geotechnical work, re-alignment of several dikes and a permanent access road due to the discovery of a number of historic properties, review of the design elevation of another dike and to obtain an easement. The design work is now complete and construction is expected to begin later this year, subject to the permitting process. An extension of up to 1.75 years is therefore requested to provide for continued design and engineering support services during, and upon completion of, construction to address design questions that may arise during construction and to furnish the record drawings for the completed installations. As the Engineer of Record for these facilities, KA is very familiar with all the design bases and other considerations that influenced their design, and is uniquely qualified to efficiently and cost-effectively vouch for the adequacy of the design, as well as to furnish sealed record (‘as-built’) drawings.  The current ‘released’ amount is $507,413, of which $440,192 has been expended to date; staff anticipates that no additional funding in excess of the previously approved $579,000 will be required for the extended term.  The Trustees are requested to approve the extension of the subject contract through September 30, 2012, with no additional funding requested.

FISCAL INFORMATION

“Funds required to support contract services for various Business Units/Departments and Facilities have been included in the 2010 Approved O&M Budget.  Funds for subsequent years, where applicable, will be included in the budget submittals for those years.  Payment will be made from the Operating Fund.

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

RECOMMENDATION

                “The Vice President – Project Management, the Vice President – Engineering, the Vice President – Environment, Health and Safety, the Vice President – Project Development, Licensing and Compliance, the Vice President – Procurement, the Vice President – Information Technology/Chief Information Officer, the Chief Technology Officer, the Director – Engineering and Design (ES&T), the Director – Customer Load Forecasting, the Director – Risk Management (Insurance), the Regional Manager – Northern New York, the Regional Manager – Central New York, the Regional Manager – Western New York and the Regional Manager – Southeastern New York recommend that the Trustees approve the award of multiyear procurement contracts to the companies listed in Exhibit ‘1k-A,’ and the extension and/or additional funding of the procurement contracts listed in Exhibit ‘1k-B,’ for the purposes and in the amounts discussed within the item and/or listed in the respective Exhibits.

                “The Chief Operating Officer, the Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Executive Vice President and Chief Engineer – Power Supply, the Senior Vice President – Power Supply Support Services, the Senior Vice President – Energy Services and Technology, the Senior Vice President – Marketing and  Economic Development, the Senior Vice President – Corporate Planning and Finance, the 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 pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the award and funding of the multiyear procurement services contracts set forth in Exhibit “1k-A,” attached hereto, are hereby approved for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the contracts listed in Exhibit “1k-B,” attached hereto, are hereby approved and extended for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That the Chairman, the Vice 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.


 

l.                     Revisions to the Governing Policy for Energy Risk Management   

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the revised Governing Policy for Energy Risk Management (the ‘Policy’), which is attached hereto as Exhibit ‘1l-A.’  The Policy supersedes the Revisions to the Governing Policies for Energy Risk Management approved by the Trustees at their meeting of January 31, 2006; the Policy also supersedes the Trustee-approved action of February 26, 2008, which revised the schedule of authorized transaction limits for forward transactions used to hedge energy-related commodity risk. The limits for short-term procurement of physical natural gas, gas transportation, fuel oil and emissions allowances, as required for operation of the Authority fossil-fueled generation plants, remains as authorized under the Trustee-approved action of February 26, 2008.   The Policy also supersedes the Trustee-approved action of June 30, 2009 which revised the limits for collateral in support of forward transactions. 

 

“The recommended Policy establishes an Executive Risk Management Committee (‘ERMC’), chaired by the Executive Vice President – Chief Financial Officer and consisting of the chair and four other Authority executives appointed by the President and Chief Executive Officer.  The Policy authorizes the ERMC to establish and administer a well-structured and controlled set of activities for mitigating unwanted effects of volatility in the energy commodity markets to which the Authority and its customers are routinely exposed.  These activities are collectively referred to as the Energy Risk Management Program (‘the Program’).

 

“The Policy requires the establishment of procedures to conduct and control the Program within the guidelines articulated by the Policy, and delegates to the ERMC the authority to establish such procedures.  These requirements include delineating functions and defining clear separation of duties among Authority staff, establishing appropriate tolerance limits for market, credit and collateral exposures, defining allowable hedging instruments, specifying reporting requirements and establishing limits for individuals authorized to execute transactions.  

 

“The Policy also requires the Executive Vice President – Chief Financial Officer to report quarterly to the Trustees as to the status of established procedures, compliance with those procedures, and the activities of the Program.  In supplement to the quarterly reporting requirement, the Program’s risk-mitigation activities will be subject to compliance reviews as prescribed by the Authority’s Internal Audit function. 

 

BACKGROUND

 

“The evolution of wholesale markets for energy and energy-related commodities, coupled with the emergence of increased and at times acute volatility in these markets, has, since 1988, precipitated the Authority to seek the Trustees’ approval of several actions pertaining to the mitigation of these risks.  Of these several actions, the January 31, 2006 approval of Governing Policies for Energy Risk Management and the February 26, 2008 approval of Revisions to the Transaction Authorization Limits for Energy and Energy-Related Financial Transactions prevail as the governing documents for the Authority’s risk-mitigation activities.  As the energy markets have continued to evolve and there have been changes in Authority staff and reporting relationships, a thorough review of the Authority’s energy and energy-related risk-mitigation activities was undertaken.  The recommended Policy is a result of that review.   

 

DISCUSSION

 

“In setting forth the philosophy, framework and delegation of authority necessary to govern risk-mitigation activities, the recommended Policy provides clear constraints as to scope.  The first-order constraint is that the Program’s activities will be confined to core business objectives of the Authority and not for speculative purposes.  More specifically, the Authority’s risk-mitigation activities will only be conducted pursuant to highly certain forecasted generation levels of Authority-owned, -operated or otherwise managed electrical generators, and the Authority’s customer load requirements.  The Policy further dictates that the primary goal of the Authority’s risk-mitigation activities is to constrain potential outcomes to within acceptable tolerances; cost-improvement goals can only be pursued subordinate to risk-containment.  These policy objectives provide specific and important guidelines to the ERMC as it establishes procedures for conducting the Program.

 

“Several of the prior occasions when Authority management sought the Trustees’ approval of items pertaining to energy risk mitigation entailed revising authority delegations simply to maintain a level of necessary transaction capability commensurate with then-prevailing conditions (such as when commodity market prices observed marked increases, or when changes in personnel or position titles required modifications to designees in order to ensure compliance).  In other instances, Trustee action was required so that Authority staff could implement hedge transactions as mandated under contractual agreements with the Authority’s customers (but for which the execution of the mandated transaction would violate authority codified in the prevailing energy risk policy).  Looking forward, it is reasonable to anticipate the need to further revise such authorizations to adapt to changing market conditions. 

 

“As the above-described actions are procedural in nature and can be effectuated within the constraints of the Policy’s objectives, it is recommended that the Authority establishes such procedural parameters and revises them from time to time, and that the authority to do so reside with the ERMC, subject to the reporting and auditing guidelines set forth in the Policy.  This demarcation of policy from procedure will appropriately reserve policy-level authorizations to the Trustees while promoting more efficient day-to-day program execution through the ERMC. 

