MINUTES OF THE ANNUAL MEETING

OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

March 29, 2011

 

Table of Contents

 

                Subject                                                                                                                                              

 

1.                 Consent Agenda:

a.       Minutes of  the Regular Meeting held on January 25, 2011                             

 

b.       Power for Jobs Program – Extended Benefits, Exhibit - “1b-A-1”; “1b-A-2”

        Resolution

 

c.        Allocation of 3,070 kW of Hydropower (TABLED)                                         

d.       St. Lawrence/Clark Energy Center – Microwave Communication System Upgrade – Increase in

        Capital Expenditure Authorization and Contract Award 

 

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

        Resolution    

 

f.        Annual Review and Approval of Guidelines and Procedures for and Annual Report of the Disposal of Personal Property, Exhibit - “1f-A”; “1f-A-1”

        Resolution

   

g.       2010 Annual Report of Procurement Contracts, Guidelines for Procurement Contracts and Annual Review

        of Open Procurement Service Contracts, Exhibit - “1g-A-1” – “1g-A-3”

        Resolution

 

h.       Annual Review and Approval of Guidelines and Procedures for the Disposal of Real Property, Guidelines and Procedures for the Acquisition

        of Real Property and Annual Report for the  Disposal of Real Property, Exhibit -  “1h-A” – “1h-C”

        Resolution               

 

i.         Annual Review and Approval of Certain Authority Policies, Exhibit - “1i-A” – “1i-L”

        Resolution

 

j.         Annual Review and Approval of Guidelines for the Investment of Funds and 2010 Annual Report on

        Investment of Authority Funds, Exhibit “1j-A”

        Resolution                                                       

   

k.       New York Power Authority’s Annual Strategic Plan, Exhibit - “1k-A”;  “1k-B”

        Resolution

 

                                                                                                                                               

 

Discussion Agenda:

2.                   Q&A on Reports from:

a.       President and Chief Executive Officer, Exhibit - “2-A”
Resolution

b.       Chief Operating Officer, Exhibit - “2-B”
Resolution

c.        Chief Financial Officer, Exhibit - “2-C”
Resolution

3.                   NYPA’s Governmental Customer Production Rate and Delivery Rate Structure Redesign – Notice of Proposed Rule Making, Exhibit - “3-A”

                Resolution

 

4.                   2010 Financial Reports Pursuant to Section 2800 of the Public Authorities Law and Regulations of the Office of the State Comptroller, Exhibit - “4-A”; “4-B”

 Resolution

 

5.                   RM Flynn Power Plant 2011 Major Outage – Capital Expenditure Authorization Request
Resolution                                                                          

 

6.                   Niagara Power Project – Lewiston Pump Generating Plant Life Extension and Modernization Program – GSU Installation – Contract Award
 Resolution                                     

 

7.                   Niagara Power Project – Lewiston Pump Generating Plant Life Extension and Modernization Program –  Pothead Replacement – Contract Award
Resolution                                            

 

8.                   NERC Reliability Standards Compliance Security Upgrades Capital Expenditure Authorization Request
Resolution                                                    

     

9.                   Motion to Conduct an Executive Session                                                                          

10.                Motion to Resume Meeting in Open Session                                                                      

11.                Next Meeting                                                                                                                           

12.                Closing                                                                                                                                                            


 

Minutes of the Annual 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, 123 Main Street, White Plains, NY

2)       New York Power Authority, 95 Perry Street, Buffalo, NY

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

The Members of the Board present were:

                                Michael J. Townsend, Chairman

                                Jonathan F. Foster, Vice Chairman

                                D. Patrick Curley, Trustee

                                Eugene L. Nicandri, Trustee

                               

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Richard M. Kessel                               President and Chief Executive Officer

Gil C. Quiniones                                   Chief Operating Officer

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

Thomas Antenucci                              Senior Vice President – Power Supply Support Services

Jordan Brandeis                                   Senior Vice President – Power Resource Planning and Acquisition

Steve DeCarlo                                      Senior Vice President – Transmission

Bert Cunningham                                Senior Vice President – Corporate Communications

Thomas DeJesu                                   Senior Vice President – Public and Governmental Affairs

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

William Nadeau                                   Senior Vice President – Energy Resource Management

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 Concadoro                            Vice President and Controller

Dennis Eccleston                                 Vice President – Information Technology/Chief Information Officer

Michael Huvane                                  Vice President – Marketing

Rocco Iannarelli                                  Vice President – Human Resources

Joseph Leary                                        Vice President – Community and Government Relations

Patricia Leto                                         Vice President – Procurement

Lesly Pardo                                           Vice President – Internal Audit

Karen Pasquale                                   Vice President – Enterprise Shared Services

Christine Pritchard                               Vice President – Media Relations and Corporate Communications

Randy Crissman                                  Vice President – Technical Compliance

Scott Scholten                                      Vice President and Chief Risk Officer

Vincent Esposito                                  Assistant General Counsel – Legislative and Regulatory Affairs

