Economic Development Power Allocation Board

A regular 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 – 10^th Floor, Albany, NY

3) Empire State Development Corporation, 95 Perry Street, Suite 500, Buffalo, NY

The following Members of the Board were present:

Samuel Hoyt, Chairman

Eugene L. Nicandri, Member

Robert B. Catell, Member

Bernard McGarry, Member

Also in attendance were:

Gil Quiniones President and Chief Executive Officer, NYPA

Judith McCarthy Executive Vice President and General Counsel, NYPA

James F. Pasquale Senior Vice President – Economic Development & Energy Efficiency, NYPA

Michael Saltzman Director, Media Relations, NYPA

Michael Huvane Vice President Marketing, Business & Municipal Marketing, NYPA

Karen Delince Corporate Secretary, NYPA

Dennis Eccleston Vice President Information Technology/Chief Information Officer – Information

Technology, NYPA

Timothy Muldoon Manager – Business Power Allocations and Compliance

Tabitha Robinson Analyst I, Business Power Allocations & Compliance, NYPA

Emily Alkiewicz Analyst, Business Power Allocations & Compliance, NYPA

Lorna Johnson Assistant Secretary, NYPA

Sheila Baughman Senior Secretary, NYPA

Joseph Carline Counsel, Couch, White LLP

Chairman Hoyt welcomed Board members and staff to the meeting. He thanked President Gil Quiniones for his leadership and staff for their help during the ReCharge New York power allocations process.

1. Adoption of the Meeting Agenda

The agenda for the April 24, 2012 meeting was unanimously adopted.

2. 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.

3. 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.

4. Adoption of the Minutes

The Minutes of the Regular Meeting of March 26, 2012 were unanimously adopted.

5. Power Allocations Under the Recharge New York Program

SUMMARY

The Members of the Economic Development Power Allocation Board (“EDPAB”) are requested to: (1) recommend that the New York Power Authority (“Authority”) Trustees (“Trustees”) approve 517 allocations of available power under the ReCharge New York (“RNY”) power program to the businesses and not-for-profit corporations listed in Exhibit “A,” and (2) deem those applications for the three businesses listed in Exhibit “B” not eligible for a RNY power allocation.

BACKGROUND

On April 14, 2011, Governor Andrew M. Cuomo signed into law the RNY power program as part of Chapter 60 (Part CC) of the Laws of 2011. RNY makes available 910 Megawatts (“MW”) of economic development power, 50% of which will be provided by the Authority’s hydropower resources and 50% of which will be procured by the Authority on the open market. RNY contracts can be for a term of up to seven years in exchange for job and capital investment commitments. The statewide program is available to businesses and not-for-profit corporations for job retention, business expansion and attraction purposes.

The RNY legislation stipulates that at least 350 MW of RNY power should be allocated to entities served by the New York State Electric and Gas, National Grid and Rochester Gas and Electric utility companies. At least 200 MW will be set aside for the purpose of attracting new businesses and encouraging expansion of existing businesses statewide. In addition, the legislation stipulates that up to 100 MW should be awarded to not-for-profit corporations (as defined in section 102 of the State’s Not-for-profit Corporation Law, subdivision five of paragraph (a)) and small businesses statewide.

Under the legislation, eligible applicant shall mean an eligible business, eligible small business, or eligible not-for-profit. Further, an eligible applicant shall not include retail businesses as defined by EDPAB, including, without limitation, sports venues, gaming or entertainment-related establishments or places of overnight accommodations. For purposes of the RNY power program, EDPAB is requested to adopt the existing definition of a retail business as a business that is primarily used in making retail sales of goods or services to customers who personally visit such facilities to obtain goods or services, consistent with the rules previously promulgated by EDPAB for implementation of the Economic Development Power program.

RNY allocation awards are comprised of 50% hydropower and 50% Authority-procured market power. Prior to entering into a contract with an eligible applicant for the sale of RNY power, and prior to the provision of electric service relating to the RNY power allocation, the Authority shall offer each eligible applicant the option to decline to purchase the RNY market power component of such allocation. If an eligible applicant declines to purchase the RNY market power component, the Authority shall have no responsibility for supplying such market power to the eligible applicant.

As envisioned by the legislation, the Authority worked cooperatively with the Department of Public Service (“DPS”) to recommend to the New York State (“NYS”) Public Service Commission (“PSC”) reduced rates by utility corporations of RNY power program allocations. Pursuant to Chapter 60 and by order of the PSC, NYS utilities are required to deliver RNY power using discounted delivery rates. The discount derives from exempting RNY power from the Renewable Portfolio Surcharges, the Systems Benefits Charge and the Energy Efficiency Portfolio Standard Surcharge. The delivery discount will apply to a customer’s total allocation even if the customer decides to purchase the RNY market power component of its allocation from a non-Authority source.

