MINUTES OF THE REGULAR MEETING OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

November 28, 2006

 

 

Table of Contents

 

            Subject                                                                                                                                      

 

1.              Minutes of the Regular Meeting held on October 24, 2006                                   

2.              Financial Reports for the Ten Months Ending October 31, 2006, Exhibit “2-A”

3.              Report from the President and Chief Executive Officer                                           

4.              Allocation of 3,250 kW of Hydro Power Resolution, Exhibit  “4-A” & “4-B”
                                                                                                                       

5.              Economic Development Power Programs – Extension to the Terms of Service and Energy Cost Savings Benefits, Resolution, Exhibit “5-A” & “5-B”  

6.              Power for Jobs Program – Extended Benefits  Resolution, Exhibit “6-A”
 

7.              Power for Jobs Program – Extended Benefits – 2007 Resolution, Exhibit “7-A” & “7-B”
 

8.              Authorization of Increase in Maximum Amount of Series 1 Commercial  Paper Notes and Authorization to Use Operating Funds to Retire Authority Debt Resolution, Exhibit “8-A”                                                                    

9.              Contribution to the County of Schoharie Office of Emergency Management for Costs Associated with the Implementation of  Emergency Preparedness Measures Resolution

10.           Motion to Conduct an Executive Session                                                               

11.           Motion to Resume Meeting in Open Session                                                          

12.           Authorization to Enter into Negotiations to Execute Long-Term  Supply Agreements for Electric Transmission and Capacity Resolution

13.           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 11:10 a.m.

 

Present:                  Frank S. McCullough, Jr., Chairman

                                Elise M. Cusack, Trustee

                                Robert E. Moses, Trustee

                                Thomas W. Scozzafava, Trustee

                                Joseph J. Seymour, Trustee

                                Leonard N. Spano, Trustee

                               

                                Michael J. Townsend, Vice Chairman – Excused

 

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Timothy S. Carey                                 President and Chief Executive 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

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

Thomas P. Antenucci                          Vice President – Project Management

Arnold M. Bellis                                   Vice President – Controller

Donald A. Russak                                Vice President – Finance

William V. Slade                                   Vice President – Environmental Management

Thomas H. Warmath                           Vice President and Chief Risk Officer

Daniel Wiese                              Vice President and Inspector General – Corporate Security

Anne B. Cahill                                      Corporate Secretary

Angela D. Graves                                 Deputy Corporate Secretary

Michael E. Brady                        Treasurer

Dennis T. Eccleston                     Chief Information Officer

Joseph J. Carline                         Assistant General Counsel

Timothy Sheehan                         Principal Attorney II – Finance Affairs

Frederick E. Chase                      Executive Director – Hydro Relicensing

Paul F. Finnegan                         Executive Director – Public and Governmental Affairs

John B. Hamor                            Executive Director – State Governmental Relations

John J. Suloway                           Executive Director – Licensing, Implementation and Compliance

Jordan Brandeis                           Director – Supply Planning, Pricing and Power Contracts

James F. Pasquale                        Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing

Michael A. Saltzman                    Director – Media Relations

Mary Jean Frank                                  Associate Corporate Secretary

Lorna M. Johnson                               Assistant Corporate Secretary

John J. Canale                                       Project Manager

Jeffrey Carey                                         Special Assistant to President and Chief Executive Officer

Jack Murphy                                         Temporary PR Counsel

Steve Mitnick                                       Transition Office of New York State Governor-Elect Eliot Spitzer

 

 

 

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

 

 

 

1.             Approval of the Minutes

 

The Minutes of the Regular Meeting of October 24, 2006 were unanimously adopted.

 


 

2.             Financial Reports for the Ten Months Ending October 31, 2006

 

Mr. Bellis presented the highlights of the reports to the Trustees.  Responding to questions from Trustee Seymour, Mr. Bellis said that the Southeastern New York (“SENY”) losses were principally due to the fact that revenues from the Poletti and 500 MW plants had been budgeted to reflect the projection of very high energy prices following last year’s hurricane season.  He said that because that energy scenario never materialized, the projected earnings didn’t materialize either.  Mr. Bellis said that a tremendous amount of hedging is built into the Authority’s system of budgeting and that the SENY customers would start to absorb their full cost of service beginning in 2007. 


 

3.             Report from the President and Chief Executive Officer

               

                President Carey said that he has been in contact with Governor-Elect Spitzer’s transition team and welcomed transition team member Steven Mitnick to the meeting, thanking him for taking the time to attend.  President Carey said that he and Authority staff would be briefing Mr. Mitnick following the Trustees’ Meeting on the Authority’s Power for Jobs (“PFJ”) and Economic Development Power (“EDP”) programs.  He said a transition memo had been shared with the transition team and that Authority staff would be working hand-in-hand with the transition team moving forward.          


 

4.             Allocation of 3,250 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 2,500 kW to New York Tungsten, LLC and one allocation of available Expansion Power (‘EP’) totaling 750 kW to Irwin Industrial Tool Company dba Bernzomatic under criteria for the evaluation of power allocated for revitalization of industry.  These two allocations total 3,250 kW.

 

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.

 

“Each application for an EP allocation must be evaluated under criteria that include, but need not be limited to, those set forth in Public Authorities Law Section 1005 (13) (a), which sets forth the eligibility, and (b), which sets forth the criteria for revitalization.

 

“Among the factors to be considered when evaluating a request for revitalization purposes are whether the business is likely to partially close or relocate, resulting in loss of jobs, whether the business is an important employer in the community and whether the business has pursued other available sources of assistance to reduce energy costs.