Karen Delince                                      Corporate Secretary

Brian McElroy                                     Treasurer

Paul Tartaglia                                       Regional Manager – SENY

Lisa Cole                                               Director – Financial Planning

Mike Lupo                                            Director – Marketing Analysis and Administration

Mark O’Connor                                   Director – Real Estate

Michael Saltzman                               Director – Media Relations

Khalil Shalabi                                      Director – Power Resource Planning and Acquisition

Janis Archer                                          Strategy Change SpecialistFinance

Sarah Barish-Straus                            Special Assistant – Project Development, President's Office

Patricia Lombardi                               Associate EngineerHydro/Transmission

Lorna  Johnson                                    Assistant Corporate Secretary

Oksana Karaczewsky                        Senior Compliance Specialist – Procurement

Sheila Baughman                                                Senior Secretary – Corporate Secretary’s Office

Lisa Farrell                                            Executive Secretary to CEOPresident's Office

Timothy Carey                                    CompUSA

Christopher Russo                               Principal, Charles River Associates

Kenneth Deon                                      Managing Partner, KPMG LLP

Christian Alexander                            Visitor

 

 

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


 

Chairman Michael Townsend congratulated new Trustee, Mr. John Dyson, in absentia, on his appointment as Trustee by the Senate on Monday, March 28th, and welcomed
 him to the Board.

 

 

1.                   Consent Agenda

               

Trustee D. Patrick Curley recused himself from voting on item 1c, Allocation of 3,070 kW of Hydropower.  Chairman Townsend said that item 1c will be tabled and considered at the next Board meeting.

In response to a question from Trustee Eugene Nicandri, Ms. Karen Delince confirmed that items 1f (Personal Property Disposal Guidelines), 1g (Annual Report of Procurement Contracts) and 1h (Real Property Acquisition Guidelines) were approved by the Governance Committee prior to submission the Board for its approval. 

In response to questions from Trustee Nicandri, Mr. Rocco Iannarelli said that staff adheres to all of the guidelines outlined in the policies being presented to the Board for approval in item 1i.  Mr. Iannarelli said that over the last year staff has updated all the policies, making material changes, with the goal of enhancing and enforcing the policies to their fullest extent.  In response to another question from Trustee Nicandri, Mr. Donald Russak said that the maintenance of the Authority’s assets is captured in the Authority’s overall strategic plan in the Power Supply Department’s Business Plan and the related Power Supply Optimization Strategic Goal.   He said that staff reevaluates the strategic plan annually and will include language in the next update that makes clearer the importance of the maintenance and enhancement of the Authority’s infrastructure.

Vice Chairman Jonathan Foster said that, based on the agenda before the Board, in the future, he would ask that the Authority be mindful of the Trustees’ time.
 

a.                   Approval of the Minutes

 

                                The Minutes of the Regular Meeting held on January 25, 2011 were unanimously adopted.

 

b.                   Power for Jobs Program – Extended Benefits

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve payments for Power for Jobs (‘PFJ’) restitution to the companies listed in Exhibit ‘1b-A-1.’  These companies have been evaluated for restitution and are due a restitution payment.  The Trustees have approved similar restitution payments at past Trustees’ meetings.  In addition, the Trustees are requested to authorize prospectively the payment of restitution to PFJ customers that subsequently are evaluated and determined to be due restitution in an aggregate amount not to exceed $4 million.

 

BACKGROUND

 

                “In July 1997, New York State enacted the PFJ program to provide low-cost power to businesses and not-for-profit corporations that agree to retain or create jobs in New York State.  In return for commitments to create or retain jobs, successful applicants received three-year contracts for PFJ electricity.

 

“The PFJ program originally made 400 megawatts (‘MW’) of power available and was to be phased in over three years.  As a result of the initial success of the program, the Legislature amended the PFJ statute to accelerate the distribution of the power and increase the size of the program to 450 MW.  In May 2000, legislation was enacted that authorized additional power to be allocated under the PFJ program.  Legislation further amended the PFJ program in July 2002.

                 

“In 2005, provisions of the enacted State Budget extended the period PFJ customers could receive benefits until December 31, 2006.  Chapter 645 of the Laws of 2006 (‘Chapter 645’) included provisions extending PFJ program benefits until June 30, 2007.  Chapter 89 of the Laws of 2007 included provisions extending PFJ program benefits until June 30, 2008.  Chapter 59 of the Laws of 2008 included provisions extending the PFJ program benefits until June 30, 2009.  Chapter 217 of the Laws of 2009 included provisions extending the PFJ program benefits until May 15, 2010.  Chapter 88 of the Laws of 2010 included provisions extending the PFJ program until June 2, 2010.  Chapter 311 of the Laws of 2010 included provisions extending the program benefits until May 15, 2011.

 

                                “Chapter 645 also created the PFJ restitution obligation, which is now set forth in Economic Development Law (‘EDL’) §189(5) (second paragraph).  This provision provides in pertinent part:

 

. . . for the period beginning January 1, 2006, for recipients who choose to elect a contract extension, and whose unit cost of electricity under the contract extension exceeds the unit cost of electricity of the electric corporation, the Power Authority shall reimburse the recipient for all dollars paid in excess of the unit cost of electricity of the electric corporation. 