The application for the RNY power program was approved by EDPAB at their meeting of September 26, 2011. Applications for RNY power were subject to a competitive evaluation process and were evaluated based on the twelve criteria set forth in the RNY legislation. Pursuant to the legislation, the criteria were considered in the aggregate and none were presumptively determinative.

DISCUSSION

In an effort to receive high-quality RNY applications and to announce the program, advertisements announcing the program were placed in major newspapers and business publications statewide; Web site postings were issued; mass emails were distributed and regional meetings were hosted by the Authority throughout the state. In addition, the program was promoted with assistance from state and local entities, including the Regional Economic Development Councils (“REDCs”), the Empire State Development Corporation and other local and regional economic development organizations within the state such as the Manufacturers Association of Central New York. Further, a RNY Call Center was established to assist prospective applicants and to further disseminate information regarding the RNY program. The RNY Call Center remains in operation. Finally, a targeted postal mailing to business customers utilizing a list of ten thousand businesses in NYS was made to foster interest in the program.

As part of Governor Cuomo’s “New York Open for Business” initiative, requests for all statewide economic development programs, including RNY, have been incorporated into a single on-line Consolidated Funding Application (“CFA”). Beginning in September 2011, the CFA was available to applicants, marking a fundamental shift in how economic development resources are allocated. The CFA continues to serve as an efficient and effective tool to streamline and expedite the state’s efforts to generate sustainable economic growth and employment opportunities across the state. All applications that are considered for an RNY allocation were submitted through the CFA process.

To support the Governor’s transformative plans to improve New York’s business climate and stimulate economic growth, ten REDCs were created. Through a performance-based, community-driven approach, each REDC has designed a strategic economic development model for their area and used the CFA as the primary support mechanism to work with eligible applicants to advance projects that demonstrate the greatest potential for job creation and economic opportunity.

The Power for Jobs (“PFJ”) and Energy Cost Savings Benefit (“ECSB”) programs expire on June 30, 2012. Current customers participating in these programs are required, under legislation, to apply for RNY in order to be considered for a RNY power allocation. RNY is a new economic development power program unrelated to the earlier PFJ and ECSB programs. All RNY applications are considered solely on their merits under the criteria established by the RNY legislation.

Current PFJ and ECSB customers who submit applications and who do not receive a RNY allocation will be considered for the transitional electricity discount (“TED”). Pursuant to section 188-a of the economic development law, the Authority is authorized, as deemed feasible and advisable by the Trustees, to provide such TED as recommended by EDPAB. The Authority shall identify and advise EDPAB whether sufficient funds are available for funding of such discounts through June 30, 2016. The amount of the TED for the period of July 1, 2012 through June 30, 2014 shall be equivalent to 66% of the unit (per kilowatt-hour) value of the savings received by the applicant under the PFJ or ECSB during the 12 months ending on December 31, 2010. The amount of the TED for the period July 1, 2014 through June 30, 2016 shall be equivalent to 33% of the unit (per kilowatt-hour) value of the savings received by the applicant under the PFJ or ECSB during the 12 months ending on December 31, 2010. EDPAB’s recommended recipients for the TED will be made at a future date. Of the applications received, 410 PFJ and ECSB customers have applied for an RNY allocation.

As of the January 27, 2012 deadline to submit a RNY application, 1,009 RNY applications have been submitted via the CFA process, requesting over 2,100 MW, a figure more than twice the total amount available for allocation under the legislation. Staff evaluated the completed applications pursuant to the following twelve criteria as set forth in the RNY legislation:

“(i) the significance of the cost of electricity to the applicant's overall cost of doing business, and the impact that a recharge New York power allocation will have on the applicant's operating costs;

(ii) the extent to which a recharge New York power allocation will result in new capital investment in the state by the applicant;

(iii) the extent to which a recharge New York power allocation is consistent with any regional economic development council strategies and priorities;

(iv) the type and cost of buildings, equipment and facilities to be constructed, enlarged or installed if the applicant were to receive an allocation;

(v) the applicant's payroll, salaries, benefits and number of jobs at the facility for which a recharge New York power allocation is requested;

