MINUTES OF THE REGULAR MEETING

OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

November 15, 2011

 

Table of Contents

 

 

 

                Subject    
                                                                                                                                            

1.                   Approval of the November 15, 2011 Meeting Agenda     

2.                    Consent Agenda:       

a.       Minutes of the Regular Meeting held on October 25, 2011

 

b.       Inclusion of Independent Not-for-Profit Institutions of Higher Education in the Statewide Energy Services Program                              

 

 

c.        Expansion Power Contracts with Moog, Inc. and Try-It Distributing Co., Inc. – Transmittal  to the Governor, Exhibit - “2c-A” – “2c-C”
Resolution                                         

 

 

                  Discussion Agenda:     

3.                   Reports from:

a.       Acting President and Chief Executive Officer, Exhibit - “3a-A”

 

b.       Acting Chief Operating Officer, Exhibit - “3b-A”

 

c.       Acting Chief Financial Officer, Exhibit - “3c-A”

  

4.                   Hydroelectric Preference Power Rates –  Notice of Adoption Appendix  “4-A” – “4-C”
Resolution

 

5.                   Massena Substation 765/230 kV Autotransformer Replacement – Capital Expenditure Authorization and Contract Award
Resolution 

 

                                                   

6.                   Selection of President and Chief Executive Officer                         

Resolution            

7.                   Election of Executive Vice President and General Counsel             

Resolution                                                                                                                       

 

8.                   Resolution – Paul F. Finnegan                                                                         

9.                   Motion to Conduct an Executive Session                                                     

10.                Motion to Resume Meeting in Open Session                                                

11.                Next Meeting                                                                                           

Closing                                                                                                                                          

 

               

                                                                                                                                                               

 


Minutes of the Regular Meeting of the Power Authority of the State of New York held at the Clarence D. Rappleyea Building, 123 Main Street, White Plains, New York at approximately 11:00 a.m.

The Members of the Board present were:

 

                                Michael J. Townsend, Chairman

                                Jonathan F. Foster, Vice Chairman

                                D. Patrick Curley, Trustee

                                John S. Dyson, Trustee

                                R. Wayne LeChase, Trustee

                                Eugene L. Nicandri, Trustee

                                Mark O’Luck, Trustee

                               

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Gil C. Quiniones                                   Acting President and Chief Executive Officer

Judith C. McCarthy                             Acting General Counsel

Donald Russak                                    Acting Chief Financial Officer

Thomas Antenucci                             Senior Vice President – Power Supply Support Services

Steve DeCarlo                                      Senior Vice President – Transmission

Thomas DeJesu                                   Senior Vice President – Public, Governmental and Regulatory Affairs

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

James Pasquale                                   Senior Vice President – Marketing and Economic Development

Joan Tursi                                            Senior Vice President – Corporate Support Services

Paul Belnick                                         Vice President – Energy ServicesEnergy Services and Technology

John Canale                                         Vice President – Project Management

Thomas Davis                                     Vice President – Financial Planning and Budgets

Dennis Eccleston                                Vice President – Information Technology/Chief Information Officer

Michael Huvane                                  Vice President – Marketing – Business and Municipal Marketing

John Kahabka                                      Vice President – Environmental, Health and Safety

Joseph Leary                                        Vice President – Community and Government Relations

Lesly Pardo                                           Vice President – Internal Audit

Scott Scholten                                      Vice President and Chief Risk OfficerEnergy Risk Assessment and Control

John Suloway                                       Vice President – Project Development, Licensing and Compliance

Lori Alesio                                            Assistant General CounselHuman Resources and Labor Relations

Vincent Esposito                                 Assistant General CounselLegislative and Regulatory Affairs

Karen Delince                                      Corporate Secretary

Brian McElroy                                     Treasurer

Jill Anderson                                        Director – Business Integration

John Brennan                                       Director – Strategy and Governance

Robert Knowlton                                 Director – Civil/Structural Engineering

Mike Lupo                                            Director – Marketing Analysis and Administration

Michael Saltzman                                Director – Media Relations

Lynn Hait                                             Regional Manager Central NYSite Administration, B-G

Gary Schmid                                        Manager – Network Services Infrastructure

Kevin O’Keeffe                                   Manager – Video Production ServicesMedia Relations

Meg Smilowitz                                     Manager – SAP Portfolio, Application Services

Ali White                                              Senior Attorney IHuman Resources and Labor Relations

Tannille Santos                                   Conservation EngineerEnergy Services and Technology

Trish Hennessy                                   PhotographerVideo and Photographic Services

Michael Schneider                              Contractor – Media Relations

Lorna M. Johnson                              Assistant Corporate Secretary

Sheila Baughman                                Senior Secretary – Corporate Secretary’s Office

Mikey Wade                                        Intern

Kenneth F. Deon                                 Managing Partner, KPMG LLP

Brendan Kennedy                               Senior Manager, KPMG LLP

 

 


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


Introduction

                Chairman Michael Townsend welcomed the Trustees and staff to the meeting.

               

1.                   Approval of the November 15, 2011 Meeting Agenda

                On motion made and seconded, the agenda for the meeting was approved as amended.

 

2.                   Consent Agenda

                On motion made and seconded, the Consent Agenda was approved.  Trustee Curley recused himself as regards the vote on item #2c – Expansion Power Contracts with Moog, Inc.
  and Try-It Distributing Co., Inc. – Transmittal to the Governor.

 

a.                   Approval of the Minutes

 

                The Minutes of the Regular Meeting held on October 25, 2011 were unanimously adopted.

               

b.                   Inclusion of Independent Not-for-Profit Institutions of Higher Education in the Statewide Energy Services Program

 

                The Acting President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to authorize the inclusion of independent not-for-profit colleges and universities within New York State as eligible participants in the Statewide
Energy Services Program (‘Statewide ESP’).  As deemed feasible and advisable by the Trustees, pursuant to a recent amendment to Chapter 477 of the Laws of 2009 (Public Authorities Law
§1005(17)) recently signed by Governor Cuomo, the Authority was authorized to finance and design, construct, implement, provide and administer energy related projects, programs and
services for this group of prospective customers.  If authorized by the Trustees, all Authority costs will be recovered directly from each participating not-for-profit college or university.

 

BACKGROUND

 

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

 

“As an outgrowth of the State’s continuing efforts in the areas of energy efficiency and clean energy technologies (e.g., its 45x15 goal to meet 45% of the State’s electricity needs
through improved energy efficiency and renewable sources by 2015 and Executive Order No. 111, which requires agencies to reduce energy consumption while transitioning to renewable
energy sources), the State signed into law Chapter 477 of the Laws of 2009 on September 16, 2009.  Governor Cuomo amended Section 1005 of the Public Authorities Law by adjusting
subsection 16 (now 17) which enhanced the Authority’s ability to provide energy efficiency, clean energy and green building programs and services to reduce energy consumption and
mitigate environmental impacts from energy usage and eliminated the sunset date originally designated.  Subsequently, he signed into law, effective August 31, 2011, the Authority’s
ability to carry out energy efficiency and clean energy projects for independent, not-for-profit colleges and universities.

 

“The amendment now authorizes the inclusion of this new customer group of independent not-for-profit institutions of higher learning for energy efficiency services consistent with
the State’s energy and environmental policies.

 

DISCUSSION

 

“There are more than100 independent not-for profit colleges and universities in the State.  The addition of these institutions as eligible participants in the Statewide ESP would assist
these institutions to address critical energy efficiency concerns, help them to reduce their energy costs, free up monies for capital expenses, which in turn could have a favorable impact on tuition
and fees.   All Authority costs will be recovered directly from each participating institution.

