MINUTES OF THE REGULAR MEETING O

6. Steuben Rural Electric Cooperative – Increase in Retail Rates – Notice of Adoption Resolution, Exhibit ‘6-A’ – ‘6-C’

7. Productivity Improvement Request Reductions Resolution, Exhibit, ‘7-A’

8. Increase in New York City Governmental Customer Rates – Notice of Proposed Rule Making Resolution

9. Modification of Westchester County Governmental Customer Rates – Notice of Proposed Rule Making Resolution, Exhibit ‘9-A’ – ‘9-C’

10. Budget Information Pursuant to Section 2801 of the Public Authorities Law Resolution, Exhibit ‘10-A’ & ‘10-B’

11. Banking Resolution Amendment to Reflect Change of Position Title to Executive Vice President and Chief Financial Officer Resolution

12. Authority Billing Systems Implementation – Systems Integration Services – Contract Award Resolution

13. Petroleum Overcharge Restitution Funds – Transfer of Funds to the State of New York and Authorization of Programs Resolution, Exhibit ‘13-A’

14. Approval and Funding of the Hydro Power-to-Hydrogen Initiative Resolution

15. Seymour-to-Greenwood Interconnection Project – Expenditure Authorization Request Resolution

16. New York City Department of Environmental Protection East Delaware and Neversink Hydroelectric Facilities – Operations
and Maintenance Services – Award Resolution

17. Revisions to the Regulations of the Authority Implementing the State Environmental Quality Review Act (21 NYCRR Part 461) Resolution Exhibit ‘17-A’ – ‘17-C’

18. Informational Item: New York Power Authority’s Annual Strategic Plan Exhibit ‘18-A’

19. St. Lawrence/FDR Power Project – Surplus Lands – Approval of the Conveyance of Surplus Property Resolution Exhibit ‘19-A’

20. Assignment and Assumption of Bank of New York Lease by J. P. Morgan Chase Resolution

21. Procurement (Services) Contracts – Business Units and Facilities – Awards Resolution Exhibit ‘21-A’

22. Procurement (Services) Contracts – Business Units and Facilities – Extensions and Approval of Additional Funding Resolution, Exhibit ‘22-A’

23. Proposed Schedule of Trustees’ Meetings in 2007 Resolution

24. Informational Item: World Trade Center Redevelopment – Lower Manhattan Energy Independence Initiative

25. Motion to Conduct an Executive Session

26. Motion to Resume Meeting in Open Session

27. Next Meeting

Closing

Minutes of the Regular Meeting of the Power Authority of the State of New York held at the Clarence D. Rappleyea Building, White Plains, New York, at 11:00 a.m.

Present: Frank S. McCullough, Jr., Chairman

Michael J. Townsend, Vice Chairman

Joseph J. Seymour, Trustee

Elise M. Cusack, Trustee

Robert E. Moses, Trustee

Thomas W. Scozzafava, Trustee

Leonard N. Spano, Trustee

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Timothy S. Carey President and Chief Executive Officer

Joseph Del Sindaco Executive Vice President and Chief Financial Officer

Thomas J. Kelly Executive Vice President and General Counsel

Vincent C. Vesce Executive Vice President – Corporate Services and Administration

Robert J. Deasy Senior Vice President – Energy Resource Management

Steven J. DeCarlo Senior Vice President – Transmission

Angelo S. Esposito Senior Vice President – Energy Services and Technology

Louise M. Morman Senior Vice President – Marketing and Economic Development

William J. Nadeau Senior Vice President – Energy Resource Management and Strategic Planning