 

As set forth in the Policy, the ERMC will have responsibility for: (a) ensuring that all energy market hedging activities are conducted in accordance with the Policy; (b) establishing management procedures for the administration of the Program; (c) establishing risk tolerances related to price and volume variability and their potential impact on financial results for the Authority and its customers; (d) providing directives and guidance to the Authority’s management and staff regarding all aspects of the Program and (e) reporting to the Trustees, at least four times per year, regarding procedures established under the Program, as well as Program results and a summary of compliance status for the period.

 

“The delegation of forward-transaction authority together with the delegation of authority to post supporting collateral in support of those forward transactions, to be administered by the ERMC in accordance with the requirements of the Policy, will supersede the related authority framework authorized by the Trustees at their February 26, 2008 and June 30, 2009 meetings, respectively.  Pursuant to the objectives of the Policy, the ERMC will delegate only the necessary and appropriate level of transaction authority to enable staff to manage the risk exposure associated with the operation of electrical generation plants and service of customer load within the volatile energy commodity markets.  The delegation of authority to the ERMC will thus enable more timely calibration of staff designations, transaction limits and allowable hedging instruments consistent with changes in prevailing market conditions. 

 

“Consistent with other previous Trustee actions, the level of transaction authority delegated to the ERMC is non-speculative and limited to the volumes associated with the forecasted generation levels and customer load requirements, including losses, for a term not to exceed four years beyond the last day of the month in which the transaction is entered. 

 

FISCAL INFORMATION

 

Payments to be made in settlement of all forward transactions covered by this Trustee item will be treated as fuel or energy payments to be paid from the Operating Fund and, to the extent allowed, will be recovered from customers as part of fuel and energy costs.

 

RECOMMENDATION

 

“The Vice President – Chief Risk Officer recommends that the Trustees approve the Governing Policy for Energy Risk Management as reflected in Exhibit ‘1l-A’ and discussed above.   

 

“The Chief Operating Officer, the Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President – Marketing and  Economic Development, the Senior Vice President – Corporate Planning and Finance, the Senior Vice President – Energy Resource Management and I concur in the recommendation.”

 

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

 

 

RESOLVED, That the Governing Policy for Energy Risk Management (“Governing Policy”), establishing the philosophy, framework and delegation of authority necessary to govern the activities of the Authority related to its Energy Risk Management program is hereby adopted in the form attached as Exhibit “1l-A”; and be it further

 

RESOLVED, That the Governing Policy delegates to the Executive Risk Management Committee, consisting of four members as appointed by the President and Chief Executive Officer and chaired by the Executive Vice President and Chief Financial Officer and, within the requirements established by the Governing Policy, the authority to establish and administer procedures governing the Authority’s activities for mitigating unwanted effects of volatility in the energy commodity markets to which the Authority and its customers are routinely exposed.  The level of this delegated authority, as pertaining to commodity transactions to hedge risk, is limited to the volumes associated with the forecasted generation levels of Authority-owned, -operated or otherwise managed electrical generators, and the Authority’s customer load requirements, including losses, for a transaction term not to exceed four years beyond the last day of the month the transaction is entered; and be it further

 

RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer, the Executive Vice President and Chief Financial Officer, the Vice President – Chief Risk Officer and any other necessary Authority officers 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 necessary to effectuate the foregoing resolutions, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 


 

 

 

 

 

New York Power Authority

Governing Policy for Energy Risk Management

 

 

 

 

Revision Date:                        September 28, 2010

 

Superseding:   Trustee Resolution & Policy of January 31, 2006

                               


 

 

Article I.           Purpose of the Energy Risk Management Program

Section 1.01    Introduction

 

The New York Power Authority (“NYPA” or “the Authority”) and its customers are routinely exposed to energy commodity price risk in the conduct of operations. In most cases price and volume variability impose a substantial and direct risk (or opportunity) to the goals of NYPA’s business units as well as to their competitive posture.  Management of these risks is important to our success and our customers’ wellbeing.  This Governing Policy for Energy Risk Management (“Policy”) sets forth the philosophy, framework, and delegation of authority necessary to govern NYPA’s activities related to its energy risk management program (“Program”).

NYPA will conduct risk management activities in a manner that supports NYPA’s mission, mitigates energy-market exposure related to price and volume variability, and prevents unauthorized financial risk, including counterparty risk.  Subordinate to those goals, the objective of cost reduction and the achievement of financial goals will be pursued within the constraints stated herein and as further delineated by management.  All Program objectives and activities will be conducted in accordance with this Policy.  Controls and procedures to be further delineated by management shall be in conformance with this Policy. 

 

Section 1.02    Scope and Objectives

 

The objectives of the program are: to identify exposures to energy price volatility as well as volumetric risk; to quantify the potential impact on the Authority’s customers and its own financial condition, including the attendant credit risks; and to monitor and mitigate those exposures where they might exceed management-determined risk tolerances while maintaining adequate flexibility to improve financial performance.

The successful management of NYPA’s resources as outlined in its mission statement requires predictability in financial performance related to its core business dealings.  Hedging activities will be conducted to secure more certainty in this regard.  The diligent measurement and awareness of risk factors will enable both enhancement of operating decisions and improved extraction of value from physical assets, thereby enhancing financial performance.

This Policy applies to all forward[1] transactions for electrical energy, capacity, ancillary services, transmission rights, natural gas, fuel oil, traded emissions, and other energy-market products used for generation or the fulfillment of customer load obligations.  The Policy governs forward physical supplies, sales and financial derivatives that impact NYPA’s risk exposures in the energy market.  Forward transactions shall be for no more than four (4) years beyond the last day of the month in which the transaction is entered. 

This Policy does not govern: spot[2] transactions for the purchase or sale of natural gas, natural gas transportation, fuel oil and emissions allowances, including CO2, NOx and SO2, transactions with the New York Independent System Operator (“NYISO”), including the bidding of generator energy and capacity, and the scheduling of load; nor transactions related to strategic procurement.  NYPA will operate under a “non-speculative” philosophy.  Hedging will be conducted with a clear recognition of the hierarchy of the following risk management objectives:

 

1.      Match Core Business Objectives:  Secure fixed or floating price structures or related options on energy-market commodities associated with generation or load‑serving requirements.

Fixed-price commitments shall not be executed for volumes in excess of high‑confidence volume forecasts, including customer requirements and estimates of generating assets’ supply and sales.  The nature of derivative obligations shall be no more firm than the certainty of volumetric expectations, using options to secure financial rights without obligation where volumes are substantially uncertain. 

 

2.      Mitigate Risk:  Given volatile energy markets, manage energy and energy-related product costs and revenues toward the mitigation of unfavorable results and the promotion of results within acceptable boundaries.

 

3.      Improve Financial Performance:  Where practical and in deference to objectives #1 and #2, reduce costs or increase revenues relative to defined targets and/or budgets by securing market positions or realigning existing hedge positions as deemed favorable.

 

Article II.  Energy Risk Management Policy

 

Section 2.01    Delegation of Authorities

a)      Board of Trustees

This Policy has been established by the Board of Trustees (“Trustees”) and the Trustees must approve any amendments to this Policy.

b)     Executive Risk Management Committee

Subject to Paragraph (c) below, an Executive Risk Management Committee (“ERMC”) is established by this Policy as management’s controlling authority with respect to energy market risk and hedging activities; the ERMC shall be governed by the provisions herein. 

    The ERMC shall consist of five (5) members, including four (4) members appointed from NYPA’s executive corps by the CEO;

    It shall be chaired by the Chief Financial Officer (“CFO”); or, in the absence of the “CFO”,  another member delegated this responsibility by the “CFO”;

    A quorum shall consist of any three (3) members including the chair;

    Actions of the ERMC shall be authorized by an affirmative vote of a simple majority of appointed members.