 

DISCUSSION

                 

                “As more specifically provided in EDL §189(5), restitution is based on whether the net amount paid by the customer for PFJ service exceeds the ‘unit cost of electricity’ of the host utility over the measurement period for the same quantity of electricity.  Under current law, the measurement period begins January 1, 2006 and ends with the date that the eligible customer ceases to be in the PFJ program.

 

                                “The host utilities, in conjunction with the Authority and the Department of Public Service, determine what the otherwise applicable full-service electric rates of the host utility would have been for service throughout the measurement period; calculate what the customer charges would have been under those rates; compare that total to the total actual charges paid by the customer for PFJ electricity and determine whether the customer had net savings, overall, in the PFJ program or is due a restitution payment.

 

                                “Staff has evaluated five additional PFJ customers for restitution.  Of those, four customers are eligible for restitution payments and are presented for approval as listed in Exhibit ‘1b-A-1.’  The fifth customer, listed in Exhibit ‘1b-A-2,’ had overall PFJ program savings, and therefore it is not eligible to receive restitution. 

 

“The Authority will receive additional requests for restitution throughout the remaining life of the PFJ program.  At this time, staff estimates that 184 customers in the PFJ program served by the following local utilities could potentially be eligible for restitution (Con Edison – 53 customers; National Grid – 95 customers; Long Island Power Authority – 17 customers; New York State Electric & Gas (‘NYSEG’) – 17 customers and Rochester Gas and Electric (‘RGE’) – 2 customers).

 

Over the last several years, energy prices have stabilized so that there is little or no difference between the price of PFJ power and the power offered by the customer’s local utility.  As a result, staff estimates restitution payments for the remaining PFJ customers will not exceed $4 million for the period January 1, 2006 through May of this year. 

 

While the Trustees will not be asked for further authorization to make restitution payments within the $4 million cap, information about restitution payments will be made available to the Trustees when requested.

 

FISCAL INFORMATION

 

“Funding of restitution payments to the four companies listed in Exhibit ‘1b-A-1’ is not expected to exceed $98,000.  Payments would be made from the Operating Fund.  This is the tenth payment request to date, which, if approved, will bring the total approved for PFJ restitution payments to $7.6 million.  At this time, staff estimates that restitution payments to all remaining PFJ customers that subsequently are evaluated and determined to be due restitution will not exceed $4 million.

 

RECOMMENDATION

 

“The Director – Market Analysis and Administration recommends that the Trustees approve the payment of PFJ restitution to the customers listed in Exhibit ‘1b-A-1,’ and authorize prospectively, the payment of restitution to PFJ customers that subsequently are evaluated and determined to be due restitution in a total amount not to exceed $4 million.

               

“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 based on staff’s recommendation, it is hereby authorized that payments be made for Power for Jobs (“PFJ”) restitution payments as described in the foregoing report of the President and Chief Executive Officer in the aggregate amount of up to $98,000 for the companies listed in
Exhibit “1b-A-1;” and be it further

 

RESOLVED, That based on staff’s recommendation, it is hereby authorized that payments be made for PFJ restitution to PFJ customers that subsequently are evaluated and determined to be due restitution, as described in the foregoing report of the President and Chief Executive Officer, in an aggregate amount not to exceed $4 million; and be it further

 

RESOLVED, That it is hereby found that the foregoing amounts may properly be withdrawn from the Operating Fund to fund such payments; and
be it further

               

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

 

RESOLVED, That the  Senior Vice President – Marketing and Economic Development or his designee be, and hereby is, authorized to negotiate and execute any and all documents necessary or desirable to effectuate the foregoing, subject to the approval of the form thereof by the Acting General Counsel; 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.

 

 

c.                    Allocation of 3,070 kW of Hydropower  

 

This item was tabled.


 

d.                   St. Lawrence/Clark Energy Center – Microwave Communication System Upgrade – Increase in Capital
                Expenditure Authorization and Contract Award 

 

                                The President and Chief Executive Officer submitted the following report:

SUMMARY

 

“The Trustees are requested to approve an increase in capital expenditures in the amount of $1.117 million and to approve the award of a contract to Aviat U.S., Inc. (‘Aviat’) in the amount of $3,426,027 to upgrade the Microwave Communication System from the St. Lawrence/FDR Power Project (‘STL’) to the Frederick R. Clark Energy Center (‘CEC’), (the ‘Project’).  This additional expenditure authorization will bring the total authorized by the Trustees for the project from $4.683 million to $5.8 million. 

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.

“In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services or equipment purchase contracts in excess of $3 million requires the Trustees’ approval.

