MINUTES OF THE REGULAR MEETING OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

July 31, 2007

 

Table of Contents

 

            Subject                                                                                                                  

 

1.              Minutes of the Regular Meeting held on June 26, 2007                                                                        

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

3.              Report from the President and Chief Executive Officer       

4.              Allocation of  1,700 kW of Hydro Power , Exhibits    ‘4-A’; ‘4-A1’ -  ‘4-A2’

Resolution                                                                                                                                          

5.              Power for Jobs Program – Extended Benefits, Exhibit   ‘5-A’

            Resolution

6.              Economic Development Programs – Service Tariff   Amendments – Notice of Proposed Rulemaking , Exhibits   ‘6-A’ & ‘6-B’               

            Resolution

7.              PURPA – Compliance with Fuel Diversity, Fossil Fuel  Efficiency and Net Metering Standards                  

            Resolution

8.              Procurement (Construction) Contract – St. Lawrence/FDR Power Project Relicensing – Construction of Dike Improvements at Wilson Hill Wildlife Management Area – Award    --   Resolution
 

9.              Procurement (Services) Contract – Hydro Power-to-Hydrogen Initiative – Award                                              

            Resolution

10.           Informational Item:  New York Power Authority’s Annual   Strategic Plan, Exhibit  ‘10-A’
              

11.           Hydropower Contracts with Upstate Investor-Owned Utilities  for the Benefit of Domestic and Rural Consumers – Month-to-Month Extensions         

             Resolution
 

12.           Authorization of Actions Related to the Other Post-Employment Benefits Trust, Exhibits  ‘12-A’ & ‘12-B’

            Resolution
 

13.           Notice of Proposed Rulemaking – Revisions to Authority’s  Freedom of Information Law Regulations (21 NYCRR Part 453) , Exhibit  ‘13-A’ & ‘13-B’               

            Resolution

14.           Motion to Conduct an Executive Session    

15.           Motion to Resume Meeting in Open Session  

16.           Next Meeting                                                                                                                                                   

            Closing                                     

 

Minutes of the Regular Meeting of the Power Authority of the State of New York held via video conference at the following participating locations at 11:00 a.m.:

1)       New York Power Authority, 123 Main Street, White Plains, NY

2)       New York Power Authority, Niagara Power Project, 5777 Lewiston Road, Lewiston, NY

3)       Harris Beach, PLLC, 99 Garnsey Road, Pittsford, NY

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

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

                                Michael J. Townsend, Vice Chairman, (Pittsford, NY)

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

                                Elise M. Cusack, Trustee (Lewiston, NY)

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

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

                                Leonard N. Spano, Trustee (White Plains, NY)

 

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Roger B. Kelley                                    President and Chief Executive Officer

Thomas J. Kelly                                    Executive Vice President and General Counsel

Joseph Del Sindaco                             Executive Vice President and Chief Financial Officer

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 Yates                                          Acting Senior Vice President – Marketing and Economic Development

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

Donald A. Russak                                Vice President – Finance

Brian C. McElroy                                  Treasurer – Corporate Finance

Albert Swansen                                    First Deputy Inspector General – Corporate Security

Anne B. Cahill                                      Corporate Secretary

Angela D. Graves                                 Deputy Corporate Secretary

Dennis T. Eccleston                            Chief Information Officer

Richard Hackman                                 Chief Technology Development Officer – Energy Services and Technology

Joseph J. Carline                                  Assistant General Counsel – Power and Transmission

Paul F. Finnegan                                  Executive Director – Public and Governmental Affairs

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

Thomas J. Concadoro                         Director – Accounting

Joseph Leary                                        Director – SENY – Public and Governmental Affairs

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

                                                                    Cooperative Marketing

Michael A. Saltzman                            Director – Media RelationsPublic and Governmental Affairs

Marilyn Brown                                     Manager – Market Pricing Analyst

Daniel J. Cappiello                               Manager – Performance Planning

Steven Lockfort                                    Manager – Risk Reporting – Energy Risk Assessment and Control

Lesly Y. Pardo                                      Manager – Internal Audit

Paul Tartaglia                                        Regional Manager – SENY – Poletti Power Project

Denise D’Ambrosio                             Principal Attorney – Finance and Risk Management

Jacquline Carmody                              Attorney – Regulatory and Contracts

Carlos Gutierrez                                    Attorney – Power and Transmission

Mary Jean Frank                                  Associate Corporate Secretary

Lorna M. Johnson                               Assistant Corporate Secretary

Gerard Vincitore                                   Senior Investment Analyst – Corporate Finance


 

Dan Miner                                             Reporter – Niagara Gazette

D. Stierer                                                Photographer – Niagara Gazette

 


 

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


 

1.                   Approval of the Minutes

 

                The Minutes of the Regular Meeting of June 26, 2007 were unanimously adopted.               


 

2.                   Financial Reports for the Six Months Ended June 30, 2007

Mr. Concadoro presented an overview of the reports for the Trustees.  In response to a question from Chairman McCullough, Mr. Concadoro said that the lower generation figures were a result of both lower output at the hydro plants and the Flynn outage.                                     


 

3.                   Report from the President and Chief Executive Officer

 

President Kelley said that he’s had an exciting first month on the job.  He’s toured almost all of the White Plains office, floor by floor, and he hopes to get to the floors he’s missed in the near future.  In addition, he’s also toured the St. Lawrence and Niagara projects.  According to President Kelley, he’s transitioning into the job well, getting to know the issues and challenges the Authority faces.  He said that Authority staff has been great in terms of meeting with him and responding to the President’s blog.  He’s also met with Tom Congdon from the Governor’s Office, as well as with Congressman Higgins and Assemblyman Hoyt from western New York. 

                The Power for Jobs program has been extended by legislation through June 30, 2008 and 100% of the customers have signed up for the extended program.  President Kelley said that the Trustees would be asked today to authorize the Authority to continue its electricity sales to the three upstate utilities for the benefit of rural and domestic customers through June 30, 2008, pending potential legislative or further Trustee action. 

                President Kelley is looking forward to a day-and-a-half retreat in August on energy and environmental policy issues sponsored by the Governor’s Office for key staff from the Authority, the Public Service Commission, the Department of Environmental Conservation, the New York State Energy Research and Development Authority and the Long Island Power Authority.

                According to President Kelley, staff morale seems good and the Authority is moving forward. 

                Chairman McCullough thanked President Kelley for the thorough report, although he said that it understated all that President Kelley had done in his first month on the job.  With regard to the extension of the Power for Jobs program, Chairman McCullough said that staff should be commended for the fact that, despite the tight timeframe created by the last-minute enactment of the legislation, there had been no lapse in service for any of the Authority’s customers.               


 

4.                   Allocation of 1,700 kW of Hydro Power

 

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 1,700 kW to two industrial companies.

 

BACKGROUND

 

“Under Section 1005 (13) of the Power Authority Act, as amended by Chapter 313, the Authority may contract to allocate or reallocate directly, or by sale for resale, 250 MW of firm hydroelectric power as 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.  Allocations are made pursuant to criteria set forth in Section 1002 (13).

 

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

 

DISCUSSION

 

                “Based on the Advisory Group’s discussions, staff recommends that the available power be allocated to the two companies as set forth in Exhibit ‘4-A.’  The Exhibit shows, among other things, the amount of power requested, the recommended allocations 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 150 jobs.

 

RECOMMENDATION

 

“The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees approve the allocation of 1,700 kW of hydropower to the companies listed in Exhibit ‘4-A.’

 

           “The Executive Vice President and General Counsel, the Acting 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 allocation of 1,700 kW of Replacement Power, as detailed in Exhibit “4-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 Chairman, the President and Chief Executive Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.


 

 

 

 

 

 

 

 

 

 

 

 

New York Power Authority

 

 

 

 

 

 

 

Exhibit "4-A"

Replacement Power

 

 

 

 

 

 

 

July 31, 2007

Recommendations for Allocations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Power

 

Estimated

New Jobs

Power

 

Exhibit

 

 

 

Requested

New

Capital

Avg. Wage

Recommended

Contract

Number

Company Name

City

County

(kW)

Jobs

Investment

Benefits

(kW)

Term

A-1

Moog, Inc.

North Tonawanda

Niagara

1,250

140

$16,850,000

$45,000

1,200

Five Years

A-2

Niacet Corporation

Niagara Falls

Niagara

2,100

10

$15,300,000

$75,000

500

Five Years

 

Total RP Recommended

 

 

 

150

$32,150,000

 

1,700

 

 

 

 

 

 

 

 

 

 

 


 

Exhibit “4-A1”

APPLICATION SUMMARY

Replacement Power

 

Company: Moog, Inc.

 

Location:                                                  East Aurora

                                                                            

County:                                                     Erie

 

IOU:                                                           New York State Electric and Gas Corporation

 

Business Activity:                                  Manufacturer of precision controls

 

Project Description:                               This two-phase project will add 66,900 sq. ft. to the company’s existing facility to expand manufacturing and office space for its Space-Defense and Industrial Groups.  The company will add equipment that will increase its output.  Products manufactured at this site as a result of this project will include combat vehicle turret and gun controls; space products, principally for new NASA programs; tactical missiles and flight simulators.

