MINUTES OF THE REGULAR MEETING

OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

June 28, 2011

 

Table of Contents

 

                                                                                                                                                      

 

1.       Approval of the June 28, 2011 Meeting Agenda                                                                       

2.                   Consent Agenda:                                                                                                                      

a.       Minutes of the Regular Meeting held on May 24, 2011                                   

b.       Transfers of Industrial Power                                                                                 

c.        Niagara Power Project – Roadway Bridges Expansion Joint Replacement – Contract Award
   

d.       Procurement (Services) Contracts – Business Units and  Facilities – Awards, Extensions and/or Additional Funding, Exhibit -  “2d-A-1” - “2d-A-2”; “2d-B”
Resolution
 

e.       Selection of Firms to Serve as Authority Financial Advisor and Swap Advisor
 Resolution                      

   

               Discussion Agenda:

3.                   Q&A on Reports from:

a.       President and Chief Executive Officer, Exhibit - “3a-A”
Resolution

b.       Chief Operating Officer, Exhibit - “3b-A”
Resolution

c.        Chief Financial Officer, Exhibit - “3c-A”
Resolution

4.                   Allocation of 1,200 kW of Hydropower, Exhibit - “4-A”; “4-A-1”
Resolution

5.                   NYPA’s  Governmental Customer Production Rate and Delivery Rate Structure Redesign – Notice of Adoption, Exhibit - “5-A”; “5-B”

                Resolution

 

6.                   Robert Moses Niagara Power Project – Units 2 and 13 Standardization – Capital Expenditure Authorization and Contract Award                 

   

7.                   765 kV Substations Motor-Operated Disconnect Replacements –  Capital Expenditure Authorization Request and Contract Award                                

  

8.                   New Astoria Infrastructure Program – Capital Expenditure Authorization Request                                                                                                                                 

 

9.                   Energy Efficiency and Clean Energy Improvements –  Authority Facilities Program                                                  

   

10.                Release of Funds in Support of the Residential Consumer Discount Program Incorporated in the Recharge New York  Power Program, Exhibit -  “10-A”
Resolution   

 

11.                Contribution of Funds to the State Treasury, Exhibit - “11-A”
Resolution

12.                Motion to Conduct an Executive Session                                                                           

13.                Motion to Resume Meeting in Open Session                                                                      

14.                 Next Meeting                                                                                                                            

15.                Closing                                                                                                                                               

 

 

                                                                                                                                                                                                               

 


 

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

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

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

 

The Members of the Board present were:

 

                                Michael J. Townsend, Chairman

                                Jonathan F. Foster, Vice Chairman

                                D. Patrick Curley, Trustee

                                John S. Dyson, Trustee

                                R. Wayne LeChase, Trustee

                                Eugene L. Nicandri, Trustee

                                Mark O’Luck, Trustee

                               

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Richard M. Kessel                               President and Chief Executive Officer

Gil C. Quiniones                                   Chief Operating Officer

Judith C. McCarthy                            Acting General Counsel

Francine Evans                                    Executive Vice President, Chief Administrative Officer

                                                                    and Chief of Staff

Elizabeth McCarthy                           Executive Vice President and Chief Financial Officer

Edward Welz                                        Executive Vice President and Chief Engineer – Power Supply

Jordan Brandeis                                   Senior Vice President – Power Resource Planning and Acquisition

Thomas Antenucci                              Senior Vice President – Power Supply Support Services

Steve DeCarlo                                      Senior Vice President – Transmission

Thomas DeJesu                                   Senior Vice President – Public and Governmental Affairs

Paul Finnegan                                      Senior Vice President – Public, Governmental and Regulatory Affairs

James Pasquale                                   Senior Vice President – Marketing and Economic Development

Donald Russak                                    Senior Vice President – Corporate Planning and Finance

Joan Tursi                                             Senior Vice President – Corporate Support Services

Paul Belnick                                         Acting Senior Vice President – Energy Services and Technology

John Canale                                         Vice President – Project Management

Thomas Davis                                      Vice President – Financial Planning and Budgets

Dennis Eccleston                                 Vice President – Information Technology/Chief Information Officer

Michael Huvane                                  Vice President – Marketing

John Kahabka                                     Vice President – Environmental, Health and Safety

Joseph Leary                                        Vice President – Community and Government Relations

Patricia Leto                                         Vice President – Procurement

Christine Pritchard                               Vice President – Media Relations and Corporate Communications

Frank Ryan                                          Vice President – Emergency Management

Karen Delince                                      Corporate Secretary

Brian McElroy                                     Treasurer

Denise Ellison                                       Director – Media Communications

Mike Lupo                                            Director – Marketing Analysis and Administration

Helle Maide                                          Director – Key Accounts and Business Development

Lou Paonessa                                       Director – Community Affairs

Joseph Kessler                                      Regional Manager, Western NY – Site Administration Niagara

Kevin O’Keeffe                                   Manager – Video Production Services

Paul Pascarello                                     Photography Services Supervisor – Video and Photographic Services

Chris Isca                                              Contractor – President’s Office

Elise Cusack                                         Community Liaison, Erie Harbor and Special Project – President's Office

Lorna Johnson                                     Assistant Corporate Secretary

Sheila Baughman                                                Senior Secretary – Corporate Secretary’s Office

Egel Travis                                            Pricing and Power Contract Analyst II, Marketing Analysis & Administration

Maciej Przybylowski                          Pricing and Power Contract Analyst, Marketing Analysis & Administration

Bert Cunningham                                                NYPA Retiree

Tom Prohaska                                     Reporter – Buffalo News

Mark Scheer                                         Reporter – Niagara Gazette

Tony Modaffferi                                 MEUA Representative

Elizabeth Modafferi                           Visitor

 


 

Chairman Townsend presided over the meeting.  Corporate Secretary Delince kept the Minutes.

 
Introduction

                Chairman Michael Townsend welcomed new Trustee, Raymond Wayne LeChase, to the meeting.  He said that Mr. LeChase is well-respected in the Greater Rochester community; he can attest to his character and integrity; and he will be an asset to the Board.  He also welcomed the other Trustees and staff to the meeting.  Chairman Townsend said that in addition to the regular Board Meeting, the Authority will host a 50th year licensing celebration of the Niagara Power Project after the meeting.

 

 

 

 

1.                   Approval of the June 28, 2011 Meeting Agenda

 

On motion made and seconded the Agenda for the Meeting was approved.

 

 

2.                   Consent Agenda

                Chairman Townsend said the Economic Development Power Allocation Board had recommended that the Authority’s Trustees approve item 2b (Transfers of Industrial Power) at their meeting held on June 27, 2011.

 

 

a.                   Approval of the Minutes

 

                The Minutes of the Regular Meeting held on May 24, 2011were unanimously adopted.

               

 

b.                   Transfers of Industrial Power

 

The President and Chief Executive Officer submitted the following report:

SUMMARY

 

                “The Trustees are requested to approve the transfer of power allocations for three existing customers, one that was granted an increase in its allocation of Municipal Distribution Agency power (‘MDA’), another which is seeking to redistribute an existing allocation to another of its facilities and a company requesting to transfer their allocation to a new location.

 

BACKGROUND

 

                “This is a housekeeping item brought routinely to the Trustees.  Three companies have requested that the Authority grant approval of their requests regarding the transfer or modification to existing Authority power allocations to their facilities.  One company has requested to transfer a portion of its Economic Development Power allocation (‘EDP’) to another of its facilities.  An allocation of MDA power is requested to be increased using unallocated power that was returned by former customers of the Nassau County Public Utility Agency (‘NCPUA’).  Lastly, a customer that has officially changed its name is relocating and wishes to transfer its Power for Jobs (‘PFJ’) allocation to the new location.  Details of the transfers requested for approval are described below.

 

“The Trustees have approved transfers of this nature at past meetings.

DISCUSSION

 

                “The proposed transferees are as follows:

 

Brooklyn Information & Culture Inc., located in Brooklyn, New York, is a non-profit arts organization that presents and produces a wide array of quality contemporary art, encourages performing arts and provides community media programs.  The company has officially changed its name to BRIC Arts Media Bklyn, Inc. (‘BRIC’).  In addition, the organization will be moving from its existing facility at 647 Fulton Street to a new location at 242 3rd Street.  BRIC wishes to transfer its 50 kW PFJ allocation to the new location.  After reporting its employment for last year the company is in compliance with its commitment.  The customer agrees to continue honoring all of the terms and conditions of the existing contract.  At their June 27, 2011 meeting, the Economic Development Power Allocation Board (‘EDPAB’) approved and recommended that the Authority approve the transfer as requested by BRIC.

 

Cold Spring Harbor Laboratory (‘CSHL’), in Cold Spring Harbor, Nassau County, is a world-leading laboratory in the fields of molecular biology and genetics.  The Authority sells MDA power to NCPUA for resale to customers.  CSHL receives a 2,200 kW allocation of MDA power that was recently extended, including associated Energy Cost Savings Benefits (‘ECSB’) through June 30, 2012.  On May 18, 2011, NCPUA approved, contingent upon Authority approval, allocation of an additional 800 kW of NCPUA’s unallocated block of MDA power to CSHL.  NCPUA has requested that the Authority approve the increase, which would bring CSHL’s total allocation to 3,000 kW.  CSHL is job compliant, having reported 945 jobs in its most recent application for 2011 extended benefits, nine percent above the contract commitment of 864.  The company agrees to continue meeting its commitments through June 30, 2012, the sunset of ECSB program.

 

J.P. Morgan-Chase (‘JPMC’), a large bank and financial services company, has multiple facilities in New York City.  The company has requested reallocating a portion of its total allocation amount from its 277 Park Avenue facility to its 383 Madison Avenue location.  The company has relocated some of its operations into the former Bear Stearns facility and therefore wishes to redistribute 2,300 kW of its 24,200 kW EDP allocation to its Madison Avenue facility.  JPMC recently reported employment of 2,290 jobs which is compliant with the company’s job commitment of 2,296 jobs.  The company agrees to continue meeting its commitments through June 30, 2012, the sunset of the ECSB program.  At their June 27, 2011 meeting, EDPAB approved and recommended that the Authority approve the transfer as requested by JPMC.

RECOMMENDATION

 

                “The Manager – Business Power Allocations and Compliance recommends that the Trustees approve the name change and transfer of a Power for Jobs allocation to a new location and the transfer of a portion of an existing Economic Development Program allocation to another of the customer’s facilities.  Additionally, it is recommended that the Trustees approve the addition of 800 kW of unallocated Municipal Distribution Agency power and associated Energy Cost Savings Benefits to Cold Spring Harbor Laboratory for a total allocation of 3,000 kW, as requested and approved by the Nassau County Public Utility Agency.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

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

 

                RESOLVED, That the Authority hereby authorizes the transfers of three industrial power allocations in accordance with the terms described in the foregoing report of the President and Chief Executive Officer; and be it further

 

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

 

 


 

c.                    Niagara Power Project – Roadway Bridges Expansion Joint Replacement – Contract Award 

                               

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award of a three-year contract in the amount of $2.171 million to EdBauer Construction (‘EdBauer’), of Blasdell, NY, to replace the existing expansion joints on Lewiston Road and on the Robert Moses Parkway Bridges at the Niagara Power Project.

 

BACKGROUND

 

“In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services contracts exceeding a one-year term require the Trustees’ approval.

 

“As part of the 2008 biennial bridge inspection, an assessment of the expansion joints located on Route 104/Lewiston Road and the Robert Moses Parkway, southbound and northbound, was performed.  The inspection revealed that of the 78 expansion joints located over the three bridges, 33 were experiencing excessive leaking.  Salt-laden water from deicing road salts is leaking through the failed expansion joints onto the reinforced concrete load-bearing bridge piers below the joints, causing the concrete to spall and deteriorate.  Therefore, it is recommended that all expansions joints be replaced to prevent further deterioration.

 

DISCUSSION

 

“The scope of work under this contract includes the removal, disposal and replacement of the existing expansion joints in the roadways and associated sidewalks.  The work will be performed in three phases as follows:

 

                Phase 1  Robert Moses Southbound Parkway                    July 1, 2011 – Nov. 23, 2011

                Phase 2  Route 104 / Lewiston Road                                   April 1, 2012 – Nov. 23, 2012

                Phase 3  Robert Moses Northbound Parkway                    April 1, 2013 – Nov. 23, 2013

 

                “The Authority issued an advertisement to procure bids in the New York State Contract Reporter and bid packages were available as of February 28, 2011.  The bid documents were downloaded by 48 potential bidders and 8 potential bidders participated in a site visit on March 10, 2011.

 

“The following five proposals were received on March 29, 2011:

               

Bidder

Location

Base Bid

With Selected Options

 

EdBauer Construction

 

Blasdell, NY

 

$2,111,978.00

 

$2,170,828.00

 

BVR Construction Co., Inc.

 

Rochester, NY

 

$2,310,659.50

 

$2,351,929.50

 

Scrufari Construction Co., Inc.

 

Niagara Falls, NY               

 

$2,491,924.00

 

$2,621,884.00

 

Crane-Hogan Structural Systems               

 

Spencerport, NY

 

$3,073,400.00

 

$3,132,410.00

 

Nichols Long and Moore Construction

 

Lancaster, NY

 

$4,035,113.00

 

$4,058,338.00

 

                “The proposals were reviewed by an evaluation committee comprising staff from Engineering, Procurement and Project Management.

 

                “EdBauer’s bid was the lowest in price and was also technically acceptable.  EdBauer, which has extensive experience in roadway construction and projects of this magnitude and demonstrated knowledge of the scope-of-work, is capable of completing this project in a timely manner.  Edbauer has performed satisfactory work on previous Authority Projects, including the construction of the Niagara University Wall and Berm Project, completed in 2009. 

 

“The Authority requested 27 option prices within the Request for Proposal for which the costs are noted above.  These include additional concrete patch repairs, sidewalk demolition and replacement, installation of rebar, additional traffic control resources and the disposal of demolished materials containing asbestos and PCBs in excess of 50 ppm which will require alternate disposal methods in accordance with environmental regulations.  The cost for this work will only be released to the bidder if the need arises and will not be reflected in the total dollar amount of the Purchase Order. 

 

                “Funding in the amount of $537,000 has been included in the 2011 approved O&M Budget.  Future funding will be included in the O&M Budget requests for that year.

 

FISCAL INFORMATION

 

                “Payment associated with this project will be made from the Authority’s O&M Fund.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Engineer – Power Supply, the Senior Vice President – Power Supply Support Services, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Procurement, the Project Manager and the Regional Manager – Western New York recommend that the Trustees approve the award of a multi-year contract to EdBauer Construction of Blasdell, NY, in the amount of $2.171 million, to replace the existing expansion joints for the roadway bridges located at the Niagara Power Project.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a three-year contract to EdBauer Construction of Blasdell, NY, in the amount of $2.171 million to replace the existing expansion joints on Lewiston Road and the Robert Moses Parkway Bridges located at the Niagara Power Project, as recommended in the foregoing report of the President and Chief Executive Officer;

 

        Contractor                                           Contract Approval

               

                EdBauer Construction                            $2.171 million

                Blasdell, NY                                                        

 

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

 

 

d.                   Procurement (Services) Contracts – Business Units and Facilities – Awards, Extensions and/or Additional Funding

                               

                               The President and Chief Executive Officer submitted the following report:

 

SUMMARY

“The Trustees are requested to approve the award and funding of the multiyear procurement (services) contracts listed in Exhibits ‘2d-A-1’ and ‘2d-A-2,’ as well as the continuation and funding of the procurement (services) contracts listed in Exhibit ‘2d-B,’ in support of projects and programs for the Authority’s Business Units/Departments and Facilities.  Detailed explanations of the recommended awards and extensions, 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, or the reasons for extension, the additional funding required and the projected expiration dates, 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 $500,000 or 25% 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 $1 million or 25% of the originally approved contract amount not to exceed $3 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 $11,558 to $11.4 million. Except as noted, these contract awards do not obligate the Authority to a specific level of personnel resources or expenditures.