(vi) the number of jobs that will be created or retained within the state in relation to the requested recharge New York power allocation, and the extent to which the applicant will agree to commit to creating or retaining such jobs as a condition to receiving a recharge New York power allocation;

(vii) whether the applicant, due to the cost of electricity, is at risk of closing or curtailing facilities or operations in the state, relocating facilities or operations out of the state, or losing a significant number of jobs in the state, in the absence of a recharge New York power allocation;

(viii) the significance of the applicant's facility, that would receive the recharge New York power allocation, to the economy of the area in which such facility is located;

(ix) the extent to which the applicant has invested in energy efficiency measures, will agree to participate in or perform energy audits of its facilities, will agree to participate in energy efficiency programs of the authority, or will commit to implement or otherwise make tangible investments in energy efficiency measures as a condition to receiving a recharge New York power allocation;

(x) whether the applicant receives a hydroelectric power allocation or benefits supported by the sale of hydroelectric power under another program administered in whole or in part by the authority;

(xi) the extent to which a recharge New York power allocation will result in an advantage for an applicant in relation to the applicant’s competitors within the state; and

(xii) in addition to the foregoing criteria, in the case of a not-for-profit corporation, whether the applicant provides critical services or substantial benefits to the local community in which the facility for which the allocation is requested is located.”

Based on the evaluation of these criteria, staff scored and ranked the applicants. Staff’s recommendations also considered the scores of criteria numbers three and eight given by each REDC to each applicant in its region. All recommended RNY allocations are based on a composite of staff’s and REDC’s scoring. Allocations were recommended for those applicants who scored the highest under this evaluation process.

In arriving at the recommended amount of each RNY allocation, staff attempted to maximize the economic benefits of low-cost Authority hydropower – the critical state asset at the core of the RNY program. To do so, staff recommended allocation amounts for each applicant with the goals of expanding participation in the program while also assuring that each recipient receives a meaningful allocation.

Accordingly, business applicants who scored high were recommended for allocations of RNY power of 50% of the requested amount or average historic demand, whichever was lower; business applicants were capped at 10 MW for any recommended allocation. Not-for-profit applicants who scored high were recommended for allocations of RNY power of 33% of the requested amount or average historic demand, whichever was lower; these allocations were capped at 5 MW. Authority customers currently receiving hydropower allocations under other Authority power programs were recommended for allocations of RNY power of 25% of the requested amount with the same caps as stated above.

Of the 877 applications reviewed, 517 are being recommended for an allocation of RNY power. The 517 businesses or not-for-profit corporations listed in Exhibit “A” have stated on their applications a willingness to create or retain over 362,000 jobs in NYS. Additionally, these applicants will be committing to capital investments totaling nearly $30 billion over five years in exchange for the allocations. Of the total 517 recommendations, 320 businesses are recommended for 510.1 MW; 122 small businesses are recommended for 12.7 MW and 75 not-for-profit corporations are recommended for 73.1 MW.

The RNY allocations in Exhibit “A” are recommended for a period of up to seven years. Consistent with legislation, each allocation recommended by EDPAB shall qualify an applicant to enter into a contract with the Authority, pursuant to the terms and conditions of the recommendation by EDPAB and on such other terms as the Authority determines to be appropriate. The contract will have provisions for effective periodic audits of the recipient of an allocation for the purpose of determining contract and program compliance and for the partial or complete withdrawal of an allocation if the recipient fails to maintain mutually agreed-upon commitments, relating to, among other things, employment levels, power utilization, capital investment and/or energy efficiency measures. In addition, there shall be a requirement that a recipient of an allocation make its facilities available, at reasonable times and intervals, for energy audits and related assessments that the Authority desires to perform. At their March 27, 2012 meeting, the Trustees approved the form and substance of a retail contract that incorporates these requirements.

There are a few applications that fall under the definition of retail businesses as established herein by EDPAB. Staff recommends that EDPAB deem ineligible those applications for the three businesses listed in Exhibit “B.”

All other applications received are still under review and will be brought to subsequent EDPAB meetings.

Recommendation

For the reasons stated above, it is requested that the Economic Development Power Allocation Board recommend that the Authority’s Trustees approve the 517 allocations of available power under the RNY power program to the businesses and not-for-profit corporations listed in Exhibit “A,” and deem those three businesses listed in Exhibit “B” not eligible for a RNY power allocation.

Before staff’s presentation to the Board, Chairman Hoyt asked if any member had a conflict of interest based on the list of applicants being considered for power allocations which was provided by staff. Mr. Bernard McGarry recused himself from the vote as it relates to Irving Tissue; SCA Tissue; Delorio Foods and Mohawk Fine Paper. Mr. Robert Catell recused himself from the vote as it relates to North Shore University Hospital and Fuller Road Management Corporation.

