April 27, 1999

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, New York

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

Members of the Board were present at the following locations:

Michael J. Townsend, Acting Chairman (White Plains, NY)

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

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

Elise M. Cusack, Trustee (Lewiston, NY)

Jonathan F. Foster, Trustee (White Plains, NY)

Eugene L. Nicandri, Trustee (White Plains, NY)

------------------------------------------------------------------------------------------------------------------------------------------------------

Gil C. Quiniones Acting Chief Operating Officer

Arthur T. Cambouris Acting Executive Vice President and General Counsel

Joseph Del Sindaco Executive Vice President and Chief Financial Officer

Joan Tursi Acting Executive Vice President – Corporate Services and Administration

Edward A. Welz Executive Vice President and Chief Engineer – Power Supply

Steven J. DeCarlo Senior Vice President – Transmission

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

Paul F. Finnegan Senior Vice President – Public and Governmental Affairs

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

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

Thomas P. Antenucci Vice President – Power Supply

Arnold M. Bellis Vice President and Controller

Joseph W. Gryzlo Vice President – Ethics and Employee Resources

John M. Kahabka Vice President – Environment, Health and Safety

Lesly Y. Pardo Vice President – Internal Audit

Donald A. Russak Vice President – Finance

Thomas Warmath Vice President and Chief Risk Officer

Joseph J. Carline Assistant General Counsel – Power and Transmission

Wendy M. Lane Assistant General Counsel – Human Resources and Labor Relations

Dennis T. Eccleston Chief Information Officer

Albert Swansen First Deputy Inspector General

Brian McElroy Treasurer

Anne B. Cahill Corporate Secretary

Lisa A. Cole Deputy Treasurer

Angela D. Graves Deputy Corporate Secretary

Paul Tartaglia Regional Manager – Southeastern New York

Russ Bahm Director of Operations – Richard M. Flynn Power Plant

Thomas A. Davis Director – Financial Planning

Joseph Leary Director – Corporate Community Affairs

Gerard R. Mullin Director – Fuel Planning and Operation

James F. Pasquale Director – Marketing Analysis and Administration

Christine Pritchard Director – Intergovernmental and Community Affairs

Michael A. Saltzman Director – Media Relations

Victoria Simon Director – Business Integration and Special Projects

Marilyn J. Brown Manager – Market Pricing Analysis

Michael J. Huvane Manager – Business Marketing and Economic Development

Michael J. Mitchell Project Manager – Power Supply

Lou Paonessa Community Relations Manager – Niagara Power Project

Dayton Richardson Facility Manager – HR/Security Supervisor – Charles Poletti Power Project

Maribel Cruz Business Development and Engineering Facilitator

Mary Jean Frank Associate Corporate Secretary
Lorna M. Johnson Assistant Corporate Secretary

Philip S. Astuto Sr. Business Planner – Controller

Oksana Karaczewsky Sr. Procurement Compliance Coordinator

Stephen P. Shoenholz Public Affairs Consultant

Sheila Baughman Senior Secretary – Corporate Secretary’s Office

Acting Chairman Townsend presided over the meeting. Corporate Secretary Cahill kept the Minutes.

1. Consent Agenda:

a. Approval of the Minutes

The Minutes of the Regular Meeting held on July 29, 2008 and the Special Meeting held on August 12, 2008 were unanimously adopted.

b. Power for Jobs Program – Extended Benefits

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve extended benefits for 39 Power for Jobs (‘PFJ’) customers as listed in Exhibit ‘1b-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 and was to be phased in over three years. As a result of the initial success of the program, the Legislature amended the PFJ statute to accelerate the distribution of the power and increase the size of the program to 450 MW. In May 2000, legislation was enacted that authorized additional power to be allocated under the program. Legislation further amended the program in July 2002.

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

“PFJ customers whose contracts expired on or prior to November 30, 2004 were eligible for a rebate to the extent funded by the Authority from the date their contract expired through December 31, 2005. 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. Additional one-year extensions were included in Chapter 645 of the Laws of 2006 (to June 30, 2007) and Chapter 89 of the Laws of 2007 (to June 30, 2008). Chapter 59 of the Laws of 2008 extended program benefits until June 30, 2009.

“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 notify customers of the process, send them a short-form application and evaluate reconsideration requests based on the approved criteria.

DISCUSSION

“At its meeting on September 16, 2008, EDPAB recommended that the Authority’s Trustees approve electricity savings rebates to the 39 businesses listed in Exhibit ‘1b-A,’ which have agreed to retain a total of more than 30,000 jobs in New York State in exchange for the rebates. The rebate program will be in effect until June 30, 2009, the program’s sunset.

“The Trustees are requested to approve the funding and payment of rebates to the companies in Exhibit ‘1b-A’ in a total amount currently not expected to exceed $5.9 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 rebate funding for these companies in the future for other rebate months.

FISCAL INFORMATION

“Rebate funding for the companies in Exhibit ‘1b-A’ is not expected to exceed $5.9 million and will be paid from the Operating Fund. To date, the Trustees have approved $137.6 million in rebates.

RECOMMENDATION

“The Executive Vice President and Chief Financial Officer and the Director – Marketing Analysis and Administration recommend that the Trustees approve the payment of electricity savings reimbursements to the Power for Jobs customers listed in Exhibit ‘1b-A.’

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

The following resolution, as submitted by the Acting Chief Operating Officer, was unanimously adopted.

WHEREAS, the Economic Development Power Allocation Board (“EDPAB”) has recommended that the Authority approve electricity savings reimbursements to the Power for Jobs (“PFJ”) customers listed in Exhibit “1b-A”;

NOW THEREFORE BE IT RESOLVED, That to implement such EDPAB recommendations, the Authority hereby approves the payment of electricity savings reimbursements to the companies listed in Exhibit “1b-A,” and that the Authority finds that such payments for electricity savings reimbursements are in all respects reasonable, consistent with the requirements of the PFJ program and in the public interest; and be it further

RESOLVED, That based on staff’s recommendation, it is hereby authorized that payments be made for electricity savings reimbursements as described in the foregoing report of the Acting Chief Operating Officer in the aggregate amount of up to $5.9 million, and it is hereby found that amounts may properly be withdrawn from the Operating Fund to fund such payments; and be it further

RESOLVED, That such monies may be withdrawn pursuant to the foregoing resolution upon the certification on the date of such withdrawal by the Vice President – Finance or the Treasurer that the amount to be withdrawn is not then needed for any of the purposes specified in Section 503(1)(a)-(c) of the General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

RESOLVED, That the Senior Vice President – Energy Marketing and Business 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 Acting Executive Vice President and General Counsel; and be it further

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

d. Neighboring States – Service Tariff Amendments – Notice of Adoption

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve amendments to the Authority’s current production service tariffs applicable to its Neighboring States customers. Staff recommends that changes to the Authority’s tariffs from the Niagara Power Project for firm, firm peaking and non-firm power (NS-1, NS-2, and NS-3) and to the Authority’s tariffs from the St. Lawrence/FDR Power Project for firm and non-firm power (SL-1 and SL-2), each attached as Exhibits ‘1d-A’ through ‘1d-E,’ respectively, become effective on October 1, 2008.

BACKGROUND

“At their May 20, 2008 meeting, the Trustees authorized the Corporate Secretary to file a Notice of Proposed Rulemaking (‘NOPR’) with the New York State Department of State for publication in the New York State Register that the Authority proposed to amend service tariffs applicable to its Neighboring States customers. These amendments were needed to include necessary new provisions and updated terminology, remove obsolete sections and improve the organization and formatting.

“The NOPR was published in the New York State Register on June 4, 2008. In addition, Neighboring States customers were notified of the proposed service tariff amendments and invited to review the materials and submit comments. In accordance with the State Administrative Procedure Act (‘SAPA’), interested parties were afforded a 45-day comment period. The public comment period closed on July 21, 2008.

DISCUSSION

“No written comments were received during the statutory comment period. Staff recommends that the amended service tariffs become effective at the start of the first billing period subsequent to the Trustees’ approval, which is October 1, 2008.

FISCAL INFORMATION

“Adoption of the proposed Neighboring States service tariffs will have no financial impact. The changes proposed are administrative in nature and have no effect on current production rates.

RECOMMENDATION

“The Manager – Market Analysis and Tariff Administration recommends that the attached amended service tariffs for the Authority’s Neighboring States customers be approved and that the Trustees authorize the Corporate Secretary to file a Notice of Adoption with the New York State Department of State for publication in the New York State Register in accordance with the State Administrative Procedure Act. The requested effective date of these tariffs is October 1, 2008.

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

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

The following resolution, as submitted by the Acting Chief Operating Officer, was unanimously adopted.

RESOLVED, That the Trustees adopt the amendments to the service tariffs applicable to the Authority’s Neighboring States customers, as set forth in the foregoing report of the Acting Chief Operating Officer; and be it further

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file a Notice of Adoption for publication in the New York State Register in accordance with the State Administrative Procedure Act; and be it further

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to submit such other notice(s) as may be required by statute or regulation concerning the adoption of the service tariff amendments; and be it further

e. Upstate Investor-Owned Utilities – Service Tariff Amendments – Notice of Proposed Rule Making

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize the Corporate Secretary to publish a Notice of Proposed Rulemaking (‘NOPR’) in the New York State Register, in accordance with the requirements of the State Administrative Procedure Act (‘SAPA’), to amend the Authority’s current production service tariffs applicable to the upstate investor-owned utility (‘IOU’) customers. Authority staff will address any comments received during the 45-day public comment period and return to the Trustees at a later date to seek final action on the IOU service tariffs.

“A comprehensive review of the Authority’s current IOU production service tariffs was performed by Authority staff in an effort to update them and make them consistent with those of other utilities. The amended tariffs, as proposed, would:

be reformatted for easier reading;
group provisions that relate to each other;
include certain standard provisions that are applicable to all Authority service tariffs; and

· add frequently used abbreviations and terms.

BACKGROUND

“The IOU customers are National Grid, New York State Electric & Gas Corporation and Rochester Gas & Electric Corporation.

“IOU customers receiving electricity from the Authority’s Niagara and St. Lawrence-FDR Power Projects are served under Service Tariff Nos. ST-41 for firm power and energy, ST-42 for firm peaking power and energy and ST-43 for interruptible energy. Currently, electricity for these customers is sold under the Application for Electric Service between the Authority and the IOU customers for resale to their residential customers.

DISCUSSION

“The amended IOU service tariffs will be an improvement over the existing tariffs, since they will include updated terminology and more streamlined organization and formatting.

“In addition, the proposed changes will make the tariffs more consistent with other utilities’ tariffs and more readable and understandable for the Authority and its IOU customers.

“The proposed revised IOU service tariffs for firm, firm peaking and interruptible power from the Niagara and St. Lawrence/FDR Power Projects are attached as Exhibits ‘1e-A’, ‘1e-B’ and ‘1e-C,’ respectively.

FISCAL INFORMATION

“Adoption of the proposed IOU service tariffs will have no financial impact. The changes proposed are administrative in nature and have no effect on current production rates.

RECOMMENDATION

“The Manager – Market Analysis and Tariff Administration recommends that the Trustees authorize the Corporate Secretary to file a Notice of Proposed Rulemaking in the New York State Register for the revision of service tariffs for the Authority’s upstate investor-owned utility customers.

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

The following resolution, as submitted by the Acting Chief Operating Officer, was unanimously adopted.

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file a Notice of Proposed Rulemaking for publication in the New York State Register in accordance with the State Administrative Procedure Act to amend the Authority’s current production service tariffs applicable to its upstate investor-owned utility customers, as set forth in the foregoing report of the Acting Chief Operating Officer; and be it further

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file such other notice(s) as may be required by statute or regulation concerning the proposed tariff amendments; and be it further

f. Procurement (Services) Contracts – Business Groups/Units/Departments and Facilities – Awards and Extension with Additional Funding

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the award and funding of the multiyear procurement contracts listed in Exhibit ‘1f-A,’ as well as the continuation and funding of the procurement contract listed in Exhibit ‘1f-B,’ in support of projects and programs for the Authority’s Business Groups/Units/ Departments and Facilities. Detailed explanations of the recommended awards and extension with additional funding, including the nature of such services, the bases for the new awards if other than to the lowest-priced bidders and the intended duration of such contracts, are set forth in the discussion below.

BACKGROUND

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

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

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

DISCUSSION

Awards

“The terms of these contracts will be more than one year; therefore, the Trustees’ approval is required. Except as noted, all of these contracts contain provisions allowing the Authority to terminate the services for the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination. Approval is also requested for funding all contracts, which range in estimated value from $50,000 to $7.5 million (aggregate total). Except as noted, these contract awards do not obligate the Authority to a specific level of personnel resources or expenditures.

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

Extension

“Although the firm identified in Exhibit ‘1f-B’ has provided effective services, the issues or projects requiring these services have not been resolved or completed and the need exists for continuing this contract. The Trustees’ approval is required because the term of this contract will exceed one year. The subject contract contains provisions allowing the Authority to terminate the services at the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination. This contract extension does not obligate the Authority to a specific level of personnel resources or expenditures.

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

“The following is a detailed summary of each recommended contract award and the extension with additional funding.