 

“The microwave communication system supports the operation of the Bulk Power System transmission lines that are routed from STL to the Marcy Switchyard at CEC and serves as a back-up communication ‘link’ for the relay protection and control systems.  The microwave communication system was built and commissioned in 1986; the equipment has reached the end of its operating life and spare parts are no longer available.  An upgraded digital microwave system would ensure system reliability, provide a more efficient communication medium for data and expand the Authority’s capabilities to implement future ‘Smart Grid’ technology.

 

“At their meeting of March 23, 2010, the Trustees approved capital expenditures of $4.683 million for the engineering, procurement, installation, testing and commissioning of the Project.

DISCUSSION

 

“The microwave communication system ‘link’ from STL to CEC contains four ‘repeater’ facilities.  These repeater facilities ensure that the data is properly transmitted over the distance between the STL and CEC facilities.  These repeater facilities are known as Belfort, Talcottville, Cooper Hill and Wilson Corners.

 

“The Project includes the replacement of all existing electronic equipment with ‘state-of-the-art’ hierarchical digital electronic equipment at STL, CEC and the four repeater facilities.  The equipment to be replaced would include antennas and elliptical cables, lightning protection, dehydration equipment and channelization equipment.  The Project includes the replacement of analog equipment serving the ‘spur link’ to the Adirondack substation.

 

“The work will be performed over a two-year period, with installation in 2011 and testing and commissioning in 2012.

 

“ The total estimated project cost to furnish and install an upgrade to the microwave communication system at STL, CEC and the four repeater facilities over this two-year period has increased by $1.117 million from $4.683 million to $5.8 million as follows:

 

Description

Previous  Authorized Amount

Current Request

Total  Authorized Amount

Engineering

$   420,000

$   105,000

$   525,000

Installation Contractors

  3,120,000

     959,000

  4,079,000

NYPA Installation Support

     300,000

 

     300,000

Project Mgt. & Const. Mgt.

     620,000

 

     620,000

Authority Indirect Expenses

     223,000

       53,000

     276,000

Total

$4,683,000

$1,117,000

$5,800,000

 

“This additional fund request results from increased scope as the design was refined, new batteries at several sites, a new tower at the Wilson Corners site, extra site work at Adirondack and the engagement of a new design consultant to finalize the engineering, as the original consultant ceased operations.

“The Authority issued an advertisement to procure bids for the procurement, installation, testing and commissioning of this project in the New York State Contract Reporter and bid packages were available as of April 28, 2010.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 44 firms, including those that may have responded to a notice in the New York State Contract Reporter.  The following firms submitted proposals for the options shown below, where Option 1 is to furnish and deliver the microwave equipment and components, Option 2 is for the Civil/Structural, Electrical and Mechanical Scope of Work to refurbish the sites of the repeater facilities and Option 3 is for the Scope of Work/Services required by Options 1 and 2 combined:

 



 

BIDDER

 

OPTION 1

 

OPTION 2

 

OPTION 3

             

Perras Excavating, Massena, NY

 

No bid

 

$879,000.00

 

No bid

Mosely Associates, Inc., Goleta, CA

 

$2,439,131.50

 

  See Note

 

$3,409,781.50

Aviat US, Inc., Santa Clara, CA

 

$2,449,885.00

 

  See Note

 

$3,308,195.00

             

Note:  Price included in Option 3.

 

“Authority staff performed an extensive evaluation of these proposals, including conducting post-bid meetings with the bidders, issuance of post-bid addenda and obtaining written clarifications to the Authority’s comments to further refine the bidders’ understanding of the technical and commercial requirements of the bidding documents.  The proposal from Mosely was determined to be non-compliant with the Authority’s technical specifications, as the equipment proposed did not meet the modulation and line rate required, the proposed system reliability was less than required, the proposed radio equipment did not meet the data-rate and bandwidth required and the company’s experience is with narrowband systems, not broadband microwave systems, as required by the Authority.  The proposal submitted by Perras for the site work, Option 2, was not further evaluated since Aviat’s inclusive pricing was lower.  Based on the contractor’s qualifications, experience and competitive pricing, Authority staff recommends the award of a contract to Aviat, the lowest-priced bidder, which is qualified to perform such services and meets the bid specification requirements, in the amount of $3,426,027, which includes an optional price of $31,824 to dispose of the existing batteries at the various facilities and an optional price of $86,008 for spare parts.

 

FISCAL INFORMATION

 

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

 

 

RECOMMENDATION

 

“The Senior Vice President – Power Supply Support Services, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Information Technology/Chief Information Officer, the Regional Manager – Northern New York and the Project Manager – Power Supply Support Services recommend that the Trustees approve the award of a contract to Aviat US, Inc., for $3,426,027 and authorize an increase in capital expenditures of $1.117 million, bringing the total authorized for the upgrade of the  microwave communication system to $5.8 million.

 

“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 Authority’s Expenditure Authorization Procedures, additional capital expenditures in the amount of $1.117 million are hereby authorized in accordance with and as recommended in the foregoing report of the President and Chief Executive Officer, in the amount and for the purposes listed below:

 

Capital

Previous  Authorized Amount

Current Request

Total  Authorized Amount

Engineering, Procurement,  Construction, Project Const. Mgt., Authority Direct & Indirect

$4,683,000

$1,117,000

$5,800,000

                                               

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 Aviat US, Inc., of Santa Clara, CA, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount listed below:

 

Contractor                                 Contract Approval

Aviat U.S., Inc.                                 