Brian Vattimo Senior Vice President – Public and Governmental Affairs

Edward A. Welz Senior Vice President and Chief Engineer – Power Generation

Anne B. Cahill Corporate Secretary

Thomas P. Antenucci Vice President – Project Management

Richard J. Ardolino Vice President – Engineering

Arnold M. Bellis Vice President – Controller

John M. Hoff Vice President – Procurement and Real Estate

Donald A. Russak Vice President – Finance

William V. Slade Vice President – Environmental Management

Tom H. Warmath Vice President and Chief Risk Officer

James H. Yates Vice President – Major Account Marketing and Economic Development

Angela D. Graves Deputy Corporate Secretary

Michael E. Brady Treasurer

Dennis T. Eccleston Chief Information Officer

Thomas A. Davis Director – Financial Planning

James F. Pasquale Director – Business Power Allocations, Regulations and Billing

Michael A. Saltzman Director – Media Relations

Daniel Wiese Inspector General and Director – Corporate Security

Mary Jean Frank Associate Corporate Secretary

Lorna M. Johnson Assistant Corporate Secretary

Daniel J. Cappiello Manager – Performance Planning

Lesly Y. Pardo Manager – Internal Audit

Jeffrey Carey Special Assistant to President and Chief Executive Officer

William Helmer Special Licensing Counsel

Jack Murphy Special Advisor to President and Chief Executive Officer

Ricardo DaSilva Associate Electrical Engineer

Oksana U. Karaczewsky Senior Procurement Compliance Coordinator

Jennifer Mayadas-Dering Senior Project Engineer

Guy Sliker Senior Research and Technical Development Engineer

Edward Gibbs Executive Director, County of Westchester Public Utility Service Agency

Chairman McCullough presided over the meeting. Secretary Cahill kept the Minutes.

3. Report from the President and Chief Executive Officer

President Carey asked Mr. Del Sindaco to introduce the newest member of the management team. Mr. Del Sindaco said that Mr. Deasy has decided to retire at the end of the year after 32 years of service to the Authority. He introduced Mr. William Nadeau, who will be the Authority’s Senior Vice President – Energy Resource Management and Strategic Planning. Mr. Nadeau thanked Mr. Del Sindaco for the warm welcome.

President Carey said that the Authority has received a positive report from the Office of the State Comptroller (“OSC”) regarding its recent audit of the Niagara plant. He stated that even though only a few issues had been raised by the OSC report, the Authority did not concur in total with the report and that the Authority had sent a letter to the OSC setting forth its position and requesting a meeting to discuss this issue.

President Carey also said that he had been asked to serve on the Board of Directors of the U.S. Green Building Council and that the Authority would be the only electric utility represented on the Council’s Board. Chairman McCullough congratulated President Carey on his appointment to this Board, saying it was consistent with President Carey’s goals for the Authority in this regard.

4. 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 60 Power for Jobs (‘PFJ’) customers as listed in Exhibit ‘4-A.’ 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.

“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 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 PFJ customers could receive benefits until December 31, 2006. In 2006, a new law (Chapter 645 of the Laws of 2006) included provisions extending program benefits until June 30, 2007.

“Section 189 of the New York State Economic Development Law, which was amended by Chapter 59 of the Laws of 2004, provided the statutory authorization for the extended benefits that could be provided to PFJ customers. The statute stated that an applicant could receive extended 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 power for jobs contract.’

“Chapter 313 of the Laws of 2005 amended the above language to allow EDPAB to consider continuation of benefits on such terms as it deems reasonable. The statutory language now reads as follows:

An applicant shall be eligible for such reimbursements and/or extensions only if it is in compliance with and agrees to continue to meet the job retention and creation commitments set forth in its prior power for jobs contract, or such other commitments as the board deems reasonable. (emphasis supplied)

“At its meeting of October 18, 2005, EDPAB approved criteria under which applicants whose extended benefits EDPAB had reduced for non-compliance with their job commitments could apply to have their PFJ benefits reinstated in whole or in part. EDPAB authorized staff to create a short-form application, notify customers of the process, send customers the application and evaluate reconsideration requests based on the approved criteria. To date, staff has mailed 200 applications, received 109 and reviewed 108.

DISCUSSION

“At its meeting on September 26, 2006, EDPAB recommended that the Authority’s Trustees approve the electricity savings reimbursement rebates to the 60 businesses listed in Exhibit ‘4-A.’ Collectively, these organizations have agreed to retain more than 54,000 jobs in New York State in exchange for rebates. 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 Exhibit.

“The Trustees are requested to approve the payment and funding of rebates for the companies listed in Exhibit ‘4-A’ in a total amount currently not expected to exceed $4,800,000. 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 to the companies listed in the Exhibit in the future.

FISCAL INFORMATION

“Funding of rebates for the companies listed on Exhibit ‘4-A’ is not expected to exceed $4,800,000. Payments will be made from the Operating Fund. To date, the Trustees have approved $48.5 million in rebates.

RECOMMENDATION

“The Executive Vice President and Chief Financial Officer and the Director – Business Power Allocations and Regulation recommend that the Trustees approve the payment of electricity savings reimbursements to the Power for Jobs customers listed in Exhibit ‘4-A.’

