MINUTES OF THE REGULAR MEETING OF THE
POWER AUTHORITY OF THE STATE OF NEW YORK
September 20, 2005
Table of Contents
Subject
1.
Minutes
of the Regular Meeting held on July 26, 2005
2.
Financial Reports for the Eight Months Ended August 31, 2005, Exhibit
‘2-A’
3.
Report from the President and Chief Executive Officer
4.. Allocation
of 1,025 kW of Hydro Power Resolution, Exhibits ‘4A & 4A1’ ,‘4B & 4-B1’
5.
Power for Jobs Program – Extended Benefits Resolution Exhibits ‘5-A1 &
5-A2’, ‘5-B’
6.
Request to Approve Extensions to the Term of Service for 27 Existing
Economic Development Power Program Customers Resolution ‘6-A’
7.
Economic Development Programs – Energy Cost Savings Benefits Resolution Exhibits
‘7-A1 & 7-A2’
8.
Increase in Government Customer Rates – Notice of Proposed Rule Making
Resolution ‘8-A’
9.
Proposed
Neighboring States Hydropower Contracts Notice of Public Hearing Resolution ‘9-A’
10.
Issuance of Series 2005 A and Series 2005 B Revenue Bonds and Commercial
Paper Notes, Series 3 Resolution
11.
Procurement (Services) Contract – St. Lawrence/FDR Power Project Life
Extension and Modernization Program – Increase in Compensation Limits
Resolution
12.
Lease of Office Space in the Clarence D. Rappleyea Building to Danziger &
Markhoff, LLP and Federal Bar Council
Resolution Exhibits‘12-A – 12-D’
13.
Procurement (Services) Contracts – Business Units and Resolution ‘13-A’
14.
Procurement (Services) and other Contracts – Business Units and Facilities –
Extensions, Approval of Additional
Funding and Increases in Compensation Ceilings Resolution ‘14-A’
15.
New York Power Authority’s Annual Strategic Plan Informational Item
‘15-A’
16.
Revision to May 24, 2005 Resolution for Execution Approval for Hedge
Transactions to Satisfy Long-Term Agreement
Obligations for Governmental Customers Resolution
17.
Agreement with Private Equity Fund Consortium Exhibits '17-A,
17-B1,
17-B2,
17-B3
17-C’
18.
Other Business
19.
Next Meeting
Closing
Minutes of the Regular Meeting of the Power Authority of the State of New
York held at the Albany Office at 11:00 a.m.
Present: Joseph J. Seymour, Chairman
Frank S. McCullough, Jr., Vice Chairman
Elise M. Cusack, Trustee
Michael J. Townsend, Trustee
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Eugene W.
Zeltmann President and Chief Executive Officer
David E.
Blabey Executive Vice President,
Secretary and General Counsel
Robert A.
Hiney Executive Vice President – Power
Generation
Vincent C.
Vesce Executive Vice President – Corporate
Services and Administration
Steven DeCarlo Senior Vice President –
Transmission
Joseph Del
Sindaco Senior Vice President and Chief
Financial Officer
Angelo S. Esposito Senior Vice President –
Energy Services and Technology
Louise M. Morman Senior Vice President –
Marketing, Economic Development
and Supply Planning
Brian
Vattimo Senior Vice President –
Public and Governmental Affairs
Joseph J. Carline
Assistant General Counsel – Power and Transmission
Thomas P. Antenucci Vice
President – Project Management
Arnold M. Bellis Vice President –
Controller
John M. Hoff Vice President –
Procurement and Real Estate
Gary Paslow Vice President –
Government Affairs and Policy Development
Donald A. Russak Vice President – Finance
William V. Slade Vice President –
Environmental Management
Thomas A. Warmath Vice President and Chief Risk
Officer
James H. Yates Vice President – Major
Accounts Marketing and Economic Development
Michael E. Brady
Treasurer
Dennis T. Eccleston Chief
Information Officer
Angela D. Graves Deputy
Secretary
Timothy Sheehan
Principal Attorney II – Managing Counsel
Denise D’Ambrosio Principal
Attorney I – Finance and Risk Management
John B. Hamor
Executive Director – State Governmental Relations
Paul W. Belnick
Director – Energy Services
Jordan Brandeis
Director – Supply Planning, Pricing and Power Contracts
Arthur M. Brennan Director
– Internal Audit
James F.
Pasquale Director – Business Power
Allocation, Regulation and Billing
Michael A.
Saltzman Director – Public Relations
Daniel
Wiese Director – Corporate Security
and Inspector General
Daniel J. Cappiello
Manager – Performance Planning
Steven Lockfort
Manager – Risk Reporting
Anthony C. Savino
Manager – Business Power Allocations and Compliance
Edward A. Welz
Project Manager – Project Management
Mary Jean
Frank Associate Secretary
Lorna M.
Johnson Assistant Secretary
Bonnie
Fahey Executive Administrative
Assistant
Niko P. Ladopolous
Legislative Liason
Joann M.