Santa Clara, CA                                 $3,426,027

 

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.

 


 

e.                    Procurement (Services) and Other 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 contracts listed in Exhibit ‘1e-A,’ as well as the continuation and funding of the procurement contracts listed in Exhibit ‘1e-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 $48,000 to $5 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 ‘1e-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 ‘1e-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:

Corporate Support Services

Corporate Support Services - Facility Management

“The two contracts with Bavier Design, LLC (‘Bavier’) and Environetics Group Architects, PC (‘Environetics’) (Q11-4927; PO# TBA) would provide for architectural services for the Clarence D. Rappleyea Building, as needed.  Services include, but are not limited to, reconfiguration /space planning services for Authority and tenant space in the Rappleyea Building, as well as the Authority’s power plant administrative facilities and visitors’ centers throughout New York State; architectural and interior design services, as needed;  preparation of construction documents and construction administration activities.  Architectural services are routinely used for the Rappleyea Building to ensure that the Authority is compliant with all applicable state and local codes for renovation projects and tenant build-outs. Such expertise is also used to maintain the Authority’s LEED-EB (Leadership in Energy and Environmental Design – Existing Building) Gold status.  To this end, bid documents were downloaded electronically from the Authority’s Procurement website by 71 firms, including those that may have responded to a notice in the New York State Contract Reporter; 9 proposals were received and evaluated. The cost of a typical project was also calculated using each bidder’s rates.  Based on the foregoing, staff recommends award of contracts to two firms:  Bavier and Environetics, the two lowest-priced evaluated bidders, which are qualified to perform such services and meet the bid requirements, including LEED accreditation and experience.  The award of contracts to two firms would benefit the Authority by ensuring sufficient coverage to support all such projects, accommodate tight schedules and multiple sites, as well as by fostering competitive pricing. The contracts would become effective on or about April 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 amount expected to be expended for the term of the contract, $375,000.

Corporate Support Services – Aviation and Travel Operations

“The contract with Turboprop East, Inc. (‘Turboprop’) (Q10-4902; PO# TBA) would provide for maintenance services for the Authority’s Beechcraft King Air 350 series aircraft, in order to ensure continued safe and reliable operation.  Services include scheduled inspections at prescribed intervals specified per the King Air series maintenance manual, unscheduled maintenance (including Aircraft On Ground field support), avionics installation, troubleshooting and repairs, as necessary, and in compliance with all applicable federal and state regulations and requirements, as well as industry standards.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 10 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 Turboprop, the lower-priced 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 April 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, $2,544,775.
 

Energy Services and Technology (‘ES&T’)

       Engineering and Design

“The contracts with Castle Power Solutions, LLC (‘Castle’), Eaton Corporation (‘Eaton’) and General Electric International Inc. (‘GEII’) (Q10-4885; PO#s TBA) would provide for power factor correction and power quality improvements for Energy Services Projects at Authority customers’ facilities, on an ‘as needed,’ project-by-project basis. Services include, but are not limited to, audits to evaluate the power system profile in order to identify the preferred solution; engineering services to design the improvements and furnishing and installing equipment to provide suitable correction, installation and commissioning in a turnkey project.  Such reactive power mitigation resulting from the installation of capacitors is expected to provide cost savings and improved power quality for Authority customers. To this end, bid documents were downloaded electronically from the Authority’s Procurement Web site by 66 firms, including those that may have responded to a notice in the New York State Contract Reporter. Three proposals were received and evaluated.  The bids were reviewed in detail and the cost of a typical project was also calculated using each bidder’s unit rates. Staff recommends award of contracts to all three firms: Castle, Eaton and GE, which are qualified to perform such services and meet the bid requirements. Although Castle is the lowest-priced bidder, staff recommends award of contracts to all three firms in order to provide sufficient resources to accommodate the potential volume and/or scheduling of work that may be requested by Authority customers, as well as to provide customers with product choices. The contracts would become effective on or about April 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, $5 million.  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.
 

Enterprise Shared Services (‘ESS’)

Information Technology

“In March 2009, the Authority acquired and implemented a suite of Sophos software products (under a New York State Office of General Services (“OGS”) State Contract with an authorized distributor, SHI International Corp.) to protect desktop computers and servers at all Authority sites from security intrusion.  The software enables the Authority to meet regulatory mandates established by New York State, the North American Electric Reliability Council (‘NERC’) and the Federal Energy Regulatory Commission (‘FERC’), as well as an internal study on network security and vulnerability.  In order to fulfill the terms and conditions of the vendor’s quoted discount, a contract was issued on February 23, 2011 to SHI International Corp. (‘SHI’) (Quote #4294911; PO# 4500200071) in accordance with the Authority’s Guidelines for Procurement Contracts and EAPs, subject to the Trustees’ subsequent approval as soon as practicable.  The subject contract would provide for updates, maintenance and technical support for the Sophos software product suite that protects the Authority against cyber network security intrusions. Currently such services are renewed annually.  Since the Authority anticipates long-term use of these products and related services, staff considers it prudent to enter into a multiyear contract for maintenance services. This would benefit the Authority by providing uninterrupted high-quality reliable service and would also result in significant savings of approximately 46% over a three-year term. Based on the foregoing, staff recommends the award of a contract to SHI, an OGS State Contract vendor.  The new contract would become effective on March 30, 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, $84,300.  It should be noted that SHI is a New York State-certified Minority Business Enterprise (‘MBE’).
 

