MINUTES OF THE REGULAR MEETING OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

December 18, 2007

 

Table of Contents

 

            Subject                                                                                                                 

 

            Introduction                                                                                                          

1.              Minutes of the Regular Meeting held on November 27, 2007                        

2.              Financial Reports for the Eleven Months Ended November 30, 2007, Exhibit  ‘2-A’

3.              Report from the President and Chief Executive Officer                     

4.              Power for Jobs Program – Extended Benefits, Exhibit    4-A’
Resolution

5.              Allocation of Hydropower , Exhibits,   ‘5-A’;  5-A1’ ,'5-A2', ‘5-A3
Resolution                                                                                                                                                

6.              Productivity Improvement Request Reductions, Exhibit  ‘6-A’
Resolution

7.              Economic Development Plan - Use of Net Revenues Produced  by Sale of Expansion Power               
Resolution

8.              Increase in New York City Governmental Customer Rates -  Notice of Adoption, Exhibit  ‘8-A’ – ‘8-D’ 
Resolution

9.              Increase in Westchester County Governmental Customer Rates   - Notice of Adoption, Exhibits   ‘9-A’ – ‘9-C’
Resolution

10.           2008 Operation and Maintenance, Capital, Energy Services and Fuel Budgets, Exhibit  ‘10-A’
Resolution

11.           Approved Budget and Financial Plan Information Pursuant to  Regulations of the Office of the State Comptroller, Exhibits  ‘11-A’ – ‘11-B’ 
Resolution

12.           Compliance Requirements - Critical Cyber Security – Capital Expenditure Authorization  
Resolution

13.           Procurement (Services) and Other ContractsBusiness Units and Facilities - Awards, Exhbit  ‘13-A’ 
Resolution

14.           Procurement (Services) and Other Contracts - Business Units and Facilities - Extensions, Approval of Additional Funding and  Increases in Compensation Ceiling, Exhibit,  ‘14-A’ 
Resolution

15.           Employees’ Savings Plan - Amendments to Plan   
Resolution

16.           2008 Revolving Credit Agreement                                                  
Resolution

17.           Motion to Conduct an Executive Session                                                      

18.           Motion to Resume Meeting in Open Session                                         

19.           Niagara-Adirondack Tie Line – Acquisition of Property, Exhibits  19-A1  ’19-A2’ Resolution                                                                                                                                                

20.           Voluntary Contributions to the State Treasury                                 
Resolution

21.           Other Business                                                                                               

22.           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, 123 Main Street, White Plains, NY at 11:00 a.m.

 

The following Members of the Board were present at the following locations:

                                Frank S. McCullough, Jr., Chairman (White Plains, NY)

                                D. Patrick Curley, Trustee (White Plains, NY)

                                James A. Besha, Sr., Trustee (White Plains, NY)

                                Robert E. Moses, Trustee (White Plains, NY)

                                Thomas W. Scozzafava, Trustee (White Plains, NY)

                                Elise M. Cusack, Trustee (Lewiston, NY) – was unable to participate due to technical difficulties

                               

                                Michael J. Townsend, Vice Chairman – excused

 

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Roger B. Kelley                                    President and Chief Executive Officer

Thomas J. Kelly                                    Executive Vice President, General Counsel and Chief of Staff

Joseph Del Sindaco                             Executive Vice President and Chief Financial Officer

Gil C. Quiniones                                   Executive Vice President – Energy Marketing and Corporate Affairs

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

Steven J. DeCarlo                                 Senior Vice President – Transmission

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

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

James H. Yates                                     Senior Vice President – Marketing and Economic Development

Arnold M. Bellis                                   Vice President and Controller

John M. Hoff                                        Vice President – Procurement and Real Estate

Donald A. Russak                                Vice President – Finance

William V. Slade                                   Vice President – Environment, Health and Safety

Thomas Warmath                                Vice President and Chief Risk Officer

Thomas P. Antenucci                          Vice President – Project Management

Joseph J. Carline                                  Assistant General Counsel – Power and Transmission

Daniel Wiese                                        Inspector General and Vice President – Corporate Security

Brian C. McElroy                                  Treasurer – Corporate Finance

Anne B. Cahill                                      Corporate Secretary

Angela D. Graves                                 Deputy Corporate Secretary

Dennis T. Eccleston                            Chief Information Officer

Paul F. Finnegan                                  Executive Director – Public and Governmental Affairs

Thomas A. Davis                                 Director – Financial Planning

Joan Tursi                                             Director – Business Services

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

                                                                    Cooperative Marketing

Michael A. Saltzman                            Director – Media Relations

Marilyn J. Brown                                  Manager – Market Pricing Analysis

Daniel J. Cappiello                               Manager – Performance Planning

Alice T. Conway                                  Senior Benefits Administrator

Mary Jean Frank                                  Associate Corporate Secretary
Lorna M. Johnson                               Assistant Corporate Secretary
Jack Murphy                                         Temporary Public Relations Counsel

Oksana U. Karaczewsky                     Senior Procurement Compliance Coordinator


 

Mike Schneider                                    Contractor
Chris Isca              Contractor

 


 

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

 


 

                Introduction

 

                Chairman Frank McCullough said that the Trustees’ Meeting was not being webcast in real time due to technical difficulties, but that a quorum was present at the meeting, since five of the seven Trustees were in the White Plains Office.


 

1.               Approval of the Minutes

 

                The Minutes of the Regular Meeting of November 27, 2007 were unanimously adopted.              


 

2.               Financial Reports for the Eleven Months Ended November 30, 2007

                        Mr. Bellis presented an overview of the reports for the Trustees.

                                     


 

3.               Report from the President and Chief Executive Officer

 

                President Roger Kelley apologized for the Authority’s internet difficulties that were interfering with real-time webcasting.  He extended his wishes for happy holidays to the Trustees and all Authority staff, saying that it has been an eventful year and that he wanted to thank everyone for their efforts.

                According to President Kelley, the Authority’s proposed overall 2008 budget had been developed through meetings with the business unit heads and review of the operations and maintenance (“O&M”), capital, energy services and fuels budgets.  He said that the 2008 proposed O&M, energy services and fuels budgets were at slightly higher levels than in 2007, but that the 2008 proposed capital budget was 74% less than the 2007 capital budget, primarily due to recognition of the Niagara relicensing settlement agreements in the 2007 budget.

                President Kelley distributed the highlights of the Authority’s new business plan to the Trustees, saying that the six strategic goals developed from the Authority’s mission statement were in turn linked to objectives added by the business unit heads that would drive their departments’ deliverables for 2008.  He said that this was the first time the Authority’s strategic plan was not a stand-alone document, adding that employee performance documents were also being streamlined in order to enhance the performance management process. 

                Updating the status of Request for Proposals #5 for 500 MW of capacity for New York City, President Kelley said that the bids would be opened on December 20th and that it was anticipated that staff would make its recommendation to the Trustees at their April 2008 meeting. 

                President Kelley said that the New York Independent System Operator’s recently released reliability needs assessment report stated that the State’s electricity resources were expected to be adequate through 2011, but that the additional capacity needs projected for the Southeastern New York region beginning in 2012 would become acute if additional resources are not marshaled by 2017.  President Kelley said that the Authority’s potential contribution to these needed additional resources include the extra capacity sought under RFP #5, possible construction of a new power plant and enhancement of the Authority’s transmission facilities. 

                On December 10th, the Governor’s Energy and Environmental Collaborative met in Albany.  President Kelley said that the Authority is in good shape to assist the State in meeting the Governor’s 15 by 15 goals.  He said that the Authority is expected to spend upwards of $120 million in 2007 on energy efficiency measures for its government customers, adding that Mr. Gil Quiniones and Mr. Angelo Esposito had done a good job in exceeding previous projections for 2007.  President Kelley said that it is anticipated that an additional $150 million will be spent on energy efficiency projects in 2008, with expenditures through 2015 projected to be $1.4 billion.  The Long Island Power Authority anticipates expenditures of $100 million by 2015 through its own energy efficiency programs, which would bring energy efficiency expenditures by both authorities to nearly $2.5 billion.

                President Kelley reported that the Authority is just beginning transmission studies aimed at improving both upstate and downstate transmission facilities by easing congestion. 

                In President Kelley’s opinion, the Authority overall has had a very good year.

                Chairman McCullough echoed President Kelley’s sentiments, saying that 2007 had been a terrific year for the Authority, highlighting such achievements as the issuance of the new 50-year license for the Niagara power project, the community programs implemented as a result of the settlement agreements connected with the relicensing, the facility upgrades under way and President Kelley’s smooth transition into his job.  President Kelley mentioned the settlement agreements with Entergy and General Electric as additional 2007 accomplishments.               


 

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 30 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 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 amended the PFJ statute to accelerate the distribution of the power and increase the size of the program to 450 MW.

 

                “In May 2000, legislation was enacted that authorized another 300 MW of power to be allocated under the PFJ program.  Legislation further amended the program in July 2002.

 

                “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. 

 

“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.  Chapter 645 of the Laws of 2006 included provisions extending program benefits until June 30, 2007.  In 2007, a new law (Chapter 89 of the Laws of 2007) included provisions extending program benefits until June 30, 2008.

 

“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. 

 

DISCUSSION

 

“At its meeting on December 18, 2007, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 30 businesses listed in Exhibit ‘4-A.’  Collectively, these organizations have agreed to retain more than 27,000 jobs in New York State in exchange for the rebates. 

 

                “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 $2.8 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 Exhibit ‘4-A’ in the future.

 

FISCAL INFORMATION

 

“Funding of rebates for the companies listed in Exhibit ‘4-A’ is not expected to exceed $2.8 million.  Payments will be made from the Operating Fund.  To date, the Trustees have approved $104.2 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 ‘4-A.’ 

 

                “The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Energy Marketing and Corporate Affairs, the Senior Vice President – Marketing and Economic Development, the Senior Vice President – Public and Governmental Affairs and I concur in the recommendation.”

 

                Chairman McCullough said that the Economic Development Power Allocation Board (“EDPAB”) meeting scheduled for earlier that morning had been postponed until Thursday, December 20th at 10 a.m. due to the internet difficulties that had made a videoconference impossible.  He said that if the Trustees approved the rebates proposed in this item, such approval would be subject to EDPAB also approving them at its Thursday meeting.  Mr. James Pasquale then presented the highlights of staff’s recommendations to the Trustees.

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

WHEREAS, the Economic Development Power Allocation Board (“EDPAB”) has recommended that the Authority approve electricity savings reimbursements to the Power for Jobs (“PFJ”) customers listed in Exhibit “4-A”;

 

NOW THEREFORE BE IT RESOLVED, That to implement such EDPAB 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 PFJ 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 $2.8 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 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 his 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, General Counsel and Chief of Staff; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President, General Counsel and Chief of Staff.

 

 


 


 

5.             Allocation of Hydropower

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve an allocation of available Replacement Power (‘RP’) totaling 12,000 kW to three industrial companies.

 

BACKGROUND

 

“Under Section 1005(13) of the Power Authority Act, as amended by Chapter 313 of the Laws of 2005, the Authority may contract to allocate or reallocate directly, or by sale for resale, 250 MW of firm hydroelectric power as Expansion Power 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 allocation of EP or RP must be evaluated under criteria that includes, but need not be limited to, those set forth in Public Authorities Law Section 1005(13) (a), which sets forth general eligibility requirements, and (b), which sets forth the special criteria for revitalization allocations.

 

“Among the factors to be considered when evaluating a request for an allocation of hydropower are the number of jobs created as a result of a power allocation;  the business’ long term commitment to the region as evidenced by the current and/or planned capital investment in business’ facilities in the region; the ratio of the number of jobs to be created to the amount of power requested; the types of jobs created, as measured by wage and benefit levels, security and stability of employment; and the type and cost of buildings, equipment and facilities to be constructed, enlarged or installed.

 

“Among the factors to be considered when evaluating a request for revitalization purposes are whether or not the business is likely to partially close or relocate, resulting in loss of jobs, whether or not the business is an important employer in the community and whether or not the business has pursued other available sources of assistance to reduce energy costs.

 

“On October 22, 2003, the Authority, National 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 hydropower.  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 hydropower.

 

DISCUSSION

 

                “Staff recommends and the Advisory Group supports the available power being allocated to the three companies set forth in Exhibit ‘5-A.’  The Exhibit shows, among other things, the amount of power requested, 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.  They are projected to result in the creation of 470 jobs.

 

“Sorrento Lactalis, Inc. (‘Sorrento’) is seeking an allocation of Replacement Power for revitalization purposes. Sorrento, which produces Italian-style cheeses, is one of the largest private employers in Erie County, supporting approximately 500 direct jobs.  In addition, the Buffalo facility purchases milk from 340 local diary farmers, supporting an estimated additional 6,000 indirect jobs. Consequently, 95% of the raw materials used in manufacturing at the facility are produced in New York State – adding $100 million to the State’s economy. 

 

“Sorrento’s current business situation is problematic and the facility has been losing money annually.  More than 500 jobs are currently at risk at Sorrento’s Buffalo facility and 30 jobs have already been relocated from Buffalo to Idaho.  A Sorrento plant in Goshen, New York was closed in 2005, resulting in the loss of 120 jobs.  Its parent company (Groupe Lactalis of France) has provided $29 million in cash subsidies since 2001.  However, Groupe Lactalis has announced that the annual subsidy has ended and that the Buffalo facility must stop its downward spiral or the facility will be closed.  The parent company has announced that $100 million in capital investment will be made available to its American facilities.  Sorrento’s Buffalo facility must convince Groupe Lactalis and its board that it is making efforts to reduce and stabilize costs in order to capture a percentage of the $100 million available for capital investment.  Sorrento spent more than $1 million in 2006 on capital improvements.  In addition, it received two grants from the New York State Energy Research and Development Authority for lighting and an energy consumption reduction study.  Sorrento has applied to the Authority for an allocation of RP for revitalization purposes.

 

“Staff recommends that a 1,500 kW allocation of Replacement Power be made under revitalization criteria.  The proposed contract would be for a non-renewable term of three years and be conditioned on Sorrento agreeing to incorporate the expansion in its capital plan for 2008.  In return, Sorrento agrees that within 36 months of the takedown of power it will secure $10 million in new capital investment and relocate a product line from the West Coast, creating 25 jobs. (Sorrento will be able to apply for a new allocation for the increased load.)  If within three years the company fails to meet the agreed-on targets, the 1,500 kW revitalization allocation will be returned to the Authority.

 

RECOMMENDATION

 

“The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees approve the allocation of 10,500 kW of hydropower to the companies listed in Exhibit ‘5-A’ and a 1,500 kW allocation to Sorrento Lactalis, Inc. under the criteria for the evaluation of applications for power allocated for industry revitalization.

 

                “The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Energy Marketing and Corporate Affairs, 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.  Trustee D. Patrick Curley recused himself from the vote on the resolution as it pertained to Brunner International, Inc.

                The following resolution, as submitted by the President and Chief Executive Officer, was unanimously adopted with Trustee D. Patrick Curley recusing himself from Brunner International, Inc.  The item is subject to ratification by the Economic Development Power Allocation Board.

 

RESOLVED, That the allocation of 12,000 kW of Replacement Power, as detailed in Exhibit “5-A,” 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 allocation of 1,500 kW of Replacement Power to Sorrento Lactalis, Inc. under the criteria for the evaluation of applications for power allocated for industry revitalization 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, 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, General Counsel and Chief of Staff.

 


 


 

                                                                                                                                        Exhibit “5-A1”

 

APPLICATION SUMMARY

Replacement Power

 

Company: Brunner International, Inc.

 

Location:                                                  Medina

                                                                  

County:                                                     Orleans

 

IOU:                                                           National Grid

 

Business Activity:                                  Manufacturer of parts for the heavy-duty truck industry

 

Project Description:                               The project will include the expansion of the company’s existing building by 10,000 to 20,000 square feet to support the installation of a new product line. In addition, the company will purchase and install new equipment, including presses, lathes, heat scanners, controls, robot machines and other manufacturing equipment.

 

Existing Allocation:                               1,800 kW of EP and 1,200 kW of RP

 

Power Request:                                       3,200 kW

                                                  

Power Recommended:                            2,500 kW

 

Job Commitment:     

                   Existing:                                291 jobs

                   New:                                         50 jobs

                                                                           

New Jobs/Power Ratio:                          20 jobs/MW

 

New Jobs -

Avg. Wage and Benefits:                       $47,000

 

Capital Investment:                                $12.37 million

 

Capital Investment per MW:                $4.95 million/MW

 

Summary:                                                Brunner manufactures parts for the heavy-duty truck industry. This expansion will help the company remain competitive in a global market. Brunner is also looking to expand in North and South Carolina, Kentucky and Mexico. A low-cost power allocation will help the company secure this expansion in Western New York.

 


 

                                                                                                                                                                            Exhibit “5-A2”

 

 

APPLICATION SUMMARY

Replacement Power

 

Company: Government Employees Insurance Company (“GEICO”)

 

Location:                                                  Amherst

                                                                  

County:                                                     Erie

 

IOU:                                                           National Grid

 

Business Activity:                                  Automobile insurance company 

 

Project Description:                               The project will include expanding GEICO’s existing site with a new 25,000-square-foot raised-floor data center to serve as the new primary corporate data center. The company will purchase additional land necessary to accommodate the utility substations required to serve the facility.  Equipment to be installed includes hundreds of servers, switches, routers, fire-suppression systems, switch gear and air-conditioning units.