“The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development, the Vice President – Major Account 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. Chairman McCullough explained that when Power for Jobs customers’ benefits are identified for reduction due to noncompliance with their job commitments, Authority staff notifies the customers of the reconsideration procedures that are in place to allow these customers to ask for EDPAB reconsideration based on special circumstances. Mr. Pasquale said that 109 customers have sent in requests for reconsideration of their reduced power allocations to date.

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 electricity savings reimbursements to the Power for Jobs customers listed in Exhibit “4-A”;

NOW THEREFORE BE IT RESOLVED, That to implement such Economic Development Power Allocation Board recommendations, the Authority hereby approves the payment of electricity savings reimbursements to the companies listed in Exhibit “4-A” and that the Authority finds that such 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 $4.8 million, 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 report 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 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 and General Counsel; and be it further

RESOLVED, That 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 and General Counsel.

5. Allocation of 3,800 kW of Hydro Power

The President and Chief Executive Officer submitted the following report.

SUMMARY

“The Trustees are requested to approve one allocation of available Replacement Power (‘RP’) totaling 600 kW to Silver Eagle Technology, Inc. and one allocation of available Expansion Power (‘EP’), totaling 3,200 kW to HSBC Technology & Services Inc.

BACKGROUND

“Under the RP Settlement Agreement, National Grid (‘Grid’) (formerly Niagara Mohawk Power Corporation), with the approval of the Authority, identifies and selects certain qualified industrial companies to receive delivery of RP. Qualified companies are current or future industrial customers of Grid that have or propose to have manufacturing facilities for the receipt of RP within 30 miles of the Authority’s Niagara Switchyard. RP is up to 445,000 kW of firm hydro power generated by the Authority at its Niagara Power Project that has been made available to Grid, pursuant to the Niagara Redevelopment Act (through December 2005) and Chapter 313 of the 2005 Laws of the State of New York.

“Under Section 1005 (13) of the Power Authority Act, as amended by Chapter 313, the Authority may contract to allocate or reallocate directly, or by sale for resale, 250 MW of firm hydroelectric power as EP and up to 445 MW of RP to businesses in the State located within 30 miles of the Niagara Power Project, provided that the amount of power allocated to businesses in Chautauqua County on January 1, 1987 shall continue to be allocated in such county.

DISCUSSION

“On October 22, 2003, the Authority, Grid, Empire State Development Corporation and the Buffalo Niagara Enterprise signed a Memorandum of Understanding (‘MOU’) that outlines the process to coordinate marketing and allocating Authority hydro power. The entities noted above have formed the Western New York Advisory Group (‘Advisory Group’) with the intent of better using the value of this resource to improve the economy of Western New York and the State of New York. Nothing in the MOU changes the legal requirements applicable to the allocation of hydro power.

“Based on the Advisory Group’s discussions, staff recommends that the 600 kW of available Replacement Power be allocated for Silver Eagle Technology, Inc. and 3,200 kW of available Expansion Power be allocated for HSBC Technology & Services Inc. These projects will help maintain and diversify the industrial base of Western New York and provide new employment opportunities.

RECOMMENDATION

“The Director – Business Power Allocations and Regulation recommends that the Trustees approve an allocation of available Replacement Power totaling 600 kW to Silver Eagle Technology Inc. and an allocation of available Expansion Power, totaling 3,200 kW to HSBC Technology & Services Inc.

“The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development, 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 allocation of 600 kW of Replacement Power to Silver Eagle Technology, Inc. and 3,200 kW of Expansion Power to HSBC Technology & Services Inc., be, and hereby is, 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 the approval of the form thereof by the Executive Vice President and General Counsel.

6. Steuben Rural Electric Cooperative – Increase in Retail Rates – Notice of Adoption

The President and Chief Executive Officer submitted the following report.

SUMMARY

“The Board of the Steuben Rural Electric Cooperative (‘Cooperative Board’) has requested the Trustees to approve revisions in the Steuben Rural Electric Cooperative’s (‘Cooperative’) retail rates for each customer service classification. These revisions will result in additional total annual revenues of about $378,500, or 6.1%.

BACKGROUND

“The Cooperative Board has requested the proposed rate increase primarily to provide revenues to allow for sufficient working funds, meet forecasted increases in operation and maintenance expenses and meet federal regulatory financial ratio level requirements. Current rates have been in effect since March 1988.

“The management of the Cooperative has planned additions to plant-in-service amounting to $1.2 million. The capital program consists of a major upgrade of the Cooperative’s extensive distribution lines and conductors and an increase to its substation capacity.