 

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 available power be allocated among the two companies as set forth in Exhibits ‘4-A’ and ‘4-B.’  The Exhibits show, among other things, the amount of power requested by each company, the recommended allocation and additional employment and capital investment information.  These projects will help maintain and diversify the industrial base of Western New York and provide new employment opportunities.  These projects are expected to result in the creation of 94 jobs.

 

RECOMMENDATION

 

“The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees approve the allocation of 3,250 kW of hydro power to the companies listed in Exhibits ‘4-A’ and ‘4-B.’

“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 2,500 kW of Replacement Power and 750 kW of Expansion Power, as detailed in Exhibits “4-A” and “4-B,” 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.

 

 


 

 

 


 

APPLICATION SUMMARY

Replacement Power

 

Company:                                              New York Tungsten, LLC

 

Location:                                               Depew

 

County:                                                  Erie County

 

IOU:                                                       National Grid

 

Business Activity:                               Manufacturer of tungsten powders

 

Project Description:                           The project includes the construction of a facility to support the production of tungsten metal powder.  In addition, the company will be installing machinery and equipment to support the batch processing of its product.

 

Prior Application:                               None

 

Existing Allocation:                            None 

 

Power Request:                                    3,000 kW

 

Power Recommended:                        2,500 kW  

 

Job Commitment:     

                    Existing:                            0 jobs

                    New:                                   60 jobs

 

New Jobs/Power Ratio:                      24 jobs/MW

 

New Jobs -

Avg. Wage and Benefits:                   $41,000

 

Capital Investment:                             $6 million 

 

Capital Investment:                             $2.4 million /MW

Per MW

 

Summary:                                             New York Tungsten, LLC is a new joint venture between Buffalo Tungsten and Silver Eagle Technology, Inc.  It will convert tungsten ore and scrap materials into powder. Tungsten metal powder is used in a wide variety of applications such as the production of tungsten carbide tooling, electrical contacts and military applications.  The company has offers to locate in other states.  However, a low-cost hydro allocation can help the company make the decision to build this project in Western New York.  A substantial portion of the company’s operational cost is energy.  The company is also working with the Empire State Development Corporation and Erie County on other economic development incentives.

 

 


 

 


 

APPLICATION SUMMARY

 

Expansion Power - Revitalization

 

Company: Irwin Industrial Tool Company (d/b/a Bernzomatic)

 

Location:                                               Medina

 

County:                                                  Orleans

 

IOU:                                                       National Grid

 

Business Activity:                               Manufacturer of hand-held torches and accessories

 

Project Description:                           The project includes the purchase and installation of new equipment and a packing line used to manufacture hand-held torches and various accessories.

 

Prior Application:                               Yes

 

Existing Allocation:                            400 kW Power for Jobs 

 

Power Request:                                    900 kW

 

Power Recommended:                        750 kW  

 

Job Commitment:

                   Existing:                            213 jobs

                   New:                                    34 jobs

 

New Jobs/Power Ratio:                      45 jobs/MW

 

New Jobs -

Avg. Wage and Benefits:                   $39,000

 

Capital Investment:                             $1.045 million

 

Capital Investment                              $ 1.39 million/MW

Per MW

 Summary:                                            Bernzomatic is a worldwide marketer and manufacturer of a full line of name-brand, hand-held torches and accessories.  A hydro allocation, along with other New York State and local incentives, will allow the company to cancel its announced plans to close and move the plant to Shanghai, China.  A hydro allocation will greatly enhance the competitiveness of Bernzomatic’s facility and allow it to gain a prominent market position and remain in Western New York.

 

 

5.             Economic Development Power Programs –Extension to the Terms of Service and Energy Cost Savings Benefits 

 

The President and Chief Executive Officer submitted the following report:

 

Summary

 

“The Trustees are requested to approve extensions to the terms of service to June 30, 2007 for 19 existing economic development power program customers listed on Exhibit ‘5-A’ and Energy Cost Savings Benefits (‘ECSB’) for 38 customers listed on Exhibit ‘5-B.’  These customers have been recommended to receive such benefits by the Economic Development Power Allocation Board (‘EDPAB’). 

 

Request to Approve Extensions to the Terms of Service for 19 Existing Economic Development Power Program Customers

 

BACKGROUND

 

“The New York Power Authority (‘Authority’) sells electricity to businesses under several State-authorized economic development programs.  These power sales are made through the Economic Development Power Program, the High Load Factor Manufacturer Program, the 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

               

“The customers detailed on Exhibit ‘5-A’ have allocation contracts previously approved by the Trustees that expire on December 31, 2006.  Staff is requesting that the Trustees extend these agreements until June 30, 2007 so these customers may continue to receive the benefits associated with the newly enacted law.  The extensions will help maintain costs and enable the customers to compete more effectively.  In addition, the customers will further secure employment levels in New York State.

 

“EDPAB recommended that the contracts be extended at its meeting on November 27, 2006.

 

Energy Cost Savings Benefits

 

BACKGROUND

 

“Chapter 313 of the Laws of 2005 was signed into law by Governor George E. Pataki on July 26, 2005.  The new law allowed certain Authority power program customers that would be exposed to bill increases as a result of higher market prices before December 31, 2006 to apply for ECSBs.  Under this law, businesses eligible to receive ECSBs are limited to Authority customers currently supplied power under the Economic Development Power, Municipal Distribution Agency and High Load Factor programs.  The ECSB was made available for the period November 1, 2005 through December 31, 2006.  In 2006, a new law (Chapter 645 of the Laws of 2006) included provisions extending these benefits until June 30, 2007.

 

“EDPAB can recommend a partial or complete withdrawal of the ECSB if the company fails to maintain mutually agreed-upon commitments, including jobs, capital investment and power utilization.