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

Extensions

“Although the firms identified in Exhibit ‘2d-B’ have provided effective services, the issues or projects requiring these services have not been resolved or completed and the need exists for continuing these contracts.  The Trustees’ approval is required because the terms of these contracts will exceed one year including the extension, the term of extension of these contracts will exceed one year and/or because the cumulative change-order limits will exceed the levels authorized by the EAPs in forthcoming change orders. The subject contracts contain provisions allowing the Authority to terminate the services at the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  These contract extensions do not obligate the Authority to a specific level of personnel resources or expenditures.

“Extension of the contracts identified in Exhibit ‘2d-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 rebidding 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 extension.

 

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

                Human Resources

                                                                                            Employee Benefits

“In late 2010, the Authority’s Employee Benefits Unit, assisted by its benefits consultant, Deloitte Consulting, sought proposals (Q10-4883) from providers of Third Party Administrative (‘TPA’) services for its self-insured major medical, hospitalization, prescription drug, dental, vision care, flexible spending accounts and short-term disability.  Prospective bidders were invited to submit proposals for one or more categories of the aforementioned services for the Authority’s various employee groups and retirees, with eligible participants including active and retired Salaried employees, members of the International Brotherhood of Electrical Workers (‘IBEW’) and the Utility Workers’ Union of America (‘UWUA’), as well as retired members of Teamsters’ Local 887.  The potential number of enrollees offered such coverage is approximately 3,235 (active employees and retirees).  To that end, bid documents were downloaded electronically from the Authority’s Procurement website by 40 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Proposals were received from six firms for one or more service categories in the Authority’s Request for Proposals (‘RPF’).  Deloitte Consulting assisted Authority staff in collecting and sorting the data submitted in the proposals.  Since no stand-alone proposal/s for optional vision care services were received in response to the original RFP, a second RFP (Q11-4929) was issued to solicit bids for this service category.  Of the 21 firms that downloaded the second RFP, four firms submitted proposals.  After an initial review of all bids received in response to both RFPs, five firms were selected to attend finalists’ meetings.  Bidders were invited to present their proposals in detail and to provide any additional data that were requested during the meetings.  Such meetings also afforded Authority staff the opportunity to meet the respective account representatives and to clarify any outstanding questions or issues.  A more detailed evaluation and analysis of the proposals and clarifications provided during the finalists’ meetings were subsequently performed based on the following evaluation criteria: financial competitiveness, plan design, prescription drug tier status, network analysis, and other considerations, such as, account management, member services capabilities, claims management and agency financial ratings of all the bidders.

“Based on the aforementioned detailed evaluation and analysis of all the proposals, clarifications and evaluation criteria, staff recommends the award of contracts to the following four firms: UnitedHealthcare Services, LLC (‘UHC’), Delta Dental of New York, Inc. (‘Delta Dental’), Davis Vision, Inc. (‘Davis Vision’) and POMCO, Inc. (PO#s TBA) to provide for TPA services for the Authority’s health and benefits programs on a self-insured basis.  Services would be provided as follows:  (1) UHC would continue to provide TPA services for the major medical program for the Authority’s active and retired Salaried and UWUA employees, the prescription drug program for active and retired employees, and the flexible spending account program for active Salaried, IBEW and UWUA employees, as well as for hospitalization under the ‘NYPA Choice Plan’ for active and retired Salaried employees; under the new contract, UHC would also provide TPA services for major medical and hospitalization for active and retired IBEW employees and Teamsters retirees; (2) Delta Dental would continue to provide TPA services for the dental program for all active employees; (3) Davis Vision would provide TPA services for the optional vision care program for active Salaried employees only; and (4) POMCO would continue to provide TPA services for short-term disability for active IBEW and UWUA employees.  UHC, Delta Dental and Davis Vision are the lowest-priced qualified bidders in the respective service categories, with wide-ranging network access / options and top-quality account management, customer service and claims processing.  Additionally, it was decided that the current arrangement for the hospitalization program with Empire HealthChoice Assurance, Inc. (Empire BlueCross BlueShield) would be continued on a fully-insured basis and that the HMO programs (which were not included in this RFP) would also continue to be offered.  Since some of these proposed contracts will cover additional employee / retiree groups and/or will not be awarded to the incumbent provider, a transition period is required to set up plans and program files prior to the commencement of actual TPA services on January 1, 2012.  In order to allow sufficient lead time for the vendor/s to prepare for the January 1 implementation date, the contracts would become effective on or about July 1, 2011, for an intended term of up to five and one-half years (including the preparatory / transition period commencing at the time of vendor notification), 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 contracts: $6,613,816 for UHC, $357,490 for Delta Dental, $11,558 for Davis Vision and $33,000 for POMCO, as further set forth on Exhibit ‘2d-A-1.’  It should be noted that these amounts do not include actual claims funding.

Business Services

Corporate Finance

“The contract with Nexant, Inc. (Q11-5012; PO# TBA) would provide for consulting services in connection with the Authority’s transmission cost-of-service and anticipated regulatory filings with the Federal Energy Regulatory Commission (‘FERC’).  Services include, but are not limited to, preparing a detailed cost-of-service study for the Authority’s integrated transmission system, including all supporting work papers, as well as developing and maintaining a computer model to forecast current and future transmission revenue requirements incorporating various levels of maintenance, capital upgrades and/or expansion to assure system reliability; developing strategies that allow for transmission system upgrades or new construction, which would take into account the Authority’s need to generate additional revenues to recover transmission project costs in the NYISO market, while considering any constraints and limitations on such recovery; and preparing various reports, updates and presentations for the Authority.  To that end, bid documents were downloaded electronically from the Authority’s Procurement website by 42 firms, including those that may have responded to a notice in the New York State Contract Reporter; five proposals were received and evaluated.  Based on an evaluation of each firm’s experience in the areas of transmission cost-of-service, FERC filings, public power and the NYISO market, as well as projected costs (including number of hours, average cost per hour, etc.), staff recommends award of a contract to Nexant, the lowest-priced technically qualified bidder, as further set forth in the Award Recommendation memorandum.  The contract would become effective on or about July 1, 2011 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, $500,000.

Corporate Support Services

Corporate Support Services - Facility Management

“The contract with Clean Air Quality Service, Inc. (‘CAQS’) (Q11-4956; PO# TBA) would provide for maintenance and upgrade of the existing Energy Management System (‘EMS’), which controls and monitors the HVAC system at the Authority’s Clarence D. Rappleyea Building in White Plains.  Services include, but are not limited to, preventive maintenance (comprising database backup and verification, hardware system support and application software support); emergency services, repairs and 24-hour technical support; repair/ replacement of worn parts; firmware and software upgrades; documentation and system training. Bid documents were downloaded electronically from the Authority’s Procurement website by 23 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 CAQS, the lower-priced bidder, which is qualified to perform such services and meets the bid requirements.  The contract would become effective on or about July 1, 2011 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, $37,500.
 

Energy Services and Technology (‘ES&T’)

       Engineering and Design

“The Authority provides engineering, design, procurement and project management services to many of its customers to promote cost savings through efficient energy usage.  Such services include, but are not limited to, various mechanical, electrical and lighting improvements, as well as energy audits, boiler and chiller replacements, and other energy-related projects in the customers’ facilities. The two contracts with Camp Dresser & McKee (‘CDM’) and L.J. Gonzer Associates (‘Gonzer’) (Q11-4992; PO#s TBA) would provide for computer-assisted drafting (‘CAD’) and design support services to supplement the Authority’s in-house staff in connection with such Energy Services projects.  Bid documents were downloaded electronically from the Authority’s Procurement website by 145 firms and one additional firm that obtained the bid documents from an alternate source, including those that may have responded to a notice in the New York State Contract Reporter.  Eight proposals were received and evaluated.  The bids were reviewed in detail and the cost of a typical project was also calculated by Authority staff using each bidder’s unit pricing per drawing and hourly rates, based on estimated quantities of hours (per job classification, drawing preparation time, typical field survey time and drafting time) reflecting historical usage.  Based on the foregoing, as well as their experience and facilities, staff recommends award of contracts to two firms: CDM and Gonzer, the lowest-priced evaluated bidders, which are qualified to perform such services and meet the bid requirements. Two contracts are recommended in order to provide flexibility and sufficient resources to accommodate the potential volume and/or scheduling of work that may be requested by the Authority.  The contracts would become effective on or about July 1, 2011 for an intended term of up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the aggregate total amount expected to be expended for the term of the contracts, $100,000.  Such contracts will be closely monitored for utilization levels, available approved funding and combined total expenditures.  It should also be noted that all costs will be recovered by the Authority.

 Power Supply

“The contract with Bristol Harbor Group, Inc. (‘Bristol Harbor’) (6000121236; PO# TBA) would provide for the professional services of a naval architect to inspect and evaluate the Authority’s marine vessels (including two ice breakers, one tug and one barge) in support of the Niagara Power Project.  Services also include the preparation of a comprehensive written report, which includes, but is not limited to, research on the applicable codes, regulations and policy guidelines; a determination regarding each vessel’s compliance and recommendations for correcting non-conformance items, where deficiencies are encountered;  other tasks, such as updating or developing operating manuals for one or more marine vessels and performing marine engineering design of proposed structural changes to the vessels, may be required on an ‘as needed’ basis.   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; five proposals were received and evaluated.  Staff recommends award of a contract to Bristol Harbor, the lowest-priced evaluated bidder, which is qualified to perform such services and meets the bid requirements. The contract would become effective on or about July 1, 2011 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, $375,000.

“Due to the need to commence services, the contract with Brosnan Risk Consultants, Inc. (‘Brosnan’) (Q11-4941; PO# TBA), which would provide for security personnel services for the Authority’s White Plains Office, 500 MW, Flynn and Small Clean Power Plant sites, became effective on June 1, 2011, in accordance with the Authority’s Guidelines for Procurement Contracts and EAPs, and subject to the Trustees’ ratification and approval at their next scheduled meeting.  Such action was necessary in order to provide a one-month transition period for the new provider of such services to identify and train prospective staff to be assigned under the subject contract, with actual security guard services to commence on July 1, 2011.  An initial amount of $100,000 was authorized to fund the transition period.  Bid documents were downloaded electronically from the Authority’s Procurement website by 69 firms, including those that may have responded to a notice in the New York State Contract Reporter; 19 proposals were received and evaluated.  Pricing clarifications with the seven apparent low bidders were conducted via telephone interviews; of this group, one firm withdrew its proposal from further consideration and the other six proposals were evaluated further and deemed incomplete, unacceptable or not qualified, as further set forth in the Award Recommendation documents.  Based on the foregoing, staff recommends award of a contract to Brosnan, the lowest-priced qualified bidder that meets the bid requirements.  Brosnan’s presentation during a bid clarification meeting with Authority staff resolved all questions and demonstrated the firm’s experience, capabilities, resources, training and internal security requirements; its references were also thoroughly checked.  The intended term of the contract is up to five years and one month, 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, $11.4 million.

“The contract with Coverco, Inc. (‘Coverco’) (6000121318; PO# TBA) would provide for plumbing pipe insulation services for the Niagara Power Project.  Services include all labor, supervision, equipment and materials to perform duct plumbing pipe and fittings insulation, as directed by Authority personnel.  Work shall consist of small projects to retrofit equipment or re-insulate deteriorated piping and valves, on an ‘as needed’ basis.  Bid documents were downloaded electronically from the Authority’s Procurement website by 14 firms, including those that may have responded to a notice in the New York State Contract Reporter; one proposal was received and evaluated.  Reasons for the lack of other responses include, but are not limited to:  the work was not in their scope of services, lack of geographic proximity or the bid documents were downloaded for information purposes only.  Staff recommends award of a contract to Coverco, the sole responding bidder, which is qualified to perform such services, meets the bid requirements and has provided satisfactory services under an existing contract for such work.  The new contract would become effective on or about July 1, 2011 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, $50,000.

“The contract with Gomez and Sullivan Engineers, P.C. (‘Gomez & Sullivan’) (Q11-5018; PO# TBA) would provide for the services of an independent consultant to perform a Federal Energy Regulatory Commission (‘FERC’) Part 12 mandated dam safety inspection of the Crescent and Vischer Ferry Hydroelectric Projects and prepare reports.  Services also include follow-up work to respond to FERC questions, as may be required.  FERC regulations also require that the Authority obtain FERC approval of its proposed independent consultant/s prior to the initiation of the inspection.  To that end, bid documents were downloaded electronically from the Authority’s Procurement website by 35 firms, including those that may have responded to a notice in the New York State Contract Reporter; additionally, three firms obtained the bid documents from an alternate source.  Six proposals were received and evaluated.  Staff recommends award of a contract to Gomez & Sullivan, the lowest-priced evaluated bidder, which is qualified to perform such services, meets the bid requirements and has provided satisfactory services under previous contracts for such work at these and other Projects.  The Gomez and Sullivan proposal was complete, competitive and fully responsive to the scope of work.  The firm has a proven record of experience in such services and demonstrated the necessary resources, expertise and qualifications to perform all such required work in accordance with FERC requirements.  The contract would become effective on or about July 1, 2011 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, $206,000.

“The contract with Haverfield Aviation, Inc. (‘Haverfield’) (C11-60028; PO# TBA) would provide for comprehensive aerial / infrared / corona inspections via helicopter, maintenance and repair of designated sections of the Authority’s transmission lines and associated structures located throughout New York State.  Inspection services also include preparation of digital reports containing descriptions and pictures of all conditions found during the inspection.  Such aerial inspections will be conducted at the rate of approximately 20% of the lines per year over a five-year cycle; infrared and corona inspections will be performed on a two-year cycle.  The maintenance is performed from a helicopter platform on energized lines owned and maintained by the Authority in 23 counties in New York State and is scheduled, as necessary, throughout the year.  Bid documents were downloaded electronically from the Authority’s Procurement website by nine firms, including those that may have responded to a notice in the New York State Contract Reporter; four proposals were received and evaluated.  Staff recommends award of a contract to Haverfield, the lowest-priced evaluated bidder, which is qualified to perform such services, meets the bid requirements and has provided satisfactory services under an existing contract for such work. The new contract would become effective on or about July 1, 2011 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, $1.9 million.

 

“The contract with Konecranes, Inc. (‘Konecranes’) (Q11-5015; PO# TBA) would provide for inspection and certification services for various cranes and related equipment at Authority projects and facilities located throughout New York State, in compliance with Occupational Safety and Health Administration (‘OSHA’) and other applicable codes, standards and requirements.  Services also include, but are not limited to, developing various required hard copy and secure website reports, as well as manuals and related documentation, on an ‘as needed’ basis.  To that 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; one proposal was received and evaluated.  The principal reasons for the lack of other responses include, but are not limited to: the work was not in their scope of services, they were unable to meet certain requirements set forth in the bid specifications, their current workload was too heavy or they downloaded the bid documents for information purposes only.  Staff recommends award of a contract to Konecranes, which is qualified to perform such services, meets the bid requirements and has provided satisfactory services under a previous contract for such work.  The firm has a proven record of experience in such services and demonstrated the necessary resources, training and qualifications to ensure that the required work is performed in accordance with all specified requirements.  The new contract would become effective on or about July 1, 2011 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, $375,000.

“The contract with Universal Office Cleaning (‘Universal’) (Q11-4972; PO# TBA) would provide for janitorial and other cleaning services for the Authority’s Richard M. Flynn Plant and the Small Clean Power Plant at Brentwood.  Bid documents were downloaded electronically from the Authority’s Procurement website by 37 firms, including those that may have responded to a notice in the New York State Contract Reporter; nine proposals were received and evaluated.  The initial apparent low bidder requested that its proposal be withdrawn from consideration.  Staff therefore recommends award of a contract to Universal, the lowest-priced of the 8 remaining bidders, which is qualified to perform such services, meets the bid requirements and has provided satisfactory services under an existing contract for such work.  The new contract would become effective on or about July 1, 2011 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, $160,000.  While not presently certified, Universal is a Woman-owned Business Enterprise and is in the process of applying for New York State certification as such.