 

Existing Allocation:                               4,250 kW of Expansion Power

 

Power Request:                                       1,250 kW

                                                  

Power Recommended:                            1,200 kW

 

Job Commitment:     

                   Existing:                                2,306 jobs

                   New:                                       140 jobs

                                                                           

New Jobs/Power Ratio:                          117 jobs/MW

 

New Jobs -

Avg. Wage and Benefits:                       $45,000

 

Capital Investment:                                $16,850,000

 

Capital Investment per MW:                $14 million/MW

 

Summary:                                                Moog is a leading worldwide designer, manufacturer and integrator of precision control components and systems for aircraft, satellites, space vehicles, missiles, automated industrial machinery and medical equipment.  A low-cost hydro allocation would make it cost effective for the firm to expand in western New York and remain competitive.

 


 

Exhibit “4-A2”

 

APPLICATION SUMMARY

 

Replacement Power

 

Company: Niacet Corporation

 

Location:                                                  Niagara Falls

                                                                            

County:                                                     Niagara

 

IOU:                                                           National Grid

 

Business Activity:                                  Manufactures specialty chemicals

 

Project Description:                               The project includes the installation of new processing equipment to expand the company’s current production capacity.  The company’s existing facility will be modified to accommodate the expansion.  New equipment will include various pumps, agitators, compressors, tanks, ventilation equipment, fans and HVAC equipment.

 

Prior Application:                                  Yes

 

Existing Allocation:                               RP 1,400 kW and EP 500 kW

 

Power Request:                                       2,100 kW

                                                  

Power Recommended:                            500 kW

 

Job Commitment:     

                   Existing:                                82 jobs

New                                                            10 jobs

                                                                           

New Jobs/Power Ratio:                          20 jobs/MW

Total jobs/Power Ratio:                         34 jobs/MW (all allocations)

 

New Jobs -

Avg. Wage and Benefits:                       $75,000

 

Capital Investment:                                $15.3 million

 

Capital Investment                                  $ 30.6 million/MW

Per MW

Summary:                                                Niacet is a manufacturer of specialty chemicals.  It is an important industry and employer in Niagara Falls.  The company is making a substantial investment in its plant that will help it remain competitive and grow in the area.  The alternative location for this project would be Mobile, Alabama.  A low-cost hydro allocation will help the company grow and implement this project in Niagara Falls.


 

5.                    Power for Jobs Program – Extended Benefits

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve extended benefits for 50 Power for Jobs (‘PFJ’) customers as listed in Exhibit ‘5-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, making a total of 267 MW available in Year One.  The 1998 amendments also increased the size of the program to 450 MW, with 50 MW to become available in Year Three.

 

                “In May 2000, legislation was enacted that authorized another 300 MW of power to be allocated under the PFJ program.  The additional MW were described in the statute as ‘phase four’ of the program.  Customers that received allocations in Year One were authorized to apply for reallocations; more than 95% reapplied.  The balance of the power was awarded to new applicants.

 

                “In July 2002, legislation was signed into law that authorized another 183 MW of power to be allocated under the program.  The additional MW were described in the statute as ‘phase five’ of the program.  Customers that received allocations in Year Two or Year Three were given priority to reapply for the program.  Any remaining power was made available to new applicants. 

 

“Chapter 59 of the Laws of 2004 extended the benefits for PFJ customers whose contracts expired before the end of the program in 2005.  Such customers had to choose to receive an ‘electricity savings reimbursement’ rebate and/or a power contract extension.  The Authority was also authorized to voluntarily fund the rebates, if deemed feasible and advisable by the Trustees.

 

“PFJ customers whose contracts expired on or prior to November 30, 2004 were eligible for a rebate to the extent funded by the Authority from the date their contract expired through December 31, 2005.  As an alternative, such customers could choose to receive a rebate to the extent funded by the Authority from the date their contract expired as a bridge to a new contract extension, with the contract extension commencing December 1, 2004.  The new contract would be in effect from a period no earlier than December 1, 2004 through the end of the PFJ program on December 31, 2005.

 

“PFJ customers whose contracts expired after November 30, 2004 were eligible for rebate or contract extension, assuming funding by the Authority, from the date their contracts expired through December 31, 2005.

 

“Approved contract extensions entitled customers to receive the power from the Authority pursuant to a sale-for-resale agreement with the customer’s local utility.  Separate allocation contracts between customers and the Authority contained job commitments enforceable by the Authority.

 

“In 2005, provisions of the approved State budget extended the period PFJ customers could receive benefits until December 31, 2006.  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.

 

“Section 189 of the New York State Economic Development Law, which was amended by Chapter 59 of the Laws of 2004, provided the statutory authorization for the extended benefits that could be provided to PFJ customers.  The statute stated that an applicant could receive extended benefits ‘only if it is in compliance with and agrees to continue to meet the job retention and creation commitments set forth in its prior power for jobs contract.’

 

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

 

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

 

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

 

DISCUSSION

 

“At its meeting on July 31, 2007, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 50 businesses listed in Exhibit ‘5-A.’  Collectively, these organizations have agreed to retain more than 70,000 jobs in New York State in exchange for rebates.  The rebate program will be in effect until June 30, 2008, the program’s sunset. 

 

                  “The Trustees are requested to approve the payment and funding of rebates for the companies listed in Exhibit ‘5-A’ in a total amount currently not expected to exceed $4.4 million.  Staff recommends that the Trustees authorize a withdrawal of monies from the Operating Fund for the payment of such amount, provided that such amount is not needed at the time of withdrawal for any of the purposes specified in Section 503(1)(a)-(c) of the General Resolution Authorizing Revenue Obligations, as amended and supplemented.  Staff expects to present the Trustees with requests for additional funding for rebates to the companies listed in the Exhibit in the future.

 

FISCAL INFORMATION

 

“Funding of rebates for the companies listed in Exhibit ‘5-A’ is not expected to exceed $4.4 million.  Payments will be made from the Operating Fund.  To date, the Trustees have approved $85.7 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 ‘5-A.’ 

 

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

 

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

 

WHEREAS, the Economic Development Power Allocation Board has recommended that the Authority approve electricity savings reimbursements to the Power for Jobs customers listed in Exhibit “5-A”;

 

NOW THEREFORE BE IT RESOLVED, That to implement such Economic Development Power Allocation Board recommendations, the Authority hereby approves the payment of electricity savings reimbursements to the companies listed in Exhibit “5-A,” and that the Authority finds that such payments for electricity savings reimbursements are in all respects reasonable, consistent with the requirements of the Power for Jobs program and in the public interest; and be it further

 

RESOLVED, That based on staff’s recommendation, it is hereby authorized that payments be made for electricity savings reimbursements as described in the foregoing report of the President and Chief Executive Officer in the aggregate amount of up to $4.4 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 Acting 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 and General Counsel; and be it further

 

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


 


 

6.                   Economic Development Programs – Service Tariff  Amendments – Notice of Proposed Rulemaking          

               

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve a notice of proposed rulemaking to amend the Authority’s tariffs for Economic Development Power (‘EDP’), High Load Factor and Industrial Economic Development served by Municipal Distribution Agencies (collectively, the ‘Power Programs’) to increase rates for certain customers.  These customers have long-term price commitments that expire on October 31, 2007.  The proposed rates reflect the increased costs incurred by the Authority, combined with the mitigating effects of the Energy Cost Savings Benefits (‘ECSB’) Awards that were recently extended by lawmakers to be effective July 1, 2007 through June 30, 2008.  (Exhibit ‘6-B’).

 

“In addition to the publication of the required notice in the New York State Register under the State Administrative Procedure Act (‘SAPA’), staff requests that the Trustees authorize the Corporate Secretary to schedule a public forum for the purpose of obtaining the views of interested parties concerning the proposed tariff amendments to increase the rates.  Staff will evaluate any comments on the notice of proposed rulemaking received in accordance with SAPA and/or at the public forum, and return to the Trustees in October 2007 seeking final adoption of the rate increase.

 

“In addition, the Trustees are requested to amend the four affected service tariffs (Service Tariff Nos. 1, 1S, 35 and 50) to conform to the extension of the ECSB Awards, as well as to make other ministerial tariff changes.  (Exhibit ‘6-A’).

 

BACKGROUND

 

                “On June 23, 2005, the New York State Legislature and the Governor agreed on legislation (Chapter 313 of the Laws of 2005) that amended the Public Authorities Law and the Economic Development Law to create the ECSB Awards to be administered by the Economic Development Power Allocation Board (‘EDPAB’).  These awards are designed to mitigate the rates that would otherwise reflect the cost of electricity purchased from the New York State Independent System Operator-administered markets and were limited to existing Power Program customers that were not subject to any long-term price commitments made by the Authority.  

 

“Under the 2005 legislation, the source of revenues for the ECSB Awards is from the sale of three types of hydro power:  70 MW of unallocated Replacement Power, 20 MW of unallocated power from the St. Lawrence/FDR Project and up to 38.6 MW from the St. Lawrence/FDR Project that is voluntarily relinquished.  (The 20 MW of St. Lawrence/FDR Project power expired on December 31, 2006 and can no longer be used to fund the program.  None of the 38.6 MW of St. Lawrence/FDR Project power was ever relinquished for use in the ECSB.)  Any shortfall in excess of the hydro revenues would come from the Authority’s Operating Fund.  Furthermore, the legislation authorized EDPAB and the Authority to administer the new ECSB Awards so as to limit rate increases through December 31, 2006 for these customers. 