Duffy Strategic Change Consultant
John Cashin
Executive Administrator, Battery
Park City Authority
Tony
Collins President, Clarkson
University
Robert A. Wood,
Jr. Director – Government Relations, Clarkson
University
John Connorton
Partner, Hawkins, Delafield & Wood
Thorne
Clark Associate, Hawkins, Delafield
& Wood
Patrick
McCarthy Lobbyist, PLA Associates
Chairman Seymour
presided over the meeting. Executive Vice President, Secretary and General
Counsel Blabey kept the Minutes.
5.
Power for Jobs Program – Extended Benefits
The President and Chief Executive Officer
submitted the following report:
SUMMARY
“The Trustees are requested to approve extended
benefits for 379 Power for Jobs (‘PFJ’) customers as listed in Exhibits
‘5-A’ and ‘5-B.’ These customers have been recommended to receive such
extended benefits by the Economic Development Power Allocation Board (‘EDPAB’).
BACKGROUND
“In July 1997, the New York State Legislature
and Governor George E. Pataki 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 PFJ program originally made 400 megawatts
(‘MW’) of power available. The program was to be phased in over three
years, with approximately 133 MW made available each year. In July 1998, as
a result of the initial success of the program, the Legislature and Governor
Pataki amended the PFJ statute to accelerate the distribution of the power,
making a total of 267 MW available in Year One. The 1998 amendments also
increased the size of the program to 450 MW, with 50 MW to become available
in Year Three.
“In May 2000, legislation was enacted that
authorized another 300 MW of power to be allocated under the PFJ program.
The additional MW were described in the statute as ‘phase four’ of the
program. Customers that received allocations in Year One were authorized to
apply for reallocations; more than 95% reapplied. The balance of the power
was awarded to new applicants.
“In July 2002, legislation was signed into law
by Governor Pataki that authorized another 183 MW of power to be allocated
under the program. The additional MW were described in the statute as
‘phase five’ of the program. Customers that received allocations in Year
Two or Year Three were given priority to reapply for the program. Any
remaining power was made available to new applicants.
“In 2004, provisions of the approved state
budget 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 and/or a power
contract extension. The Authority was also authorized to voluntarily fund
the rebates, if deemed feasible and advisable by the Trustees.
“PFJ customers whose contracts expired on or
prior to November 30, 2004 were eligible for a rebate to the extent funded
by the Authority from the date their contract expired through December 31,
2005. As an alternative, such customers could choose to receive a rebate to
the extent funded by the Authority from the date their contract expired as a
bridge to a new contract extension, with the contract extension commencing
December 1, 2004. The new contract would be in effect from a period no
earlier than December 1, 2004 through the end of the PFJ program on December
31, 2005.
“PFJ customers whose contracts expired after
November 30, 2004 were eligible for rebate or contract extension, assuming
funding by the Authority, from the date their contracts expired through
December 31, 2005.
“Approved contract extensions entitled customers
to receive the power from the Authority pursuant to a sale-for-resale
agreement with the customer’s local utility. Separate allocation contracts
between customers and the Authority contained job commitments enforceable by
the Authority.
“In 2005, provisions of the approved state
budget extended the period during which PFJ customers could receive benefits
until December 31, 2006, the program’s new sunset date.
DISCUSSION
“As a result of its meeting, EDPAB recommended
that the Authority’s Trustees approve the allocations and/or electricity
savings reimbursement rebates to the 379 businesses listed in Exhibits ‘5-A’
and ‘5-B.’ Exhibit ‘5-A’ lists businesses that have requested and are being
recommended for contract extensions, while Exhibit ‘5-B’ lists those
businesses that have requested and are being recommended for electricity
savings reimbursements. Collectively, these organizations have agreed to
retain more than 157,000 jobs in New York State in exchange for the contract
extension or rebate. The contracts will be extended and the rebate program
will be in effect until December 31, 2006, the program’s sunset. The power
will be wheeled by the investor-owned utilities as indicated in the
Exhibits.
“The Trustees are requested to approve contract
extensions for the companies listed in Exhibit ‘5-A,’ and the payment and
funding of rebates for the companies listed in Exhibit ‘5-B’ in a total
amount currently not expected to exceed $6,500,000. Staff recommends that
the Trustees authorize a withdrawal of monies from the Operating Fund for
the payment of such amount, provided that such amount is not needed at the
time of withdrawal for any of the purposes specified in Section
503(1)(a)-(c) of the General Resolution Authorizing Revenue Obligations, as
amended and supplemented. Staff expects to present the Trustees with
requests for additional funding for rebates for the companies listed on the
Exhibits in the future.
“Completed applications were reviewed by EDPAB
and recommendations were made at their meeting on September 19, 2005.
FISCAL INFORMATION
“Funding of rebates for the companies listed in
Exhibit ‘5-B’ is not expected to exceed $6,500,000. Payments will be from
the Operating Fund.