The “ERMC” is hereby charged with the following responsibilities, and necessary authorities are conveyed accordingly:

 

1.      To ensure that all energy market hedging activities are conducted in accordance with this Policy;

2.      To establish management procedures (“Procedures”) for the administration of the Program, including:

¬  Hedge strategy formulation and execution protocols

¬  Permissible risk-mitigation products and instruments

¬  Transaction limits

¬  Organizational roles and separations

¬  Approval hierarchies

¬  Contract procedures

¬  Credit and collateral management procedures

¬  Risk quantification and monitoring procedures

¬  Other controls and procedures as deemed necessary for the orderly conduct of the Program;

3.      To establish risk tolerances related to price and volume variability and their potential impact on financial results for NYPA and its customers; and

4.      To provide directives and guidance to NYPA management regarding all aspects of the Program.

 

c)      Chief Financial Officer

The Chief Financial Officer (“CFO”) is ultimately responsible for the financial integrity of NYPA and, accordingly, no delegation of authority to the ERMC is intended to impair the CFO’s ability to protect such financial integrity.  Under normal circumstances it is expected that tolerances and other Program issues will be determined by the ERMC, but in the event of unusual circumstances the CFO may act, as deemed necessary in his or her discretion, to preserve financial viability.  In the event of such circumstances the Trustees shall be notified expeditiously of the conditions and resolution associated with such action.

 

Section 2.02:   Separation of Duties

The ERMC, in formulating Procedures, shall provide for separation of duties in a manner that assures checks and balances among three distinct organizational functions delineated below: 

 

1.      Front Office – responsible for the execution of hedge strategy and transactions,

2.      Middle Office – responsible for risk and compliance monitoring

3.      Back Office – responsible for deal confirmations, cash management and accounting.

 

In fulfilling its role, the Back Office shall independently obtain primary documentation from counterparties with respect to deal confirmations and shall not depend solely on information provided by internal sources.

Also, in accordance with its independent role, the Office of Internal Audit shall conduct periodic reviews of the Program of a scope and on a schedule of its choosing.

 

Section 2.03 Activities

Permissible transactions for purposes of risk management shall be restricted to products and instruments specified by the ERMC and deployed for the following applications:

                                i.            Mitigating risk related to the cost of energy or related products to be procured for normal business purposes.
                              ii.            Mitigating risk related to the price of energy and related products sold by NYPA.
                            iii.            Mitigating risk related to margins where NYPA owns generation or other capacity.
                            iv.            Mitigating risk related to the locational cost differentials of energy and fuel procured or sold for transmission or transportation to an ultimate location.
                              v.            Mitigating risk related to customer contract obligations related to energy markets.
                            vi.            Mitigating risk of excessive out-of-the-money settlements associated with hedge transactions.

 

Section 2.04    Reporting

Maintenance of timely reports is critical to an orderly Program.  At a minimum, the Program shall maintain a record of transactions; volumes and values of hedged and floating positions, both physical and financial; the linking of financial hedges with physical volumes; and quantification of the company’s exposure to market volatility. These and other records shall be maintained in accordance with directives of the ERMC.

Quarterly, the CFO shall provide to the Trustees a report regarding Procedures established under the Program, as well as Program results and a summary of compliance status for the period.


 

m.                 Selection of Fixed-Income Managers for the Authority’s Nuclear Decommissioning Trust Fund

 

                 The President and Chief Executive Officer submitted the following report:

 

 

SUMMARY

 

“The Trustees are requested to approve the award of multiyear procurement contracts to J. P. Morgan Investment Management Inc. (‘J. P. Morgan’), Prudential Investment Management, Inc. (‘Prudential’), Schroder Investment Management North America Inc.  (‘Schroder’), Bradford & Marzec  LLC (‘Bradford’) and Garcia Hamilton & Associates, L.P. (‘GH&A’) for professional fixed-income investment management services in connection with the Authority’s Nuclear Decommissioning Trust (‘NDT’) 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 terms of the contracts considered herein are for more than one year and, therefore, the Trustees’ approval is required.

 

Pursuant to U. S. Nuclear Regulatory Commission (‘NRC’) ruling NUR-0584, the Authority established the NDT Fund in 1990.  The purpose of the fund is to ensure that there are sufficient funds available to pay for the decommissioning costs (i.e., removing the spent fuel and dismantling any systems or components containing activation products) of the James A. FitzPatrick (‘FitzPatrick’) and Indian Point 3 (‘IP3’) Power Plants at license expiration.  On November 21, 2000, the Authority completed the sale of its IP3 and FitzPatrick nuclear plants to two subsidiaries of Entergy Corporation pursuant to a purchase-and-sale agreement dated March 28, 2000.  In accordance with the Decommissioning Agreements, the Authority retains contractual decommissioning liability until license expiration, a change in the tax status of the fund or any early dismantlement of the plants, at which time the Authority will have the option to terminate its decommissioning responsibility and transfer the plant’s fund to the Entergy subsidiary owning the plant.  At that time, the Authority will be entitled to be paid an amount equal to the excess of the amount in the fund over the Inflation-Adjusted Cost Amount (a fixed estimated decommissioning cost amount adjusted in accordance with the effect of increases and decreases in the NRC’s minimum cost-estimate amounts applicable to the plant), if any.  The Authority’s decommissioning liability is limited to the lesser of the Inflation-Adjusted Cost Amount or the amount of the plant’s fund, guaranteeing that no additional cost burdens may be placed on the Authority.

 

As of July 31, 2010, the market value of assets held in the NDT Fund totaled $979 million, of which $351 million were invested in equities and $628 million were invested in fixed- income securities.  The fixed-income portion of the NDT Fund is currently managed by two portfolio managers: BlackRock, with assets under management of $327 million, and J. P. Morgan, with assets under management of $301 million.  The BlackRock agreement is scheduled to expire in accordance with its terms on October 31, 2010, while the J. P. Morgan agreement is in effect through September 7, 2014 subject to early termination provisions.  A portion of the assets under management with J. P. Morgan ($158 million) were previously managed by TCW Asset Management Company (‘TCW’).  In late 2009, TCW underwent a major management change, with the Chief Investment Officer and key investment professionals departing the firm.  In December 2009, the Authority determined that the impact of TCW’s management change warranted reallocation of the assets managed by TCW to a segregated account to be managed by J. P. Morgan.  The Authority informed J. P. Morgan that the assets formerly managed by TCW would be subject to rebid concurrently with the expiration of the BlackRock agreement.  The total amount of assets rebid is approximately $485 million. 

 


DISCUSSION

 

On July 13, 2010, the Authority solicited proposals for professional fixed-income investment management services by notice to a number of firms providing such services and advertisement in the New York State Contract Reporter in order to determine qualified fixed- income portfolio managers for the NDT Fund.  On or before August 3, 2010, the Authority received a total of 19 proposals.

 

Authority staff, with the support of its financial advisor, PFM Advisors (‘PFM’), evaluated each proposal, taking into consideration quantitative and qualitative criteria.  From a quantitative standpoint, staff evaluated historical performance; various risk metrics and the schedule of fees.  From a qualitative standpoint, firms were evaluated based on team duration and experience, investment style and research capabilities.  After conducting an extensive review and analysis of each proposal, Authority staff, with the concurrence of PFM, invited the seven firms with the highest relative rankings to give oral presentations.  Based on the above criteria and oral presentations, the following firms were identified to have the highest overall rankings to manage the fixed-income assets in the NDT Fund:  J. P. Morgan, Prudential, Schroder, Bradford and GH&A.     