 

“At their October 19, 2005 meeting, the Trustees approved a rulemaking modifying the tariff rates for the customers in the Power Programs that had been approved for ECSB Awards.  These customers included customers for which pricing protection ended on October 31, 2005, and customers that had no pricing protection.  The Trustees froze these customers’ production rates from November 1, 2005 to January 1, 2006 at the demand charge of $8.16/kW and the energy charge of $23/MWh.  These rates were then subject to a 5% delivered rate increase on February 1, 2006 and a 6% delivered rate increase on August 1, 2006, for a cumulative 11.3% increase through December 31, 2006.  Customers that had long-term pricing commitments through October 31, 2007 were not affected.  The Authority anticipated that the hydro revenues and the rate increases would not fully recover the Authority’s production costs under the Power Programs and estimated a fiscal impact of -$7.5 million through December 31, 2006.

 

“In 2006, lawmakers authorized the extension of the ECSB Awards through June 30, 2007.  In compliance with the extension, at their meeting on October 24, 2006, the Trustees extended customers’ contracts and modified the tariffs to appropriately reflect the extension.

 

DISCUSSION

 

“In June 2007, the Legislature passed another extension of the ECSB Awards that was signed into law by the Governor on June 29, 2007 (Chapter 89 of the Laws of 2007).  The legislation extended ECSB Awards through June 30, 2008.  Eligible customers are defined as those that were served from the Authority’s former James A. FitzPatrick nuclear power plant whose power prices may be subject to increase before June 30, 2008.  Furthermore, to minimize the disruption in service, the law directs EDPAB to expedite the ECSB Awards and to defer the compliance review until after the applicants have received the awards.

 

“At their meeting on June 26, 2007, the Trustees took the initial steps needed to implement the 2007 legislative changes.  First, the Trustees approved the extension of the 66 Power Program contracts that were set to expire on June 30, 2007 or on a later date to June 30, 2008.  Second, the Trustees approved the EDPAB recommendation that all Power Program customers be approved for ECSB benefits, subject to subsequent documentation.  EDPAB recommended that compliance review be deferred until on or before September 30, 2007.  Finally, Authority staff noted that the rates for the customers not currently receiving ECSB Awards would be increased by 11.3% effective November 1, 2007 when they become eligible to receive the ECSB Awards that are the subject of the proposed tariff change.

 

“Accordingly, staff’s proposed tariff modifications would increase production rates for those customers whose contractual pricing protection ends on October 31, 2007.[1]  Consistent with the October 2005 Trustee action that first approved limited rate increases for customers receiving ECSB benefits, these new ECSB beneficiaries will be subject to an 11.3% price increase based on their ‘as-delivered’ rates.  Under this proposed rulemaking, a new Table III (shown in Exhibit ‘6-A’) will be added to the four service tariffs listing the proposed production rates for the customers newly approved to receive ECSB Awards.  Exhibit ‘6-B’ shows the current and proposed delivered rates by customer and the percentage increase.  In addition, the Trustees are being asked to approve and make effective modifications to the four service tariffs that extend the ECSB Awards received by current customers through June 30, 2008, which is in conformance with Chapter 89 of the Laws of 2007, plus some ministerial changes.

 

“From the inception of the ECSB Awards in November 2005 to December 31, 2006, the cost of serving such customers exceeded the billed customer revenues by $27.4 million.  The Authority’s market sales of the 70 MW of Replacement Power and 20 MW of St. Lawrence/FDR power did produce net revenues of $33.0 million, yielding total net revenues of +$5.6 million.  As noted, the forecasted net revenues were -$7.5 million.  However, due to the addition of the newly eligible customers on November 1, 2007, the ECSB Awards will be spread over an additional 484 GWh of sales for the November 2007 to June 2008 period.  In addition, the total value of the ECSB itself likely will be diminished because hydro revenues will continue to be generated solely by the 70 MW of Replacement Power.  Staff also recommends that the Trustees continue the authorization of a withdrawal of monies from the Operating Fund for the payment of such awards, 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 intends to inform the affected customers periodically of the cost to the Authority of the ECSB Awards. 

 

                “This pricing plan is an interim solution through June 30, 2008.  After that date, if the ECSB Awards are not extended again, or if a permanent plan is not adopted, the tariffs would permit the charging of market-based rates for all electricity sold under these contracts. 

 

                “The proposed tariffs include an updated provision that reflects the ECSB Awards extension by indicating that the tariff rates are subject to the Trustees’ discretion to be raised above the prescribed fixed-rate levels prior to June 30, 2008 if the Trustees determine in their sole discretion that such action is necessary to protect the Authority's financial condition.  Upon making such a determination, the Trustees would have the authority to modify the tariff charges up to the full cost incurred by the Authority to serve the customers.

 

FISCAL INFORMATION

 

                “Implementing the proposed tariff amendments will ensure that the Authority has the means in place to offset a portion of the cost of purchasing electricity commodity in the market to serve the Power Program customers that receive ECSB Awards.  The November 1, 2007 to June 30, 2008 estimated revenues from the rate increase will total about $3.7 million.  Including this impact, the cost to the Authority of implementing ECSB Awards is estimated to be $5.4 million for the same period.

 

RECOMMENDATION

 

                “The Manager – Market and Pricing Analysis recommends that the Trustees authorize the Corporate Secretary to file notices for publication in the State Register of:  (1) a proposed rulemaking to adopt tariff amendments implementing new rates effective November 1, 2007 for certain Power Program customers that will no longer have contractual pricing protections and (2) a public forum to obtain the views of interested parties on the proposed tariff amendments.

 

“The Manager – Market and Pricing Analysis further recommends that the Trustees adopt modifications to the service tariffs that implement the extension of the Energy Cost Savings Benefits Awards approved by the State Legislature in 2007.

 

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

 

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

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, authorized to file with the Secretary of State for publication in the New York State Register notice of the Authority’s proposed rulemaking to adopt tariff amendments to increase rates from certain customers effective November 1, 2007 as permitted under the Energy Cost Savings Benefit legislation and consistent with the expiration of the price protection provisions contained in the Authority’s contracts; and to schedule a public forum to solicit the views of interested parties concerning the proposed action; and be it further

 

RESOLVED, That the customers’ service tariffs be modified accordingly to reflect the extension of the Energy Cost Savings Benefit Awards authorized in Chapter 89 of the Laws of 2007; and be it further

 

RESOLVED, That such monies may be withdrawn pursuant to the foregoing resolution upon 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 Acting Senior Vice President – Marketing and Economic Development  or his designee(s) be, and hereby is, authorized to take such other and further actions as may be necessary to effectuate the foregoing; and be it further

 

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

 


 

7.                   PURPA – Compliance with Fuel Diversity, Fossil Fuel  Efficiency and Net Metering Standards                                 

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

               

“The Trustees are requested to authorize a public hearing for the purpose of commencing consideration of Fuel Sources, Fossil Fuel Generation Efficiency and Net Metering standards (‘Standards’) as required by the federal Energy Policy Act of 2005 (‘EPACT’).  The Authority, as a non-regulated electric utility under the requirements of EPACT, must complete consideration of the Standards and make a determination as to whether to adopt the Standards by August 8, 2008.  The Standards concern fuel diversity, fossil fuel efficiency and net metering service.  The public hearing will provide interested parties with an opportunity to provide comments to the Authority with respect to whether and how the Standards should be adopted.

 

BACKGROUND

 

“The Public Utility Regulatory Policies Act (‘PURPA’) is a federal statute first enacted in 1978 for the purposes of encouraging: (1) conservation of energy supplied by electric utilities; (2) optimization of the efficient use of facilities and resources by electric utilities and (3) equitable rates to electric consumers.  The Authority is a non-regulated electric utility with respect to the Federal Energy Regulatory Commission (‘FERC’), the agency that implements PURPA.

 

“In August 2005, PURPA was amended by the Energy Policy Act of 2005.  Under EPACT, the Authority is required to provide public notice and conduct a hearing with respect to the consideration of a number of standards, including those relating to Fuel Sources, Fossil Fuel Generation Efficiency, and Net Metering.  At their meeting of March 27, 2007, the Trustees completed consideration of and adopted the Demand Response and Smart Metering (‘DRSM’) Standard under EPACT.  While not required to adopt the Standards, the Authority must consider the Standards in good faith and issue a determination as to whether the Authority will adopt any or all of them.  The law requires the Authority to publicly announce the date of the hearing before August 8, 2007, and to make its consideration and determination by August 8, 2008.

 

DISCUSSION

 

“The Fuel Sources standard requires each electric utility to develop a plan to minimize its dependence on one fuel source and ensure that the energy it sells to consumers is generated by a diverse range of fuels and technologies, such as renewables. 

 

                “The Fossil Fuel Generation Efficiency standard requires each electric utility to develop and implement a 10-year plan to increase the efficiency of its fossil fuel generation. 

 

                “The Net Metering standard requires each electric utility to make available upon request, net metering service to any electric consumer that the electric utility serves.  Net metering service is defined by the statute as ‘service to an electric consumer under which electric energy generated by that electric consumer from an eligible on-site generating facility and delivered to the local distribution facilities may be used to offset electric energy provided by the electric utility to the electric consumer during the applicable billing period.’

 

“In preparing a report recommending whether the Authority should adopt the Standards, staff will consider the views of interested parties, in particular the Authority’s customers, who will be afforded an opportunity to provide comments at a public hearing to be held on Wednesday, January 16, 2008 at the Authority’s White Plains office, as well as in writing.  Staff’s recommendation will be made available to the public upon request.

