ECONOMIC DEVELOPMENT POWER
April 20, 2011- SPECIAL MEETING
Videoconference – 10:00 a.m.
New York Power Authority Offices:
123 Main Street, 16th Floor, White Plains, NY
30 South Pearl Street, 10th Floor, Albany, NY
Empire State Development Corporation, 95 Perry Street, Suite 500, Buffalo, NY
City of Oswego Community Development, 20 West Oneida Street, 3rd Floor, Oswego, NY
1. Power for Jobs Extended Benefits, Energy Cost Savings Benefit Awards and Economic Development Power Program Contract Extensions.
2. Other Business
3. Next Meeting
A special meeting of the Economic Development Power Allocation Board was held via videoconference 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, 10th Floor, Albany, NY
3) Empire State Development Corporation, 95 Perry Street, Suite 500, Buffalo, NY
4) City of Oswego Community Development, 20 West Oneida Street, 3rd Floor, Oswego, NY
The following Members of the Board were present at the following locations:
Kenneth Schoetz, Chairman (Buffalo, NY)
Eugene L. Nicandri, Member, (White Plains, NY)
Mary Vanouse, Member, (Oswego, NY)
Robert B. Catell, Member, (Excused from meeting)
Also in attendance were:
Judith McCarthy First Deputy General Counsel, NYPA
James F. Pasquale Senior Vice President - Marketing & Economic Development, NYPA
Karen Delince Corporate Secretary, NYPA
Vincent Esposito Assistant General Counsel, Legislative & Regulatory Affairs, NYPA
Michael Huvane Vice President - Marketing, NYPA
Timothy Muldoon Manager – Business Power Allocations & Compliance, NYPA
Michael Saltzman Director, Media Relations, NYPA
Dennis Eccleston Vice President Information Technology/Chief Information Officer – Information Technology, NYPA
Lorna Johnson Assistant Secretary, NYPA
Sheila Baughman Senior Secretary, NYPA
1. Power for Jobs Extended Benefits, Energy Cost Savings Benefit Awards and
Economic Development Power Program Contract Extensions
On April 14, 2011 the Governor signed legislation authorizing an extension of the Power for Jobs (“PFJ”) and the Energy Cost Savings Benefit (“ECSB”) Programs through June 30, 2012. It is therefore requested that Members of the Economic Development Power Allocation Board (“EDPAB”) recommend to the New York Power Authority Board of Trustees (“Trustees”) the extension of PFJ program benefits to the customers listed in Exhibit “A” and ECSB program benefits to the customers listed in Exhibit “C” through June 30, 2012. It is also requested that EDPAB recommend the extension of underlying contracts for economic development program customers, listed in Exhibit “B,” through June 30, 2012, to coincide with the term of extended ECSB benefits to such entities.
Power for Jobs
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 agreed 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 were given the option to receive benefits in the form of an “electricity savings reimbursement” rebate or a power contract extension. The New York Power Authority (“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 the 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, that was subsequently extended to June 2, 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 program, Municipal Distribution Agency 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 market 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 ECSB. 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 December 2010, the net earnings from the unallocated hydropower sold into the wholesale market virtually offset the customer losses.
Concurrent with the PFJ program as described above, ECSB has been extended many times, including provisions in Chapter 311 of the laws of 2010 extending ECSB program benefits to May 15, 2011.
Power for Jobs
The recently passed legislation would allow PFJ recipients to continue with existing elections (i.e., power contracts or rebates) through June 30, 2012, with the program benefits administered as in current law. Manufacturers currently receiving benefits under the power contract option are allowed to switch to the rebate option for the extended term. 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 Economic Development Law, 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 order to avoid disruption in the delivery of PFJ benefits, the legislation directs EDPAB to expedite the award of PFJ and to defer the review of compliance with job commitments until after applicants have been awarded PFJ benefits.
In light of the requirement of the legislation that current recipients receive extended PFJ benefits with minimal disruption subject to later review of compliance matters, it is requested that EDPAB recommend that the Trustees approve extensions for all current PFJ program participants, subject to receipt of proper documentation requesting such extensions and agreement on the requisite commercial terms. Consistent with the legislative goal that current PFJ program participants receive extended benefits with minimal disruption, it is also requested that EDPAB recommend that review of compliance matters be deferred, however, not later than June 30, 2011.
EDPAB is requested to recommend to the Trustees PFJ contract extensions and the funding of rebates for the companies listed in Exhibit “A” through June 30, 2012. 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 of the Authority. While EDPAB will not be asked to recommend the payment amounts on a monthly basis, the information will be made available when requested. The total cost of the extended rebate program is estimated to be about $50 million for the thirteen-and-a-half month extension of the Program. From the inception of the rebate program in 2005 through the end of 2010, the Authority incurred $241 million in rebate payments to eligible customers, averaging slightly more than $40 million per year.
Contract Extensions and ECSB Awards
There are fifty one Economic Development Power and High Load Factor allocations with underlying power contracts that have terms ending on May 15, 2011, or on other dates before June 30, 2012. In order for ECSB benefits to be extended for such allocations, it is necessary to extend their underlying power contracts. It is requested that EDPAB recommended extension of Economic Development Power and High Load Factor contracts, as necessary, so that such businesses will be able to receive ECSB benefits through the end of the legislation’s extension period on June 30, 2012. 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 recommend extensions of ECSB awards through June 30, 2012. The legislation extends 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 June 30, 2012. For entities currently receiving ECSB awards, the legislation provides for continuation of the existing level of benefits for the period while allowing the Authority to continue to use up to 70 MW of unallocated Replacement Power and up to 38.6 MW of unallocated Preservation Power to fund the ECSB awards, provided that any such Replacement Power must be made available for allocation in Western New York and any such Preservation Power must be made available in Franklin, Jefferson an St. Lawrence counties 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, 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 legislation 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, it is requested that EDPAB recommend that the Trustees approve extensions for all current ECSB program participants, as listed in Exhibit “C,” through June 30, 2012, subject to receipt of proper documentation requesting such extensions and agreement on the requisite commercial terms. Consistent with the legislative goal that current ECSB program participants receive extended benefits with minimal disruption, it is also requested that EDPAB recommend that review of compliance matters be deferred, however, not later than June 30, 2011.