Contract Awards in Support of Business Groups/Units/Departments and Facilities:

Business Services

Information Technology

“In the past five years, the Authority’s Information Technology division (‘IT’) has undertaken major initiatives involving the upgrade of its White Plains Office Data Center, establishment of a ‘Hot-Site’ for Disaster Recovery, replacement of its legacy Billing Systems and expansion of its SAP R/3 environment. During the next three years, IT will launch new initiatives in Customer Relationship Management (‘CRM’), Enhanced Data Management Business Warehouse and NERC CIP compliance. IT will also continue to support and maintain the Authority’s current investment in its computer and network infrastructure, as well as its existing computer applications portfolio. In order to meet the needs of this plan, the Authority uses contractors to augment its technical staff on a short-term basis, as necessary.

“Since the existing contracts are expiring and the need for such services is ongoing, bid documents were prepared and downloaded electronically from the Authority’s Procurement website by 89 firms, including those that may have responded to a notice in the New York State Contract Reporter. Thirty proposals were received and evaluated to identify a ‘short list’ of prequalified firms providing temporary programming personnel. The following 14 firms were the lowest-priced bidders that meet the bid requirements: Carlyle Consulting Services, Inc., Computer Generated Solutions, Inc., Contract Specialties Group, Ltd., Delphi Strategic Staffing LLC dba Rohn Rogers Associates, Eclaro International, Inc., Garrett Sayer Group, LLC, Infotech Global, Inc.,* L. J. Gonzer Associates, Inc., Marlabs, Inc., Qualified Resources International, LLC dba Monroe Staffing Services, Neotecra, Inc.,* RCG Information Technology, Inc., System Edge (USA), LLC* and Unique Comp Inc.* (Q08-4300; PO#s TBA). (Some of these firms have provided such services to the Authority under previous contracts in a timely and satisfactory manner.) As specific positions are required, the Authority will request résumés of candidates based on the requirements and experience required for each position from all 14 prequalified firms. Contracts would only be awarded to the successful firms, as each required position is bid among the entire prequalified group. Competition among the group is expected to provide qualified talent from a wide variety of firms. The new contracts would become effective on or about October 1, 2008 for an intended term of up to three years, subject to the Trustees’ approval, which is hereby requested. All contracts will expire on September 30, 2011, regardless of their duration. Approval is also requested for the aggregate total amount expected to be expended for the term of the contracts, $7.5 million. Commitments will be made through individual purchase order releases against master outline agreements with the successful firms, as positions are required; total commitments and expenditures for all awarded contracts will also be tracked against the approved total. (An asterisk following the name of a firm indicates that it is a New York State-certified Minority/Woman-owned Business Enterprise, ‘M/WBE.’)

“The Authority also has a need to augment its specialized SAP programming staff to support various IT efforts and initiatives related to the SAP enterprisewide financial/business management system at the Authority. In an effort to prequalify firms to provide the services of temporary programming personnel to support specialized SAP-related tasks and initiatives, bid documents were prepared and downloaded electronically from the Authority’s Procurement website by 61 firms, including those that may have responded to a notice in the New York State Contract Reporter. Twenty-one proposals were received and evaluated to identify a ‘short list’ of prequalified firms providing specialized SAP temporary programming personnel. The prequalification selection process included, but was not limited to, the following primary considerations: the bidder’s primary focus or subspecialty being SAP, the depth of the bidder’s organization and SAP recruitment staff resources, the quality of résumés submitted for each SAP job category, the bidder’s experience in the tri-state area and compliance with bid requirements. The following six firms have been identified as a result of the prequalification selection process: ACSYS, Inc., Atrinova Inc., Bayforce Technology Solutions, Inc., Cross Thread Solutions LLC, Delphi Strategic Staffing LLC dba Delphi Solutions and Tescra, Inc. (Q07-4186; PO#s TBA). These firms were the most technically qualified bidders that meet or exceed the aforementioned evaluation criteria and bid requirements. It should also be noted that the hourly billing rates submitted by these bidders are significantly lower than those of SAP. As specific positions are required, the Authority will request résumés of candidates based on the requirements and experience required for each position from all six prequalified firms. Contracts would only be awarded to the successful firms, as each required position is bid among the entire prequalified group and the best candidate is selected. Competition among the group is expected to provide qualified talent from a wide variety of firms. Contracts would become effective on or about October 1, 2008 for an intended term of up to three years, subject to the Trustees’ approval, which is hereby requested. All contracts will expire on September 30, 2011, regardless of their duration. Approval is also requested for the aggregate total amount expected to be expended for the term of the contracts, $3 million. Commitments will be made through individual purchase order releases against master outline agreements with the successful firms, as positions are required; total commitments and expenditures for all awarded contracts will also be tracked against the approved total.

“The contract with SilkRoad technology, inc. (‘SilkRoad’) (Q08-4246; PO# TBA) would provide for web-based software and services to support eRecruitment, applicant tracking and onboarding functions for the Authority’s Human Capital and Development Employment Group at the Authority’s White Plains Office and the Human Resources Departments at the Facilities. Services include externally hosting the software (a Software as a Service, ‘SaaS,’ solution) for the Authority to provide turnkey services, including requisitioning, candidate acquisition, applicant tracking and onboarding, as well as communication management, reporting/analytics, data management, application integration and application security to support these activities. Bid documents were downloaded electronically from the Authority’s Procurement website by 50 firms, including those that may have responded to a notice in the New York State Contract Reporter. Eleven proposals were received and evaluated. The two lowest-cost bidders were invited to make presentations and product demonstrations to the Authority’s Evaluation Committee. Staff recommends award of a contract to SilkRoad, the lowest-priced bidder that meets all the bid requirements and is qualified to perform the work. The contract would become effective on or about October 1, 2008, for an intended term of three years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $150,400.

Energy Marketing and Business Development

Energy Services and Technology – Energy Services

“The contract with Whitestone Construction Corp. (‘Whitestone’) (Q08-4302; PO# TBA) would provide for the furnishing, delivery and installation of energy-efficient replacement windows in three Westchester County Department of Public Works buildings in White Plains in compliance with all applicable codes and regulations, as part of the Authority’s Energy Services Program. To this end, bid documents were downloaded electronically from the Authority’s Procurement website by seven firms, including those that may have responded to a notice in the New York State Contract Reporter. One proposal was received and evaluated. Staff recommends the award of a contract to Whitestone, the sole responding bidder, which is qualified to perform such services and meets the bid requirements. The contract would become effective on or about November 1, 2008, for a term of up to 18 months, subject to the Trustees’ approval, which is hereby requested. (While staff anticipates that services will be completed within one year, an additional six months are requested to accommodate any potential delays, typically due to such factors as inclement weather and customer scheduling issues.) Approval is also requested for the total amount expected to be expended for the term of the contract, $4.65 million. It should be noted that all costs will be recovered by the Authority.

Power Supply

“Due to the need to commence services, the contract with American Federal Crane Certification Bureau, a Division of American Crane Certification, Inc. (‘American Crane’) (4600001966) became effective on July 30, 2008, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs. The purpose of this contract is to provide for annual inspection and certification services for cranes and other lifting devices at various Authority facilities located throughout New York State, in compliance with all applicable Occupational Safety and Health Administration (‘OSHA’) requirements and ANSI standards. Services include visual inspection, functional and operational testing on aerial bucket trucks, cranes, digger/derricks and self-propelled manlifts, including liquid penetrant inspection of each hook for the overhead and gantry cranes, crawler, locomotive and truck cranes. Bid documents were downloaded electronically from the Authority’s Procurement website by 12 firms, including those that may have responded to a notice in the New York State Contract Reporter. Two proposals were received and evaluated. Based on its ability to perform the work and reasonable pricing, staff recommends award of a contract to American Crane, the lower-priced bidder, which is qualified to perform such services, meets the bid requirements and has provided satisfactory service under an existing contract for such work. The intended term of the contract is up to 3.4 years, subject to the Trustees’ ratification and approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $163,639.

“The contract with Carrier Corporation (‘Carrier’) (Q08-4321; PO# TBA) would provide for heating, ventilation and air-conditioning (‘HVAC’) maintenance services for the Authority’s Charles Poletti, 500 MW Combined Cycle and Small Clean Power Plants (excluding Brentwood, which is serviced by another contractor). Services include HVAC equipment and system preventative maintenance (including annual maintenance, seasonal start-up, shutdown, service call work and preventative maintenance of the equipment, as recommended by the equipment manufacturer and common industry practice), as well as on-call equipment maintenance and repairs, on an ‘as needed’ basis. Bid documents were downloaded electronically from the Authority’s Procurement website by 17 firms, including those that may have responded to a notice in the New York State Contract Reporter. One proposal was received and evaluated. Based on its ability to perform the work and reasonable pricing, staff recommends award of a contract to Carrier, the sole responding bidder, which is qualified to perform such services and meets the bid requirements. The contract would become effective on October 1, 2008 for an intended term of up to three years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $1.5 million.

“The contract with Eaton Electrical Services & Systems (‘Eaton’) (Q08-4340; PO# TBA) would provide for the installation of two SF6 generator breakers and related equipment for Units 3 and 4 at the Blenheim-Gilboa Project (‘B-G’) as part of the Life Extension and Modernization upgrades at B-G. To this end, bid documents were downloaded electronically from the Authority’s Procurement website by 15 firms, including those that may have responded to a notice in the New York State Contract Reporter. Two proposals were received and evaluated. Staff recommends award of a contract to Eaton, the lower-priced bidder, which is qualified to perform the work, meets the bid requirements and has provided satisfactory service under a prior contract for work at B-G. The contract would become effective on or about October 1, 2008, for an intended term of up to two years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $550,688.

“The contract with Hi Tech Air Conditioning Service, Inc. (‘Hi Tech’) (Q08-4350; PO# TBA) would provide for HVAC maintenance services for the Authority’s Richard M. Flynn Plant and Brentwood Small Clean Power Plant. Services include HVAC equipment and system preventative maintenance (including annual maintenance, seasonal start-up, shutdown, service call work and preventative maintenance of the equipment, as recommended by the equipment manufacturer and common industry practice), as well as on-call equipment maintenance and repairs, on an ‘as needed’ basis. Bid documents were downloaded electronically from the Authority’s Procurement website by 20 firms, including those that may have responded to a notice in the New York State Contract Reporter. Three proposals were received and evaluated. Based on its ability to perform the work and reasonable pricing, staff recommends award of a contract to Hi Tech, the lowest-priced bidder, which is qualified to perform such services, meets the bid requirements and has provided satisfactory service under an existing contract for such work. The new contract would become effective on October 1, 2008 for an intended term of up to 3.25 years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $120,000.

“The contract with Modern Disposal Services, Inc. (‘MDS’) (4600001965) would provide for asbestos-containing waste removal and disposal services for the St. Lawrence/FDR Power Project. Services include furnishing specialized waste containers and transportation to and disposal of such asbestos waste at its landfill, in accordance with all applicable federal, state and local codes and regulations. Bid documents were sent to two firms, including those that may have responded to a notice in the New York State Contract Reporter. One proposal was received and evaluated. Based on its experience and reasonable pricing, staff recommends award of a contract to MDS, the sole responding bidder, which is qualified to perform such services, meets the bid requirements and has provided satisfactory service under an existing contract for such work. The new contract would become effective on October 1, 2008 for an intended term of up to three years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $50,000.

“As part of the Good Neighbor Agreement between the Authority and Niagara University, the Authority has agreed to build a new warehouse and transfer the existing warehouse to Niagara University in 2011. The contract with Nelson Associates Architectural Engineering (‘Nelson Associates’) (Q08-4352; PO# TBA) would provide for architectural/ engineering services to prepare a fully detailed design, working drawings and specifications for the construction of a new warehouse with office space at the Niagara Power Project. Such design would incorporate the U. S. Green Building Council’s Leadership in Energy and Environmental Design (‘LEED’) certification standards and requirements. Services also include, but are not limited to, providing construction support (i.e., review of construction bids, review submittals, walk-downs, required design change notices, technical inspections, etc.) for the duration of the project, including submittal of record drawings based on as-built drawings after project completion. Bid documents were downloaded electronically from the Authority’s Procurement website by 62 firms, including those that may have responded to a notice in the New York State Contract Reporter. Six proposals were received and evaluated. The two lowest-priced bidders were invited for a bid review meeting. Staff recommends award of a contract to Nelson Associates, the lowest-priced bidder, which is qualified to perform such services. The contract would become effective on or about September 24, 2008 for an intended term of approximately 2.25 years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $632,915 (which includes funding for emerging issues, such as expanding the capacity of the existing Authority sewage pump stations, additional energy modeling calculations that may be required for LEED certification and any additional environmental issues that may arise after site investigations).