 

DISCUSSION

 

“At its meeting of November 27, 2006, EDPAB recommended that the Authority’s Trustees approve the payment of ECSBs to the 38 businesses listed on Exhibit ‘5-B.’  Collectively, these organizations have agreed to retain more than 58,000 jobs in New York State in exchange for these benefits.  The companies will be eligible to receive these benefits until June 30, 2007. 

 

“Staff recommends that the Trustees authorize a withdrawal of monies from the Operating Fund for the payment of the ECSBs, 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 amendments were reviewed by EDPAB and recommendations were made at its meeting on November 27, 2006.

 

FISCAL INFORMATION

 

“Funding of ECSBs for all the companies participating in the program is not expected to exceed $5 million.  Payments will be made from the Operating Fund.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Financial Officer and the Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommend that the Trustees approve extensions to the terms of service to June 30, 2007 for the existing economic development power program customers listed on Exhibit ‘5-A.’  In addition, it is recommended that the Trustees approve the payment of Energy Cost Savings Benefits to the customers listed on Exhibit ‘5-B.’

 

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

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees.  He pointed out that, between last month and this month, all 33 eligible Economic Development Power and 70 eligible Energy Cost Savings Benefits customers had applied and been approved by the Economic Development Power Allocation Board (“EDPAB”) for extended benefits through June 30, 2007.

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

WHEREAS, the Trustees find that staff's review supports an extension of allocations from Authority economic development power programs for 19 existing customers listed on Exhibit “5-A” until June 30, 2007 and that such extension be, and hereby is, approved on the terms set forth in the foregoing report of the President and Chief Executive Officer; and  

 

WHEREAS, the Economic Development Power Allocation Board has recommended that the Authority approve the payment of Energy Cost Savings Benefits to the 38 customers listed on Exhibit “5-B”;

 

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 “5-B” 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 $5 million for all companies participating in the program, including those in Exhibit “5-B,” 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 and 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 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, 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.             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 42 Power for Jobs (‘PFJ’) customers as listed in Exhibit ‘6-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 completed review of 108.

 

DISCUSSION

 

“At its meeting on November 27, 2006, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 42 businesses listed in Exhibit ‘6-A.’  Collectively, these organizations have agreed to retain more than 42,000 jobs in New York State in exchange for rebates.  The rebate program will be in effect until June 30, 2007, the program’s sunset. 

 

“The Trustees are requested to approve the payment and funding of rebates for the companies listed in Exhibit ‘6-A’ in a total amount currently not expected to exceed $2 million.  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 Exhibits in the future.

 

FISCAL INFORMATION

 

“Funding of rebates for the companies listed on Exhibit ‘6-A’ is not expected to exceed $2 million.  Payments will be made from the Operating Fund.  To date, the Trustees have approved $58 million in rebates.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Financial Officer and the Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommend that the Trustees approve the payment of electricity savings reimbursements to the Power for Jobs customers listed in Exhibit ‘6-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.  In response to questions from Trustee Cusack, Mr. Pasquale said that the allocation reductions for companies not in compliance with their job numbers were about the same as they had been in previous years and that all customers whose allocations were reduced receive a letter explaining how they may invoke the reconsideration process.  Chairman McCullough said that many companies that had submitted reconsideration requests had their allocations restored either in whole or in part, with Mr. Pasquale adding that 48 companies’ allocations had been fully restored, and 35 half restored following the reconsideration process.

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 “6-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 “6-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 $2 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 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 and 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 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, 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.

 


 


 

7.             Power for Jobs Program – Extended Benefits - 2007

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve extended benefits for 401 Power for Jobs (‘PFJ’) customers as listed in Exhibits ‘7-A’ and ‘7-B’ until June 30, 2007 to reflect recently enacted changes in the law.  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.

 

“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. 

 

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

 

DISCUSSION

 

“At its meeting on November 27, 2006, EDPAB recommended that the Authority’s Trustees approve contract extensions to the 272 businesses listed in Exhibit ‘7-A.’  Exhibit ‘7-B’ lists those businesses that EDPAB is recommending to continue to receive electricity savings reimbursements.  Collectively, these organizations have agreed to retain more than 207,000 jobs in New York State in exchange for the contract extensions or rebates.  The contracts will be extended and the rebate program will be in effect until June 30, 2007, the program’s newly enacted sunset date.  The power will be wheeled by the investor-owned utilities as indicated in the Exhibits. 

               

FISCAL INFORMATION

 

“The cost of rebates to these customers will not be known until 2007.  Payments will be made from the Operating Fund.  To date, the Trustees have approved $58.3 million in rebates.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Financial Officer and the Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommend that the Trustees approve the contract extensions for, and the extension of eligibility to receive electricity savings reimbursements to, the Power for Jobs customers listed in Exhibits ‘7-A’ and ‘7-B.’

 

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

 

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees.  Chairman McCullough said that prior to the EDPAB meeting held on November 27th, Authority staff had done a terrific job in a very compressed time period of notifying all 500+ PFJ customers of their options for contract extension or electricity rate reimbursement for January 1, 2007 through June 30, 2007.  He said that the response rate for the customers was approximately 99%.  President Carey said that the Marketing, Legal, Corporate Secretary’s Office, Reproduction and Mailroom staff had all done their part in making this possible, right up through close of business on Thanksgiving eve.  He said that Marketing staff will be talking to the 6 customers that did not respond in time to be considered for contract extensions or reimbursements beginning on January 1, 2007, adding that over the past year, 42 PFJ customers had left the program, largely because of their need for long-term energy contracts.  President Carey said that the Commission on the Future of Power Programs for Economic Development, which is meeting today in New York City, should be releasing its recommendations for restoring the viability of the Authority’s economic development power programs soon.  Responding to questions from Trustee Seymour, Mr. Pasquale said that the reimbursements for the January 1, 2007 through June 30, 2007 period are projected to be between $20 million and $25 million.  He said that $58 million was budgeted for the reimbursements for 2006, but that the amount spent on reimbursements in 2006 will be around $40 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 contract extensions and electricity savings reimbursements to the Power for Jobs customers listed in Exhibits “7-A” and “7-B”;

 

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 “7-A,” and the extension of eligibility to receive electricity savings reimbursements to the companies listed in Exhibit “7-B,” and be it further

 

RESOLVED, That the Senior Vice President – Marketing and 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 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, 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.