RECOMMENDATION
“The Senior Vice President and Chief Financial
Officer and the Director – Business Power Allocations, Regulation and
Billing recommend that the Trustees approve the contract extensions for, and
the payment of electricity savings reimbursements to, the Power for Jobs
customers listed in Exhibits ‘5-A’ and ‘5-B.’
“The Executive Vice President, Secretary and
General Counsel, the Senior Vice President – Marketing, Economic Development
and Supply Planning, the Vice President – Major Accounts Marketing and
Economic Development, the Senior Vice President – Public and Governmental
Affairs and I concur in the recommendation.”
Mr. Pasquale presented the highlights of staff’s
recommendations to the Trustees. In response to a question from Chairman
Seymour, Mr. Paslow said that the pro rata electricity allocation reduction
for Power for Jobs customers not meeting their job commitments was what
Assemblyman Tonko had been referring to in his recent correspondence. Vice
Chairman McCullough, who is also Chairman of the Economic Development Power
Allocation Board (“EDPAB”), said that this was the first time that EDPAB had
recommended such a reduction since September 11, 2001, and that Authority
staff will be working to develop the criteria for an appeal process for
those companies whose allocations are reduced. Responding to a question
from Chairman Seymour, Vice Chairman McCullough said that the criteria will
be specific and tough and might include such things as capital commitment,
the company’s wage rates and any extenuating circumstances.
The following resolution, as submitted by
the President and Chief Executive Officer, was unanimously adopted.
WHEREAS, the Economic Development Power Allocation Board has recommended
that the Authority approve contract extensions and electricity savings
reimbursements to the Power for Jobs customers listed in Exhibits “5-A and
“5-B,” respectively;
NOW THEREFORE BE IT RESOLVED, That to implement such Economic Development
Power Allocation Board recommendations, the Authority hereby approves
contract extensions for those companies listed in Exhibit “5-A,” and the
payment of electricity savings reimbursements to the companies listed in
Exhibit “5-B,” as submitted to this meeting, and that the Authority finds
that such extensions and payments for electricity savings reimbursements
are in all respects reasonable, consistent with the requirements of the
Power for Jobs program and in the public interest; and be it further
RESOLVED, That based on staff’s recommendation, it is hereby authorized that
payments be made for electricity savings reimbursements as described in the
foregoing report of the President and Chief Executive Officer in the
aggregate amount of up to $6,500,000 and it is hereby found that amounts may
properly be withdrawn from the Operating Fund to fund such payments; and be
it further
RESOLVED, That such monies may be withdrawn pursuant to the foregoing
resolution upon the certification on the date of such withdrawal by the Vice
President – Finance or the Treasurer that the amount to be withdrawn is not
then needed for any of the purposes specified in Section 503 (1)(a)-(c) of
the General Resolution Authorizing Revenue Obligations, as amended and
supplemented; and be it further
RESOLVED, That the Senior Vice President – Marketing, Economic Development
and Supply Planning or her designee be, and hereby is, authorized to
negotiate and execute any and all documents necessary or desirable to
effectuate the foregoing subject to the approval of the form thereof by the
Executive Vice President, Secretary and General Counsel; and be it further
RESOLVED, That the Chairman, the President and Chief Executive Officer and
all other officers of the Authority are, and each of them hereby is,
authorized on behalf of the Authority to do any and all things and take any
and all actions and execute and deliver any and all certificates, agreements
and other documents to effectuate the foregoing resolution, subject to the
approval of the form thereof by the Executive Vice President, Secretary and
General Counsel.
6. Request to Approve Extensions to the Term of Service for 27 Existing
Economic Development Power Program
Customers
The President and Chief Executive Officer
submitted the following report:
SUMMARY
“The Trustees are requested to approve an
extension to the term of service to December 31, 2006 for 27 existing
economic development power program customers, as listed in Exhibit ‘6-A.’
BACKGROUND
“The Authority sells electricity to businesses
under several state-authorized economic development 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.
DISCUSSION
“Chapter 313 of the Laws of 2005 was signed into
law by Governor George E. Pataki on July 26, 2005. The new law allows
certain Authority power program customers who would be exposed to price
increases before December 31, 2006 to apply for an Energy Cost Savings
Benefit. Under the new law, businesses eligible to receive Energy Cost
Savings Benefits are limited to Authority customers currently supplied power
under the Economic Development Power, Municipal Distribution Agency and High
Load Factor programs. The Energy Cost Savings Benefit will be available for
the period November 1, 2005 through December 31, 2006.
“The 27 customers mentioned above have
allocation contracts, previously approved by the Trustees, which expire at
various times before December 31, 2006. We are requesting the Trustees to
extend each of these agreements until December 31, 2006 so that the
customers may receive the benefits associated with the recently passed law.
The extensions will help maintain costs and enable these customers to
compete more effectively. In addition, they will further secure employment
levels in New York State.
“The Economic Development Power Allocation Board
recommended that the contracts be extended at their meeting on September 19,
2005 and the Municipal Distribution Agencies have requested in writing that
their customers also be granted contract extensions.