Contract Extensions and/or Additional Funding:

Energy Services & Technology

Energy Services

“The Statewide Energy Services Program (‘Statewide ESP’) is an energy efficiency program that provides a turnkey approach to identifying, procuring and implementing energy-saving solutions for participants outside the Southeastern New York (‘SENY’) service territory.  At their meeting of December 14, 2004, the Trustees approved the award of contracts to three firms:  DMJM + Harris (now AECOM USA Inc.), PB Power, Inc. (now PB Americas, Inc.) and Select Energy Services, Inc. (now Ameresco Select, Inc.) (4600001362, 460001364 and 4600001363, respectively) for project management and program implementation services in connection with the Statewide ESP initiative.  The Trustees also approved a funding increase in the Statewide ESP in the amount of $250 million; of this amount, the Trustees approved an aggregate total of $230 million to the three aforementioned Implementation Contractors (‘ICs’) to assist Authority staff with the audit, design and construction of Satewide ESP projects, to be allocated as projects are assigned.  The contracts, which were competitively bid, became effective on January 1, 2005 for an initial term of three years, with an option to extend for up to two additional years through December 31, 2009, which was subsequently exercised.  (An additional extension through December 31, 2012 of the contracts with Ameresco and PB Power was subsequently approved by the Trustees at their meeting of September 29, 2009.)  While all three aforementioned ICs performed well, one firm (AECOM) subsequently withdrew from the statewide market.  Since the demand for the Statewide ESP had increased dramatically, it was necessary not only to replace the IC that withdrew from the statewide market, but also to retain a fourth IC in order to provide the resources necessary to meet the increased program demand for such services.  At their meeting of June 27, 2006, the Trustees approved the award of competitively bid contracts to two additional firms: Einhorn Yaffee Prescott Architecture & Engineering, PC (now EYP Architecture & Engineering, PC; ‘EYP’) (4600001644) and Wendel Energy Services, LLC (‘Wendel’) (4600001645), which are also funded from the aforementioned aggregate $230 million.  While many of the projects assigned to EYP and Wendel have been completed successfully, the progress of approximately 30 other projects previously assigned to these two firms has been delayed for various reasons. They include, but are not limited to, delays in customer approvals, changes in project scope requested by customers and permitting delays by the some state entities.  Additionally, several customers delayed project milestone approvals due to budget uncertainties caused by the economic crisis; such delays put many project on hold, while customers re-evaluated capital budget priorities and often resulted in extensive changes in project scopes of work.  Customers have now authorized the Authority to proceed to the next steps on most of these projects and other projects are expected to receive authorization to proceed shortly.  Examples of such projects that will require additional time for completion include, but are not limited to those for:  Clinton and Union-Endicott Central School Districts, OGS Empire State Plaza and Harriman Campus, New York State Department of Environmental Conservation – Belleayre, SUNY - Upstate Medical, Cobleskill and Albany campuses, Cortland County and the Town of Islip.  The scopes of work vary by Customer and facility; they may include, but are not limited to: replacement of boilers, chillers, HVAC systems and related controls; installation / upgrade of lighting and lighting controls; replacement of motors, pumps, water heaters; installation of photovoltaic or wind turbine generators; installation of building insulation and weatherization; recovery and re-use of building waste heat; installation of efficient snow-making equipment and installation upgrade of building energy management system controls.  Since work is in progress on these projects, and these contractors have been performing very well, it would not be practical or cost-effective to rebid these services or reassign these projects to a new contractor/s.  An extension of approximately four and one-half years of the contracts with EYP and Wendel is therefore requested to provide for the continuation of IC services through completion of all such previously assigned projects.  No new projects will be assigned to these contracts.  The current aggregate ‘Target Value’ for all five contracts totals $180 million, of which $141,092,183 has been released to date.  Staff anticipates that no additional funding in excess of the previously approved aggregate $230 million will be required for the extended term.  The Trustees are requested to approve the extension of the subject contracts with EYP and Wendel through December 31, 2015 and to approve the release and allocation of the $50 million remaining from the previously approved $230 million, as needed.  Change Orders reflecting such allocations will be executed in accordance with the Authority’s EAPs.  Such expenditures will be closely monitored for utilization levels, available approved funding and combined total expenditures.  It should be noted that all costs will be recovered by the Authority.

ES&T - Energy Services + Power Supply – Environment, Health & Safety

“At their meeting of September 25, 2007, the Trustees approved the award of a contract to Veolia ES Technical Solutions, LLC (‘Veolia’) (460001846) to provide for the recycling/ disposal of lamps and light ballasts, mercury-containing equipment, batteries and small capacitors, as well as other electrical waste generated by the Authority’s High Efficiency Lighting Program (‘HELP’).  Services include furnishing, or arranging for furnishing, all labor, supervision, material, equipment, laboratory facilities, transportation including vehicles, fuel, tolls, highway use taxes, insurance, spill prevention control and countermeasure equipment and materials and federal, state and local permits, licenses and other approvals necessary to manage the waste from its point(s) of generation within New York State to the point(s) of ultimate disposition.  The contract, which was competitively bid, became effective on November 1, 2007, for a term of four years (through October 31, 2011), in the approved amount of $700,000.  An additional $175,000 was subsequently authorized in accordance with the Authority’s EAPs.  The current ‘Target Value’ is $875,000, of which $736,985 has been released to date.  Based on current waste generation trends and the increased number and scope of scheduled projects, as well as unanticipated regulatory costs associated with the management of new and existing waste streams, staff projects that an additional $650,000 may be required through the end of the approved contract term.  Pricing shall remain firm at the current rates for the duration of the contract.  The Trustees are requested to approve the additional funding requested, increasing the approved compensation ceiling to $1.525 million.  Such services will be rebid and the Trustees’ approval for the award and funding of a new multi-year contract will be sought later this year.  It should be noted that all costs associated with this work will be recovered by the Authority.

Power Supply

“At their meeting of June 29, 2004, the Trustees approved the award of a competitively bid contract to GE Hydro Power Inc. (4600001295) to provide for the fabrication, delivery and field installation of motor/generator stator windings for up to 11 units at the Lewiston Pump Generating Plant (‘LPGP’) at the Niagara Power Project, for an estimated seven-year term and a total amount of $15 million.  The subject contract established a mechanism for implementing emergency stator rewinds, necessitated by either stator winding failure or if testing, evaluation and analysis determined that such work was required, on an ‘as needed’ basis.  To date, only two units have required a stator rewind under this contract.  A spare set of stator coils was also procured and is currently stored in the Authority’s warehouse, ready for immediate use if an emergency stator rewind should be required.  The LPGP Life Extension and Modernization (‘LEM’) Program, currently scheduled to start in December 2012 and be completed in 2020, includes the replacement of all stator windings; such work will be performed under a new contract.  In the interim, a four-year extension of the existing contract, which currently expires on June 30, 2011, is requested to perform any emergency stator rewind/s that may be required prior to implementation of the LEM Program.  The Trustees are therefore requested to approve an extension of the subject contract through June 30, 2015, with no additional funding requested.  The current ‘released’ amount is $4,196,746.  It should be noted that the Authority is under no financial obligation to release any additional work under the subject contract.

“At their meeting of February 29, 2000, the Trustees approved the award of a competitively bid contract to General Electric International, Inc. (now General Electric Energy Services, Inc.; ‘GE Energy’) (4600000395) to provide for the removal, rehabilitation and installation of 16 sets of generator rotor poles and accessories, as part of the Life Extension and Modernization (‘LEM’) Program at the St. Lawrence/FDR Power Project (‘Project’), in the amount of $6,285,745.  At their meeting of May 23, 2006, the Trustees approved additional funding for additional required materials and work, increasing the compensation limit to $11,356,000.  GE Energy has been successfully refurbishing and rehabilitating the unit rotor pole assemblies at the Project in accordance with the LEM schedule (currently expected to be completed by 2013); 14 of the 16 units have been completed to date.  Recently, the Authority authorized additional site work relating to emergent issues encountered during inspection and rehabilitation of Unit 24, and will necessitate a change in scope to the subject contract.  Such issues include, but are not limited to, the following:  performing extensive crack repairs, moving and securing of rotor arm, preparation of welding documentation, and additional Non-Destructive Testing of the rotor pole assembly.  The current ‘Target Value’ is $11,356,000, of which $9,869,293 has been released to date.  Staff estimates that an additional $1.3 million will be required to correct as-found conditions with the rotor pole assembly for the balance of LEM and to accommodate the required change in scope.  The Trustees are therefore requested to approve the additional funding requested, increasing the compensation limit and expenditure release authorization to $12,656,000.  This amount has been accounted for in the total cost estimate and is within the previously approved Capital Expenditure Authorization Request (‘CEAR’).

“At their meeting of September 26, 2006, the Trustees approved the award of a contract to NAES Corp. (formerly North American Energy Services) (4500133069) to provide for the operation and maintenance (‘O&M’) of the New York City Department of Environmental Protection’s (‘NYC DEP’) East Delaware and Neversink hydroelectric facilities (‘Facilities’).  The original award, which was competitively bid, became effective on November 29, 2006 for an initial term of 19 months, with an option to extend for two additional years.  (There are provisions in the contract to extend the contract term for additional periods of time, to a maximum of nine additional years; requests to exercise any such further renewal options and approval of additional funding beyond the current levels will be presented to the Trustees for review and approval as needs arise.)  Several incremental additional funding increases, as well as contract term extensions, were subsequently authorized by the Trustees, most recently at their meeting of June 29, 2010, when the contract was extended through June 30, 2012 and the approved compensation limit was increased to $12,249,957.  Staff projects that an additional $1.5 million will be required to support new and/or ongoing capital projects that have been identified and agreed to by the NYC DEP for the previously approved contract term.  The Trustees are requested to approve the additional funding now requested, thereby increasing the approved contract value to $13,749,957.  All contract renewals between the Authority and NAES are subject to the Operating Agreement between the Authority and the NYC DEP.  The City of New York, acting through the NYC DEP, will reimburse the Authority for all direct and administrative costs. 

“At their meeting of March 20, 2003, the Trustees approved a contract award to Siemens Westinghouse Power Corp. (now Siemens Energy, Inc.) (‘Siemens’; 4600001092) to provide outage support and operating plant services for the Richard M. Flynn Power Plant (‘Flynn’), in the estimated amount of $24 million.  This long-term Operating Plant Service Agreement (‘OPSA’) was approved for an intended 12-year term through April 15, 2015; the OPSA includes discounts ranging from 3.29% below Siemens’ normal prices on shop repairs to 10.2% on new components.  Siemens is the original equipment manufacturer (‘OEM’) for the Flynn gas turbine and other plant equipment and, as such, is uniquely qualified to perform such services and modifications and to provide replacement parts.  At their meeting of June 26, 2007, the Trustees authorized an additional $3.2 million for a complete rotor rewind released on an emergency basis, as well as a steam turbine inspection, increasing the compensation ceiling to $27.2 million.  The Flynn Plant’s last Major Outage occurred in 2007; the next such Outages are scheduled for October/November of 2011 and 2015, respectively.  While a significant portion of expenses in preparation for the forthcoming Outage have already been committed (e.g., for mixing elbows, compressor blades, turbine blades and vanes, valve actuators, controls upgrade, etc.), additional funding will be required for services and materials to complete the 2011 Outage.  Furthermore, additional funding will also be required to refurbish or replace gas turbine parts in 2012 and 2013 that will be removed during the 2011 Outage.  Staff anticipates that after planned expenditures for 2011 – 2013, there should be adequate funding to provide for unplanned events, repairs or purchases, as well as some preparation for the 2015 Major Outage.  The current ‘released’ amount is $24,422,540 (of the approved $27.2 million).  Staff estimates that an additional $8.8 million will be required to cover the aforementioned scope.  Since the approved term expires on April 15, 2015, less than six months prior to the 2015 Major Outage that will be related to the Siemens (OEM) gas turbine, staff recommends that it would be prudent to extend the subject contract by 8.5 months,  in order to minimize disruptions in service or flow of materials for the 2015 Outage.  The Trustees are therefore requested to approve an extension of the subject contract through December 31, 2015, and also to approve the additional funding requested, thereby increasing the approved compensation ceiling to $36 million.

“At their meeting of October 26, 1999, the Trustees approved the award of a competitively bid contract to Voith Hydro, Inc. (‘Voith’) (4500016211) to provide for the delivery of 16 new Generator Control Systems (‘GCS’) and associated work, as part of the Life Extension and Modernization (‘LEM’) Program at the St. Lawrence/FDR Power Project, in the amount of $11,469,657.  The Trustees also approved the initial release of $1,995,330 for the design, development, testing and furnishing of the first GCS.  Several incremental releases from the originally approved amount, as well as additional funding, were subsequently authorized by the Trustees, most recently at their meeting of September 29, 2009, when the approved compensation limit and expenditure release authorization were increased to $23,004,806.  Voith has been successfully furnishing and commissioning equipment to control the generation assets at the plant in accordance with the LEM schedule, currently expected to be completed by 2013; 13 of the 16 units have been completed to date.  Recently, several emergent issues were identified, which will require additional work and funding.  Such issues include, but are not limited to the following: (1) compliance with additional NERC/CIP regulatory requirements; (2) procurement of upgraded GCS cabinets; (3) migration of the existing panel view application; (4) reduction of the set-point limit for shutdown; and (5) upgrade of work station equipment.  The current contract amount is $22,939,627 (of the approved total $23,004,806).  Staff estimates that an additional $2 million will be required to accommodate the required additional scope of work.  The Trustees are therefore requested to approve the additional funding requested, increasing the approved compensation ceiling and expenditure release authorization to $25,004,806.  This additional amount is within the authorization limits of the St. Lawrence LEM Capital Expenditure Authorization Request (‘CEAR’).

FISCAL INFORMATION

“Funds required to support contract services for various Business Units/Departments and Facilities have been included in the 2011 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 certain contracts in support of Energy Services Programs will be made from the Energy Conservation Effectuation and Construction Fund.

RECOMMENDATION

“The Deputy General Counsel, the Senior Vice President – Transmission, the Senior Vice President – Corporate Planning and Finance, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Environment, Health and Safety, the Vice President – Technical Compliance, the Vice President – Procurement, the Director – Compensation and Benefits, the Director – Engineering and Design (ES&T), the Director – Corporate Support Services, the Regional Manager – Northern New York, the Regional Manager – Central New York, the Regional Manager – Western New York, the Regional Manager – Southeastern New York and the General Manager – Clark Energy Center recommend that the Trustees approve the award of multiyear procurement (services) contracts to the companies listed in Exhibits ‘2d-A-1’ and ‘2d-A-2,’ and the extension and/or additional funding of the procurement (services) contracts listed in Exhibit ‘2d-B,’ for the purposes and in the amounts discussed within the item and/or listed in the respective exhibits.

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the award and funding of the multiyear procurement services contracts set forth in Exhibits “2d-A-1” and “2d-A-2,” attached hereto, are hereby approved for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the contracts listed in Exhibit “2d-B,” attached hereto, are hereby approved and extended for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

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

 

 

e.        Selection of Firms to Serve as Authority Financial Advisor and Swap Advisor  

                             

    The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award of multiyear procurement contracts each in the amount of $250,000 to Public Financial Management, Inc. (‘PFM’) to provide financial advisory services and to Swap Financial Group, LLC (‘SFG’) to provide swap advisory services in connection with the Authority’s issuance of debt, interest rate exchange program or other financial issues.