“Pursuant to 19 NYCRR 1204, each State agency is charged with providing, at a minimum, an annual fire safety inspection for each building within its custody in an effort to determine compliance with the Uniform Fire Prevention and Building Code. An inspection report must also be prepared by the agency, violations corrected and a correction plan prepared and maintained for violations that remain uncorrected 60 days after their discovery. Since the need for such services is ongoing and the existing contract will expire later this year, staff recommends the award of a new contract to the New York State Department of State - Office of Fire Prevention and Control (‘OFPC’) (PO# TBA). The contract would provide for the services of a trained, experienced and certified fire protection specialist to perform inspections and various other fire safety-related services for the Authority statewide, in compliance with all applicable State fire codes, laws and regulations. Services comprise: (1) initial inspection (consisting of fire and life safety inspections in each building/facility owned or operated by the Authority to meet the requirements for such annual inspections, issuance of certificates of compliance and assistance in devising corrective actions, as needed); (2) re-inspection of those facilities found to need corrective actions during initial inspections, as well as assistance in preparing responses to any safety complaints, as needed and (3) consultative services (including, but not limited to, a customized fire safety employee training program, fire safety and emergency response planning and evacuation drills), as may be requested by the Authority. Pursuant to Section 156 of the Executive Law, OFPC has the authority and responsibility for providing fire safety inspections at State-regulated facilities, upon the request of the State agency. OFPC has the personnel, training and equipment to assume the fire and safety inspections of State-regulated facilities and the Authority is requesting OFPC to undertake the responsibility to conduct fire safety inspections for, and at, certain facilities under the Authority’s control. Based on the foregoing reasons and OFPC’s reasonable pricing, as well as its satisfactory services provided under the existing contract, staff recommends award of the proposed contract to OFPC on a sole-source basis. The new contract would become effective on January 1, 2009, for an intended term of three years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $105,000.

“The contract with Occupational Health Care Division of the Niagara Falls Memorial Medical Center (‘OHC’) (4600001963) would provide for on-site annual physicals and other off-site medical examinations for Authority employees of the Niagara Power Project. Services also include, but are not limited to: pre-employment physicals, fitness-for-duty and return-to-work examinations and drug and alcohol testing, as well as specialized examinations (e.g., for users of respiratory equipment, employees who must meet Coast Guard Captain’s License requirements, etc.). Bid documents were downloaded electronically from the Authority’s Procurement website by 11 firms, including those that may have responded to a notice in the New York State Contract Reporter. Two proposals were received and evaluated. Based on its qualifications, ability to perform the work and reasonable pricing, staff recommends award of a contract to OHC, the lower-priced evaluated bidder, which is qualified to perform such services, meets the bid requirements and has provided satisfactory service under an existing contract for such work. The new contract would become effective on October 1, 2008 for an intended term of up to four years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $400,000.

“The contract with Siemens Building Technologies, Inc. (‘Siemens’) (RFQ 20037388; PO# TBA) would provide for technical support services for the proprietary building control system that monitors and controls HVAC functions at the Niagara Power Project. The award is made on a sole-source basis, since Siemens is the original equipment manufacturer and, as such, is uniquely qualified to provide such services. A notice of the Authority’s intent to award a sole- source contract to Siemens for such services was published in the New York State Contract Reporter. Based on its ability to perform the work and reasonable pricing, staff recommends award of a contract to Siemens, which is qualified to perform such services and has provided satisfactory service under an existing contract for such work. The new contract would become effective on October 1, 2008 for an intended term of up to five years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $75,000.

“In the early 1990s, the Authority awarded a contract to Underground Systems, Inc. (now USi), with the Trustees’ approval, to design, furnish, deliver, install and commission a dielectric fluid leak detection system to monitor Feeder Y-49 on the Sound Cable Project. The system’s proprietary design is a complex arrangement of Remote Terminal Units and communication links that monitor cable temperature, flows and other critical parameters and perform calculations to determine if there is a leak. Over time, the original system became outdated and required updating in order to ensure the reliability and safety of Feeder Y-49 and to meet environmental licensing commitments. In 2005, the hardware and software were upgraded by USi under a new contract, which also provided for 24/7 monitoring and system maintenance for a three-year term, with the Trustees’ approval, and which facilitated uprate (the ability to increase the flow of power through the cable). Since the existing contract is expiring and the need for such services is ongoing, staff recommends the award of a new contract to USi. The proposed contract (Q08-4359; PO# TBA) would provide for continuous monitoring of the leak detection and uprate system on a 24/7/365 basis, as well as maintenance and repair of the installed system, including annual calibration and leak testing, field maintenance and technical support, as needed, including an answering service that would notify the appropriate parties of calls regarding system alarms and operating issues in the event of a suspected or actual dielectric fluid leak. This award is made on a sole-source basis, since USi is the original system designer of the existing proprietary software and hardware configuration. This firm is therefore uniquely qualified to monitor and maintain the system, in order to ensure the reliability of the Y-49 Cable and to fulfill the Authority’s regulatory licensing commitments. USi’s proposed pricing is reasonable, representing a modest increase to the current rates; in addition, the contractor has demonstrated competency in fulfilling its obligations under the existing contract. The new contract would become effective on October 1, 2008 for an intended term of up to five years, subject to the Trustees’ approval, which is hereby requested. Approval is also requested for the total amount expected to be expended for the term of the contract, $1,262,500. It should be noted that all costs will be recovered by the Authority.

Contract Extension with Additional Funding:

Business Services

Corporate Finance

“The contract with Brown, Williams, Moorhead & Quinn, Inc. (4500149315) provides for consulting services in connection with the Authority’s transmission cost-of-service and anticipated regulatory filings with the Federal Energy Regulatory Commission (‘FERC’). The original award, which was competitively bid, became effective on November 1, 2007 for a term of up to one year. The consultant was to develop, with the support of Authority staff, and provide a computer model to forecast current and future transmission revenue requirements, incorporating various levels of maintenance, capital upgrades and/or expansion; develop a list of constraints and limitations on the Authority’s ability to generate additional revenue to recover new transmission project costs in the New York Independent System Operator market and prepare a detailed cost-of-service study for the Authority’s transmission system. The consultant and Authority staff’s efforts to bring the data to a level compatible with FERC standards caused a delay in the start of the primary task. Work is currently under way to analyze 2007 transmission costs for a potential filing with FERC in 2009, to be followed by a potential second filing for a major transmission capital project. In the event these rate cases are required to proceed through the settlement or hearing process, the consultant’s services would be required for an additional two-year period beyond the initially anticipated one-year term. As the original consultant, this firm is uniquely qualified to perform the additional related services and rebidding would not be practical. Staff therefore recommends a two-year extension of the subject contract. The current contract amount is $150,000; staff anticipates that an additional $150,000 may be required for the extended term. It should be noted that the rates will remain firm for the duration of the contract. The Trustees are requested to approve the extension of the subject contract through October 31, 2010, as well as the additional funding requested.

FISCAL INFORMATION

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

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

RECOMMENDATION

“The Vice President – Project Management, the Vice President – Engineering, the Vice President – Finance, the Vice President – Business Development and Asset Management, the Chief Information Officer, the Director – Energy Services, the Director – Human Capital and Development, the Regional Manager – Northern New York, the Regional Manager – Western New York, the Regional Manager – Central New York and the Regional Manager – Southeastern New York recommend the Trustees’ approval of the award of multiyear procurement contracts to the companies listed in Exhibit ‘1f-A,’ and the extension with additional funding of the procurement contract listed in Exhibit ‘1f-B,’ for the purposes and in the amounts discussed within the item and/or listed in the respective Exhibits.

“The Acting Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Acting Executive Vice President – Corporate Services and Administration, the Executive Vice President and Chief Engineer – Power Supply, the Senior Vice President – Energy Services and Technology, the Senior Vice President – Transmission and I concur in the recommendation.”

In response to a question from Trustee Jonathan Foster, Ms. Oksana Karaczewsky said that when Authority staff followed up with potential bidders to ascertain the reasons for there being only one bid submitted for the project to furnish, deliver and install energy-efficient replacement windows in three Westchester County Department of Public Works buildings in White Plains, the reasons they were given included insufficient resources to carry out the project, discomfort with the scope of work and the prevailing wage rates.

Responding to another question from Trustee Foster, Mr. Edward Welz said that safety was one of the factors taken into consideration when evaluating the proposals for annual inspection and certification services for cranes and other lifting devices at various Authority facilities.

The following resolution, as submitted by the Acting Chief Operating Officer, was unanimously adopted.

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the award and funding of the multiyear procurement services contracts set forth in Exhibit “1f-A,” attached hereto, are hereby approved for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the Acting Chief Operating Officer; and be it further

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the contract listed in Exhibit “1f-B,” attached hereto, is hereby approved and extended for the period of time indicated, in the amount and for the purpose listed therein, as recommended in the foregoing report of the Acting Chief Operating Officer; and be it further

RESOLVED, That the Acting Chairman, the Acting Chief Operating 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 Acting Executive Vice President and General Counsel.

g. Budget Information Pursuant to Section 2801 of the Public Authorities Law

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize the Corporate Secretary to submit budget information to the Governor and legislative leaders pursuant to Section 2801 of the Public Authorities Law.

BACKGROUND

“In January 2006, the Public Authorities Accountability Act of 2005 (‘PAAA’) was signed into law, reflecting the State’s commitment to maintaining public confidence in public authorities by ensuring that the essential governance principles of accountability, transparency and integrity are followed at all times. To facilitate these objectives, the PAAA established an Authority Budget Office (‘ABO’) that monitors and evaluates the compliance of State authorities with the requirements of the Act. Among other things, the PAAA amended Section 2801 of the Public Authorities Law to require that budget reports by a State authority be submitted to designated governmental officials 90 days, rather than 60 days, before the start of the authority’s fiscal year.

DISCUSSION

“The Trustees are requested to authorize the Corporate Secretary to file the attached budget information (Exhibit ‘1g-A’) pursuant to Section 2801(1) of the Public Authorities Law, which provides as follows:

State authorities. Every state authority or commission heretofore or hereafter continued or created by this chapter or any other chapter of the laws of the State of New York shall submit to the governor, chairman and ranking minority member of the senate finance committee, and chairman and ranking minority member of the assembly ways and means committee, for their information, annually not less than ninety days before the commencement of its fiscal year, in the form submitted to its members or trustees, budget information on operations and capital construction setting forth the estimated receipts and expenditures for the next fiscal year and the current fiscal year, and the actual receipts and expenditures for the last completed fiscal year.

As provided in Executive Order No. 173, this information will also be submitted to the State Division of the Budget. Additionally, the Section 2801 budget information will be electronically posted to the Office of the State Comptroller’s and the ABO’s jointly operated Public Authorities Reporting Information System (‘PARIS’).

FISCAL INFORMATION

“There is no anticipated fiscal impact.

RECOMMENDATION

“The Vice President – Controller recommends that the Trustees authorize submittal of the attached budget information (Exhibit ‘1g-A’) as discussed herein.

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

The following resolution, as submitted by the Acting Chief Operating Officer, was unanimously adopted.

RESOLVED, That pursuant to Section 2801 of the Public Authorities Law, the Corporate Secretary be, and hereby is, authorized to submit to the Governor, the Chairman and Ranking Minority Member of the Senate Finance Committee, the Chairman and Ranking Minority Member of the Assembly Ways and Means Committee, the Division of the Budget and the Authority Budget Office the attached budget information on operations and capital construction setting forth the estimated receipts and expenditures for the next fiscal year and the current fiscal year, and the actual receipts and expenditures for the last completed fiscal year in accordance with the foregoing report of the Acting Chief Operating Officer; and be it further

RESOLVED, That the Acting Chairman, the Acting Chief Operating 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 Acting Executive Vice President and General Counsel.

Exhibit “1g-A”

September 23, 2008

Power Authority of the State of New York

Estimated Receipts and Expenditures 2008 and 2009

Actual Receipts and Expenditures 2007

(in millions)

	Actuals	Forecast	Estimated
	2007	2008	2009
Revenue Receipts :
Sale of Power, Use of Transmission Lines,
Wheeling Charges and other receipts	$2,938.4	$3,274.7	$3,391.0
Earnings on Investments and Time Deposits	$48.1	$50.8	$60.6
Total Revenues	$2,986.5	$3,325.5	$3,451.6

Expenses:
Operation and Maintenance, including Transmission
of Electricity by others, Purchased Power and
Fuel Purchases	($2,712.6)	($2,814.8)	($3,006.7)

Debt Service :
Interest on Bonds and Notes / Commercial Paper Paydown	($97.3)	($108.3)	($95.3)
General Purpose Bonds Retired	($384.8)	($166.0)	($103.6)
Notes Retired	($6.1)	($6.0)	($6.5)
Total Debt Service	($488.2)	($280.3)	($205.4)

Total Requirements	($3,200.8)	($3,095.1)	($3,212.1)

Net Operations	($214.3)	$230.4	$239.5

Capital Receipts :
Sale of Bonds, Promissory Notes & Commercial Paper	$720.4	$169.5	$105.5
Less : Repayments / Commercial Paper Paydown	($208.6)	($51.8)	($112.3)
Earnings on Construction Funds	$5.4	$8.5	$5.8
DSM Recovery Receipts	$84.3	$60.7	$35.8
Other	$93.7	$42.0	$102.0
Total Capital Receipts	$695.2	$228.9	$136.8

Capital Additions & Refunds :
Additions to Electric Plant in Service and
Construction Work in Progress, and Other costs	($225.2)	($255.8)	($272.0)
Construction Escrow	($164.9)	$49.8	$60.0
Total Capital Additions & Refunds	($390.1)	($206.0)	($212.0)

Net Capital	$305.1	$22.9	($75.2)

Net Increase/(Decrease)	$90.8	$253.3	$164.3

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

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“In accordance with regulations of the Office of the State Comptroller (‘OSC’), the Trustees are requested to approve for public release a proposed 2009 budget and four-year financial plan; authorize making the proposed budget and four-year financial plan available for public inspection at not less than five convenient public places throughout New York State and authorize posting the proposed budget and four-year financial plan on the Authority’s website.