 


 

FISCAL INFORMATION

 

                “There are no anticipated fiscal impacts.

 

RECOMMENDATION

 

                “The Executive Vice President and General Counsel recommends that a public hearing on the Fuel Sources, Fossil Fuel Generation Efficiency and Net Metering standards be held at the Authority’s White Plains Headquarters Office on Wednesday, January 16, 2008.  The Corporate Secretary will arrange for notice to be issued by publication in the New York State Register and the office of Public and Governmental Affairs will issue a news release.

 

                “The Senior Vice President – Energy Resource Management and Strategic Planning, the Senior Vice President and Chief Engineer – Power Generation, the Acting 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.

 

                                                WHEREAS, by August 8, 2007, the Authority must set a public hearing date for the consideration of the following Standards under the Public Utility Regulatory Policies Act:

 

                                                                Fuel Sources

 

                                                                Fossil Fuel Generation Efficiency

 

                                                                Net Metering

                                               

NOW THEREFORE BE IT RESOLVED, That the Trustees direct the Corporate Secretary to schedule a public hearing on the Fuel Sources, Fossil Fuel Generation Efficiency and Net Metering standards, such hearing to be held on Wednesday, January 16, 2008 in the Jaguar Room at the Clarence D. Rappleyea Building, 123 Main Street, White Plains, New York, and to arrange to have a notice of such public hearing published in the New York State Register; and be it further

                                

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


 

8.                   Procurement (Construction) Contract – St. Lawrence/FDR  Power Project Relicensing – Construction of Dike  Improvements at Wilson Hill Wildlife Management

        Area – Award 

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award of a procurement contract to J. E. Sheehan Contracting Corp. (‘Sheehan’) for construction services to improve the dikes within the Wilson Hill Wildlife Management Area (‘WHWMA’) at the St. Lawrence/FDR Power Project (‘Project’).  The term of the contract will be from August 1, 2007 through December 31, 2009.  The total cost of the contract is $8,552,000.

 

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 or for contracts in excess of $3 million.

“The Federal Energy Regulatory Commission (‘FERC’) issued the new license for the Project on October 23, 2003.  The Trustees accepted the new license at their meeting of November 25, 2003.  As part of this license, the Authority is required to construct improvements to the existing dikes and water control structures at the WHWMA and to install a new dike with a water control structure to benefit waterfowl and other species.  The new dike will include an emergency access road from the mainland to the western end of Wilson Hill Island.  This contract will involve construction of the majority of the WHWMA improvements.  Additional improvements to one other WHWMA dike and installation of new recreational facilities at the WHWMA will be accomplished under separate contracts.  At their meeting of December 16, 2003, the Trustees authorized a total of $169 million for expenditures related to compliance with the new license, including the costs of constructing these improvements to the WHWMA.

 

DISCUSSION

 

“To meet the requirements of the new license, the Authority will hire a construction firm to refurbish the existing dikes and water control structures and to construct the new dike with a water control structure and emergency access roadway.

 

“On May 14, 2007, the Authority issued a Request for Proposals (‘RFP’) for the above services, including a notice in the New York State Contract Reporter.  A site visit for potential bidders was conducted on May 23, 2007, and several bid addenda were issued to address questions from potential bidders.  Proposals were received on June 13, 2007 from Perras Excavating, Inc. (‘Perras’) of Massena and Sheehan of Potsdam.

 

“Staff from the Authority’s Licensing, Environmental and Procurement divisions evaluated the proposals for technical qualifications and pricing.  Early in this review phase, Procurement received a request via email from Perras seeking to increase its bid price to correct omissions in its proposal.  Under its procurement policies, the Authority could not accept a post-bid revision to bid prices.  Therefore, Perras’ proposal was removed from further consideration because it was deficient. 

 

“It is recommended that the contract be awarded to Sheehan, the remaining qualified bidder.  Sheehan has considerable experience working with the Authority on earthwork-related and other relicensing projects, all of which have been satisfactorily completed.  Its proposed project organization includes supervisory and management personnel who are technically qualified to execute this work and who are known by the Authority’s project management team.  Sheehan’s proposal meets the Authority’s schedule and quality control requirements. 


 

“The term of the contract will be from August 1, 2007 through December 31, 2009; the award amount is $8,552,000. 

 

FISCAL INFORMATION

“Since these expenditures are related to implementing commitments in the new license and the settlement agreements, payments will be made from the Capital Fund. 


RECOMMENDATION

 

“The Senior Vice President – Public and Governmental Affairs, the Vice President – Procurement and Real Estate and the Vice President – Environment, Health and Safety recommend that the Trustees authorize award of a contract to J. E. Sheehan Contracting Corp. for $8,552,000 for construction services to install dike improvements at the Wilson Hill Wildlife Management Area at the St. Lawrence/FDR Power Project.   

 

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

 

Mr. Suloway presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman McCullough, Mr. Suloway said that this project would entail rehabilitating existing dikes, work on the tops of the dikes, water control structures and building a new dike with an emergency access road.  He added that this is the largest contract resulting from the relicensing settlement agreements.  Responding to another question from Chairman McCullough, Mr. Suloway said that if the second bidder had not been disqualified, its revised bid would have come in slightly lower in price than the successful bidder.  Mr. Kelly said that the error in the second bidder’s proposal was only discovered after the bid had been opened.  He said that rebidding the project was not an option under the Authority’s procurement policies and guidelines and that selecting the successful bidder was deemed to be the best course of action, especially since the successful bidder’s proposal price was lower than that estimated by the Authority’s engineers for the project.  Mr. Kelly said that given the Authority’s guidelines, the law and the engineering estimate, staff determined that the Authority was on solid legal ground in awarding the contract to the successful bidder.  In response to a question from Trustee Besha, Mr. Kelly said that the unsuccessful bidder’s proposal was deemed to be nonconforming with the Authority’s Request for Proposals.

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, approval is hereby granted to award a contract to J. E. Sheehan Contracting Corp. for a period commencing on August 1, 2007 and ending on December 31, 2009, in an amount of $8,552,000, for construction services to install improvements to dikes and water control structures at the Wilson Hill Wildlife Management Area at the St. Lawrence/FDR Power Project in compliance with the new license for the St. Lawrence/FDR Power Project, as recommended in the foregoing report of the President and Chief Executive Officer;

 

Contractor                                            Contract Approval

 

J. E. Sheehan                                         

Contracting Corp.                                   $8,552,000

 

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, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 

 


 

9.                   Procurement (Services) Contract – Hydro Power-to-Hydrogen Initiative – Award                                                                                       

               

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize a contract award in the amount of $9 million to General Physics Corporation for the design, fabrication, furnishing, installation, start-up and maintenance of two hydrogen fueling stations in Western New York.  One station is to be located at the Niagara Frontier Transportation Authority (‘NFTA’) Frontier bus garage in Buffalo and the other station is to be located at the New York State Office of Parks, Recreation and Historic Preservation (‘State Parks’) alt-fuel facility in Niagara Falls. 

 

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.

 

“At their meeting of September 26, 2006, the Trustees approved the Authority’s Hydro Power-to-Hydrogen initiative to be implemented in the Buffalo/Niagara region and expenditures of up to $21 million in program financing. 

 

“Hydrogen is considered to be the optimum fuel for transportation because it is clean burning and can also be used directly in a fuel cell engine where the principal emission is chemically pure water.  Hydrogen fuel can be produced through a variety of processes, including electrolysis of water and steam reformation of natural gas. Currently, most hydrogen fuel is produced by steam reformation.  Reforming natural gas, however, releases significant amounts of CO2, and because steam is required in this process, it also generates NOx and other emissions.  The use of renewable hydro power for electrolysis generates clean and renewable hydrogen.  The hydro power-to-hydrogen program has the potential to jump-start a new high-tech hydrogen industry, reduce the State’s dependence on fossil fuels and improve local air quality.

 

“Consistent with the Authority’s mission to help spur energy research and economic growth in New York State, dedicating low-cost and renewable hydro power to a sizable electrolysis project in the Buffalo/Niagara region will both insure a successful hydrogen fuel demonstration project and foster commercial development of this technology.  The Buffalo/Niagara region is particularly suitable for the innovative hydrogen industry given the availability of a skilled workforce and State universities, and the proximity to inexpensive hydro power resources.  The initiative is aligned with the New York State Hydrogen Roadmap, a document jointly developed in 2005 among the Authority, the New York State Energy Research and Development Authority (‘NYSERDA’) and the Long Island Power Authority (‘LIPA’), which sets goals for expanded use of hydrogen fuel statewide.

 

“In a future agenda item, Trustees’ approval will be sought for a 700 kW allocation of hydropower to NFTA to power these hydrogen production fueling stations.

 

DISCUSSION

 

“In March 2007, the Authority solicited bids for the construction of two hydrogen stations. Two bids were received on May 30, 2007, one from LP Ciminelli Incorporated and one from General Physics Corporation.  Authority staff conducted a review of the two bids in cooperation with NFTA and State Parks.  General Physics Corporation was the lowest bidder and was also determined to be the more qualified of the two bidders.  General Physics Corporation has extensive experience in the design and installation of hydrogen vehicle fueling stations. 