 



 

 

 


 


 

8.             Authorization of Increase in Maximum Amount of  Series 1 Commercial Paper Notes and Authorization to Use Operating Funds to Retire Authority Debt  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to authorize (1) an increase in the maximum amount of the Series 1 Commercial Paper Notes (the ‘CP-1 Notes’) to $400 million; (2) amendments to the associated commercial paper dealer agreements  increasing the maximum aggregate principal amount of the CP-1 Notes that may be marketed to $400 million and (3) the use of up to $100 million of additional Operating Fund monies through 2007 for the purpose of the payment, purchase, defeasance and/or redemption of Revenue Bonds, Subordinate Revenue Bonds, Commercial Paper Notes and Extendible Municipal Commercial Paper Notes.

 

BACKGROUND

 

                “The Authority’s Energy Services Program (‘Program’) recently achieved a new milestone in that total investments in energy efficiency and other clean energy initiatives have now surpassed $1 billion in the nearly 20 years of the Program’s existence.  The Program is responsible for reducing oil use by 1.8 million barrels per year and avoiding annual greenhouse gas emissions by more than 750,000 tons.  Customer energy bill savings have been reduced by more than $95 million per year and peak loads have been cut by more than 200 MW.  This tremendously successful Program has been financed substantially through the issuance of CP-1 Notes, which are repaid by participants over periods that are generally up to 10 years.

 

“Currently, the maximum aggregate amount of CP-1 Notes that may be issued is $350 million.  In order to allow for the continued growth and funding of the Program, the maximum aggregate amount of CP-1 Notes must be increased.  Based on estimates provided by staff, the maximum authorized amount should be increased to $400 million.  Additionally, in order to facilitate the marketing of the CP-1 Notes, the Authority’s dealer agreements relating to the CP-1 Notes need to be amended to increase the maximum aggregate principal amount of the CP-1 Notes that may be marketed to $400 million and to confirm RBC Dain Rauscher Inc. as the successor dealer to Artemis Capital Group, Inc. following its acquisition by Dain Rauscher Group.  The Authority’s other dealer for the CP-1 Notes is Lehman Brothers, Inc.

 

“The Trustees are also requested to expand the authorizations previously granted by the Trustees in February and October 1998, July 2000, September 2001, February 2003 and January and November 2004 that allowed for the use of Operating Fund monies for the payment, purchase and/or defeasance of Revenue Bonds, Subordinate Revenue Bonds, Commercial Paper Notes and Extendible Municipal Commercial Paper Notes. 

 

“To date, all but approximately $20 million of the authorizations have been used.  These prior authorizations have enabled the Authority to better align its cost structure for the rigors of the competitive market.  While these efforts are largely concluded, there may be other opportunities to provide savings for Authority customers and/or for the Authority to continue to control its cost structure.  Accordingly, the Trustees are requested to authorize the use of up to an additional $100 million of Operating Fund monies through 2007 for the payment, purchase, defeasance and/or redemption of debt as specified above and to extend the prior authorizations through 2007.  Before any withdrawal is made for such purpose, Authority staff would determine that the funds to be withdrawn are not needed to pay for operating expenses, debt service or any of the other purposes specified in Section 503 (1)(a)-(c) of  the Authority’s General Resolution Authorizing Revenue Obligations, as amended and would obtain approval of such withdrawal from the President and Chief Executive Office and the Chairman.

 

FISCAL INFORMATION

 

                “Funding for the Energy Services CP-1 Notes is provided for in the Authority’s Capital Budget and will be recovered from the Program participants through loan repayments.  There is no cost impact for the use of Operating Funds to retire debt.

 

RECOMMENDATION

 

                “The Treasurer recommends that the Trustees authorize (1) an increase in the maximum amount of Series 1 Commercial Paper Notes that may be issued to $400 million; (2) the amendment of the associated commercial paper dealer agreements to increase the maximum aggregate principal amount of such Notes that may be marketed to $400 million; (3) confirmation of RBC Dain Rauscher Inc. as the successor dealer to Artemis Capital Group, Inc. and (4) the use of up to $100 million of additional Operating Fund monies through 2007 for the payment, purchase, defeasance and/or redemption of Revenue Bonds, Subordinate Revenue Bonds, Commercial Paper Notes and Extendible Municipal Commercial Paper Notes, and extend through 2007 the specified prior authorizations for such use of Operating Fund monies. 

 

                “The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Vice President – Finance and I concur in the recommendation.”

 

Mr. Brady presented the highlights of staff’s recommendations to the Trustees.  In response to questions from Trustee Seymour, Mr. Brady said that the commercial paper notes serve as a revolving fund for the Statewide Energy Services Program (“ESP”) and that, to date, the Authority has experienced a 100% collection rate on the loans made to ESP participants.