 

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.  Moreover, the Authority’s Expenditure Authorization Procedures require the Trustees’ approval for the award of personal services contracts in excess of $1 million if low bidder, or $500,000 if sole-source or non-low bidder.  The terms of the contracts considered herein are for more than one year and, therefore, the Trustees’ approval is required.

 

“The Authority engages the services of a financial advisor to support its capital markets activities and the issuance of bonds, notes and other forms of debt instruments.  The financial advisor generally assists the Authority in the independent evaluation of financing alternatives under consideration; advising on rating agency interactions and investor relationships; providing  market pricing on comparable issuers; monitoring the performance of the underwriting team; and negotiating bond pricing.  The financial advisor may also be engaged to assist the Authority on other matters of financial import.

 

“The Authority also engages the services of a swap advisor when considering the use of financial derivative instruments with the objective of mitigating the impact of interest rate exposure on its earnings and cash flows and to minimize debt costs.  The swap advisor assists the Authority in evaluating the risks and/or benefits associated with a potential derivative transaction; proper market conditions for entering into a transaction; bidding, pricing and awarding of a transaction; and providing an independent evaluation and report concerning the fairness of the price for a particular derivative transaction.

 

DISCUSSION

 

                “On April 13, 2011, the Authority issued a Request for Proposal (‘RFP’) for firms interested in providing financial advisory and/or swap advisory services to the Authority.  The RFP was advertised in the New York State Contract Reporter.  Top ranked municipal financial advisory and swap advisory firms, based on number of transactions and dollar volume, were also invited to respond to the RFP.   On or before May 4, 2011, 4 firms submitted responses to provide financial advisory services and 6 firms submitted responses to provide swap advisory services.

 

“The Authority’s evaluation of responses took into consideration several qualitative characteristics, as well as overall pricing.  In reviewing the proposals received for financial advisory services, staff considered the breadth and depth of experience advising municipal clients on debt issuance; knowledge of the business issues surrounding the public power sector; past experience with the Authority or clients similar in size and scope; success in negotiating and re-pricing bond transactions on behalf of the issuer; professional experience including support personnel; and the ability to provide advice and guidance on other financial issues that may arise during the term of the agreement.  Similarly, with the review of proposals received for swap advisory services, staff considered the proposers’ technical expertise in pricing, bidding and terminating various types of derivative products; ability to provide support in evaluating the effectiveness of hedging transactions as required under Governmental Accounting Standards Board Statement No.53, Accounting and Financial Reporting for Derivative Instruments;  professional experience including support personnel; and quantitative analysis and reporting. 

 

“Based on staff’s evaluation, it is recommending the award of multiyear contracts to PFM to provide financial advisory services and to SFG to provide swap advisory services.  Both firms were rated the highest in the qualitative and quantitative evaluations noted above, are the leading independent advisors in their respective fields and have a proven record of success in advising municipal clients.  In addition, both firms’ proposals were competitively priced for their experience and quality of services that will be provided.

 

“PFM is the only municipal financial advisor with a dedicated Public Power team, consisting of eleven professionals.  They have served as financial advisor on over $25 billion of public power financings over the last five years and they were ranked as the number one municipal financial advisor for long-term new money issuance in terms of number of transactions and dollar volume in 2010.   

 

“SFG is an independent swap advisory firm whose sole business is providing advice on swaps and related derivative products.  They have completed over 700 transactions representing $29 billion in notional amount over the past three years on behalf of their clients and serve as a member on the Governmental Accounting Standards Board Derivatives Task Force.

 

FISCAL INFORMATION

 

                “Expenses for advisory services provided in connection with the issuance of Authority debt will be paid from proceeds of the sale.  Non-debt related advisory services will be paid from the Authority’s Operating Fund.

 

  RECOMMENDATION

 

“The Treasurer recommends the Trustees’ approval of the award of multiyear service contracts to Public Financial Management, Inc. to provide financial advisory services and Swap Financial Group, LLC to provide swap advisory services. 

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the award of the multiyear contracts to Public Financial Management, Inc. to provide financial advisory services and Swap Financial Products, LLC to provide swap advisory services, is hereby approved and the execution of such contracts by the Executive Vice President and Chief Financial Officer, the Senior Vice President – Corporate Planning and Finance or the Treasurer, subject to the approval of the form thereof by the Acting General Counsel, on behalf of the Authority, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

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

  


 

3.                   a.             Report of the President and Chief Executive Officer

 

President Richard Kessel also welcomed new Trustee, Wayne LeChase, to the meeting and said that he looked forward to working with him.  He also welcomed Elise Cusack, former Trustee, to the meeting.  President Kessel continued that the Authority’s 50th Anniversary of the Niagara facility is an important milestone in energy history and for the Authority and said that the project is the center for economic activity in Lewiston and Niagara County. 

President Kessel said that the Authority will be reaching another milestone with the formal handing over of the Astoria II Power Plant to the Authority on Friday, July 1st for commercial operation.   Astoria Energy II will own and operate the plant while the Authority will own the substation and be responsible for the marketing and sale of the electricity from the plant.  He ended by stating that this asset will enable the Authority to produce additional megawatts of power, and that, combined with the Astoria I plant, will produce approximately 15% of electricity in New York.  He encouraged the Trustees to visit the facility.

Energy Services

President Kessel reported that as of May 2011, the Authority completed energy services projects at more than 3,800 facilities around the state, saving the program participants $1.3 billion over the life of the programs.  The Authority hopes to generate $180 million in project initiatives in 2011; this amount will exceed what the projects generated in 2010.  President Kessel mentioned some of the initiatives being undertaken around the state such as the solar roofs in a number of schools and municipalities.  Other initiatives include LED lighting on the George Washington and Verrazano Bridges; railroad compressed air systems; swimming pool lighting; micro-hydro turbines, sewage and waste treatment facilities,  He said that the Authority’s energy services program is one of the best in the state, with businesses saving on their energy bills, while, at the same time, helping the environment.  A full report on the energy services and technology program update was provided to the Trustees.

President Kessel then introduced Bert Cunningham, the Authority’s former Senior Vice President of Corporate Communications, who had recently retired.  He said that Mr. Cunningham, a top communications person, did an outstanding job at the Authority.  Chairman Townsend added that Mr. Cunningham was a great asset to the Authority and wished him the best of luck in his future endeavors.  In response, Mr. Cunningham thanked Chairman Townsend and President Kessel for the honor and recognition.  He said that his two years at the Authority were some of the most challenging and rewarding of his 41 years in communications.  He said that it was a pleasure working with the Authority, Board and staff and offered special thanks to Ms. Christine Pritchard and the Corporate Communications and Public Affairs staff and also the Human Relations staff for their outstanding work.


 

b.             Report of the Chief Operating Officer

 

Mr. Gil Quiniones provided highlights of the report to the Trustees.   He said that during the first half of the year the Authority’s generation and transmission assets were running well.  He added that in June and July the Authority was going to be audited by the North American Electric Reliability Corporation (“NERC”), the entity that monitors the reliability and preparedness of utilities across the country; Authority staff is prepared for the Audit.  Mr. Quiniones ended by stating that the summer months, when higher loads are anticipated, are the busiest time of year for Authority staff, however, staff is prepared for any challenge and looks forward to a good summer this year.

                In response to a question from Trustee LeChase, Mr. Quiniones said that the audits are mandated by the Federal Government and conducted on a regular basis on utilities across the country. 

                In response to a question from Trustee Nicandri, Mr. Quiniones said that the loss of institutional knowledge is an issue for the Authority and the entire utility industry as many employees prepare to retire within the next 5 – 7 years.  The Authority realizes that this is critical and is working on this human capital issue.

                In response to a question from Vice Chairman Foster, Mr. Quiniones said that the Authority is making progress with regards to this human capital issue.  The Authority has identified where it is vulnerable in its operations and will actively recruit for the necessary skill-set through training and co-op programs and have relationships with colleges and universities. He added that some engineering positions are very difficult to recruit and the Authority has to compete with large engineering firms and Investor-Owned Utilities (“IOUs”) for potential employees from the same pool of potential employees.

In response to a question from Trustee O’Luck, Mr. Quiniones said that he will provide the Board with a detailed report of the Authority’s staffing plan regarding human capital and diversity issues.  President Kessel added one way to alleviate the problem is to quickly back-fill the technical positions in the critical areas of operations with the goal of making sure that the Authority has the right number of employees to operate its facilities.  He also added that he has instructed Mr. Randy Crissman to provide the Trustees with staff reports on the Authority’s compliance issues on a quarterly basis beginning in September.

In response to a question from Trustee Curley, Mr. Quiniones said that the Audit is a two-part audit, one on the Authority’s cyber security compliance and the other on the physical reliability of the Authority’s systems.  In response to further question from Trustee Curley, Mr. Quiniones said that the Authority will receive a report of the Audit.  Ms. Judith McCarthy added that the Trustees would not be affected by confidentiality issues and will be provided with a copy of the report.

c.             Report of the Chief Financial Officer

Ms. Elizabeth McCarthy provided highlights of the financial report to the Trustees.  She said that the Authority continues to be in a strong financial position.  Its net income at the end of the reporting period was $86.8 million, which is $7.1 million higher than budgeted.   She continued that, at the end of the reporting period, the Authority had approximately $1.1 billion in cash and liquidity, which has been invested in a variety of instruments with a variety of maturity dates.  Ms. McCarthy also said that hydro flows and precipitation are higher than normal; therefore, it is predicted that at the end of the year net income will be $197 million, which would be $17 million above the 2011 budget.  In terms of the Authority’s capital program, energy services programs are ahead of the budget and programs for the facilities and transmission systems are below budget.  Ms. McCarthy concluded that the energy derivatives have a negative mark-to-market of $180 million, an unrealized loss.  These derivatives were entered into on behalf of the Authority’s customers, in consultation with them.  Also, any gains or losses as a result of those derivatives will be recovered from the customers.


 

4.                   Allocation of 1,200 kW of Hydropower  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve an allocation of 1,200 kW of available Expansion Power (‘EP’) to Buffalo Shredding and Recovery LLC (‘Buffalo Shredding’) as described herein and in Exhibit ‘4-A.’  The allocation of hydropower will support capital expansion of $12.5 million and the creation of 22 jobs in Western New York.

 

BACKGROUND

 

“Under Section 1005(13) of the Power Authority Act, as amended by Chapter 313 of the Laws of 2005, the Authority may contract to allocate or reallocate directly, or by sale for resale, 250 MW of firm hydroelectric power as EP and up to 445 MW of Replacement Power (‘RP’) to businesses in the State located within 30 miles of the Niagara Power Project, provided that the amount of power allocated to businesses in Chautauqua County on January 1, 1987 shall continue to be allocated in such county. 

 

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

 

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

 

“The Authority works closely with business associations, local distribution companies, and economic development entities to garner support for the projects to be recommended for allocations of Authority hydropower.   Discussions routinely occur with National Grid, Empire State Development Corporation (‘ESD’), the Buffalo Niagara Enterprise (‘BNE’), Niagara County Center for Economic Development (‘NCCED’) and Erie County Industrial Development Agency (‘ECIDA’) to coordinate other economic development incentives that may help bring projects to New York State.  Staff confers with these entities to help maximize the value of hydropower to improve the economy of Western New York and the State of New York.

 

DISCUSSION

 

                “At this time, there is 13,925 kW of unallocated EP available to be awarded to businesses under the criteria set forth in PAL Section 1005(13)(a).  Staff recommends an EP allocation of 1,200 kW be awarded to Buffalo Shredding, as set forth in Exhibit ‘4-A.’  The exhibit shows, among other things, the amount of power requested by the applicant, the recommended allocation amount and the applicant’s commitment to job creation and capital investment.  Additional information on the project is contained in the application summary attached as Exhibit

‘4-A-1’ as well as in the individual expansion project description below.

 

                “Buffalo Shredding has submitted an application requesting 4,600 kW for building a metals recycling facility in the town of Hamburg, Erie County.  The company is a newly formed subsidiary of Metalico, Inc., a company with multiple New York State facilities and statewide employment of over 200 employees.  Metalico also owns and operates several out-of-state facilities in Pennsylvania, Ohio and New Jersey.  The company is proposing to build a metals recycling facility within a vacant industrial facility, the former Arcelor-Mittal steel galvanizing mill.  The existing facility would be refurbished to accommodate the purchase and installation of a 4,000 horsepower shredder and metal separation processing system.  The raw materials – scrap cars, appliances and sheet metal, etc. – would be sourced locally from the company’s existing operations in Buffalo, Rochester and Syracuse.  The recycled material would be sold mainly to New York and Ohio customers.

                “Currently, Metalico sends much of its scrap feedstock to its Pittsburgh shredder operations.  Building the facility in Western New York would allow the company to reduce costs associated with transporting raw materials to be processed out-of-state.  If the company moves forward with this project, the equivalent of 22 jobs currently in Pennsylvania would be ‘in-sourced’ to New York State.  Additionally, the company and its affiliates plan to acquire and maintain a private fleet of railcars to supplement local rail traffic through South Buffalo Railroad.  This will create additional indirect jobs and increased local business along with $1.5 million in new freight business.

 

                “Metals recycling is a commodities business characterized by thin margins and volatile raw material costs.  The cost of electricity is estimated to be about 1% to 3% of the cost of production, depending on the cost of scrap metal feedstock, by far, the most significant cost of production.  An allocation of hydropower would help reduce operational costs providing a significant incentive for the company to move forward with this project.  The company is also in the process of obtaining incentives from the Hamburg Industrial Development Agency.

 

                “In discussions with other members of the economic development community regarding this project, specifically, ESD, BNE, National Grid, NCCED and ECIDA, several concerns were raised.  The group raised the issue of whether incentives should be directed to this industry without other extraordinary circumstances, such as brownfield redevelopment.  The group expressed concerns regarding the large field of competitors in this industry and the need to incentivize this specific project.  There was also concern whether this project represents the best use of hydropower resources.  Overall, while there was support for the allocation, the group was unable to reach consensus on supporting this recommended allocation.

 

                “Buffalo Shredding commits to create 22 new jobs with an average total compensation of $43,000 per job.  The jobs ratio for a recommended 1,200 kW allocation is 18.3 new jobs per MW, which is above the two-year historic average of 14.5 new jobs per MW.  The capital investment ratio for the allocation is $10.4 million per MW, which is below the two-year historic average of $25.3 million per MW.  If Buffalo Shredding moves forward, this project has the added benefit of bringing a vacant manufacturing site back to productive use.

 

                “Based upon a review and evaluation of the company’s application for hydropower as detailed above, staff recommends a 1,200 kW EP allocation be awarded to Buffalo Shredding, as set forth in Exhibit ‘4-A.’  In total, the company will commit to $12.5 million of capital investment and to create 22 new jobs.  The recommended allocation will help Buffalo Shredding and Recovery decide to move forward with expansion plans in the Buffalo region, thus improving and diversifying the economy of Western New York.

 

RECOMMENDATION

 

“The Manager – Business Power Allocations and Compliance recommends that the Trustees approve an allocation of 1,200 of unallocated Expansion Power to Buffalo Shredding and Recovery LLC, as set forth in Exhibit

‘4-A.’

 

For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

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

 

RESOLVED, That the allocation of 1,200 kW of Expansion Power to Buffalo Shredding and Recovery LLC, as detailed in Exhibit “4-A,” be, and hereby is, approved on the terms set forth in the foregoing report of the President and Chief Executive Officer; and be it further

               

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

 


 

5.                   NYPA’s Governmental Customer Production Rate and Delivery Rate Structure Redesign – Notice of Adoption

            The President and Chief Executive Officer submitted the following report:

 SUMMARY

                “The Trustees are requested to take final action to approve a redesign of the currently effective production and delivery rate structures for NYPA’s New York City (‘NYC’) and Westchester County (‘Westchester’) Governmental Customers (collectively, ‘Customers’).  This rate redesign, which is revenue neutral to the Authority, would properly align costs with rates, and ultimately eliminate cross-subsidization among Customers.  The rate redesign changes would commence with the July 2011 service period. 