“Under the new rates, an average residential customer who currently pays about 9.4 cents per kWh will pay about 10.0 cents per kWh. A commercial customer that currently pays 8.5 cents per kWh will pay 9.0 cents after the increase. Industrial customers that presently pay 8.8 cents will pay 8.9 cents after the increase. A new service class, ‘Large, Separated, Electric Cold Storage or Processing Plant’ was created, to serve only large industrial customers from a different metering point. The creation of this new class allows the cooperative to explicitly calculate and monitor the cost of serving this unique load. The estimated average rate for this new class is 5.3 cents per kWh.

DISCUSSION

“The proposed rate revisions are based on a cost-of-service study prepared by the Cooperative and reviewed by Authority staff. Two public hearings were held by the Cooperative, on July 18 at the Cherry Creek district office and another on July 19, 2006 at the Bath main office. No rate payer comments were received at the public hearing. The Cooperative Board has requested that the proposed rates be approved. No comments concerning the proposed action have been received by the Authority’s Corporate Secretary.

“Pursuant to the approved procedures, the Senior Vice President – Marketing and Economic Development requested the Corporate Secretary to file a notice for publication in the New York State Register of the Cooperative’s proposed revision in retail rates. Such notice was published on August 2, 2006.

“An expense and revenue summary, comparisons of present and proposed total annual revenues and their corresponding rates by service classification are attached as Exhibits ‘6-A,’ ‘6-B’ and ‘6-C,’ respectively.

RECOMMENDATION

“The Director – Business Power Allocations and Regulation recommends that the attached schedule of rates for the Steuben Rural Electric Cooperative be approved as requested by the Board of the Steuben Rural Electric Cooperative to take effect beginning with the first full billing period following the date this resolution is adopted.

“It is also recommended that the Trustees authorize the Corporate Secretary to file a notice of adoption with the Secretary of State for publication in the New York State Register and to file such other notice as may be required by statute or regulation.

“The Executive Vice President and General Counsel, the Senior Vice President – Marketing and Economic Development and I concur in the recommendation.”

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees. In response to a question from Trustee Seymour regarding the Board’s jurisdiction to consider such matter, Mr. Pasquale said that the Authority regulates the rates of the municipal utilities and rural electric cooperatives under provisions of our contract and State law.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the proposed rates for electric service for the Steuben Rural Electric Cooperative, Inc., as requested by such Cooperative Board, be approved, to take effect with the first full billing period following this date, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, authorized to file a notice of adoption with the Secretary of State for publication in the New York State Register and to file any other notice required by statute or regulation; and be it further

RESOLVED, That 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 and General Counsel.

Steuben Rural Electric Cooperative

Expense and Revenue Summary

Five-Year

Average Proposed ¹

Purchase Power Expense

(NYPA hydro, incremental & ISO charges) $1,217,713 $1,595,691

Distribution Expense (Coop-owned facilities) 1,926,045 2,179,797

Transmission Expense 0 17,007

Depreciation Expense

(on all capital facilities and equipment) 957,365 1,033,118

General & Administrative Expenses

(salaries, insurance, mgmt services & adm. expenses) 679,298 796,256

Rate of Return – (Average 4.6%, Proposed 4.0%)

(includes debt service on current & planned debt,

federal regulatory financial ratio level

requirement, Coop members’ patronage capital

distribution and cash reserves for contingencies) 956,826 966,649

Total Cost of Service $5,737,247 $6,588,518

Revenue at Present Rates $6,210,065

Deficiency at Current Rates 378,453

Revenue at Proposed Rates $6,588,518

Increase % at Proposed Rates 6.1%

¹ Based on five years of historical and projected data.

Steuben Rural Electric Cooperative

Comparison of Present and Proposed Net Monthly Rates

Present ¹ Proposed ¹

Rates Rates

Residential, Schedule 1

$ 9.75 Customer Charge $ 10.33

$ .0789 Energy Charge, per kWh. $ .0841

Commercial Service, Schedule 2

$ 9.75 Customer Charge $ 10.33

$ .0789 Energy Charge, per kWh. $ .0841

Industrial Service, Schedule 3

$ 3.81 Demand Charge, per kW $ 3.81

$ .0612 Energy Charge, per kWh. $ .0619

Security Lighting, Schedule 4

(Charge per lamp, per month)

$ 7.84 100 Mercury Vapor $ 8.60

Large, Separated, Electric Cold Storage or

Processing Plant Service, Schedule 5

New Service

Class

N/A Demand Charge, per kW $ 4.84

N/A Energy Charge, per kWh. $ .0216

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¹ Average annual purchased power adjustment (PPA) reflected in present and proposed rates.