 

“Assisting these institutions of higher education has benefits for the State:

 

·         The facilities in the new market serve over 450,000 undergraduate and graduate students. More than 300,000 of these students are New York residents.  Fifty-four percent of the
baccalaureate degrees, seventy-three percent of the master’s degrees and seventy-nine percent of the doctoral and first professional degrees earned in the State are from these
institutions;

·         Boost local economy – the schools in nine of the State’s counties provide five percent or more of those counties’ total local employment; 

·         These institutions contribute $54 billion to the economy, employ 174,000 people and sponsor 500 research centers and institutes that are available to businesses and local communities.

                “If approved by the Trustees, the Statewide ESP projects, programs and services will be available to not-for-profit colleges and universities that sign a cost-recovery agreement and
                commit to repay the Authority for the costs associated with any financing provided for eligible ESP project(s).

 

FISCAL INFORMATION

               

“No additional funding is requested for the implementation of energy-related projects, programs and services to be included in the Statewide ESP for the benefit of the independent
not-for-profit institutions.  Funding will be provided through Authority financing options previously approved by the Trustees for Statewide ESP.  In addition, projects may be funded, in part,
with monies from the Petroleum Overcharge Restitution (‘POCR’) fund.  All Authority costs, including Authority overheads, excluding any grant of POCR funds, will be recovered from the
individual participating institution, similar to other Energy Services and Technology programs.  The Authority will continue to evaluate each applicant in order to best mitigate risk of loss to
the Authority. 

 

RECOMMENDATION

               

“The Vice President – Energy Services and Technology recommends that the Trustees approve the inclusion of independent not-for-profit colleges and universities in the Statewide
Energy Services Program. 

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

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

 

RESOLVED, That the Trustees authorize inclusion of independent not-for-profit colleges and universities into the Statewide Energy Services
Program as described in the foregoing report of the Acting President and Chief Executive Officer; and be it further

 

RESOLVED, That the funding for the energy related projects, programs and services for the benefit of the independent not-for-profit institutions
be provided through Authority financing options previously approved by the Trustees for Statewide Energy Services Programs;

                                                               

Commercial Paper Program/                        Statewide ESP

Operating Fund/POCR                                     Authorization

 

Previously Authorized                                      $833 million

Additional Funding                                           $    0 million

Total Amount Authorized                                $833 million

 

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

 

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

 

RESOLVED, That the Chairman, the Vice Chairman, the Acting President and Chief Executive Officer, the Acting 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 Acting General Counsel.


c.                    Expansion Power Contracts with Moog, Inc. and Try-It Distributing Co., Inc. – Transmittal to the Governor 

 

The Acting President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve the proposed agreements (‘Agreements’) for the sale of Expansion Power to Moog, Inc. (‘Moog’) and Try-It Distributing Co., Inc.
(‘Try-It’) and to authorize their transmittal to the Governor.  The proposed Agreements with Moog and Try-It are attached as Exhibits ‘2c-A’ and ‘2c-B,’ respectively.

 

BACKGROUND

 

At their July 26, 2011 meeting, pursuant to criteria set forth in §1005 (13) of the Public Authorities Law (‘PAL’), the Trustees approved 300 kilowatt (‘kW’) and 200 kW Expansion
Power allocations to Moog and Try-It, respectively,
each for a term of five years.  The Trustees also authorized a public hearing, pursuant to §1009 of the PAL, on the proposed Agreements
to effectuate the sale of power and energy for the allocation to the companies. 

 

 In return for the 300 kW allocation, Moog, a designer and manufacturer of precision motion control equipment, committed to invest $13 million to build and equip a new, two-story,
 68,000 square-foot corporate shared services building at its East Aurora campus.  As a result of this project, the company would commit to creating 70 new jobs in addition to the nearly 2,500
existing high-quality jobs.

 

In return for the 200 kW allocation, Try-It, a wholesale beverage distributor located in Depew, New York, committed to invest a total of $14.0 million to expand its existing office and
warehouse facility by over 100,000 square feet.  A majority of the new space will be climate controlled warehousing operations.  As a result of this expansion project, the company would commit
to creating 23 new jobs above its existing 242 jobs.

               

                “Regarding the proposed Agreements, firm electric service will be equivalent to that provided to all other Authority firm hydropower customers and subject to pro-rata curtailment when
there is insufficient generation at the Niagara and St. Lawrence/FDR facilities to meet the energy requirement of the firm hydropower customers.  The allocations will be subject to enforceable
employment commitments.  The Agreements include an annual job reporting requirement with a job compliance threshold of 90%.  Should the ratio of actual jobs reported to jobs committed
fall below the compliance threshold, the Authority have the right to reduce the hydropower allocation on a pro-rata percentage basis.

 

                “Electricity will be sold directly to the customers (‘direct service’), with delivery service provided by New York State Electric and Gas, the local distribution company.  The rates, terms,
and conditions for direct EP sales, as applicable to all other direct service EP allocations, are contained in the ‘Schedule of Rates for Sale of Expansion Power – Service Tariff No. EP-1,’ that is
effective through June 30, 2013.  Thereafter, sales for these Agreements and all EP and Replacement Power allocations will be served under the ‘Schedule of Rates for Sale of Firm Power to
Expansion and Replacement Customers located In Western New York – Service Tariff No. WNY-1.’

 

                “Regarding the status of the individual expansion projects, both Moog and Try-It’s projects have commenced and are progressing as planned.  If the Agreements are approved by
the Trustees and the Governor, the individual customer agreements will only be executed after a project review is completed by and to the satisfaction of the Authority.

 

DISCUSSION

 

                “A public hearing on the Agreements was held on October 4, 2011 at the Niagara Power Project’s Power Vista Visitor Center in Lewiston.  There were no oral statements made at the
public hearing and no written statements were submitted.  The official transcript of the public hearing is attached as Exhibit ‘2c-C.’  As such, the Agreements are submitted for final approval
as proposed.

 

RECOMMENDATION

 

The Manager – Business Power Allocations and Compliance recommends that the Trustees approve the proposed Agreements for the sale of Expansion Power to Moog, Inc. and
Try-It Distributing Co., Inc. and authorize the transmittal of the Agreements to the Governor for approval.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

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

 

RESOLVED, That the Expansion Power agreements for the sale of hydroelectric power and energy generated by the Authority for sale to Moog, Inc. and Try-It Distributing Co., Inc., respectively, are in the public interest and should be submitted to the Governor for approval and that the agreements, 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 agreements 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 Acting General Counsel, to negotiate and execute any and all documents necessary or desirable to implement the agreements with the companies as set forth in the foregoing report of the Acting President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the Vice Chairman, the Acting President and Chief Executive Officer, the Acting 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 Acting General Counsel.

 


3.                   Discussion Agenda

a.             Report of the Acting President and Chief Executive Officer

                Acting President and Chief Executive Officer Quiniones discussed the Authority’s performance, as reflected in the performance matrix developed by Authority staff, and highlighted
some of the key initiatives.  He said that the Authority is performing well operationally and financially. 

Key Issues

 Governor’s Energy Efficiency Initiative

Acting President and Chief Executive Officer Quiniones said that because of the Authority’s success in its energy efficiency program, Authority staff is assisting the Governor’s office
staff in their effort to accelerate the implementation of energy efficiency initiatives in public buildings around the state.

Recharge New York

Acting President and Chief Executive Officer Quiniones said that, to date, staff has received 133 completed applications for power under the new Recharge New York (“RNY”)
Program with approximately 600 additional applications in progress in the online system.  Staff from Marketing and Public and Governmental Affairs continue to visit stakeholders
around the State in order to explain the program and the application process.  