 

“This final action would conclude NYPA’s rulemaking process performed under the State Administrative Procedure Act (‘SAPA’).  This memorandum addresses the comments made by Customers under SAPA in response to NYPA’s original notice of proposed rulemaking (‘NOPR’).  The Trustees are further requested to authorize the Corporate Secretary to publish a Notice of Adoption in the New York State Register (‘State Register’) regarding the final proposed rate design.

            “The final proposed rate design is embodied in a comprehensive update to the Authority’s Service Tariff No. 100 applicable to the NYC Governmental Customers and to Service Tariff No. 200 applicable to Westchester Governmental Customers, which are attached as Exhibit ‘A.’  These revised tariffs were made by Authority staff to reflect the results of the proposed rate structure redesign and improve the tariffs’ format and organization. 

            Finally, NYPA staff will process lump-sum refunds to the Customers related to accumulated delivery service over-collections that were identified during the rate redesign process.  As explained below, NYPA staff determined that it would augment the refund to include interest in the amount of $6.7 million. 

                  

BACKGROUND

At their March 29, 2011 meeting, the Trustees directed the publication in the State Register of a NOPR concerning the Authority’s proposal to redesign rates for production and delivery services charged to Customers. The State Register notice was published on April 13, 2011 in accordance with SAPA.  The public comment period for the NOPR ended on May 31, 2011.

As explained in the March 29th Memorandum to the Trustees, in accordance with contractual commitments, the Authority completed an evaluation of the production (i.e. demand and energy) and delivery charges related to serving the Customers, and recommended a redesign of the production and delivery service structure.  NYPA staff engaged the consulting firm Black & Veatch and solicited the input of the Customers over the last two years, which resulted in numerous meetings and discussions to help facilitate the rate redesign studies.  

          “The March 29th memorandum explained that the proposed production rate design and delivery rate design are based on sound ratemaking principles that are widely accepted by public utility commissions throughout the United States.  Using the principle of cost causation, NYPA’s production revenue requirement is allocated to each service class by identifying appropriate linkages between elements of cost and particular customer service classes.            The recommended delivery rate structure also uses cost-causation principles and is designed to match the delivery rates that NYPA charges to Customers to the rates Consolidated Edison Company of New York, Inc. (‘Con Ed’) charges NYPA, including minimum delivery bill provisions.

“NYPA also proposed to include new tariff provisions applicable to standby and net metering services, which represent an improvement over the existing services provided under the tariffs.  Further proposed tariff changes include necessary updated terminology and information and improvements to the organization and formatting of the current tariffs.

 

“On April 12, 2011, NYPA staff conducted a conference call to gather the views of Customer representatives regarding the proposed rate redesign changes contained in the NOPR.  NYPA staff responded in verbal and written form to the concerns and questions raised, and provided written answers to five data requests received from the City of New York (‘City’).

In accordance with the SAPA-prescribed deadline, timely written comments were filed by the City, the County of Westchester (‘County’) and the Port Authority of New York and New Jersey (‘Port Authority’).  The Metropolitan Transportation Authority (‘MTA’) filed comments out of time.  In the interest of having a complete record that includes the views of all affected Customers, the Authority will accept the MTA’s comments into the record.  All written comments are included in the record of this proceeding and attached as Exhibit ‘B.’

 

DISCUSSION

“Based on the Customer comments, NYPA staff recommends the adoption of the rate redesign as originally proposed, except for certain changes discussed below pertaining to the Port Authority’s production rates.  The production rates would become effective with the July billing period for both the NYC and Westchester Governmental Customers.  In their comments, all Customers, overall, either strongly support or raise no objection to the proposed production rate redesign plan.

 

“Further, the proposed implementation of production minimum billing will be delayed to 2012 rate year, because, in staff’s judgment, Customers will likely need more time to understand the impacts of these provisions.  It is staff’s plan to work with Customers through the 2012 cost-of-service preparation process in the remaining months of 2011 to explain the production minimum billing provision and any estimated impacts on their bills.

“As originally proposed, staff recommends immediate implementation of the delivery rate structure change for the Westchester Governmental Customers and a four-year phase-in plan for the NYC Governmental Customers, with an immediate removal of the NYPA declining block rate structure.  Although the implementation of the delivery minimum bill provisions will be similarly delayed until 2012 to ensure proper functioning within NYPA’s billing system, such minimum bill costs or credits will be reconciled until then via the delivery charge true-up mechanism, which no Customer opposed.  All are necessary to eliminate the current annual delivery service over-collection and to manage Customer impacts.

 

“Below is NYPA staff’s review and analysis of the comments received from the Customers on NYPA’s original rate redesign proposal.

 

 

A.  Staff Analysis of Customer Comments and Recommendations.

 

Issue 1:  Requests for ‘Full Year 1’ Mitigation

 

Customer Comments:  The City comments that for both the production and delivery rate redesigns, the estimated bill impacts that NYPA indicated on its Schedule 1 for ‘Year 1’ would not be fully realized in light of the July 1, 2011 implementation date because NYPA revises its production cost of service each January and new Con Ed delivery rates are scheduled to take effect next April.  The City requests that NYPA ‘clarify’ that the rate redesigns will result in ‘full mitigation’ of existing interclass subsidies amongst the NYC Governmental Customers by ensuring that the Year 1 rates are in effect for a full twelve months.  The Port Authority makes the same clarification request with respect to the delivery rate redesign only, basing its claim on the fact that the July 1, 2011 implementation date would not allow ‘full realization’ of each Customer’s estimated first year delivery bill impact.

 

Staff Analysis:  NYPA staff declines to make the clarifications requested by the City and the Port Authority.  The estimated Customer bill impacts shown on Schedule 1 of the NOPR were made for the purpose of illustrating the effects of the revised rates on an annualized basis.  However, these estimates did not and could not represent actual Customer bill reductions (or increases) that would result because it was uncertain when the new rate designs would take effect.  Any date of implementation that does not coincide with calendar year 2011 would have the effect of altering the estimated outcomes shown on Schedule 1.[1] 

 

“To grant the City’s and Port Authority’s clarifications would result in compressing twelve months of estimated bill impacts into six months for production and nine months for delivery and would represent an abandonment of cost-of-service principles.  Put another way, accelerating twelve months of estimated impacts into a compressed time period will exaggerate short-term impacts, and unduly hurt some Customers.  The City and the Port Authority would likely benefit from a ‘full Year 1’ mitigation because Schedule 1 indicates for the City a $4 million reduction in production charges and a $7.3 million reduction in delivery charges, and for the Port Authority a $4.1 million reduction in delivery charges.  However, the Port Authority is silent with respect to production rate redesign, probably because Schedule 1 estimates $2.2 million increase to the Port on an annualized basis.  The Port Authority surely knows that its production charge increase would be diminished under anything less than ‘full Year 1’ mitigation.  

 

“As expected, NYPA’s proposed rate redesign produces some ‘winners’ and some ‘losers,’ as virtually all rate redesigns do.  NYPA staff has developed, as it should, estimated bill impacts on an annualized basis to assist the Customers acquiring a better understanding of how the rate redesign will likely affect them.  However, it is simply unrealistic for NYPA to devise a plan that accelerates supposed year-long impacts for certain charges of certain Customers and not for others.  To do so would decouple the redesigned rates from their cost basis. 

 

“NYPA understands the City’s and the Port Authority’s desire to enjoy the estimated impacts of the newly designed rates as soon as possible.  However, NYPA could never guarantee that a full twelve months of impacts would be realized by the end of 2011.  During 2010, staff moved as expeditiously as possible to develop consensus with Customers regarding the plan with an eye towards implementing redesigned production and delivery rates as soon as practically feasible in 2011.  Despite the best efforts of all parties involved, it was not possible for the rate redesign to coincide with calendar year 2011.  While the benefits flowing from the redesigned production and delivery rates will begin mid-year 2011, their full value will be realized in subsequent years.   

 

Issue 2:  Delivery Rate Phase-In for NYC Governmental Customers

 

                “Customer Comments:  The Port Authority opposes the four-year phase-in of the redesigned delivery rates, claiming instead that immediate implementation is the ‘best option’ because it provides the quickest transition to ‘true cost-based rates.’  The Port Authority then concedes that a longer transition is necessary:  75% implementation in 2011 (as NYPA has proposed), with the remaining 25% in 2012.  The Port Authority also states that ‘separate phase-in schedules’ for certain Customers may be needed. 

 

“The City and the MTA, however, comment that the four-year phase in is appropriate.  Both the City and the MTA recognize that an immediate implementation of Con Ed-based delivery rates would produce a nearly 200% increase for the MTA and the City’s Department of Environmental Protection.  MTA explains that disproportionate rate impacts on certain customers compel the need for a reasonable phase-in period and that four years is the ‘minimum reasonable period’ in this case.

 

Staff Analysis:  NYPA staff recommends adopting the four-year delivery rate phase-in for NYC Governmental Customers as originally proposed.  While staff understands the desire to move to cost-based rates as quickly as possible, the principle of gradualism in ratemaking, which is well-established throughout the United States, is applicable here.  This principle is reinforced by the rate design provisions in the 2005 Long-Term Agreements (‘LTA’) executed by NYPA and each of the NYC Governmental Customers, which says ‘the goal of the Parties [is] to . . . redesign rates so that the rates charged  . . . recognize[] individual customer impacts and ameliorate[] such impacts.’  LTA, Art. VI (emphasis added).

 

“Based on the need to ensure that the impacts of the rate redesign do not impose an undue burden on any single Customer, NYPA staff does not agree with either an immediate phase-in or the two-year phase-in proposed by the Port Authority.  There appears to be substantial agreement among the Customers that a four-year phase-in for the NYC Governmental Customers is appropriate in these circumstances. 

 

“In addition, staff does not believe there should be any Customer-specific phase-ins of cost-based delivery rates, as suggested by the Port Authority.  One of the benefits of utility ratemaking is the efficiencies gained by designing rates for an entire class, and there has been no demonstration that any individual NYC Governmental Customer should have a phase-in schedule that deviates from the rest of the class.  Furthermore, implementation of the Port Authority’s suggestion would not be revenue neutral to NYPA.

 

Issue 3:  Rate Redesign and Consistency with LTA

 

                “Customer Comments:  The MTA contends that NYPA’s rate redesign study violates Article V of the LTA because the concurrence of the NYC Governmental Customers representing at least 80% of the total annual energy usage supplied by NYPA is needed for a group decision of the NYC Governmental Customers.  Without its concurrence, the MTA maintains, the 80% threshold was not met and the ‘entire rate design study . . . could be considered invalid.’   

 

                “Staff Analysis:  The suggestion by the MTA that the rate redesign study could be deemed invalid is based on a faulty interpretation of the LTA and should be rejected.  The ‘80% rule’ of LTA Art. V simply does not apply to rate design decisions made by NYPA.

 

                Article VI of the LTA (‘Rate Design Study, New Tariffs’) patently permits NYPA to make the rate design decisions at issue in the instant proceeding.  After the rate design study results are shared with the Customers, ‘the NYC Governmental Customers agree that, as provided below, the appropriate tariff changes shall be implemented.’ Id. (emphasis added).  The provision continues:  ‘After the studies are completed, and in cooperation with the NYC Governmental Customers, NYPA will initiate the public comment and approval process under SAPA to adopt appropriate tariff changes.’  Id. (emphasis added).  If 80% concurrence were needed to adopt a final rate redesign, the drafters of the LTA would not have directed that the rate redesign study process be subject to a SAPA proceeding. 

 

                “MTA has informed NYPA of various concerns it has regarding the proposed delivery service rate redesign in the course of two years of work on this subject.  NYPA has attempted to address those concerns in a manner that balances the needs and interests of all Customers.  LTA Art. VI does indicate that at the outset of the rate redesign study process, the Customer’s ‘input and concurrence’ is needed related to the ‘scope, design, data collection and cost allocation method.’  But NYPA proceeded to use the final rate redesign that came from this study process to issue its rate redesign proposal under SAPA in accordance with the LTA Art. VI.  This is a procedure to which the Customers have explicitly agreed. 

 

                “At its core, the MTA’s objections to NYPA’s delivery rate redesign relate solely to its disagreement with the delivery rates assessed by Con Ed to NYPA under the Con Ed’s conventional high tension rate which is used to serve a majority of the MTA load.  The MTA has provided no data to NYPA to support its contention that Con Ed is charging NYPA incorrect delivery rates for service to the MTA, even though the MTA has voiced its concerns about this issue numerous times.  In its comments, MTA attempts to relitigate the rates that were determined in the last Con Ed delivery rate case before the New York Public Service Commission (‘PSC’).  This is not the forum to contest those rates.[2] 

 

“The MTA’s misinterpretation of the LTA merely underscores its dissatisfaction with the PSC’s approval of the current three-year rate plan for Con Ed.  NYPA’s rate redesign properly aligns its own delivery rates with the PSC-approved delivery rates of Con Ed, all in accordance with a contractually-authorized SAPA process.  Any suggestion that NYPA has violated the LTA should be rejected by the Trustees.[3]

 

Issue 4:   Production Rate Allocator

Customer Comments:  The Port Authority argues that NYPA should use a 4-month coincident peak demand allocator (or 4 CP) for production rates rather than a 1-month coincident peak demand allocator (or 1 CP).  The Port Authority states that a 4 CP allocator, which averages the customer peaks over the four summer months, would result in more stable rates from year to year.  In contrast, the City supports NYPA’s proposed 1 CP demand allocator as the most appropriate because the New York Independent System Operator (‘NYISO’) also uses this method (i.e. the system peak) to allocate costs.  The County also supports the 1 CP allocator, but states that this could impose unfavorable rates on school districts and that it may be appropriate for NYPA to modify its production cost allocator if the NYISO system peak occurs in either June or September.

 

Staff Analysis:  NYPA staff decided to adopt the 1 CP production cost allocator because it sends the most accurate price signal to Customers.  This issue was examined thoroughly in the rate design study process, and ultimately, staff determined that because NYISO-administered capacity markets are set by the NYISO system peak, 1 CP is the most appropriate allocator.  In addition, Customers implement their demand reduction measures during the time of the system peak.

 

“The Port Authority’s proposal to adopt the 4 CP allocator is currently unsupported.  However, if the NYISO system peak were to shift from July and August to the outer summer months of June or September, the points raised by the Port Authority, as well as County, are well-taken.  NYPA agrees that if the date of system peak changes significantly, it may be appropriate for NYPA revisit this issue and consider a change in production cost allocator.

 

Issue 5:  Customer-Specific Rates in Future Con Ed Rate Proceedings

 

                “Customer Comments:  The City and the Port Authority object to NYPA’s proposal concerning a re-examination of Con Ed delivery rates in subsequent PSC proceedings to support the development of a specific MTA rate.  The City states that it is ‘premature’ for NYPA to commit now to support such a rate ‘without any basis for believing that Con Edison’s cost of service will support such a new rate.’  The Port Authority requests that the Trustees ‘clarify that NYPA reserves prejudgment’ regarding any Customer-specific rate design in the next Con Ed rate case.

 

                “Staff Analysis:  As stated in NYPA’s recommended plan, NYPA intends to ‘initiate communication with Con Edison regarding the cost basis’ of current rates for the purpose of examining whether Con Ed should develop a ‘specific MTA rate.’  The plan further states that NYPA and the Customers will ‘conduct an investigation to better understand Con Edison delivery rates to NYPA.’  NYPA staff believes that there is a credible basis to develop a better understanding of the Con Ed delivery rates as they pertain to the MTA and to initiate communications to this end.  NYPA has not prejudged the outcome of this analysis.  If, in the judgment of NYPA staff, there is a well-reasoned basis to support the development of a MTA-specific rate, NYPA would be justified in supporting such a rate development in the next Con Ed rate proceeding.