 

J. P. Morgan has performed well since its selection in 2009 as a fixed-income portfolio manager of the NDT Fund.  Due to its performance consistency, prudent management of the assets previously managed by TCW and attentiveness to customer service, it is recommended that J. P. Morgan continue to serve as a fixed-income portfolio manager of the NDT Fund with an award of $48.5 million of the assets subject to this RFP.  This award, combined with the other assets currently managed by J. P. Morgan, will aggregate to $192 million.

 

As a result of its perceived superior security selection expertise, consistent track record for the past two decades and strong investment management team, it is recommended that Prudential manage approximately $194 million in assets.  To balance the portfolio, it is also recommended that Bradford manage $97 million and Schroder manage $97 million due to their rigorous approach to risk management.  GH&A has a high-quality investment strategy, conservative investment philosophy and strong track record; it is recommended that it manage $48.5 million.  GH&A is 100% employee owned, with almost 75% of the firm owned by ethnic minority and women partners.

 

It is recommended that the five firms be awarded five-year contracts, with asset allocations as noted below, subject, however, to early termination at any time by the Authority on 60 days’ notice.  The allocation amounts are based on the assets’ ending market value as of July 31, 2010 and will be adjusted proportionally for the actual asset value on the transition date of the assets.

 

                                                                                                Asset Allocations

                                                                                                   (in $millions)                   

 

J. P. Morgan                                                                            48.5

Prudential                                                                              194.0

Schroder                                                                                  97.0

Bradford & Marzec                                                              97.0

Garcia Hamilton & Associates                                           48.5

Total                                      485.0

 

FISCAL INFORMATION

The fees for the fixed-income investment management services are expected to range from 12 basis points to 30 basis points (a basis point is equal to 1/100th of 1%, or 0.01%) dependent on investment management style and the amount of assets under management, subject to negotiation, and will be paid from the NDT Fund.


 

RECOMMENDATION

 

The Treasurer recommends the Trustees’ approval of the award of multiyear service contracts to J. P. Morgan Investment Management Inc., Prudential Investment Management, Inc., Schroder Investment Management North America Inc., Bradford & Marzec LLC and Garcia Hamilton & Associates, L.P. for management of fixed-income assets for the Nuclear Decommissioning 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, the award of the multiyear investment management service contracts to J. P. Morgan Investment Management Inc., Prudential Investment Management, Inc., Schroder Investment Management North America Inc., Bradford & Marzec LLC and Garcia Hamilton & Associates, L.P. to manage fixed-income assets for the Authority’s Nuclear Decommissioning Trust Fund, is hereby approved and the execution of such contracts by the Executive Vice President and Chief Financial Officer, the Senior Vice President – Corporate Planning and Finance or the Treasurer, subject to the 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 Chairman, the Vice 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.


 

n.                   Selection of Firms to Serve as Authority Underwriters

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the appointment of a prequalified underwriting pool of Senior Managers, Co-Managers and Selling Group members to originate, underwrite and sell the Authority’s Debt Obligations for a period of three years.     

 

BACKGROUND

 

“The Authority’s Series 2000A Revenue Bonds maturing on November 15, 2030 and November 15, 2040 are redeemable prior to maturity on or after November 15, 2010.  Based on current market conditions, the Authority will be able to refund these bonds and generate present-value savings.  The majority of the bonds being refunded were issued for the Life Extension and Modernization and Relicensing of the Robert Moses Niagara Power Project and, therefore, the refunding will result in lower debt-service costs for the Authority’s hydro customers.

 

“Due to the relatively infrequent and low volume of bond issuances, the Authority has historically solicited proposals from firms to serve as underwriters on a deal-by-deal basis.  In preparing for the Series 2000A refunding, staff has taken into consideration the Authority’s latest capital plan, which includes estimates for several major initiatives.  These major initiatives, if approved, will require the Authority to access the capital markets on a more frequent basis.  As a result, and due to the efficiencies obtained from having a qualified pool of underwriters available to select from at any time, the Authority decided to address underwriter selection with a forward- looking view in mind.   

 

DISCUSSION

 

                “On July 8, 2010, the Authority issued a Request for Qualifications (‘RFQ’) for firms interested in providing underwriting services for Authority debt issuances.  The RFQ was advertised in the New York State Contract Reporter.  Banks, brokers and dealers that have an established relationship with the Authority were also invited to respond to the RFQ.  In consideration of the recommendations of the Executive Order No. 10 Task Force established to increase the use of Minority and Women-Owned Business Enterprise (‘MWBE’) underwriters, firms certified with the New York State Department of Economic Development were encouraged to respond.  On or before August 5, 2010, 22 firms submitted responses to the RFQ, of which 9 were MWBEs.

 

“The Authority’s evaluation of responses took into consideration several qualitative characteristics essential for a successful underwriting team.  Specifically, responses were evaluated for firm experience in structuring, underwriting and selling both tax-exempt and taxable bond and note issues; knowledge of the Authority, its business markets and the public power industry; the ability and demonstrated willingness to underwrite bonds; financial strength and capital position, including excess net capital allocated to public finance; distribution capability in the retail and institutional sectors; diversity and commitment to equal employment opportunities, including the willingness to partner with an MWBE and value-added services and financing proposals aimed at cost savings or debt structuring. 

 

“Based on staff’s evaluation, six firms exhibited the qualifications that would make them ideal to serve in a Senior or Co-Senior underwriting capacity.  Based on their combined experience and distribution capabilities, staff believes the team will be able to market the Authority’s bonds at the lowest possible interest cost.

 

Senior Managers

 

          Barclays Capital Inc.

          Citigroup Global Markets Inc.

          Loop Capital Markets LLC *

          Morgan Stanley & Company Inc.

          Ramirez & Co., Inc. *

          Wells Fargo Bank, N.A.

 

“In addition to the selection of Senior Managers, the following firms are being recommended to serve as Co-Managers and Selling Group Members based on their qualifications to distribute and/or underwrite bonds:

 

Co -Managers

 

          Bank of America Merrill Lynch

          Goldman, Sachs & Co.

          J.P. Morgan

          M.R. Beal & Company *

          Siebert Brandford Shank & Co., Inc. *

 

Selling Group Members

 

          Blaylock Robert Van *

          BMO Capital Markets

          BNY Mellon Capital Markets, LLC

          CastleOak Securities, L.P. *

          Duncan–Williams, Inc.

          Janney Capital Markets along with MFR Securities

          M&T Securities, Inc.

          Roosevelt & Cross

          Stern Brothers & Co.

          Stone & Youngberg LLC

          TD Securities

 

                “Firm assignments for Senior Manager(s), Co-Manager(s) and Selling Group members will be established at the time of each financing transaction from the respective pools.

 

FISCAL INFORMATION

 

                “There is no fiscal impact associated with this action. 

 

RECOMMENDATION

 

“The Treasurer recommends the Trustees’ approval of the appointment to the firms referenced in Exhibit ‘1n-A’ (attached) for the purpose of providing underwriting services for a three-year period. 

 

“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 the appointment of prequalified firms to serve as Senior Managers, Co-Managers and Selling Group members as set forth Exhibit “1n-A,” attached hereto, is hereby approved for the period of three years as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the Vice 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.