BACKGROUND

“OSC implemented new regulations in March 2006 that address the preparation of annual budgets and four-year financial plans by ‘covered’ public authorities, including the Authority. (See 2 NYCRR Part 203 (‘Part 203’), attached as Exhibit ‘1h-A.’) These regulations establish various procedural and substantive requirements, discussed below, relating to the budgets and financial plans of public authorities.

DISCUSSION

“Part 203 sets forth specific requirements in connection with submitting, formatting, preparing supporting documentation for and monitoring annual budgets and financial plans of public authorities.

“Under Part 203, the Authority’s proposed budget and four-year financial plan (Exhibit ‘1h-B’) must be made available for public inspection at least 30 days before approval by the Trustees of a final budget and financial plan and not less than 60 days before commencement of the next fiscal year. The availability for public inspection must be for a period of not less than 45 days and in not less than five convenient public places throughout the State. The regulations also require the Authority to post the proposed budget and four-year financial plan on its website.

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

“Other key elements that must be incorporated in each proposed budget and four-year financial plan are a description of the budget process and the principal assumptions, as well as a self-assessment of risks to the budget and financial plan. Additionally, the proposed budget and financial plan must include a certification (Exhibit ‘1h-C’) by the chief operating officer (defined as the executive officer responsible for overseeing the day-to-day activities of an authority) that, to the best of his or her knowledge and belief after reasonable inquiry, the proposed budget and financial plan are based on reasonable assumptions and methods of estimation and that the Part 203 regulations have been satisfied.

“The Trustees will be asked to approve the Authority’s final budget and four-year financial plan, including any modifications and amendments thereto, at their meeting of December 16, 2008.

FISCAL INFORMATION

“There is no anticipated fiscal impact.

RECOMMENDATION

“The Vice President – Controller recommends that the Trustees approve for public release the proposed 2009 budget and four-year financial plan; authorize making the proposed budget and four-year financial plan available for public inspection at no less than five convenient public locations and authorize posting the proposed budget and four-year financial plan on the Authority’s website.

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

The following resolution, as submitted by the Acting Chief Operating Officer, was unanimously adopted.

RESOLVED, That pursuant to 2 NYCRR Part 203, the proposed budget and four-year financial plan, including its certification by the Acting Chief Operating Officer, is approved for public release in accordance with the foregoing report of the Acting Chief Operating Officer; and be it further

RESOLVED, That pursuant to 2 NYCRR Part 203, the Corporate Secretary be, and hereby is, authorized to make the proposed budget and four-year financial plan available for public inspection at not less than five convenient public places throughout New York State, notify the Office of the State Comptroller of said locations and post the proposed budget and four-year financial plan on the Authority’s website; and be it further

RESOLVED, That the Acting Chairman, the Acting Chief Operating 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 Acting Executive Vice President and General Counsel.

2. Financial Reports for the Eight Months Ended August 31, 2008

Mr. Bellis presented the highlights of the Financial Reports to the Trustees.

3. Report from the Acting Chief Operating Officer

Mr. Gil Quiniones welcomed the Authority’s two new Trustees – Mr. Jonathan Foster and Judge Eugene Nicandri – on behalf of Authority staff. Mr. Quiniones said that he wanted to touch on a few highlights of the busy and productive period since the Trustees’ last regular meeting in July. Mr. Quiniones provided the following details:

Financial Market Turbulence: Staff is closely monitoring the ongoing turbulence in the financial markets. Even before Lehman Brothers’ bankruptcy filing, staff had taken a number of precautionary actions, since Lehman is a major dealer for the Authority’s commercial paper program. Staff will continue to implement such actions in a prudent and measured fashion. In recent weeks, staff began to put the Lehman-marketed commercial paper out with longer maturities to allow for an orderly transition to other dealers should that become necessary. That transition is now being carried out, with Lehman having indicated that it is unable to market paper at this time. With the acquisition by Barclays Capital of Lehman’s North American businesses and operating assets, staff expects the firm to resume remarketing capabilities within the next week. In addition to the transition to other dealers, a portion of the outstanding paper is being paid down with Authority operating funds and an item on today’s agenda seeks the Trustees’ authorization to expand the Authority’s ability to use such funds for that purpose, helping the Authority remain well positioned and well protected, with sufficient flexibility to weather the current financial crisis.

Alcoa Contract: Staff successfully completed negotiation of a proposed long-term power supply contract with Alcoa, based on the agreement in principle signed last December. Another item on today’s agenda seeks the Trustees’ authorization for staff to hold a public hearing on the proposed contract in line with Section 1009 of the Power Authority Act.

RFP #5/Astoria Energy Contract: As authorized by the Trustees at their April meeting, staff has also completed negotiation of a 20-year power supply agreement with Astoria Energy, the winner in the Authority’s RFP #5 solicitation to help meet the long-term needs of the Authority’s New York City governmental customers. This will result in construction of a new state-of-the-art 500 megawatt combined-cycle power plant in Astoria, Queens.

Entergy Value-Sharing Agreements: In another successful outcome, the Authority reached a settlement in August in which Entergy agreed that the proposed spin-off of its nuclear assets into Enexus, a newly formed entity, will not result in it terminating its Value-Sharing Agreements (“VSAs”) with the Authority. The VSAs stem from the sale of the Authority’s Indian Point 3 and FitzPatrick nuclear plants to Entergy in November 2000 and provide that the Authority receive an equal share of annual profits from the plants beyond specified levels from 2008 through 2015. The VSAs could provide the Authority with up to $72 million a year, for a total of $504 million. The Authority received the 2008 payment prior to the settlement.

Generating Assets: All of the Authority’s generating assets are operating well and meeting their commitments. In addition, the Authority continues to make progress on the Life Extension and Modernization (“LEM”) programs at the St. Lawrence-FDR and Blenheim-Gilboa (“B-G”) projects. The 10^th of the 16 units at St. Lawrence has resumed operation after completion of its upgrade, with the 11^th unit removed from service so that the LEM work can proceed. At B-G, the 3^rd of the 4 units was removed from service as scheduled on September 15.

Priority Initiatives: At the request of the Governor’s Office – and based on comments and guidance from the Trustees – we submitted a memo in mid-August on the Authority’s priority programs, policies and legislation that we recommend the Governor support or pursue in 2009. These recommendations included ways the Authority can help meet the State’s transmission needs, measures to expand the Authority’s energy services offerings and options for improving Authority economic development programs.

Transmission - The Authority is participating in the Transmission Owners Collaborative established recently by the New York Independent System Operator to examine the condition of New York State’s existing transmission infrastructure and identify options for bringing new renewable power sources on line. In addition, the Authority is exploring opportunities to upgrade its own system to enable transmission of renewable energy from upstate sources and hydropower from Quebec to the rest of the State. The current focus is on the Authority’s Moses-Adirondack lines, but the Authority also wants to be prepared to license and build new transmission facilities if it is called upon to do so.

Energy Services – The Authority has executed cost-recovery agreements with the New York City Department of Environmental Protection (“DEP”) and the City University of New York (“CUNY”) to enable it to carry out projects directly with those entities. Previous Authority energy services projects with DEP and CUNY have been implemented under the Authority’s overall agreement with the City of New York. The new DEP agreement provides for up to $300 million worth of Authority energy services projects over the next five years. The Authority anticipates undertaking about $50 million worth of projects in the first phase of its program with CUNY.

Renewable Energy - The Authority responded last week to the New York City Economic Development Corporation’s Request for Expressions of Interest in working with the City to increase renewable energy services and supply. The Authority proposed an expanded partnership with the City to implement renewable energy projects and secure additional renewable energy resources. These efforts could include support of offshore wind projects, expanded solar power purchase agreements and increased use of anaerobic digester gas at DEP sites.

In response to a question from Trustee Nicandri, Mr. Joseph Del Sindaco said that the Authority did not see any downside to paying down its debt and in fact looked for such opportunities when the cost of money was high. Responding to a question from Trustee D. Patrick Curley, Mr. Del Sindaco said that the Authority would not incur any prepayment penalties for paying down its debt. Trustee Foster said that he had engaged in a long phone conversation the previous day with Mr. Del Sindaco and that he was very impressed with the Authority’s handling of its commercial paper program. Acting Chairman Townsend said that the Authority would benefit from Mr. Foster’s financial expertise.

4. Proposed Preservation Power Contract with Alcoa, Inc. – Notice of Public Hearing

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize a public hearing, pursuant to Section 1009 of the Public Authorities Law, on a new contract for the sale of 478 MW (374 MW firm and 104 MW interruptible) of Preservation Power (‘Contract’) to Alcoa, Inc. (‘Alcoa’), and the accompanying Service Tariff No. 22 (‘Tariff’).

BACKGROUND

“The existing contracts for the Sale of Firm and Interruptible Power and Energy, dated August 24, 1981, between the Authority and Alcoa and Reynolds Metals Company for their respective Massena operations are slated to terminate on June 30, 2013. The parties have been in discussions for a number of years concerning a possible new power supply agreement. At their meeting of January 29, 2008, the Trustees ratified an Agreement in Principle (‘Agreement’) signed on December 21, 2007 by the Authority’s then-President and Chief Executive Officer and a representative of Alcoa. The Agreement was subject to negotiation and approval of a formal power contract between the parties. Alcoa and Authority staff have completed their negotiations and the proposed Contract is attached as Exhibit ‘4-A.’ The Tariff is appended to the Contract.

“Alcoa currently has about 1,285 employees at its Massena plant and is the largest manufacturing employer in the North Country. It has two contracts for the purchase of hydropower from the Authority comprising a total of 374 MW of firm and 104 MW of interruptible power. In 2005, the New York State Legislature enacted, and the Governor signed, Chapter 313 of the Laws of 2005, which established the Preservation Power program set forth in Section 1005(13) of the Public Authorities Law to govern the allocation of 490 MW of firm and interruptible power from the St. Lawrence/FDR Project that is currently allocated to Alcoa and General Motors Powertrain.

DISCUSSION

“The proposed Contract[1] is consistent with the Agreement approved by the Trustees at their January 29, 2008 meeting. The allocation of Preservation Power is in consideration of Alcoa’s agreement to invest at least $600 million in a new East Plant, the former Reynolds facility, and to retain 900 smelting jobs between a West Plant and the new East Plant, plus cold-finished fabrication jobs. The other key elements of the Contract are as follows:

Power Allocation Quantity

The current allocation to Alcoa of 374 MW firm hydropower and 104 MW interruptible hydropower will continue when the term of the new Contract begins on July 1, 2013. The current allocation of firm and interruptible hydropower between the East and West Plants will stay the same as long as the existing East Plant operates. Once the new East Plant is operational, the allocation of firm and interruptible hydropower may change, as agreed to by the Authority and Alcoa.

The firm service will be equivalent to that provided to all other Authority firm hydropower customers and subject to pro-rata curtailment when there is insufficient generation at the Niagara and St. Lawrence/FDR facilities to meet the energy requirements of the firm hydropower customers.

The current arrangement for managing the availability of interruptible hydropower (a special class of hydropower sold only to Alcoa) will stay the same, with interruptions triggered by daily measurement of seven-day rolling average net generation at the Niagara and St. Lawrence/FDR Projects.

The total amount of hydropower will be subject to an enforceable employment commitment of 1,065 Alcoa employees beginning in 2008 and trending to no less than 900 over the term of the Contract that includes an annual job report to be submitted by Alcoa to the Authority. A job compliance threshold of no less than 95% will apply. Should Alcoa’s actual jobs reported fall below the compliance percentage, the Authority may reduce the amount of hydropower on a pro-rata percentage basis, with a proviso relating to decreases in employment resulting from production curtailment due to prolonged firm and/or interruptible power curtailment by the Authority.

Pricing

The Authority’s base production charges (demand and energy) will be set at a new effective base rate beginning July 1, 2013, with such initial rate subject to both an annual escalator based on the indices in the current contracts and an adjustment based on increases in the market price of aluminum as reported on the London Metal Exchange (‘LME’).

The firm and interruptible rates shall be no lower than the cost-based ‘Preference’ rate charged by the Authority to its Preference customers.

In addition to the above base production charges, Alcoa will pay all New York Independent System Operator charges imposed on the Authority with respect to its service to Alcoa.

The Contract will provide for a pass-through to Alcoa of all taxes, assessments and other charges or costs imposed by third parties relating to provision of service to Alcoa, including, for example, costs incurred by the Authority to comply with any renewable portfolio standards, carbon regulation regimes or New York State programs requiring the construction of reliability or infrastructure upgrades.

The Authority’s standard contract provisions concerning rate increases necessary to meet bond covenant requirements will apply.

The rate provisions will be subject to reopening in the event that currently unforeseen major capital expenditures are required at the St. Lawrence/FDR Project during the life of the contract.

Term

The Contract will have an effective date of July 1, 2013 with a Base Term of 30 years (2013 to 2043), with one 10-year option to extend under certain defined circumstances relating to availability of power and aluminum prices over the initial term.

Economic Development Fund

Alcoa will capitalize a $10 million North Country Economic Development Fund (‘NCEDF’) within 90 days of the date on which its Board of Directors approves the rebuilding of its Massena East smelter. The NCEDF will be used exclusively for economic development purposes in the counties of St. Lawrence, Franklin, Essex, Jefferson, Lewis, Hamilton and Herkimer and on the Akwesasne Mohawk Reservation. The NCEDF will be jointly administered by the Authority and an entity of or specified by the State of New York.