 

Issue 6:   Port Authority Production Rate Design Issues

 

Customer Comments:  The Port Authority comments that the proposed merger of Service Classes 64 and 69 will uniquely impact the Port Authority due to its production service contracts for the purchase of electricity from the John F. Kennedy (‘JFK’) International Airport Cogeneration plant used to serve JFK International Airport.  The Port Authority requests to specify a Service Class 64 Time-of-Day (‘TOD’) successor rate in NYPA’s service tariffs and to adjust the JFK International Airport rate for the NYISO charges that Port Authority pays for in a separate charge of the bill.  Further, the Port Authority asks for the standby service provision to be applied to the back-up and maintenance power service.

 

                “Staff Analysis:  Based on Port Authority’s comments received in regards to the JFK International Airport's backup and maintenance service rates, further NYPA staff analysis was performed.  Staff concurs with Port Authority and proposes a new SC 69 TOD rate (successor to ST 15 TOD and Service Class 64) applicable to power sales made to the airport only.  The new production rates would exclude those NYISO costs and revenues that are being recovered in a separate charge of the direct bill from NYPA to the Port Authority, thus ensuring that the Port Authority will not be double-billed.

 

“Further, staff agrees that the power provided for back-up and maintenance purposes qualifies to be treated as standby service.  Once the Port Authority’s production contract pertaining to the airport’s backup and maintenance service is modified to include the standby service tariff provision and NYPA's billing process is adjusted to accommodate this new billing, NYPA will employ the new standby service provision for Port Authority's back-up and maintenance billing.

 

 B.  For Trustees Information - Refund of Over-collections

                “As indicated in the March 29th memorandum, NYPA and the Customers reached agreement on the need to refund NYPA’s accumulated over-collections of delivery service charges, a matter that is outside the NOPR process.  NYPA had planned to refund those amounts over twelve months commencing no later than the date of the implementation of redesigned delivery rates, but committed to inform the Trustees of any change to its refund plan.  NYPA staff solicited informal comments from the Customers regarding the refunds which elicited numerous opinions on the refund issue including their timing, the inclusion of interest and the allocation methodology.  NYPA staff also committed to update the total accumulated over-collections, which was last reported as $39.1 million through January 2011.  Through the end of March 2011, the accumulated over-collection balance stood at $35.1 million.

“Based on its review of the refund-related comments, NYPA staff recommends the addition of interest in the amount of $6.7 million, for an accumulated over-collection total of approximately $41.8 million.  The interest amount was calculated by applying the Federal Energy Regulatory Commission (‘FERC’) interest rate provision (which includes quarterly compounding)[4] to (a) all cumulative monthly over- or under-collection balances from January 2005 through December 2009 and (b) the accumulated over-collection balance that existed at the end of 2009 for each month from January 2010 through June 2011.  However, such refunds will be provided net of an estimated $12.1 million in increased delivery charges to account for the Con Ed delivery rate increase covering the period April-June 2011, which NYPA has not passed through to Customers.  The $12.1 million estimate will be subject to NYPA’s delivery service true-up provisions explained in its rate redesign proposal. 

“The accumulated total over-collection (net of the increase in the Con Ed delivery charges for April-June 2011) generally will be refunded in a lump-sum in the form of a credit on the July bills to those Customers whose delivery charges exceeded Con Edison’s delivery charges to NYPA.  Two Customers (the New York City Housing Authority and Port Authority of New York and New Jersey) requested their refunds via check or wire transfer and NYPA has agreed to accommodate these requests.  All refunds will be determined on a customer-by-customer basis, based upon the percentage allocations set forth in Schedule 2 of the original rate redesign study.

 

FISCAL INFORMATION

                 “The adoption of the proposed production rate structure change is intended to be revenue neutral to the Authority.

                 “The adoption of the proposed delivery rate structure (including the described phase-in elements) is intended to be revenue neutral to the Authority, is consistent with accepted ratemaking principles and makes the necessary cost-of-service based correction to the current annual over-collection of delivery revenues by Authority.

                “The amounts to be refunded to Customers are based on the accumulated over-collections of Authority delivery revenues.  Though not revenue-neutral, staff has regarded the accumulated over-collections as a NYPA obligation and such amounts have not been included in NYPA’s prior year net revenues.  The estimated impact on net revenues is $1.2 million.

 

 RECOMMENDATION

                 “The Director – Market Analysis and Administration recommends that the Trustees authorize the Corporate Secretary to file a Notice of Adoption with the New York State Department of State for publication in the New York State Register for the adoption of the new production and delivery rate structure for the NYC Governmental Customers and the Westchester Governmental Customers.

                “It is also recommended that the Senior Vice President – Marketing and Economic Development, or his designee, be authorized to issue written notice of the proposed action to the affected Customers under the provisions of the Authority’s tariffs.

 

                “For the reasons stated, I recommend the approval of the above requested actions by adoption of a resolution in the form of the attached draft resolution.” 

 

Mr. Mike Lupo presented highlights of staff’s recommendation to the Trustees.

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

 

 RESOLVED, That the Trustees adopt the Authority’s production and delivery rate redesign plan for the New York City and Westchester County Governmental Customers as described in the foregoing report to the Trustees, inclusive of the service tariff modifications consistent with the rate redesign plan; and be it further

 

 RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file a Notice of Adoption concerning this final rule on redesigned rates for publication in the New York State Register in accordance with the State Administrative Procedure Act and to submit such other notice as may be required by statute or regulation; and be it further

 

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

 

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

 

A motion was made and seconded to reopen discussion on the item. 

On motion made and seconded the item was amended to include the addition of the following information.

Mr.  James Pasquale said that two sections in the item needed to be updated.  First, in the “Fiscal Information” section, it states that the rate change is revenue neutral to the Authority; however, after calculation of the interest payment, which is slightly more than contemplated, there will be a net income impact of $1.2 million.  Second, as to the timing of the refunds to the customers, the item indicates that they would receive the refunds in June; however, the customers will actually receive their refunds in July or August.

 

On motion made and seconded, the item, as amended, was reapproved by the Trustees.


 

6.             Robert Moses Niagara Power Project – Units 2 and 13 Standardization – Capital Expenditure Authorization and Contract Award  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize capital expenditures in the amounts of $10.4 million and $9.8 million for the standardization of Units 2 and 13 (the ‘Project’), respectively, at the Robert Moses Niagara Power Project (‘RMNPP’).  The standardization work will result in Units 2 and 13 conforming to the remaining 11 upgraded units at RMNPP and will allow these units to perform their function as regulating units in the New York Independent System Operator (‘NYISO’) market and maintain a reliable and competitive power production facility.

 

“The Trustees are also requested to approve the award of a two-year contract to Alstom Power, Inc. (‘Alstom’) of Littleton, CO, in the amount of $8.2 million ($4.7 million, Unit 2 and $3.5 million,Unit 13) to perform this work in conjunction with the Authority’s site craft labor.

 

BACKGROUND

 

“In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services contracts in excess of $3 million and contracts exceeding a one-year term requires the Trustees’ approval.

 

“Based on economic analyses, the Authority adopted a plan in 1991 to rehabilitate and upgrade the generating units to increase the Project’s use of available water, improve operating efficiency of each unit, allow additional operating flexibility and provide for life extension and modernization of the facilities.  The completed upgrade program involved an upgrade of each of the 13 generating units at the Project from a nominal output of 175 MVA to 215 MVA; work included replacement of the turbine, modifications to the generator, replacement of the transformer and other associated equipment modifications and replacement.

 

“After receiving Federal Energy Regulatory Commission’s (‘FERC’) approval in 1989, the upgrade program of the Project units began in 1991.  Installation of the prototype turbine-generator on Unit 4 was completed in 1993 without some of the technological advancements made on the later upgraded units.  Upgrade work on the remaining units was completed at a rate of one per year, with the program completed in December 2006 when the last (13th) unit was upgraded.  The overall upgrade program was completed on schedule and under budget.

 

“At the December 2006 Trustee Meeting, the Trustees authorized capital expenditures to standardize the prototype turbine-generator on Unit 4 and the Trustees were informed that some level of standardization would also be required for no more than two additional units completed in the early stages of the RMNPP Upgrade Program.  The Unit 4 standardization work was completed in April, 2010.

 

“Units 13 and 2 were the second and third units, respectively, in the series to be upgraded beginning in 1991 at the start of the upgrade program.  For this reason the units that were upgraded earlier in the program required modification to current standards and technology as the units that were later upgraded.  The standardization work for Units 2 and 13 will be similar to the work performed on Unit 4.  In addition, Units 2 and 13 will be used as regulating units to maintain required outputs, as needed, by NYISO.  By using the Units outside of their normal operating parameters for ‘best gate’ operation, the Units experience rough operating zones that can cause severe cavitation and extreme forces, pressures and stresses that were not accounted for in the original design.  Some of the effects of running the units outside of their normal operating parameters have been cracking of the draft tube hatch, severe cavitation in the seal edges of the wicket gates and cavitation on the stainless steel runner blades in Unit 4 (which has previously been used as a regulating unit).

 


 

DISCUSSION

 

                 “The completed RMNPP upgrade program, included rebuilding the existing wicket gates, installing new greaseless bushings and line-boring of the lower wicket gate journal sockets.  The first two units that were upgraded (4 and 13) were provided with Teflon-lined type bushings, while the later units used a Teflon-epoxy plug design in the bushings.  The Teflon-lined bushings have experienced higher-than-expected failure rates at other facilities.

 

                “The standardization work will include replacement of Teflon-lined bushings with plug-type greaseless bushings, which have a proven record of performance.  Additional work required from the technology advancements made during progression of the upgrade program will include:

 

 

“The above items are included in the scope of the Overall Standardization contract that is requested to be awarded to Alstom with Authority site support for some items.  It is anticipated that both Units 2 and 13 will need similar upgrades due their role as regulating units and to maintain commonality between the Units.  With this authorization and completion of the above work, all RMNPP Units will be common and standardized.

 

                “The Authority placed a notice to procure bids in the New York State Contract Reporter and bid packages were available as of November 30, 2010.  The bid documents were downloaded by 188 potential bidders and 12 potential bidders participated in a site visit on December 21, 2010.

 

“Two proposals were originally received on February 28, 2011 and after several bid addenda and clarification meetings to the vendors’ bids, the following revised bids were evaluated:

 

                                Bidder                                                   Location                               Lump Sum

 

                                Alstom Power, Inc.                              Littleton, CO                         $8,242,597

 

                                Voith Hydro                                         York, PA                                $13,648,428

 

                “The proposals were reviewed by an evaluation committee comprising staff from Engineering, Procurement and Project Management.

 

                “Alstom’s bid was the lowest in price and was also technically acceptable.  Alstom, which has extensive experience in hydro mechanical construction and projects of this magnitude and demonstrated knowledge of the scope-of-work, is capable of completing this project in a timely manner.  The Authority’s prior experience with Alstom at Niagara and St. Lawrence has been satisfactory and Alstom has been able to provide acceptable results in the past. 

 

                “Funding in the amount of $9.2 million (Unit 2 – capital), $1.4 million (Unit 2 – O&M) and $503,000 (Unit 13 – capital) has been included in the 2011 approved Capital and O&M Budgets, of which $2.4 million has been previously authorized by the President and Chief Executive Officer for procurement of long-lead items in order to meet the outage schedule.  Future years’ expenditures will be included in the Capital and O&M Budget requests for those years.

                The total project capital costs are estimated as follows:

 

UNIT 2 (000’s)

 

Description

Previous  Authorized Amount

Current Request

Total  Authorized Amount

Engineering

  $      0

 $    200

 $     200

Procurement

   1,140

    1,160

     2,300

Construction/Installation

          0

    7,440

     7,440

Authority Direct/Indirect

        60

    1,600

     1,660

Total

 $1,200

 $10,400

 $11,600

 

UNIT 13 (000’s)

 

Description

Previous  Authorized Amount

Current Request

Total  Authorized Amount

Engineering

 $       0

 $   500

$     500

Procurement

   1,140

      400

    1,540

Construction/Installation

          0

   7,300

    7,300

Authority Direct/Indirect

        60

   1,600

    1,660

Total

 $1,200

 $9,800

$11,000

 

FISCAL INFORMATION

 

                “Payments associated with this project will be made from the Authority’s Capital and O&M Funds.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Engineer – Power Supply, the Senior Vice President – Power Supply Support Services, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Procurement, the Project Manager and the Regional Manager – Western New York recommend that the Trustees authorize capital expenditures in the amount of $10.4 million (Unit 2) and $9.8 million (Unit 13) and approve award of a contract to Alstom Power Inc.  in the amount of $8.2 million ($4.7 million, Unit 2 and $3.5 million, Unit 13) to perform the standardization of Units 2 and 13 at the Robert Moses Niagara Power Project.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

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

 

RESOLVED, That in accordance with the Authority’s Expenditure Authorization Procedures program, capital expenditures of $20.2  million are hereby approved for the standardization of Units 2 and 13 at the Robert Moses Niagara Power Project, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a two-year contract to Alstom Power, Inc., in the amount of $8.2 million to perform the Standardization of Units 2 and 13 at the Robert Moses Niagara Power Project, as recommended in the foregoing report of the President and Chief Executive Officer;

 

Contractor                               Contract Approval

 

Alstom Power, Inc.,                                $8.2 million

 Littleton, CO                                                     

 

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

 


 

7.             765 kV Substations Motor-Operated Disconnect Replacements – Capital Expenditure Authorization Request and Contract Award  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize a Capital Expenditure Authorization Request (‘CEAR’) in the amount of $13.5 million for the replacement of obsolete, degraded, motor-operated disconnect (‘MOD’) switches at the Clark Energy Center (‘CEC’) 765 kV and Massena 765 kV Substations.  The Trustees also are requested to approve the award of a contract to Alstom Grid, Inc. (‘Alstom’) (formerly Areva) of Charleroi, PA,in the amount of $3.08 million to procure 28 horizontal motor-operated disconnect switches.  This work is scheduled to commence in 2011 and continue through 2017.

 

BACKGROUND

 

“Section 2879 of the Public Authorities Law and the Authority’s Guidelines for Procurement Contracts require Trustees’ approval for procurement contracts involving services to be rendered for a period in excess of one year.  In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services or equipment purchase contracts in excess of $3 million require Trustees’ approval.

 

“The CEC and Massena Substations serve the 765 kV transmission lines that originate near the St. Lawrence/FDR Power Project, in Chateauguay, NY and terminate at the Authority’s CEC, Marcy Substation.  The lines were put into service in 1978.  There are 14 horizontal and 3 vertical switches at CEC and 14 horizontal and 10 vertical switches at the Massena Substation.  The MOD switches have become increasingly less reliable and more difficult to maintain.  This has led to increased maintenance and replacement equipment costs.  Parts are also becoming more difficult to find as these MOD switches are obsolete and no longer available.

 

“Records show increased maintenance on the MOD switches since 1998.  Recently, in 2009 and 2010, MOD 7303 at CEC failed, causing damage to Current Transformer 7304 and requiring reconfiguration of the existing south bus to provide a temporary repair and operation of the 765 kV yard.

 

DISCUSSION

 

“In response to the Authority’s request for proposals advertised in the New York State Contract Reporter, two firms submitted proposals as follows:

 

Bidder                                   Location                               Original Proposal              Total (with options)

 

Alstom Grid, Inc.                 Charleroi, PA                        $2,947,460.00                      $3,079,112

                                               

Southern States, LLC         Hampton, GA                      $1,924,871.00                      Non-Responsive

 

“Authority staff recommends an award to Alstom for furnishing and delivering horizontal MOD switches at the CEC and Massena Substations over a period of four years (2011 – 2014).  Additional engineering is required to purchase the remaining vertical switches at the substations and address bus work modifications.  This work will extend the project duration through 2017.