Human Resources

Talent Development

“The contract with Development Dimensions International, Inc. (‘DDI’) (Q11-4943; PO# TBA) would provide for executive assessment services for two levels of Authority leadership (Mid-level and Business Unit) to measure the manager’s or executive’s performance against specific competencies, which can be used in evaluating the individual’s leadership skills and predicting future effectiveness.  Staff recommends that the subject award be made on a single-source basis, since DDI has a unique assessment methodology, which is widely recognized as the ‘gold standard’ in the assessment industry and involves role playing and videotaping.  The Authority has used this methodology consistently to assess many of its key executives and managers under a previous contract for such services, which was competitively bid.  Staff submits that it would not be prudent or practical to change assessment methodologies at this time and that it is in the best interests of the Authority to retain DDI’s services, in order to continue to provide consistency in comparing future assessments with those performed previously. The new contract would become effective on or about April 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 contract, $175,000.


Marketing & Economic Development (‘MED’)

 

Marketing Analysis & Administration

 

“The contract with Black & Veatch New York, LLP (‘Black & Veatch’) (Q10-4921; PO# TBA) would provide for general electric rate consulting services on behalf of the Authority.  Such services involve, but are not limited to, the following two general areas:  (1) rate development, rate design, rate evaluations and analyses (with respect to the sale of the Authority’s electric commodity) for the Authority’s customer sectors, including SENY governmental and business customers, as well as municipal and other customers throughout the State; and (2) general rate, pricing, power contract evaluation, market analysis and support services for the Authority.  To this end, bid documents were downloaded electronically from the Authority’s Procurement Web site by 72 firms, including those that may have responded to a notice in the New York State Contract Reporter; 6 proposals were received and evaluated on weighted criteria that included, but were not limited to, responsiveness and understanding of the work scope; soundness of the proposed methodology; breadth, depth, experience and expertise of the bidder’s team; quality and clarity of the proposal; references; compensation, etc.  Based on the foregoing, staff recommends award of a contract to Black & Veatch, the lowest-priced bidder as well as one of the most qualified.  The contract would become effective on or about April 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, $2 million.
 

Power Supply

“The contract with All State Fire Equipment of WNY (‘All State’) (6000118890; PO# TBA) would provide for inspection and testing services for fire protection systems at the Niagara Power Project, in accordance with all applicable codes.  Services include, but are not limited to, all labor, supervision, equipment and material to perform quarterly and annual tests and inspections of the Project’s fire protection systems, including semiannual inspection and testing of the fire suppression system for the ice breaker Latham.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 34 firms, including those that may have responded to a notice in the New York State Contract Reporter; 2 proposals were received and evaluated.  Staff recommends award of a contract to All State, the lower-priced bidder, which is qualified to perform such services and meets the bid requirements. The contract would become effective on or about April 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, $60,000.

“The contract with BIDCO Marine Group, Inc. (‘BIDCO’) (6000119132; PO# TBA) would provide for penstock inspections of generating units at the Niagara Power Project’s Robert Moses Plant (‘RMNPP’).  Services include, but are not limited to, all labor, supervision, technical expertise, equipment, tools and materials to perform all operations and activities associated with such inspections and services, including supplying videotapes /DVDs and inspection reports.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 34 firms, including those that may have responded to a notice in the New York State Contract Reporter; 3 proposals were received and evaluated.  Staff recommends award of a contract to BIDCO, the lowest-priced bidder, which is qualified to perform such services and meets the bid requirements. The contract would become effective on or about May 1, 2011 for an intended term of up to two years and eight months, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $100,000.

