ECONOMIC DEVELOPMENT POWER
August 17, 2010 - Video Conference – 11:15 a.m.
New York Power Authority Offices:
123 Main Street, 16th Floor, White Plains, NY
30 South Pearl Street, 10th Floor, Albany, NY
501 Seventh Avenue, 9th Floor, New York, NY
Empire State Development Corp., 95 Perry Street, Suite 500, Buffalo, NY
City of Oswego Community Development, 20 West Oneida St., 3rd Floor, Oswego, NY
1. Power for Jobs Extended Benefits, Energy Cost Savings Benefits Awards
and Economic Development Power Program Contract Extensions
2. Next Meeting
A special meeting of the Economic Development Power Allocation Board was held via video conference at the following participating locations:
1) New York Power Authority, 123 Main Street, White Plains, NY
2) New York Power Authority, 30 South Pearl Street, Albany, NY
3) New York Power Authority, 501 Seventh Avenue, New York, NY
4) Empire State Development Corp., 95 Perry Street, Suite 500, Buffalo, NY
5) City of Oswego Community Development, 20 West Oneida St., 3rd Floor, Oswego, NY
The following Members of the Board were present at the following locations:
Kenneth Schoetz, Chairman (Buffalo, NY)
Robert B. Catell, Member (New York, NY)
Mary Vanouse, Member (Oswego, NY)
Eugene Nicandri, Member (Absent)
Also in attendance were:
James F. Pasquale Senior Vice President - Marketing & Economic Development, NYPA
Vince Esposito Assistant General Counsel – Legislative & Regulatory Affairs, NYPA
Angela Graves Deputy Secretary, NYPA
Mary Jean Frank Associate Corporate Secretary, NYPA
Michael Huvane Director – Business Muni & Coop Marketing & Economic Development, NYPA
Timothy Muldoon Manager – Business Power Allocations & Compliance, NYPA
Michael Saltzman Director – Media Relations, NYPA
1. Power for Jobs Extended Benefits, Energy Cost
Savings Benefit Awards and Economic Development
Power Program Contract Extensions
On August 9, 2010, the Governor signed legislation authorizing an extension of the Power for Jobs (“PFJ”) and the Energy Cost Savings Benefit (“ECSB”) Programs through May 15, 2011. It is therefore requested that the Members of the Economic Development Power Allocation Board (“EDPAB”) recommend extensions of the PFJ and ECSB programs to May 15, 2011 for existing PFJ customers, listed in Exhibit “A,” and existing ECSB customers, listed in Exhibit “C”. In addition, the Board is requested to recommend extensions to the underlying allocation contracts for the economic development program customers, listed in Exhibit “B,” through May 15, 2011, to coincide with the term of extended ECSB benefits to such entities.
In July 1997, the New York State Legislature and the Governor approved a program to provide low-cost power to businesses and not-for-profit corporations that agree to retain or create jobs in New York State. In return for commitments to create or retain jobs, successful applicants receive three-year contracts for PFJ electricity.
The program, originally intended to last three years, has been extended many times by the Legislature. Chapter 59 of the Laws of 2004 extended the benefits for PFJ customers whose contracts expired before the end of the program in 2005. Such customers had to choose to receive an “electricity savings reimbursement” rebate or a power contract extension. The Authority was also authorized to voluntarily fund the rebates, if deemed feasible and advisable by the Trustees.
In 2005, provisions of the approved State budget extended the period PFJ customers could receive benefits until December 31, 2006. Chapter 645 of the Laws of 2006 included provisions extending the program benefits until June 30, 2007. In 2007, a new law (Chapter 89 of the Laws of 2007) included provisions extending the program benefits until June 30, 2008.
In 2008, a new law (Chapter 645 of the Laws of 2008) included provisions extending program benefits until June 30, 2009. In 2009, Chapter 217 of the Laws of 2009 included provisions extending the program benefits until May 15, 2010. In 2010, Chapter 311 of the Laws of 2010 included provisions extending the program benefits until May 15, 2011.
Contract Extensions and ESCB Awards
The Authority sells electricity to businesses under several State-authorized economic development power programs. These power sales are made through the Economic Development Power Program, High Load Factor Manufacturer Program, Municipal Distribution Agency Industrial Power Program and other power sales programs. The capacity and energy for these sales are provided by market purchases and supported by other Authority sources, as needed. In some instances, these customers are served directly by the Authority and in other cases the customers receive Authority power through resale arrangements with municipal distribution agencies or investor-owned utilities. Contracts range in length from 5 to more than 20 years.
Chapter 313 of the Laws of 2005 allowed customers from the above listed economic development programs that would otherwise be exposed to price increases to apply for benefits under the ECSB program. The legislation also authorized the Authority to sell certain amounts of unallocated hydropower into the wholesale market and use the net earnings from such sales to fund the ECSB program. During periods of lower market prices, the net earnings from the available hydropower have been sufficient to cover the cost of the ECSB program. In higher-priced markets, however, the Authority has needed to contribute to the ECSB program. From the inception of the program in November 2005 through May 2010, the net earnings from the unallocated hydropower sold into the wholesale market virtually offset the customer losses.
Power for Jobs
The recently passed legislation would allow PFJ recipients to continue with existing elections (i.e., power contracts or rebates) through May 15, 2011, with the program benefits administered as in current law. In addition, the legislation extends the availability of “restitution” for those PFJ power contract customers that incur aggregate higher costs in the program as opposed to taking service from their local utilities under standard tariff provisions.
Under the Economic Development Law, as amended by the legislation, EDPAB may prescribe a simplified form and content for an application for such extended PFJ benefits. An applicant is eligible for extended PFJ benefits only if it is in compliance with and agrees to continue to meet the job retention and creation commitments set forth in its prior PFJ contract, or such other commitments “as the board deems reasonable.” However, in light of the need to minimize disruption in receipt of such benefits, the legislation requires that EDPAB expedite the award of extended PFJ benefits and defer the review of compliance with job commitments until after the applicant has been awarded extended benefits.