INFORMATION ON RECHARGE NEW YORK POWER PROGRAM
The new legislation signed by the Governor on April 14, 2011 amended Economic Development Law to create a new Recharge New York power program (“RNY”). The Governor’s program will commence power sales on July 1, 2012, after the expiration of both the PFJ and ECSB programs that will terminate on June 30, 2012. RNY is a 910 MW economic development power program, consisting of 455 MW of hydroelectric power and an equal amount of market supply. The 455 MW block of hydropower was previously sold to three upstate utilities, New York State Electric & Gas Corporation (“NYSEG”), Niagara Mohawk Power Corporation d/b/a National Grid (“National Grid”) and Rochester Gas & Electric Corporation (“RG&E”), for the benefit of their rural and domestic consumers.
As with current practices, EDPAB will review applications and recommend RNY allocations for approval by the Trustees. The criteria used to evaluate the applications include, but are not limited to: the amount of new capital investment, the significance of electricity cost to the business, the number of jobs created or retained, an applicant’s payroll and its facility’s significance to the local and regional economy, and the risk of the business closing or curtailing operations in New York State. RNY allocations shall not exceed a term of seven years and relinquished power can be reallocated to eligible applicants.
Eligible applicants include businesses whose demand is greater than 400 kW, not-for-profit corporations, and small businesses, those whose demand is less than 400 kW. Current PFJ and ECSB recipients are eligible to apply for RNY only if in substantial compliance with their existing contractual commitments. The new legislation also provides for compliant PFJ and ECSB customers that apply for, but are not awarded RNY allocations to receive “transitional electricity discounts,” phasing them out of program benefits over four years. At least 350 MW is set aside for use at facilities located within NYSEG, National Grid and RG&E service territories. At least 200 MW is set aside for the purpose of attracting new business to the state, creating new business within the state and expansion of existing facilities resulting in new jobs and increased capital investment. Lastly, the total amount of RNY power allocated to small businesses and not-for-profit entities is not to exceed 100 MW.
It is recommended that the Economic Development Power Allocation Board authorize and recommend to the Trustees the extension of Power for Jobs benefits, Energy Cost Savings Benefits and the contract extensions as set forth above.
The attached resolution is recommended for adoption.
Mr. James Pasquale presented highlights of staff’s recommendation to the Board. In response to a question from Trustee Eugene Nicandri, Mr. Pasquale said that the Power for Jobs (“PFJ”) and Energy Cost Savings Benefit (“ECSB”) Program customers are in the process of submitting applications, which will include updated job commitments, to extend their benefits for the current PFJ and ECSB programs through June 30, 2012. He continued that all of the customers in the PFJ and ECSB programs have to reapply for benefits under the new Recharge New York Program, which will be effective on July 1, 2012.
In response to a question from Ms. Mary Vanouse, Mr. Pasquale said that applicants do not have to create jobs in order to get an allocation under the new program, Recharge New York. Mr. Pasquale said that based on the information in the applications, mainly what the company is willing to give to the state in return for an allocation, the Board will make a determination on how much power these customers will receive. In response to a further question from Ms. Vanouse, Mr. Pasquale said that job creation was not a requirement of the PFJ program; the program was primarily for job retention.
In response to a question from Chairman Kenneth Schoetz, Mr. Pasquale said that The PFJ and ECSB customers will be competing with other businesses in the state that want to apply for power under the new program. Mr. Pasquale said that staff is planning to conduct seminars on the new program to businesses around the state. Staff will also conduct a competitive review of the applications received and, based on the information contained in the application, will recommend and the Board will determine the allocation a company should receive.
In response to a question from Trustee Nicandri, Mr. Pasquale said that according to the legislation, contracts for Recharge New York can be for a period up to seven years. Therefore, depending on what a business is willing to commit to the state, the Board can make a determination as to the term of each contract. In response to a further question from Trustee Nicandri, Mr. Pasquale said that the Board can be flexible in determining the duration of each contract.
In response to a question from Ms. Vanouse, Mr. Pasquale said that the criteria for an allocation of power will be the same for both the current PFJ and ECSB customers and all new businesses that will apply for an allocation under the Recharge New York program. This includes criteria which are written in the law, for example, job and salary commitments, cost of energy compared to overall operating costs, capital investment and the risk of an applicant leaving the state. He ended that staff will be reviewing each application before making a recommendation to the Board.
Mr. Vincent Esposito added that staff was in the process of preparing a summary comprising the regulations and statutes that govern the Board and will include the criteria and procedures for the new Recharge New York Program.
The following resolution was unanimously adopted by members of the Board present.
RESOLVED, That the Board hereby authorizes and recommends to the New York Power Authority, extension through June 30, 2012, 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 as detailed in Exhibits “A”, “B”, and “C”, subject to review by the Board on or before June 30, 2011, of whether applicants for such benefits are in compliance with their respective contractual commitments associated with such program benefits.
2. Other Business
No other business to report.
3. Next Meeting
The next meeting of the Board will be held on May 24, 2011.