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

RESOLVED, That the Trustees hereby adopt the Supplemental Resolution supplementing the Commercial Paper Note Resolution, attached hereto as Exhibit “8-A,” which authorizes an increase in the maximum amount of Series 1 Commercial Paper Notes that may be issued to $400 million and confirms the appointment of RBC Dain Rauscher Inc. as the successor to Artemis Capital Group, Inc. as a Commercial Paper Dealer; and be it further

RESOLVED, That the Executive Vice President and Chief Financial Officer, the Treasurer and Deputy Treasurer be, and each of them hereby is, authorized to execute such amendments to the Authority’s Dealer Agreements  for the Series 1 Commercial Paper Notes as such officer deems necessary or advisable to effectuate the intent of the foregoing resolution subject to the approval of the form thereof by the Executive Vice President and General Counsel; and be it further

RESOLVED, That the Trustees hereby authorize the use of up to $100 million in Operating Fund monies through 2007 for the payment, purchase, defeasance and/or redemption of Revenue Bonds, Subordinate Revenue Bonds, Commercial Paper Notes and Extendible Municipal Commercial Paper Notes, and such authorization shall be in addition to the authorizations set forth in the resolutions adopted by the Trustees in February and October 1998, July 2000, September 2001, February 2003, and January and November 2004, with such authorizations hereby being extended through 2007; and be it further

RESOLVED, That as a prerequisite to any withdrawal pursuant to the foregoing resolution, the Treasurer shall obtain the approval of such withdrawal from the Chairman and the President and Chief Executive Officer and shall certify that such 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 be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer, the Executive Vice President and General Counsel, the Vice President – Finance, the Treasurer and the Deputy Treasurer are, and each of them hereby is, authorized to do and perform or cause to be done and performed in the name and on behalf of the Authority, all other acts to execute and deliver or cause to be executed and delivered all other notices, requests, directions, consents, approvals, orders, applications, agreements, certificates and further documents or other communications of any kind under the corporate seal of the Authority or otherwise as he, she or they may deem necessary, advisable or appropriate to effect the intent of the foregoing resolutions, subject to the approval as to the form of such certificates, agreements and other documents by the Executive Vice President and General Counsel.


 

POWER AUTHORITY OF THE STATE OF NEW YORK

FIFTH

SUPPLEMENTAL RESOLUTION

amending and supplementing a resolution

of the authority authorizing commercial

paper notes adopted November 25, 1997

(as supplemented by supplemental resolutions

adopted February 24, 1998, January 26, 1999, December 14, 1999 and February 26, 2002)

Adopted on November 28, 2006

SUPPLEMENTAL RESOLUTION

WHEREAS, on November 25, 1997, the Power Authority of the State of New York (the “Authority”) adopted an Amended and Restated Resolution, and amended and supplemented such resolution on February 24, 1998, January 26, 1999, December 14, 1999 and February 26, 2002 (as amended and supplemented, the “Resolution”);

WHEREAS, the Authority has determined to increase the aggregate principal amount of the Series 1 Notes that may be outstanding under the Resolution at any time;

WHEREAS, the Authority has also determined to confirm the appointment of RBC Dain Rauscher Inc. (as successor entity to Artemis Capital Group, Inc.) as a Dealer for the Series 1 Notes;

WHEREAS, pursuant to Section 602 of the Resolution the Authority may amend or modify the Resolution at any time by a supplemental resolution, without notice to or the consent of any Holder, to increase the aggregate principal amount of Commercial Paper Notes that may be outstanding thereunder at any time;

WHEREAS, in order to accomplish the foregoing the Authority has determined to amend the Resolution in the manner herein provided;

BE IT RESOLVED by the Power Authority of the State of New York that the Resolution is hereby amended as follows:

ARTICLE I

DEFINITIONS

Section 101.     Definitions.  (A)   Except as provided in paragraph (B) of this Section 101, all terms which are defined in the Resolution, including by cross-reference, or in the General Resolution, shall have the same meanings in this Supplemental Resolution.

(B)       In this Supplemental Resolution (herein referred to as the “Supplemental Resolution”), unless a different meaning clearly appears from the context:

(1)        “General Resolution” means the Authority’s General Resolution Authorizing Revenue Obligations adopted on February 24, 1998, as supplemented and amended.

(2)        “Series 1 Notes” means the Commercial Paper Notes, Series 1 authorized by Section 301 of the Resolution. 

 

ARTICLE II

AMENDMENTS TO RESOLUTION

Section 201.     Section 301 of the Resolution is amended and supplemented so that the sixth sentence of such section reads as follows (strikeout indicates deletion; bolding indicates new language):

Subject to Section 602, the principal amount of all Series 1 Notes outstanding at any time shall not exceed $350,000,000 $400,000,000, the principal amount of all Series 2 Notes outstanding at any time shall not exceed $450,000,000, the principal amount of all Series 3 Notes outstanding at any time shall not exceed $350,000,000, and the principal amount of all Series 4 Notes outstanding at any time shall not exceed $220,000,000.

Section 202.  Section 310 is amended so that the first sentence of such section reads as follows (strikeout indicates deletion; bolding indicates new language):

The appointment of RBC Dain Rauscher Inc. (as successor entity to Artemis Capital Group, Inc.) and Lehman Brothers Inc. as Dealers for the Series 1 Notes is hereby ratified and confirmed.

ARTICLE III

MISCELLANEOUS

Section 301.     Effective Date.  This Supplemental Resolution shall be in full force and effect upon its adoption.

 

 

9.          Contribution to the County of Schoharie Office of Emergency Management for Costs Associated with the Implementation of Emergency Preparedness Measures

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve a multiyear contribution to the County of Schoharie Office of Emergency Management (the ‘County’), the purpose of which is to help offset costs associated with the implementation of emergency preparedness measures in the Schoharie Valley.