 

“The award amount of $3.08 million includes procurement of equipment as well as technical support from Alstom at each facility during installation.

 

“Alstom is a supplier of 765 kV MOD switches throughout North America and the rest of the world, with its primary manufacturing facility for horizontal switches in La Prairie, Quebec, Canada and a new facility in Charleroi, PA.  Alstom has supplied more than 1000, 3-phase, 765 kV vertical break switches to Hydro Quebec and American Electric Power (‘AEP’).  Additional switches have been sold to Commonwealth Edison, the Authority and Churchill Falls.  Alstom supplied a 765 kV switch to the Authority at CEC in 2010.  This was done as part of a pilot project for replacement of an existing HK Porter Switch.  

 

“Southern States, LLC submitted an incomplete proposal.  The proposal was not accepted because it took exception to the terms and conditions of the contract and failed to furnish the required commercial information.  Staff deemed the company commercially non-responsive and not subject to further evaluation.

 

“The work will be performed over a seven-year period with an initial delivery of seven horizontal MOD switches beginning in 2011.

 

“Funding has been included in the 2011 approved Capital Budget in the amount of $3.313 million.  Actual expenditures for the year are expected be less as a result of lower cost of equipment and reduced scope-of-work associated with delays resulting from contract negotiations.  Funding for future years will be included in the Capital Budget request for that year.

 

“The total CEAR amount over the seven-year period is estimated at $13.5 million, as follows:

 

                                Engineering/Design                                              $ 1,396,000

                                Procurement                                                         $ 5,964,000

Construction/Installation                                   $ 5,101,000

                                Authority Direct Expenses                                 $    406,000

Authority Indirect Expenses                              $    633,000

                                                                                TOTAL                  $13,500,000

 

“The CEAR includes amounts in excess of the contract award to cover engineering and construction support, contingency and overheard costs.

 

FISCAL INFORMATION

 

                “Payments will be made from the Authority’s Capital Fund.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Engineer – Power Supply, the Senior Vice President – Transmission, the Vice President – Engineering and the Vice President – Procurement, recommend that the Trustees authorize capital expenditures in the amount of $13.5 million and approve the award of a contract to Alstom Grid, Inc. of Charleroi, PA, in the amount of $3.08 million to replace the motor-operated disconnect switches at the Clark Energy Center 765kV Substation and the Massena 765kV Substation.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

                Mr. John Canale presented highlights of staff’s recommendation to the Trustees.  In response to a question from Vice Chairman Foster, Mr. Canale said that the bid proposal from Southern States, LLC was deemed non-responsive as it did not meet the commercial and technical terms.  In response to a question from Trustee LeChase, Mr. Canale said that the project is for specialty equipment and not many companies are able to perform this type of work.  In response to a question from Trustee Nicandri, Mr. Canale said that the work to be performed is because of the “end-of-useful-life” of the switches.  In response to a comment by Chairman Townsend, Mr. Welz added that Alstom Power, Inc. has been responsive to the Authority’s needs in the past and that staff feels very comfortable awarding the contract to them.  In response to a question from Chairman Townsend, Mr. Quiniones said that surety bond was not required for this project.

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

 

  RESOLVED, That expenditures are hereby approved in accordance with the Authority’s Expenditure Authorization Procedures, for capital expenditures in the amount of $13.5 million for the replacement of the motor-operated disconnect switches at the Clark Energy Center 765 kV Substation and the Massena 765 kV substation.

 

AND BE IT FURTHER RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a contract to Alstom Grid, Inc. of Charleroi, PA, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount listed below:

 

Contractor

                         

                          Alstom Grid, Inc.

Charleroi, PA

Contract Approval

    

        $3.08 million

 

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


 

8.             New Astoria Infrastructure Program – Capital Expenditure Authorization Request

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve the New Astoria Infrastructure Program for the total estimated cost of $7.55 million.  The program will provide critical infrastructure to the 500 MW Combine Cycle Power Plant and Administration Building that is currently installed or routed through the Charles Poletti Power Plant. 

 

“The Trustees are further requested to authorize capital expenditures in the amount of $4.9 million to complete Phase I of the infrastructure work.  Phase I will include a new fire pump-house and associated electrical work, completion of the Administration Building’s gas line, Information Technology (‘IT’) Infrastructure and construction oversight.  This work will be awarded in accordance with the Authority’s Expenditure Authorization Procedures and will be completed by the end of the first quarter of 2012.  Expenditure authorization for Phase II of the work, with an estimated cost of $2.54 million, will be requested in late 2011 or early 2012 when final project costs are clarified.

 

BACKGROUND

 

                “As a result of the Charles Poletti Power Plant ceasing operation on January 31, 2010, new infrastructure is required to support services for the 500 MW Power Plant as well as the overall Astoria Site.  These services include, but are not limited to, gas service for the Administration Building’s boiler; a new electric fire pump-house and protection system; new 500 MW communication and control systems; new security infrastructure; new electrical feeds and substation equipment to support power loads previously energized from the Poletti substation (security booth, Fuel Oil Yard (‘FOY’) panels, auxiliary buildings, etc.); the Kensico, In-City and Y-49 Remote Terminal Unit (‘RTU’) and communications; new sewer ejection pump power feeds.  These projects will be designed using the Authority’s engineers as well as consultant engineers.  Phase I installations will be completed in the first quarter of 2012 and include completion of the gas line and IT Infrastructure, the new fire pump-house and the electrical work.  Phase II will include the balance of the projects and will be completed in 2012.

 

“The costs for all these services are presented in the Capital Expenditure Authorization Request (‘CEAR’).   Funding in the amount of $2.9 million has been included in the 2011 approved Capital Budget, of which $395,000 has been previously authorized by the President and Chief Executive Officer to proceed with engineering and design services for Phase I.  Future funding will be included in the Capital Budget request for those years.

 

                “The total project cost over a two-year period is estimated at $7.55 million, as follows:

               

 

Preliminary Funding

 

 

Phase I

 

Phase II

Preliminary Engineering    

$    95,000

$               0

$   304,000

Engineering

$  281,000

$    220,000

$   330,000

Procurement

$             0

$      96,000

$     64,000

Construction/Installation

$             0

$ 4,140,000               

$1,323,000

Authority Direct/ Indirect  

$    19,000

$    233,000                

$    232,000

 

$   395,000

$4,900,000

$2,254,000

TOTAL: $7,550,000

 

 

 

 


 

FISCAL INFORMATION

 

                “Payment associated with this Project will be made from the Authority’s Capital Fund.

 

RECOMMENDATION

 

“The Executive Vice President and Chief Engineer – Power Supply, the Senior Vice President – Power Supply Support Services, the Vice President – Project Management, the Vice President – Procurement and the Regional Manager – SENY recommend that the Trustees approve a capital program estimated at $7.55 million and authorize capital expenditures of $4.9 million for the installation of new infrastructure at the Astoria site.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

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

 

RESOLVED, That expenditures are hereby approved in accordance with the Authority’s Expenditure Authorization Procedures, for the estimated cost of $7.55 million and capital expenditures in the amount of $4.9 million for the installation of new infrastructure at the Astoria site; and be it further

 

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

 


 

9.             Energy Efficiency and Clean Energy – Improvements  Authority Facilities Program

               
               
The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize capital expenditures in the amount of $9.58 million for the implementation of energy efficiency and clean energy improvements at various Authority facilities.  This amount will be in addition to $15.7 million in funding previously approved by the Trustees for this program.

BACKGROUND

                “The Authority has been implementing energy services programs since the 1990s as part of its overall mission to provide clean, economic and reliable energy for the benefit of its customers and the people of New York State.  In 1992, the Authority determined that, given the success of its High Efficiency Lighting Program (‘HELP’) for its governmental customers, it should ‘practice what it preaches’ and implement energy efficiency measures at the Authority’s facilities and headquarters building.  At their meeting held on March 31, 1992, the Trustees authorized capital expenditures in the amount of $4.7 million, over a two-year period, for the installation of energy-efficient lighting measures at the Authority facilities, including the corporate headquarters offices in White Plains.  At their February 26, 2002 meeting, the Trustees authorized additional capital expenditures of $3.5 million for the installation of energy efficiency improvements at the Authority’s Clarence D. Rappleyea Office Building (‘Rappleyea Building’) (White Plains headquarters).  At their February 27, 2007 and March 31, 2009 meetings, the Trustees authorized $2.5million and $5 million, respectively, for energy efficiency improvements at various Authority facilities.

                “Thus far, almost $12 million in energy efficiency projects have been completed at the Authority’s facilities and headquarters sites under the Authority Facilities Program, with annual savings of $700,000.

                “To date, the Trustees have approved almost $3.3 billion in financing for energy services programs throughout the State.  In 2010 alone, the Authority invested a record of $175 million in projects throughout the state.  Since the Authority began its energy services work, its programs have reduced the demand for electricity by approximately 231 MW, resulting in savings of $132 million annually. 

DISCUSSION

 

                “Projects already implemented under the Authority’s Facilities Program include energy efficiency upgrades at the Poletti, Blenheim-Gilboa (‘B-G’), St. Lawrence and Niagara Power Projects.  The new fuel cell at the Rappleyea Building has been completed as well.

                “If approved by the Trustees, the additional funding will be used to implement the energy efficiency measures that were recommended in the completed audit and feasibility studies at the St. Lawrence and Niagara, Power Project facilities. The total projected cost for work at these two facility projects is $9.58 million.

                “At the St. Lawrence Power Project facility, ES&T is currently in the design phase with the recommended energy efficiency measures of  interior and exterior lighting upgrade and controls, HVAC upgrades including motors and heating controls,  upgrades to various ventilation systems,  and water tower freeze protection system upgrades that save energy. The projected cost for work at this project is $3.98 million.

                “The Niagara Power Project facility completed feasibility study includes the recommended energy efficiency measures of lighting, energy management system upgrades, HVAC upgrades, motors, and chilled water system retro-commissioning. The total projected cost for work at this facility is $5.6 million.

               


 

FISCAL INFORMATION

 

                “Funding for this program will be paid from the Capital Fund. 

RECOMMENDATION

 

“The Acting Senior Vice President – Energy Services and Technology recommends that the Trustees authorize additional funding of $9.58 million for the Authority Facilities Program to complete energy efficiency upgrades and improvements at the various Authority facilities.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

                Mr. Paul Belnick presented highlights of staff’s recommendation to the Trustees.  In response to a question from Vice Chairman Foster, Mr. Belnick said that although the payback for this project seems long, the Project makes financial sense.  The Authority considers the life cycle cost of its projects; therefore, all of the Authority’s projects are implemented where the savings would pay for the project over its life. 

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

 

RESOLVED, That pursuant to the Authority’s Expenditure Authorization Procedures, approval is hereby granted for the expenditures of up to $9.58 million to finance the cost of energy efficiency and clean energy measures at the various Authority’s facilities  as recommended in the foregoing report of the President and Chief Executive Officer, in the amounts and for the purposes listed below:

 

                                                Capital Funds                                      Expenditure

                                               

                                                Previously authorized                      $15.7 million      

                                                Additional funding                            $ 9.58 million

                                                Total amount authorized                 $25.28 million

 

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

               

                         


 

10.          Release of Funds in Support of the Residential Consumer Discount Program Incorporated in the Recharge New York Power Program

               

The President and Chief Executive Officer submitted the following report:

SUMMARY 

“The Trustees are requested to approve the release of funds in support of the first six months of the Residential Consumer Discount Program incorporated in the Recharge New York (‘Recharge NY’) Power Program as set forth in Chapter 60 of the Laws of 2011.

 

BACKGROUND

 

“In March 2011, Governor Cuomo signed into law the Recharge NY Power Program that will utilize 455 megawatts (‘MW’) of the firm power from the Authority’s Niagara and St. Lawrence hydroelectric facilities, combined with market-based power purchases, to form a new, 910-megawatt economic development power program to replace and expand upon the Power for Jobs (‘PFJ’) and Energy Cost Savings Benefits (‘ECSB’) economic development programs.

 

“As part of the Recharge NY program, the Authority is directed to withdraw all 455 MW of firm hydroelectric power presently sold to certain utility companies for the benefit of their residential consumers.  The withdrawals are anticipated to be effective August 1, 2011.  To mitigate the price impacts of this withdrawal on the residential consumers, the Authority has been authorized, as deemed feasible and advisable by the Trustees, to fund monthly Residential Consumer Discount Program payments for the benefit of such consumers on a declining schedule.  For each of the first three years following the withdrawal, the Authority is authorized to provide $100 million per year to fund the discounts.  In years four and five following the withdrawal, the Authority is authorized to fund discounts of $70 million and $50 million, respectively.  Beginning in year six following the withdrawal, and for each year thereafter, the Authority is authorized to fund discounts of $30 million per year.

 

“Upon the withdrawal of this power from the utilities, the Authority is authorized to use the revenues from the sale of this power into the wholesale market, together with any other funds of the Authority as the Trustees may deem feasible and advisable, to support the Residential Consumer Discount Program.  The Department of Public Service staff reported that during 2010 the 455 MW of hydropower used for the benefit of the utilities’ residential consumers provided $102 million in net value for residential consumers.  Because the 455 MW of withdrawn hydropower is not scheduled to be allocated to eligible Recharge NY program customers until July 1, 2012, it is presently estimated that the sale of this power into the wholesale market will produce approximately the $100 million required on an annualized basis to fund the Residential Consumer Discount Program for the first year.  Given the volatility in market prices, however, there is no assurance that the sale of this power will produce sufficient net revenues to cover the full amount of the residential discount.  Therefore, Authority funds may be needed to supplement the market revenues.   

 

“Following the July 1, 2012 start of business customer allocations under the Recharge NY program, the source of funding for the residential discount is expected to shift over time to other Authority funds, as deemed feasible and advisable by the Trustees.  It should be noted, however, that during the same period, the requests for funds to support the PFJ customer rebates and the ECSB Program will decline or be eliminated as those programs are replaced by Recharge NY.

DISCUSSION

 

“The Authority is requested, from time to time, to make financial contributions and transfers of funds to the State or to otherwise provide financial support for various State programs, including rebates to customers of the PFJ program, the provision of below-cost energy to the beneficiaries of the State’s ECSB program and the Residential Consumer Discount Program related to Recharge NY. 

 

“Any such contribution or transfer of funds must (1) be authorized by the Legislature; (2) be approved by the Trustees ‘as feasible and advisable,’ (3) satisfy the requirements of the Authority’s General Resolution Authorizing Revenue Obligations dated February 24, 1998, as amended and supplemented (‘Bond Resolution’) and (4) as set forth in the Trustees’ Policy Statement dated May 24, 2011, a debt service coverage ratio of 2.0 shall be used as a reference point in considering any such payments or transfers.

 

“The Bond Resolution’s requirements to withdraw monies ‘free and clear of the lien and pledge created by the [Bond] Resolution’ are such that withdrawals (a) must be for a ‘lawful corporate purpose as determined by the Authority,’ and (b) the Authority must determine, taking into account, among other considerations, anticipated future receipt of revenues or other moneys constituting part of the Trust Estate, that the funds to be so withdrawn are not needed for (i) payment of reasonable and necessary operating expenses, (ii) an Operating Fund reserve for working capital, emergency repairs or replacements, major renewals or for retirement from service, decommissioning or disposal of facilities, (iii) payment of, or accumulation of a reserve for payment of, interest and principal on senior debt or (iv) payment of interest and principal on subordinate debt.

 

                “Staff has reviewed the effects of the anticipated payments during the first six months of the Residential Consumer Discount Program, August 2011 through January 2012.   Based on current market rates, the up to $50 million in residential discounts is estimated to be off-set nearly in its entirety by the sale of the withdrawn power into the wholesale market.