 

Existing Allocation:                               1,600 kW of Expansion Power

 

Power Request:                                       12,000 kW

                                                  

Power Recommended:                            8,000 kW

 

Job Commitment:     

                   Existing:                                1,354 jobs

                   New:                                          420 jobs

                                                                           

New Jobs/Power Ratio:                          53 jobs/MW

 

New Jobs -

Avg. Wage and Benefits:                       $37,000

 

Capital Investment:                                $200 million

 

Capital Investment per MW:                $25 million/MW

 

Summary:                                  GEICO, which was incorporated in 1937, is the largest direct marketer and private passenger auto insurance company in New York State, based on direct written premiums. GEICO is a wholly owned subsidiary of Berkshire Hathaway, Inc. The company is planning a new data center. GEICO is looking at other sites, including locations in North Carolina, Georgia and West Virginia.  A low-cost power allocation would make this project cost effective in western New York.

 


 

                                                                                                                                                                            Exhibit “5-A3”

 

 

APPLICATION SUMMARY

Replacement Power - Revitalization

 

Company: Sorrento Lactalis, Inc

 

Location:                                                  Buffalo               

                  

County:                                                     Erie

 

IOU:                                                           National Grid

 

Business Activity:                                  Food processor manufacturing Italian-style cheeses

 

Project Description:                               Sorrento is requesting power under the revitalization criteria to serve existing load.  Sorrento has agreed that within 36 months it will secure $10 million in capital investment from its parent company and will relocate a product line from the West Coast.

 

Existing Allocation:                               250 kW of Replacement Power and 1,500 kW of Power for Jobs

 

Power Request:                                       1,500 kW

                                                  

Power Recommended:                            1,500 kW

 

Job Commitment:       

                   Existing:                                   500 jobs

                   New:                                              0 jobs

                                                                           

New Jobs/Power Ratio:                          NA

 

New Jobs -

Avg. Wage and Benefits:                       NA

 

Capital Investment:                                NA

 

 Capital Investment per MW:               NA

 

Summary:                                                 The Buffalo plant has been manufacturing Italian-style cheeses for 55 years. This location also serves as a major distribution center for the East Coast. A hydro revitalization allocation will help Sorrento reduce and stabilize its costs, which is key to keeping the plant running.  Reducing costs will signal to Sorrento’s parent company that the plant can yield a higher cash flow to support a future capital investment in a new or relocated process line.                                                  


 

6.             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 nine companies listed in Exhibit ‘6-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 nine 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 290 contracts with 185 business customers, excluding Power for Jobs (‘PFJ’) agreements.  In 2006, nine customers (with 15 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:

 

1.        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.

 

“Two companies, Delphi Automotive Systems and North American Höganäs, will still be below their job commitments even after the reduction to their base employment commitments for their productivity improvements.  However, both of these companies are in the automotive industry and, as directed by the Trustees at their April 2007 meeting, staff will defer action regarding the Authority’s automotive customers for one year.  The Annual Review of Jobs Trustee item that will be presented in 2008 will include a recommendation and justification for refreshing the job commitments of the Authority’s automotive customers.

 

DISCUSSION

 

“Staff recommends that the Trustees approve action regarding the nine customers meeting the productivity improvement requirement for a reduction to their employment commitments in 15 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 ‘6-A.’

 

Section I.

Allocations to Continue with Job Commitment Changes for Productivity Improvements

 

Ceres Corporation,             Niagara Falls, Niagara County

Allocation:                            1,700 kW, 1,600 kW and 1,300 kW of Replacement Power (‘RP’)

Jobs Commitment:              60 jobs for all allocations

 

Background:  Ceres Corporation (‘Ceres’), founded in 1976, was the first U. S. producer of cubic zirconia, as well as the first cubic zirconia manufacturer to develop and sell colored cubic zirconia.  The product is used in the gem-cutting industry and is also used in jewelry.  Ceres developed and sells the industry’s leading diamond-testing instruments.  For the past year, Ceres averaged 46.42 jobs, i.e., 77.36% of its contractual commitments.  While the company is in the midst of developing a new product line and is growing, it implemented productivity improvement measures this past year, resulting in a reduced employment level of 47 jobs.  One job was reduced due to new product design; 3 were reduced due to automation; 4 were reduced due to more efficient new equipment and 5 were reduced due to a new process. 

 

Recommendation:  Staff recommends that the Trustees reduce Ceres’ 1,700 kW, 1,600 kW and 1,300 kW RP allocations’ employment commitments by 13 jobs to 47 positions.

 

Delphi Automotive Systems,             Lockport, Niagara County

Allocation:                                            14,300 kW of Expansion Power (‘EP’)

Jobs Commitment:                              5,246 jobs

 

Background:  Delphi Automotive Systems (‘Delphi’), formerly a division of General Motors (‘GM’), manufactures radiators, condensers and heaters mainly for GM automobiles, but has diversified to other car makers as well.  The company requested a productivity improvement reduction of its job commitment by 477 jobs.  For the past year, Delphi averaged 3,527.17 jobs.  The EP allocation is a ‘vintage’ contract, meaning that it has an 80% job ratio and two-year job average.  The two-year average is 3,807.42 jobs, i.e., 72.58% of the company’s commitment.  Delphi has been in bankruptcy and is in the midst of restructuring.  Early in 2006, Delphi was awarded an additional 10 MW revitalization allocation.  Of the 477 jobs requested, only 365 job reductions qualified as actual productivity improvements.  The 365 employment reductions made were accomplished through rebalancing job duties, job combinations, new methods of manufacturing parts, new designs for parts and restructuring of workstations.

 

Recommendation:  Staff recommends that the Trustees reduce Delphi’s 14,300 kW EP allocation employment commitment by 365 jobs to 4,881 positions.

 

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

Allocation:                                                            790 kW of EP and 31,700 kW of RP

Jobs Commitment:                                              251 jobs and 198 jobs, respectively

 

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 267.13 jobs, i.e., 106.42% and 134.91% of its contractual commitments, respectively.  The company was able to reduce 9 jobs due to productivity improvements in 2006, with 5 jobs reduced through new computerized handling of every aspect of inventory and supply chain management and business planning, and 4 jobs reduced through new processes in handling personnel files and engineering.

 

Recommendation:  Staff recommends that the Trustees reduce DuPont’s employment commitments for both its 790 kW EP and 31,700 kW RP allocations by 9 jobs, to 242 and 189 positions, respectively.

 

FMC Corporation,               Tonawanda, Erie County

Allocation:                            2,500 kW of RP

Jobs Commitment:              142 base jobs and 25 created jobs

 

Background:  FMC Corporation - active oxidants division (‘FMC’), at this site since 1960, manufactures peracetic acid, a biocide for the food industry, and persulfates, used in the cosmetics industry.  At the time of the 2006 Annual Item, FMC had two allocations that required reporting, a 5.5 MW RP allocation with 71 jobs and a 750 kW RP allocation with 106 jobs.  FMC took down 2 MW of its newest allocation of 2.5 MW with 142 base jobs and 25 created jobs in June 2007, with the remainder to be drawn down in June 2008.  This 2.5 MW allocation will not be required to be reported until the 2008 Annual Item.  For the past year, FMC averaged 105.33 jobs, i.e., 99.37% of its 106 jobs contractual commitment.  FMC requested a reduction of 6 jobs due to productivity improvements made in 2006.  The 6 jobs were reduced through installation of new high-efficiency equipment and a new computerized monitoring system.

 

Recommendation:  Staff recommends that the Trustees reduce FMC’s 2,500 kW RP allocation’s base employment commitment by 6 jobs to 136 positions, for an overall reduction to 161 jobs.

 

Ford Motor Company,         Buffalo, Erie County

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

Jobs Commitment:              1,772 jobs and 1,772 jobs, respectively

 

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 Fusion, Edge 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 1,556.50 jobs, i.e., 87.84% of its contractual commitment.  The company requested a productivity improvement reduction of its job commitment by 113 jobs.  Of the 113 jobs, only 106 qualified as productivity improvements.  Ford’s reduction comes from new product design, new equipment, job rebalancing on the lines, job combinations and new manufacturing processes.

 

Recommendation:  Staff recommends that the Trustees reduce Ford’s 4,300 kW and 2,900 kW EP allocation employment commitments by 106 jobs to 1,666 positions each.

 

Luvata Buffalo, Inc.,            Buffalo, Erie County

Allocation:                            3,000 kW of RP

Jobs Commitment:              602 base jobs and 55 created jobs

 

Background:  Luvata Buffalo, Inc. (‘Luvata’), formerly Outokumpu American Brass or OAB Holdings, Inc., in business since 1906, manufactures copper and brass sheets and rolls.  The company requested a productivity improvement reduction of its job commitment by 10 jobs.  Luvata’s reduction comes from rebalancing job duties (6 positions), eliminating a process (1 position) and new equipment (3 positions).  For the past year, Luvata averaged 618.21 jobs, i.e., 102.69% of its contractual commitment. (Per its contract, the company is not yet required to have added the 55 new positions.)

 

Recommendation:  Staff recommends that the Trustees reduce Luvata’s RP allocation employment commitment by 10 jobs to a base of 592 base positions and 55 created positions.

 

Mele Manufacturing Co., Utica, Oneida County

Allocation:                            475 kW of Economic Development Power (‘EDP’)

Jobs Commitment:              164 jobs

 

Background:  Mele Manufacturing Co. (‘Mele’), founded in 1912, manufactures, as well as resells, jewelry cases, custom packaging, desk accessories, legal binders and custom injection molding.  However, the company has, for the most part, switched into a new business, manufacturing modular flooring, which is the growth part of the company.  For the past year, Mele averaged 75.79 jobs, i.e., 46.21% of its contractual commitment.  The company made major productivity improvements through design and process changes.  Mele’s new, highly efficient computerized and mechanized facilities require fewer workers than before, and the facilities’ cost-efficient operations have enabled the company to continue its viability in Utica and sustain a level workforce.  The company does not see much further growth, but does foresee stability.  Mele maintains a strong job-to-MW ratio. 

Recommendation:  Staff recommends that the Trustees reduce Mele’s 475 kW EDP allocation employment commitment by 88 jobs to 76 positions.

 

North American Höganäs, Inc.,        Niagara Falls, Niagara County

Allocation:                                            1,000 kW of RP and 4,000 kW of EP

Jobs Commitment:                              67 jobs and 71 jobs (vintage)

 

Background:  North American Höganäs, Inc. (‘NAHI’), formerly Pyron Corporation, founded in 1940, manufactures sponge iron and atomized steel powders for powder metallurgical processes in the auto and food additive industries.  The company’s powder metals are used in the automotive parts business for antilock brakes, brake pads, cams, transmission parts and steering systems, as well as an iron food supplement for cereals, breads, etc.  The EP allocation, as a ‘vintage’ contract, has an 80% job ratio and a two-year job average.  For the past year, NAHI averaged 37.92 jobs, i.e., 56.60% of its employment commitment, and for the past two years 38.21 jobs, i.e., 53.82% of its employment commitment, respectively.  In 2005, after NAHI restructured the organization, sustainable employment levels were reached.  An upswing in business in 2006 has continued into 2007, with expected growth in employment of 4 new jobs.  NAHI has a new product in development that it expects will increase sales and employment.  The company requested a productivity improvement reduction of its job commitment by 9 jobs for 2006.  NAHI’s reduction comes from rebalancing job duties (7 positions), a new process (1 position) and new equipment (1 position).

 

Recommendation:  Staff recommends that the Trustees reduce NAHI’s RP allocation employment commitment by 9 jobs to a base of 58 positions and reduce the company’s EP allocation employment commitment by 9 jobs to a base of 62 positions (vintage).

 

Occidental Chemical Corporation,      Niagara Falls, Niagara County

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

Jobs Commitment:                                  230 jobs and 238 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 244.13 jobs and 238.59 jobs, i.e., 106.14% and 100.25% of its contractual commitments, respectively.  In 2006, Oxy reorganized its maintenance program reducing 6 jobs through rebalancing job schedules; 3 jobs through job combination; 1 job through a new computer system for monitoring; 1 job through a new process and 1 job through automation.

 

Recommendation:  Staff recommends that the Trustees reduce Oxy’s 56,000 kW RP and 38,700 kW EP allocation employment commitments by 12 jobs to 218 and 226 positions, respectively.

 

RECOMMENDATION

 

                “The Director - Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees adjust the job commitments for nine customers with 15 contracts due to productivity improvements as described above and set forth in Exhibit ‘6-A.’

 

“The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Energy Marketing and Corporate Affairs, 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 Chairman McCullough, Mr. Pasquale said that a decision by the Trustees on reducing power allocations to certain automotive companies in Western New York had been postponed in April and would be reconsidered at a Trustees’ Meeting in 2008.

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 nine customers (with 15 contracts) that made productivity improvements as described in the foregoing report of the President and Chief Executive Officer and as set forth in Exhibit “6-A”; and be it further

 

RESOLVED, That the Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing 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 resolution, subject to the approval of the form thereof by the Executive Vice President, General Counsel and Chief of Staff.

 


 

                                                                                Exhibit “6-A”

 

 

 

I.              ALLOCATIONS TO CONTINUE WITH JOB COMMITMENT CHANGES FOR                 PRODUCTIVITY IMPROVEMENTS

 

 

 

Company

 

 

 

Location

 

 

Type of Power

 

Allocation kW

 

Employment Commitment

 

Average

2006

Jobs

Average Annual %

Achieved

 

Revised Commitment

 

Revised

%

Ceres Corporation

Niagara Falls

RP

1,600

60

46

77%

47

100%

Ceres Corporation

Niagara Falls

RP

1,300

60

46

77%

47

100%

Ceres Corporation

Niagara Falls

RP

1,700

60

46

77%

47

100%

Delphi Automotive Systems LLC

Lockport

EP

14,300

5,246

V 3,807

73%

4,881

78%

E.I. Du Pont De Nemours & Co., Inc.

Niagara Falls

EP

790

251

V 267

106%

242

110%

E.I. Du Pont De Nemours & Co., Inc.

Niagara Falls

RP

31,700

198

263

133%

189

139%

FMC Corporation

Tonawanda

RP

2,500

167

105

NYR

161

NYR

Ford Motor Company

Buffalo

EP

4,300

1,772

1,557

88%

1,666

93%

Ford Motor Company

Buffalo

EP

2,900

1,772

1,557

88%

1,666

93%

Luvata Buffalo, Inc.

Buffalo

RP

3,000

602

618

103%

592

104%

Mele Manufacturing Co.

Utica

EDP

475

164

76

46%

76

100%

North American Hogänäs Corporation

Niagara Falls

RP

1,000

67

38

57%

58

66%

North American Hogänäs Corporation

Niagara Falls

EP

4,000

71

V 38

54%

62

61%

Occidental Chemical Corporation

Niagara Falls

RP

56,000

230

V 244

106%

218

112%

Occidental Chemical Corporation

Niagara Falls

EP

38,700

238

V 239

100%

226

106%


EP
= Expansion Power                             RP = Replacement Power        V = Vintage allocation – 2 year average  

NYR = Not yet required to report jobs on this allocation.


 

7.             Economic Development Plan - Use of Net        Revenues Produced by Sale of Expansion Power

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve an Economic Development Plan (‘Plan’) covering the use of net revenues produced by the sale of Expansion Power (‘EP’) and to authorize the submission of such Plan to the Economic Development Power Allocation Board (‘EDPAB’) for the period of one year.

 

BACKGROUND

 

                “Chapter 32 of the Laws of 1987: (a) authorized the Authority to enter into new contracts for the sale of EP to customers in Western New York; (b) provided for the sale of industrial power as Economic Development Power (‘EDP’) under newly established criteria and (c) established EDPAB to review applications for EDP and to recommend approved applications to the Authority.

 

                “The eighth unnumbered paragraph of Section 1005 of the Public Authorities Law (‘PAL’), as amended by Chapter 32, directs the Authority to identify net revenues produced by the sale of EP and, further, to identify an amount of such net revenues to be used solely for Industrial Incentive Awards.  These awards are to be made in conformance with a Plan, covering all such net revenues, that is submitted by the Authority to EDPAB and is approved by EDPAB pursuant to Section 188 of the Economic Development Law (‘EDL’).

 

                “Net revenues are defined by Section 1005 as any excess of revenues properly allocated to the sales of EP over costs and expenses properly allocated to such sales.  The Authority is directed in Section 1005 to identify net revenues no less often than annually.  Section 188 of the EDL provides that EDPAB is to review each Plan applying the same economic development criteria as those used to evaluate applications for power.  The statute does not specify a definition of Industrial Incentive Awards.

 

                “The Authority approved five-year programs in 1990, 1996 and 2001 and a one-year program in 2006 under which EP net revenues were to be dedicated to helping maintain stable industrial rates.  EDPAB has periodically approved such Plans for use of EP revenues to hold industrial rates at a stable level.