 

BACKGROUND

 

“In the fall of 2005, the New York City Department of Environmental Protection (‘NYC DEP’) and the New York City Bureau of Water Supply advised the public regarding structural problems at the 80-year old Gilboa Dam, which is located high in the Schoharie Valley and upstream from the Authority’s Blenheim-Gilboa Pumped Storage Power Project (‘B-G’).  NYC DEP has announced and has started to implement a Gilboa Dam interim stabilization project to bring the dam up to New York State standards for existing dams. 

 

“The County advises that NYC DEP is in the process of installing an outdoor warning siren system (‘System’) to warn downstream residents and others, including the Authority’s B-G facility, of potential danger in the event of flooding associated with the failure or breach of the Gilboa Dam.  This system is scheduled to be completed and operating by January 2007.  NYC DEP announced its commitment to pay the full cost of $370,000 to the County for the installation of the system.  NYC DEP further announced that it will reimburse the County for most of its expenses related to emergency planning for the Gilboa Dam.

 

“By letter of October 19, 2006, the Schoharie County Board of Supervisors has requested financial assistance for a five-year period from the Authority for the implementation of emergency preparedness measures along the Schoharie Creek.  The total amount of the requested assistance for the five-year period is $31,000.

 

DISCUSSION

 

“In conjunction with the construction and operation of B-G, the Authority has been a good neighbor to, and has had a good working relationship with, the County by providing financial assistance for emergency planning and response matters.  The County has requested the Authority to continue that financial assistance for emergency planning matters by contributing  the total sum of $31,000 to be paid over a five-year period as follows:  Year 1: $5,500; Year 2: $5,700; Year 3: $6,200; Year 4: $6,600 and Year 5: $7,000.

 

FISCAL INFORMATION

 

“Payment will be made from the Operating Fund.

 

RECOMMENDATION

 

                “The Senior Vice President and Chief Engineer – Power Generation and the Senior Vice President – Public and Governmental Affairs recommend that the Trustees authorize the requested expenditure.

 

                “The Executive Vice President and General Counsel, the Executive Vice President – Corporate Services and Administration, the Executive Vice President and Chief Financial Officer and I concur in the recommendation.”

 

Mr. Vattimo presented the highlights of staff’s recommendations to the Trustees.  Chairman McCullough said that the contribution would be made directly to the County of Schoharie.

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

RESOLVED, That the Authority hereby approves a multiyear commitment of up to a total of $31,000 to the County of Schoharie Office of Emergency Management to be used to help offset costs associated with the implementation of emergency preparedness measures, as set forth and for the reasons stated 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, the Executive Vice President and General Counsel 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, 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.

 
 

10.          Motion to Conduct an Executive Session

               

“Mr. Chairman, I move that the Authority conduct an Executive Session for the purpose of discussing matters relating to litigation and potential litigation.  Upon motion moved and seconded, an Executive Session was held.

 


 

11.          Motion to Resume Meeting in Open Session

“Mr. Chairman, I move to resume the meeting in Open Session.”  Upon motion moved and seconded, the meeting resumed in Open Session.

 

 

12.          Authorization to Enter Into Negotiations to Execute Long-Term Supply Agreements for Electric Transmission and Capacity  

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize entering into negotiations for the execution of long-term supply agreements with Hudson Transmission Partners, LLC (‘Hudson’) and FPL Energy, LLC (‘FPLE’), which have been identified by the Authority as the winning bidders in response to the Authority’s Request for Proposals (‘RFP’) for Long-Term Supply of In-City Unforced Capacity[1] and Optional Energy issued on March 11, 2005.  These supply agreements are intended to serve the long-term requirements of the Authority’s governmental customers in New York City (‘NYC Governmental Customers’).

“The Authority would secure these long-term supplies through the transmission rights associated with Hudson’s proposed transmission line extending from Bergen County, New Jersey, to Con Edison’s West 49th Street substation and the Unforced Capacity (‘UCAP’) associated with FPLE ownership of capacity produced at the existing Red Oak combined cycle power plant in Sayreville, New Jersey.  In accordance with the bidders’ proposals, the Authority will acquire 500 MW of qualifying locational capacity in NYISO’s Zone J, which will facilitate the purchase of favorably priced energy from the neighboring control area, PJM Interconnection (‘PJM’), for resale into Zone J, effectively lowering the net cost of this capacity purchase for the NYC Governmental Customers..

 

BACKGROUND

 

“The Authority has served the NYC Governmental Customers since the mid-1970s, and in 2005 executed new Long-Term Agreements (‘LTAs’) to continue this supply relationship through 2017.  The Authority uses its own generation resources plus market purchases to supply these customers.  At present and until at least February 2009 (when the Poletti unit may be retired), the In-City UCAP requirements for the NYC Governmental Customers will be fully met using Authority-owned assets and market purchases, including the recently completed 500 MW plant at the Poletti site.

 

“In accordance with the LTAs, the Authority identified a need to acquire capacity starting as early as the retirement of the Poletti Power Project in order to meet the locational capacity requirement of those customers under NYISO’s rules.

 

“The Authority’s March 11, 2005 RFP requested long-term supplies of up to 500 MW of In-City UCAP and optional energy to be supplied as early as February 1, 2008, preferably for a term lasting through December 31, 2017.  Under the RFP, capacity could take the form of physical power plants located within New York City (i.e., Zone J) or Unforced Delivery Rights (‘UDRs’) supplied through firm transmission capacity from other markets connected to NYISO Zone J (New York City) so as to meet the NYISO criteria for Zone J UCAP. 

 

“The Authority issued the RFP and evaluated the bids in coordination with several of its largest NYC Governmental Customers (the City of New York, the Metropolitan Transportation Authority, the New York City Housing Authority and the Port Authority of New York and New Jersey), a process required by the LTAs.  