 

“Subject to the Trustees’ approval, the Authority will enter into a contract with General Physics to design, permit and install the hydrogen generation and fueling stations, as well as to provide maintenance services for the fueling stations for a period of six years through an extended warranty program.  The extended warranty provision will allow for the host site operators, NFTA and State Parks, to become familiar with hydrogen fueling station operation and maintenance practices, and ensure a successful and safe demonstration program.  No construction will take place until a State Environmental Quality Review Act determination has been completed by the Authority.

 

“The two fueling stations will be installed subject to site installation agreements.  These site agreements are currently being negotiated by the Authority and the host sites, NFTA and State Parks.  Upon installation, each host site will assume ownership of its respective station.  The fueling stations will be powered by a new hydro power allocation of approximately 700kW to NFTA.  Each station will require approximately 350kW of hydro power for operation.  NFTA will use half of the new allocation for the station at its facility and half of the allocation for the State Parks station under a shared-use agreement.  This shared-use agreement will allow NFTA to use the hydrogen at both stations.

 

“The two fueling stations, once put into operation, will represent one of the largest hydrogen demonstration projects in the world, and will be capable of attracting support from a variety of private and public partners.  The Authority has recently applied for more than $6 million in federal co-funding for this initiative, and is actively pursuing additional funding opportunities.  Two bus developers have indicated their intention of supplying hydrogen fuel cell transit buses for this initiative.

 

FISCAL INFORMATION

 

“Funding for this initiative, which has been included in the Authority’s Operating Forecast, will be provided from the Operating Fund.  The total cost of the program, as previously approved, is not to exceed $21 million.  At this time, the Trustees are being requested to approve an award for the installation of two hydrogen fueling stations in the amount of $9 million.  A portion of the costs may be recovered from the participating partners and through federal, State and local grants and co-funding. 

 

RECOMMENDATION

 

“The Senior Vice President – Energy Services and Technology recommends that the Trustees approve a contract award to General Physics Corporation in the amount of $9 million for the design, fabrication, furnishing, installation, start-up and maintenance of two hydrogen fueling stations in Western New York.

 

“The Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Executive Vice President – Corporate Services and Administration, the Acting Senior Vice President – Marketing and Economic Development, the Senior Vice President and Chief Engineer – Power Generation, the Senior Vice President – Public and Governmental Affairs and I concur in the recommendation.”

 

Mr. Hackman presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Trustee Scozzafava, Mr. Hackman said that the hydrogen would be used to power buses and utility vehicles belonging to the Niagara Frontier Transportation Authority and the New York State Office of Parks, Recreation and Historic Preservation.  Responding to a question from Trustee Besha, Mr. Hackman said that these vehicles would be operated for the most part during on-peak hours.  In response to a question from Trustee Cusack, Mr. Hackman said that it is anticipated that ground will be broken for the fueling facilities in January 2008, with the facilities becoming operational in the first quarter of 2009.

                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 Trustees hereby authorize the award of a contract in the amount of $9 million to General Physics Corporation for the design, fabrication, furnishing, installation, start-up and maintenance of two hydrogen fueling stations in Western New York; and be it further

 

RESOLVED, That Operating Fund monies will be used to finance the contract costs in the amounts and for the purposes listed below:

               

                                                                                                                Expenditure Authorization

                                Operating Funds                                                                 (not to exceed)         

 

Total previously approved                                  $21 million

 

Two fueling stations, including                                        $ 9 million

                                electrolysis, hydrogen storage and

dispensing equipment                                                         __________

 

                Total remaining                                   $12 million

 

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


 

10.                Informational Item:  New York Power Authority’s Annual  Strategic Plan                                                                                     

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are presented with the 2008-12 Strategic Plan as set forth in Exhibit ‘10-A’ and attached hereto. 

 

BACKGROUND

 

                “Article VII – Fiscal Management of the Authority By-Laws states in Section 2 – ‘Strategic Plan, that the Trustees shall annually review a Strategic Plan which shall become the basis for the development of departmental plans, the annual budget and the capital expenditure plan.’  As part of the Authority’s annual review and planning process the content of the Strategic Plan was expanded to make clear and specific the Authority’s role and intentions so that all stakeholders have a clear understanding of the driving forces behind the Authority’s direction and decisions.  In addition, the strategic planning process itself is in the midst of a significant change, going from a short-term tactical work plan to a long-term dynamic Strategic Plan providing guidance and purpose to each organization and employee as directed by the Trustees.

 

DISCUSSION

 

“Before work could begin on the Strategic Plan itself, it was necessary to define the strategic planning process, its scope and the detailed work-plan necessary to ensure its acceptance in a timeframe that would allow for the resource allocation process to benefit from it.

 

“Once the structure of this new process was completed, work began in earnest in January 2007 with the formation of an 11-member Core Team of mid-level Authority staff members, chosen for their experience, expertise, intelligence, perspective and knowledge of the Authority and its business environment.  Their assignment was to: assess the Authority as it is and the industry influences affecting it and define a vision of the future that would suggest how to do things better and add greater value.

 

“In order to keep the Authority’s leadership engaged, the approach required that Authority executives be kept involved as each milestone was completed.  The Executive Management Committee (‘EMC’) reviewed the approach and selection of the Core Team.

 

“The first assignment for the Core Team was to describe the ‘current state’ of the Authority, or the way things are now, and then describe the ‘future state’ aspiration.  The Core Team completed the analysis for five categories of external industry trends and eight internal Authority processes.  Once completed, the results were presented to the EMC in March to confirm agreement as to the Current and Future States as presented by the Core Team.

 

“With the aspirations confirmed, Core Team members went on to identify the Issues that needed to be addressed in order to achieve the agreed-to vision of the future.  Through consultations with colleagues and senior managers, a detailed listing of Issues was prepared followed by extensive meetings that included far-ranging discussions in specific categories on what specific actions or Strategies the Authority needed over the planning horizon to resolve those Issues and achieve the desired future.

 

“The Core Team refined its list to 40 key Strategies, and met over a two-day period in May with the EMC to finalize and prioritize those Strategies to be presented to the Trustees for concurrence.  Guidance from the EMC resulted in the reduction and consolidation of the initial list to a group of 20 Strategic Initiatives in support of the Authority’s mission.  A Strategy Leader was assigned to assume responsibility for each strategy’s implementation.

 

“The final step in the process called for the creation of ‘charters,’ or tactical plans, for each of the Strategic Initiatives.  The Strategy Leader was responsible for the Charter’s development, which consisted of a work plan, the team members who would be assisting and an order-of-magnitude estimate of the resource requirements necessary to implement it and the benefits that could be expected.  An EMC ‘Sponsor’ was named to provide guidance and assistance on an ongoing basis.

 

“A two-day planning conference was convened in June for Strategy Leaders to present the draft Charters to the Trustees and EMC for final modifications and guidance.  The Strategies are included within the Strategic Result Areas section of the Strategic Plan.

 

“Concurrently, the Strategic Plan document is being updated to reflect any changes resulting from the planning process and related discussions to the Authority’s Mission and Decision Drivers.  The Strategic Plan is presented in the format delineated below:

 

·         MISSION STATEMENT - A Mission Statement is a clear definition of the Authority’s aims, focus and emphasis for a specified timeframe.

·         DECISION DRIVERS - Underlying this Mission Statement is a set of core values that define the priorities for the Authority.  Values determine how we make decisions, perform our work and deal with others.  By understanding the driving forces behind what we want to be, we will make decisions that will support the Authority’s goals.

·         STRATEGIC RESULT AREAS - If we are to succeed in our Mission, there are specific areas where we need to articulate our vision and make clear our intentions.  In order to do that for both internal and external stakeholders, we need to define our goals and objectives, as well as identify the specific Strategies we are undertaking that support that vision.  (The Balanced Scorecard then translates Mission and Strategies into objectives and measures with specific targeted levels of performance quantifying success.)

 

“The attached Strategic Plan reflects the results of the planning process.”

 

                Mr. Cappiello presented an overview of staff’s report to the Trustees.  Chairman McCullough said that Mr. Nadeau, Mr. Cappiello and all staff who had participated in developing the Strategic Plan had done a great job, demonstrating a terrific commitment of time and effort.  He said that the development of this Strategic Plan was a great step forward and that the Authority would clearly be changing direction in some areas.  He reiterated what Mr. Cappiello had said about the Plan document being in its infancy and said that as early as this fall, more direction and specific programs would be forthcoming from the Executive Management Committee and the Trustees.  Chairman McCullough congratulated Mr. Nadeau and Mr. Cappiello and thanked them for their hard work.


 

11.                Hydropower Contracts with Upstate Investor-Owned Utilities for the Benefit of Domestic and Rural Consumers – Month-to-Month Extensions                            

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to authorize month-to-month extensions of contracts for sale to National Grid (‘Grid’)(formerly Niagara Mohawk Power Corporation), New York State Electric and Gas Corporation (‘NYSEG’) and Rochester Gas and Electric Corporation (‘RG&E’) (hereinafter referred to individually as ‘Grid,’ ‘NYSEG’ and ‘RG&E,’ respectively, or collectively as the ‘Utilities’) of a total of 455 MW of firm and 360 MW of firm peaking hydropower currently being sold to the Utilities for the benefit of domestic and rural consumers.  Existing contracts for the sale of such power to the Utilities expire on August 31, 2007.  The contract extensions would be month to month and commence on September 1, 2007, pending later approval by the Governor under §1009 of the Public Authorities Law and resolution by the Legislature and the Governor of the long-term disposition of the power and associated energy, or as otherwise may be determined by the Trustees.