Chairman Hoyt made the following remarks:

“We have waited a long time to have a new statewide economic development program, so I’m thrilled, today, to officially introduce ReCharge New York (ReCharge).

ReCharge has replaced two existing NYPA programs — the Power for Jobs (PFJ) and Energy Cost Savings Benefit (ECSB) Programs — which statutorily expire on June 30, 2012. There are several reasons why ReCharge is superior to the PFJ and ECSB programs:

• The PFJ and ECSB programs were temporary; they were extended by law each year. This created uncertainty for businesses in these programs. ReCharge is a permanent program and requires no further action by the Legislature.

• The annual extension of the PFJ and ECSB programs meant that businesses would have only one year of energy cost certainty. ReCharge provides up to seven years of low-cost power contracts, allowing businesses to plan and facilitate greater investment in New York State.

• No new businesses were allowed into the PFJ and ECSB programs. ReCharge is open to any eligible business, statewide.

• The PFJ and ECSB programs were primarily reliant on NYPA cash subsidies. They were not sustainable. ReCharge is backed by 455 megawatts of stable and low-cost hydropower, allowing the program to, in fact, be self-sustaining.

• The PFJ and ECSB programs were created by different legislation, had very different criteria and provided inconsistent benefits to the Authority’s customers. ReCharge has very prescriptive criteria and is consistent in its pricing.”

Chairman Hoyt then asked Mr. James Pasquale, Senior Vice President of Marketing and Economic Development to further discuss ReCharge New York. He said Mr. Pasquale has worked with the Authority for 27 years and is responsible for all its Economic Development and Energy Services initiatives and has been overseeing the economic development programs since 1997.

Mr. Pasquale made the following remarks:

“I, too, am thrilled, today, to talk about ReCharge New York.

ReCharge New York levels the playing field. All existing customers had to reapply and were evaluated, competitively, along with all the new businesses that were applying for low-cost power the first time. All applicants were evaluated against the same criteria. The application process was based on merit and regional priorities.

There were many challenges to overcome before getting to this point. Staff tried for years to get legislation passed to create a new economic development program. I cannot tell you how many email exchanges, conference calls and meetings staff participated in – with the Governor’s staff, legislators and business groups – trying to develop a program that was palatable to everyone.

Launching ReCharge was a NYPA-wide effort; almost every business unit was, or will be, involved in ReCharge in one way or another.

ReCharge is a new business model for the Authority. PFJ was sale-for- resale -- The Authority sold power to the IOUs and they, in turn, resold it to the recipients. The IOUs billed the customers and took on the credit risk. ReCharge allocations will be direct-serve. The Authority will bill the customers, and as a result, take on the credit and collection risks and will have to deal with any non-payment issues that may arise.

Staff also needed to develop:

· RNY Customer Contract Template:

· RNY-1 Tariff for 4 zonal rates for Hydro only and blended product

· RNY savings models – estimate savings

· Six Delivery Service Arrangements with IOUs and LIPA

The Authority had never attempted an undertaking such as this. In a very short period of time staff had to, among many things:

· Create a project plan

· Create an outreach plan

· Create logos

· Develop an application

· Create a scoring matrix

· Set up a call center to handle all inquiries. (this received very positive feedback from both businesses and legislators)

· Review more than 1,000 applications, against very prescriptive criteria, in a very short period of time.

It is important for the Board to understand the challenges that had to be overcome and the monumental effort put forth by staff to launch ReCharge New York.

There is still more work to be done. Staff has to execute the more than 500 contracts being recommended for approval today; continue to review the additional large number applications; and monitor those applicants who receive allocations to ensure that they are in compliance with the commitments agreed to.

Mr. Pasquale then asked Mr. Michael Huvane to formally present the item to the Board.

Mr. Michael Huvane presented highlights of staff’s recommendation to the Board.

Trustee Eugene Nicandri said that the Board members were briefed by staff on the allocation criteria. He thanked staff for their due diligence in performing the tasks associated with this program. By motion made and seconded the Board approved the allocations under the ReCharge New York Power Program with Messrs. McGarry and Catell being recused from the vote as it relates to the aforementioned companies.

The following resolution was unanimously adopted by members of the Board present.

RESOLVED, That the Economic Development Power Allocation Board hereby approves the attached policies attached as Exhibits “A” and “B.”