7. Productivity Improvement Request Reductions

The President and Chief Executive Officer submitted the following report.

SUMMARY

“It is requested that the Trustees approve reductions to the employment commitments for each of the five companies listed in Exhibit ‘7-A.’ These customers have clauses in their contracts that allow them to request a reduction in their commitments if the reduction is due to productivity improvements. Each of the five companies that made the productivity improvement requests met the appropriate criteria.

BACKGROUND

“Each year, Authority staff initiates a review of all business power allocations and the customers’ performance against agreed-upon job commitments. In 2005, the Authority had 289 contracts with 210 business customers, excluding Power for Jobs (‘PFJ’) agreements. In 2005, five customers (with 12 contracts) requested a reduction to their base employment commitments due to productivity improvements made during the reporting period.

“The contracts contain a customer commitment to retain or add a specific number of jobs. A company may request a productivity review to have its job commitment reduced if the reduction in employment is due to increased efficiency or improved technology. Relocation of specific activities away from the facility will not be considered an increased efficiency, improved technology or productivity improvement. Employment reductions made due to reduced production or sales volume will not be considered as an increased efficiency, improved technology or productivity improvement.

“A recommendation to lower a customer’s job commitment due to productivity improvements is made when:

The customer submits documentation of procedural or operational change, and

2. Staff conducts a site visit to verify the improvement(s) and the resulting reduction(s) in

jobs.

“The most common types of productivity improvements are automation, job consolidation, rebalancing and new process/design change.

“Automation reduces employment by increasing efficiency or improving technology. Job consolidation and rebalancing are similar improvements – job consolidation takes two jobs and eliminates one by giving the other job the duties of that job, while rebalancing redistributes work among many workers while eliminating one or two workers. New process/design change is a new method of doing something or a new design for a part that requires fewer workers to produce the same amount of work or product.

DISCUSSION

“Staff recommends that the Trustees approve action regarding the five customers meeting the productivity improvement requirement for a reduction to their employment commitments in 12 contracts. Brief descriptions of those companies that meet the productivity improvement employment reduction requirements are listed in Section I.

“A summary of all contracts discussed in this item is provided as Exhibit ‘7-A.’

Section I.

Allocations To Continue with Job Commitment Changes for Productivity Improvements

E.I. Du Pont De Nemours & Co., Inc., Niagara Falls, Niagara County

Allocation: 790 kW of Expansion Power (‘EP’) and 31,700 kW of Replacement Power (‘RP’)

Jobs Commitment: 254 jobs and 201 jobs, consecutively

Background: E. I. Du Pont De Nemours & Co., Inc. (‘DuPont’) has been in the chemicals business for more than 200 years and has been producing sodium chloride and lithium at this plant for more than 100 years. Both allocations are ‘vintage’ contracts, meaning that they have an 80% job ratio and a two-year job average. For the past two years, DuPont averaged 262.96 jobs, i.e., 103.53% and 130.83% of its contractual commitments, respectively. The company was able to reduce three jobs due to productivity improvements in 2005 made through new, more reliable equipment.

Recommendation: Staff recommends that the Trustees reduce DuPont’s employment commitments for both its EP and RP allocations by 3 jobs, to 251 and 198 positions, respectively.

Ford Motor Company, Buffalo, Erie County

Allocation: 4,300 kW of EP and 2,900 kW of EP

Jobs Commitment: 1,869 jobs and 1,869 jobs, consecutively

Background: Ford Motor Company (‘Ford’) opened its Buffalo Stamping Plant in 1950. Currently, Ford stamps doors, floor pans, quarter panels and some inner body components for the Windstar, Taurus and Crown Victoria models. The components then go to other Ford assembly plants and distribution centers throughout the U.S. and Canada. For the past year, Ford averaged 1,667.67 jobs, i.e., 89.23% of its contractual commitment. The company requested a productivity improvement reduction of its job commitment by 97 jobs. Ford’s reduction comes from automating the inspection of parts and various handling processes, as well as from new manufacturing processes.

Recommendation: Staff recommends that the Trustees reduce Ford’s EP allocation employment commitments by 97 jobs to 1,772 positions each.