 

DISCUSSION

 

                “Allocations of EDP have been a useful economic development tool.  EDPAB has recommended allocations associated with the creation or retention of more than 95,000 jobs, totaling 428 MW, to date.  The costs of providing EDP are greater than the revenues produced by such sales.  In order to continue to market this power on a competitive basis consistent with the aim of the legislation creating EDPAB, the rates for industrial power must be kept low enough to be of sufficient economic incentive for industries to locate or expand in New York State.

 

                “In December 2006, the Temporary State Commission on the Future of New York State Power Programs for Economic Development recommended numerous changes in the form and administration of the Authority’s EDP programs.  Any such changes would require legislation.  Moreover, the Power for Jobs (‘PFJ’) and Energy Cost Savings Benefit (‘ESCB’) programs will end on June 30, 2008.  The ECSB awards go to the same customers that benefit from current Industrial Incentive Award rate relief.  Thus, pending clarification on the future of these programs, it is appropriate to again propose extensions of the Industrial Incentive Awards for one year instead of the usual five years.


 

                “It is therefore proposed that the Authority’s Chairman be authorized to submit the Authority’s Plan to EDPAB for the ensuing one-year period providing for the use of 2006 net EP revenues of $7.283 million to support 2007 industrial rates, provided that the Chairman, at his discretion, may recommend to EDPAB a different use of such net revenues, consistent with statutory requirements.  The Authority will report to EDPAB on the effect of using these funds.

 

RECOMMENDATION

 

                “The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees authorize the Chairman to submit to the Economic Development Power Allocation Board for approval for the ensuing one-year period, an Economic Development Plan that provides for the use of net revenues from the sale of Expansion Power to support industrial rates, provided that the Chairman, at his discretion, may recommend to the Economic Development Power Allocation Board a different use of such net revenues consistent with statutory requirements.

 

                “The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Energy Marketing and Corporate Affairs, the Senior Vice President – 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 Authority hereby approves an Economic Development Plan that provides for the use of net revenues from the sale of Expansion Power to support industrial rates for a one-year period, or for such other use as determined by the Chairman, consistent with statutory requirements, in accordance with the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman or his designee be, and hereby is, authorized to submit an Economic Development Plan for the next year to the Economic Development Power Allocation Board for review and approval; and be it further

 

RESOLVED, That the Chairman or his designee be, and hereby is, authorized to execute any and all documents necessary or desirable to effectuate such Economic Development Plan; 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, General Counsel and Chief of Staff.


8.             Increase in New York City Governmental Customer  Rates – Notice of Adoption

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to take final action to approve an increase in the rates for the sale of firm power to the New York City Governmental Customers (‘Customers’) in 2008.  This proposed action is consistent with the rate-setting process set forth in the 2005 Agreements containing certain supplemental terms and conditions governing the supply of electricity (‘Long-Term Agreements’ or ‘LTAs’) executed by each of the Customers and the Authority.

 

                “Under this proposed final action, staff seeks approval to increase the ‘Fixed Costs’ component (as defined in the LTAs) of the Customers’ 2008 production rates.  This proposition, by itself, would increase the estimated billed production revenues of these Customers by 2.6% on average as compared to 2007 rates.  Secondly, the Trustees are requested to authorize a change in Service Tariff No. 100 regarding the effective date of production rate changes from using a proration method to a billing-period method.  If approved by the Trustees, the effective date of the increase would be January 1, 2008.  With the Tariff change, the increase would be applicable as of the January 2008 billing period.

 

BACKGROUND

 

                “At their September 25, 2007 meeting, the Trustees directed the publication in the New York State Register (‘State Register’) of a notice that the Authority proposed to increase the Fixed Costs component of the production rates to be charged in 2008 to the Customers.  Customers were directly notified of the proposed rate increase by mail on September 26, 2007.  The State Register notice was published on October 10, 2007 in accordance with the State Administrative Procedure Act (‘SAPA’).  Since this proposal would increase revenues to the Authority by more than 2%, a public forum was held, in accordance with the Authority’s policy, at its New York City office on November 15, 2007.  No oral comments were received.  The public comment period originally scheduled to close on November 26, 2007 was extended to November 30, 2007 in response to the Customers’ request for extension.  Comments were filed, pursuant to SAPA procedures, by the City of New York (Department of Citywide Administrative Services) (the ‘City’) and the Port Authority of New York and New Jersey and the Metropolitan Transportation Authority (‘PA/MTA’).

 

“As indicated in the September 25th memorandum to the Trustees, under the LTAs, the Authority must establish Fixed Costs based on cost-of-service principles and make changes only under a SAPA proceeding with the approval of the Trustees.  As the memorandum also indicated, the LTAs establish two distinct cost categories:  Fixed Costs and Variable Costs.  Fixed Costs include operation and maintenance (‘O&M’), shared services (e.g., headquarters), debt service, other expenses (i.e., certain directly assignable costs) and a credit for investment and other income.

 

“Because the Variable Costs component is developed in collaboration with the Customers in accordance with the provisions of the LTAs previously approved by the Trustees, staff is not requesting the Trustees’ approval of the Variable Costs component of the production rates for 2008 (i.e., fuel and purchased power, risk management, New York Independent System Operator (‘NYISO’) ancillary services and O&M reserve, less a credit for NYISO revenues from Customer-dedicated generation).  In addition, in 2007 the Customers collectively selected an ‘Energy Charge Adjustment (‘ECA’) with Hedging’ cost-recovery mechanism offered under the LTA under which the Authority passes through all Variable Costs to the Customers.  This cost- recovery mechanism employs a monthly charge or credit that reflects the difference between the projected Variable Costs of electricity recovered by the tariff rates and the monthly actual Variable Costs incurred by the Authority.  This billing mechanism is already in effect and will continue through 2008. 


 

DISCUSSION

               

“Based on staff’s analysis, the final increase in Fixed Costs sought by this action is $20.7 million.  This represents a $5.8 million decrease from the proposed Fixed Costs estimate.  Under the LTAs, Customers’ concerns must be considered in a confidential process prior to presenting any proposed changes to the Fixed Costs to the Trustees or issuing them for public comment.  Numerous Customer data requests were subsequently presented to staff, and in all cases, responses to relevant questions were provided to the Customers.  In addition, staff met with the Customers to further discuss their written comments prior to the November 30th deadline.  The following formal written comments were filed in accordance with SAPA.  A review and analysis of the five issues raised by the written comments is as follows:

 

Issue 1: Overall Fixed Costs Proposal for 2008

 

Comments:  The PA/MTA raised concerns regarding the proposed 17.9% Fixed Costs increase in the Preliminary 2008 Cost of Service (‘COS’).  Citing the level of increases over the past two years, these Customers state that changes should track the rate of inflation on the order of 2.68% for 2006 and 1.83% projected for 2007.

 

Staff Analysis:  Staff has reviewed the PA/MTA’s comments that the Fixed Costs increases over the past two years have outpaced the Gross Domestic Product Implicit Price Deflator rate-of-inflation measure even though there have been no additions of new generating units dedicated to serving the Customers during that period. 

 

“Of the $27.8 million proposed increase in the Fixed Costs component of the Preliminary 2008 Cost of Service, $6.7 million is directly attributable to a Customer request during the LTA negotiations in calendar year 2004 to levelize the Poletti debt service schedule, thereby reducing the impact on rates in the first two years of the LTA (this action has now become a net charge to the 2008 Preliminary COS).  An additional $2.5 million is earmarked for outside consulting assistance to facilitate a collaborative resource planning effort with the Customers to explore replacing the capacity requirements of the Poletti project, which is scheduled to shut down in early 2010.

 

“Additionally, $9.3 million is for payment of the initial principal component of the debt service for the Small Hydro projects’ variable-rate debt, of which almost $7.9 million, or 85%, is assignable to the Customers (the balance is recovered through the Westchester Governmental Customer rates).  It should be noted that the same proportional market value of the total Small Hydro energy output is credited to the Customers.  Finally, $6.7 million is the amortized cost of the competitively bid outsourcing of outage maintenance for the 500 MW Combined Cycle Unit (‘500 MW CCU’) alluded to in the PA/MTA comments.

 

“Staff contends that the level of Fixed Costs required should be predicated on the resources necessary to meet the Customers’ needs and ensure effective operation of the facilities dedicated to them.

 

Recommendation:  The $2.5 million for outside consulting assistance to explore replacing the capacity requirements of the Poletti project is an estimate based on the anticipated work plan.  Actual costs will depend on the results of the collaborative effort between the Authority and the Customers.  In an effort to acknowledge the PA/MTA’s concerns regarding the impact of the proposed increase on rates, staff recommends reducing the proposed 2008 Fixed Costs by $2.5 million for future supply planning work and proposes recovering only the actual costs for this effort from the Customers in a mutually agreed-upon manner.  Staff also recommends levelizing the impact of the Small Hydro debt service through 2015, which, along with other minor allocation adjustments, would further reduce the proposed 2008 Fixed Costs increase by $3.3 million.  This proposal would also be considerably beneficial to the Customers in the 2009 and 2010 rate years.

 

“These recommendations would reduce the proposed 2008 Fixed Costs by a total of $5.8 million, resulting in an increase of $20.7 million, or 13.5%, over 2007 Fixed Costs.  This equates to an overall production increase of 0.36% to the Customers’ rates for 2008.


 

Issue 2:  O&M Component of Fixed Costs.

 

                “Comments:  The Customers raised concerns that the O&M components of Fixed Costs, specifically the 500 MW CCU and Poletti projects are excessive.  The City contends that the projected O&M for consulting services should be reduced by $2.0 million based on its own assessment of historical costs.

 

“In a similar vein, the PA/MTA request an O&M reduction of $10 million, including $1.8 million for Poletti.  The PA/MTA also request a $7.7 million reduction of the 500 MW CCU O&M based on their comparison of a group of ‘peer units,’ i.e., generating plants of an allegedly similar nature elsewhere.  Additionally, the PA/MTA request that staff consider outsourcing the operation of the 500 MW CCU and other fossil units to achieve perceived economies of scale, implies that the Authority is ‘cross-subsidizing’ other facilities through the Fixed Costs O&M and contends that the Authority might be overly risk averse, resulting in ‘over-maintaining’ the facilities dedicated to the Customers.  The City claims that the $1.7 million for consulting services was above historical levels over the past five years.  The PA/MTA state that the overall Poletti O&M increases should be less than the rate of inflation given that the plant is scheduled for retirement in early 2010 and should be ‘capped’ at 3% above the 2007 level, resulting in an overall O&M reduction of $1.8 million.

 

Staff Analysis:  Staff has reviewed both the City’s and the PA/MTA’s comments related to the Poletti O&M projection.  Staff found these claims to be unsupported.  The O&M estimates included in the 2008 Preliminary COS delivered to the Customers on May 15, 2007 was developed several months in advance of the formal 2008 O&M budget process, which was completed in early November.  Consequently, the estimates in the Preliminary 2008 Cost of Service were based on very early cost projections.  The final proposed 2008 O&M Poletti budget, which is also being presented for Trustee approval today, is $16.8 million, $2.7 million less than presented in the 2008 Preliminary COS, and is more in line with the Customers’ expectations.

 

                “Staff has also reviewed the PA/MTA’s further claims that the O&M projection for the 500 MW CCU is ‘excessive’ based on their consultant’s benchmarking analysis of a group of ‘peer units,’ i.e., generating plants of an allegedly similar nature located mostly in the South and the West.  Of the 17 units represented in the peer group, nine were greater than 1,000 MW, with one at almost 2,400 MW and five at less than 300 MW, which is not representative of ‘peer units.’  Two of the suggested ‘peer units’ located in the West that are more representative of the 500 MW CCU had actual O&M (unadjusted for any New York City cost differences) of $9.9 million and $8 million, respectively, compared to the $9.9 million projected in the 2008 Preliminary COS, before including the $6.7 million of levelized outage costs associated with the Wood Group long-term services agreement.  The Customers did not indicate whether the peer group data included outage costs.  Staff has determined that the Customers’ claim of ‘excessive’ 500 MW CCU O&M costs per kW at 405% is unsupported by the data supplied.

 

“However, because the plant needs several minor upgrades and, in part, since the 500 MW CCU has provided more generation output than expected, (500,000 MWH, or 23%, through October), the maintenance requirements are projected to be above the 2008 Preliminary COS estimate to ensure efficient and reliable operation in 2008 and beyond.

               

“Staff has also reviewed the PA/MTA’s comments regarding outsourcing operation of the fossil generating units dedicated to the Customers, cross-subsidization of costs and the Authority being overly averse to plant operating risks and has determined that these concerns should be addressed during the 2009 LTA Annual Process, scheduled to begin during the first quarter of 2008.

 

Recommendation:  Staff recommends no changes to the O&M component of the projected 2008 Fixed Costs for the Customer-dedicated generating facilities included in the 2008 Preliminary COS.  The additional 500 MW CCU work noted above will be offset by the reduction in the final 2008 Poletti O&M budget.

 

                Issue 3:  Shared Services.

 

                “Comments:  The Customers request that the Authority reduce the Shared Services component of the Fixed Costs.  Both the City and the PA/MTA justify their respective proposed reductions to this component by citing that the addition of an element to Shared Services, i.e., Headquarters Direct Support, is ‘inconsistent with past practices.’  The City requests a reduction of $5.1 million and the PA/MTA, through separate analysis, requests a $7.4 million reduction in Shared Services. 

 

                “Staff Analysis:  The Shared Services component of the Fixed Costs consists of the portion of the headquarters O&M budget not directly assignable to any facility or project, plus the Research & Development O&M budget offset by the allocation to capital projects.

 

                “These Shared Services estimates are based on the level of headquarters resources required to support the Customers and the proportional amount of corporate overhead allocated on the basis of labor assigned to the 500 MW CCU, Poletti and the Small Hydro projects.  Historically, a hybrid allocation rate was developed from the labor allocations and direct-support cost projections.  The Authority uses the same methodology to allocate the headquarters costs to the other Authority facilities.

 

                “The Authority’s financial system does not provide for a Southeastern New York (‘SENY’) organizational center to capture costs relating to the administrative aspects (direct support) of serving the Customers and,

consequently, all costs to serve these Customers flow through the Poletti, 500 MW CCU and Small Hydro projects.  With the impending closure of Poletti in early 2010, there would have been a significant increase in the 500 MW CCU and Small Hydro allocation percentages to recover the same direct-support activities, including Marketing, Energy Risk Assessment and Control (‘ERAC’), Energy Resource Management (‘ERM’), Billing, etc. assigned through the Poletti project.  To address this issue, staff segregated the direct-support activities under the Headquarters Direct Support component to separate these activities from the overall Shared Services.  The methodology is exactly the same as in prior years, just presented differently. 

 

                “The main drivers for the proposed increase are incremental post-Poletti supply planning consulting work, an increase in the overall Headquarters budget and additional level of effort to support the LTAs and not due to the addition of the Headquarters Direct Support component.  If the same methodology were applied to the Final 2007 COS, the Headquarters Direct Support Component of the $18.5 million of Shared Services would have been approximately $6.5 million.

 

                “Recommendation:  For the reasons stated above, staff recommends no changes to the Shared Services component of the Fixed Costs category.

 

        Issue 4:  Capital Costs – Other Capital Costs

 

                “Comments:  The Customers request that the Authority eliminate the Other Capital Costs. Both the City and the PA/MTA have requested, through separate analysis, a $2.9 million reduction for Other Capital Costs, citing a ‘departure from previous cost of service practices.’  The City also comments that ‘NYPA has not identified specific financing instruments used to fund the claimed working capital requirement’ and the PA/MTA states that ‘NYPA can finance much of this investment through other cash flows that reduce the net cash-flow requirements of the organization.’

 

                “Staff Analysis:  Other Capital Costs represent the carrying costs or lost-opportunity costs for the Authority’s investment in Plant Materials & Supplies for the Poletti and 500 MW CCU projects, oil inventory and NYMEX margin requirements dedicated to the Customers.  Also included are the depreciation expense for capital additions to the Poletti and 500 MW CCU projects funded by the Authority’s operating reserves, since all bond proceeds for the Poletti and 500 MW CCU projects have been exhausted.

 

                “The items noted above are assets funded by the Authority solely for the Customers’ benefit, which do not earn a return.  In fact, due to the average cost-pricing nature of inventories, the Authority is reimbursed through rates for the average issued price from inventories and not the replenishment costs, which are generally higher.

 

                “Staff contends that the $2.9 million of Other Capital Costs is a legitimate cost that should be passed on to the Customers and rejects the Customers’ claim that these costs should be excluded from the 2008 Preliminary COS.

               

                “Recommendation:  For the reasons stated above, staff recommends no changes to the Other Capital Cost item.

 

                Issue 5: Other Expenses – Asset Retirement Charges

 

                “Comments:  The PA/MTA comment that while they are in agreement that the COS correctly includes Poletti and 500 MW CCU site-remediation charges, there should be an offsetting credit to the Customers for the salvage value of equipment and residual value of the property after site demolition and restoration.  The PA/MTA further suggest a formal agreement with the Authority addressing the Customers’ role in the future use and/or value of the property after the retirement of the Poletti and 500 MW CCU facilities.

 

                “Staff Analysis: Although the Poletti project is scheduled to close in early 2010, it is anticipated that actual decommissioning would occur simultaneously with the 500 MW CCU, sometime in 2030.  Decommissioning does not presume or require that the land be disposed of and it is not possible at this time to foreclose the possibility that the land would continue to be used by the Authority for power generation purposes.