 

BACKGROUND

 

                “The Utilities are currently receiving a total of 553 MW of firm power from the St. Lawrence/FDR and Niagara Power Projects and 360 MW of firm peaking hydro power from the Niagara Project for the benefit of domestic and rural consumers under contracts executed on February 22, 1989.  These and predecessor contracts with the Utilities for the purchase of such power have been in effect since February 10, 1961.  The power is purchased at the cost-based hydro power rate and the benefits are passed on to the Utilities’ residential and small farm customers (the rural and domestic, or ‘R&D,’ customers) without markup under Public Service Commission tariffs.      

               

DISCUSSION

 

                “In 1976, the Federal Power Commission (‘FPC,’ the predecessor of the Federal Energy Regulatory Commission, or ‘FERC’) determined that 1,880 MW of firm power is available for sale from the Niagara Project.  State of Vermont Public Service Board v. Power Authority of the State of New York, Docket No. E-8746, 55 FPC 1100, Issued March 12, 1976.  The Authority had been selling a total of 1,936 MW of firm Niagara power, 56 MW in excess of the amount of firm Project Power determined to be appropriate by the FPC.  In the meantime, the Authority made commitments in connection with relicensing the Niagara Project to allocate 58 MW of Niagara Project power for the benefit of the Host Communities, Erie County and the City of Buffalo, the Tuscarora Nation and Niagara University.  As of January 1, 2007, based on a rigorous study, the Authority declared there were an additional 32 MW of firm Niagara Project power available for sale as a result of the completion of the Niagara Upgrade project.  Of this amount, one-half, or 16 MW, must be sold to municipal systems pursuant to federal law.  The remainder is the net available capacity resulting from the Upgrade project. 

 

“Other than the 553 MW sold to the Utilities, the entire firm output from the St. Lawrence/FDR and Niagara Projects is sold under contracts extending beyond August 31, 2007, or otherwise required to be used for specific purposes under law.  Consequently, to account for the new relicensing-related power allocations, adjustments in sales to comply with FPC (FERC) rulings and firm power increases due to the Niagara Upgrade, the 553 MW must be adjusted.  Therefore, commencing September 1, 2007, reflecting the adjustments outlined above, 98 MW of the 553 MW of St. Lawrence/FDR and Niagara Project firm power currently sold will not be available for sale to the Utilities.  This leaves 455 MW of firm power and 360 MW of firm peaking power currently sold to the Utilities.

 


 

Current Utility Allocations:                                                                                                   553 MW

 

     Adjustments

     Less:  Niagara Relicensing Allocations:                                      −58 MW

     Less:  FPC (FERC) Adjustments                                                   −56 MW

     Plus:  Net Available Niagara Upgrade Capacity                        +16 MW

     Total Adjustments                                                                          −98 MW

 

Revised Utility Allocations:                                                                                                  455 MW

 

                “Chapter 59 of the Laws of 2006 (Part U) authorized the creation by the Governor of a ‘Temporary State Commission on the Future of New York State Power Programs for Economic Development’ (‘Commission’).  The charge to the Commission was to recommend to the Governor and the Legislature on or before December 1, 2006, ‘whether to continue, modify, expand or replace the state’s economic development power programs, including but not limited to the power for jobs program and the energy cost savings benefit program. . . .’ 

 

                “On December 1, 2006, the Commission issued its report, which included an array of findings and recommendations.  A key recommendation of the report was that, among other things, hydropower now sold to the Utilities ought to be ‘redeployed’ for economic development purposes.

 

The Commission recommends that power reserved for ‘rural and domestic’ uses be redeployed for economic development purposes.  A portion of the hydropower from NYPA’s Niagara and St. Lawrence Power Projects is sold to three upstate investor owned utilities, National Grid and two units of Energy East, NYS Electric and Gas (NYSEG) and Rochester Gas and Electric (RGE).  These sales are made in accordance with Public Authorities Law 1005 (5) which states that power from NYPA power projects ‘shall be considered primarily as for the benefit of the people of the state as a whole and particularly the domestic and rural consumers to whom the power can economically be made available.’  The contracts for this power expire at the end of the current Niagara Project license, August 31, 2007.

 

The Commission recommends this significant power asset should be redeployed for statewide economic development and allocated to approved businesses under the revised application process and criteria.  The Commission believes that while the collective value of the ‘rural and domestic’ hydropower to the customer base of the utilities is substantial, the value of the savings to the average residential customer—approximately five to ten dollars per month—is arguably less significant than the benefits the power could leverage if targeted for economic development, e.g. jobs, payroll, capital investment and other benefits.

 

Hydropower used in this manner can be blended with market-priced power to create a large pool of competitive power for economic development purposes.  This shifting of power from residential to economic development purposes should be phased in over a period of three years.

 

Report at 15-16.

 

DISCUSSION

 

                “In the recently concluded legislative session, the Power for Jobs and Energy Cost Savings Benefit Programs were extended for an additional year through June 30, 2008, (Chapter 89 of the Laws of 2007) with the understanding that a reformation of the State’s economic development power programs was necessary, with the goal of creating a long-term power resource with price stability for business, whether based on the recommendations of the Commission or some other approach.  It is expected that this issue will be addressed before the current programs expire in mid-2008.

 

                “In the meantime, it is appropriate, consistent with the adjustments outlined above and maintenance for the time being of the status quo, that firm and peaking hydropower sales to the Utilities be continued on flexible terms to allow the power to be used in a new economic development power program if authorized by the Legislature.

 

                “It is recommended that the amounts of firm and peaking St. Lawrence/FDR and Niagara Project power currently sold to the Utilities be adjusted as follows and that appropriate contract extension agreements be entered into to sell these quantities to the respective Utilities on a month-to-month renewable basis subject to reallocation as may be authorized by law or as otherwise may be determined by the Trustees.

 

 

Utility

Current Allocations

Firm MW /  Peaking MW

Recommended Allocations Firm MW  /  Peaking MW

 

Grid

                 230  /  175

               189  /  175

 

NYSEG

                 203  /  150

               167  /  150

 

RG&E

                 120  /    35

                 99  /    35

 

Total Firm / Peaking

                 553  /  360

               455  /  360

 

                “The contract extensions would commence on September 1, 2007, subject to negotiation of appropriate terms with the utilities, later approval by the Governor under §1009 of the Public Authorities Law and resolution by the Legislature and the Governor of the long-term disposition of the power and associated energy, or as otherwise may be determined by the Trustees.  In addition to the withdrawals specified above, the Authority would be allowed to reduce or terminate service if it is determined to be necessary to comply with any statute, ruling, order or decision by a regulatory or judicial body or the Trustees relating to hydropower and energy allocated under the proposed contracts.

 

FISCAL INFORMATION

 

                “The proposed extension agreements will provide that the Utilities continue to pay for hydropower at the same rates they are currently charged, that is, determined in accordance with the ratemaking principles incorporated in the Auer Settlement and subsequent rate settlements.  Accordingly, there will be no fiscal impact associated with the power sold on a month-to-month basis. 

               

RECOMMENDATION

 

                “The Acting Senior Vice President – Marketing and Economic Development recommends that the Trustees authorize month-to-month extensions of contracts for sale to National Grid, New York State Electric and Gas Corporation and Rochester Gas and Electric Corporation, for a total of 455 MW of firm and 360 MW of firm peaking hydropower for the benefit of domestic and rural consumers subject to its use in a new economic development power program if authorized by the Legislature or as otherwise may be determined by the Trustees.

 

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

 

                Mr. Kelly provided an overview of the history of these contracts and then summarized staff’s recommendations to the Trustees.  He said that for more than 45 years, the Authority had sold National Grid, New York State Electric and Gas Corporation and Rochester Gas and Electric Corporation 553 MW of firm and 360 MW of peaking hydro power for the benefit of their rural and domestic customers.  The three contracts for this power expire on August 31, 2007.  Staff is recommending that the Authority follow the step-by-step process detailed in Section 1009 of the Public Authorities Law to negotiate new contracts with the three utilities under which the Authority will sell them 455 MW of firm and 360 MW of peaking hydro power for the benefit of their rural and domestic customers through June 30, 2008.  The 455 MW of firm power represents a reduction necessitated by the new Niagara license settlement agreements with the Tuscarora Nation, Niagara University and others, offset by the Niagara plant upgrades.  Mr. Kelly said that as part of its final report issued in December 2006, the Temporary Commission on the Future of New York State Power Programs for Economic Development had recommended that this rural and domestic power be reallocated for economic development purposes.  In response to a question from Chairman McCullough, Mr. Kelly said that the new contracts will extend through June 30, 2008, but will be terminable or modifiable on 30 days’ notice.

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

 

                RESOLVED, That the Authority hereby authorizes month-to-month extensions of contracts for sale to National Grid, New York State Electric and Gas Corporation and Rochester Gas and Electric Corporation, for a total of 455 MW of firm and 360 MW of firm peaking hydropower for the benefit of domestic and rural consumers, to commence on September 1, 2007, pending later approval by the Governor under §1009 of the Public Authorities Law and resolution by the Legislature and the Governor of the long-term disposition of the power and associated energy, or as otherwise may be determined by the Trustees consistent with law; and be it further

 

RESOLVED, That the President and Chief Executive Officer, or his designee, is hereby authorized to execute contract extensions on the terms set forth in the foregoing report of the President and Chief Executive Officer, the form of which shall be approved by the Executive Vice President and General Counsel, and to do such other and further things and to execute such documents as may be necessary to effectuate the foregoing; and be it further

 

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


 

12.                Authorization of Actions Related to the Other Post-Employment Benefits Trust                                                                                                

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to take the following actions related to the creation of the Other Post-Employment Benefits Trust (‘Trust’):  Approval of the Trust Agreement, adoption of the Trust Investment Policy Statement, appointment of a Trustee Custodian and approval of the initial funding plan for the Trust.