“Since 1991, the Authority has leased winter mooring space at the First Buffalo Marina (‘Marina’) for three of its vessels used to support critical ice boom operations.  In the spring of 2008, the Marina operator (Ganco, Inc.) placed the property on the market and was no longer willing to lease the mooring space to the Authority.  Ganco also refused the Authority’s offer to purchase only that portion of the property leased by the Authority for winter ice boom operations.  The Authority conducted an extensive search for alternative winter mooring sites and identified the Marina location as best suited for the Authority’s short- and long-term needs. At their meeting of June 29, 2010, the Trustees authorized the acquisition of the entire Marina site.  Since closing on the property on October 15, 2010, the Authority has administered contracts and collected fees for 2010-11 winter storage and 2011 summer slip rentals.  In November 2010, staff solicited proposals (Q10-4906) for the services of a qualified and experienced marina management company with the demonstrated knowledge and resources to operate, maintain and manage the Marina.  Bid documents were downloaded electronically from the Authority’s Procurement website by 34 firms, including those that may have responded to a notice in the New York State Contract Reporter; three proposals were received and evaluated. Based on a thorough review of each bidder’s proposal, including demonstrated knowledge, experience and capability to provide the required services, technical and safety considerations, as well as proposed compensation to the Authority, staff recommended award of a contract to Brand-On First Buffalo Marina Inc. (‘Brand-On’), which is qualified to perform such services, meets the bid requirements and offers the highest compensation / percentage of return to the Authority at 12.25% of gross receipts.  (Gross receipts shall mean the total amount received by or accruing to the Marina operator, its agents, employees and contractors by reason of the privileges granted under the contract, from any and all sales for cash or credit, for consumption, or use on or off the premises of any goods or services as outlined in the contract and approved by the Authority.)  The Authority would receive 12.25% of the revenue collected by Brand-On for the winter storage and summer slip rental contracts, as well as park and launch activities.  The Authority may also collect its share of the revenue received from any additional future Authority-approved services that may be offered at the Marina by the operator (e.g., concessions).  In addition, Brand-On proposed greater Marina improvements than the other bidders, including a new security system with surveillance cameras, upgrades to the restroom, shower and office facilities, as well as new landscaping.  Brand-On will fund such enhancements as part of its operating costs.  Due to the need to commence services, the contract with Brand-On (PO# 4500200149) became effective on March 1, 2011, in accordance with the Authority’s Guidelines for Procurement Contracts and EAPs and subject to subsequent Trustees’ approval as soon as practicable.  Such interim approval to award was obtained in order to allow Brand-On sufficient time to become familiar with the Marina facilities and responsibilities, as well as for the timely installation of docks and launching of vessels for the summer season, which commences on April 15.  The intended term of the contract is up to five years, subject to the Trustees’ approval, which is hereby requested.  No funding is requested since this is a revenue-generating contract.  While not presently certified, Brand-On is a Woman-owned Business, and has committed to obtaining New York State certification as such during the contract term.

“The contract with Casella Waste Service (‘Casella’) (6000119914; PO# 4600002376) would provide for refuse removal and disposal services for the St. Lawrence/FDR Power Project. Services include furnishing all necessary containers for refuse, recyclables, wood and insulators, as needed, and include the container, hauling, landfill and disposal fees.  Bid documents were downloaded electronically from the Authority’s Procurement website by 11 firms, including those that may have responded to a notice in the New York State Contract Reporter; one proposal was received and evaluated.  Staff recommends award of a contract to Casella, 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. (Reasons for the lack of other responses include, but are not limited to, the work was not in the scope of their services or was too small, lack of geographic proximity, or the bid documents were downloaded for information purposes only.)  The new contract would become effective on or about April 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, $400,000.

“The contract with General Electric International Inc. (‘GEII’) (6000117383; PO# TBA) would provide for technical assistance services, on an ‘as needed’ basis, to support the Authority’s 500 MW Plant. Although the existing contract for such services was awarded on a sole source basis, staff attempted to identify additional / new firms that would be able to perform such services. To this end, bid documents were downloaded electronically from the Authority’s Procurement website by 95 firms, including those that may have responded to a notice in the New York State Contract Reporter; one proposal was received and evaluated.  A crucial component of the work scope is the ability to submit technical questions for engineering review to the Power Answer Center (‘PAC’) and execute the recommendations of such PAC cases, which are proprietary to GE.  Multiple vendors were unable to fulfill this work scope requirement and others downloaded the bid documents for information purposes only.  GEII is the original equipment manufacturer and, as such, is uniquely qualified to provide such services. Based on the foregoing, staff recommends award of a contract to GEII, which is qualified to perform such services, meets the bid requirements and has provided satisfactory services under an existing contract for such work. Rates for the field engineer and specialty rates will be based on GE’s published rates in effect at the time of service. The new contract would become effective on or about April 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, $300,000.

“The contract with Hoerbiger Service Inc. (‘Hoerbiger’) (6000118082; PO# TBA) would provide for maintenance services for reciprocating gas compressors serving gas turbines at the Richard M. Flynn and the Small Clean Power Plants.  Services include, but are not limited to, annual inspections / maintenance and technical services for each of the units.  Bid documents were downloaded electronically from the Authority’s Procurement website by 17 firms, including those that may have responded to a notice in the New York State Contract Reporter; one proposal was received and evaluated.  The principal reasons for the lack of other responses include, but are not limited to: work scope was too technical, they did not have the capability or expertise to perform such services, they were unable to perform the required work and/or to support emergent issues on a 24/7 basis or they downloaded documents for information purposes only.  Staff recommends award of a contract to Hoerbiger, which is qualified to perform such services, meets the bid requirements and has provided satisfactory services for such work in the past.  Hoerbiger has both the expertise and the machine shop capabilities to handle the repairs that the Authority would require. The contract would become effective on or about April 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, $600,000.

