3.                   Economic Development Plan – Use of Net Revenues Produced by Sale of Expansion Power

SUMMARY

                The Economic Development Power Allocation Board (“EDPAB”) is requested to approve an Economic Development Plan (“Plan”) for 2008 submitted by the New York Power Authority (Authority”) for use of industrial incentive awards pursuant to Section 188 of the Economic Development Law (“EDL”). 

BACKGROUND

                Section 1005 of the Public Authorities Law (“PAL”), as amended by Chapter 32 of 1987, directs the Authority to identify net revenues produced by the sale of Expansion Power (“EP”) and, further, to identify an amount of such net revenues to be used solely for Industrial Incentive Awards.  These awards are to be made in conformance with a Plan, covering all such net revenues. The Authority is to submit Plans annually to EDPAB and approved by EDPAB pursuant to EDL.

                Net revenues are defined by Section 1005 as any excess of revenues properly allocated to the sales of EP over costs and expenses properly allocated to such sales. 

In connection with approval of an application for power submitted on behalf of Chase Manhattan Bank, EDPAB approved a resolution on December 1, 1988 which concluded that the available industrial incentive awards be used for the purpose of assisting Power Authority efforts to limit future Fitzpatrick production rate increases for all industrial, business, and Economic Development Power customers of the plant.  Further, the Board recommended that future Boards act affirmatively on any economic development plan submitted to it subsequently by the Authority to the extent it provides for such use of industrial incentive awards.

The Authority approved five-year programs in 1990, 1996 and 2001 and a one-year program in 2006 and 2007 under which EP net revenues were to be dedicated to helping maintain stable industrial rates. 

At their meeting of December 16, 2008, the Trustees of the Authority approved a one year plan that provides for the use of net revenues from the sale of Expansion Power which support the rates of the business customers served under power programs associated with the Power Authority’s former James A. Fitzpatrick Nuclear Power Plant (the "Fitzpatrick Power Programs"). These programs include the High Load Factor, Economic Development, and Municipal Distribution Agency power programs. The EDPAB previously approved Plans submitted annually by the Authority for 1996 through 2006 that provided for such use of the net revenues.  Through calendar year 2006, the Authority has reported net revenues cumulating to $128.54 million.

DISCUSSION

                Allocations of EDP have been a useful economic development tool.  EDPAB has recommended allocations associated with the creation or retention of more than 94,000 jobs, totaling 417 MW, to date.  The costs of providing EDP are greater than the revenues produced by such sales.  In order to continue to market this power on a competitive basis consistent with the aim of the legislation creating EDP programs, the rates for industrial power must be kept low enough to be of sufficient economic incentive for industries to locate or expand in New York State.

                In December 2006, the Temporary State Commission on the Future of New York State Power Programs for Economic Development recommended numerous changes in the form and administration of the Authority’s EDP programs.  Any such changes would require legislation.  Moreover, the Power for Jobs (“PFJ”) and Energy Cost Savings Benefit (“ECSB”) programs will end on June 30, 2009.  The ECSB awards go to the same customers that benefit from current Industrial Incentive Award rate relief.  Thus, pending clarification on the future of these programs, it is appropriate to again propose extensions of the Industrial Incentive Awards for one year instead of the usual five years.

In calendar year 2007, net revenues of $8.039 million were produced from the sale of Expansion Power. It is recommended that the Board approve the use of the 2007 Expansion Power net revenues towards the cost of serving the former FitzPatrick customers from the marketplace.

RECOMMENDATION

It is recommended the Power Allocation Board approve the Economic Development Plan submitted by the Authority, which provides for the use of net revenues produced in 2007 from the sale of Expansion Power to support rates to Industrial Power Program customers for one year as described herein.

                Mr. James Pasquale presented the highlights of staff’s recommendations to the Board.  In response to a question from Chairman Kenneth Schoetz, Mr. Pasquale said that the Economic Development Plans are developed on a year-to-year basis because the Power for Jobs and Energy Cost Savings Benefits programs have been approved by the State Legislature on a year-to-year basis for the last several years.  Responding to another question from Chairman Schoetz, Judge Eugene Nicandri said that the Power Authority’s Trustees would be discussing the future of the Authority’s economic development power programs very soon.  Mr. Bernard McGarry requested that staff look into alternative ways to use these funds, particularly if a specific business may need some special help.  Responding to a question from Judge Nicandri, Mr. Pasquale said that the Power Authority may recommend alternatives to the Board.  Judge Nicandri said that a more flexible approach to the plan would be helpful if the net result would be the preservation or creation of jobs.  He said he would also support an investigation of such an alternative.  Mr. Pasquale pointed out that the Board was being asked to approve the 2008 Economic Development Plan today and that staff would be coming back to the Board for approval of the 2009 Plan.

Following consideration of such applications, the Members of the Board present voted unanimously to approve the Economic Development Plan.

WHEREAS, section 1005 of the Public Authorities Law authorizes the Power Authority of the State of New York to identify an amount of the net revenues produced by the sale of Expansion Power which shall be used for industrial incentive awards; and

WHEREAS, such industrial incentive awards must be made in conformance with an Economic Development Plan submitted by the Authority and approved by the Board pursuant to Section 188 of the Economic Development Law; and

WHEREAS, the Board, on December 1, 1988, endorsed the use, to the extent necessary, of available industrial incentive awards for the purpose of assisting Authority efforts to limit future rate increases for Fitzpatrick Power Program customers; and

WHEREAS, the Board, on December 1, 1988, recommended that any Economic Development Plan submitted by the Authority in the future be approved to the extent it provides for such use of industrial incentive awards; and

WHEREAS, the Authority has approved an Economic Development Plan for 2001 that provides for the use of net revenues from the sale of Expansion Power to support rates for Industrial Power Program customers and further, has authorized the submission of such Plan to the Board for its approval;

WHEREAS, the Authority has approved an Economic Development Plan for 2007 that provides for the use of net revenues from the sale of Expansion Power to support rates for Industrial Power Program customers and further, has authorized the submission of such Plan to the Board for its approval;

NOW THEREFORE BE IT RESOLVED, That the Board hereby determines that the Economic Development Plan for 2007 which is submitted by the Authority, and its implementation is consistent with the criteria and requirements provided for in Sections 184 and 185 of the New York Economic Development Law and in Part 370 of Title 21 of the Official Compilation of Codes, Rules and Regulations of the State of New York; and be it further

RESOLVED, That the Power Allocation Board hereby approves such Plan providing for the use of net revenues from the sale of Expansion Power to support rates for Industrial Power Program customers, in accordance with the attached memorandum.                                         

4.             Other Business

            Judge Nicandri thanked Ms. Anne Cahill for her help and cooperation in her role as Corporate Secretary to the Power Authority. 

                Chairman Schoetz noted the contributions and dedication of Mr. James Duncan, who recently resigned from the Board after many years of service, saying that his efforts would certainly be missed.  Mr. McGarry said that Mr. Duncan had served with great distinction and that he would miss him and Judge Nicandri joined in those sentiments.  

5.             Next Meeting

                The next meeting of the Board is to be determined.