FISCAL INFORMATION

“The proposed Contract provides for an increase in the base production rates beginning in 2013 to a level above the cost-based production rates. Moreover, the rates will continue to be subject to annual adjustment based on the same escalators used in the current contract. It is expected that the 2013 base production rate increase of about $5 per MWh will result in approximately $20 million in additional annual revenues for the Authority. In addition, the Authority will share in the value of higher aluminum prices in a further adjustment to the charges under the proposed Contract. This quarterly adjustment will provide additional revenue to the Authority in the event the market price of aluminum as reported on the LME exceeds $2,000 per ton on an inflation-adjusted basis. (There will be no reduction in revenues in the event aluminum prices fall below this threshold.)

“The proposed Contract also provides for a number of other fiscal safeguards, including the direct pass-through of all third-party costs, charges, assessments or taxes the Authority may incur in serving Alcoa. The production rates will not fall below the Authority’s cost-based production rates for the hydroelectric facilities and the rate provisions are subject to reopening in the event that currently unforeseen major capital expenditures are required at the St. Lawrence/FDR Project during the life of the Contract. Finally, other standard contract terms apply, including provisions relating to hydroelectric curtailments and to rate increases necessary to meet bond covenant requirements.

RECOMMENDATION

“The Manager – Business Marketing and Economic Development and the Director – Marketing Analysis and Administration recommend that the Trustees authorize a public hearing on the Preservation Power Contract with Alcoa to be held at the Frank S. McCullough, Jr. Hawkins Point Visitors’ Center at the St. Lawrence/FDR Project in Massena, New York on Thursday, November 6, 2008 at 10 a.m. It is further recommended that, pursuant to Section 1009 of the Public Authorities Law, the Corporate Secretary be authorized to transmit copies of the proposed contract to the Governor and legislative leaders, and to arrange for the publication of a notice of public hearing in six newspapers throughout the State in accordance with the Public Authorities Law.

“The Acting Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Senior Vice President – Energy Marketing and Business Development, the Vice President – Finance and I concur in the recommendation.”

Mr. Michael Huvane presented an overview of staff’s recommendations to the Trustees. In response to a question from Trustee Curley, Mr. Huvane said that the 95% job threshold would still be in effect even if Alcoa didn’t use all of the Authority’s power allocation. Responding to a question from Acting Chairman Townsend, Mr. Huvane said that the North Country Economic Development Fund would be similar to the Authority’s existing revolving loan funds and that staff would begin to develop the structure of the fund once Alcoa’s Board of Trustees has approved the power contract. Trustee Nicandri said that the fund was going to be very important to the North Country and its economic survival.

The following resolution, as submitted by the Acting Chief Operating Officer, was unanimously adopted.

RESOLVED, That the Trustees hereby authorize a public hearing on the terms of the proposed contract for the sale of Preservation Power to Alcoa, Inc. to be held at the Frank S. McCullough, Jr. Hawkins Point Visitors’ Center at the St. Lawrence/FDR Project in Massena, New York on Thursday, November 6, 2008 at 10 a.m.; and be it further

RESOLVED, That the Corporate Secretary be, and hereby is, authorized to transmit copies of the proposed contract to the Governor, the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee pursuant to Section 1009 of the Public Authorities Law; and be it further

RESOLVED, That the Corporate Secretary be, and hereby is, authorized to arrange for the publication of a notice of public hearing in six newspapers throughout the State, all done in accordance with the provisions of Section 1009 of the Public Authorities Law; and be it further

RESOLVED, That the Acting Chief Operating Officer or his designee be, and hereby is, authorized, subject to the approval of the form thereof by the Acting Executive Vice President and General Counsel, to enter into such agreements, and to do such other things, as may be necessary or desirable to implement the contract with Alcoa, Inc. as set forth in the foregoing report of the Acting Chief Operating Officer; and be it further

RESOLVED, That the Acting Chairman, the Acting Chief Operating 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 Acting Executive Vice President and General Counsel.

5. Municipal and Rural Electric Cooperatives - Residential Customers – Funding for Home Heating Kits

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize up to $5 million to fund a Winter Home Heating Tune-Up Project (‘Project’) for the Municipal and Rural Electric Cooperative Utility Systems’ (‘Munis and Co-ops’) low-income residential customers. The Project would be implemented under the existing Statewide Energy Services Program (‘Statewide ESP’) and would include the Authority’s purchase and free distribution (via the Munis and Co-ops) of home heating tune-up kits (‘kits’) to eligible customers to help mitigate anticipated significant increases in home heating costs for the winter of 2008-09.

BACKGROUND

“On July 1, 2008, Governor David A. Paterson held a Winter Fuels Summit for representatives of all relevant New York State agencies and public authorities to look at strategies and policies that could make home heating costs more affordable for the upcoming winter. Each agency and authority head was asked to discuss current programs and identify new or enhanced initiatives that could assist New Yorkers in managing their home heating bills this winter.

“In response to the Governor’s directive, the Authority has developed the Project, which would be offered to low-income residential customers served by the Munis and Co-ops. The Project would involve the Authority purchasing kits that would be made available at no cost to eligible participants through the Munis and Co-ops. Each kit would include an assortment of items to help improve heating, lighting and water efficiency in the home, as well as several tips for installation.

DISCUSSION

“Since the 1980s, the Authority has offered energy services programs (most notably, the Watt Busters home energy audit and weatherization program completed in the mid-1990s) to the customers of its Munis and Co-ops to help reduce energy usage in homes and businesses.

“At their meeting of May 23, 2006, the Trustees authorized the inclusion of the Authority’s 51 Muni and Co-op customers in the Statewide ESP program with the goal of each Muni and Co-op launching and administering programs within its own system.

“Staff is now proposing to expand the Statewide ESP to allow for the purchase and free distribution of kits to the Munis and Co-ops’ low-income residential customers to help reduce overall home heating costs and improve efficiency in the home.

“An estimated 20,000 homes would be eligible for the kit, with 10,000-15,000 homes participating in the Project. Each kit, which would cost up to $150, would include self-adhesive door sweeps; weather-stripping for doors and windows; tubes of caulking; a hot water thermometer; a refrigerator thermometer; wall switches and outlet gaskets; window insulation film; a low-flow shower head; a faucet aerator; an LED night light; a radon gas testing kit and an energy conservation guide on ‘How to Save Around the House.’

“All of these items provide simple and effective ways to help reduce heating and electric costs. The Authority will work with the Munis and Co-ops to develop a distribution plan that ensures the kits are available to eligible project participants.

FISCAL INFORMATION

“Funding for the Project will be provided primarily from the Operating Fund. The total cost of the Project is not expected to exceed $5 million.

RECOMMENDATION

“The Senior Vice President – Energy Services and Technology and the Senior Vice President – Energy Marketing and Business Development recommend that the Trustees approve the implementation of a project to purchase and arrange for free distribution of home heating tune-up kits for low-income residential customers of New York State’s Municipal and Rural Electric Cooperative Utility Systems as part of the Statewide Energy Services Program and authorize up to $5 million for program funding.

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

Ms. Maribel Cruz presented the highlights of staff’s recommendations to the Trustees. Trustee Foster said that he thought the program was a terrific idea, but suggested that more thought be given to the funding allocation. Ms. Cruz said that the exact cost of the program has not yet been determined, but that all of the money spent on it would be accounted for. In response to a question from Trustee Foster, Ms. Cruz said that staff would report back to the Trustees next month with more details on the program costs. Acting Chairman Townsend stated that the viability of the program should be monitored. Responding to a question from Trustee Nicandri, Mr. Quiniones said that the target audience for this program would be low-income (as defined by the New York State Office of Temporary and Disability Assistance) customers of the municipal and rural electric cooperatives. Acting Chairman Townsend commended staff for working with the Governor’s Office on its home heating assistance initiative and encouraged them to pursue similar initiatives. Trustee Curley said that it would be a good idea to let the Governor’s Office know if the program ends up costing more than initially estimated. Trustee James Besha recused himself from voting on this item.

The following resolution, as submitted by the Acting Chief Operating Officer, was adopted by a vote of 5-1 with Trustee Besha recusing himself.

RESOLVED, That the Trustees hereby authorize the inclusion of the home heating tune-up kit project in the Statewide Energy Services Program as described in the foregoing report of the Acting Chief Operating Officer; and be it further

RESOLVED, That Operating Fund monies be used to fund the project costs in the amount and for the purpose listed below:

Expenditure Authorization

Operating Funds (not to exceed)

Purchase and distribution $5 million

of home heating tune-up kits

TOTAL $5 million

AND BE IT FURTHER RESOLVED, That the Acting Chairman, the Acting Chief Operating 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 Acting Executive Vice President and General Counsel.

6. Procurement (Services) Contract – St. Lawrence/FDR Power Project – Life Extension and Modernization Program – Increase in Expenditure Authorization

and Contract Compensation Limit

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize capital expenditures of $56.415 million to complete the St. Lawrence/FDR Power Project (‘St. Lawrence’) Life Extension and Modernization (‘LEM’) Program. This would bring the total expenditures for the program to the $281.4 million previously approved by the Trustees. The $56.415 million is for the rehabilitation of the remaining five Allis-Chalmers (‘AC’) type units, which will allow for complete rehabilitation of all 16 units by 2013, as planned.

“The Trustees are further requested to approve a total increase of $8.1 million to the compensation ceiling for contracts with Alstom Hydro US, Inc. (‘Alstom’), Littleton, Colorado (Contracts # 4600001236 and #4600001237). This increase is for additional rehabilitation work and changes to the contracts’ terms and conditions related to necessary repairs, cost escalation, liquidated damages and other administrative issues related to turbine overhaul and runner replacement for the AC-type units. This requested increase will bring the total value of the Alstom contracts to $33.3 million, which is within the limits of the previously approved Capital Estimate Authorization Request (‘CEAR’).

BACKGROUND

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

“At their meeting of November 25, 1997, the Trustees approved initiation of a St. Lawrence LEM program, estimated to cost $254.139 million, aimed at renewing St. Lawrence’s generation assets from 1998 through 2013. The Trustees also approved funding of $2.211 million to enable staff to begin engineering tasks leading to the purchase of the ‘prototype’ turbine runner and two new transformers, overhaul of the gantry cranes and refurbishment of the intake gate and associated seals.

“At their meeting of July 28, 1998, the Trustees authorized additional expenditures of $16.3 million and approved the award of a contract to Alstom for modernization of the first set of eight turbines and replacements for the Baldwin Lima Hamilton (‘BLH’) machines.

“At their meeting of February 29, 2000, the Trustees authorized award of a contract in the amount of $6,285,745 to General Electric International, Inc. (‘GE’) (Contract #4600000395) to furnish materials and refurbish 16 generator rotor poles and approved the release of $1,091,470 for materials and refurbishing the first rotor.

“At subsequent meetings in March 2001, January 2002, June 2002, April 2003 and October 2003, additional expenditure authorizations were approved for miscellaneous materials and services, bringing the total expenditure authorization limit to $82.7 million.

“At their meeting of February 24, 2004, the Trustees approved an increase in the LEM Program’s estimate to $281.4 million, in order to correct as-found conditions with the turbine components caused by excessive wear. In addition, the Trustees approved an increase in the expenditure authorization limit to $158.8 million and the award of a second contract to Alstom to provide the second set of eight turbines and replacements for the AC machines, including fabrication of the prototype.

“At their meeting of September 20, 2005, the Trustees approved increases in compensation limits for previously awarded contracts to: (i) Alstom to provide the second set of eight turbines for the AC machines for $25.2 million; (ii) GE for rehabilitation of the remaining Generator Rotor Poles for $6.856 million and (iii) Voith Siemens Power Generation, Inc. (‘VSY’) for the design and manufacture of the remaining eight sets of the Generation Control System (‘GCS’) for $21.5 million.

“At their meeting of May 23, 2006, the Trustees authorized additional expenditures of $66.185 million for the St. Lawrence LEM Program, bringing the total authorized amount to $224.985 million from the previously authorized capital expenditure amount of $158.8 million. This increase in the authorized capital expenditures was for the rehabilitation of three additional units at the St. Lawrence facility and releases for fabrication the remaining seven AC turbine runners. This would bring the total number of rehabilitated units at St. Lawrence to 11. In addition, the Trustees approved an increase in the compensation limit for a previously awarded contract to GE for the removal, rehabilitation and installation of 16 sets of generator rotor poles and accessories. This additional compensation brought the total GE contract amount for this Program to $11.356 million.

DISCUSSION

“The total estimated cost of the St. Lawrence LEM Program is unchanged at $281.4 million and is proceeding on schedule, with three units completed every two years, as planned. All eight BLH-type units and two AC-type units have been successfully rehabilitated and returned to service. Rehabilitation of the third AC-type unit and manufacture of the last five AC replacement turbines are under way. The third AC-type unit outage is scheduled to last eight months, with a return-to-service date of March 31, 2009.

“The requested increase in capital expenditures is for rehabilitation of the last five AC-type units, including generator rotor poles, unit automation, additional rehabilitation work, AC turbine contract changes and associated auxiliary equipment, in order to maintain the existing schedule.