RECOMMENDATION
“The Director – Business Power Allocations,
Regulation and Billing recommends that the Trustees approve extensions to
the term of service to December 31, 2006 for 27 existing economic
development power program customers, as listed in Exhibit ‘6-A.’
“The Executive Vice President, Secretary and
General Counsel, the Senior Vice President – Marketing, Economic Development
and Supply Planning, the Vice President – Major Accounts Marketing and
Economic Development and I concur in the recommendation.”
The following resolution, as submitted by
the President and Chief Executive Officer, was unanimously adopted.
RESOLVED, That the Trustees find that staff’s review supports an extension
of allocations from Authority economic development power programs for 27
existing customers until December 31, 2006 and that such extensions be, and
hereby are, approved on the terms set forth in the foregoing report of the
President and Chief Executive Officer; and be it further
RESOLVED, That the Chairman, the President and Chief Executive Officer and
all other officers of the Authority are, and each of them hereby is,
authorized on behalf of the Authority to do any and all things and take any
and all actions and execute and deliver any and all agreements, certificates
and other documents to effectuate the foregoing resolution, subject to
approval of the form thereof by the Executive Vice President, Secretary and
General Counsel.
7.
Economic Development Programs – Energy Cost Savings Benefits
The President and Chief Executive Officer
submitted the following report:
SUMMARY
“The Trustees are requested to approve Energy
Cost Savings Benefits for 59 customers as listed in Exhibit ‘7-A.’ These
customers have been recommended to receive such benefits by the Economic
Development Power Allocation Board (‘EDPAB’).
BACKGROUND
“Chapter 313 of the Laws of 2005 was signed into
law by Governor George E. Pataki on July 26, 2005. The new law allows
certain Authority power program customers who would be exposed to price
increases before December 31, 2006 to apply for an Energy Cost Savings
Benefit. Under the new law, businesses eligible to receive Energy Cost
Savings Benefits are limited to Authority customers currently being supplied
power under the Economic Development Power, Municipal Distribution Agency
and High Load Factor programs.
“The Energy Cost Savings Benefit will be
available for the period November 1, 2005 through December 31, 2006. Each
application will be evaluated under criteria adopted by EDPAB in
consultation with the Authority. The new law states that such criteria
shall include:
·
overall economic impact of the company in terms of jobs
created or retained, payroll, capital investment and the use of in-state
suppliers;
·
the likelihood that absent approval a company would close,
contract or relocate outside of New York State;
·
the company’s compliance with prior contractual commitments to
retain and/or create jobs and
·
the extent to which a benefit would affect the overall
productivity or competitiveness of the company and its existing in-State
employment.
“EDPAB can recommend a partial or complete
withdrawal of the Energy Cost Savings Benefit if the company fails to
maintain mutually agreed-upon commitments including jobs, capital investment
and power utilization.
“The legislation also authorizes the sale of
Authority power into the wholesale market with net earnings from such sales
(and other funds deemed feasible and advisable by the Trustees) to be used
for the Energy Cost Savings Benefits. Power available to fund Energy Cost
Savings Benefits includes:
·
up to 70 MW of unallocated replacement power;
·
up to 38.6 MW of preservation power relinquished or withdrawn
after the effective date of the new legislation and
·
up to 20 MW of power from the St. Lawrence/FDR project for the
period ending December 31, 2006.
DISCUSSION
“As a result of its meeting, EDPAB recommended
that the Authority’s Trustees approve Energy Cost Savings Benefits to the 59
businesses listed in Exhibit ‘7-A.’ Collectively, these organizations have
agreed to retain more than 74,000 jobs in New York State in exchange for
these benefits. The companies will be eligible to receive these benefits
until December 31, 2006.
“The Trustees are requested to approve the
funding of Energy Cost Savings Benefits for the companies listed in Exhibit
‘7-A’ in a total amount currently not expected to exceed $36,000,000. Staff
recommends that the Trustees authorize a withdrawal of monies from the
Operating Fund for the payment of such amount, provided that such amount is
not needed at the time of withdrawal for any of the purposes specified in
Section 503(1)(a)-(c) of the General Resolution Authorizing Revenue
Obligations, as amended and supplemented.
“Completed applications were reviewed by EDPAB
and recommendations were made at their meeting on September 19, 2005.
FISCAL INFORMATION
“Funding of Energy Cost Savings Benefits for the
companies listed in Exhibit ‘7-A’ is not expected to exceed $36,000,000.
Payments will be made from the Operating Fund.
RECOMMENDATION
“The Senior Vice President and Chief Financial
Officer and the Director – Business Power Allocations, Regulation and
Billing recommend that the Trustees approve the payment of Energy Cost
Savings Benefits to the customers listed in Exhibit ‘7-A.’
“The Executive Vice President, Secretary and
General Counsel, the Senior Vice President – Marketing, Economic Development
and Supply Planning, the Vice President – Major Accounts Marketing and
Economic Development, the Senior Vice President – Public and Governmental
Affairs and I concur in the recommendation.”