 

 

 

I.                   Underwriters for Authority Debt Issuances   RFQ Q-10-4814JB

1.      Senior Managers

Barclays Capital Inc.

            745 Seventh Avenue, 19th Floor

            New York, NY 10019

 

Citigroup Global Markets Inc.

            390 Greenwich Street, 2nd Floor

New York, NY 10013

 

                                    Loop Capital Markets LLC

                                                88 Pine Street, 25th Floor

                                                New York, NY 10005

 

                                    Morgan Stanley & Company Inc.

                                                1221 Avenue of the Americas

                                                New York, NY 10020

 

                                    Ramirez & Co., Inc.

                                                61 Broadway, 29th Floor

                                                New York, NY 10006

 

                                    Wells Fargo Bank, N.A.

                                                375 Park Avenue

                                                New York, NY 10152

 

2.      Co-Managers

 

Bank of America Merrill Lynch

One Bryant Park

New York, NY 10036

 

Goldman, Sachs & Co.

200 West Street

New York, NY 10282

 

J.P. Morgan

383 Madison Avenue

New York, NY 10179

 

                                    M.R. Beal & Company

                                                100 Wall Street, 6th Floor

                                                New York, NY 10005

 

                                    Siebert Brandford Shank & Co., Inc.

                                                100 Wall Street, 18th floor

                                                New York, NY 10005

 

 

3.      Selling Group

 

Blaylock Robert Van

600 Lexington Avenue, 3rd Floor

New York, NY 10022

 

BMO Capital Markets

3 Times Square, 28th floor

New York, NY 10036

 

BNY Mellon Capital Markets, LLC

320 Old Slip, 15th Floor

New York, NY 10286

 

CastleOak Securities L.P.

110 59th Street, 2nd Floor

New York, NY 10022

 

Duncan–Williams, Inc.

1120 Avenue of the Americas

Suite 4164

New York, NY 10036

 

Janney Capital Markets (along with MFR Securities)

575 Lexington Avenue, 35th Floor

New York, NY 10022

 

M&T Securities, Inc.

285 Delaware Avenue

Buffalo, NY 14202

 

Roosevelt & Cross

One Exchange Plaza

55 Broadway, 22nd Floor

New York, NY 10006

 

Stern Brothers & Co.

8000 Maryland Avenue

Suite 800

St. Louis, MO 63105

 

Stone & Youngberg LLC

Lever House

390 Park Avenue, 15th Floor

New York, NY 10022

 

TD Securities

31 West 52nd Street

New York, NY 10019


 

Discussion Agenda

 

2.                   Transmission System – Life Extension and Modernization and Condition Assessment – Contract Award  

               

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve the award of a contract to Quanta Technology (‘Quanta’) of Raleigh, NC in the amount of $2,047,733 to perform a condition assessment of the Authority’s existing Transmission System assets.

 

BACKGROUND

 

                “In accordance with the Authority’s Expenditure Authorization Procedures, the award of personal services contracts in excess of $1 million if low bidder, or $500,000 if sole source or non-low bidder, requires the Trustees’ approval.

 

                “The Authority’s Transmission System assets are reaching their end-of-design life and are in need of upgrades to comply with regulatory requirements and to maintain reliability.  A series of conditions within the Authority’s Transmission System outline the need to develop an overall program for performing an assessment in accordance with items listed in the Power Supply Long- Range Work Plan.

 

“The Authority sought to procure the services of an Engineering Consultant to:

 

1.       Assess the overall condition of transmission equipment and assets;

2.       Provide recommendations for upgrade or replacement, as necessary, taking into account industry practices;

3.       Prioritize work and develop a schedule for implementation;

4.       Develop cost estimates for addressing each task.

 

“The results of the assessment will allow the Authority to prioritize future work to ensure the continued reliability of its Transmission System.  This prioritization will provide the Authority with added information to better use its financial and personnel resources.

 

DISCUSSION

 

“The Authority issued an advertisement to procure bids in the New York State Contract Reporter and bid packages were available as of June 3, 2010.  The bid documents were downloaded by 66 potential bidders and 14 potential bidders participated in a site visit on June 21, 2010.

 

“The following proposals were received on July 12, 2010:

 

Bidder                                           Location                               Base Bid                               Final Bid

 

Mott MacDonald                       Westwood, MA                    $2,661,516                           $3,298,795

 

Quanta Technology    Raleigh, NC                                          $3,128,406                           $2,047,733

 

TRC Engineers                             Liverpool, NY                       $3,992,637                           $3,495,817

 

AECOM                                        New York, NY                      $4,387,876                           $3,596,395

 


 

“Following a review of the proposals, the Authority recommends an award to the lowest- priced bidder, Quanta, which is technically qualified to perform the work.

 

“Quanta will focus on the evaluation of the following projects:

 

-          Clark Energy Center Switchyard Life Extension and Modernization

-          Massena Sub Switchyard Life Extension and Modernization

-          Niagara Switchyard Life Extension and Modernization

-          Line Clearance Remediation  

-          Corten Structure Member Reinforcement  

-          Grillage Foundation Inspection

-          Insulator Replacement

-          PV20 Line Assessment, Replacement and Upgrade

-          Tower Painting - Complete System Painting

 

“These projects require a large financial investment to provide anticipated maintenance.  Quanta will be responsible for performing a condition and life assessment and risk-of-failure assessment to provide the Authority with interim and final reports detailing which areas should be addressed immediately (within the next 3 years), in the short term (within the next 3-5 years) and in the long term (within the next 5-10 years).

 

“The scope of work will require field inspections and extensive reviews of maintenance records and studies.  The work will be coordinated by Project Management and Transmission staff.  As part of the deliverable, the Consultant will include preliminary schedules and cost estimates for implementing any recommendations.

 

“Recommendations received from Quanta will be reviewed by the Authority and budgeted accordingly in future fiscal years.

 

FISCAL INFORMATION

 

                “Payments will be made from the Authority’s Operating Fund.

 

RECOMMENDATION

 

“The Senior Vice President – Power Supply Support Services, the Senior Vice President – Transmission, the Vice President – Project Management and the Vice President – Procurement recommend that the Trustees award a contract to Quanta Technology in the amount of $2,047,733 to perform a condition assessment of the Authority’s Transmission System.

 

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

 

                Mr. John Canale presented the highlights of staff’s recommendations to the Trustees.  In response to questions from Trustee Nicandri, Mr. Canale said that the final bids were submitted after clarification meetings with the two lowest bidders.  The $1.1 million difference between the initial and final bids of the low bidder was attributable to the fact that several assets listed in the original scope of work had been studied previously in detail and were removed from the scope before the final bids were submitted.  Responding to a question from Vice Chairman Foster, Mr. Canale said that the unsuccessful bidders did not necessarily understand the scope of work as well as the successful bidder.  In response to another question from Vice Chairman Foster, Mr. Canale said that the project involves approximately 2,000 man-hours per task (a total of approximately 20,000 man-hours for entire project), with the preliminary and final reports due in May and June 2011, respectively.  President Kessel said that this is an important project and that he has asked staff to look at the Authority’s vulnerabilities system wide, especially in light of such recent events as the huge service disruptions caused by problems on the Long Island Railroad.  Trustee Mark O’Luck said that it was important to look at the Authority’s need to upgrade facilities in the next 3-5 years, in addition to the next 5-10 years. 