Proposed Hydro Rate Increase

Acting President and Chief Executive Officer Quiniones said that based on comments received at the public forum to consider the hydropower rate increase, staff will be recommending
that the rates be modified downward from the initial proposal.   He thanked Trustee Dyson for his input in identifying measures to reduce the Authority’s expenses, adding that these measures
will continue with the objective of achieving ten percent reductions in overhead expenses in keeping with the Governor’s goal.

In response to a question from Trustee Nicandri, Acting President and Chief Executive Officer Quiniones said that two employees have been assigned to support the Governor’s office
with regard to its energy efficiency initiative.  He said the assignment will be for approximately six months and they will be providing technical expertise for the development of the program.

In response to a question from Trustee LeChase, Acting President and Chief Executive Officer Quiniones said that the number of applications received, to date, for the RNY program
is less than anticipated; but it is expected additional applications will be submitted.  He added that RNY is a very valuable program, and, eventually, the number of potential customers
applying for the program will increase.

In response to a question from Chairman Townsend, Acting President and Chief Executive Officer Quiniones said that although customers who were a part of the Power for Jobs (“PFJ”)
or Energy Cost Savings Benefit (“ECSB”) programs are more aware of the new program because of the Authority’s outreach activities, the Authority is expecting to receive applications from new
businesses that are not a part of the PFJ or ECSB program.

In response to a question from Trustee Curley, Acting President and Chief Executive Officer Quiniones said that under the Recharge New York program, applications go through the
Central Funding Application (“CFA”) process and that the Regional Economic Development Councils have access to the applications submitted through the CFA.  In response to further
question from Trustee Curley, Acting President and Chief Executive Officer Quiniones said that no applications have been rejected by the Authority; staff reviews the applications and if they
are incomplete, staff will contact the applicant and assist them with the application. 
 

b.                   Report of the Acting Chief Operating Officer

Senior Vice President – Power Supply Support Services, Mr. Thomas Antenucci, provided highlights of the report to the Trustees. 

Performance Measures

·         Net Generation exceeded projections; transmission reliability measures exceeded its target and there were no significant transmission events in October.

Key Issues

Forced Outages

·         500 MW Plant – two forced outages from problems on Unit 7B which tripped out of service on September 27 and had an oil leak on October7th.  The unit was repaired and
returned to service on October 7 and 10, respectively.

·         Y-49 feeder located near the east Garden State substation – reason for outage has been located and the unit is in the process of being repaired.

Planned Maintenance Outages

·         Richard M. Flynn Power Plant – scheduled to return to service by the end of November.

·         Niagara-Lewiston Plant – replacement of the generator step-up transformer to be completed in December.

·         Blenheim-Gilboa Project – Unit #3 expect to return to service by the end of the week.

Technical Compliance – NERC Reliability Standards

·         The Northeast Power Coordinating Council (“NPCC”) conducted a Culture of Compliance Survey of its 350 registered entities.  On October 18, the Authority received a letter
from NPCC stating that the Authority has demonstrated that it meets or exceeds all minimum characteristics for a favorable culture of compliance.

 

c.                    Report of the Acting Chief Financial Officer

Acting Chief Financial Officer, Mr. Donald Russak, provided highlights of the report to the Trustees.  He said that the Authority continues to perform well financially.  For the period
ended October 30, 2011, Net Income was $19 million, which is $7 million above budget. Net Income through October 31, 2011 is $211 million; this amount is $62 million above budget.

In response to a question from Vice Chairman Foster, Mr. Russak said that the lower capacity prices in the marketplace have a greater effect on the Blenheim-Gilboa (“B-G”)
Power Plant than the Niagara and St. Lawrence-FDR Plants because B-G receives a higher percentage of its revenues from the capacity market.  In response to a question from
Trustee Nicandri, Mr. Russak said that the overall revenue impact at B-G is the result of a combination of the lower capacity prices and the reduced on-peak and off-peak price differentials
in the energy market.

Mr. Russak continued that the Operating Fund balances for October increased temporarily because of the proceeds from the 2011 bond sale; this will be used to refund the 2001
series bonds during November.  Mr. Russak ended by stating that the 2012 budget briefing package is being prepared for the Trustees’ review.  Staff will also set up individual briefings with
the Trustees to answer any questions they may have.  In response to a question from Trustee Nicandri, Mr. Russak said that the 2012 budget will be presented to the Trustees for approval at
the December meeting.  In response to a question, from Trustee O'Luck, Mr. Russak said that last year the Authority did have a flat budget, however, later in the year, staff sought and received
approval from the Trustees for an adjustment to that budget. 

 

 

4.                   Hydroelectric Preference Power Rates - Notice of Adoption

 

The Acting President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to adopt a final rule with respect to the preference power rates supplied from the Niagara and St. Lawrence/FDR Hydroelectric Projects (individually, ‘Niagara
Project’ and ‘St. Lawrence Project,’ and collectively, the ‘Hydro Projects’).  The rates have been modified downward from the change proposed at the July 26, 2011 meeting of the Trustees as a
result of the public comment process.  Such rates apply to the Authority’s hydroelectric sales to forty-seven municipal electric systems and four rural electric cooperative customers located in-state
 (collectively, the ‘NY Munis & Coops’), the neighboring states customers (‘NS Customers’)[*], three upstate investor-owned utilities (for the benefit of their residential customers) and the Niagara
Project relicensing customers.[†]  Under the 41-month final rate plan proposed by Authority staff, new rates would commence December 1, 2011, with subsequent increases starting May 2012, 2013 and
2014, and concluding on April 30, 2015.  The commencement of new rates would be delayed one month from staff’s original proposal as a result of the Authority’s decision to extend the end of the public
 comment period from October 3, 2011 to October 24, 2011.  This proposal would increase rates for a typical municipal system residential customer by less than 60 cents per month for each year of the
phase-in period, which cost represents less than 1% of the total bill, and by less than 5 cents per month for each year of the phase-in period for a typical utility residential customer, which is also well
below 1%.

 

                “The Trustees are also requested to authorize the Corporate Secretary to publish a Notice of Adoption in the New York State Register (‘State Register’) regarding the final rate plan.

                 

BACKGROUND

 

“At their meeting of July 26, 2011, the Trustees authorized publication in the State Register of a Notice of Proposed Rulemaking (‘NOPR’) to increase the preference power rates.  The proposed rate
 plan was prepared by Authority staff and explained in its July 2011 report on ‘Preliminary Staff Report, Hydroelectric Production Rates, Rate Modification Plan – Rate Years 2011-2014’ (referred to herein as
 the ‘Preliminary Staff Report’ and included in Appendix ‘4-B’ to this report).  The proposed rate plan was based on the results of staff’s preliminary 2011 hydroelectric cost-of-service (‘Hydro CoS’ or ‘CoS’)
study.  The July NOPR sought to increase the effective rates to $11.42 per MWh for the 2011 rate year as compared to the 2008 rate level of $10.71 per MWh at the time the rates were frozen in April 2009, and
added gradual increases from the 2012 through 2014 rate years with a proposed final effective rate of $13.87 per MWh. 

 

“The current rates, which end on November 30, 2011, are based on the ratemaking methodologies adopted by the Trustees at their meetings approving earlier increases to the preference rate in 2003
and 2007, which are also reflective of the same cost-of-service principles agreed to by the NY Munis & Coops, the NS Customers and the Niagara Project relicensing customers through either settlements or
in their purchase contracts with the Authority.  Except as noted below, those same CoS principles are continued in this Preliminary Staff Report.