Mr. Pasquale presented the highlights of staff’s
recommendations to the Trustees. In response to a question from Chairman
Seymour, Mr. Pasquale said that these benefits would be provided only until
December 31, 2006, in accordance with the legislation that created them.
Responding to a question from Trustee Townsend, Mr. Pasquale said that the
Authority’s costs for these benefits are estimated at $36 million.
The following resolution, as submitted by
the President and Chief Executive Officer, was unanimously adopted.
WHEREAS, the Economic Development Power Allocation Board has recommended
that the Authority approve the payment of Energy Cost Savings Benefits to
the customers listed in Exhibit “7-A”;
NOW THEREFORE BE IT RESOLVED, That to implement such Economic Development
Power Allocation Board recommendations, the Authority hereby approves the
payment of Energy Cost Savings Benefits to the companies listed in Exhibit
“7-A” as submitted to this meeting, and that the Authority finds that such
payments for Energy Cost Savings Benefits are in all respects reasonable,
consistent with the requirements of the Authority’s economic development
programs and in the public interest; and be it further
RESOLVED, That based on staff’s recommendation, it is hereby authorized that
payments be made for Energy Cost Savings Benefits as described in the
foregoing report of the President and Chief Executive Officer in the
aggregate amount of up to $36,000,000 and it is hereby found that amounts
may properly be withdrawn from the Operating Fund to fund such payments; and
be it further
RESOLVED, That such monies may be withdrawn pursuant to the foregoing
resolution upon the certification on the date of such withdrawal by the Vice
President – Finance or the Treasurer that the amount to be withdrawn is not
then needed for any of the purposes specified in Section 503 (1)(a)-(c) of
the General Resolution Authorizing Revenue Obligations, as amended and
supplemented; and be it further
RESOLVED, That the Senior Vice President – Marketing, Economic Development
and Supply Planning or her designee be, and hereby is, authorized to
negotiate and execute any and all documents necessary or desirable to
effectuate the foregoing subject to the approval of the form thereof by the
Executive Vice President, Secretary and General Counsel; and be it further
RESOLVED, That the Chairman, the President and Chief Executive Officer and
all other officers of the Authority are, and each of them hereby is,
authorized on behalf of the Authority to do any and all things and take any
and all actions and execute and deliver any and all certificates, agreements
and other documents to effectuate the foregoing resolutions, subject to the
approval of the form thereof by the Executive Vice President, Secretary and
General Counsel.
8.
Increase in Government Customer Rates – Notice of Proposed Rule Making
The President and Chief Executive Officer
submitted the following report:
SUMMARY
“The Trustees are requested to approve a Notice
of Proposed Rule Making (‘NOPR’) to increase the rates to be charged in 2006
to the New York City Governmental Customers (‘NYC Governmental Customers’ or
‘Customers’). This proposed action would increase the Customers’ estimated
total billed revenues by 1.1 % on average as compared to 2005 rates. The
Trustees are also requested to direct the Secretary to publish a NOPR in the
State Register in accordance with the requirements of the State
Administrative Procedures Act (‘SAPA’).
“This proposed rate action has two parts.
First, the Authority staff seeks to increase the Fixed Costs component of
the production rates to be charged under the new supplemental Long Term
Agreements (‘LTAs’) that most of the Customers executed earlier this year.
Under the LTAs, any increase in the Fixed Costs component of the production
rates must be done in accordance with SAPA. Changes in the Variable Costs
component are determined in collaboration with the Customers in accordance
with the LTAs. Recovery of the expected Variable Costs through an annual
reset mechanism in the LTAs has been previously approved by the Trustees.
“Second, staff seeks to increase the production
rates applicable to any Customer that has not signed the new LTAs
(‘Non-Signatory Rates’). Any such Customer, under the terms of earlier
long-term contracts set to expire at the end 2006, would be entitled to a
fixed rate that the Authority may modify to recover its full cost of serving
such Customer. Thus, the Non-Signatory Rate must reflect the higher risk of
providing electricity at a fixed rate and the short-term nature of this
service.
“After comments are received concerning this
proposed rate action in accordance with SAPA, Authority staff will
return to the Trustees at their December 2005 meeting to seek final adoption
of this proposal.
BACKGROUND
“In 2005, the Authority and the NYC Governmental
Customers, representing more than 90% of the load in this customer class,
entered into the LTAs for the purchase of full-requirements production
electric service (with narrow exceptions for distributed generation and
renewable resources)through
December 31, 2017. The LTAs replaced prior agreements entered into during
the mid-1990s with most of these same Customers. The LTAs also established
a new relationship between the Authority and the Customers that reflects the
costs of procuring electricity in the restructured marketplace managed by
the New York Independent System Operator (‘NYISO’). The LTAs define
specific cost categories with respect to providing electric service, and
establish new methods for procuring resources and managing risk and a
collaborative process with the Customers for selecting a cost-recovery
mechanism.