 

“The Authority received bids from 14 prospective suppliers containing more than 25 separate bid options, including proposals for the purchase of capacity only and for the purchase of capacity with must-take energy, capacity with optional energy under tolling arrangements with proposed and existing generation from both In-City and neighboring markets, and transmission bids from neighboring markets to Zone J.

DISCUSSION

 

“The evaluation focused on three finalist proposals: a capacity-only bid from new gas-fired generation in New York City; a bid for capacity from new gas-fired generation in New Jersey with transmission to New York City, plus optional energy under a tolling agreement; and a joint proposal (Hudson and FPLE) for new transmission from New Jersey to West 49th Street, Manhattan, plus capacity from existing generation in PJM.  Under the third proposal, the Authority would have access to purchases of energy from the PJM market.  The finalist bidders provided 10- and 20-year pricing.  The capacity-only bid provided options for development of 200, 400 or 500 MW nameplate capacity.  The transmission proposal by Hudson provided an option to take 500 MW or the full 660 MW capacity of the proposed line, along with the associated right to import energy over the facility.

“Economic evaluation of the bids took into account associated transmission costs as well as the potential value of optional energy purchases for sale into the Zone J market.  In the case of the tolling proposal, energy would come from the bidder’s proposed plant in Linden, New Jersey, and in the case of the transmission proposal it would come from energy market purchases from the PJM Interconnection system.

In the exercise of due diligence, the Authority used an economic consultant in addition to numerous subject matter experts to fully examine the proposals, including outside counsel, financial and engineering consultants.

 

“In addition, the NYC Governmental Customers exercised their own due diligence by retaining consultants to assist the Authority in this selection process.  

 

Selection Process

 

“The decision to recommend Hudson and FPLE, for transmission rights and capacity was reached based on the results of a structured selection process based on RFP criteria, the assessment of the subject matter experts, the input of the NYC Governmental Customers and evaluation by Authority staff and senior management with relevant expertise.  The RFP criteria include, among other factors, project economics, schedule risk, overall project completion risk, permitting and licensing factors, financing risks and other factors, including the diversification of the region’s energy and fuel supply.  The original economic (price) ranking served as the initial basis for screening the bid proposals.  The proposals were also screened based on minimum requirements of the RFP criteria, resulting in three specific proposals that were given detailed evaluation.  In this evaluation, each of the review criteria was given a percentage weight.  Leading proposals were evaluated and scored based on the reports of the subject matter experts, as well as the technical expertise and judgment of Authority senior management participating in the decision process.  The combined proposal from Hudson and FPLE scored the highest and best meets the objectives of the Authority and the NYC Governmental Customers.  The evaluation matrix used in this scoring process was provided to the Trustees for their review.

 

“Based on its analyses, Authority staff believes that Hudson’s proposal to build a transmission line from the PJM Interconnection into New York City will yield strategic value to the Authority’s customers and the New York City regional economy, as well as become part of a cost-effective method of obtaining long-term capacity supply.  The transmission line that Hudson will build will be a long-term asset to the region, having a useful life of more than 40 years.  As a source of energy from the PJM Interconnection market, it will add fuel diversity to the New York City region and contribute to a reduction in Zone J energy prices.

 

“The terms of the proposal from Hudson provide for its assumption of $40 million in transmission upgrade costs in New Jersey to allow UCAP withdrawal.  The contract price will be higher or lower depending on the final cost of these upgrades.  It is the opinion of the subject matter expert engaged to examine this that the cost will be lower than $40 million. 

 

“The proposed supply arrangement will require the Authority to enter into transactions, for the first time, within the PJM system.  The Authority would expect to take ‘Point to Point’ service under PJM’s tariff to convey the UCAP purchased from FPLE at the Red Oak combined cycle power plant in Sayreville, New Jersey, to the terminus of Hudson’s transmission line in Bergen, New Jersey.  The anticipated cost of this service was included in the bid evaluation process.  There may be additional assessments under PJM’s Regional Transmission Expansion Plan (‘RTEP’) and other possible settlements and regulatory initiatives that may affect the PJM market structure.  There will also be costs associated with maintaining status as a market participant in PJM.  In the evaluation process, these exposures were assumed to apply to all New Jersey-based supply options that would require use of the PJM system.

 

“Hudson has offered the option of purchasing delivery rights in the amount of 500 MW or the full 660 MW that they intend to develop.  While the bids were evaluated on the basis of the 500 MW offerings, the lower unit cost of Hudson’s 660 MW option, along with the higher volume of economic energy imports, would result in a more attractive net UCAP cost.  Accordingly, the recommendation contained herein is to purchase the full 660 MW from Hudson, and purchase UCAP from FPLE in an amount that will result in the delivery of 500 MW into NYISO Zone J.  Allowance for losses and transmission line outages, as projected by Hudson, would increase this amount to approximately 520 MW. 

 

“The NYC Governmental Customers have requested that the Authority proceed with negotiating the necessary contracts with Hudson and FPLE and have provided the Authority with their concurrence that the Authority should proceed with final contract negotiations.  In the event that the terms of current LTAs end before the terms of the supply agreements with Hudson and FPLE, the NYC Governmental Customers have agreed to continue to purchase from the Authority the products and services associated with these supply agreements and to pay the Authority all associated costs, on a wholesale basis, to the conclusion of their terms.

 

“At the conclusion of these negotiations and on receipt of the NYC Governmental Customers’ concurrence with the final contract terms, along with any other required implementation agreements with the Customers, the Trustees will be presented with final versions of the supply agreements and NYC Governmental Customer agreements for their approval prior to their execution. 