 

“The customers were provided with written notice of the Preliminary Staff Report and notice of three public forums shortly after July 26, 2011.  The NOPR was published in the State Register on
August 17, 2011 together with notices of public forums on this rate proposal to be held for the purpose of obtaining the views of interested parties.

 

                “After issuing the Preliminary Staff Report, Authority staff met with various customer groups and elected officials and entertained extensive discovery regarding the proposed rate plan.  Staff
responded to 128 data requests from the following parties:  the Municipal Electric Utilities Association (‘MEUA,’ 35 requests), the New York Association of Public Power (‘NYAPP,’ 64 requests) and the
NS Customers (29 requests).  Many requests were answered with work papers supporting the CoS calculations, but several others required detailed explanations, sometimes with attachments of financial
or Hydro Project data.  

 

                “Public forums were held in Syracuse, Niagara Falls and Massena on September 19, 20 and 22, respectively.  The forums were conducted in accordance with the terms of the ‘Policy and
Procedures – Public Forum on Rate Proposals’ adopted by the Authority’s Trustees at their meeting of November 27, 1990.  Authority staff spoke at the forums to explain the procedures and summarize
the results of the CoS and proposed rates.  Representatives of various customers attended, as well as elected officials and residents of New York State.  Customers included representatives from the NS
Customers, MEUA, NYAPP, Niagara Power Coalition, Inc. (‘NPC,’ an organization representing the Niagara Relicensing host communities), Jamestown Board of Public Utilities, Town of Massena Electric
Department and the Plattsburgh Municipal Lighting Department.  Elected officials included Assemblyman John D. Ceretto, William L. Ross, Chairman of the Niagara County Legislature (and also NPC Chairman),
and Renae Kimble, Niagara County Legislator.  Mr. Charlie McGrath, a St. Lawrence Project-area citizen, also commented.  In addition to oral or written comments delivered at the public forum, written comments
were received through October 24, 2011, the end of an extended public comment period.  

 

                “The Authority received written comments from MEUA, NYAPP, the NS Customers, and NPC as well as numerous letters from elected officials and other parties concerning the rate proposal.[‡]

 

                “All of the public comments were evaluated by Authority staff.  The Staff Analysis, a detailed description of the issues raised and staff’s recommendations, is contained in Appendix ‘4-A.’  A summary
 of staff’s analysis of the major issues and final recommendations are set forth below.  (The transcript of the public forums and all written comments are included in Appendix ‘4-C’ to this report.)

               

DISCUSSION

 

STAFF ANALYSIS OF PUBLIC COMMENTS

 

Requests to Delay Implementation Date and Extend Review Period:  There were several comments which requested that NYPA delay implementation of the new rates until May 1, 2012.  MEUA requested that
for future Authority rate proceedings, the review time be extended to allow for at least four months between publication of the Notice and the comment due date.  Many parties cited the need for more time to
 consider responses to data requests and to file comments.  As the Staff Analysis explains in more detail, there was sufficient time to review the data supporting the pending rate action, including the responses
 to the significant amount of data requests received.
  By operation of the extended due date that the Authority granted for the filing of comments, the Authority has consented to delay the implementation date
for new rates, which was originally scheduled to become effective on November 1, 2011.  Staff does not find convincing the arguments to delay implementation of the new rates or to permanently alter the
review time which is done in accordance with state law.  The proposed rates should be implemented one month later than originally proposed, to be effective December 1, 2011.

 

Proposed Preference Rates and their Conformance With the ‘Lowest Possible Rate’ Standard:  Many customers argued that the proposed rates do not conform with the statutory standard that preference
customers be served at the ‘lowest possible rate’ as set forth in the Public Authorities Law.  They claim that various adjustments are needed including the enlargement of the demand charge allocator and several changes to NYPA’s calculation of unforced capacity (‘UCAP’) sales credits used in the CoS and in the Rate Stabilization Reserve (‘RSR’) reconciliation mechanism,[§] all to lower customers’ rates. 

 

“The attached Staff Analysis discusses the merits of these proposals in detail.  However, as amply explained in the Staff Analysis, staff finds there is no compelling argument that any of these
adjustments are required to satisfy the ‘lowest possible rate’ standard.  The rate methodologies used in the July 2011 Preliminary Staff Report are virtually identical to the methodologies adopted by the
Trustees in 2003, which were later agreed to by all the preference customers in contracts or settlement, and used again in 2007 when the Trustees authorized the last preference rate increase.  Further, MEUA,
NYAPP and the NS Customers have ignored the provisions in their long-term hydropower contracts or settlements that specifically permit NYPA to employ the rate methodologies adopted by the Authority’s Trustees in 2003.  In addition, as the courts have recognized, the Authority possesses ‘broad discretion’ in determining what comprises the ‘lowest possible rate’ pursuant to the Auer decisions and the Auer Settlement, both of which have long-provided guidance on NYPA’s preference power ratemaking.  None of the customers has alleged, nor can they allege, that NYPA has somehow abandoned its agreements
that set forth NYPA’s rate methodologies.

 

Requests to Increase the Demand Allocator:  NYAPP argues that the denominator used to set the demand rate should be based on the MW-months of NYPA’s contract demand plus the MW-months of the Authority’s average UCAP sales from the Projects.  MEUA makes a similar claim, in that NYPA does not calculate the demand rate by spreading the cost over ‘all users’ of Hydroelectric Projects’ capacity.  The
NS Customers reach the same conclusion.

 

“The billing determinant methodology used for the proposed 2011-2014 hydroelectric production rates is the same methodology used in both the 2003 and 2007 production rates proposals and is
entirely consistent with the contracts and settlements reached with various preference power customers.  According to standard ratemaking principles, the firm power contract customers are responsible for
the cost recovery of the assets developed to serve them.  NYPA adheres to this principle when it undertakes its cost recovery through production rates that are developed by using the total firm demands of its hydroelectric customers. 

 

“As explained in detail in the Staff Analysis, NYPA does not find compelling the argument to increase the denominator used to calculate the demand charge.  However, to provide the preference
customers with the timing benefits of NYPA’s UCAP sales, staff proposes to include a UCAP credit, based on projected ISO sales revenue, into the annual rate development for each of the 2011-2014 rate years.
Any differences in the estimated UCAP credit and actual UCAP sales would be reconciled in future annual RSR computations.  By making this adjustment, NYPA would reduce the Hydro CoS by $1.6 million
in Rate Year (‘RY’) 2011, $3.7 million in RY 2012, $5.1 million in RY 2013 and $6.5 million in RY 2014.

 

Claims That the UCAP Credit be Cost-Based and Applied Directly to the RSR Balance:  The RSR contains a UCAP Credit which is designed as a credit to the preference power rates to account for sales of
UCAP for the hydroelectric projects that is above the needs of the contract hydro customers.  Both NYAPP and MEUA request that prior RSR annual calculations be revised to reflect a cost-based rate for
the UCAP.  NYAPP contends that NYPA is incorrectly crediting UCAP sales based on the lower of market prices or costs and that a cost-based UCAP credit would be consistent with applicable precedents
and its settlement with NYPA. 

 

“As explained in the Staff Analysis, consistent with staff’s determination not to expand the billing determinants to include estimated short-term UCAP sales, staff finds unconvincing NYAPP’s proposal
 that the UCAP credits be re-valued at cost.  As these NYISO customers are not receiving the same product, service or benefits as NYPA firm contract customers, staff affirms that it is unsound ratemaking to
apply the same cost of service rate to these transactions.