 

                “Recommendation:  Staff recommends no action at this time and will pursue further discussions with the Customers regarding the Poletti and 500 MW CCU post-retirement property value.


                “Based on the foregoing analysis, the proposed increase of $20.7 million in the Fixed Costs component of the production rates will be implemented.


                “In addition, subsequent to the issuance of the Notice of Proposed Rulemaking, staff recognized the need to revise Section ‘H’ of the Common Provisions in Service Tariff No. 100.  Section ‘H’ currently states that ‘rates and charges shall be applied to service on or after the effective date.’  Where bills include periods before and after the effective date, the rates and charges will be prorated accordingly.  As stated at the public forum, it is proposed that Section ‘H’ be modified for production rates only to be consistent with the ECA billing procedures and to be applied on a billing-period basis.  Therefore, staff proposes to move Section ‘H’ relating to production rates from Section V Common Provisions to Section ‘C’ under Section VI General Provisions Applicable to Production and to modify the Section to read as set forth below:

 

Revised Section ‘C’:  ‘Effective Date of Rates and Charges’

               

‘The foregoing rates and charges shall apply to any billing period that includes service on and after the effective date hereof, and are applicable for the entire billing period.’

 

“For this rate action, the new rates would be effective on January 1, 2008 and would be applicable to the January 2008 billing period.  For the January 2008 billing period, the Customers have many different meter-read dates, all of which include energy usage occurring in December.  Therefore, a portion of December’s consumption will be billed at the new rates, since the meter-read dates in the January billing period occur after the January 1, 2008 effective date.

 

                “The proration of the charges as described in the current Section ‘H’ will still apply to delivery rates.  However, upon Trustee acceptance of Section ‘C’ relating to the effective dates of production charges, Section ‘H’ (which would be applicable only to delivery) will be moved to Section ‘D’ under General Provisions Applicable to Delivery.

 

“As mentioned, the final rates will combine the Trustee-authorized Fixed Costs increase with the Variable Costs increase achieved in accordance with LTAs.  For the Trustees’ information, the combined increase is $2.8 million and would represent an estimated 0.36% increase in production rates and an estimated 0.3% increase in average total bills.  The combined Fixed Costs and Variable Costs increase would be equally applied to demand and energy charges.  Also, the Customers will continue to be subject to the ECA through 2008.  As prescribed by the LTAs, the Authority will issue revised tariffs reflecting the new rates for 2008 that incorporate both the final Fixed Costs and Variable Costs, as well as the 2008 ECA Base Rate.

 

“Exhibit ‘8-A’ shows the overall estimated Customer bill impacts for 2008.  Exhibit ‘8-B’ shows both current and final 2008 Conventional and Time-of-Day production rates.  Exhibit ‘8-C’ is the public forum transcript, which indicates that no party made any oral comments on the Authority’s proposal.  Exhibit ‘8-D’ includes the written comments filed by the Customers.

 

FISCAL INFOMATION

 

                “The adoption of the Fixed Costs increase would result in an estimated $20.7 million of additional revenue to the Authority over current rates.

 

RECOMMENDATION

 

                “The Manager – Market and Pricing Analysis, recommends that the Trustees authorize the Corporate Secretary to file a Notice of Adoption with the New York State Department of State for publication in the New York State Register for an increase in Fixed Costs and modification of Service Tariff No. 100 applicable to the New York City Governmental Customers under the Long-Term Agreements.

 

                “It is also recommended that the Senior Vice President – Marketing and Economic Development, or his designee, be authorized to issue written notice of final action to the affected Customers.

 

                “The  Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President and Chief Financial Officer, the Executive Vice President – Energy Marketing and Corporate Affairs, the Senior Vice President – Marketing and Economic Development, the Vice President – Controller, the Vice President – Finance, the Assistant General Counsel – Power and Transmission and I concur in the recommendation.”


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

 

RESOLVED, That the Trustees adopt an increase in Fixed Costs applicable to the New York City Governmental Customers under the Long-Term Agreements and modify Service Tariff No. 100 as described in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development  or his designee be, and hereby is, authorized to issue written notice of this final action by the Trustees to the affected Customers; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file such notices as may be required with the New York State Department of State for publication in the New York State Register and to submit such other notice as may be required by statute or regulation concerning the rate increase; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President, General Counsel and Chief of Staff.

 


 

 


 

 


 


 

9.             Increase in Westchester County Governmental Customer Rates – Notice of Adoption

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to take final action to approve a modification in the rates for the sale of firm power to the Westchester County Governmental Customers (‘Customers’) in 2008.  This proposed action is consistent with the rate-setting process set forth in the Supplemental Electricity Agreements executed by the Customers and the Authority, in addition to the terms of their original application for service.

 

“This proposed final action seeks approval to increase the production rates of the Customers by 15.05 % on average as compared to 2007 rates.  Secondly, the Trustees are requested to authorize a change in Service Tariff No. 200 regarding the effective date of production rate changes from using a proration method to a billing-period method.  If approved by the Trustees, the effective date of the increase would be January 1, 2008.  With the Tariff change, the increase would be applicable as of the January 2008 billing period.

 

BACKGROUND

 

“At their September 25, 2007 meeting, the Trustees directed the publication in the New York State Register (“State Register”) of a notice that the Authority proposed to increase the production rates by 18.1%.  Customers were directly notified of the proposed rate increase by mail on September 26, 2007.  The State Register notice was published on October 10, 2007 in accordance with the State Administrative Procedure Act (‘SAPA’).  Since this proposal would increase revenues to the Authority by more than 2%, a public forum was held, in accordance with the Authority’s policy, at the White Plains office on November 14, 2007.  No written or oral comments were submitted by Customers during the SAPA process.  The public record was closed on November 26, 2007.

 

“In addition, in 2008 the Customers will be subject to an ‘Energy Charge Adjustment (‘ECA’) with Hedging’ cost-recovery mechanism, under which the Authority passes through all Variable Costs to the Customers.  This cost-recovery mechanism employs a monthly charge or credit that reflects the difference between the projected Variable Costs of electricity recovered by the tariff rates and the monthly actual Variable Costs incurred by the Authority.  This billing mechanism is already in effect and will continue through 2008.

 

DISCUSSION

 

“Based on staff’s analysis, and informal questions and discussions with the County of Westchester, the final increase in production rates sought by this action is 15.05%.  This represents a 3% decrease from the rate increase proposed by staff in September.   The decrease is primarily attributable to changes in purchased-power expenses.

 

“Finally, subsequent to the issuance of the Notice of Proposed Rulemaking, staff recognized the need to revise Section ‘H’ of the Common Provisions in Service Tariff No. 200.  Section ‘H’ currently states that rates and charges shall be applied to service on or after the effective date.  Where bills include periods before and after the effective date, the rates and charges will be prorated accordingly.  As stated at the public forum, it is proposed that Section ‘H’ be modified for production rates only to be consistent with the ECA billing procedures and to be applied on a billing-period basis.  Therefore, staff proposes to move Section ‘H’ relating to production rates from Section V Common Provisions to Section ‘B’ under Section VI General Provisions Applicable to Production and to modify the Section to read as set forth below:

 

Revised Section ‘B’:  ‘Effective Date of Rates and Charges’

               

‘The foregoing rates and charges shall apply to any billing period that includes service on and after the effective date hereof, and are applicable for the entire billing period.’

 

        “For this rate action, the new rates would be effective on January 1, 2008 and would be applicable to the January 2008 billing period.  For the January 2008 billing period, the Customers have multiple meter-read dates, all of which include energy usage occurring in December.  Therefore, a portion of December’s consumption will be billed at the new rates, since the meter-read dates in the January billing period occur after the January 1, 2008 effective date.

 

                “The proration of the charges as described in the current Section ‘H’ will still apply to delivery rates.  However, upon Trustee acceptance of the revisions to Section ‘B’ relating to effective dates of production charges, the existing Section ‘H’ (which will be applicable to delivery only) will be moved to Section ‘D’ under General Provisions Applicable to Delivery.

 

“Exhibit ‘9-A’ shows the overall estimated Customer bill impacts for 2008.  Exhibit ‘9-B’ shows both current and final 2008 Conventional and Time-of-Day production rates.  Exhibit ‘9-C’ is the public forum transcript, which indicates that no party made any oral comments on the Authority’s proposal. 

 

FISCAL INFORMATION

 

                “The adoption of the production rate increase would result in an estimated $6.2 million of additional revenue over current rates.

 

RECOMMENDATION

 

                “The Manager, Market and Pricing Analysis recommends that the Trustees authorize the Corporate Secretary to file a Notice of Adoption with the New York State Department of State for publication in the New York State Register of an increase in production rates and modification of Service Tariff No. 200 applicable to the Westchester County Governmental Customers.

 

                “It is also recommended that the Senior Vice President – Marketing and Economic Development, or his designee, be authorized to issue written notice of final action to the affected customers.

 

                “The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President and Chief Financial Officer, the Executive Vice President – Energy Marketing and Corporate Affairs, the Senior Vice President – Marketing and Economic Development, the Vice President – Controller, the Vice President – Major Account Marketing and Economic Development, the Vice President – Finance, the Assistant General Counsel – Power and Transmission and I concur in the recommendation.”

 

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

 

RESOLVED, That the Trustees adopt an increase in the production rates applicable to the Westchester County Governmental Customers and to modify Service Tariff No. 200 as described in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development  or his designee be, and hereby is, authorized to issue written notice of this final action by the Trustees to the affected customers; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file such notices as may be required with the New York State Department of State for publication in the New York State Register and to submit such other notice as may be required by statute or regulation concerning the rate increase; 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 resolution, subject to the approval of the form thereof by the Executive Vice President, General Counsel and Chief of Staff.


 


 


 

10.          2008 Operation and Maintenance, Capital, Energy Services and Fuel Budgets

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

                “The Trustees are requested to approve the 2008 Budgets for Operation and Maintenance (‘O&M’), Capital, Energy Services and Fuel Purchases, as follows:

 

                                                                                                                                2008 Budget

                                                                                                                                 ($ million)

                                                O&M                                                                         295.2   

                                                Capital                                                                       142.3

                                                Energy Services                                                      104.8

Fuel                                                                           562.0

 

BACKGROUND

                “The Authority is committed to providing reliable, affordable and clean energy consistent with its dedication to safety, while promoting the development of energy-efficient technologies, for the benefit of the State of New York.  The 2008 budgets are intended to provide the Authority’s operating facilities and support organizations with the resources needed to meet the Authority’s overall mission and strategic objectives.

 

DISCUSSION

O&M

 

                “The O&M budget of $295.2 million represents an increase of $14.0 million, or 5.0%, from the 2007 budget.  The increases by organization are as follows:  Power Generation ($11.0 million); Transmission ($2.3 million) and Headquarters Support ($0.7 million).

 

“Payroll costs, which include salaries, overtime and fringe benefits, account for $162.5 million, or approximately 55%, of the budget.  This represents a $6.0 million increase from the 2007 budget of $156.5 million.  Factors contributing to the payroll increase include the incorporation of annual and bargaining unit increases and salary adjustments, reduced labor charged to capital projects and a slight increase in employee benefit costs.  Non-payroll expenses of $132.7 million increased $8.0 million due to increased outside services to support numerous headquarters and transmission initiatives, as well as planned maintenance outages.

 

                “Power Generation’s 2008 budget is $11.0 million (7.8%) above the 2007 level, primarily due to greater outage costs, a shift of labor from capital to recurring maintenance, additional consultant support to review and analyze potential energy initiatives for the Southeastern New York (‘SENY’) area and salary, material and services escalation.  The outage budget of $12.3 million includes a Hot Gas Path Inspection at the 500 MW plant along with maintenance outages at numerous Small Clean Power Plant (‘SCPP’) units.  Major non-recurring projects include the Robert Moses Niagara Power Project (‘RMNPP’) Unit #6 Stator Repair ($2.4 million), Joint Works with Ontario Power Generation ($1.4 million), Crescent Fish Guidance System ($1.1 million), Vischer Ferry Regulating Structure Repair ($1.1 million) and the Lewiston Pump Generating Plant (‘LPGP’) Life Extension and Modernization Study ($0.9 million).

 

“The 2008 Transmission budget is $2.2 million (4.6%) above the 2007 level due to an increase in payroll, transmission line operations and maintenance support and the establishment of the North American Electric Reliability Corporation (‘NERC’) Compliance organization.  Major ongoing initiatives include continuation of the Right-of-Way Maintenance program ($3.3 million), Tower Painting ($0.6 million) and Breaker and Insulator Maintenance ($0.5 million).

 

“Headquarters support departments are $0.7 million (1.0%) above the 2007 level, due primarily to the implementation of Strategic Planning programs ($1.2 million), increased Information Technology (‘IT’) maintenance agreements ($0.9 million), White Plains Office restacking and rehabilitation work ($0.8 million) and increased outside litigation support ($0.7 million), offset by the decision not to rebudget the $3.0 million for an Authority awareness campaign.

 

“The R&D budget of $8.8 million is unchanged from 2007.

Fuel

“The Fuel budget of $562.0 million is an increase of $31.5 million (5.9%) from 2007.  This is a cash budget reflecting planned fossil-fuel purchases in 2008 for the Charles Poletti Power Project (‘Poletti’), the Richard M. Flynn Power Plant (‘Flynn’), the Small Clean Power Plants (‘SCPPs’) and the 500 MW plant.  The budget assumes higher commodity prices and increased generation at Flynn and the SCPPs, offset by reduced generation at Poletti.

 

Capital

“The 2008 Capital budget totals $142.3 million, a decrease of $400.4 million (73.8%) from 2007.  The decrease reflects the recognition of the $363.6 million cost of settlement obligations under the Niagara Relicensing Agreements in 2007.  Included in this request are both new and ongoing capital projects, as well as general plant equipment purchases.  Significant capital projects include $24.2 million and $20.3 million, respectively, for the Blenheim-Gilboa and St. Lawrence Life Extension projects, $17.7 million for the Static Var Compensator and Tri- Lakes Reliability Project, $16.5 million for agreed-upon commitments in the relicensing application for St. Lawrence and $8.5 million for Security Improvements at all facilities.  Headquarters Administrative support projects, which total $26.4 million, primarily comprise IT-related initiatives and Fleet Management vehicle and equipment purchases.

 

Energy Services

“The Energy Conservation/Renewable projects account for $104.8 million, $2.6 million above the 2007 budget.  Increases in the Peak Load Management and Energy Services programs for public entity customers are offset by a reduction in the Clean Air for Schools projects.

 

FISCAL INFORMATION

“Payment will be made from the Operating Fund for Operation and Maintenance and Fuel Purchases.

 

“Payment will be made from the Capital Fund or Energy Conservation Effectuation Fund for Capital and Energy Services expenditures.

 

RECOMMENDATION

                “The Executive Vice President and Chief Financial Officer and the Vice President and Controller recommend approval of the 2008 Operation and Maintenance, Fuel, Capital and Energy Services budgets as discussed herein.

 

“The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President - Corporate Services and Administration, the Executive Vice President - Energy Marketing and Corporate Affairs, the Senior Vice President and Chief Engineer - Power Generation and I concur in the recommendation.”

 

Ms. Joan Tursi presented the highlights of staff’s recommendations to the Trustees, thanking everyone involved in formulating the proposed budgets for making the 2007 process so successful.  Chairman McCullough added that the proposed budget document had been sent to the Trustees prior to the meeting so that they would have a chance to review it in detail.  Responding to a question from Trustee Thomas Scozzafava, Ms. Tursi said that the Authority’s net revenues for 2008, which are projected to be $186 million, should be adequate to support the 2008 budget.

In response to a question from Trustee James Besha, Ms. Tursi said that the capital expenditures budget fluctuates from year to year, but that it is significantly lower this year because the relicensing expenditures had already been budgeted in earlier years. 

Chairman McCullough asked Ms. Tursi to provide all of the Trustees with a document that includes budgets for the past 10 years.

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

RESOLVED, That the 2008 budgets for Operation and Maintenance, Fuel, Capital and Energy Services expenditures, as discussed in the foregoing report of the President and Chief Executive Officer, are hereby approved; and be it further.

 

RESOLVED, That up to $83.3 million of monies in the Operating Fund are hereby authorized to be withdrawn from such Fund and deposited in the Capital Fund, provided that at the time of withdrawal of such amount or portions of such amount, the monies withdrawn are not then needed for any of the purposes specified in Subsections (1)(a)-(c) of Section 503 of the General Resolution Authorizing Revenue Obligations adopted on February 24, 1998, with the satisfaction of such condition being evidenced by a certificate of the Treasurer or the Deputy Treasurer; 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, General Counsel and Chief of Staff.