 

                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, approval is hereby granted to award a contract for a condition assessment of the Authority’s Transmission System, as recommended in the foregoing report of the President and Chief Executive Officer, as listed below:

 

                                                 Contractor

                                            Quanta Technology

Contract Approval

        $2,047,733

AND BE IT FURTHER RESOLVED, That the Chairman, the Vice 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.

 

 


 

3.                   Procurement (Construction) Contract – Niagara Power Project Relicensing, Compliance and

Implementation – Reservoir State Park Rehabilitation – Award

 

The President and Chief Executive Officer submitted the following report:

SUMMARY

 

“The Trustees are requested to approve the award of a procurement contract to Mark Cerrone, Inc. for the rehabilitation of Reservoir State Park located within the boundary of the Niagara Power Project (‘Project’).  The term of the contract will be for two years.  The amount for which authorization is requested is $6,827,570. 

BACKGROUND

 

“Section 2879 of the Public Authorities Law and the Authority’s Guidelines for Procurement Contracts require the Trustee’s approval for procurement contracts involving services to be rendered in excess of one year.  The Authority’s Guidelines for Procurement Contracts also require the Trustee’s approval for procurement contracts in excess of $3 million.

 

“The Federal Energy Regulatory Commission (‘FERC’) issued the New License for the Project on March 15, 2007.  Article 404 of the new Project license required that the Authority submit for FERC approval within one year of the effective date of the new license a recreation plan for the existing recreation facilities within the Project boundary and proposed recreational enhancements.  The Authority submitted the required recreation plan on August 29, 2008 and received FERC approval of the plan in an order dated November 13, 2008.

 

“Reservoir State Park is within the Project boundary and is located along the South side of the Project’s Lewiston Reservoir.  The 133-acre park is owned by the Authority and is operated and maintained by the New York State Office of Parks and Recreation (‘NYSOPR’) under an existing agreement.  Under the approved recreation plan, the Authority is committed to extensively rehabilitate and enhance the park grounds and facilities.  Improvements will include rehabilitation and reorientation of existing baseball diamonds and addition of new amenities (including new lighting for one diamond), new outdoor pavilions, repaired and expanded parking at three parking lots, a new natural ice rink, a new winter pavilion with toilet facilities at the sledding hill, regraded soccer fields for improved drainage, refurbished and new basketball and tennis courts, a new ADA-accessible perimeter walking path for the South section of the park, new trees and shrubbery throughout the park, refurbishment of the existing maintenance building, repaving of the existing path to the top of the Lewiston Reservoir, an improved children’s playground and new kiosks and signage.

DISCUSSION

 

                “On July 12, 2010, the Authority issued a Request for Proposals (‘RFP’) for the construction of the Reservoir State Park rehabilitation project, including a notice in the New York State Contract Reporter.  Three proposals were received on August 17, 2010 from Mark Cerrone, Inc. (Niagara Falls, NY), Edbauer Construction, Inc. (Blasdell, NY) and Sicoli and Massaro (Niagara Falls, NY). 

 

“Staff from the Authority’s Relicensing and Implementation (‘R&I’) and Procurement and Real Estate Divisions, with support from R&I’s NIA compliance and implementation contractor and construction management contractor, evaluated the proposals for technical qualifications and pricing.  All three firms submitted proposals with prices that were higher than the Authority’s estimate for the contract.  Mark Cerrone, Inc. was the lowest bidder.  His bid price was within 10% of the Authority’s estimate for the contract, while the other two proposals were over $1 million higher than the Authority’s estimate.  Questions were issued to all three firms focusing on the firms’ capabilities and experience with managing multiple specialty subcontractors and their experience with projects of a similar nature.

 

“Cerrone satisfactorily responded to the Authority’s subsequent questions as requested.  Their responses provided additional information regarding: 1) their ability to manage multiple subcontractors; 2) their experience with the various aspects of this type of  recreational construction;  3) additional information regarding their infrastructure subcontractor; and 4) contractual clarifications concerning project costs and their proposed Deviations and Exceptions.  The responses provided by Cerrone were acceptable to the proposal reviewers.

 

“Project references provided in Cerrone’s proposal were evaluated to define those references from similar projects and projects with similar fee and level of effort.  The review team reached out to five entities (private firms and one municipality) and spoke directly with four of the five.  All of the references gave favorable reviews.

 

“Cerrone’s proposal indicated a solid understanding of and adherence to the RFQ requirements and a clear understanding of the work.  A reasonable and adequate schedule was proposed that will meet NYPA’s needs.  The evaluation team concluded that Cerrone’s proposal demonstrated that they are qualified to conduct this work.  Therefore, it is recommended that the contract be awarded to Mark Cerrone, Inc.  The contract term will be for two years, and the contract amount will be $5,937,017.  In addition, it is recommended that an appropriate reserve of 15% ($890,553) be authorized to cover possible additional materials and services due to unforeseen construction conditions and/or severe weather conditions which occur during the installation period.  Including the reserve amount, the total recommended authorization is $6,827,570. 

 

FISCAL INFORMATION   

 

“Since these expenditures are related to implementing commitments in the New License and the FERC-approved recreation plan, payments will be made from the Capital Fund. 

RECOMMENDATION

 

“The Vice President – Project Development and Licensing; the Vice President – Procurement and the Director – Relicensing and Implementation recommend that the Trustees authorize award of a contract to Mark Cerrone, Inc. for $6,827,570 for construction services for rehabilitation of Reservoir State Park at the Niagara Power Project.   

 

“The Chief Operating Officer, the Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Executive Vice President and Chief Administrative Officer and Chief of Staff, the Executive Vice President and Chief Engineer – Power Supply, the Senior Vice President – Power Supply Support Services and I concur in the recommendation.”

 

                Mr. John Suloway presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Trustee Nicandri, Mr. Suloway said that this was Relicensing’s first time working with the successful bidder, which had come highly recommended.

“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, approval is hereby granted to award a contract to Mark Cerrone, Inc. for two years, in an amount of  $6,827,570 for construction services for rehabilitation of Reservoir State Park at the Niagara Power Project, as recommended in the foregoing report of the President and Chief Executive Officer;

 

 

Contractor                           Contract Approval

 

Mark Cerrone, Inc.                 $6,827,570

 

AND BE IT FURTHER RESOLVED, That the Chairman, the Vice 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.

 

 


 

4.                   Authorization  to Execute Power Purchase Agreement to Provide Environmental Attributes

for Port Authority of New York and New Jersey

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

“The Trustees are requested to authorize the execution of a Master Power Purchase and Sale Agreement (‘MPPSA’), between the Authority and Taylor Biomass Energy – Montgomery LLC (‘Taylor Biomass’), for the Authority to purchase Environmental Attributes (‘Attributes’) produced from approximately 20.2 MW of generation at a to-be-constructed waste stream and woody biomass-fired facility in Montgomery, Orange County, New York, on behalf of the Port Authority of New York and New Jersey (‘Port Authority’), one of the Authority’s New York City governmental electric customers under the 2005 Long-Term Agreement (‘LTA’).

 

BACKGROUND

 

“Taylor Biomass was the successful bidder on a Request for Proposals (‘RFP’) issued on behalf of the Port Authority.  The purchase of Attributes from 20.2 MW of generation from Taylor Biomass under the MPPSA is compatible with the Port Authority’s Sustainability Policy objectives and demonstrates contributions to the economic development of the Orange County geographic area.