 

NYPA’s UCAP Credit Calculation Applied to the RSR and Claims that Preference Customers Cross-Subsidize Non-Preference Customers:  NYAPP states that a flaw in NYPA’s UCAP calculation used in the RSR causes actual capacity sales to be understated because NYPA’s UCAP sales crediting methodology leaves the difference between the forecasted demand and the actual demands out of the equation.  Preference customers are charged for the costs of those MW-months but cannot use them.  Nevertheless, preference customers are not granted a dollar credit when NYPA sells these MW-months, either in the UCAP credit
 to the RSR or in the calculation of the demand rate.  MEUA argues that cross-subsidization can occur between the rates charged to preference customers and non-preference customers, and has observed that the drop in demand of Reynolds Metals (i.e., now ALCOA’s East Plant) over 2009-10 is a major factor in this regard. 

 

“As explained in the Staff Analysis, the comments concerning the cross-subsidization issue have some merit and staff has reconsidered its UCAP sales credit methodology.  Staff recommends that the
actual UCAP sales be used in the annual RSR calculations for 2005 through 2010.  The dollar effect of the change is a reduction of $13.5 million in the RSR negative balance.

 

Treatment of 455 MW Preference Power Redirected to the Recharge New York Power Program:  NYAPP and NS Customers voiced concerns over the withdrawal of 455 MW from preference power allocations
to the Recharge New York Program, and its effect on the demand rate.  Staff has continued to include the 455 MW withdrawn from the R&D customers in the total billing demands of the hydroelectric project
CoS, which is consistent with the Customers’ view.  Staff also recognizes that the withdrawn power may no longer be classified as preference power thus, its proportional share of the RSR balance should be excluded.  Staff recommends reducing the RSR balance by 30.17% or $10.5 million to reflect this adjustment.  This amount is expected to be recovered through the sales made under the Recharge New York
Power Program.

 

Annual RSR Report Procedures:  MEUA points out that the RSR is a ‘full, after the fact reconciliation of NYPA’s rate year costs and revenues.’  MEUA requests the right to review the annual RSR calculations
 and the establishment of a public process, with an opportunity for information sharing, discovery and comment.
 While other customers did not provide written comments on the specific issue of RSR review,
NYAPP and the NS Customers made this concern known to NYPA staff at in-person meetings.  NYPA staff agrees that transparency in the Hydro CoS process, including the annual RSR computation, is a
worthwhile goal.  NYPA staff agrees to provide the preference customers with the annual reconciliation to the RSR by June 1 of each year and to meet over the ensuing months to discuss relevant issues and
provide needed data to customers, but does not believe a public comment process is warranted as the RSR mechanism is provided for in customer contracts. 

 

Increased Credit for Ancillary Services Production:  NS Customers assert that its current ancillary services credit is insufficient, as it only credits the costs associated with the amount of regulation necessary for contract loads, and not the actual regulation service sales.  As explained in the Staff Analysis, the NS Customers’ claim is inconsistent with their Authority hydro contracts in which their members agreed that
certain methodologies and principles adopted by the Authority in 2003 would continue to be used without objection when the Authority sets future hydro rates. 

 

“However, staff does recommend that the ancillary services credit for the 2011-14 be increased by a total of $2.2 million from that shown in the preliminary CoS.  This change stems from an adjustment
to the 2009 test year billing determinants to reflect average annual usage for the ALCOA East plant, which was shut down for much of that year.

 

Request for Credits Based on Authority Investment Income:  NS Customers argue that they should receive a credit for investment income in the CoS since much of the Authority’s investment income is
generated from the operations at the Hydro Projects.  This argument runs counter to the ratemaking principles established in the preference customer contracts.
 As explained in the Staff Analysis, a claim
for a share of the Authority’s investment income would produce preference rates that are below cost and in violation of settled law and applicable ratemaking principles.  Staff recommends no credit be
provided for investment income. 

 

2009-2010 Deferred Rate Increases:  NYAPP asserts that Authority costs associated with 2009-10 increases at the hydroelectric projects should not be allocated to ratepayers, due to the fact that the March
2009 rate increase proceeding was cancelled by the Trustees.  NYAPP claims that they had no ‘notice’ that 2009 and 2010 costs would be deferred and that they expected those costs to be forgiven.  NYAPP
also claims that the Authority’s proposal in this regard demonstrates a lack of ‘transparency.’  At the March, 2009 Trustee Meeting, the Trustees gave clear notice that 2009 and 2010 costs ‘[would] be deferred
and recovered over appropriate, subsequent years(s).’  All deferred amounts are being captured in the contractually agreed-upon RSR reconciliation mechanism.  Therefore, Staff does not recommend any
changes to the RSR mechanism that would fail to recognize the cost deferrals related to the 2009 and 2010 rate years.  

 

Contributions to the New York State Treasury:  MEUA commented that NYPA’s expenditures used to make contributions to the State Treasury have been ‘properly excluded’ from Hydro CoS.  However,
NYAPP noted the size of the voluntary transfers to the State and requested that the Authority adopt ‘detailed metrics’ for measuring its creditworthiness at the time it considers making voluntary contributions
 to the State, and registered its concern about the Authority’s future financial strength.  NPC commented that the Authority should use surplus funds pledged to the State Treasury to offset the entire rate
increase.  As the Staff Analysis explains, staff has reviewed existing policies and concludes that the Authority has developed an in-depth review process to ensure that these transfers are ‘feasible and
advisable’ and will not result in preference power rate increases beyond those necessary to provide power at cost.  There is no cause to provide the relief requested by the NPC, as the inclusion of such
‘surplus funds’ in the Hydro CoS would lower the preference rate below cost. 
No changes are recommended. 

 

Inclusion of Charitable Contributions within the CoS:  MEUA has requested that charitable contributions and sponsorships not directly assigned to the hydroelectric projects be removed from the cost of
service.  Staff concurs with this request, and recommends that all costs for such contributions and sponsorships be removed from the preference customer CoS in the total amount of $483,000 over the
41-month rate plan period.    

 

Recovery of Costs for Parks Neighboring the St. Lawrence Power Project:  NYAPP seeks clarification concerning payments made to the Robert Moses and Coles Creek State Parks (‘Parks’) located in the
direct vicinity to the St Lawrence Power Project.  The Federal Energy Regulatory Commission license issued for the St. Lawrence Project on October 23, 2003 incorporates these Parks as project recreational
facilities and, under the terms of the license, the Authority has the ultimate responsibility to fund the O&M costs of the Parks.  However, as part of a 2009 Memorandum of Understanding between the State
of New York and the Authority, the Authority was relieved of these annual payments to the Office of Parks, Recreation and Historic Preservation (‘OPRHP’) for the state fiscal years 2011 through 2017. 
In reviewing accounting data for past years, staff discovered that in 2008, $8 million charged to the Miscellaneous and General Expenses Account for the Niagara and St. Lawrence Projects for Parks
reimbursement had not been backed out of financial information used in the 2008 actual hydroelectric CoS.  The CoS did include a separate entry for $800,000 attributable to the Parks.  The removal of the
$8 million charge from the CoS resulted in positive adjustment to the cumulative RSR of about $3 million.  Staff recommends that the $800,000 cost for the Parks not be included in the RSR true-up and confirms
that it is not in the CoS for Rate Years 2011-14 covered under this rate proceeding.

 

Shared Services Expenses within the CoS:  NYAPP indicated that the Authority did not provide sufficient information as to what it includes in Shared Services within the CoS, and generally requested
additional information describing what is included in this category of expenses.  Staff responded to several data requests regarding the allocation of shared services costs.  It was staff’s understanding
that the responses were sufficient, as there was no receipt of any further requests for follow-up information concerning shared services expenses.  The final rate recommendation reflects certain overhead
cost-cutting measures undertaken by staff in the last few months including an approximate $5 million reduction for RY 2012-2014 resulting from the Trustees approval of a revised funding plan for the
Other Post-Employment Benefits (‘OPEB’) Trust at their October 2011 meeting.