 

EXHIBIT “10-A”
Page 1 of 3

O&M AND FUEL

2008 BUDGET

($ MILLIONS)

 

 

 

 

 

 

%

DEPARTMENT

 

2007

 

2008

 

CHANGE

 

 

 

 

 

 

 

     EXECUTIVE OFFICES

 

11.7

 

12.3

 

5.2%

     BUSINESS SERVICES

 

32.3

 

34.4

 

6.6%

     HUMAN RESOURCES AND CORP SUPPORT

 

18.5

 

19.5

 

5.2%

    ENERGY MARKETING AND CORP AFFAIRS

        

19.9

 

17.0

 

(14.4%)

 

 

 

 

 

 

 

TRANSMISSION

 

 

 

 

 

 

     ENERGY CONTROL CENTER

 

5.4

 

5.8

 

7.0%

     HEADQUARTERS SUPPORT

 

4.6

 

5.8

 

29.2%

     CLARK ENERGY CENTER

 

10.5

 

10.8

 

2.6%

     TRANSMISSION FACILITIES

 

28.0

 

28.3

 

1.0%

TOTAL TRANSMISSION

 

48.5

 

50.7

 

4.6%

 

 

 

 

 

 

 

POWER GENERATION

 

 

 

 

 

 

     POWER GENERATION - HQ

 

9.1

 

7.2

 

(21.6%)

     BLENHEIM - GILBOA

 

15.9

 

14.8

 

(6.7%)

     CHARLES POLETTI

 

19.7

 

20.4

 

3.9%

     NIAGARA

 

38.6

 

44.4

 

14.9%

     ST. LAWRENCE

 

18.5

 

18.3

 

(1.5%)

     R.M. FLYNN

 

12.4

 

5.7

 

(54.4%)

     SCPP

 

13.0

 

15.2

 

16.9%

     SMALL HYDRO

 

4.2

 

6.7

 

60.7%

     500 MW

 

10.0

 

19.8

 

97.8%

TOTAL POWER GENERATION

 

141.5

 

152.5

 

7.8%

 

 

 

 

 

 

 

R&D AND INSTITUTIONAL FUNDING

 

8.8

 

8.7

 

(0.4%)

 

 

 

 

 

 

 

TOTAL O&M BUDGET

 

281.2

 

295.2

 

5.0%

 

 

 

 

 

 

 

FUEL

 

 

 

 

 

 

     OIL

 

65.6

 

37.8

 

(42.4%)

     GAS

 

464.4

 

524.0

 

12.8%)

     HEDGING

 

0.5

 

0.2

 

(60.0%)

TOTAL FUEL BUDGET

 

530.5

 

562.0

 

5.9%

 

 

 

 

 

 

 


 

EXHIBIT “10-A”
Page 2 of 3

CAPITAL

2008 BUDGET

($ MILLIONS)

 

 

 

 

 

 

 

 

 

 

%

 

 

2007

 

2008

 

 

CHANGE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TRANSMISSION

 

31.1

 

23.4

 

 

(24.8%)

 

 

 

 

 

 

 

 

POWER GENERATION

 

 

 

 

 

 

 

     POWER GENERATION HQ.

 

0.4

 

0.8

 

 

 

     BLENHEIM - GILBOA

 

24.8

 

26.1

 

 

 

     CHARLES POLETTI

 

0.2

 

0.2

 

 

 

     R.M. FLYNN

 

7.9

 

0.6

 

 

 

     NIAGARA

 

399.1

 

17.4

 

 

 

     ST. LAWRENCE

 

37.4

 

39.8

 

 

 

     500 MW

 

6.9

 

7.4

 

 

 

     SCPP PROJECT

 

1.8

 

0.2

 

 

 

 

 

478.5

 

92.5

 

 

(80.7%)

 

 

 

 

 

 

 

 

ADMINISTRATION SUPPORT

 

33.1

 

26.4

 

 

(20.2%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL CAPITAL BUDGET

 

542.7

 

142.3

 

 

(73.8%)

 

 

 


 

EXHIBIT “10-A”
Page 3 of 3

ENERGY SERVICES

2008 BUDGET

($ MILLIONS)

 

 

 

 

 

 

 

 

 

 

 

 

%

 

 

2007

 

2008

 

 

CHANGE

 

 

 

 

 

 

 

 

ENERGY CONSERVATION

 

 

 

 

 

 

 

     SENY CUSTOMER PROGRAMS

 

55.2

 

58.8

 

 

 

     OTHER NYPA-FUNDED PROGRAMS

 

35.6

 

39.8

 

 

 

     PETROLEUM OVERCHARGE RESTITUTION PROGRAM

 

2.5

 

2.5

 

 

 

     ENVIRONMENTAL BOND ACT AND BOE PROGRAMS

 

8.2

 

2.7

 

 

 

     OFFSET EMISSIONS PROJECTS

 

0.7

 

1.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ENERGY SERVICES BUDGET

 

102.2

 

104.8

 

 

2.5%

 

 

 

 

 

 

 

 


 

 

11.           Approved Budget and Financial Plan Information Pursuant to Regulations of the Office of the State Comptroller                     

 

SUMMARY

 

“In accordance with regulations of the Office of the State Comptroller (‘OSC’), the Trustees are requested to approve a 2008 annual budget and four-year financial plan and authorize: (i) making the approved budget and four-year financial plan available for public inspection at not less than five convenient public places throughout New York State, (ii) submitting the approved budget and four-year financial plan to OSC and (iii) posting the approved budget and four-year financial plan on the Authority’s website.

 

BACKGROUND

 

                “OSC implemented new regulations in March 2006 that address the preparation of annual budgets and four-year financial plans by ‘covered’ public authorities, including the Authority.  (See 2 NYCRR Part 203 (‘Part 203’), attached as Exhibit ‘11-A.’)  These regulations establish various procedural and substantive requirements, discussed below, relating to the budgets and financial plans of public authorities.

 

DISCUSSION

 

“Part 203 sets forth specific requirements in connection with submitting, formatting, preparing supporting documentation for and monitoring annual budgets and financial plans of public authorities.  On September 25, 2007, the Trustees approved for public release the Authority’s proposed 2008 budget and four-year financial plan pursuant to Part 203.

 

“Under Part 203, it is now necessary and appropriate for the Trustees to adopt an approved 2008 budget and four-year plan (attached as Exhibit ‘11-B’).  The approved 2008 budget and four-year plan must be available for public inspection not less than seven days before the commencement of the next fiscal year and the availability for public inspection must be for a period of not less than 45 days and in not less than five convenient public places throughout the State.  The approved budget and four-year plan must be submitted to OSC, via electronic filing through the Public Authorities Reporting Information System maintained by OSC and the Authority Budget Office, within seven days of approval by the Trustees.  The regulations also require the Authority to post the proposed budget and four-year financial plan on its website.

 

“Under Part 203, each approved budget and four-year financial plan must be shown on both an accrual and cash basis and be prepared in accordance with generally accepted accounting principles; be based on reasonable assumptions and methods of estimation; be organized in a manner consistent with the public authority’s programmatic and functional activities; include detailed estimates of projected operating revenues and sources of funding; contain detailed estimates of personal service expenses related to employees and outside contractors; list detailed estimates of non-personal service operating expenses and include estimates of projected debt service and capital project expenditures. 

               

“Other key elements that must be incorporated in each approved budget and four-year financial plan are a description of the budget process and the principal assumptions, as well as a self-assessment of risks to the budget and financial plan.  Additionally, the approved budget and financial plan must include a certification by the chief operating officer (defined as the executive officer responsible for overseeing the day-to-day activities of an authority) that, to the best of his or her knowledge and belief after reasonable inquiry, the proposed budget and financial plan is based on reasonable assumptions and methods of estimation and that the Part 203 regulations have been satisfied.

 

“Finally, as indicated in the proposed budget and four-year financial plan, the approved budget and four-year financial plan uses updated estimates of generation, fuel prices, electric prices, operation and maintenance expenses, capital costs and other revenue and expense items.  The approved budget and four-year financial plan includes a section discussing the differences between the proposed and approved budget and four-year financial plan.

FISCAL INFORMATION

 

                “There is no anticipated fiscal impact.

 

RECOMMENDATION

 

“The Vice President – Controller recommends that the Trustees approve the 2008 annual budget and four-year financial plan and authorize: (i) making the approved budget and four-year financial plan available for public inspection at no less than five convenient public locations throughout New York State, (ii) submitting the approved budget and four-year financial plan to the Office of the State Comptroller in the prescribed format and (iii) posting the approved budget and four-year financial plan on the Authority’s website.

 

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

 

                Mr. Thomas Davis presented the highlights of staff’s recommendations to the Trustees.  Chairman McCullough explained that the proposed budget and financial plan had been on the agenda at the September Trustees’ Meeting and that the actions called for in this item were in compliance with regulations of the Office of the State Comptroller.

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

 

RESOLVED, That pursuant to 2 NYCRR Part 203, the attached 2008 annual budget and four-year financial plan, including its certification by the President and Chief Executive Officer, is approved in accordance with the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That pursuant to 2 NYCRR Part 203, the Corporate Secretary be, and hereby is, authorized to make the approved budget and four-year financial plan available for public inspection at not less than five convenient public places throughout New York State, submit the approved budget and four-year financial plan to the Office of the State Comptroller in the prescribed format and post the approved budget and four-year financial plan on the Authority’s website; 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, General Counsel and Chief of Staff.


 

12.           Compliance Requirements - Critical Cyber Security - Capital Expenditure Authorization

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve capital expenditure funding in the amount of $7 million for the implementation of upgrades for Critical Cyber Security to achieve compliance with new Federal Energy Regulatory Commission (‘FERC’) standards.

 

BACKGROUND

 

“In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services or equipment purchase contracts in excess of $3 million, as well as personal services contracts in excess of $1 million if low bidder, or $500,000 if sole source or non-low bidder, requires Trustees’ approval.

“FERC adopted new Reliability Standards for Cyber Security in the Bulk Power System on August 6, 2007.  These standards were developed and issued by the North American Electric Reliability Corporation (‘NERC’) in 2006.  The proposed standards require owners and operators of the grid to establish plans, protocols and controls to safeguard physical and electronic access to systems, train personnel on security matters, report security incidents and be prepared to recover information.

 

“The new reliability standards for cyber security are represented in eight Critical Infrastructure Protection (CIP) standards:

 

 

 

 

 

 

 

 

 

“These eight new standards provide a comprehensive set of requirements to protect the bulk power system from malicious cyber attacks.  Because of the scope of facilities covered by these standards and the investment in security upgrades required by most utilities, the implementation plan calls for a two-year phase-in to achieve full compliance with all requirements.  The utility industry will be making progressive improvements in security measures through the end of 2009 to meet the new standards.


 

Term

Definition

Bulk Electric Systems

Electrical generation resources, transmission lines, interconnections with neighboring systems and associated equipment, generally operated at voltages of 100 kV or higher.

Critical Assets

Facilities, systems, and equipment which, if destroyed, damaged, degraded or otherwise rendered unavailable, would affect the reliability or operability of the Bulk Electric System.

Cyber Assets

Programmable electronic devices and communication networks, including hardware, software and data.

Critical Cyber Assets

Cyber Assets that are essential to the reliable operation of Critical Assets.

Electronic Security Perimeter

Logical boundary surrounding a network to which Critical Cyber assets are connected and for which access is controlled.

Physical Security Perimeter

Physical completely enclosed border (six walls) surrounding computer rooms, telecommunications rooms, operations centers and other locations in which Critical Cyber Assets are housed and for which access is controlled.

Critical Cyber Incident

Any malicious act or suspicious event that compromises, or was an attempt to compromise, the Electronic Security Perimeter or Physical Security Perimeter of a Critical Cyber Asset, or disrupts, or was an attempt to disrupt, the operation of a Critical Cyber Asset.

 

“The utility industry must be compliant by the end of 2009 or face penalties and sanctions.  The following table lists the financial impacts.

 

Potential Utility Fines

 

Violation Severity Level

Violation
Risk
Factor

Lower

Moderate

High

Severe

Range Limits

Range Limits

Range Limits

Range Limits

Low

High

Low

High

Low

High

Low

High

Lower

$1,000

$    3,000

$2,000

$    7,500

$  3,000

$  15,000

$  5,000

$     25,000

Medium

$2,000

$  30,000

$4,000

$100,000

$  6,000

$200,000

$10,000

$   335,000

High

$4,000

$125,000

$8,000

$300,000

$12,000

$625,000

$20,000

$1,000,000

 

DISCUSSION

 

“The Authority has developed a plan to achieve compliance with the new cyber security standards by mid 2009.  This plan requires a team effort by Power Generation, Transmission, the Office of the Inspector General and Information Technology.  This work, which is under way, will require additional hardware and software systems to be procured and implemented in 2008-09.  Authority policies and procedures will need to be reviewed and revised, as required, to ensure compliance.  The major portions of this work include:

 

 

“All of the above efforts will begin in 2008 and some will not be completed until 2009.  Expenditures of $4.2 million are planned for 2008, with $2.8 million planned for 2009.

 

FISCAL INFORMATION

 

                “Payments for capital expenditures will be made from the Capital Fund.  Funding for subsequent years will be included in the budget submittals for those years.

 

RECOMMENDATION

 

“The Chief Information Officer – Information Technology recommends that the Trustees approve capital expenditures of $7 million for Critical Cyber Security compliance requirements.

 

                “The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Corporate Services and Administration, the Executive Vice President and Chief Financial Officer, the Executive Vice President – Energy Marketing and Corporate Affairs, the Senior Vice President and Chief Engineer – Power Generation, the Senior Vice President – Transmission, the Inspector General and Vice President – Corporate Security and I concur in the recommendation.”

 

                Mr. Dennis Eccleston presented the highlights of staff’s recommendations to the Trustees.  Responding to a question from Chairman McCullough, Mr. Eccleston said that this request covered critical cyber security expenditures to be made in 2008 and 2009.

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

 

RESOLVED, That Capital Expenditures are hereby approved in accordance with the Authority’s Expenditure Authorization Procedures, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount and for the purpose listed below:

 

                                                                                                                                Expenditure

                                                Capital                                                                   Authorization

 

                Critical Cyber Security

                Compliance Requirements

 

                Current Request                                                                 $7,000,000

                TOTAL AMOUNT AUTHORIZED                  $7,000,000

 

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, General Counsel and Chief of Staff.

 


 

13.              Procurement (Services) and Other Contracts – Business Units and Facilities – Awards                
 

                The President and Chief Executive Officer submitted the following report:


SUMMARY

“The Trustees are requested to approve the award and funding of the multiyear procurement contracts listed in Exhibit ‘13-A’ for the Authority’s Business Units/Departments and Facilities.  Detailed explanations of the nature of such services, the bases for the new awards if other than to the lowest-priced bidders and the intended duration of such contracts, are set forth in the discussion below.

BACKGROUND

“Section 2879 of the Public Authorities Law and the Authority’s Guidelines for Procurement Contracts require the Trustees’ approval for procurement contracts involving services to be rendered for a period in excess of one year.

“The Authority’s Expenditure Authorization Procedures (‘EAPs’) require the Trustees’ approval for the award of non-personal services, construction or equipment purchase contracts in excess of  $3 million, as well as personal services contracts in excess of $1 million if low bidder, or $500,000 if sole source or non-low bidder.

DISCUSSION

“The terms of these contracts will be more than one year; therefore, the Trustees’ approval is required.  Except as noted, all of these contracts contain provisions allowing the Authority to terminate the services for the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  Approval is also requested for funding all contracts, which range in estimated value from $10,000 to $6 million.  Except as noted, these contract awards do not obligate the Authority to a specific level of personnel resources or expenditures.

“The issuance of multiyear contracts is recommended from both cost and efficiency standpoints.  In many cases, reduced prices can be negotiated for these long-term contracts.  Since these services are typically required on a continuous basis, it is more efficient to award long-term contracts than to re-bid these services annually.

Contracts in Support of Business Units/Departments and Facilities:

Business Services

                “The four contracts with Deloitte & Touche LLP, PA Consulting Group, Satyam Computer Services Ltd. and The Brattle Group (‘Deloitte,’ ‘PACG,’ ‘Satyam’ and ‘Brattle,’ respectively) (Q07-4134; PO#s TBA) would become effective on or about December 19, 2007, subject to the Trustees’ approval.  The purpose of these contracts is to provide for risk management consulting services within three primary areas: risk modeling, fair value determination or validation of derivative transactions and risk management consulting (in connection with internal controls, hedge effectiveness, trading controls, counterparty credit and other matters, as may be required).  Bid documents were downloaded electronically from the Authority’s Procurement website by 43 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Four proposals were received and evaluated.  A thorough review of the proposals indicated that no single firm was fully responsive to all requirements set forth in the Request for Proposals (‘RFP’).  Each firm demonstrated specific expertise, experience, skills, strengths and qualifications in different areas that complement each other and, which taken as a whole, would provide the Authority with the ability to award specific well-defined tasks to the best-qualified firm that can complete each task most efficiently.  Staff therefore recommends award of contracts to all four bidders, Deloitte, PACG, Satyam and Brattle, respectively.  The intended term of these contracts is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the aggregate total amount expected to be expended for the term of the contracts, $2.4 million.