 

 “In a related item being brought for the Trustees’ consideration today, staff is recommending the release of $47.5 million in voluntary contributions to the State as authorized pursuant to state Budget legislation.  These transfer amounts, combined with the $50 million in Residential Consumer Discount Program payments requested herein, would not result in the Authority going below the reference point debt service coverage ratio of 2.0 as set forth in the Board’s Policy guidance (see Exhibit ‘10-A’).  Accordingly, given the current financial condition of the Authority, its estimated future revenues, operating expenses, debt service and reserve requirements, staff is of the view that it will be feasible for the Authority to provide up to $50 million in Residential Consumer Discount Program payments in support of the Recharge NY program over the first six months of the program.  Staff intends to return to the Trustees with a recommendation as to the release of any future amounts based on the financial circumstances of the Authority at the time such payments are to be considered.

 

FISCAL INFORMATION

 

“Staff has determined that sufficient funds are available to provide up to $50 million in support for the Residential Consumer Discount Program authorized by the Recharge NY program at this time and that such Authority funds are not needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s Bond Resolution.  While the contemplated release of up to $50 million associated with the first six months of the program was not reflected in the Power Authority’s 2011 Operating Budget, this amount is estimated to be offset by the sale of the withdrawn power into the wholesale market.  With the exception of some small timing differences, it is not expected to affect overall earnings or net cash flow.

RECOMMENDATION

“The Senior Vice President – Corporate Planning and Finance recommends that the Trustees affirm the release of up to $50 million for the first six months of the residential consumer discount program authorized by the Recharge New York program is feasible and advisable and to authorize such payments.

 

“For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

                Mr. Donald Russak presented highlights of staff recommendation to the Trustees.  In response to a question from Vice Chairman Foster, Mr. Russak said that in 2009, the block of power used for the Power for Jobs and Energy Cost Savings Benefits programs produced about $80 million in value and in 2010 it produced about $102 million in value.  Therefore, the risk to the Authority was manageable given our financial condition.  In response to further question from Vice Chairman Foster, Mr. Russak said that approximately 2.5 million residential customers serviced by the three upstate utilities, National Grid, New York State Gas and Electric Corporation and Rochester Gas and Electric Corporation, are the beneficiaries of that block of power.

                In response to a question from Trustee Nicandri, Mr. Russak said that a decision with regard to the scheduled time-frame for Trustee approvals has not been finalized as yet.  In response to further question from Trustee Nicandri, Mr. Russak said that as of July 1, 2012, the effective date of the Recharge New York Program and the end of the Power for Jobs and Energy Cost Savings Benefit Programs, the hydropower from those programs will be allocated to business customers and the monies currently used to support those programs will be available for the residential discounts of the Recharge New York Program.  Mr. Russak also said that as part of the Recharge New York legislation, the amount of subsidies required will decline over time.  In response to a question from Vice Chairman Foster, Mr. Russak said that the law authorizes payment of $100 million for the first 3 years; $70 million for the fourth year; $50 million for the fifth year; and $30 million for the sixth year and thereafter; however, this is subject to the amounts being deemed feasible and advisable by the Trustees.  He ended by stating that in the end, the Recharge New York Program will be positive for the Authority financially and be a sound economic development prospect for the state.

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

RESOLVED, That the Trustees hereby authorize the release of up to $50 million from the Operating Fund to support the first six months of the Residential Consumer Discount Program as authorized by the Recharge New York Power Program as set forth in Chapter 60 of the Laws of 2011 as discussed in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the amount of $50 million to be used for the Residential Consumer Discount Program described in the foregoing resolution is not needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

 

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

 

RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer, the Acting General Counsel, the Executive Vice President – Chief Financial Officer, the Senior Vice President – Corporate Planning and Finance, the Corporate Secretary, the Treasurer and all other officers of the Authority be, and each of them hereby is, authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents that they, or any of them, may deem necessary or advisable to effectuate the foregoing resolution, subject to approval as to the form thereof by the Acting General Counsel.

 

 

 

Debt Service Coverage Calculation

Pursuant to the May 24, 2011 Board Policy Statement

 

 

 

Sources of Cash Flow:                                                                               ($ million)

(i)         Net Cash from Operating Activities                                                   $ 396

(ii)        Cash Flow from Entergy Value Sharing Agreement                              72

(iii)       Cash Flow from Entergy Notes Receivable                                            30

(iv)       Earnings Received on Investments                                                          26

(v)        Interest Portion of Energy Conservation Program Payments                    2

Subtotal:                                                                                                          $ 526

Less:    Prior Contributions to the State (not included above)                        $   65

Total Cash Flow (Before current request)                                                      $ 461

Debt Service:                                                                                                  $ 170

Debt Service Coverage Ratio (before current request):                                    2.7X

 

 

 

Pending Request(s) for Withdrawal:

Voluntary Contributions to the State                                                             $ 47.5 1

Residential Consumer Discount Program (RNY)                                              50.0

Subtotal:                                                                                                          $ 97.5

 

Total Cash Flow (after current request)                                                          $ 363.5

Debt Service:                                                                                                  $ 170.0

Debt Service Coverage Ratio (after current request):                                       2.1X

 

 

1 – Considered under separate Trustee item.

 


 

11.          Contribution of Funds to the State Treasury

 

The President and Chief Executive Officer submitted the following report:

SUMMARY 

“The Trustees are requested to approve a contribution in the amount of $40 million to the State’s general fund as authorized by legislation approving the 2011-12 Budget of the State of New York (Chapter 58 of the Laws of 2011).  In addition, the Trustees are requested to approve a second contribution in the amount of $7.5 million related to the extension of the Power for Jobs (‘PFJ’) Program, as provided in Chapter 60 of the Laws of 2011.

 

BACKGROUND

 

“The Authority is requested, from time to time, to make financial contributions and transfers of funds to the State or to otherwise provide financial support for various State programs.  This financial support has come in the form of direct transfers to the State’s general fund, rebates to customers of the PFJ program, the provision of below-cost energy to the beneficiaries of the State’s Energy Cost Savings Benefits (‘ECSB’) Program and other such contributions.  Further, as noted in a related item under consideration at this meeting, the Authority is requested to make Residential Customer Discount Program payments, starting in August 2011, related to the Recharge New York Power Program.

 

“Any such contribution or transfer of funds must (1) be authorized by the Legislature; (2) be approved by the Trustees ‘as feasible and advisable,’ (3) satisfy the requirements of the Authority’s General Resolution Authorizing Revenue Obligations dated February 24, 1998, as amended and supplemented (‘Bond Resolution’), and (4) as set forth in the Trustees’ Policy Statement dated May 24, 2011, a debt service coverage ratio of 2.0 shall be used as a reference point in considering any such payments or transfers.

 

“The Bond Resolution’s requirements to withdraw monies ‘free and clear of the lien and pledge created by the [Bond] Resolution’ are such that withdrawals (a) must be for a ‘lawful corporate purpose as determined by the Authority,’ and (b) the Authority must determine, taking into account among other considerations anticipated future receipt of revenues or other moneys constituting part of the Trust Estate, that the funds to be so withdrawn are not needed for (i) payment of reasonable and necessary operating expenses, (ii) an Operating Fund reserve for working capital, emergency repairs or replacements, major renewals or for retirement from service, decommissioning or disposal of facilities, (iii) payment of, or accumulation of a reserve for payment of, interest and principal on senior debt or (iv) payment of interest and principal on subordinate debt.

 

DISCUSSION

 

“The State’s fiscal year (‘SFY’) 2011-12 Budget legislation authorizes the Authority as deemed ‘feasible and advisable by its trustees’ to provide $100 million in contributions to the State, with $40 million to be considered for payment by June 2011 and the remaining $60 million considered for payment by January 2012.

 

“In January 2011, the Trustees approved a contribution to the State in the amount of $25 million, pursuant to the SFY 2010-11 Budget legislation, which was paid at that time.  This $25 million amount, together with the $40 million considered herein, totals to $65 million for the Authority’s calendar year 2011 operations, which is the amount the Authority budgeted for in its 2011 Operating Budget.  In regards to the second amount ($60 million) contemplated in the SFY 2011-12 Budget, staff is not recommending any action at this time, but will return to the Board with a recommendation as to that contribution based on the financial circumstances of the Authority at the time such contribution is to be considered for payment. 

 

“Under the PFJ Program, distributors of the power are allowed to take a tax credit against their gross receipts tax (‘GRT’) to offset lost revenues that may result from the Program.  The Authority has traditionally been authorized to make a voluntary contribution to the State Treasury ‘as deemed feasible and advisable by the trustees’ equal to amount of the GRT credit to offset the foregone revenue of the State resulting from the GRT credit.  In extending the PFJ Program for the final time to June 30, 2012 as part of the Recharge New York Power Program legislation, the legislation authorized the Authority to provide a $7.5 million GRT-related contribution, retroactively, for SFY 2010-11 and a second GRT-related contribution in the amount of $6.0 million associated with SFY 2011-12.  Under consideration today, is the $7.5 million amount related to SFY 2010-11.  The $6.0 million amount related to SFY 2011-12 is due for consideration in the first quarter of 2012.

 

“Staff has reviewed the effects of the two transfer amounts, totaling $47.5 million, on the Authority’s expected financial position and reserve requirements.  In addition, in accordance with the Board’s Policy Statement, staff calculated the impact of these transfer amounts on the Authority’s debt service coverage ratio and determined it would not fall below the 2.0 reference point level as shown in Exhibit ‘11-A’ attached hereto.  Given the current financial condition of the Authority, its estimated future revenues, operating expenses, debt service and reserve requirements, staff is of the view that it will be feasible for the Authority to make the contribution of $47.5 million at this time.

 

FISCAL INFORMATION

 

“Staff has determined that sufficient funds are available in the Operating Fund to transfer $47.5 million to the State’s general fund at this time and that such Authority funds are not needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s Bond Resolution.  The contemplated transfer of $40 million associated with the SFY 2011-12 Budget legislation was anticipated and reflected in the Power Authority’s 2011 Operating Budget approved by the Trustees at their December 13, 2010 meeting.  The GRT-related $7.5 million amount was not included in the Authority’s Operating Budget.  Both amounts will be recorded as an expense at the time of payment.

RECOMMENDATION

The Senior Vice President – Corporate Planning and Finance recommends that the Trustees affirm that the transfer to the State Treasury of $47.5 million is feasible and advisable and authorize such transfer.

 

For the reasons stated, I recommend the approval of the above-requested action by adoption of a resolution in the form of the attached draft resolution.”

 

Mr. Donald Russak provided highlights of staff’s recommendation to the Trustees.  In response to a comment by Trustee Curley, Mr. Russak said that authority staff has periodically held discussions with the state with regard to the contributions to the state treasury.  However, no conclusion has yet been reached as to an agreed-upon form of payment.  In response to further comment by Trustee Curley, Mr. Russak said that he would expect discussions to continue with the state in this regard.  Mr. Russak added that the January 2009 temporary asset transfer was posted as a long-term receivable.

                Trustee Nicandri stated that based on assurances made to the Trustees at a prior meeting regarding the HTP Project, in particular the assurance that other entities will be participating in the project, he wanted the record to show that he is prepared to vote “yes” on staff’s recommendation today.  However, he reserves his right to vote “no” for future voluntary contributions to the state if those obligations are not fulfilled.  Trustee O’Luck opined that the Authority’s voluntary contributions to the state should be reevaluated, giving consideration to other projects to be undertaken by the Authority.  He added that he, too, is prepared to vote “yes” on staff’s recommendation today, but reserves the right to vote “no” for future voluntary contributions.

 

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

RESOLVED, That the Trustees hereby authorize a payment to the State Treasury in the amount of $40 million from the Operating Fund as authorized by Chapter 58 of the Laws of 2011 as discussed in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That the Trustees hereby authorize a second payment to the State Treasury in the amount of $7.5 million from the Operating Fund as authorized by Chapter 60 of the Laws of 2011 as discussed in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the amount of $47.5 million to be used for the contributions to the State Treasury described in the foregoing resolution is not needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

 

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

 

RESOLVED, That the Chairman, the Vice Chairman, President and Chief Executive Officer, the Chief Operating Officer, the Acting General Counsel, the Executive Vice President – Chief Financial Officer, the Senior Vice President – Corporate Planning and Finance, the Corporate Secretary, the Treasurer and all other officers of the Authority be, and each of them hereby is, authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents that they, or any of them, may deem necessary or advisable to effectuate the foregoing resolutions, subject to approval as to the form thereof by the Acting General Counsel.

 


 

Debt Service Coverage Calculation

Pursuant to the May 24, 2011 Board Policy Statement

 

 

 

Sources of Cash Flow:                                                                               ($ million)

(i)         Net Cash from Operating Activities                                                   $ 396

(ii)        Cash Flow from Entergy Value Sharing Agreement                               72

(iii)       Cash Flow from Entergy Notes Receivable                                            30

(iv)       Earnings Received on Investments                                                          26

(v)        Interest Portion of Energy Conservation Program Payments                    2

Subtotal:                                                                                                          $ 526

Less:    Prior Contributions to the State (not included above)                        $   65

Total Cash Flow (Before current request)                                                      $ 461

Debt Service:                                                                                                  $ 170

Debt Service Coverage Ratio (before current request):                                    2.7X

 

 

 

Pending Request(s) for Withdrawal:

Voluntary Contributions to the State                                                             $ 47.5

Residential Consumer Discount Program (RNY)                                              50.0 1

Subtotal:                                                                                                          $ 97.5

 

Total Cash Flow (after current request)                                                          $ 363.5

Debt Service:                                                                                                  $ 170.0

Debt Service Coverage Ratio (after current request):                                       2.1X

 

  

1 – Considered under separate Trustee item.

 


 

12.          Motion to Conduct an Executive Session

 

                Mr. Chairman, I move that the Authority conduct an executive session pursuant to the Public Officers Law of the State of New York section §105 to discuss matters leading to the appointment, employment, promotion, demotion, discipline, suspension, dismissal or removal of a particular person or corporation.  On motion made and seconded, an Executive Session was held.

 

 

13.                Motion to Resume Meeting in Open Session

 

Mr. Chairman, I move to resume the meeting in Open Session.  On motion made and seconded, the meeting resumed in Open Session.

 

14.                Next Meeting

 

The next regular meeting of the Trustees will be held on Tuesday, July 26, 2011, at 11:00 a.m., at the Clarence D. Rappleyea Building, White Plains, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.

 

 

 

 

Closing

                On motion made and seconded, the meeting was adjourned by the Chairman at approximately 1:45 p.m.

 

 

 

 

Karen Delince

Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                

 

 

 

 

 


 

[1] There are myriad assumptions in Schedule 1 that would have made it impossible, even in the best of circumstances, for such bill impacts to be realized during 2011:  (1) the production rate redesign would have had to take effect on January 1, 2011, the effective date of NYPA’s last production rate increase; (2) the 2009 billing determinants used in the estimate would need to be repeated in 2011; and (3) the delivery rate redesign would have had to take effect on April 1, 2011 and employ the Con Ed rates in effect for the April 1, 2010 through March 31, 2011 period despite the fact that new Con Ed delivery rates took effect on April 1, 2011.  

[2]   NYPA need not address the MTA’s separate and mistaken claim that NYPA’s proposed rate redesign should not be implemented because the MTA believes it “does not align with Con Ed’s unbundled cost of service,” except to point out that (a) MTA’s argument is a collateral attack on a Con Ed’s PSC-authorized delivery rates which NYPA has no jurisdiction to change, and (b) NYPA cannot lawfully be directed to “trap” costs, i.e. charge its Customers less than what NYPA itself incurs in paying Con Ed delivery rates which have been authorized by a valid regulatory authority.  

[3]   As noted in the Staff Analysis of Issue 2, supra, the MTA supports the four-year phase-in associated with the delivery rate redesign even if the MTA claims to oppose the delivery rate redesign itself.

[4]   FERC’s interest rate methodology is set forth in 18 C.F.R. § 35.19a(a)(2)(iii) (2011).