 

SUMMARY OF FINAL RATE PROPOSAL

 

                “For the reasons summarized above and described in detail in the Staff Analysis, Authority staff recommends that the demand rates originally proposed in the July 2011 Preliminary Staff Report
be amended and approved as shown below.  The proposed final demand and energy rates and the overall effective rates at a typical 70% load factor are shown below:

 

Rate Year[**]

Demand Rate $/kW-month

Energy Rate $/MW-hour

RSR-related Surcharge $/MW-hour

Effective Rate[††] $/MW-hour

2011

3.26

4.92

-

11.30

2012

3.57

4.92

-

11.91

2013

3.91

4.92

-

12.57

2014

4.07

4.92

up to 0.40

13.28

 


“Also, as noted and recommended in the Staff Analysis of public comments, the RSR balance must be altered and lowered from the -$51.3 million balance cited in the NOPR to account for 1) $13.5
million in additional revenues tied to the total annual UCAP sales and internal transfers; 2) a reduction of $3 million in the 2008 RSR calculation resulting from a correction of charges included in the 2008 CoS
related to payments to OPRHP; and 3) a 30.17% reduction in the revised RSR balance to account for the withdrawing of 455 MW of firm hydroelectric power formerly allocated to the upstate utilities for their residential customers and which is now allocated to the Recharge New York Power Program.  The remaining RSR balance equals -$24.5 million.

 

“As a result, staff retracts its recommendation that a $0.50/MWh surcharge begin in 2014, but rather, should the RSR balance exceed the $25 million threshold the surcharge would be no greater than $0.40/MWh

 

FISCAL INFORMATION

 

“Implementation of the proposed schedule of rate increases would allow the Authority to recover its costs associated with serving the preference power customers.  For the 2011 rate year, the estimated revenue increase would be about $2.1 million.  For the 41-month period from December 2011 through April 30, 2015, the estimated cumulative base rate revenue increases would be about $45.8 million with the additional RSR surcharge of $2.7 million being collected from preference power customers for the period May 1, 2014 to April 30, 2015.

 

RECOMMENDATION

 

                “The Vice President – Financial Planning and Budgets recommends that the Trustees: (1) adopt the conclusions of the Staff Analysis attached hereto as Appendix ‘4-A’; (2) approve the hydroelectric preference rates for the 41-month plan commencing December 1, 2011, as set forth above; and (3) include in the Authority’s records the Preliminary Staff Report contained Appendix ‘4-B,’ and the transcripts of
the public forums, written public comments and letters contained in Appendix ‘4-C.’

 

                “It is also recommended that the Secretary be authorized to publish a Notice of Adoption of the above-described preference rates in the State Register, including notice of the availability of the Final
Rate Modification Plan and other materials included in the record of these proceedings.

 

                “It is also recommended that the Senior Vice President – Marketing and Economic Development, or his designee, be authorized to issue written notice of the final action, including a copy of the revised
tariff leaves, as necessary, to the affected customers.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

Mr. Thomas Davis presented highlights of staff’s recommendation to the Trustees.  In response to a question from Trustee Nicandri, Mr. Davis said that the billing determinants associated with
the allocation of power to the RNY customers will remain in the calculation of future hydropower Cost Of Service rate actions.  

Trustee Dyson added that the Authority is required by law to "break even" and that is why it has undertaken this process.  After consideration of comments from customers, the Authority has
agreed to lower the amount of the increase in the rates, which will be phased-in over a number of years to lessen the impact on the customers.  The Authority was able to consider this further reduction in
rates because of the more than $3 million cut in spending, which the Authority has undertaken as part of Governor Cuomo’s overall goal of 10% cuts in spending.  Trustee Dyson thanked staff for the
thorough and professional job done in putting the elements of the recommendation together.  Chairman Townsend also thanked Trustee Dyson for his role in assisting staff in this effort.
           
The following resolution, as submitted by the Acting President and Chief Executive Officer, was unanimously adopted.

 

WHEREAS, on July 26, 2011, the Authority authorized the Secretary to file a Notice of Proposed Rulemaking for publication in the New York State Register of its intention to increase the hydroelectric preference power rates; and

 

WHEREAS, such notice was duly published in the New York State Register on August 17, 2011 and more than 45 days have elapsed since such publication; and

 

WHEREAS, Public Forums were held on September 19, 20 and 22 of 2011 and staff received and responded to both oral and written comments and data requests as set forth in the attached Final Rate Modification Plan; and

 

WHEREAS, the proposed rate action should be modified, in accordance with the changes contained in the foregoing report of the Acting President and Chief Executive Officer, and as explained in detail in the Staff Analysis contained in Appendix “4-A”;

 

NOW THEREFORE BE IT RESOLVED, That the rates for sale of power and energy to Authority customers receiving the preference power rate, as recommended in the foregoing report of the Acting President and Chief Executive Officer, are hereby approved effective December 1, 2011; 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 as required by contract with respect to the modification in rates, including applicable tariff leaves; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file a Notice of Adoption with the Secretary of State for publication in the New York State Register and to submit such other notice as may be required by statue or regulation; and be it further

 

RESOLVED, That the Chairman, the Vice Chairman, the Acting President and Chief Executive Officer, the Acting 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 Acting General Counsel.

 

 


5.                   Massena Substation 765/230 kV Autotransformer Replacement Capital Expenditure Authorization and Contract Award  

                                   

The Acting President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize capital expenditures in the amount of $4.4 million for the engineering, design, procurement, installation and testing of a new 765/230 kV auto-transformer to
be used as a replacement of a failed 765/230 kV autotransformer at the Massena Substation, Massena, NY.  The Trustees are also requested to approve the award of a multi-year contract in the amount of $3.1
million to Smit Transformers, Nijmegen, Netherlands, to furnish, deliver, and install this autotransformer at the Massena Substation.

 

BACKGROUND

 

“Section 2879 of the Public Authorities Law and the Authority’s Guidelines for Procurement Contracts require the Trustees’ approval for procurement contracts involving services to be rendered for
a period in excess of one year.  In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services contracts exceeding $3,000,000 require the Trustees’ approval.

 

“The Massena Autotransformers No. 1 and No. 2, consist of seven single-phase autotransformers, three each for each bank and one designated as a spare to be put into service in the event of a failure.
On July 8, 2008 Transformer 2A from autotransformer bank No. 2 failed and it was replaced with the existing spare autotransformer.  This event left the Massena Substation without a spare to handle a contingency failure in either of the autotransformer banks.

 

“The autotransformers are critical long-lead time electrical components required for successful operation and functioning of the substation.  Failure of a single autotransformer can result in loss of service.
 A spare autotransformer is essential to maintaining the operation of the substation and will mitigate the impacts should one of the existing autotransformers fail.  With the installation of this new autotransformer,
the current spare would still be used as the spare autotransformer for the facility.

 

DISCUSSION

 

“The scope-of-work under this contract includes the design, fabrication, delivery, installation, assembly and testing of one 765/230 kV single-phase autotransformer.

 

                “The Authority issued an advertisement to procure bids in the New York State Contract Reporter and bid packages were available as of May 26, 2011.  The bid documents were downloaded by
68 potential bidders.