“Credit protection provisions in the proposed agreements would conform to the requirements recommended by the Vice President, Chief Risk Officer – Energy Risk Assessment and Control, except for any variations deemed acceptable.

 

ENVIRONMENTAL DISCUSSION

 

“With respect to Hudson, where facilities required to obtain the UDRs will not come from existing assets, any contract negotiated by Authority staff pursuant to this Trustee authorization will, in order for the Authority to be in compliance with its obligations under the State Environmental Quality Review Act (‘SEQRA’), be executed after Hudson’s projects have been the subject of the requisite environmental reviews, including the issuance of the appropriate findings and permits.  Hudson shall provide the Authority with the findings and permits or other authorizations to construct new transmission or generating facilities, which the Authority may use in completing its SEQRA evaluations and process (21 NYCRR § 461.13(b)).  The Trustees are requested to authorize the completion of the Authority’s finding statement under SEQRA by the Vice President – Environmental, Health and Safety who will review and consider any final Environmental Impact Statement prepared for any of the facilities and, with the concurrence of the Executive Vice President and General Counsel, determine that the Authority’s SEQRA responsibilities have been fulfilled.  

 

FISCAL INFORMATION

 

“All costs associated with these purchases will be recovered under the terms of the Long-Term Agreements with the NYC Governmental Customers.

 

“Bid prices and the estimated payments to Hudson and PPLE are contained in a separate Term Sheet, which has been provided to the Trustees.

 

RECOMMENDATION

 

“It is recommended that the Senior Vice President – Energy Resource Management and the Director – Power Resource Planning and Acquisition be authorized to enter into negotiations for purchase agreements with Hudson Transmission Partners, LLC and FPL Energy, LLC, having such terms and conditions deemed necessary or advisable, based on the Long-Term Agreements with the New York City Governmental Customers and those customers’ concurrence with those agreements.

“At the conclusion of these negotiations, and with the agreement of the New York City Governmental Customers, the Trustees will be presented with final versions of the agreements with Hudson Transmission Partners, LLC and FPL Energy, LLC, and the New York City Governmental Customers, for their approval prior to their execution. 

“The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President, Marketing and Economic Development, the Senior Vice President and Chief Engineer, the Senior Vice President – Transmission, the Vice President, Chief Risk Officer – Energy Risk Assessment and Control and I concur in the recommendation.”

 

Mr. Brandeis presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman McCullough, Mr. Brandeis said that the contract negotiation process would probably take three to six months.  President Carey said that the Authority had engaged in an open and transparent process in soliciting and evaluating these proposals, working hand-in-hand with its major SENY customers.  Bidders not selected will have an opportunity to meet with the selection team who will explain why they were not selected.

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

WHEREAS, the Authority has contractual obligations to serve various governmental customers in New York City; and

WHEREAS, the source of capacity to serve the needs of these customers includes the Charles Poletti Power Project and such unit is scheduled to close no later than January 1, 2010;

NOW, THEREFORE, BE IT RESOLVED, That the Senior Vice President – Energy Resource Management and the Director – Power Resource Planning and Acquisition are hereby authorized on behalf of the Authority to negotiate agreements between the Authority and Hudson Transmission Partners, LLC and FPL Energy, LLC,  as described in the foregoing report of the President and Chief Executive Officer, including, but not limited to (a) Firm Transmission Capacity Purchase Agreement (“FTCPA”), Master Power Purchase and Sale Agreements (“MPPSAs”), ISDA Master Agreements and any transactions, schedules or confirmations related to such FTCPA’s, MPPSAs or ISDA Master Agreements; (b) any transactions, schedules, amendments or confirmations related to any existing FTCPAs, MPPSAs or ISDA Master Agreements between the Authority and any of the above-described entities; (c) as required, memoranda of understanding relating to SEQRA or (d) any other alternative form of agreement (“Other Alternative Agreements”) with any of the above-described entities, having such terms and conditions as are consistent with the Term Sheet, discussed in the foregoing report of the President and Chief Executive Officer, and as are deemed necessary or advisable by the President and Chief Executive Officer to effectuate the long-term arrangements to provide energy or capacity supplies for the Authority as discussed in the foregoing report of the President and Chief Executive Officer, with the execution of such FTCPAs, MPPSAs,  ISDA Master Agreements, agreements, transactions, amendments, schedules, memoranda of understanding, and confirmations and Other Alternative Agreements being subject to subsequent approval by the Trustees; and be it further

RESOLVED, That the Vice President – Environmental, Health and Safety is authorized to review and consider the final Environmental Impact Statements prepared by the authorities having jurisdiction, pursuant to the State Environmental Quality Review Act, over those projects not yet constructed that are the subject of this Resolution, and to make the findings required by Section 461.13(b) of the Authority’s SEQRA regulations, subject to the concurrence of the Executive Vice President and General Counsel; and be it further

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer and the Executive Vice President and General Counsel are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, 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.


 

13.          Next Meeting

The next meeting of the Trustees will be held on Tuesday, December 19, 2006, at 11:00 a.m., at the Clarence D. Rappleyea Building, White Plains, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.  

Closing

 

On motion duly made and seconded, the meeting was adjourned by the Chairman at approximately
12:00 noon.

 

 

 

 

Anne B. Cahill

Corporate Secretary

 

 


 

[1]   A load serving entity, such as the Authority, must demonstrate that it has acquired sufficient generation capacity to serve its load under the rules of the New York Independent System Operator (“NYISO”).  UCAP is a capacity measure that accounts for required reserves and forced outage rates.  NYISO rules further require that a proportion of the load within the five boroughs of New York City be served by UCAP that is recognized as being located within that locality (“In-City UCAP”).