 

“The Port Authority approached the Authority requesting that the Authority explore the possibility of securing Attributes from new renewable energy facilities that are compatible with the Port Authority’s Sustainability Policy objectives and from those projects that provide economic development contributions in the form of jobs or environmental benefits to the community in and around the Port Authority’s Stewart Airport facility in Orange County.  Attributes are the environmental aspects of renewable power generation that may be sold separately from the energy itself and include all environmental characteristics, claims, credits, including renewable energy credits (‘RECs’), benefits, emissions reductions, offsets, allowances and allocations attributable to generation by the facility.

 

“On January 12, 2010, in consultation with the Port Authority, the Authority issued an RFP for Attributes representing up to 25 MW of generation from new renewable energy generators (i.e., not yet in commercial operation), to commence no later than December 31, 2013, for a term of up to 20 years.  The Port Authority and the Authority met in March 2010 to jointly develop an evaluation process and scoring criteria.  On April 19, 2010, the Authority received proposals that offered supply of Attributes from new renewable sources that included photovoltaic solar and syngas produced from waste stream (municipal solid waste, construction and demolition waste and commercial waste disposal processes) and woody biomass.

 

DISCUSSION

 

“A team of Authority staff, in consultation with representatives from the Port Authority, analyzed the proposals and agreed that only one of the physical-supply bidders, Taylor Biomass, provided an offer for Attributes that met the criterion of providing Attributes at a stable and economically competitive price while contributing to economic development in Orange County.  Taylor Biomass’ generation resource is a combined-cycle generator set fueled by syngas produced from the sorted and non-recyclable portions of the waste stream and woody biomass. The facility’s metered interconnection point with the New York Independent System Operator (‘NYISO’) is located in Zone G. 

 

“The Attributes from Taylor Biomass include all environmental attributes and future environmental attributes associated with the generation of energy by the facility (i.e., RECs) and Attributes associated with the diversion of organic waste from a landfill for processing and consumption of waste to, for or by the facility (i.e., ‘Greenhouse Gas Offsets’).  The proposed purchase-and-sale agreement with Taylor Biomass is for 20 years, commencing on the commercial operation date targeted for October 1, 2012. 

 


 

“The Taylor Biomass renewable energy facility will be located on 95 acres of interchange development property in Montgomery, Orange County, New York.  Subject to the final issuance of permits, construction is scheduled to begin in the third quarter of 2010.  The Town of Montgomery’s Town Board is acting as the Lead Agency under the State Environmental Quality Review Act (‘SEQRA’) and is responsible for the environmental review of the project.

 

“Authority staff is finalizing negotiations with Taylor Biomass to complete the MPPSA.  The principal commercial terms and pricing of the proposed MPPSA between the Authority and Taylor Biomass are provided in the Confidential Term Sheet provided to the Trustees under separate cover.  Under the MPPSA, the net output will be Attributes associated with up to 20.2 MW of generation.  Since the cost of Attributes purchased under the recommended 20-year MPPSA would be passed through to the Port Authority, the completed MPPSA must be approved by the Port Authority before execution by the Authority.

 

“The Authority will also execute a separate agreement with the Port Authority (‘Authority – Port Authority Agreement,’ ‘APAA’) for the resale of the Attributes from the Authority to the Port Authority.  The APAA agreement concerning this transaction is pursuant to, but separate from, the Long-Term Agreement (‘LTA’) that expires in 2017.  The APAA for this transaction will continue through the 20-year term of the MPPSA and will provide that the Port Authority agrees to pay all costs and bear all risks associated with the MPPSA. 

 

Environmental Review

 

                “In order for the Authority to comply with its SEQRA obligations, Taylor Biomass must obtain the required permits and authorizations from the requisite agencies having jurisdiction over the project.  The Authority’s SEQRA regulations require, in the case where an agency other than the Authority is the lead agency, that the Trustees or their delegates take the final environmental impact statement (‘EIS’) prepared by the requisite agencies into consideration before making a final decision on the proposed action, in this case, the issuance of a contract for the purchase of the Attributes from a facility not yet constructed.  A written finding that the provisions of the Authority’s SEQRA regulations have been met is required.  The Trustees are requested to delegate the completion of the findings statement to the Vice President – Environment, Health and Safety, who will review and consider the final EIS prepared by the relevant jurisdictions to determine that the Authority’s SEQRA responsibilities have been fulfilled.

 

FISCAL INFORMATION

“The summary terms and conditions of the 20-year MPPSA have been provided to the Trustees in the Term Sheet.  The costs of Attributes purchased and all risks under the proposed MPPSA will be passed through to the Port Authority in accordance with the terms and conditions of the APAA.

 

RECOMMENDATION

 

“The Senior Vice President – Power Resource Planning and Acquisition recommends that the Trustees authorize the President and Chief Executive Officer, or his designee, to execute a Master Power Purchase and Sale Agreement with Taylor Biomass Energy – Montgomery LLC for the Authority to purchase Environmental Attributes from a 20.2 MW syngas facility to be operated by Taylor Biomass Energy – Montgomery LLC on behalf of the Port Authority of New York and New Jersey for the terms and conditions set forth in the Term Sheet. 

 

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

 

Mr. Jordan Brandeis presented the highlights of staff’s recommendations to the Trustees.  President Kessel said that this was a significant and progressive project encouraged by Governor Paterson and Senator Schumer.  In response to a question from Vice Chairman Foster, President Kessel said that the Authority was facilitating the project on behalf of its customer, the Port Authority.  Mr. Brandeis added that the Authority worked with the Port Authority to configure the business arrangement for the project.  Trustee O’Luck said that this was a great project and that it had been discussed at a meeting he had with the Port Authority a few months ago.  Chairman Townsend said that he hoped this would be the impetus for similar projects in the future.

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

 

WHEREAS, at the request of, and in cooperation with, the Port Authority of New York and New Jersey (“Port Authority”), the Authority issued a Request for Proposals (“RFP”) for supply of Environmental Attributes of up to 25 MW to assist the Port Authority in meeting its Sustainability Policy objectives and to contribute to the economic development of the Orange County geographic area; and 

 

WHEREAS, as a result of such RFP, the Authority-Port Authority team identified Taylor Biomass Energy – Montgomery LLC (“Taylor Biomass”) as the successful bidder offering Environmental Attributes from a 20.2 MW syngas generation facility located in Montgomery, New York; and

 

WHEREAS, the prices and commercial terms offered by Taylor Biomass compare favorably with projections of market energy prices and the purchase would meet the Port Authority’s Sustainability Policy objectives and contribute to the economic development of the Orange County area; and

 

WHEREAS, under a separate Authority-Port Authority Agreement, the Authority will agree to sell to the Port Authority and the Port Authority will agree to purchase from the Authority all the Attributes purchased by the Authority under the Master Power Purchase and Sale Agreement (“MPPSA”); and

 

WHEREAS, under the Authority – Port Authority Agreement, the Port Authority shall pay all costs and assume all risks arising out of the MPPSA for the term of the MPPSA; and

 

WHEREAS, by purchasing Environmental Attributes from a syngas generation facility (a renewable source of generation), the Authority and the Port Authority are furthering the State’s ‘45 by 15’ plan, which calls for New York State to meet 45% of its electricity needs through improved energy efficiency and clean renewable energy by 2015;

 

