July 27, 2009


A meeting of the Governance Committee was held at the Authority’s office at the Clarence D. Rappleyea Building, 123 Main Street, White Plains, New York, at approximately 6:05 p.m.


 The following Members of the Governance Committee were present:


Trustee Eugene L. Nicandri, Chairperson

Trustee Elise M. Cusack


Also in attendance were:


Richard Kessel                        President and Chief Executive Officer

Gil Quiniones                          Chief Operating Officer

Terryl Brown Clemons            Executive Vice President and General Counsel

Joseph Del Sindaco                 Executive Vice President and Chief Financial Officer

Edward Welz                           Executive Vice President and Chief Engineer – Power Supply

Bert Cunningham                    Senior Vice President – Corporate Communications

Paul Finnegan                        Senior Vice President – Government and Regulatory Affairs

Joan Tursi                               Senior Vice President – Enterprise Shared Services

Agnes Harris                           Vice President – Human Resources

Patricia Leto                           Vice President - Procurement

Lesly Pardo                             Vice President – Internal Audit

Karen Delince                         Corporate Secretary

Angela Graves                                    Deputy Corporate Secretary

Brian McElroy                        Treasurer

Dennis Eccleston                     Chief Information Officer

Joseph Gryzlo                         Chief Ethics and Compliance Officer

Jacqueline Carmody               Attorney I

Gerard Mullin                         Director – Fuel Planning and Operations

Mark O’Connor                      Director – Real Estate

Mary Jean Frank                    Associate Corporate Secretary

Lorna Johnson                        Assistant Corporate Secretary

Chuck Haddon                        Managing Director, Navigant Consulting

Khai Nguyen                           Director, Navigant Consulting

1.                  Minutes of the Regular Meeting of February 24, 2009

            The minutes of the Committee’s meeting of February 24, 2009 were adopted.

2.                  Procurement and Real Estate Division Report


            Ms. Patricia Leto presented an overview of the Authority’s Procurement activities, with Mr. Gerard Mullin, Mr. Brian McElroy and Mr. Mark O’Connor reporting on fossil fuel purchases, corporate finance activity and acquisition and disposal of real property, respectively. 


Procurement Contract Activity through June 30, 2009 


·                          1,571 contracts (excluding fossil fuel) greater than $5,000 in value were active. 


·                          The overall value of these contracts is more than $1.16 billion, with more than $129 million in contract expenditures for the first half of the year. 


·                          More than 41% of the contracts are for the purchase of equipment and commodities.


·                          Services such as technician work and contracted personnel accounted for 35% of the contracts. 


·                          More than 15% of the contracts are for consulting services (e.g., engineering, design, and specialized analysis).


·                          Approximately 9% of the contracts are for construction work. 


·                          Based on the total value of the contracts included in the summary, approximately 94% of the total dollars expended (excluding fuels and corporate finances) were for contracts that were competitively bid


·                          In terms of the number of contracts processed, 69% of the contracts were competitively bid, while 31% were sole-source awards, including the purchase of highly specialized spare parts and services from original equipment manufacturers and procurement of services on an emergency basis and from proprietary sources.


·                          While approximately 60% of the total number of non-fuel contracts thus far in 2009 exceeded $25,000 in value, the total value of those contracts was approximately 99.8% of the total non-fuel expenditures.


·                          On May 20, 2009, the “2008 Annual Report of Procurement Contracts” was certified by the Authority’s Chief Financial Officer for submission to the New York State Comptroller’s Public Authorities Reporting Information System in accordance with Section 2879 of the New York State Public Authorities Law.


Fuel Purchases 


·                          In the first half of 2009, a total of $134 million was spent on fuel purchases -- $125 million for natural gas and related costs and $9 million for fuel oil.  These fuel purchases were carried out through 47 contracts for natural gas and fuel oil, as well as pipeline transportation and related services.


·                          The price of natural gas for the New York City market is about $4 per dekatherm (the equivalent of 1 million Btus).


·                          The price of #6 residual fuel oil used at Poletti is currently $65 a barrel, the #2 fuel oil used at Flynn costs $75 a barrel and the jet/kero used at the 500 MW plant is at $85 a barrel. 


·                          Staff expects continued softness in fuel prices for the near term, with prices increasing going into 2010.


Corporate Finance Activity


            In the first half of 2009, $1.2 million was paid for non-procurement unique and specialized services requiring a broad depth of knowledge and expertise that are provided by a limited group of firms.  The non-procurement items include trustees and paying agent services, commercial paper remarketing services, escrow agent services and fees paid for revolving credit agreements supporting the Authority’s Commercial Paper Programs and Adjustable Rate Tender (“ART”) Notes.  In response to a question from Chairman Nicandri, Mr. McElroy said that the total amount spent for the whole year would be roughly double the amount spent in the first half of the year.  Responding to a question from Mr. Quiniones, Mr. McElroy said that the auction rate security market is disappearing and that the Authority had refunded two of its programs in this market, switching to commercial paper instead.   