“The contract with Avotus Corporation (‘Avotus’) (Q07-4095; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for telecommunications expense management services for the Authority’s wireline and wireless telecommunications assets.  The objective is to determine the best, most cost-effective outsourced solution to manage such services as contract compliance, sourcing, ordering and provisioning, inventory, usage, business intelligence, invoice management and dispute resolution under one long-term service agreement.  Bid documents were downloaded electronically from the Authority’s Procurement website by 36 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Nine proposals were received and evaluated.  The evaluation criteria included technical qualifications, functional qualifications, experience, company/staffing resources and responsiveness to the bid requirements.  Three firms were eliminated in the first evaluation round; the remaining six firms were invited to make presentations to Authority staff, resulting in the elimination of four additional firms.  Staff recommends award of a contract to Avotus, the lowest-priced bidder (of the two remaining qualified bidders), which provides additional functionality to better manage such Authority assets and expenses.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $330,000 (including contingency).

Corporate Services and Administration

“The four contracts with C.T. Male Associates, P.C., Dana L. Drake, L.S., Stantec Consulting  Services, Inc. and TVGA Consultants (‘CT Male,’ ‘Drake,’ ‘Stantec’ and ‘TVGA,’ respectively) (Q07-4163; PO#s TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of these contracts is to provide for regional surveying and mapping services in support of the routine operation and maintenance of all Authority facilities and offices, as well as ancillary projects and transmission lines, as may be required.  In addition to property surveys, these services are required to support engineering, construction, licensing, transmission, environmental and, occasionally, legal and marketing initiatives.  Since the existing contracts for such services expire at the end of the year, and the need for such services is ongoing, staff prepared a new RFP.  Bid documents were downloaded electronically from the Authority’s Procurement website by 67 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Nineteen proposals were received and evaluated on weighted criteria that included, but were not limited to, each firm’s experience, staff qualifications, technical proposal, ability to perform the work and meet schedules/deadlines and quality assurance/quality control.  The proposals were evaluated separately for each region.  Each firm selected will provide services for Authority facilities in a specific region of the State (Blenheim-Gilboa, St. Lawrence, Southeastern New York (‘SENY’), including the White Plains Office/Poletti/Small Clean Power Plants, Niagara and Clark Energy Center regions and/or related counties, respectively).  Based on pricing and qualifications, staff recommends award of contracts to the following firms: C. T. Male for the Blenheim-Gilboa and St. Lawrence regions, Drake for the St. Lawrence region (to continue work related to previously performed surveys and as a backup to the C. T. Male contract), Stantec for the SENY region and TVGA for the Niagara and Clark Energy Center regions.  The intended term of these contracts is up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the aggregate total amount expected to be expended for the term of the contracts, $6 million.  Total commitments and expenditures for all four contracts will be tracked against the approved total.

“The three contracts with Kucera International Inc. (‘Kucera’), Aero-Metric, Inc. and James W. Sewall Company (‘Sewall’) (Q07-4166; PO#s TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of these contracts is to provide for statewide photogrammetric services (including aerial photography, mapping support and associated analyses) in support of the routine operation and maintenance of all Authority facilities and offices, ancillary projects and transmission lines, as may be required.  Such services are needed to support real estate, environmental, operations and relicensing activities, on an ‘as required’ basis, and, especially, to identify any problems along the Authority’s 1,000 miles of transmission line right-of-way.  Since the existing contract for such services expires at the end of the year, and the need for such services is ongoing, staff prepared a new RFP.  Bid documents were downloaded electronically from the Authority’s Procurement website by 38 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Ten proposals were received and evaluated on weighted criteria that included, but were not limited to, each firm’s experience, staff qualifications, technical proposal, ability to perform the work and meet schedules/deadlines and quality assurance/quality control.  Based on pricing and qualifications, staff recommends award of contracts to three firms:  Kucera, Aero-Metric and Sewall, the three lowest-priced bidders that were responsive to the bid requirements and qualified to perform the work.  This will afford the Authority additional flexibility and competitive pricing.  The intended term of these contracts is up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total aggregate amount expected to be expended for the term of the contracts, $500,000.  Total commitments and expenditures for all three contracts will be tracked against the approved total.

“The four contracts with Alexander Building Corporation, C.W. Brown, Inc., Construction Force Services, Inc. and Scully Construction LLC (‘Alexander,’ ‘CWB,’ ‘CFS’ and ‘Scully,’ respectively) (Q07-4171; PO#s TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of these contracts is to provide for on-call general contracting services at the Authority’s Clarence D. Rappleyea Building in White Plains.  Bid documents were downloaded electronically from the Authority’s Procurement website by 19 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Five proposals were received and evaluated.  Following receipt of the original proposals, a Post-Bid Addendum was issued to the five bidders to clarify labor rate pricing.  Four bidders submitted responses, which were further evaluated by Authority staff.  Based on the 2008 project schedule and anticipated project list for subsequent years, staff recommends the award of contracts to four firms: Alexander, CWB, CFS and Scully, the lowest-priced bidders that were responsive to the bid requirements and are qualified to perform the work.  The award of multiple contracts will afford the Authority sufficient resources and flexibility to complete all requisite work in a timely manner, and will keep prices competitive.  The intended term of these contracts is up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the aggregate total amount expected to be expended for the term of the contracts, $6 million.  Total commitments and expenditures for all four contracts will be tracked against the approved total.

“The contract with E. K. Ward & Associates, Inc., a New York State certified Minority/Woman-Owned Business Enterprise (‘M/WBE’) (Q07-4162; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for executive coaching services to enhance the performance and/or development of individuals within the Authority.  Bid documents were downloaded electronically from the Authority’s Procurement website by 25 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Nine proposals were received and evaluated.  Staff recommends award of a contract to E. K. Ward, the most technically qualified firm with reasonable pricing, in accordance with the Authority’s Guidelines for Procurement Contracts pertaining to the award of personal services contracts.  The intended term of this contract is up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $500,000.

Energy Marketing and Corporate Affairs

Public and Governmental Affairs

“The contract with AG Design (Q02-4048; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for on-premises Macintosh computer graphics training for the Authority’s graphic communications group.  Bid documents were downloaded electronically from the Authority’s Procurement website by 12 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Four proposals were received and evaluated.  Staff recommends award of a contract to AG Design, the lowest-priced bidder that meets the bid requirements and is qualified to perform the services.  The intended term of this contract is two years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $10,000.

Energy Services and Technology

“The two contracts with Airmatic Compressor Systems, Inc. (‘Airmatic’) and Wood Brothers Air Compressors, LLC (‘Wood Brothers’) (Q07-4159; PO#s TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of these contracts is to provide for audits and site surveys for energy-efficient compressed air system replacement or upgrade for various facilities throughout the five boroughs of New York City and in Westchester County, as part of the Authority’s Energy Services program.  Bid documents were downloaded electronically from the Authority’s Procurement website by 18 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Four proposals were received and evaluated.  Staff recommends award of two contracts, one to Airmatic and one to Wood Brothers, the lowest-priced bidders that meet the bid requirements and are qualified to perform the work.  The award of two contracts would afford the Authority additional resources to complete this work.  The intended term of these contracts is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the combined total amount expected to be expended for the term of the contracts, $300,000.  It should be noted that all costs will be recovered by the Authority.

“The contract with the Electric Power Research Institute (‘EPRI’; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for the Authority’s participation in the full portfolio of EPRI Environment sector programs (which are in addition to the Authority’s existing membership agreement with EPRI).  The Authority has participated in a very limited number of Environment sector programs under the membership contract with EPRI, which included air quality, electromagnetic fields, fish protection and hydroelectric generation study areas.  Developments related to environmental issues affecting the Authority’s generation and transmission capabilities, coupled with the Authority’s expanded role in urban fossil generation, suggest that the Authority could gain significant value by expanding its participation in the EPRI Environment sector.  Participation in program areas associated with the regulatory response to greenhouse gas control, the relationship between air quality and adverse health outcomes and environmental issues associated with transmission facility maintenance would bring value to the Authority’s efforts to meet both its obligations as a public power producer and its strategic initiative to demonstrate environmental leadership.  Additionally, participation in the EPRI occupational health and safety target (program) would further support the Authority’s strategic objective to be an industry leader in safety performance.  The intended term of this contract is two years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $890,000.  It should be noted that EPRI has offered significant discounts to members that agree to a multiyear, full-portfolio purchase, resulting in a 50% discount for the first year and a 37.5% discount for the second year (which is less than the cost of adding the additional programs on an individual basis).

Power Resource Planning and Acquisition

“Effectively meeting the in-city capacity needs of its New York City governmental customers is one of the Authority’s most important priorities.  The Authority is currently in the process of determining how best to meet the shortfall in such capacity following the anticipated closure of its Charles Poletti Power Project in 2010.  Options being considered include purchase of capacity through a competitive bid process and/or acquiring assets providing such capacity.  To this end, staff conducted an emergency competitive bid to provide for consulting services to support an asset valuation analysis of the Ravenswood 2450 MW Generating Plant in order to determine whether all or part of this facility could be part of the Authority’s New York City governmental customer supply portfolio.  Due to the urgency in retaining an appropriate advisor to perform this work as soon as possible in order to support an anticipated bid schedule set by the Public Service Commission, bid documents were sent to seven qualified firms that were invited to submit proposals.  Three proposals were received and evaluated.  Staff recommended the award of the subject contract to Levitan and Associates, Inc. (‘LAI’), the lowest-priced bidder that is also well-qualified to perform these services.  LAI provided an excellent description of the expected work tasks to perform the evaluation and associated work, demonstrating a good understanding of the process.  In addition, the firm has the necessary experience to effectively complete the asset valuation, with specific experience in performing valuations of generation assets in New York City on behalf of other area utilities and investors, and has established working relationships with the various governmental and regulatory organizations involved in the upcoming processes.  Due to the need to commence services immediately, the contract with LAI (4500148082) became effective on September 25, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The intended term of this contract is up to two years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $1,000,000.  It should be noted that the Authority will seek to recover all costs of this contract from the benefiting customers.

Power Generation

“The contract with American Electrical Testing Co., Inc. (‘AETC’; Q07-4132; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for switchyard maintenance services for nine of the Authority’s Small Clean Power Plants (‘SCPPs’) at six SCPP sites (as well as for the Vernon Boulevard site, on an emergency basis) to ensure their continued integrity and reliable operation.  Services include preventative maintenance at prescribed intervals, general inspections and testing of the protective relay system, including those sites associated with feeder protection and interconnection to the local utility.  Bid documents were downloaded electronically from the Authority’s Procurement website by 24 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Five proposals were received and evaluated.  Following receipt of the original proposals, a Post-Bid Addendum was issued to the five original bidders to request pricing for a reduced work scope.  Five responses were received and evaluated.  Staff recommends award of a contract to AETC, the lowest-priced bidder that is qualified to perform the work and meets the bid requirements.  The intended term of this contract is two years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $1 million (including contingency).

“The contract with Bancker Construction Corp. (‘Bancker’; 6000083530; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for excavating services for the Charles Poletti Power Project.  Services include all labor, supervision, equipment and materials to excavate and reinforce trenches/holes of various depths and lengths to uncover underground water, steam fuel, oil and electrical utilities; pump any water out of any excavations that become filled due to rain and leakage and respond to any emergent excavation issues in a timely manner.  Bid documents were sent to four firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommends award of a contract to Bancker, the lowest-priced evaluated bidder that is qualified to perform such work.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $300,000.

“The contract with Brockway Sanitation Service (‘Brockway’; 6000086476; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for sewage removal and disposal services for the St. Lawrence/FDR Power Project.  Services include annual pumping of several septic tanks and other holding tanks on an ‘as needed’ basis, transportation and sewage disposal at a registered wastewater treatment facility.  Bid documents were sent to two firms, including those that may have responded to a notice in the New York State Contract Reporter.  One proposal was received and evaluated.  Staff recommends award of a contract to Brockway, the sole responding bidder, which is qualified to perform such work and which has provided satisfactory service under the current contract.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $100,000.

“Due to the need to commence services, the contract with Buffalo Industrial Diving Co., Inc. (‘BIDCO’; 4600001847) became effective on November 1, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for diving services to perform penstock inspections at the Niagara Power Project on an ‘as needed’ basis.  Inspection services include, but are not limited to, providing all labor, equipment and materials to perform video and, as necessary, visual inspection of the internal surface of the penstock (either with a remotely operated vehicle or by human personnel).  Such inspections will include a detailed examination of each weld in the penstock (a complete 360-degree sweep of each weld).  Such inspections must report any cracking, scraping or other abnormal conditions found in steel, and any debris or other forms of underwater development or collection.  Bid documents were downloaded electronically from the Authority’s Procurement website by 10 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Three proposals were received and evaluated.  Staff recommended award of the subject contract to BIDCO, the lowest-priced evaluated bidder that is qualified to perform such work.  The intended term of this contract is three years and two months, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $150,000.

“The contract with C & S Engineers, Inc. (Q07-4165; PO# TBA) would become effective on or about December 19, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for design engineering and inspection services for the brick façade and window project in the Administration Building at the St. Lawrence/FDR Power Project.  Services shall include providing all labor, materials, equipment and supervision necessary to produce construction drawings and specifications, as well as to provide inspection services for the project during the design phase, and also to provide support through construction and project closeout/as-built acceptance, as needed.  Bid documents were downloaded electronically from the Authority’s Procurement website by 33 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Three proposals were received and evaluated.  Staff recommends award of a contract to C & S Engineers, the lowest-priced bidder that meets the bid requirements and is qualified to perform the work.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $439,000.

“The two contracts with Chalmers & Kubeck, Inc. and Frank D. Riggio Company, Inc. (Q07-4180; PO#s TBA) would become effective on or about January 1, 2008, subject to the Trustees’ approval.  The purpose of these contracts is to provide for all labor, supervision, tools and equipment to perform repairs on globe, gate, check, safety and plug valves at the Authority’s Charles Poletti Power Plant, 500 MW Combined Cycle Plant, Richard M. Flynn Power Plant and Small Clean Power Plants.  The contractors are required to troubleshoot, disassemble valves and provide a written inspection report with recommendations for repair of the aforementioned plant valves, including boiler safety valves.  The contractors will provide such on-call services on a 24/7, ‘as needed’ basis and will respond within a few hours of receiving the call for service.  Bid documents were downloaded electronically from the Authority’s Procurement website by 13 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommends award of contracts to both bidders, Chalmers & Kubeck and Frank D. Riggio, which are qualified to perform the work and meet the bid requirements.  The intended term of these contracts is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the aggregate total estimated amount expected to be expended for the term of the contracts, $500,000.

“The contract with General Electric Co. (‘GE’; 4600001844) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for all labor, supervision, equipment, materials, tools and supplies necessary to clean up to five hydroelectric generators at the St. Lawrence/FDR Power Project, using a dry ice (CO2) cleaning process, and to install six PDA couplers into the high-voltage winding system per the Authority’s specification and drawings.  Bid documents were sent to two firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommends award of a contract to GE, the lower-priced bidder, which is qualified to perform such work.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $250,000.

“The contract with Integrated Systems and Power, Inc. (‘Integrated S&P’; Q07-4138; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for an annual fire system inspection and maintenance agreement for five Small Clean Power Plant (‘SCPP’) sites (excluding Vernon Boulevard and Brentwood).  Services include annual testing and certification of all applicable equipment and components of the Siemens Cerberius Pyrotronics MXL-IQ fire system installed at the respective SCPPs.  Bid documents were downloaded electronically from the Authority’s Procurement website by 11 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommends award of the subject contract to Integrated S&P, the lowest-priced bidder, which is qualified to perform the work and meets the bid requirements.  The intended term of this contract is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $105,000.

“The contract with Morrisonville Septic Tank Service (‘Morrisonville’; 6000086475; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for sewage removal and disposal services for the Plattsburgh substation.  Services include annual pumping of a septic tank on an ‘as needed’ basis, transportation and sewage disposal at a registered wastewater treatment facility.  Bid documents were sent to two firms, including those that may have responded to a notice in the New York State Contract Reporter.  One proposal was received and evaluated.  Staff recommends award of a contract to Morrisonville, the sole responding bidder, which is qualified to perform such work and which has provided satisfactory service under the current contract.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $20,000.

“The contract with Most Healthcare Systems, Inc. (Q07-4188; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for annual medical/occupational physical examinations and other medical services for approximately 75 employees at the Charles Poletti Power Project, as required by all applicable safety and health standards.  Such examinations will be performed on site in a medical trailer to be provided by the aforementioned firm.  Bid documents were downloaded electronically from the Authority’s Procurement website by 12 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Four proposals were received and evaluated.  Staff recommends award of a contract to Most Healthcare, the lowest-priced bidder that meets the bid requirements and is qualified to provide the services.  The intended term of this contract is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $80,000.

FISCAL INFORMATION

“Funds required to support contract services for various Business Units/Departments and Facilities have been included in the 2008 Approved O&M Budget.  Funds for subsequent years, where applicable, will be included in the budget submittals for those years.  Payment will be made from the Operating Fund.

“Funds required to support contract services for capital projects have been included as part of the approved capital expenditures for those projects and will be disbursed from the Capital Fund in accordance with the project’s Capital Expenditure Authorization Request.  Payment for the contracts in support of Energy Services Programs will be made from the Energy Conservation Effectuation and Construction Fund.  All costs, including Authority overheads and the cost of advancing funds, will be recovered by the Authority consistent with other Energy Services and Technology Programs.