“The current additional expenditure request for the CEAR is:

Engineering and Construction Management $ 4,142,000

Procurement $ 1,542,000

Construction $ 30,621,000

Auxiliary Facility Equipment/Materials $ 14,167,000

Authority Direct and Indirect $ 5,943,000

Total $ 56,415,000

“The St. Lawrence LEM Program services being provided by Alstom were separated into two contracts for the AC-type unit work. Contract #4600001236 is for procurement of ‘major components,’ such as fabrication of the new turbine runners and rehabilitation of head covers at Alstom’s facility. Contract #4600001237 is for labor performed at the St. Lawrence facility by Alstom, such as machining the discharge ring. Several conditions emerged following the initial contract award with Alstom necessitating an increase in the compensation ceiling for services and materials as described below.

“During the rehabilitation and inspections of the first AC-type unit components at Alstom’s facility, it became apparent that additional repairs would be necessary to correct as-found conditions with the turbine components caused by excessive wear. In addition, during the second-unit rehabilitation work, unforeseen cracks were detected in the unit’s stay ring, thus requiring immediate repairs to maintain unit integrity. It is anticipated that the last six AC-type units will require similar repairs. The total cost for this additional work is approximately $4.8 million for all eight units; contract #4600001236 will be increased by $2.8 million and contract #4600001237 will be increased by $2 million, accordingly.

“In order to more effectively manage the AC turbine contract (#4600001236), terms and conditions were revisited and a ‘settlement agreement’ was reached that: (i) eliminated the escalation clause, (ii) increased the turbine warranty from one year to five years and (iii) changed the liquidated damages clause that was limited to 1% of that portion of the equipment price attributable to the delay per week to $5,000 per day for time exceeding the schedule. The additional cost of $2.7 million for these three items will be divided into eight equal payments triggered by turbine deliveries.

“In accordance with the Authority’s standard contract terms, Alstom is also entitled to reimbursement for the costs of ‘letters of credit’ (‘LOC’) and performance bonds. The LOCs for Contract #4600001236 will cost approximately $525,000. The performance bonds for Contract #4600001237 will cost approximately $75,000. The total contract value will be increased by an additional $600,000.

“In summary, the total requested increase in the compensation ceiling for the Alstom contracts is $8.1 million.

Additional work $ 4,800,000

Settlement agreement $ 2,700,000

LOC & performance bonds $ 600,000

Total additional funds requested $ 8,100,000

This requested increase in the compensation ceiling for the Alstom contracts will bring the total value of the contracts to $33.3 million. This amount has been accounted for in the total cost estimate and is within the previously approved CEAR.

FISCAL INFORMATION

“Payments will be made from the Capital Fund and will be funded with bond proceeds.

RECOMMENDATION

“The Vice President – Project Management, the Vice President – Engineering, the Regional Manager – Northern New York and the Project Manager – Power Supply recommend that the Trustees authorize: (i) remaining capital expenditures in the amount of $56.415 million for rehabilitation of the last five units for the St. Lawrence/FDR Power Project Life Extension and Modernization Program and (ii) an increase in the compensation limit of $8.1 million for additional work, escalation, extended warranty, letters of credit and performance bonds for the contracts with Alstom Hydro US, Inc. (Contracts #4600001236 and #4600001237) for the eight Allis-Chalmers-type units at the St. Lawrence/FDR Power Project.

“The Acting Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Executive Vice President and Chief Engineer – Power Supply, the Vice President – Controller and I concur in the recommendation.”

Mr. Michael Mitchell presented the highlights of staff’s recommendations to the Trustees. In response to a question from Trustee Nicandri, Mr. Mitchell said that the new design of the blades was aimed at increasing efficiency.

The following resolution, as submitted by the Acting Chief Operating Officer, was unanimously adopted.

RESOLVED, That in accordance with the Authority’s Expenditure Authorization Procedures, capital expenditures are hereby approved to be committed for the Life Extension and Modernization of the St. Lawrence/ FDR Power Project, in the amounts and for the purposes listed below:

Previously New

Current Authorized Current Authorized

Description Estimate Amount Request Totals

Engineering &

Construction

Management $ 28,700,000 $ 24,558,000 $ 4,142,000 $ 28,700,000

Procurement $ 82,581,000 $ 81,039,000 $ 1,542,000 $ 82,581,000

Construction $ 82,124,000 $ 51,503,000 $30,621,000 $ 82,124,000

Auxiliary Facility $ 60,765,000 $ 46,598,000 $14,167,000 $ 60,765,000

Equipment/

Materials

Authority Direct/

Indirect $ 27,230,000 $ 21,287,000 $ 5,943,000 $ 27,230,000

Totals $281,400,000 $224,985,000 $ 56,415,000 $281,400,000

AND BE IT FURTHER RESOLVED, That approval is hereby granted under the existing contract with Alstom Hydro US, Inc. to increase the contract value and commit capital funds for Contracts #4600001236 and #4600001237 pertaining to turbine overhaul and associated work for the Life Extension and Modernization of the St. Lawrence/FDR Power Project, in the amounts and for the purposes listed below:

Current total contract authorized amount $ 25,200,000

Additional increase in contract amount $ 8,100,000

New contract amount $ 33,300,000

7. Flynn Capacity Supply Agreement – Energy Pricing Modification, Amendment No. 7

The Acting Chief Operating Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize the Vice President and Controller to execute an amendment to the Capacity Supply Agreement (‘CSA’) between the Authority and the Long Island Lighting Company (‘LILCO’), a subsidiary of the Long Island Power Authority, d/b/a ‘LIPA,’ hereinafter referred to as ‘LIPA,’ providing for: (1) new energy pricing terms and conditions associated with the sale of electricity from the Richard M. Flynn Power Plant (‘Flynn’) and (2) reimbursement of capital expenditures. The new energy pricing arrangements would ensure savings to Long Island ratepayers and provide the Authority with positive net revenues for the Flynn plant.

BACKGROUND

“On May 10, 1991, the Trustees approved the CSA with LILCO. In May 1998, LIPA acquired LILCO, along with its electric transmission and distribution system, as well as other assets associated with electric operations. The CSA runs through May 2020, although there is provision for either party to terminate the extension upon notice given no later than April 30, 2012.

“The Authority has entered into six Amendments with both LILCO and LIPA since the CSA was approved in 1991, and is about to enter into Amendment No. 7 subject to the Trustees’ approval. Amendment Nos. 5 and 6 dealt primarily with the price aspects of the sale of Flynn power and energy to LIPA. Similarly, proposed Amendment No. 7 deals with pricing provisions for the period January 1, 2009 through December 31, 2014.

DISCUSSION

“The Authority’s formal notice to LIPA to terminate Amendment No. 6 in June 2008 prompted the parties to enter into a new amendment that would improve and stabilize future payment streams from LIPA. This new amendment will allow for a more stable net revenue stream over the next six years.

“The major terms of Amendment No. 7 are set forth in Exhibit ‘7-A,’ attached hereto. The following is a brief overview of the key elements of the terms of the amendment.

“The Monthly Capacity Payment, which in the past had varied from year to year, will now be a levelized amount per month and will, subject to operating performance requirements contained in the CSA, remain fixed for the amendment term. The payments have been reduced to reflect the impact of the Authority’s debt refinancing.

“The monthly fixed O&M formula previously contained in the CSA will be discontinued and replaced by a monthly fixed amount of $1,237,101 for the next 72 months starting on January 1, 2009. This new recovery amount reflects actual site O&M and administrative expenses for the Flynn plant. The new fixed O&M amount is based on forecasted estimates of O&M and administrative expenses for Flynn over the next six years.

“LIPA will now pay for all planned capital expenditures at an amortized rate of 5% annually. The Authority will provide a list of planned capital expenditures to LIPA. Any capital expenditures that occur at the Flynn plant that are not on the ‘planned’ list will automatically require a review process by both LIPA and the Authority. Both parties will make a good-faith effort to review all the information concerning the unplanned expenditure. LIPA will review all the data with the Authority and then make a determination as to whether it will approve or reject the payment for the capital expenditure.

“The energy pricing provisions of Amendment No. 7 will remain unchanged from Amendment No. 6, except for the shared-savings provision. LIPA will now keep only the first 17% of the daily energy shared-savings amount, which is a reduction from 20%. This amount was reduced to reflect the increasingly competitive nature of the Long Island electric market. The remaining shared savings above 17% will still be split on a 50/50 basis, with the Authority’s total benefit from this provision being capped, as it currently is in Amendment No. 6, at $5 million. The shared savings will be calculated daily. It should be noted that the Authority will continue to bear the risk associated with natural gas purchases under Amendment No. 7, but this additional shared-savings amount should help offset those losses when they do occur.

“Under Amendment No.7, LIPA will continue to be obligated to ensure that the Flynn plant is bid into the New York Independent System Operator (‘NYISO’) market as a ‘must-run’ unit for all hours of the day. This ‘must-run’ provision will prevent the wear and tear on the plant that would occur if it were required to cycle on and off. In addition, gas-balancing expenses that were provided for under Amendment No. 6 will continue to be recovered under Amendment No. 7, but the $750,000 annual cap will be eliminated. LIPA will pay for all CO₂ allowance expenses incurred by the Authority.

“Once the Authority’s spare transformer (120 MVA GSA) has been procured, the Authority at its option will lend it to LIPA if it is required. The Authority must be notified beforehand of the date the transformer will be returned and will incur no availability or performance penalties if one of the two remaining transformers should fail while the spare is on loan to LIPA. A new transformer will be returned to the Authority once LIPA procures one.

FISCAL INFORMATION

“The changes to the pricing arrangements embodied in Amendment No. 7 are designed to provide continued savings to Long Island ratepayers and positive and stable net revenues from operation of the Flynn plant to the Authority.

RECOMMENDATION

“The Senior Business Planner, the Director – Financial Planning and the Director – Fuel Planning recommend that the Trustees authorize the Vice President and Controller to execute Amendment No. 7 to the Capacity Supply Agreement with Long Island Lighting Company, a subsidiary of the Long Island Power Authority, having such terms and conditions as he deems necessary or advisable and as are consistent with the terms set forth in Exhibit ‘7-A’ attached hereto, provided that any such terms and conditions are subject to the approval of the form thereof by the Acting Executive Vice President and General Counsel or his designee.

“The Acting Executive Vice President and General Counsel, the Executive Vice President and Chief Financial Officer, the Executive Vice President and Chief Engineer – Power Supply, the Senior Vice President – Energy Resources Management and Strategic Planning and I concur in the recommendation.”

The following resolution, as submitted by the Acting Chief Operating Officer, was unanimously adopted.

RESOLVED, that the Vice President – Controller be, and hereby is, authorized to execute an amendment to the Capacity Supply Agreement (“Amendment No. 7”) between the Authority and the Long Island Lighting Company, Inc., d/b/a “LIPA,” having such terms and conditions as he deems necessary or advisable and as are consistent with the terms set forth in Exhibit “7-A” hereto, subject to the approval of the form thereof by the Acting Executive Vice President and General Counsel.

RESOLVED, That the Acting Chairman, the Acting Chief Operating 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 Acting Executive Vice President and General Counsel.

8. Annual Review of Hydropower Allocation Job Commitments

The Acting Chief Operating Officer submitted the following report:

SUMMARY

It is recommended that the Trustees take no action on 28 customers with 45 contracts, as set forth in Exhibit ‘8-A’ attached hereto. Also, set forth in Exhibit ‘8-A,’ is information on one customer that relinquished two allocations (this customer is also part of the automotive section).

BACKGROUND

Authority staff reviewed all business hydropower allocations and the customers’ performance against agreed-upon job commitments. In 2007, the Authority had 182 contracts with 95 business customers. This year’s review covers a total of 90 customers with 172 contracts that required the customers to report job levels for 2007. The contracts reviewed by staff represent overall power allocations of 578,932 kW and total employment commitments of 36,675 jobs. In the aggregate, these customers reported actual employment of 34,741.48 jobs. This represents 94.73% of the total job commitment for business hydropower customers reporting in 2007. Nevertheless, 28 customers with 45 contracts have actual job levels below the minimum threshold.

The contracts contain a customer commitment to retain or add a specific number of jobs. If the actual job level falls below 90% of that commitment, (80% for ‘vintage’ customers, i.e., those having contract allocations prior to 1988) the Authority may reduce that customer’s power allocation proportionately. Provided contract language allows for it, a company may request a productivity review to have its job commitment reduced if the reduction in employment is due to increased efficiency or improved technology.

DISCUSSION

This annual review of business power allocation job commitments, with a focus on hydropower allocations, covers the period from January through December 2007. Staff recommends that the Trustees take no action on 28 companies with 45 contracts not meeting their commitments, as detailed in Section I of Exhibit ‘8-A.’

Section I

Allocations to Continue with No Change

(Staff recommends that the Trustees take no action at this time on these allocations.)

American Axle and Manufacturing Inc., Tonawanda, Erie County

Allocation: 1,300 kW and 2,600 kW of Replacement Power (‘RP’) and 3,250 kW of Expansion Power (‘EP’)

Jobs Commitment: 668 jobs for each allocation

Background: American Axle – Tonawanda Facility manufactures automobile driveline and chassis systems and components, including axles and drive-shafts for light trucks and SUVs. For the past year, American Axle – Tonawanda averaged 542.33 jobs, i.e., 81.19% of its commitments. The company is in the process of closing down this facility.