Supplier Diversity Program


·                          Through the first half of the year, the Authority awarded $21.9 million (or 21.8% of its reportable expenditures) on contracts with certified M/WBEs, representing both direct contracts and subcontracts and including construction-related work.


·                          The Authority’s annual goal for the use of New York State Certified Minority/Women-Owned Businesses (“M/WBEs”) is 6% of its non-specialty procurements.  The Authority does not include specialty procurements such as turbine runners, transformers, circuit breakers, other large electrical equipment, natural gas and other specialized goods and services since there are no M/WBEs available to provide these goods and services. 


·                          The Authority continues an active outreach program with various M/WBE organizations and trade associations.  The Authority hosted its Annual Purchasing Exchange on June 18th in the White Plains Office.  More than 260 representatives of M/WBEs attended and met with representatives of about 36 New York State, federal, New York City and local government entities, as well as private companies.  The venue will most likely be changed next year due to the overwhelming success of the event.


            In response to a question from Governance Committee Chairman Eugene Nicandri, Ms. Leto said that the M/WBE expenditures were significantly higher than at the midpoint of previous years because many of the vendors for the Authority’s energy efficiency work had finally submitted invoices for their work.  Mr. Gil Quiniones said that the Procurement team does a great job in the M/WBE area and Mr. Joseph Del Sindaco said that staff has done a lot of outreach to M/WBE firms.  Ms. Leto cited Ms. Debra White, the Manager of the Authority’s Supplier Diversity Program, as the person responsible for much of the Program’s success.  In response to a question from Trustee Elise Cusack, Ms. Leto said that the Program is designed to give M/WBE firms the opportunity to bid on Authority work.  She said that the Authority helps M/WBE firms obtain the necessary State certification.  Responding to another question from Chairman Nicandri, Mr. Joseph Del Sindaco said that the Program had been up and running for nearly 20 years.  


Disposal of Personal Property


            In the first half of 2009, the Authority received nearly $339,550 for all reportable personal property disposed of that had a value of more than $5,000.  There was only one non-fleet-related reportable personal property disposal from January through June, the sale of scrap material from the Niagara Project for approximately $156,532.  The Authority participated in one fleet-related auction during this period, which was conducted by JJ Kane Auctioneers.  Such auction resulted in the sale of 48 units (including one lot of 12 trailer hitches) comprising light-duty vehicles, heavy-duty trucks and special equipment, of which 25 were greater than $5,000 in value.  The gross sale price for these 45 units was $197,750; the net price (after commission and transportation costs were deducted) was approximately $183,017.


            In June, the Authority solicited proposals for disposal of the fourth Generator Step-Up transformer at the Blenheim-Gilboa Project; proposals were due by July 9th.  Although the value of copper is significantly lower than last year due to the change in market conditions, the Authority still expects the reclamation/salvage value of the scrap copper and steel to exceed the cost of recycling/disposal.


            The 2008 Public Authorities Reporting Information System report of Personal Property Disposal was successfully completed by the March 31, 2009 deadline.


Acquisition and Disposal of Real Property 


·                     During the first half of the year, the Authority acquired 102 danger-tree permits for its Niagara-Adirondack, Fitz-Edic, Willis-Plattsburgh, Plattsburgh-Vermont, Gilboa-New Scotland and Moses-Willis-Plattsburgh lines to eliminate dangerous vegetation.  In addition, the Authority acquired an easement along the Niagara –Adirondack Tie Line from a local landowners, allowing permanent rights to maintain the Authority’s rights-of-way.  The Authority issued seven land-use permits for use of the Authority’s easement areas.  These permits, with their accompanying insurance requirements, assure the use of the Authority’s easement consistent with the operation of its transmission lines. 


·                     The available space in the Authority’s Clarence D. Rappleyea headquarters office building in White Plains is essentially 100% leased.  During the first half of the year, the Authority entered into a long-term lease (through September 30, 2014) with the law firm of Berman Bavarro for 7,814 square feet of space in the building for an annual rent of approximately $201,210.  In addition, the Authority negotiated a Partial Surrender of Lease for the 5th floor at a price of $1.55 million paid by JPMorgan Chas as successor to the Bank of New York.  This reacquisition allows for use of the 5th floor for Authority staff.