RECOMMENDATION

“The Senior Vice President – Public and Governmental Affairs, the Vice President – Procurement and Real Estate, the Vice President – Engineering, the Vice President – Project Management, the Vice President – Environment, Health and Safety, the Vice President and Chief Risk Officer, the Director – Energy Services, the Director – Power Resource Planning and Acquisition, the Director – Human Capital and Development, the Chief Information Officer, the Chief Technology Development Officer, the Director – Corporate Support Services, the Regional Manager – Northern New York, the Regional Manager – Western New York, the Regional Manager – Central New York and the Regional Manager – Southeastern New York recommend the Trustees’ approval of the award of multiyear procurement contracts to the companies listed in Exhibit ‘13-A’ for the purposes and in the amounts set forth above.

                “The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Corporate Services and Administration, the Executive Vice President – Chief Financial Officer, the Executive Vice President – Energy Marketing and Corporate Affairs, the Senior Vice President – Energy Services and Technology, the Senior Vice President and Chief Engineer – Power Generation and I concur in the recommendation.”

 

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the award and funding of the multiyear procurement services contracts set forth in Exhibit “13-A,” attached hereto, are hereby approved for the period of time indicated, in the amounts and for the purposes listed therein, as recommended 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, 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, General Counsel and Chief of Staff.


 


14.           Procurement (Services) and Other Contracts – Business Units and Facilities – Extensions, Approval of Additional Funding and Increases in Compensation Ceiling

 

                The President and Chief Executive Officer submitted the following report:


SUMMARY

 

“The Trustees are requested to approve the continuation and funding of the procurement (services) and other contracts listed in Exhibit ‘14-A’ in support of projects and programs for the Authority’s Business Units/Departments and Facilities.  The Trustees are also requested to approve an increase in the compensation ceiling of the contracts with Quantec LLC and CEA Technologies, Inc.  Detailed explanations of the nature of such services, the reasons for extension, the additional funding required and the projected expiration dates are set forth below.

BACKGROUND

“Section 2879 of the Public Authorities Law and the Authority’s Guidelines for Procurement Contracts require the Trustees’ approval for procurement contracts involving services to be rendered for a period in excess of one year.

“The Authority’s Expenditure Authorization Procedures (‘EAPs’) require the Trustees’ approval when the cumulative change order value of a personal services contract exceeds the greater of $250,000 or 35% of the originally approved contract amount not to exceed $500,000, or when the cumulative change order value of a non-personal services, construction, equipment purchase or non-procurement contract exceeds the greater of $500,000 or 35% of the originally approved contract amount not to exceed $1 million.

DISCUSSION

“Although the firms identified in Exhibit ‘14-A’ have provided effective services, the issues or projects requiring these services have not been resolved or completed, and the need exists for continuing these contracts.  The Trustees’ approval is required because the terms of these contracts exceed one year and/or because the cumulative change order limits will exceed the levels authorized by the EAPs in forthcoming change orders.  All of the subject contracts contain provisions allowing the Authority to terminate the services at the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  These contract extensions do not obligate the Authority to a specific level of personnel resources or expenditures.

“Extension of each of the contracts identified in Exhibit ‘14-A’ is requested for one or more of the following reasons: (1) additional time is required to complete the current contractual work scope or additional services related to the original work scope; (2) to accommodate an Authority or external regulatory agency schedule change that has delayed, reprioritized or otherwise suspended required services; (3) the original consultant is uniquely qualified to perform services and/or continue its presence and re-bidding would not be practical or (4) the contractor provides a proprietary technology or specialized equipment, at reasonably negotiated rates, that the Authority needs to continue until a permanent system is put in place.

Contracts in Support of Business Units/Departments and Facilities:

Energy Marketing and Corporate Affairs

Public and Governmental Affairs

“At their meeting of June 29, 2004, the Trustees approved the award of a contract to Stone & Webster, Inc. (‘S&W’; 4500092440) in the amount of $750,000, to provide for design services for three Habitat Improvement Projects (‘HIPs’) at Coles Creek, Little Sucker Brook and Nichols Island Pool and for improvements to the Wilson Hill Wildlife Management Area (‘WHWMA’) at the St. Lawrence/FDR Power Project, in compliance with the requirements set forth in the New License Settlement Agreement.  The original award, which was competitively bid, became effective on July 1, 2004 for an initial term of 3.5 years, with an option to extend for up to two additional years.  An additional $169,324 was subsequently authorized to perform the geotechnical testing program for WHWMA and Nichols Island HIP, address comments from the Army Corps of Engineers on the WHWMA improvements, revise the WHWMA dike design to reduce costs, assess alternatives to the proposed discharge scheme from WHWMA to the Grasse River and design an alternative discharge (i.e., pump house) for WHWMA.  To date, S&W has completed geotechnical work in support of design work for WHWMA and Nichols Island Pool; the design for WHWMA dike improvements and water control structures; an assessment of an alternate method of discharging water from WHMWA and 90% of the design for the pump house at WHWMA.  Additional work to be completed under this contract includes completion of the design of the WHWMA pump house, support during construction, which is now under way, preparation of record drawings and completion of the design of recreational facilities; the remaining work will be completed in 2008 and 2009.  (No further work on the Little Sucker Brook or Nichols Island Pool HIPs will need to be completed under this contract.  The Coles Creek HIP is complete.)  It should be noted that a new dike designed to separate two WHWMA pools will need to be redesigned and/or relocated due to unsatisfactory subsurface conditions – the presence of a pre-1860 log road under the centerline of the new dike – unearthed during construction.  Work related to this redesign effort will be performed under a separate contract.  A two-year extension is now requested to exercise the contract option to continue the aforementioned services through project completion.  The current contract amount is $919,324; it is anticipated that no additional funding will be required for the extended term.  The Trustees are requested to approve the extension of the subject contract through December 31, 2009, with no additional funding requested.

Marketing and Economic Development

Increase in Compensation Ceiling:

“The contract with Quantec LLC (4500140940) provides for consulting services in connection with the Consolidated Edison Company of New York, Inc. (‘Con Ed’) delivery service rate case, which was initiated earlier this year.  The Authority is obligated to actively intervene in all Con Ed rate cases on behalf of its governmental customers.  The original award, which was competitively bid, became effective on May 25, 2007 for a term of one year, in the amount of $350,000.  An additional $200,000 was subsequently authorized in accordance with the Authority’s EAPs, to support additional settlement negotiations and litigation in the last quarter of 2007.  (Since the Public Service Commission staff rejected an early settlement proposal by Con Edison in early October, the Authority can expect a fully litigated case, unlike the prior such rate case, which moved quickly to settlement discussions and bypassed submittal and review of all briefs.)  A seven-month extension is now requested to enable the consultant to assist the Authority with complex issues assigned to working groups that will likely be established and are expected to meet regularly throughout 2008, as well as to allow additional time for the resolution of the rate case and the consultant’s participation in any additional customer meetings related to this matter, as may be necessary.  The current contract amount is $550,000; staff anticipates that an additional $200,000 will be required for the extended term.  The Trustees are requested to approve the extension of the subject contract through December 31, 2008, as well as the additional funding requested, thereby increasing the compensation ceiling to $750,000.

Energy Services and Technology

Increase in Compensation Ceiling:   

“At their meeting of December 14, 2004, the Trustees approved the award of a three-year contract to CEA Technologies, Inc. (‘CEATI’; 4500101572) in the amount of $675,000 to provide for the continuation of the Authority’s membership and participation in the activities of 11 Interest Groups of the Canadian Electricity Association.  Such membership and project participation, ongoing since 1999 under previously issued contracts, provide the Authority with an opportunity to collaborate with Canadian and other participating utilities and to identify technology issues and challenges of common concern and work cooperatively to find cost-effective solutions.  Such Interest Groups include: Dam Safety, Hydraulic Plant Life, Water Management, Strategic Options for Sustainable Power Generation, Life Cycle Management of Substation Equipment and Apparatus, Power System Planning and Operation, Transmission Line Asset Management, Overhead Line Design Issues and Wind and Ice Storm Mitigation, Transmission Underground Cables, Electro-Magnetic Tool Program and Customer Energy Solutions.  These groups bring together leading experts from more than 40 participating utilities representing both large and small Canadian, other North American, European and Asian utilities.  Continuing involvement with these Interest Groups provides significant benefits to the Authority by providing access to the latest technical information available in the field, as well as co-funding opportunities for various Authority-sponsored projects.  The existing contract became effective on January 1, 2005.  A three-year extension is now requested in order to provide for the continuation of the aforementioned membership and projects.  For administrative purposes, staff recommends issuing a Change Order to the existing contract rather than issuing a new sole- source award.  The current contract amount is $743,675 (which includes $675,000 previously approved by the Trustees and an additional $68,675 subsequently authorized in accordance with the EAPs); it is anticipated that additional funding in the amount of $875,000 will be required for the extended term, to include Interest Group participation fees, certain Technology Watch fees and specific project participation in the CEATI programs.  The Trustees are requested to approve the extension of the subject contract through December 31, 2010, as well as the additional funding requested, thereby increasing the compensation ceiling to $1,618,675.

FISCAL INFORMATION

“Funds required to support contract services for various Headquarters Office Business Units/Departments and Facilities have been included in the 2008 Approved O&M Budget.  Funds for subsequent years, where applicable, will be included in the budget submittals for those years.  Payment will be made from the Operating Fund.

“Funds required to support contract services for capital projects have been included as part of the approved capital expenditures for those projects and will be disbursed from the Capital Fund in accordance with the Project’s Capital Expenditure Authorization Request (‘CEAR’).

RECOMMENDATION

“The Senior Vice President – Public and Governmental Affairs, the Vice President – Procurement and Real Estate, the Vice President – Environment, Health and Safety, the Executive Director – Licensing, Implementation and Compliance, the Chief Technology Development Officer, the Manager – Power Contracts and the Regional Manager – Northern New York recommend the Trustees’ approval of the extensions, additional funding and increase in compensation ceiling of the procurement contracts discussed within the item and/or listed in Exhibit
‘14-A.’

“The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Corporate Services and Administration, the Executive Vice President – Chief Financial Officer, the Executive Vice President – Energy Marketing and Corporate Affairs, the Senior Vice President – Energy Services and Technology, the Senior Vice President and Chief Engineer – Power Generation, the Senior Vice President – 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 pursuant to the Guidelines for Procurement Contracts adopted by the Authority, each of the contracts listed in Exhibit “14-A,” attached hereto, is hereby approved and extended for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That pursuant to the Authority’s Expenditure Authorization Procedures, increases in the compensation ceilings of the contracts with Quantec LLC and CEA Technologies, Inc. are hereby approved, as recommended in the foregoing report of the President and Chief Executive Officer, in the amounts and for the purposes listed below:


 

 

                                                                Contract Approval               Projected

                                                                (Increase in                             Closing

                O&M                                     Compensation Ceiling)            Date        

 

Provide for consulting services
in connection with the Consoli-
dated Edison Company of New
York, Inc. delivery service rate
case:

 

Quantec LLC

4500140940

 

Previously approved amount                          $350,000                   12/31/08

 

Additional amount authorized                        200,000

per EAPs

 

Additional amount requested                         200,000

 

REVISED COMP. CEILING                      $   750,000

 

Provide for the Authority’s

membership and participation
in the activities of 11 Interest
Groupsof the Canadian
Electricity Assn.:

 

CEA Technologies, Inc.
(“CEATI”)

4500101572

 

Previously approved amount                    $675,000                        12/31/10

 

Additional amount authorized                           68,675

per EAPs

 

Additional amount requested                     875,000

 

REVISED COMP. CEILING               $1,618,675

 

 

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, General Counsel and Chief of Staff.


 

15.           Employees’ Savings Plan – Amendments to Plan

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to amend the Employees’ Savings Plan (the ‘Plan’) to: (a) eliminate the requirement that employees complete one year of service in order to be eligible for the employer matching contributions; (b) provide for the addition of a designated Roth account; (c) authorize non-spousal beneficiaries to roll over distributions into qualified IRAs and (d) add two additional qualifying events for which Plan members could seek a hardship withdrawal (repair of certain qualifying damage to an employee’s principal residence and payments for specific family members’ burial or funeral expenses).  In addition, Trustee approval is sought for the addition of T. Rowe Price Retirement Date Funds to the Plan and the removal of the T. Rowe Price Growth & Income Fund and International Stock Fund from the Plan, with the transfer of the assets of those funds into the
T. Rowe Price Equity Index Trust and the Dodge & Cox International Stock Fund, respectively.

 

BACKGROUND

 

“At their meeting of February 28, 1984, the Trustees approved the implementation of the Employees’ Savings Plan, otherwise known as the 401(k) Plan.  The Plan is designed to provide employees with a means of saving through a tax-deferred compensation arrangement.  Under the Plan, employees may elect to defer receiving part of their salary and to have this deferred compensation invested in a selection of investments.  The Plan also provides for employer matching contributions and employee post-tax contributions.  At present, more than 95% of eligible employees participate in the Plan.  As of December 31, 2006, Plan assets totaled $199,387,222.

 

“The Trustees have provided specific authorization for the Employees’ Savings Plan Committee (‘Plan Committee’) to act on the Trustees’ behalf in certain circumstances.  However, the Plan document states that ‘this authorization does not extend to Plan amendments or modifications reflecting policy determinations, such as, but not limited to, any change of investment options, investment manager or employer match.’  The changes and amendments to the Plan described below which are being submitted to the Trustees for their approval were approved by the Plan Committee, comprising Arnold Bellis, Vice President and Controller (Chair); Thomas Kelly, Executive Vice President, General Counsel and Chief of Staff; Vincent Vesce, Executive Vice President – Corporate Services and Administration; Steven DeCarlo, Senior Vice President - Transmission and Alice Conway, Senior Benefits Administrator.

 

DISCUSSION

 

1.        Employer Matching Contributions

 

“The Plan provides for a one-year waiting period before an employee is eligible to receive the employer match.  In the current recruitment environment, the Authority is looking for enhancements to increase its ability to attract high-caliber talent, particularly in the engineering field.  Overall, despite a competitive employee benefits package, the Plan Committee determined that a change to the one-year waiting period is recommended to allow the Authority to remain competitive in its recruitment efforts.  The one-year waiting period for matching contributions is no longer a common feature in other employers’ Plans.  Based on the Authority’s 2006 experience, the cost is projected to be less than $50,000 per year.  Not every new hire joins the Plan immediately and/or contributes the 6% required for a full match of their contributions.

 

2.        Roth Option

 

“The Plan Committee also voted to add the option of a Roth Account and to amend the Plan accordingly.  As of 2006, 401(k) Plans are allowed to provide for Roth Accounts.  A Roth Account is a separate account to which contributions may be made with after-tax dollars, with the distributions from such an account generally being non-taxable.  This type of account provides an alternative investment opportunity for Plan participants.  An amendment to the Plan is required in order to allow for Roth contributions.


 

        3.     Non-spousal Beneficiaries

 

“The Pension Protection Act of 2006 added a provision that would allow non-spousal beneficiaries to roll over distributions from a 401(k) account to a qualifying account elsewhere.  Pending legislation mandates this as a 401(k) Plan feature; however, that legislation is not likely to be enacted soon.  The Plan Committee has voted to approve an amendment to the Plan to allow for this non-spousal beneficiary rollover.

 

4.     Additional Categories of Hardship Withdrawals

 

“The Internal Revenue Code has also been amended to provide two more events that qualify for a hardship withdrawal.  These events include expenses for repair of damage to a primary residence under enumerated casualty scenarios (such as Hurricane Katrina) and funeral or burial expenses for certain designated family members.  The Plan Committee recommends that the Authority’s Plan be amended to allow for these hardship withdrawals.

 

5.        Addition of New Funds

 

“The Plan Committee has decided to add the T. Rowe Price Retirement Date Funds to the Plan.  These funds are managed funds with a specific retirement date in mind.  Each retirement fund offers a diversified portfolio of mutual funds designed to automatically adjust in line with the targeted date.  The Committee determined that these funds provided a good option for Plan participants who were not interested in actively monitoring their accounts.  The T. Rowe Price funds were reviewed and determined to have better ratings than comparable products offered by other companies.

 

6.        Changes in Investments

 

“The Plan Committee periodically conducts reviews of the Plan’s investment options to make sure they meet Plan participants’ needs and Plan objectives.  The Plan Committee made a decision to remove the T. Rowe Price Growth & Income Fund and replace it with the comparable T. Rowe Price Equity Index Trust, which has a significantly lower overall investment management fee.  In addition, the T. Rowe Price International Stock Fund is recommended to be replaced with the Dodge & Cox International Stock Fund.  The Committee determined that the T. Rowe Price International Stock Fund was not meeting performance expectations and found the Dodge & Cox International Stock Fund to be a preferable option in the international market.  The decision to remove and replace these funds was made after a careful review and analysis of the Plan’s investments.  Performance was not the sole factor in the decision to remove these investments from the Plan; risk, return, diversification and cost were also considered.

 

FISCAL INFORMATION

 

“It is estimated that the cost of the change to the waiting period for the employer match will amount to under $50,000 a year.  Future years’ costs will vary depending on hiring trends.

 

“The other additions and changes to the Plan have no cost impact to the Authority.

 

RECOMMENDATION

 

“The Executive Vice President – Corporate Services and Administration recommends that the Trustees approve these amendments and changes to the Employees’ Savings Plan approved by the Employees’ Savings Plan Committee.