“The LTAs separate all costs into two distinct
categories: Fixed Costs and Variable Costs. Fixed Costs include operation
and maintenance (‘O&M’), shared services, debt service, other expenses (i.e.,
certain directly assignable costs) and a credit for investment and other
income. Under the LTAs, the Authority must establish Fixed Costs based on
Cost of Service (‘COS’) principles and make changes only under a SAPA
proceeding. In addition, the LTAs contemplate that year-to-year changes in
Fixed Costs will be reviewed by the Customers in advance of a filing made
under SAPA. On August 24, 2005, Authority staff met with the Customers to
inform them of the proposed Fixed Costs increase and to solicit their
views. Under the LTAs, the Customers’ concerns must be considered prior to
presenting any proposed changes to the Fixed Costs to the Trustees or
issuing them for public comment. Customers will also have the opportunity
to submit comments in accordance with SAPA procedures.
“Staff is not requesting the Trustees’ approval
of the Variable Costs (i.e. fuel and purchased-power expense, risk
management, NYISO ancillary services and O&M reserve, less a credit for
NYISO revenues from Customer-dedicated generation) includable in the final
2006 production rates applicable to the Customers subject to the LTAs.
Under the LTAs approved by the Trustees, the Authority develops the Variable
Costs, which generally are subject to the Customers’ review and comment.
Subsequently, staff will incorporate these Variable Costs and the
Trustee-approved Fixed Costs into new tariff rates for service commencing in
2006. In accordance with the LTAs and outside the Trustees’ approval
process, the Authority will issue revised tariffs reflecting the new 2006
rates.
“For those Customers subject to Non-Signatory
Rates, no separate treatment for Fixed Costs and Variable Costs (as is
required under the LTAs to establish production rates) will apply. Instead,
subject to SAPA notice and comment procedures, staff has developed an
adjusted COS to account for the higher risks and costs attributable to
providing electric service to such non-signatory Customers. Staff will
propose to apply these higher costs to such Customers’ existing demand and
energy rates in an across-the-board fashion.
“This action does not affect Westchester County
and the local governmental entities in the County that have a different
arrangement with the Authority that does not provide for COS-based rates
until 2007.
DISCUSSION
A.
Fixed Costs Increase under LTAs
“A proposed increase in Fixed Costs was first
presented to the Customers on June 1, 2005 for their review and comment. As
part of the annual process set forth in the LTAs, Authority staff provided
its pro forma 2006 COS, 2006 revenue projections (at current standard
tariff offering rates), a comparison with pro forma 2005 costs and
revenues and the cost of different risk management and cost-recovery options
affecting Variable Costs that are not part of this proposed rate action.
“Since June 1, staff has made refinements to its
proposal concerning an increase in Fixed Costs, and now projects a Fixed
Costs increase of $9.4 million applicable only to the Customers subject to
the LTAs. This proposed increase in Fixed Costs would result in a 1.5%
increase in production rates as compared to 2005 rates, representing a 1.1%
increase in estimated total billed revenues. Staff proposes to apply this
increase equally to both the demand and energy rates.
“Staff will recommend for consideration at the
December meeting final adoption of a Fixed Costs increase based on this
analysis and comments from the Customers and the public. If this is
adopted, staff will incorporate the approved Fixed Costs and the final
Variable Costs that are determined in the annual process with the Customers
into new tariff rates to become effective in January 2006.
B.
Non-Signatory Rates
“As of the date of this proposed action, there
is only one non-signatory Customer, the New York Convention Center Operating
Corporation (‘Convention Center’)(see Exhibit ‘8-A’). If the Convention
Center retains that status or if new Customers materialize that do not
become signatories to the LTA, the Authority must offer such Customers
Non-Signatory Rates based on an adjusted 2006 COS.
“Such rates would be higher than the rates
offered under the LTA to reflect additional risk management costs inherent
in providing electricity to such Customers at a fixed rate as prescribed in
their contracts. Non-Signatory Rates, which are short-term rates not
offered to long-term contract customers (i.e., those under the LTA),
are higher because they exclude the benefits of certain long-term resources
such as the Authority’s new 500 MW Combined Cycle plant.
“Thus, the proposed Non-Signatory Rates that
would be noticed reflect a 14.1% increase in production rates, representing
a 9.2% increase in total billed revenues. Staff proposes to apply this
increase equally to both demand and energy components of the Non-Signatory
Rates.
FISCAL INFORMATION
“The adoption of this proposal concerning the
increase in Fixed Costs applicable to the Customers under the LTAs and an
overall increase in Non-Signatory Rates would result in the combined
recovery of approximately $9.8 million in additional revenues to the
Authority over current rates. These new revenues are offset by
corresponding increases in the costs of serving the Customers.
RECOMMENDATION
“The Director – Supply Planning, Pricing and
Power Contracts recommends that the Trustees authorize the Secretary to file
a Notice of Proposed Rule Making in the New York State Register for the
adoption of: (1) an increase in Fixed Costs applicable to the New York City
Governmental Customers under the Long Term Agreements, and (2) an increase
in the production rates applicable to New York City Governmental Customers
who are non-signatories to the Long Term Agreements, both as described
above.