·                     As part of the St. Lawrence Project relicensing Settlement Agreement in 2003, the Authority agreed to several changes in the Project boundary that would remove approximately 1,340 acres from the Project.  Approximately 599 acres of the removed lands are in the process of being conveyed either to the affected local municipality or to adjoining landowners, if interested.  To date, 480 of the 599 acres have been conveyed; during this reporting period, 336 acres were conveyed at no cost to the municipalities and 37 acres were conveyed in separate transactions to private landowners in 30 separate parcels.  To date, the Authority has received nearly $477,083 from the sales of properties.  The monies taken in by the Authority for the private land conveyances will be returned to the affected local municipalities to fund local public projects.  The Authority has paid out $162,610 to the Town of Lisbon and $6,460 to the Town of Massena. 


·                     As part of the Niagara Relicensing Settlement Agreement, the Authority was obligated to convey certain properties to various entities.  Transactions moving toward completion include a 53-acre parcel to be conveyed to the Tuscarora Nation, a 24-acre parcel to Niagara University and the acquisition of a 10-acre parcel from Killian Bulk Storage along the Buffalo River for storage and maintenance of the Authority’s ice boom.  The Authority has signed a sublease with Empire State Development Corporation for office space at 95 Ferry Street in Buffalo that will be used by energy efficiency services and community relations staff. 




            As of June 30, 2009, overall inventory levels at all of the Authority’s operating facilities totaled $85.74 million, compared to a year-end total in 2008 of $87.71 million.  The current inventory level includes $1.7 million for field poles issued to the Niagara Rotor Poles Replacement project in February.    


            The design of the new Niagara Warehouse and Office Space was completed in June.  The warehouse will optimize the use of volume with modern racking and an automatic retrieval system whenever possible.  A Request for Proposals for construction of the new building was issued this month, with construction expected to begin in the last quarter of the year.

3.         Recent Developments and Status of Authority’s Ethics Programs


            Mr. Joseph Gryzlo provided an overview of the Ethics Office’s key initiatives, saying that the principal substantive issues arising under the Ethics Law and/or the Authority’s Code of Conduct since his last report to the Governance Committee on February 24, 2009, included the following:


            Allegations                                1

            Appearance of impropriety     12

            Conflicts of interest                  6

            Gifts                                          8

            Outside activities                      4

            Outside employment               10

            Post employment                      6

            Research projects                      1


            Mr. Gryzlo said that the number of annual cases in the past several years has been increasing with 55 cases to date in 2009 (the year-end total for 2008 was 80).  He sees this increase as a positive sign and attributes it to enhanced communications and employees’ willingness to raise issues and seek guidance relating to ethics laws and the Authority’s Code of Conduct. 


            Financial disclosure forms were due at the New York State Commission on Public Integrity (“CPI”) by May 15th.  The Ethics Office facilitated required filers’ ability to meet this obligation.  The Authority submitted its annual honoraria filing with CPI before the June 1st deadline.  This report highlights any payments to employees for outside speaking events, published written materials or travel expenses paid by an outside party for an Authority employee to attend an event unrelated to their Authority duties.  During this reporting period, there was only one honorarium to report.


            The Governance Committee has been asked to review and recommend for the Trustees’ approval the draft revised Code of Conduct.  The revised Code has been approved by executive management and is applicable to all Authority Trustees and employees.  Mr. Gryzlo conducted impact bargaining with the Authority’s in-house unions (IBEW Locals 2032 and 2104 and UWUA Local 1-2), which did not object to the inclusion of the Authority’s bargaining unit employees as covered individuals under the revised Code.  The revised Code is more user friendly than the previous version.  All Trustees and employees will be required to certify on an annual basis that they have read and are in compliance with the Code’s provisions.  On motion duly made and seconded, the Governance Committee voted unanimously to recommend the revised Code be reviewed and approved by the full Board of Trustees.


            The Ethics Office will deliver its 2009 training in the fourth quarter.  The training will focus on the revised Code of Conduct and will be delivered online.  Senior executives, Trustees and employees without dedicated computer access will receive paper copies of the training, in addition to the computer-based format.  Once they have completed the training, Trustees and staff will be asked to certify that they have completed the program and the completed training will be included in their centralized training profiles.  President Kessel asked Mr. Gryzlo to make a short presentation on the revised Code of Conduct to the Trustees this fall. 


            Earlier this year, the Ethics Office was transferred to the Law Department and its name was changed to the Ethics and Compliance Office.  Mr. Gryzlo was named the Authority’s Chief Ethics and Compliance Officer. 


            The Ethics and Compliance Office’s second-quarter customer survey yielded a satisfaction rating of 1.21 on the 1-4 scale (with “1” being the best score), with several positive comments included.  These results will be incorporated into the Law Department’s overall customer satisfaction performance measure report. 


4.                  Motion to Conduct an Executive Session


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

5.                  Motion to Resume Meeting in Open Session


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




6.         Next Meeting


            The next regular meeting of the Governance Committee will be held on a date to be determined.