 

“The following seven proposals were received on July 26, 2011:

 

BIDDER

LOCATION

BID WITH OPTIONS

EVALUATED BID

Smit

Nijemgen, Netherlands

$3,068,912.00

$4,346,912.00

TBEA

Shenyang, PR China

$2,893,648.00

$4,409,648.00

Hyundai

Ulsan, Korea

$3,420,296.00

$4,495,296.00

ABB

Varennes, QC, Canada

$3,966,976.00

$4,808,976.00

BTW

Hebei, China

$3,870,000.00

$5,345,000.00

XD

Jiangsu, China

$4,574,315.00

$5,912,315.00

Alstom

Stafford, England

$4,800,000.00

$6,435,000.00

 

“The proposals were reviewed by an evaluation committee comprising staff from Engineering, Procurement, Project Site, Quality Assurance and Project Management.  The evaluated cost took into
account the technical and commercial evaluation factors as detailed in the bid documents.  Authority staff recommends the contract award to Smit Transformers, the lowest evaluated price and technically
 acceptable bidder.  The evaluated bid price shown above also includes optional prices for spare parts and extended warranty.  The evaluated cost took into account operational characteristics of the autotransformer:  no load losses, load losses and auxiliary losses. 

 

“The project work will be performed over a three-year period with design and fabrication taking place during 2012 and 2013.  Delivery, installation, and field testing would be completed in 2014.

 

“The total project cost to purchase and install this autotransformer is estimated at $4.4 million as follows:

                                                               

                Engineering                                                           $    341,000.00

                Procurement                                                         $ 3,225,000.00

                Construction                                                         $    230,000.00

                Authority Direct and Indirect                            $    631,000.00

                                                                                                Total:     $ 4,427,000.00

 

FISCAL INFORMATION

 

                “Payment associated with this project will be made from the Authority’s Capital Fund.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Engineer – Power Supply, the Senior Vice President – Power Supply Support Services, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Procurement, the Project Manager and the Regional Manager – Northern New York recommend that the Trustees approve the award of a contract to Smit Transformers, in the amount of $3.1 million, to furnish a

765/230 kV autotransformer for Massena Substation and authorize the capital expenditure of $4.4 million for the project.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

Mr. John Canale presented highlights of staff’s recommendation to the Trustees.  In response to a question from Chairman Townsend, Mr. Canale said that the replacement autotransformer is
being manufactured in the Netherlands; the Authority did not receive any bids from firms in the United States.  In response to a question from Trustee Nicandri, Mr. Canale said that the Authority has been operating without a back-up autotransformer for approximately three years.  In response to a question from Trustee O'Luck, Mr. Canale said that the original equipment was purchased in 1977 and that the Autotransformers, Nos. 1 and 2, (7 total: 3 in each bank and 1 designated spare) at the Massena Substation are the same age as the one that failed.  In response to further question from Trustee O'Luck, Mr. Russak said that staff is including costs for a series of autotransformer replacements at the facilities in the 2012 budget.  In response to a question from Chairman Townsend, Mr. Canale said that the autotransformers are about 35 years old however, they typically last for approximately 45 - 50 years, and the cause of the failure of the autotransformer being replaced has not been determined.  He said that staff is also taking steps to ensure that the other autotransformers do not experience a similar failure.

Acting President and Chief Executive Officer Quiniones added that an evaluation of a Life Extension and Modernization (“LEM”) program is currently being performed on the Authority’s entire transmission system; the Trustees will be provided with an update of the LEM condition assessment of the Authority’s transmission system in January.

In response to a question from Vice Chairman Foster, Mr. Canale said that staff is taking extra precautions by conducting weekly monitoring and analysis of the autotransformers.  Mr. Antenucci added that it is not industry practice and has not been the Authority’s practice to have a spare autotransformer on every site; however, in order to reduce the Authority’s vulnerability to similar events, the Authority has initiated a program to reduce its vulnerability by selectively purchasing spares ahead of time. 

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

 

RESOLVED, That pursuant to the Authority’s Expenditure Authorization Procedures, additional capital expenditures in the amount of $4.4 million are hereby authorized as recommended in the foregoing report of the Acting President and Chief Executive Officer;

 

Capital                                                  Expenditure Approval

                Engineering, Procurement,                     $4.4 million        

                Installation

                Authority Direct & Indirect

 

AND BE IT FURTHER RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a contract to Smit Transformers, in the amount of $3.1 million to provide an autotransformer for use at the Massena Substation, as recommended in the foregoing report of the Acting President and Chief Executive Officer;
 

 

                                Contractor                                           Contract Approval

                                 Smit Transformers                           $3.1 million

                                 Nijmegen, Netherlands                    

 

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

 

6.                   Selection of President and Chief Executive Officer

 

The Chairman submitted the following report:

SUMMARY

“The Trustees are requested to consider the selection of Mr. Gil C. Quiniones of New York, New York as President and Chief Executive Officer of the Authority, effective as stated below.

BACKGROUND AND DISCUSSION

         “Under the Public Authorities Law (‘PAL’) and the Authority’s By-Laws, the Trustees have the authority to select the President and Chief Executive Officer, subject to confirmation by the Senate.  
 Section 2852 of the PAL provides that the Senate shall vote to confirm any appointment within 60 days of its submission to the Senate during session.  If submission is made when Senate is not in session, 
confirmation shall be made within 7 days of the convening for session.  If the Senate fails to vote to confirm any such appointment within the prescribed time, the appointment is deemed confirmed without 
further Senate action.
 
         “On July 26, 2011, Mr. Richard M. Kessel resigned from his position as President and Chief Executive Officer of the Authority.  At that time, the Trustees designated Mr. Gil C. Quiniones as Acting President
and Chief Executive Officer of the Authority, effective September 7, 2011.  On October 31, 2011, Governor Andrew M. Cuomo recommended Mr. Gil C. Quiniones to be President and Chief Executive Officer of the 
New York Power Authority.  The Trustees, after due consideration, have elected to appoint Mr. Quiniones for the office of President and Chief Executive Officer. 
 

RECOMMENDATION

Pursuant to Section 1004 of the Public Authority Act and Article IV, Section 2 of the Authority’s By-Laws, ‘Election of Non-Statutory Officers,’ adopted December 18, 1984 and last amended on July 26, 2011, the Trustees recommend that, based on his substantial knowledge of Authority matters, management skills, strong expertise and record of exemplary service to the Authority, Mr. Gil C. Quiniones be
elected as President and Chief Executive Officer, subject to confirmation by the New York State Senate.  The Trustees further recommend that Article IV, Section 2 of the Authority’s By-Laws be amended to
permit the election of the President and Chief Executive Officer and all other non-statutory officers to occur at ‘any regular or special meeting of the Trustees.’  The current version of this section reads as if
such elections may only occur at the Trustees’ annual meeting.

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

Chairman Townsend said that the Governor recommended that Mr. Gil C. Quiniones of New York be nominated as President and Chief Executive Officer of the Authority.  On behalf of the
Trustees, he is pleased to present the motion today to appoint Mr. Quiniones to the position.  He added that the Governance Committee, which met earlier, recommended that Mr. Quiniones be appointed
to the position.  The recommendation is subject to Senate confirmation.  Vice Chairman Foster, Trustees Nicandri, LeChase, Curley, Dyson and O’Luck endorsed the selection of Mr. Quiniones as President and Chief Executive Officer of the Authority.

                Mr. Quiniones expressed sincere thanks to the Governor for recommending him and to the Board of Trustees for appointing him for the position of President and Chief Executive Officer of the Authority, subject to approval by the New York State Senate.  He felt honored by the Board’s confidence in him and was looking forward to working with the Trustees and staff to carry out the Authority’s mission to advance the state’s energy and economic development goals.