“It is also recommended that the Senior Vice
President – Marketing, Economic Development and Supply Planning, or her
designee, be authorized to issue written notice of proposed action to the
affected customers.
“The Executive Vice President, Secretary and
General Counsel, the Senior Vice President and Chief Financial Officer, the
Senior Vice President – Marketing, Economic Development and Supply Planning,
the Vice President – Controller, the Vice President – Major Accounts
Marketing and Economic Development, the Vice President – Finance, the
Assistant General Counsel – Power and Transmission and I concur in the
recommendation.”
The following resolution, as submitted by
the President and Chief Executive Officer, was unanimously adopted.
RESOLVED, That the Authority projects an increase in the Fixed Costs of
serving the New York City Governmental Customers when comparing those costs
contained in current rates to 2006 projected costs; and be it further
RESOLVED, That the Authority has entered into new supplemental Long Term
Agreements with the New York City Governmental Customers and those
agreements provide for the recovery of additional Fixed Costs through a rate
filing under the State Administrative Procedure Act; and be it further
RESOLVED, That the Authority has other New York City Governmental Customers
who have not signed the new form of Long Term Agreement from whom the
Authority must recover the cost of providing service under fixed rates; and
be it further
RESOLVED, That the Senior Vice President – Marketing, Economic Development
and Supply Planning or her designee, be and hereby is, authorized to issue
to the affected customers written notice of proposed action by the Trustees
as described in the foregoing report of the President and Chief Executive
Officer; and be it further
RESOLVED, That the Secretary of the Authority be, and hereby is, directed to
file such notices as may be required with the Secretary of State for
publication in the State Register and to submit such other notice as may be
required by statute or regulation concerning the proposed rate increase
described in the foregoing report of the President and Chief Executive
Officer; and be it further
RESOLVED, That the Chairman, the President and Chief Executive Officer and
all other officers of the Authority are, and each of them hereby is,
authorized on behalf of the Authority to do any and all things and take any
and all actions and execute and deliver any and all certificates, agreements
and other documents to effectuate the foregoing resolution, subject to the
approval of the form thereof by the Executive Vice President, Secretary and
General Counsel.
9.
Proposed Neighboring States Hydropower Contracts – Notice of Public Hearing
The President and Chief Executive Officer
submitted the following report:
SUMMARY
“The Trustees are requested to authorize a
public hearing, pursuant to Section 1009 of the Public Authorities Law, on
proposed contracts with seven neighboring states (herein collectively
referred to as ‘the Bargaining Agents’ or ‘the Neighboring States’). The
proposed contracts continue existing contractual arrangements with the
Neighboring States for sale of Niagara power and energy. The only
significant change from the existing contract is that the term has been
extended to 2025.
“The Niagara Redevelopment Act (‘NRA’) and the
Federal Energy Regulatory Commission (‘FERC’) license for the Niagara
Project mandate these sales to the Neighboring States. These contracts are
modeled on the St. Lawrence contracts with the Neighboring States that were
approved by the Trustees at their meeting of February 24, 2004. The
Neighboring States and the amounts of firm and peaking power allocated to
each are listed in Exhibit
‘9-A.’
BACKGROUND
“The NRA requires the Authority to make
available at least 50% of the Niagara Project’s power to ‘preference
customers’(i.e., public bodies and non-profit cooperatives within economic
transmission distance). It further requires the Authority to make available
a ‘reasonable’ portion of such preference power, but not more than 10% of
total Niagara Project power, to preference customers in neighboring states.
“Pursuant to the foregoing statutory and license
conditions, the Authority has been selling hydropower from the Niagara
Project since 1961 to neighboring states. Initially, hydropower was sold
only to Vermont and subsequently to Ohio and Pennsylvania. Since 1985,
power has been sold to the current seven Neighboring States (Connecticut,
Massachusetts, New Jersey, Ohio, Pennsylvania, Rhode Island and Vermont) to
comply with FERC’s rulings on this matter.
“Under the current contracts with the seven
Neighboring States which had been extended to August 31, 2007, the
termination date of the current Niagara Project license, the Authority sells
188 MW of firm Niagara hydropower, 40 MW of peaking Niagara hydropower and
10% of interruptible energy from the Niagara Project to all seven
Neighboring State customers.
“On August 18, 2005, the Authority filed its
relicensing application for the Niagara Project with FERC. As part of a
settlement agreement, all seven Neighboring States agreed to support the
Authority’s entire offer of settlement, including our request for a 50-year
license and, as required by FERC rulings under the NRA, the Authority agreed
to continue to sell 188 MW of firm Niagara hydropower, 40 MW of peaking
Niagara hydropower and 10% of interruptible energy from the Niagara Project
to all seven Neighboring State customers. The proposed new license for the
Project will contain articles implementing the NRA’s requirements concerning
neighboring state sales. A proposed form of contract to take effect when
the current contracts expire was filed with FERC as part of the settlement
agreement.