General Motors Corporation – Powertrain, Buffalo, Erie County

Allocation: 13,800 kW, 1,100 kW and 800 kW of EP and 2,000 kW and 725 kW of RP

Jobs Commitment: 3,404 (13,800, 1,100 kW, 800 kW and 725 kW), and 3,404 base jobs and 44 created jobs (2,000 kW)

Background: General Motors Corporation – Powertrain (‘GM Powertrain’) manufactures engines for several of GM’s automobile models, including the Chevy Colorado and Canyon pick-up. The company requested a productivity improvement reduction of its jobs commitment by 282 jobs, which included two employment reductions that qualify for 2006, resulting in 280 reductions qualifying for 2005. The bulk of GM’s reduction comes from replacing an old engine line with the world’s most advanced engine manufacturing facilities and processes for the new engines, as well as from rebalancing job duties along the assembly lines, automation and new manufacturing processes. For the past year, GM – Powertrain averaged 2,914.50 jobs, i.e., 84.53% of its contractual commitment.

Recommendation: Staff recommends that the Trustees reduce GM Powertrain’s EP and RP allocation employment commitment by 280 jobs to a base of 3,124 positions. The RP allocation that still has time to create jobs will have its employment commitment reduced to 3,124 base jobs, with 44 created jobs (3,168).

Occidental Chemical Corporation, Niagara Falls, Niagara County

Allocation: 56,000 kW of RP and 38,700 kW of EP

Jobs Commitment: 237 jobs and 245 jobs, respectively

Background: Occidental Chemical Corporation (‘Oxy’) is the country’s largest merchant marketer of chlorine and caustic soda, which is used for the plastics, pulp and paper, water purification, bleach and sanitation industries. The company requested a productivity improvement employment commitment reduction. Both allocations are ‘vintage’ contracts, meaning that they have an 80% job ratio and a two-year job average. For the past two years, Oxy averaged 254.21 jobs and 246.75 jobs, i.e., 107.26% and 100.71% of its contractual commitments, respectively. In 2005, Oxy reorganized its maintenance program through combining jobs (six jobs reduced) and through a new inventory process (one job reduced).

Recommendation: Staff recommends that the Trustees reduce Oxy’s RP and EP allocation employment commitments by seven jobs to 230 and 238 positions, respectively.

OAB Holding, Inc., Buffalo, Erie County

Allocation: 8,060 kW of RP

Jobs Commitment: 501 jobs

Background: OAB Holding, Inc (‘OAB’), in business since 1906, manufactures copper and brass sheets and rolls. The allocation is a ‘vintage’ contract, meaning that it has an 80% job ratio and a two-year job average. The company requested a productivity improvement reduction of its job commitment by 19 jobs. However, only 18 of the 19 qualified as productivity improvement reductions. OAB’s reduction comes from rebalancing job duties (14 positions), eliminating a process (three positions) and new equipment (one position). For the past two years, OAB averaged 634.50 jobs, i.e., 126.65% of its contractual commitment.

Recommendation: Staff recommends that the Trustees reduce OAB’s RP allocation employment commitment by 18 jobs to a base of 483 positions.

RECOMMENDATION

“The Director – Business Power Allocations and Regulation recommends that the Trustees adjust the job commitments for five customers with 12 contracts due to productivity improvements as described above and set forth in Exhibit ‘7-A.’

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees. In response to a question from Trustee Cusack, Mr. Pasquale said that all of the companies requesting these reductions are located in the western part of the State because they are hydro power customers. Responding to another question from Trustee Cusack, Mr. Pasquale said that Authority staff conducts inspections at the customers’ facilities to ensure that the claimed improvements have in fact been made. Chairman McCullough added that the Authority wants more companies to implement productivity improvements.

The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted.

RESOLVED, That the Authority hereby approves adjustment of the future job commitment levels for five customers (with 12 contracts) that made productivity improvements as described in the foregoing report of the President and Chief Executive Officer and as set forth in Exhibit “7-A”; and be it further

RESOLVED, That the Director – Business Power Allocations and Regulation is hereby authorized to provide written notice to these companies whose allocations and job commitments are being reduced; 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 resolutions, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

Table of Contents

Residential, Schedule 1

Commercial Service, Schedule 2

Industrial Service, Schedule 3

Security Lighting, Schedule 4

Large, Separated, Electric Cold Storage or

Processing Plant Service, Schedule 5

Allocations To Continue with Job Commitment Changes for Productivity Improvements