 

BACKGROUND

 

“In 2004, the Governmental Accounting Standards Board (‘GASB’) issued Statement Nos. 43, Financial Reporting for Post-employment Benefit Plans Other Than Pension Plans and 45, Accounting and Financial Reporting by Employers for Post-employment Benefits Other than Pensions.  These standards define the accounting and reporting requirements for assets and liabilities related to ‘other post-employment benefits’ (‘OPEB’).  Specifically, Statement No. 45 requires governmental employers to account for OPEB on an ‘accrual’ basis, i.e., as the benefits are earned during the working career of the employee, rather than on a ‘pay-as-you-go’ basis, where costs would be recorded as the benefits are paid during the employee’s retirement.  OPEB may include medical, prescription drug, life and other long-term care benefits offered by the employer for retirees and eligible beneficiaries.  Larger government employers like the Authority were required to begin reporting accrued OPEB liabilities no later than the first financial reporting period after December 15, 2006.  The Authority implemented accrual accounting for its OPEB obligation in 2002, in advance of this rule’s effective date. 

 

“The Authority’s unfunded actuarial accrued liability for OPEB was $325 million as of December 31, 2006.  GASB Statement No. 43 does not mandate the funding of accrued OPEB obligations.  However, a liability such as OPEB, if it were to remain unfunded, could significantly impact the employer’s financial standing and its overall credit rating, with a concomitant impact on the cost of debt financing.  GASB Statement No. 45 specifies conditions under which contributions may be treated as an offset to OPEB obligations.  To qualify as such, payments are considered contributions to the extent they:  (1) pay for current-year retiree benefit costs or (2) are made to a qualifying trust.  To be a GASB-qualifying trust, the trust must be: (1) irrevocable, (2) dedicated to providing benefits to retirees and their beneficiaries in accordance with plan terms and (3) legally protected from creditors of the employer and plan administrator. 

 

                “At their meeting of December 19, 2006, the Trustees authorized staff to begin to take certain actions to initiate the establishment of a Trust for OPEB.  Specifically, the Trustees authorized actions by the Authority to initiate the establishment of a trust for OPEB by establishing the parameters of a trust; developing investment guidelines; and competitively searching and/or soliciting for a financial management consultant, investment manager(s) and Trustee Custodian. 

               

DISCUSSION

 

                “Pursuant to the above-mentioned Trustee authorization, staff competitively searched and selected PFM Advisors (‘PFM Advisors’) as financial management consultant.  Orrick, Herrington & Sutcliffe LLP (‘Orrick’) and Hawkins, Delafield & Wood provided legal services related to the creation and the financing of the Trust.  With the support of these entities, staff developed the Trust Agreement and the Investment Policy Statement (both contained in Exhibit ‘12-A’).

 

                Creation of Trust

 

“The exclusive purposes of the Trust are to accumulate, hold and invest funds for the payment of Benefits to Plan Beneficiaries and the payment of related administrative costs of the Plan and of the Trust, as provided in the Trust Agreement.  The Trust is intended to be a trust created under the common law of  the State of New York and it is intended that all income derived from the Trust Estate shall be excludable from gross income for federal tax purposes pursuant to Section 115 of the Internal Revenue Code.

 

“The principal of the Trust, together with any earnings thereon, shall be held separate and apart from funds of the Authority and any Investment Manager.  All Trust assets and all income thereon are irrevocably dedicated to, and shall be used for, the exclusive purposes of the Trust as set forth in the Trust Agreement.  At no time will any Trust assets be used for, or diverted to, any other purposes.

 

“The Authority intends that the assets of this Trust are to be taken into account for the purpose of determining the Authority’s OPEB obligation on the Authority’s financial statements under GASB Statement Nos. 43 and 45.  Upon the establishment of the Trust, it is expected that each year, at a minimum, the Normal Cost will be contributed into the Trust and, to the extent appropriate, additional contributions may be deposited into the Trust.  Also, any retiree benefits will be paid by withdrawals from the Trust. 

 

“In no event shall the Authority’s Trustees or its members, or any of its directors, officers, employees or agents be liable hereunder.  Distributions from the Trust do not constitute debts of the Authority (within the meaning of constitutional or statutory limitations or restrictions) nor are they legal or equitable pledges, charges, liens or encumbrances upon the Authority’s property, income or other assets.

 

Investment Policy Statement

 

                “The Trust Investment Policy Statement (Attachment B to Exhibit ‘12-A’) is a document that outlines and discusses the Trust’s investment objectives, cash-flow projections, risk tolerance, view of the economy and markets.

 

                “In order to develop a comprehensive policy statement, PFM Advisors and the Authority engaged in a portfolio planning survey and analysis, reviewed the Authority’s actuarial valuation and reviewed the investment policy the New York State Comptroller uses for the New York State and Local Employees’ Retirement Fund.  Subsequently, PFM Advisors and the Authority developed several alternative asset allocation models, reviewed capital market assumptions and determined the probability of achieving the desired investment objectives for each model.

 

“The portfolio planning survey was designed to facilitate an understanding of the Trust’s risk/return profile and asset classes appropriate for the portfolio.  The information derived from the planning survey was then used to assist in constructing a series of strategic asset allocation models.  In developing these asset allocation models, PFM Advisors used advanced proprietary modeling programs from Ibbotson Associates.  Essentially, each model incorporated historical data on asset class investment returns, volatility and correlations with other asset classes and capital market assumptions made by PFM Advisors.  After each model was developed, a series of tests were performed in order to determine the probability of achieving the desired return on investment. 

 

“Based on the various model tests and the Trust’s objectives and risk tolerances, the following strategic asset class allocations are recommended:

 

 

Asset Type

Target

% Allocation

Range of

Allocation

Equities

61%

 

   Domestic Equity

42%

37% - 47%

   International Equity

19%

14% - 24%

Other Equity

6%

 

   Real Estate (REITs)

6%

1% - 11%

Fixed Income

33%

 

   Domestic Fixed Income

30%

25% - 35%

   Cash Equivalent

3%

0% - 10%

 

“The recommended asset allocation employs the same general asset classes that the New York State Comptroller uses in managing the New York State and Local Employees’ Retirement Fund.  The Trust will combine active and passive investment strategies.  Staff recommends these two investment strategies based on two factors.  First, an empirical study based on historical data concluded the following:

 

1.        Over the last 10 years active strategies have added value in most asset classes.

2.        Passive strategies tend to outperform during strong markets with momentum.

3.        Active strategies tend to outperform in weak and/or less efficient markets.

4.        Active strategies tend to provide better relative downside protection.

 

Secondly, based on the Trust’s asset class allocation and staff’s views on market efficiency, both active and passive investment strategies complement each other and provide a balanced investment approach.

 

“Accordingly, given the Trust’s purpose, return objectives and risk tolerances, the Investment Policy Statement was created to assist in supervising, monitoring and evaluating the investment assets of the Trust.

 

                Appointment of Trustee Custodian

 

                “On May 8, 2007, a Request for Proposals was issued for Trustee and Custody Services for the Trust.  A comprehensive review of all responses was conducted and rankings were developed for each respondent based on the following key points of consideration:

 

1.        Commitment to the Public Sector Market

2.        Commitment to the Trust and Custody Services Business

3.        Breadth and Depth of Experience and Services

4.        Presence in Local Community

5.        Plan Cost

6.        Other Factors (Securities Lending, Commission Recapture, Third Party Lenders and Transition Accounting)

 

“Staff determined that all respondents were of significant size and capable of performing the necessary custodial services.  However, The Bank of New York’s commitment to the public sector, commitment to the trust custody business and its securities lending and commission recapture programs provide added value.  These benefits, coupled with cost considerations, result in staff recommending that The Bank of New York be appointed as the Trustee Custodian.  Exhibit ‘12-B,’ entitled ‘Trust and Custody Provider Review,’ summarizes the Trustee Custodian rankings.

 

                Funding Plan

 

                “The establishment of a Trust, in addition to securing the Authority’s ability to meet its OPEB obligations in the future, would reduce the cost of the obligations by allowing investment in longer-term, less restrictive and generally higher-yielding investments.  Based on discussions with the Authority’s actuary, a 1% increase in the earnings of such a Trust Fund could yield a 15% decrease in the prior service liability and the annual OPEB cost.  This higher earnings rate is estimated to produce more than $70 million in present-value savings over a 30-year period.

 

“At their meeting of December 19, 2006, the Trustees set aside $100 million as a reserve within the Operating Fund in anticipation of the establishment of the Trust.  At this time, the Trustees are requested to authorize and approve a transfer of this $100 million into the Trust from the Operating Fund.  After a thorough review by staff and PFM Advisors of the earnings potential of the Trust relative to the cost of issuing the debt, staff is also recommending that an additional $125 million be made available and deposited into the Trust through the issuance of taxable commercial paper.  The commercial paper, which staff intends to amortize over a 10-year period, will provide additional earnings opportunities for the Fund.  It is estimated that the issuance of commercial paper for this purpose will provide more than $20 million in additional savings. 