In light of the legislative goal that current PFJ program participants receive PFJ extended benefits with minimal disruption, staff recommends EDPAB defer review of compliance matters until on or before October 26, 2010. EDPAB recommends that the Authority approve such extensions for all PFJ program participants, subject to receipt of proper documentation requesting such extensions and agreement to the requisite commercial terms.
It should be noted that, due to the retroactive nature of this extension, there could be unavoidable gaps in the continuation of PFJ contract service. However, there will likely not be disruption in the provision of PFJ rebates since they are calculated after the fact.
The EDPAB is requested to recommend that the Trustees approve contract extensions or the funding of rebates for the companies listed in Exhibit “A” through May 15, 2011. The actual payment of rebates for the companies listed in Exhibit “A” will continue to be made as in prior years subject to the financial considerations contained in the Fiscal Information section below. While the EDPAB will not be asked to recommend the payment amounts on a monthly basis, the information will be made available to them when requested. The total cost of the extended rebate program is estimated to be about $50 million at current market prices. From the inception of the rebate program in 2005 through the end of 2009, the Authority incurred $202.5 million in rebate payments to eligible customers, averaging slightly more than $40 million per year.
Contract Extensions and ECSB Awards
There are several Economic Development Power program customers whose underlying power contracts have terms ending on June 2, 2010, or on other dates before May 15, 2011. In order for such customers to receive an extension of ECSB benefits, it is necessary to extend their underlying power contracts. Pursuant to Economic Development Law, staff requests EDPAB recommend an extension of Economic Development Power contracts, as necessary, so that such businesses will be able to receive ECSB benefits through the end of the legislation’s extension period on May 15, 2011. These customers are listed on Exhibit “B.”
ECSB awards serve to moderate rates for businesses served under the High Load Factor, Economic Development Power and Municipal Distribution Agency programs. Under the new legislation, EDPAB is authorized to approve extensions of ECSB awards through May 15, 2011. The legislation would extend availability of ECSB benefits to entities that are currently receiving such benefits and businesses under these programs whose rates would be subject to increase on or before May 15, 2011. For entities currently receiving ECSB awards, the legislation provides for continuation of the existing level of benefits for another year while allowing the Authority to continue to use up to 70 MW of unallocated Replacement Power and Preservation Power to fund the ECSB awards, provided that any such Replacement Power must be made available for allocation in Western New York during the extension period.
As under current law, applications for extensions of ECSB awards are to be in the form and contain such information, exhibits and supporting data as EDPAB may prescribe. EDPAB is to review the applications received and determine the applications that best meet the criteria established for the ECSB awards and recommend such applications to the Authority with “such terms and conditions as it deems appropriate.” In order to avoid disruption in the delivery of ECSB benefits, the bill directs EDPAB to expedite the award of ECSB and to defer the review of compliance with job commitments until after applicants have been awarded ECSB.
In light of the requirement of the legislation that current recipients receive extended ECSB benefits with minimal disruption subject to later review of compliance matters, staff requests that EDPAB recommend that the Authority approve extensions for all current ECSB program participants, subject to receipt of proper documentation requesting such extensions and agreement on the requisite commercial terms. In light of the legislative goal that current ECSB program participants receive extended benefits with minimal disruption, staff requests EDPAB recommend that review of compliance matters be deferred until on or before October 26, 2010. Lastly, it is requested that EDPAB recommends that the Power authority Trustees approve ECSB awards to companies listed in Exhibit “C,” through May 15, 2011
It should be noted that due to the requirements of the host utilities and the late approval by the Legislature, there could be unavoidable gaps in the continuation of service to certain power program customers that request ECSB benefits. However, the ECSB benefits will be applied retroactively from June 2, 2010.
It is recommended that the Economic Development Power Allocation Board authorize and recommend to the Authority the extension of Power for Jobs contracts and rebates, Energy Cost Savings Benefits awards and the contract extensions as set forth above.
Mr. James Pasquale presented the highlights of staff’s recommendations to the members of the Board.
In response to a question from Chairman Kenneth Schoetz, Mr. Pasquale said that the law allows the Board to reduce allocations for companies that are not meeting their job commitment targets and that staff is hoping to have the compliance review information ready for the Board’s consideration at its September meeting.
Responding to a question from Mr. Robert Catell, Mr. Pasquale said that the Governor’s decision to sign the bill into law, rather than veto it as he had originally planned to do, may have been influenced by calls his office received from a number of companies whose electricity bills increased after the expiration of the Power for Jobs program on June 2.
The following resolution was unanimously adopted by Members of the Board present.
RESOLVED, That the EDPAB hereby authorizes and recommends to the New York Power Authority, extension through May 15, 2011, of Power for Jobs program contracts and electricity savings reimbursements, Energy Cost Savings Benefits awards and the length of contracts between the Authority and Economic Development Power program customers, subject to review by the EDPAB on or before October 26, 2010, of whether applicants for such benefits are in compliance with their respective contractual commitments associated with such program benefits.
2. Next Meeting
The next meeting of the Board will be held via video conference on September 27, 2010 at 1:00p.m.
The next meeting of the Board will be held in person at the Authority’s Albany office on Monday, September 27.
Chairman Schoetz said that he would work with Authority staff to draft a preliminary agenda for the meeting that would then be submitted to the other Board members for their input.
In response to a question from Ms. Mary Vanouse, Mr. Pasquale said that he would provide the Board with a copy of the legislation supported by the Governor and the New York State Senate that would have created a replacement for the Power for Jobs program.