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

 

RESOLVED, That pursuant to Article IX, Section 1, “Amendments,” of the Authority’s By-Laws, which give the Trustees the power to amend any provision of the By-Laws, Article IV, Section 2, “Election of Non-Statutory Officer,” of the Authority’s By-Laws, is hereby amended to permit the election of the President and Chief Executive Officer and all other non-statutory officers to occur at “any annual, regular or special meeting of the Trustees”; and be it further

 

RESOLVED, That pursuant to Section 1004 of the Public Authorities Law and amended Article IV, Section 2, “Election of Non-Statutory Officer,” of the Authority’s By-Laws, Mr. Gil C. Quiniones is hereby elected and appointed as President and Chief Executive Officer of the Authority, subject to confirmation by the New York State Senate, and shall hold such office pursuant to Article IV, Section 3 of the Authority’s By-Laws.                 


7.                   Election of Executive Vice President and General Counsel

 

The Chairman submitted the following report:

 

SUMMARY

“The Trustees are requested to consider the election of Ms. Judith C. McCarthy of Westchester County, New York as Executive Vice President and General Counsel of the Authority.

BACKGROUND AND DISCUSSION

“Article IV, Section 2 of the Authority’s By-Laws provides for the election of certain non-statutory officers by the Trustees.  Ms. Judith C. McCarthy was appointed First Deputy General Counsel on
January 31, 2011 and serves as Acting General Counsel since that time.  She has rendered exceptional service to the staff and Board of Trustees of the Authority. 

RECOMMENDATION

“It is recommended that, pursuant to Article IV of the By-Laws, adopted December 18, 1984, and last amended November 15, 2011, Ms. Judith C. McCarthy be elected as Executive Vice President and
General Counsel of the Authority effective immediately.

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

Chairman Townsend said that the Trustees are being asked to consider the election of Ms. Judith McCarthy of Westchester, as Executive Vice President and General Counsel of the Authority.
He said that Ms. McCarthy has performed admirably as Acting General Counsel and will be a great asset to the Authority.  He is confident she will do a good job and look forward to working with her.
He added that the Governance Committee also recommended the election of Ms. McCarthy to the position.  Trustee Nicandri said that, as Chair of the Governance Committee, he worked with Ms. McCarthy and she was very helpful in providing legal counsel to the Committee and will vote in favor of the motion to elect her.  The other Trustees endorsed the recommendation.

Ms. McCarthy said that she appreciated the vote of confidence and also the support given to her over the past ten months.  She also thanked Mr. Quiniones for his support and Governor Cuomo
 for giving her the opportunity to work at the Authority.

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

 

RESOLVED, That pursuant to Article IV, Section 2 of the Authority’s By-Laws, Ms. Judith C. McCarthy is hereby elected as Executive Vice President and General Counsel of the Authority effective immediately.

 

  

8.                   Resolution – Paul F. Finnegan

 

WHEREAS, Paul F. Finnegan has been a highly valued employee at the New York Power Authority for more than 17 years, including his most recent position as senior vice president of Public, Governmental and Regulatory Affairs in which he spearheaded NYPA’s engagement with members of Congress, the executive and legislative branches of New York State government and local government entities; and

 

WHEREAS, Mr. Finnegan, who joined NYPA in 1994 as a state legislative liaison, has provided sage advice and counsel over the years to the NYPA Board of Trustees and senior management on countless matters of significance that reflect the Power Authority’s broad reach and influence on the state’s electric power system, economy, local communities and environment; and

 

WHEREAS, Mr. Finnegan’s impact on the Power Authority’s intergovernmental relations has included his major role in the Authority’s successful federal relicensing of its St. Lawrence-Franklin D. Roosevelt and Niagara power projects, in 2003 and 2007, respectively, and the attendant carrying out of wide ranging commitments under agreements that he helped make possible for major recreational, environmental and economic benefits in Northern and Western New York; and

 

WHEREAS, the practical good sense and judgment that Mr. Finnegan brought to bear on a wide range of matters have made him an influential voice, with those qualities exhibited every day in his contributions to the Power Authority’s sound decision-making; and

 

WHEREAS, Mr. Finnegan’s quick wit and marvelous sense of humor have advanced his ability to transcend partisan politics in reinforcing the Power Authority’s positive relations with federal, state and local elected officials, for the effective undertaking of the Authority’s programs and initiatives; and 

 

WHEREAS, Mr. Finnegan’s warm and vibrant personality and self-effacing demeanor have furthered the admiration and affection that the NYPA Board of Trustees and his co-workers have for him and have made him a valued confidant of NYPA chairmen, presidents and other senior executives; and    

 

WHEREAS, the wayfaring requirements of the positions held by Mr. Finnegan, including vice president of Intergovernmental and Community Relations, called for frequent travels to NYPA facilities and numerous communities around the state, at the expense of being away from his family, at great personal sacrifice; and

 

WHEREAS, Mr. Finnegan’s peripatetic ways will now be divided between his home in Lake Pleasant, in Adirondack Park, Hamilton County, and a new residency in the sun-splashed environs of Ventura, California;

 


NOW THEREFORE BE IT RESOLVED, that the Trustees of +the Power Authority of the State of New York extend their deepest appreciation to Paul Finnegan for his dedicated service and varied contributions to NYPA and wish him; his wife, Jeannie; their two beloved golden retrievers, Cedar and Riley; and the large extended Finnegan family of brothers, sisters, nieces and nephews much health, happiness and success. 

 

                                November 15, 2011

 

 

                Acting President and Chief Executive Officer Quiniones read the resolution honoring Mr. Paul Finnegan’s service to the Authority.

                Mr. Finnegan said that this is an opportunity for him to take on new challenges.  He said that he appreciated the support and opportunities granted to him by the Authority.  He will
    always have fond memories of the Authority and will miss everyone.

 


9.                   Motion to Conduct an Executive Session

 

                Mr. Chairman, I move that the Authority conduct an executive session pursuant to the Public Officers Law of the State of New York section §105 to discuss matters leading to the appointment, employment, promotion, demotion, discipline, suspension, dismissal or removal of a particular person or corporation.  On motion made and seconded, an Executive Session was held.

 


10.                Motion to Resume Meeting in Open Session

 

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


11.                Next Meeting

 

The next regular meeting of the Trustees will be held on Thursday, December 15, 2011, at 11:00 a.m., at the Clarence D. Rappleyea Building, White Plains, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.

 


Closing

                On motion made and seconded, the meeting was adjourned by the Chairman at approximately 1:30 p.m.

 

 

 

Karen Delince

Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                

 

 

 

 

 



[*] These customers are certain municipal utility systems in the states of Connecticut, Massachusetts, New Jersey,
Ohio, Pennsylvania, Rhode Island and Vermont.

[†]These customers include the seven 'host communities' (e.g. cities, towns and school districts) located in the
vicinity of the Niagara Project and the Tuscarora Nation.

[‡] The letters received by the Authority are included in Appendix ‘C’ to this Report.

[§]  Each year, in accordance with the terms of the affected customer contracts, an annual reconciliation is performed whereby any differences between actual costs incurred and cost-based rate revenues collected are accumulated in a Rate Stabilization Reserve (‘RSR’).  Should the RSR balance exceed a ±$25 million bandwidth, a credit or surcharge is applied to the affected customers’ bills to return or collect, as appropriate, the excess amount.

[**] Except for 2011, the preference power rate year runs from May 1 of the calendar year indicated to April 30 of the following year.  Because the final rule in this NOPR proceeding is proposed to be adopted on November 15, 2011, the RY 2011 would extend from December 1, 2011 to April 30, 2012.

[††] Effective rate at 70% load factor.