 

“Overall, the $225 million recommended at this time for deposit into the OPEB Trust represents nearly three-quarters of the Authority’s OPEB liability.  Full funding is not recommended at this time as staff would like to monitor the earnings on the Fund.  If the investment returns exceed the earnings assumption in the actuarial report used to determine the liability, the overall liability could be further reduced and staff is looking to avoid over-funding the Trust.  While the initial funding plan is designed to fund up to three-quarters of the liability, the intent is to eventually achieve fully funded status. 

 

“At this time, PFM Advisors and staff are soliciting responses from investment managers for the different investment asset classes.  Staff will seek the Trustees’ approval once the various recommended investment managers are determined.  Prior to such approval, the initial deposits to the Fund are to be invested in Exchange Traded Funds (‘ETFs’) in accordance with the Trust’s asset allocation guidelines (as referenced above) and managed by the Trustee Custodian.  ETFs are like open-ended mutual funds that typically replicate a stock market index.  ETFs allow for diversified and low-cost index investments, while allowing for full liquidity on a daily basis. After investment managers have been selected and approved by the Trustees, the ETFs will be sold and the proceeds will be reinvested with each respective investment manager.  Accordingly, the Trust will be partially funded and begin earning an investment return.

 

FISCAL INFORMATION

 

                “Upon Trustee approval of the Trust, adoption of the Trust Investment Policy Statement and the appointment of a Trustee Custodian, $100 million will be transferred from the designated OPEB Reserve within the Operating Fund to the Trust.  In addition, the proceeds of the recommended $125 million commercial paper issuance will be deposited into the Trust.  Other ancillary costs associated with legal and financial consultants will continue to be paid from the Operating funds under current contracts until the Trust is funded.  The costs associated with the OPEB liability have, since 2002, been incorporated into the Authority’s customer rates as they have been approved by the Trustees and such collections are expected to be sufficient to cover the cost of retiring the commercial paper.

 

RECOMMENDATION

 

“The Vice President – Finance recommends that the Trustees: (1) approve the creation of the Other Post-Employment Benefits Trust agreement, (2) adopt the Trust Investment Policy Statement, (3) appoint The Bank of New York as Trustee Custodian and (4) approve the funding plan as outlined above, including the transfer of $100 million from the OPEB Reserve within the Operating Fund to the Trust; the issuance of $125 million in taxable commercial paper, the proceeds of which are also to be deposited into the Trust, and allow the initial deposits to be invested in Exchange Trade Funds.

 

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

 

                Mr. Russak presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman McCullough, Mr. Russak said that he estimates that it will be a year or two before staff returns to the Trustees asking for authorization of full funding of the trust, since staff will be monitoring the earnings performance of the funds in the trust between now and then.  Responding to a question from Trustee Besha, Mr. Russak confirmed that the actuarial assumption for the trust is based on a 7% rate of return.  Mr. Del Sindaco said that a New York Times article within the last two weeks described that governments at all levels across the country have trillions of dollars in OPEB liability, citing New Jersey’s $58 billion in unfunded OPEB liability as an example.  He said that the OPEB trust being discussed today differentiates the Authority not only from other authorities but also from other government entities of all kinds nationwide.  Chairman McCullough said that there is no question that this OPEB trust is creating security for both the Authority and its employees. 

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

 

RESOLVED, That the Trustees hereby approve the creation of an Other Post-Employment Benefits Trust (“Trust”) and authorize its execution by the Executive Vice President and Chief Financial Officer, the Vice President – Finance or the Treasurer, subject to approval of the form thereof by the Executive Vice President and General Counsel, on behalf of the Authority, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Trustees approve the adoption of the Trust Investment Policy Statement and appointment of The Bank of New York as Trustee Custodian for the Other Post-Employment Benefits Trust; 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 a transfer of $100 million from the Other Post-Employment Benefits Reserve within the Operating Fund to the Trust and that up to $125 million of the Authority’s Commercial Paper Series 3 Notes may be issued with the proceeds deposited into the Trust and that the Trust may invest in Exchange Traded Funds prior to final investment management selection 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, the Executive Vice President and General Counsel, 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 resolution; and be it further

 

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


 

13.                Notice of Proposed Rulemaking – Revisions to Authority’s  Freedom of Information Law Regulations (21 NYCRR Part 453)

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to authorize the Corporate Secretary to publish a Notice of Proposed Rule Making (‘NOPR’) in the New York State Register in connection with the adoption of revisions to the Authority’s regulations implementing the Freedom of Information Law (‘FOIL’), which appear as Part 453 of Chapter 21 of the New York Code of Rules and Regulations (‘NYCRR’).  The Trustees are further requested to authorize the Corporate Secretary to make any and all other filings and take all steps necessary or appropriate therewith in accordance with the requirements of the State Administrative Procedure Act (‘SAPA’), the Executive Law  and FOIL.  In addition, the Trustees are requested to authorize the Corporate Secretary to schedule a public forum for the purpose of obtaining the views of interested parties concerning the proposed revisions to the FOIL regulations. 

 

BACKGROUND

 

“FOIL, which was enacted in 1977, directed State agencies (a term that includes public authorities) to adopt regulations governing the availability of agency records and the procedures that the public should follow to gain access to those records.  The Authority adopted its FOIL regulations in 1978 and has not amended them since then.  Recent changes in law and circumstances make amendments to the Authority’s FOIL regulations appropriate at this time. 

 

DISCUSSION

 

“On June 5, 2007, in accordance with Executive Order No. 20 of Governor George Pataki, as extended by Executive Order No. 5 of Governor Eliot Spitzer, a Notice of Intent for Rule Making, together with other supplementary materials, was submitted to the Governor’s Office of Regulatory Reform (‘GORR’) regarding the proposed revisions to the Authority’s FOIL regulations.  The revised FOIL regulations are attached as Exhibit ‘13-A’ and include these revisions:  (1) change the amount of time the Authority has to either grant or deny FOIL requests to 20 days from 10 days, to conform with current FOIL time limits; (2) clarify the hours of operation of the Secretary’s Office for the purpose of calculating response times to FOIL requests; (3) include faxing and e-mailing as acceptable means of making FOIL requests; (4) specify electronic media as the preferred method of providing records to FOIL requesters and (5) increase the ways in which FOIL requesters may pay for copies of requested records.  

 

“GORR authorized the Authority to proceed with filing the NOPR on July 16, 2007.  A copy of the letter authorizing the Authority to proceed is attached as Exhibit ‘13-B.’

 

                “SAPA requires that, prior to action adopting the revised FOIL regulations, the NOPR be published in the New York State Register.  In addition, the Executive Law requires that the notice of adoption be transmitted to the Temporary President of the Senate and the Speaker of the Assembly. 

 

                “Pursuant to SAPA, public comment on the proposed revisions to the FOIL regulations will be accepted for 45 days following publication of the NOPR in the State Register.  In addition, a public forum will be held on September 18, 2007 to solicit public comment.  Staff will consider any comments received at the public forum or in writing by the Corporate Secretary through October 1, 2007, and then the Trustees will be asked to approve the final adoption of the revised regulations at their meeting on October 30, 2007.

                                                                                                                                                                                                                                                                                                                                                                    RECOMMENDATION

 

                “The Executive Vice President and General Counsel recommends that the Trustees authorize the Corporate Secretary to: (i) file a Notice of Proposed Rule Making in the New York State Register in connection with the proposed adoption of the revised Freedom of Information Law regulations and to make any and all other filings and take all steps necessary or appropriate therewith in accordance with the requirements of the State Administrative Procedure Act, the Executive Law and the Freedom of Information Law, and (ii) schedule a public forum for the purpose of obtaining the views of interested parties concerning the proposed revisions. 

 

“I concur in the recommendation.”

 

                Ms. Cahill presented an overview of staff’s recommendations to the Trustees.  In response to a question from Chairman McCullough, Ms. Cahill said that the revisions to the Authority’s FOIL regulations would make the Authority’s FOIL response timeframes the same as those that have been specified in FOIL since it was amended in May 2005.

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

               

                RESOLVED, That the Corporate Secretary be, and hereby is, authorized to file a Notice of Proposed Rule Making in the New York State Register in connection with the proposed adoption of the revised Freedom of Information Law regulations and to make any and all other filings and take all steps necessary or appropriate therewith in accordance with the requirements of the State Administrative Procedure Act, the Executive Law and the Freedom of Information Law; 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 and General Counsel. 


 

14.                Motion to Conduct an Executive Session

 

“Mr. Chairman, I move that the Authority conduct an Executive Session for the purpose of discussing matters related to proposed, pending or current litigation.”  Upon motion duly made and seconded, an Executive Session was held.


 

15.                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.

16.                Next Meeting

The next Meeting of the Trustees will be held on Tuesday, September 25, 2007, at 11:00 a.m., at the Poletti Power Project, Queens, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.

 

Closing

 

On motion duly made and seconded, the meeting was adjourned by the Chairman at approximately
12:20 p.m.

 

 

 

 

Anne B. Cahill

Corporate Secretary

 

 


 

[1]   Such customers are now designated as “Option 5” customers in both the current and proposed tariffs.  That pricing category will not apply to any Power Program customer commencing November 1, 2007.