DISCUSSION
“The proposed contracts with the Neighboring
States implement the requirements of the proposed Niagara Project license
and represent the minimum sales to neighboring states required under
existing FERC rulings. They contain detailed principles governing the
establishment of cost-based rates over the contract term that parallel those
in the St. Lawrence contracts with the Neighboring States previously
approved by the Trustees. Under the proposed contracts, the Authority may
seek FERC approval to reduce the allocations to the Neighboring States from
10% to 7.5%; however, the Neighboring States would then be free to challenge
any of the Authority’s ratemaking principles established by the Trustees at
their April 29, 2003 meeting.
“To the extent that sales of hydropower from
Niagara could be deemed to have renewable attributes, the Neighboring States
would have the right to acquire such attributes under terms and conditions
negotiated among the parties. The proposed contracts have a term that
commences on the later of the effective date of the new FERC License or the
date of the contracts’ execution and runs through September 1, 2025, the
same as the current Niagara contracts with the municipal and rural electric
cooperative customers. The form of the Niagara contract that is part of the
proposed license is attached as Exhibit ‘9-B.’
“The Authority agreed to commence the statutory
contract approval process for the new proposed contracts now with the
expectation that the process would be concluded in early 2006, to take
effect as stated above. If the license is not granted to the Authority, the
contracts would be of no force and effect. If the new license is not issued
by September 1, 2007, the new contracts, if approved by the Governor, would
take effect only on a month-to-month basis until a new license is issued.
FISCAL INFORMATION
“The 228 MW of Niagara Project power and energy
that will continue to be sold to the Neighboring States under the proposed
contracts will be sold at the same rates that currently apply to such sales.
Thus, the proposed contracts will have no revenue impact on the Authority.
RECOMMENDATION
“The Director – Supply Planning, Pricing and
Power Contracts and the Executive Director – Hydro Relicensing recommend
that the Trustees authorize a public hearing on the proposed contracts with
the Neighboring States to be held in the New York Office at a time and date
authorized by the Chairman. It is further recommended that, pursuant to
Section 1009 of the Public Authorities Law, the Executive Vice President,
Secretary and General Counsel be authorized to transmit copies of the
proposed contracts to the Governor and the legislative leaders.
“The Executive Vice President – Power
Operations, the Executive Vice President, Secretary and General Counsel, the
Senior Vice President – Marketing, Economic Development and Supply Planning
and I concur in the recommendation.”
Mr. Brandeis presented the highlights of staff’s
recommendations to the Trustees. In response to questions from Chairman
Seymour and Vice Chairman McCullough, Mr. Brandeis said that up to 10% of
the Niagara Project’s power was mandated to be provided to neighboring
states. Responding to a question from Trustee Cusack, Mr. Blabey said that
the 10% would be open to an increase if the other states got involved in
attempting to amend the Niagara Redevelopment Act, which provides for
out-of-state sales. In response to
a question from Chairman Seymour, Mr. Brandeis said that the Authority would
have to seek approval to reduce the amount of power allocated to the
Neighboring States from the Federal Energy Regulatory Commission (“FERC”),
but that FERC might also see fit to leave the amount allotted to them at the
10% level. Mr. Carline added that, in its contracts with the Neighboring
States, the Authority reserved the right to request FERC to bring the amount
down to 7.5%, but that by doing so it ran the risk of opening up the issue
of the rates paid for the power.
The following resolution, as submitted by
the President and Chief Executive Officer, was unanimously adopted.
RESOLVED, That the Authority hereby authorizes a public hearing on the terms
of the proposed contracts for the sale of hydroelectric power and energy
generated by the Authority to the Neighboring States substantially in the
form attached hereto, to be held at a subsequent time and date authorized by
the Chairman; and be it further
RESOLVED, That the Executive Vice President, Secretary and General Counsel
be, and hereby is, authorized to transmit copies of the proposed contracts
to the Governor, the Speaker of the Assembly, the Minority Leader of the
Assembly, the Chairman of the Assembly Committee on Ways and Means, the
Temporary President of the Senate, the Minority Leader of the Senate and the
Chairman of the Senate Finance Committee pursuant to Section 1009 of the
Public Authorities Law; and be it further
RESOLVED, That the Senior Vice President – Marketing, Economic Development
and Supply Planning or her designee be, and hereby is, authorized, subject
to approval of the form thereof by the Executive Vice President, Secretary
and General Counsel, to enter into such other agreements with the Bargaining
Agents, and to do such other things as may be necessary or desirable to
implement sales to the Neighboring States as required by the proposed new
Federal Energy Regulatory Commission Niagara Project license and as set
forth in the foregoing report of the President and Chief Executive Officer;
and be it further
RESOLVED, That the Chairman, the President and Chief Executive Officer and
all other officers of the Authority are, and each of them hereby is,
authorized on behalf of the Authority to do any and all things and take any
and all actions and execute and deliver any and all agreements, certificates
and other documents to effectuate the foregoing resolution, subject to the
approval of the form thereof by the Executive Vice President, Secretary and
General Counsel.