NOW, THEREFORE, BE IT RESOLVED, That the President and Chief Executive Officer, or his designee, is hereby authorized on behalf of the Authority to execute  agreements between the Authority and Taylor Biomass Energy – Montgomery LLC, as described in the foregoing report of the President and Chief Executive Officer and the Term Sheet provided under separate cover to the Trustees, including (a) the MPPSA and any transactions, schedules or confirmations related to such MPPSA and  (b) any other consents, agreements or other transactions as are necessary or ancillary to such MPPSA; and be it further

 

 RESOLVED, That the Vice President – Environment, Health and Safety is authorized to review and consider the final Environmental Impact Statements prepared by the authorities having jurisdiction pursuant to the State Environmental Quality Review Act over the project not yet constructed that is the subject of this Resolution, and to make the findings required by Section 461.13(b) of the Authority’s SEQRA regulations; and be it further

 

RESOLVED, That the Chairman, the Vice 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 necessary or advisable to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 


 

 

5.                   a.             Report of the President and Chief Executive Officer

 

                President Richard Kessel noted the importance of the Trustees’ approval of item 1e (Proposed Long-Term Contract Extensions for the Sale of Western New York Hydropower – Transmittal to the Governor), saying that it had been the result of a two-year-plus process and that it was critical to the economy of Western New York.  He said that the 106 companies receiving the Replacement Power and Expansion Power from the Niagara Power Project employ 150,000 people and that, in addition to their job commitments, the companies were committing themselves to capital investments of $150 million.  He thanked the Power for Economic Prosperity group, which represents some of the hydropower customers, as well as the Authority staff responsible for making this happen.  President Kessel said that he had discussed the contracts with Governor Paterson, who is fully supportive of them. 

                President Kessel said that he and Trustee Curley had joined Governor Paterson, Senator Schumer and Ms. Carol Bartz, the Chief Executive Officer of Yahoo! in Lockport last week for the dedication of the new datacenter.  He said that the Governor, the Senator and Ms. Bartz had explicitly stated at the event that if it hadn’t been for the Authority, the datacenter would not be in Lockport.

An economic development update provided to the Trustees showed that since October 2008, 58 MW of hydropower has been allocated to 16 businesses.  These allocations are helping to create nearly 900 new jobs with an average salary of more than $50,000 and will bring more than $800 million in capital investment to Western New York. 

In the North Country, the hydropower allocation to Florelle Tissue (item 1d – Preservation Power Contract to Florelle Tissue Corporation – Transmittal to the Governor) will help create 75 new jobs.  President Kessel said that the Authority had saved Alcoa from going out of business and that the company’s Massena plant has turned the corner.  He said he was confident that in 2011 Alcoa would reopen its East Smelter and commit to a multimillion-dollar modernization project. 

Since May 2009, the Authority has provided Industrial Incentive Awards to 10 businesses; these awards have helped protect nearly 4,000 jobs. 

                President Kessel’s community outreach activities over the past few months included:

·         AERTC (July 9)

·         Buffalo News editorial board, Erie Canal Harbor Agreement signing ceremony (July 13)

·         Watertown Daily Times editorial board; meeting with Senator Aubertine, tour of Maple Ridge Wind Farm (July 15)

·         Tour of Shoreham (July 19)

·         Meetings with municipal customers, including:  Mayor and Electric District Manager in Greene, Electric District Superintendent in Sherburne; and Mayor and Electric District Superintendent of Hamilton, along with representative of Colgate University (July 20)

·         Great Lakes Offshore Wind “Get Listed” event and news conference (July 27)

·         Plattsburgh Press Republican editorial board; meeting with Plattsburgh Mayor and meeting with representative of Plattsburgh Municipal Electric System (August 5)

·         Meeting with Erie County Executive Chris Collins; meeting with Congressman Higgins; news conference on Authority’s rate freeze (August 10)

·         Meeting with Authority Regional Managers in Massena; meeting with Chuck Kelly from Ogdensburg Journal editorial board (August 11)

·         News conference announcing allocation to SKF Aeroengine in Jamestown with Empire State Development Corporation, Chautauqua County Executive and other State and local officials (August 17)

·         Keynote address at Annual Meeting of Otsego Rural Cooperative (August 18)

·         Tour of transmission system near Blenheim-Gilboa facility (August 19)

·         Meeting with Lake Placid Village officials on various joint ventures and tour of dam that Village is seeking to remove (August 25)

·         BAE tour on Long Island (August 27)

·         Power for Jobs news conference in Syracuse; Authority Day at State Fair (August 31)

·         Yahoo! ribbon-cutting ceremony with Governor Paterson and Senator Schumer (September 20)

·         Remarks at Cornell roundtable with local sustainability and energy efficiency advocates (September 21)

·         Remarks to Chamber of Commerce in Utica; tour of Griffiss Airforce Base Technology Park; meeting with local Senators and Assembly members; Authority service awards (September 23)

 

Chairman Townsend asked Trustee Nicandri to say a few words about Ms. Angela Graves and Ms. Mary Jean Frank from the Corporate Secretary’s Office, who are both retiring with 29+ and 8+ years of service, respectively.  Trustee Nicandri said that he could best describe the work that Ms. Graves and Ms. Frank do in their jobs as akin to herding cats and thanked them for their years of service at the Authority.

                President Kessel then thanked Mr. Angelo Esposito, who is retiring after 29+ years at the Authority, for his work, which had helped transform the Authority into the leading energy efficiency power entity in the country.  Mr. Esposito said that he had loved his career at the Authority and thanked the Trustees and staff for their assistance with the Authority’s energy efficiency portfolio of 400+ projects worth more than $1.4 billion.  He said that he felt like he was leaving the Authority with a full tank of gas and the keys in the ignition.

                The Trustees were then shown a video on the Authority’s generation, transmission and energy resource management operations. 

 


 

b.                   Report of the Chief Operating Officer

 

                                Mr. Gil Quiniones provided highlights of the report to the Trustees.

 


 

c.                    Report of the Chief Financial Officer

 

                Ms. Elizabeth McCarthy provided highlights of the financial reports to the Trustees.

 

                Trustee Nicandri said that he wanted the record to show that Ms. Elizabeth McCarthy had briefed him prior to today’s meeting on some of the financial matters on the agenda.  Vice Chairman Jonathan Foster requested that an item on the Authority’s financial status be added to the Discussion Agenda for next month’s Trustees’ Meeting.  Chairman Townsend concurred with that suggestion and noted that Ms. McCarthy reaches out to each of the Trustees, as needed, to brief them on financial issues.  He said that he would like to see an overall capital project matrix on the January or February 2011 Trustees’ Meeting agenda.  Ms. McCarthy said that staff would be reaching out to the Trustees in November to brief them on next year’s budget and the Authority’s four-year financial plan.

 

6.                   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.”  On motion made and seconded, an Executive Session was held.

 

 7.                   Motion to Resume Meeting in Open Session

 

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

 8.                   Next Meeting

 

                Chairman Townsend said that the next meeting of the Trustees would be held at the Niagara Power Project in Lewiston on Tuesday, October 26, 2010. 

 


 

Closing

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

2:15 p.m.

 

 

 

Karen Delince

Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                             

 

 

 

 

SEPT MINS.10


 

[1] “Forward” refers to all periods beyond the current month.    

[2] “Spot” refers to transactions for physical commodities, with delivery typically during the same month in which they are transacted.  In certain cases, where transactions occur later in the month, commodity delivery may occur in the following month. 

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