 

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


 

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

 

RESOLVED, That the following Amendments and Changes to the Employees’ Savings Plan (“Plan”) are approved:

 

·         Elimination of the requirement that employees complete one year of service in order to be eligible for the employer matching contributions;

 

·         Addition of  a designated Roth Account to the Plan;

 

·         Authorization for non-spousal beneficiaries to roll over distributions into qualified IRAs;

 

·         Addition of two qualifying events for which Plan members may seek a hardship withdrawal (repair of certain qualifying damage to an employee’s principal residence and payments for specific family members’ burial or funeral expenses);

 

·         Addition of  T. Rowe Price Retirement Date Funds to the Plan; and

 

·         Removal of the T. Rowe Price Growth & Income Fund and International Stock Fund from the Plan and the transfer of those funds’ assets into the T. Rowe Price Equity Index Trust and the Dodge & Cox International Stock Fund, respectively;

 

AND BE IT FURTHER RESOLVED, That the Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President, General Counsel and Chief of Staff. 

 


 

16.           2008 Revolving Credit Agreement

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

“The Trustees are requested to approve a $775 million Revolving Credit Agreement (‘RCA’) with a syndicate of seven banks led by JPMorgan Chase Bank, N. A. (‘JPMorgan’) for an initial term not to exceed February 1, 2011, to replace an expiring agreement that provides liquidity support for the Authority’s Series 1, 2 and 3 Commercial Paper Notes, and to authorize an extension of such RCA not to exceed February 1, 2012.


BACKGROUND

                “The Authority currently has $581 million of Series 1, 2 and 3 Commercial Paper Notes outstanding and expects to issue an additional $125 million to $150 million of additional Notes in 2008.  In accordance with the Commercial Paper Notes Resolution, the Authority is required to maintain in full force and effect a Credit Agreement while the Notes are outstanding.  The current Revolving Credit Agreement will expire on January 31, 2008.

 

DISCUSSION

                “The Authority invited 11 banks having AA ratings from at least one rating agency to submit proposals for a $775 million facility.  Only one proposal for the full $775 million requested was received, and that was from JPMorgan, which would act as agent for a syndicate of seven banks providing the credit facility.

 

                Bank commitments would be as follows:

 

                                JPMorgan Chase Bank, N. A.                            $157,500,000

                                The Bank of Nova Scotia                                    $157,500,000

                                State Street Bank and Trust Company             $110,000,000

                                Landesbank Baden-Wurttemburg                     $100,000,000

                                Bayerische Landesbank                                      $100,000,000

                                BNP Paribas                                                          $100,000,000

                                The Bank of New York                                        $  50,000,000

 

                                Total                                                                       $775,000,000

 

                “The JPMorgan proposal would provide the credit facility for an annual commitment fee of 20 basis points (20/100 of 1%) payable on the unused amount of the facility and equivalent to an average of $1,573,000 per year.  In the event the Authority has to draw on the line, the interest rates would be the higher of the JPMorgan Prime Rate or the Federal Funds rate plus 0.50% for the first 180 days.  The Authority may also select a Eurodollar Rate Loan, which would bear interest based on LIBOR plus a margin that is determined by the Authority’s long-term credit rating.  After 180 days, the loan would convert to a two-year term loan if not repaid.

 

                “There would be annual administrative fees of $15,000 per year payable to JPMorgan and legal fees of its counsel would not exceed $32,000.

 

                “A second proposal for a $300 million liquidity facility was received from Dexia Credit Local (‘Dexia’).  While the limited proposal from Dexia was less expensive at 17 basis points, if the Authority awarded only a portion of the line to the JPMorgan syndicate, pricing on that line would be 22 basis points, or 2 basis points higher than for the entire line.  After analysis, staff determined that awarding the entire line to the JPMorgan syndicate was overall less expensive than having two lines.


 

 

FISCAL INFORMATION

“The annual cost of the proposed line along with the Administrative Agent fee and legal fees will be paid from the Operating Fund.

 

RECOMMENDATION

“The Treasurer recommends that the Trustees: (1) approve the execution of the 2008 Revolving Credit Agreement with JPMorgan and the banks listed above with a borrowing capacity not to exceed $775 million and for an initial term not to exceed February 1, 2011 and (2) authorize an extension of such agreement not to exceed February 1, 2012.

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

 

                Mr. Brian McElroy presented the highlights of staff’s recommendations to the Trustees.  Responding to a question from Chairman McCullough, Mr. McElroy said that the syndicated Revolving Credit Agreement recommended by staff would cost $51,000 less than issuing individual Revolving Credit Agreements.  In response to a question from Trustee Besha, Mr. McElroy said that the Dexia Credit Local proposal had been for $300 million.

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

 

RESOLVED, That the Trustees authorize the execution by the Executive Vice President and Chief Financial Officer, the Vice President – Finance or the Treasurer, subject to the approval of the form thereof by the Executive Vice President, General Counsel and Chief of Staff, on behalf of the Authority, of the 2008 Revolving Credit Agreement (“2008 RCA”) between the Authority and JPMorgan Chase, N. A., as Administrative Agent, and the banks listed in the foregoing report of the President and Chief Executive Officer, with such Agreement having such terms and conditions as the executing officer deems necessary or advisable, such execution to be conclusive evidence of such determinations, provided that such Agreement shall have an initial term not exceeding February 1, 2011 and shall not exceed $775 million in borrowing capacity; and be it further


                RESOLVED, That the Executive Vice President and Chief Financial Officer, the Vice President – Finance or the Treasurer are, and each hereby is, authorized to execute an extension of the 2008 RCA, provided that such extension shall not in the aggregate extend the 2008 RCA beyond February 1, 2012; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President and Chief Financial Officer, the Vice President – Finance, the Treasurer and the Deputy Treasurer are, and each 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; 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, General Counsel and Chief of Staff.


 


17.           Motion to Conduct an Executive Session

 

        “Mr. Chairman, I move that the Authority conduct an Executive Session for the purpose of discussing matters leading to the award of contracts to particular corporations.”  Upon motion duly made and seconded, an Executive Session was held. 


 


18.           Motion to Resume Meeting in Open Session

 

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

 


 

19.           Niagara-Adirondack Tie Line – Acquisition of Property

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize the acquisition of ‘danger tree’ easements by purchase, appropriation or condemnation to remove trees that threaten the continued safe operation of the Niagara-Adirondack Tie Line (‘NATL’).  The proposed easements described in Exhibit ‘19-A’ will encumber 50-foot-wide strips of land adjacent to both the northerly and southerly right-of-way boundaries of the NATL.

 

BACKGROUND

 

“The 300-foot-wide NATL right-of-way runs from the Niagara Power Project to the Edic Substation near Utica and, as the major east-west transmission facility in New York State, is responsible for transporting as much as 6-8% of the State’s total electric load.  The rights-of-way for the NATL were acquired in the early 1960s before the Authority established the policy of acquiring danger tree easements contemporaneously with transmission line easements.  As no such danger tree easement exists abutting the NATL easement from the original acquisition, the Authority has either purchased temporary danger tree permits or permanent easements to remove trees adjacent to the NATL or, in the vast majority of cases, purchased the right to cut individual trees.  Acquisition of danger trees has been increasingly difficult with changes in land use such as suburbanization of areas in the vicinity of Authority transmission lines.

 

“Due to the importance of the NATL to the reliability of electric service in New York, the recently mandated federal compliance criteria and the threat presented by danger trees to both the operation of the line and the health and safety of those people living proximate to the line, it is necessary to acquire permanent tree-cutting rights in these cases.

 

DISCUSSION

 

“The transmission line maintenance department has identified trees on each of the subject properties that threaten the continued safe operation of the NATL.  A danger tree is defined as a tree outside the Authority’s existing easement that, either currently or in the near future, could fall into the transmission line wire security zone, the 15 feet surrounding the transmission line conductor.  Additional criteria used in defining a danger tree include the species, condition and lean of the tree; soil conditions; terrain and other variables that might influence the tree’s potential to fall toward the transmission line conductor.  Such an occurrence could cause a flash-over or possible outage of that transmission line.  In fact, flash-overs, and the consequential outages, played a central role in the August 2003 blackout that severed power to millions of people in the Northeast, the Midwest and Canada.  To prevent these occurrences and their associated hazardous consequences, off-right-of-way trees must be monitored and danger trees eliminated once identified.

 

“The Authority’s Transmission Business Unit has identified six properties that contain danger trees where the Authority is attempting to negotiate easement agreements for the purpose of cutting danger trees outside the current right-of-way (hereinafter ‘danger tree easements’) with the owners.  These properties, located in the Town of Victor, Ontario County, are shown in Exhibit ‘19-A.’  Therefore, it is hereby requested that the Trustees approve the acquisition of these danger tree easements either by purchase or through the use of eminent domain given the importance of the transmission line to the State power grid and the number of trees identified as a threat to the safe operation of the line.  In addition to the reviews of the situation conducted by the transmission line maintenance department and the system forester, the Senior Vice President – Transmission has personally inspected the sites and concurs that the trees must be acquired by either purchase, appropriation or condemnation.

 

FISCAL INFORMATION

 

“Payment will be made from the Operating Fund.


 

 

RECOMMENDATION

 

“The Senior Vice President – Transmission, the Vice President – Environment, Health and Safety and the Director – Real Estate recommend that the Trustees approve the acquisition of the permanent easement rights shown and described on the Niagara Power Project, Niagara-Adirondack Tie Line Map Nos. OV-1438, Parcel No. 1438; OV-1439, Parcel No. 1439; OV-1440, Parcel No. 1440; OV-1441, Parcel Nos. 1441A and 1441B; OV-1442, Parcel No. 1442 and OV-1443, Parcel Nos. 1443A and 1443B by either purchase or eminent domain and further delegate to the President and Chief Executive Officer and/or the Executive Vice President, General Counsel and Chief of Staff the authority to approve the payments to be made for the acquisition of the real property rights.

 

“The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Corporate Services and Administration, the Vice President – Procurement and Real Estate and I concur in the recommendation.”

 

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

 

RESOLVED, That pursuant to the provisions of Article 5, Title 1 of the Public Authorities Law, the Authority hereby finds it necessary to acquire by purchase, appropriation or condemnation the real property shown and described on Power Authority of the State of New York, Niagara Power Project, Niagara-Adirondack Tie Line, Map Nos. OV-1438, Parcel No. 1438; OV-1439, Parcel No. 1439; OV-1440, Parcel No. 1440; OV-1441, Parcel Nos. 1441A and 1441B; OV-1442, Parcel No. 1442 and OV-1443, Parcel No. 1443 and hereby finds and determines that such real property is required for a public use and hereby determines that such real property is reasonably necessary for the operation and maintenance of the Niagara-Adirondack Tie Line, and that because of the urgent situation caused by the danger trees, the public interest will be endangered by any delay in the acquisition of these danger tree easements; and be it further

 

RESOLVED, That in the opinion of the Authority the acquisition of the real property shown and described on Power Authority of the State of New York, Niagara Power Project, Niagara-Adirondack Tie Line, Map Nos. OV-1438, Parcel No. 1438; OV-1439, Parcel No. 1439; OV-1440, Parcel No. 1440; OV-1441, Parcel Nos. 1441A and 1441B; OV-1442, Parcel No. 1442 and OV-1443, Parcel No. 1443 is de minimis in nature so that the public interest will not be prejudiced by the acquisition of such real property without a public hearing; and be it further

 

RESOLVED, That the President and Chief Executive Officer and the Executive Vice President, General Counsel and Chief of Staff are hereby authorized to acquire any and/or all of the sites identified in Exhibit “19-A”  by purchase, appropriation or condemnation and are hereby authorized to approve the payments to be made for such acquisitions; and be it further

 

RESOLVED, That the President and Chief Executive Officer, the Vice President –  Procurement and Real Estate and the Director – Real Estate be, and each of them hereby is, authorized and directed to execute on behalf of the Authority such certificates, requests and directions on terms and conditions substantially in accordance with the foregoing report of the President and Chief Executive Officer as are necessary or desirable for the acquisition of such real property, subject to the approval of the Executive Vice President, General Counsel and Chief of  Staff; 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, General Counsel and Chief of Staff.


 

Exhibit “19-A1”

 

 

Reputed Owner                                                    Map No.                 Acreage

                               

Devans and Donna Osborne                             OV-1438                 0.9

 

Phillip and Vendla Clark                                      OV-1439                 0.8

 

John and Carmen Powers                                   OV-1440                 0.2

 

John Ramsey                                                        OV-1441                 0.7

 

Karen Hubbard                                                     OV-1442                 0.2

 

Faith Adams and George Yeado                        OV-1443                 0.4

 


 

20.           Voluntary Contributions to the State Treasury

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the Authority’s voluntary contribution of $205 million to New York State, as authorized by Chapter 91 of the Laws of 2007 (‘Chapter 91’).

 

BACKGROUND

 

“On August 16, 2006, the Governor signed Chapter 645 of the Laws of 2006 (‘Chapter 645’) which, among other things, authorized the Authority, if deemed ‘feasible and advisable’ by its Trustees, to make certain contributions, totaling $175 million, to the State’s general fund.  That legislation also extended until June 30, 2007 and otherwise modified the Authority’s Power for Jobs (‘PFJ’) and Energy Cost Savings Benefit (‘ECSB’) programs.  Specifically, that law authorized a contribution to the general fund of not less than $75 million for the State’s fiscal year (‘SFY’) 2005-06 and of not less than $100 million for SFY 2006-07.  Chapter 645 also set a cap of $394 million on the total contributions to be paid by the Authority.  At the time, the Authority had paid a total of $219 million to the State based on prior legislative and Trustee authorizations.

 

“Following passage of that legislation, on December 19, 2006, the Trustees adopted a resolution that deferred ‘final determination as to the amount of the voluntary contributions to the State of New York until a further evaluation of the programmatic, financial and business circumstances’ surrounding Chapter 645’s extension of the PFJ and ECSB programs and its effect on the Authority.

 

“On June 29, 2007, the Governor signed Chapter 91 of the Laws of 2007 (‘Chapter 91’), which repeated the authorizations found in Chapter 645 and added a new one authorizing, should the Trustees find it ‘feasible and advisable,’ an additional voluntary contribution of not less than $30 million for SFY 2007-08 and raising the cap for such contributions to a total of $424 million.  To date, the Authority has not paid any of the additional $205 million authorized by these laws, but if such amount is paid the cap will have been met.  On that same date, Chapter 29 of the Laws of 2007 was signed by the Governor, thereby extending the PFJ and ECSB programs for an additional year to June 30, 2008.

 

DISCUSSION

 

“Staff has now reviewed all relevant and appropriate fiscal parameters set forth in the Trustees’ resolution of December 19, 2006.  Given the financial condition of the Authority, its estimated revenues, operating expenses, debt service and reserve requirements, staff recommends that it is feasible for the Authority to make the voluntary contributions of $205 million authorized by the PFJ legislation and to pay the anticipated added costs associated with the extension of the PFJ and ECSB programs through June 30, 2008 without compromising its financial integrity.  Accordingly, the Authority now has the ability to meet the financial obligations and contributions contemplated by Chapter 91.

 

FISCAL INFORMATION

 

“Staff has determined that the funds are available to make voluntary contributions totaling $175 million to the State’s general fund by December 31, 2007, with the remaining $30 million to be paid by March 31, 2008.  These payments represent the amounts authorized by legislation during the three state fiscal years 2005-06 through 2007-08.

 

RECOMMENDATION

 

“The Vice President – Finance requests that the Trustees determine that the payment to the State Treasury of $205 million is feasible and advisable and authorize such payment, in accord with the provisions of Chapter 91 of the Laws of 2007.

 

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


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

 

RESOLVED, That the Trustees hereby authorize a payment to the State Treasury of $205 million from the Authority’s Operating Fund pursuant to the Power for Jobs legislation discussed in the foregoing report of the President and Chief Executive Officer, with payment of $175 million authorized to be made on or before December 31, 2007 and $30 million authorized to be made on or before March 31, 2008; and be it further

 

RESOLVED, That the amount of $205 million to be used for the payment to the State Treasury described in the foregoing resolution is not needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

 

RESOLVED, That as a condition to making the payments specified in the foregoing resolutions, on the day of such payment the Vice President – Finance or the Treasurer shall certify that such monies to be used for the payment to the State Treasury described in the foregoing resolutions are not then needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

 

RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Chief Financial Officer, the Vice President – Controller, the Vice President – Finance, the Treasurer, the Corporate Secretary and all other officers of the Authority be, and each of them hereby is, authorized and directed, for and in the name and 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, which they, or any of them, may deem necessary or advisable in order to effectuate the foregoing resolution, subject to the approval as to the form thereof by the Executive Vice President, General Counsel and Chief of Staff.

 


 

21.           Other Business

                Chairman McCullough wished everyone happy holidays and a healthy and happy new year.

 


 

22.           Next Meeting

The next Regular Meeting of the Trustees will be held on Tuesday, January 29, 2008, 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.

 


 

Text Box: DECMINS.07

 

Closing

 

On motion duly made and seconded, the meeting was adjourned by the Chairman at approximately
2:10 p.m.

 

 

 

 

Anne B. Cahill

Corporate Secretary