American Axle and Manufacturing Inc., Buffalo, Erie County

Allocation: 500kW and 2,200 kW of EP

Jobs Commitment: 1,720 jobs for both allocations

Background: American Axle – Buffalo Gear & Axle Facility manufactures automobile driveline and chassis systems and components, including axles and drive-shafts for light trucks and SUVs. For the past year, American Axle – Buffalo averaged 666.66 jobs, i.e., 38.76% of its commitment. The company is in the process of closing down this facility.

Brunner International, Inc., Medina, Orleans County

Allocation: 1,200 kW of RP

Jobs Commitment: 291 jobs

Background: Brunner, located at this site since 1992, manufactures parts for the heavy-duty truck industry. For the past year, Brunner averaged 245.50 jobs, i.e., 84.36% of its contractual commitment. In 2007, the company experienced lay-offs due to unique circumstances, in that federal regulation aimed at reducing truck engine emissions resulted in significant cost penalties to trucking companies. The new engines required to meet the regulations are considerably more expensive and, consequently, trucking companies either stopped or severely reduced purchases of new trucks. Brunner was hit with a 50% drop in demand for its products. The company recognizes that business will rebound, since eventually new trucks will have to be bought. Brunner took advantage of the downtime by completely rebuilding key equipment, performing further preventative maintenance and purchasing some new equipment. In addition, Brunner performed a complete examination of the its wage structure. Currently, the company is actively recruiting for 30 open positions and foresees employment levels increasing to a level where it will be in compliance.

C & S Wholesale Grocers, Inc., Lancaster, Erie County

Allocation: 550 kW of EP

Jobs Commitment: 682 jobs

Background: CSWG has been providing warehousing and distribution services to supermarket chains, independent grocers and military facilities across the nation for more than 85 years. CSWG entered western New York in 2002, when it entered into an agreement with Tops Markets, Martins and other local grocery stores. For the past year, CSWG averaged 592.00 jobs, i.e., 86.80% of its contractual commitment. CSWG was below its commitment in 2007 because its largest customer, Tops Markets, since being sold, has gone through some restructuring, closing underperforming stores and rebuilding its brand. The company believes that Tops Markets’ efforts will pay off this year and, as that occurs, employment levels should increase to a level where it will be in compliance.

Contract Pharmaceuticals Limited Niagara, Buffalo, Erie County

Allocation: 250 kW of RP

Jobs Commitment: 329 jobs

Background: CPL, a Canadian company, purchased Bristol-Myers Squibb’s facility in 2005 and manufactures dry skin, anti-inflammatory and anti-fungal dermatological products, in addition to various cold medicines under contract for other companies. For the past year, CPL averaged 286.90 jobs, i.e., 87.20% of its contractual commitment. CPL experienced major growth in 2007 to nearly 20% more than its 2006 employment level. The company is optimistic about its continued growth and expects to be in compliance this year.

Curtis Screw Co., Inc., Buffalo, Erie County

Allocation: 1,450 kW, 350kW and 300 kW of RP

Jobs Commitment: 260 base jobs plus16 created jobs, and 260 jobs each, respectively

Background: Curtis Screw, founded in 1905, is an industry leader in precision machined components and assemblies for the automotive market. For the past year, Curtis Screw averaged 229.50 jobs, i.e., 88.27% of its commitments (the 16 created jobs are not due yet for reporting). The company is just two jobs short of its commitment.

Delphi Automotive Systems, Lockport, Niagara County

Allocation: 14,300 kW of EP

Jobs Commitment: 4,881 jobs

Background: Delphi, formerly a division of GM, manufactures radiators, condensers and heaters, mainly for GM autos, but has diversified to other car makers as well. For the past year, Delphi averaged 3,029.83 jobs. The EP allocation is a ‘vintage’ contract, meaning that it has an 80% job ratio and two-year job average. The two-year average is 3,278.50 jobs, i.e., 67.17% of the company’s commitment. Early in 2006, Delphi was awarded an additional 10 MW revitalization allocation. Delphi has been in bankruptcy and is in the midst of restructuring. In order to remain competitive, Delphi needs to take a number of steps, including completely streamlining its manufacturing operations, implementing innovative technology and completing a competitive operating agreement plan with its union. Delphi is working hard at all of these steps. According to Delphi, the reason management has kept this plant open is its hydropower allocations. Delphi’s restructuring will result in further declines in its employment levels.

Ford Motor Company, Buffalo, Erie County

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

Jobs Commitment: 1,666 jobs and 1,666 jobs, respectively

Background: Ford opened its Buffalo Stamping Plant in 1950. Currently, Ford stamps doors, floor pans, quarter panels and some inner-body components for the Windstar, Fusion, Crown Victoria and Edge models. The components then go to other Ford assembly plants and distribution centers throughout the U. S. and Canada. For the past year, Ford averaged 1,251.08 jobs, i.e., 75.10% of its contractual commitments. In order to stay competitive, Ford is in the process of a major restructuring due to the changes in the automotive industry. According to Ford, its hydropower allocations are the reason that management decided to keep the plant open. The company invested more than $200 million in the plant in the past few years as part of this plan, bringing production of the new Edge to this facility. However, Ford must continue to streamline itself and implement further productivity improvements in order to remain viable. The company is proud of the good jobs it provides, but recognizes that over time the employment level will decrease.

General Motors Corporation - Powertrain, Buffalo, Erie County

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

Jobs Commitment: 3,016 (13,800 kW, 1,100 kW, 800 kW and 725 kW), and 3,060 base jobs (2,000 kW)

Background: GM Powertrain manufactures engines for several of GM’s automobile models, including the Chevy Colorado and Canyon pick-up. For the past year, GM - Powertrain averaged 1,992.83 jobs, i.e., 65.13% of its contractual commitment for the 2 MW RP allocation and 66.08% of its contractual commitment for the other allocations. In order to stay competitive, GM Powertrain has implemented joint union/management initiatives and technology improvements. The plant has aggressively made productivity improvements to not only sustain business but also to expand it. At their June 26, 2007 meeting, the Trustees acknowledged the new plans and agreements GM Powertrain has made by reducing its employment commitment to 3,060 jobs for 2007 and 1,600 jobs for 2008 through 2010.

Honeywell International, Buffalo, Erie County

Allocation: 300 kW of RP

Jobs Commitment: 168 jobs

Background: Honeywell, formerly Allied-Signal Inc., has been a research and development lab since the early 1900s. Honeywell develops and produces atmospherically safe fluorocarbons. For the past year, Honeywell averaged 145.93 jobs, i.e., 86.86% of its contractual commitment. Since the site is a research facility, it depends on continued funding from Honeywell’s businesses. Honeywell grew steadily in 2007 and the facility is at its highest employment level in six years. While employment is expected to be level for most of 2008, the company expects to see further growth and be in compliance with its employment commitment either at the end of 2008 or the beginning of 2009.

Ingram Micro Corporation, Williamsville, Erie County

Allocation: 900 kW of EP

Jobs Commitment: 1,525 jobs

Background: Ingram is a leading wholesale distributor of microcomputer products worldwide, including hardware, software and networking equipment. For the past year, Ingram averaged 1,255.17 jobs, i.e., 82.31% of its job commitment. In 2007, Ingram completed the expansion of its East Coast Solution Center and the success of the new center has contributed to the company’s significant growth. The company’s current employment level of 1,340 jobs is nearly in compliance, at 87.87% of its commitment. The company expects to continue to grow.

International Imaging Materials, Inc., Amherst, Erie County

Allocation: 1,000 kW of EP and 250 kW of RP

Jobs Commitment: 852 jobs and 472 jobs, respectively

Background: International Imaging, in business since the mid-1980s, manufactures thermal transfer ribbons. For the past year, International Imaging averaged 396.75 jobs, i.e., 46.57% and 84.06% of its contractual commitments, respectively. In 2007, the company saw employment fall with tough competition and a steep decline in the price of its core product line. International Imaging made capital investments in productivity improvements that have allowed it to remain competitive globally. To further ensure the company’s health, International Imaging is diversifying and expanding its current product line and acquiring other companies. International Imaging’s strategy has already had positive results in 2008 and its employment level is growing.

Lakeside Warehouse Corporation/The Carriage House Cos., Dunkirk, Chautauqua County

Allocation: 500 kW of EP

Jobs Commitment: 199 jobs

Background: Lakeside, in business since 1988, is a storage facility for both raw materials and finished products associated with syrups. In 2007, Lakeside averaged 165.42 jobs, i.e., 83.12% of its contractual commitment. The company recently changed its business from focusing on food bottling to producing foods. Lakeside is trying to expand and National Grid has recently worked with the company to help it maximize its hydropower benefit. The Lakeside facility in Dunkirk is very close to the Red Wing facility in Fredonia and Carriage House considers them one entity for employment purposes, with workers shifting from one facility to the other. As specific needs arise, the manufacturing capabilities of each facility determine their employment levels and the facility where personnel spend the majority of their time is where they are reported. So, while Dunkirk’s average was 14 jobs below its commitment, Fredonia’s average was 57 jobs above the commitment; the combined commitment would be 639 jobs, with the company’s actual jobs at 662.

Lockheed Martin, Niagara Falls, Niagara County

Allocation: 250 kW of RP

Jobs Commitment: 45 jobs

Background: Lockheed manufactures gravity gradiometer technology for the U. S. Navy and commercial use. For the past year, Lockheed averaged 39.25 jobs, i.e., 87.22% of its contractual commitment. While Lockheed’s workforce needs fluctuate, the company has not been able to hire personnel to perform the work in-house, so the work is outsourced. The company grew by more than 30% in 2006 and continued to grow another 13% in 2007. Lockheed met its commitment for the last six months reported. The company has continued growing in 2008 and foresees continued growth for years to come.

Niagara Ceramics Corporation, Buffalo, Erie County

Allocation: 250 kW and 600 kW of RP and 250 kW of EP

Jobs Commitment: 190 jobs each

Background: Founded in 2003, Niagara Ceramics purchased the majority of Buffalo China’s manufacturing assets and produces dinnerware. In 2007, Niagara Ceramics averaged 136.17 jobs, i.e., 71.67% of its commitments. As part of the purchase agreement between Niagara Ceramics and Buffalo China’s parent company, Oneida Ltd., Niagara Ceramics agreed to a non-competition covenant with certain exceptions, with Oneida being obligated to purchase a set amount of product from Niagara Ceramics for five years, at decreasing levels each year, at a fixed price. The company has suffered due to rising production costs, Oneida’s decreasing purchase obligation and the non-competition provision. Niagara Ceramics has sued Oneida to release it from this provision, which expires in early 2009. The company is awaiting the results of arbitration. Several companies would like to do business with Niagara Ceramics but are waiting for the arbitration results before making any commitments. The company expects to expand this year, if it is released from the non-competition provision, or in 2009, when the non-competition provision expires.

Niagara LaSalle Corporation, Buffalo, Erie County

Allocation: 700 kW of RP

Jobs Commitment: 164 jobs

Background: Niagara LaSalle began operating in 1986 under the name Niagara Cold Drawn Corp. The company manufactures cold-finished steel bars and has expanded to include thermal-treated steel bars. For 2007, Niagara LaSalle averaged 143.00 jobs, i.e., 87.19% of its commitment. The company’s 10% decline in production volume compared to 2006 was due to several key customers ordering less as they realigned their inventories. This resulted in an employment reduction, but the company anticipates stronger volume and expects to meet its commitment in 2008.

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

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

Jobs Commitment: 58 jobs and 62 jobs, respectively

Background: NAHI, formerly Pyron Corporation, founded in 1940, manufactures sponge iron and atomized steel powders for powder metallurgical processes. The company’s powder metals are used in the automotive parts business for anti-lock brakes, brake pads, cams, transmission parts, steering systems, etc. The EP allocation, as a ‘vintage’ contract, has an 80% job ratio and a two-year job average. For the past year, NAHI averaged 50.35 jobs, i.e., 86.82% of its employment commitment, and for the past two years, 44.14 jobs, i.e., 71.19% of its employment commitment. In the second half of 2007, NAHI’s sales were more than 30% higher than its sales for the second half of 2006 and the company is growing due to the success of its new products. NAHI also made productivity improvements that are paramount to its global competitiveness. If its employment commitments are reduced due to the productivity improvements, the company will be in compliance.

Nuttall Gear Company, Niagara Falls, Niagara County

Allocation: 350 kW of RP

Jobs Commitment: 135 jobs

Background: Nuttall, started in 1983 from a leveraged buy-out of Westinghouse’s Electric Gear division, manufactures enclosed gear drives for industrial, commercial, transportation and utility applications. In 2007, Nuttall averaged 115.50 jobs, i.e., 85.55% of its commitment. After completing a large order for a major customer; the company did not have another work order of the same magnitude to replace it, resulting in a drop in employment. Currently, Nuttall is exploring opportunities with various customers that it hopes will result in more orders and increased employment.

PEMCO – Precision Electro Minerals Co., Inc., Niagara Falls, Niagara County

Allocation: 800 kW of RP

Jobs Commitment: 22 jobs

Background: PEMCO, incorporated in 1987, makes and sells fused silica for use in the foundry and refractory industry. For 2007, PEMCO averaged 17.00 jobs, i.e., 77.27% of its contractual commitment. During 2007, the company was not able to fully capitalize on its opportunities due to a cash-flow problem that resulted in the furnaces running a maximum of five days per week. However, PEMCO has since recovered and is running on a 24/7 schedule and meeting its commitment. The company foresees this situation continuing in 2008.

Precious Plate, Inc., Niagara Falls, Niagara County

Allocation: 800 kW of RP

Jobs Commitment: 145 jobs

Background: Precious, established in 1973, provides leading-edge electroplating services to high-tech companies, primarily for computers, cell phones and phone-switching gear. In 2007, Precious averaged 127.92 jobs, i.e., 88.22% of its commitment. The company also restructured in 2007, which resulted in the elimination of several white-collar positions but had no effect on blue-collar jobs. Currently, openings for 10 production employees have not been filled due to a lack of qualified workers in the area. If Precious could fill the positions, it would easily be in compliance. Sales are surpassing expectations this year and overtime is more than 50% above the level for the same period last year.

Quebecor World Buffalo, Inc., Depew, Erie County

Allocation: 1,000 kW of EP

Jobs Commitment: 1,075 jobs

Background: Quebecor, in business under various names and owners since the late 1800s, manufactures paperback books, magazines and tab-size inserts. For 2007, Quebecor averaged 758.92 jobs; however, the EP allocation is a ‘vintage’ contract with an 80% job ratio and a two-year job average. The two-year average is 793.25 jobs, i.e., 73.79% of the company’s commitment. Quebecor undertook a major productivity improvement and capital investment project in 2007, replacing two photopolymer presses and one offset press with two new Timson presses. These new automated presses resulted in a reduction of 48 jobs. Additionally, the company automated several functions in its prepress plating area, which allowed for an increase in plate production without requiring increased employment. These changes allowed the company to remain competitive and cost efficient.

RHI Monofrax, Ltd., Falconer, Chautauqua County

Allocation: 2,082 kW of EP

Jobs Commitment: 380 jobs

Background: Monofrax, the only manufacturer of fused cast refractories in the Americas, uses an electric furnace ceramic foundry to manufacture the refractories, which are used primarily to line melting furnaces for glass product manufacturing. For 2007, Monofrax averaged 243.17 jobs, i.e., 63.99% of its contractual commitment. Monofrax does not ever foresee meeting its original commitments. However, Monofrax was purchased by RHI, an Austrian company that has a few other refractory sites around the world and is looking to invest in the facility with the highest rate of return. RHI’s investment in this facility resulted in productivity improvements that enabled the company to be globally competitive. The productivity improvements allowed the company to reduce its workforce through attrition when people retire. Because Monofrax’s process is so electricity intensive, its hydropower allocation is the driving force in keeping the company competitive. The company, which recently hired 15 new employees and is in the process of hiring 13 more, anticipates growth over the next few years.

Sherwood, A Division of Harsco Corp., Wheatfield, Niagara County

Allocation: 400 kW of EP

Jobs Commitment: 207 jobs

Background: Sherwood, founded in 1923, manufactures gas-control valves and regulators for compressed gas, refrigerants and scuba diving gear. For the past year, Sherwood averaged 158.75 jobs, i.e., 76.69% of its employment commitment. Sherwood’s employment level, especially in the second half of 2007, reflects business conditions. The company’s employment level dropped by 60 jobs in 2007, with 40 of those jobs lost in the second half of the year. Rebounding a bit in 2008, Sherwood has added 10 jobs back with 5 more to be filled, although 31 staff are still on lay-off. The hydropower allocation will be a major factor in the company’s decision whether to embark on an expansion project at this location.

Special Metals Corporation, Dunkirk, Chautauqua County

Allocation: 1,000 kW of EP

Jobs Commitment: 81 jobs

Background: SMC, founded in 1952, is a world leader in super-alloy technology. The company pioneered the vacuum induction melting method to produce super-alloys for military and civilian use in jet engine turbines. Nearly every jet engine in the free world has some alloy in it produced by SMC. For the past year, SMC averaged 71.75 jobs, i.e., 88.58% of its commitment. SMC is only one job short of its commitment. Additionally, the company has been meeting its commitment since May of last year.

Sweeney Steel Service Corporation, Buffalo, Erie County

Allocation: 450 kW of RP

Jobs Commitment: 16 base jobs and 28 created jobs

Background: Sweeney is a metal service center specializing in flat-rolled steel products cut to customer specifications. In 2007, Sweeney averaged 37.08 jobs, i.e., 84.28% of its commitment. The company grew last year and by the fourth quarter of 2007 was less than one job short of its commitment.

TAM Ceramics, LLC/Ferro Electronic Materials Inc., Niagara Falls, Niagara County

Allocation: 1,700 kW and 600 kW of RP

Jobs Commitment: 152 jobs each

Background: Ferro supplies dielectric powder to the passive electronic component industry and zirconia-based ceramic powders to industry. For the past year, Ferro averaged 96.00 jobs, i.e., 63.16% of its commitments. At the end of 2007, TAM Ceramics, LLC (‘TAM’) acquired Ferro. A very large portion of the operating costs for this business is the cost of electricity, as this is a very electricity-intensive operation. The hydropower is the reason the company is competitive. At the time of purchase, only one of the two original businesses was in operation. TAM plans to grow the second business and bring employment up to historic levels within three years. The company is proud that it recently acquired a large golf club manufacturer in Taiwan as a customer. This customer is also helping TAM do business in mainland China, a noteworthy achievement for a U. S. manufacturer.

Tulip Corporation, Niagara Falls, Niagara County

Allocation: 300 kW of EP and 1,200 kW of RP

Jobs Commitment: 122 jobs each

Background: Tulip, an injection-molding company, recycles rubber and plastic and manufactures battery cases for the major battery manufacturers. For 2007, Tulip averaged 66.97 jobs, i.e., 54.89% of its commitment. The RP allocation is a ‘vintage’ contract, with an 80% job ratio and two-year job average. The two-year average is 73.61 jobs, i.e., 60.34% of the company’s commitment. Tulip’s major decline in business in mid-2005 was followed by an increase in production through much of 2006 that then declined late in the year. The company experienced another increase in activity in mid-2007. At their October 30, 2007 meeting, the Trustees extended Tulip’s EP allocation for five years, while reducing its employment commitment to 110 jobs effective November 1, 2007. Tulip is aggressively pursuing expansion in its reprocessed material line and the emerging industrial jar market. Additionally, the company is seeking new business opportunities and has invested in equipment to produce plastic lumber. Tulip is optimistic that its power allocations will bring additional growth in the coming year.

Valeo Engine Cooling – Truck USA, Jamestown, Chautauqua County

Allocation: 1,000 kW of EP

Jobs Commitment: 500 jobs

Background: Valeo manufactures engine-cooling parts for the trucking industry. Last year, Valeo averaged 339.97 jobs, i.e., 67.98% of its contractual commitment. The company lost two large customers’ business in late 2006 to out-of-state competitors due to the high cost of doing business in western New York. In 2007, Valeo gained new business from a major customer, which had a positive impact on sales and employment. However, the slowing economy resulted in an overall negative impact on 2007’s employment level.

Washington Mills Electro Minerals Corp., Niagara Falls, Niagara County

Allocation: 9,700 kW of RP

Jobs Commitment: 171 jobs

Background: Washington Mills manufactures abrasive grains for sandpaper and grinding wheels. In 2007, Washington Mills averaged 150.33 jobs, i.e., 87.91% of its commitment. The company is only a few jobs below its commitment. Unfavorable market conditions in 2007 resulted in reduced sales volume that led to the reduction in jobs. However, commodity availability and the currency exchange rate this year are having a positive impact on business and the company expects to grow in 2008.

Section II

Allocation Relinquishment Information

American Axle and Manufacturing Inc., Buffalo, Erie County

Allocation: 300 kW of EP and 3,200 kW of RP

Jobs Commitment: 1,805 jobs and 1,720 jobs, respectively

Background: American Axle manufactures automobile driveline and chassis systems and components, including axles and drive-shafts for light trucks and SUVs. The company has returned its 300 kW EP and 3,200 kW RP allocations, as it is in the process of closing down this facility.

RECOMMENDATION

The Director – Marketing Analysis and Administration recommends that the Trustees take no action for 28 customers with 45 contracts, as described above and set forth in Exhibit ‘8-A.’

The Acting Executive Vice President and General Counsel, the Senior Vice President – Energy Marketing and Business Development and I concur in the recommendation.”

Mr. James Pasquale presented the highlights of staff’s recommendations to the Trustees. In response to Acting Chairman Townsend’s request that he explain the review process for the new Trustees, Mr. Pasquale said that businesses receiving hydropower allocations commit to retaining or creating a certain number of jobs in New York State. Once a year, staff sends the businesses a form on which they report their actual job levels on a month-to-month basis for the previous year. In making their determination as to whether to cut the allocation for a business that is not meeting its job commitments, staff also looks at data from the current year to see if the previous year’s job numbers are improving. Mr. Pasquale said that, due to economic conditions, staff was requesting one-year waivers for any businesses in the automotive industry that are not meeting their job commitments. Trustee Curley recused himself from the vote for Brunner International, Inc. and International Imaging Materials, Inc.

The following resolution, as submitted by the Acting Chief Operating Officer, was adopted by a vote of 6-0 with Trustee Curley recusing himself as regards Brunner International and International Imaging Materials, Inc.

RESOLVED, That the Authority hereby defers action with respect to the 28 companies described in the foregoing report of the Acting Chief Operating Officer and as set forth in Exhibit “8-A”; and be it further

RESOLVED, That the Acting Chairman, the Acting Chief Operating 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 Acting Executive Vice President and General Counsel.

I. ALLOCATIONS TO CONTINUE WITH NO CHANGE

Company	Location	Date of Trustee Approval	Type of Power	Allocation kW	Employment Commitment (# of jobs)	Average 2007 Jobs	Average Annual % Achieved
American Axle & Mfg Inc. – Buffalo Gear & Axle Facility	Buffalo	May 94	EP	500	1,720	666.66	38.76
American Axle & Mfg Inc. – Buffalo Gear & Axle Facility	Buffalo	Feb 93	EP	2,200	1,720	666.66	38.76
American Axle & Mfg Inc.	Tonawanda	Apr 91	RP	1,300	668	542.33	81.19
American Axle & Mfg Inc.	Tonawanda	Apr 94	RP	2,600	668	542.33	81.19
American Axle & Mfg Inc.	Tonawanda	May 94	EP	3,250	668	542.33	81.19
Brunner International, Inc.	Medina	Jun 02	RP	1,200	291	245.50	84.36
C & S Wholesale Grocers, Inc.	Lancaster	Oct 90	EP	550	682	592.00	86.80
Contract Pharmaceuticals Limited Niagara	Buffalo	Apr. 91	RP	250	329	286.90	87.20
Curtis Screw Co., Inc.	Buffalo	Dec 04	RP	1,450	276 (260)	229.50	88.27
Curtis Screw Co., Inc.	Buffalo	Apr 94	RP	350	260	229.50	88.27
Curtis Screw Co., Inc.	Buffalo	Jan 89	RP	300	260	229.50	88.27
Delphi Automotive Systems LLC	Lockport	Dec 88	EP - Vintage	14,300	4,881	3,278.50	67.17
Ford Motor Company	Buffalo	Dec. 94	EP	4,300	1,666	1,251.08	75.10
Ford Motor Company	Buffalo	Feb. 93	EP	2,900	1,666	1,251.08	75.10
G. M. Powertrain - Tonawanda Plant	Buffalo	Sep 97	EP	1,100	3,016	1,992.83	66.08
G. M. Powertrain - Tonawanda Plant	Buffalo	Jun. 96	EP	800	3,016	1,992.83	66.08
G. M. Powertrain - Tonawanda Plant	Buffalo	Aug 97	RP	725	3,016	1,992.83	66.08
G. M. Powertrain - Tonawanda Plant	Buffalo	Jan 94	EP	13,800	3,016	1,992.83	66.08
G. M. Powertrain - Tonawanda Plant	Buffalo	Jun 00	RP	2,000	3,060	1,992.83	65.13
Honeywell International	Buffalo	Apr 89	RP	300	168	145.93	86.86
Ingram Micro Corporation	Williamsville	Sep 97	EP	900	1,525	1,255	82.31
International Imaging Materials, Inc.	Amherst	Jan 89	RP	250	472	396.75	84.06
International Imaging Materials, Inc.	Amherst	Mar 95	EP	1,000	852	396.75	46.57
Lakeside Warehouse Corporation - The Carriage House Companies	Dunkirk	May 99	EP	500	199	165.42	83.12
Lockheed Martin	Niagara Falls	Feb 93	RP	250	45	39.25	87.22
Niagara Ceramics Corporation	Buffalo	Jan 89	RP	250	190	136.17	71.67
Niagara Ceramics Corporation	Buffalo	Jan 94	RP	600	190	136.17	71.67
Niagara Ceramics Corporation	Buffalo	Mar 04	EP	250	190	136.17	71.67
Niagara LaSalle Corporation	Buffalo	Jul 86	RP	700	164	143.00	87.19
North American Hogänäs Corporation	Niagara Falls	Jan 89	RP	1,000	58	50.35	86.82
North American Hogänäs Corporation	Niagara Falls	Oct 88	EP - Vintage	4,000