“The contract with MOST Healthcare Systems, Inc. (‘MOST’) (6000118309; PO# TBA) would provide for on-site physical examinations and other medical services, including respirator fit testing, for approximately 50 employees at the 500 MW Plant, in accordance with all applicable safety and health standards.  Such examinations will be performed on-site in a self-contained mobile medical testing facility (trailer) to be provided by the aforementioned firm. Bid documents were downloaded electronically from the Authority’s Procurement website by 13 firms, including those that may have responded to a notice in the New York State Contract Reporter; two proposals were received and evaluated.  Staff recommends award of a contract to MOST, the lower-priced 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 contract would become effective on or about April 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, $48,000.

“The contract with Test Products, Inc. (‘TPI’) (Q11-4937; PO# TBA) would provide for capacity testing of station batteries and associated chargers located in power generating stations and switching stations owned and/or operated by the Authority.  The battery systems to be tested are multi-cell systems of 25-250 volts for use as an emergency direct current power supply; capacities range up to 3,900 amp-hour at the eight-hour rate.  Such testing is performed to determine the physical, chemical and electrical condition of the equipment, as well as the available capacity of the batteries.  Bid documents were downloaded electronically from the Authority’s Procurement Web site by 19 firms, including those that may have responded to a notice in the New York State Contract Reporter; three proposals were received and evaluated.  The proposal submitted by the lowest-priced bidder did not fully meet the requirements of the specification, as more fully set forth in the Award Recommendation memorandum.  Staff therefore recommends award of a contract to TPI, the next lowest-priced bidder, which is more qualified to perform such services, demonstrated full compliance with the technical specifications and other bid requirements, and has provided satisfactory services under an existing contract for such work.  The new contract would become effective on or about April 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, $325,000.

“The contract with Thinking Outside the Square, Inc. (‘TOTS’) (6000119002; PO# TBA) would provide for maintenance and repair of displays and exhibits at the Niagara Power Project’s Power Vista Visitors’ Center.  Services consist of providing all labor, supervision, equipment and supplies to maintain and repair displays, and include, but are not limited to, lighting, audio, carpentry, electrical and mechanical work, graphic design and fabrication, to be performed on a scheduled or ‘as needed’ basis, as well as pickup, delivery and installation, as may be required.  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; two proposals were received and evaluated.  Staff recommends award of a contract to TOTS, the lower-priced bidder, which is qualified to perform such services and meets the bid requirements. The contract would become effective on or about April 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, $100,000.

“In order for the Authority to ensure compliance by its vendors / suppliers / contractors with its technical specifications, as well as all applicable ISO quality requirements, design drawings, industry codes and standards, the Authority retains the temporary services of experienced Quality Assurance (‘QA’) engineers / inspectors and metallurgists for assignments on an on-call, ‘as needed’ basis.  Such QA services include, but are not limited to, monitoring, surveillance and inspection of field work performed by contractors at Authority facilities or manufacturers’ / vendors’ activities at their respective factories / facilities worldwide, in order to ensure that purchased equipment, components, materials or systems and/or the installation thereof meets specifications.  Services may also include metallurgical evaluation of welding, corrosion, coatings, failure mechanism and prevention. To this end, bid documents were downloaded electronically from the Authority’s Procurement website by 97 firms, including those that may have responded to a notice in the New York State Contract Reporter; 9 proposals were received and evaluated.  Staff recommends award of contracts to four firms, ASR International Corp. (‘ASR’), Bureau Veritas North America, Inc. (‘Bureau Veritas’), Procurement Services Consulting, Inc. (‘PSCI’) and Quality Inspection Services, Inc.  (‘QISI’), a wholly owned subsidiary of APPLUS RTD (Q10-4925; PO#s TBA), the lowest-priced bidders, which are qualified to perform such services and meet the bid requirements. The award of contracts to four firms would enable the Authority to benefit from their respective complementary strengths and areas of expertise, as well as to utilize the lowest-cost provider for the appropriate services required.  The contracts would become effective on or about April 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, $2 million.  Such contracts will be closely monitored for utilization levels, available approved funding and combined total expenditures.  It should be noted that ASR is a NYS-certified Minority Business Enterprise (‘MBE’).
 

Contract Extensions and/or Additional Funding:

Power Supply

“At their meeting of February 24, 2004, the Trustees approved the award of a competitively bid contract to Alstom Power Inc. (‘Alstom’), in the amount of $25.1 million, for the procurement of a second set of eight turbines and other replacement equipment for the Allis-Chalmers (‘AC’) units, as part of the Life Extension and Modernization (‘LEM’) Program at the St. Lawrence/FDR Power Project (‘St. Lawrence’). Such Work was separated into two contracts: Contract #4600001236 for the procurement of major components, including fabrication of new turbine runners and rehabilitation of head covers at Alstom’s facility and Contract #4600001237 for labor and materials required to refurbish the existing AC units at the St. Lawrence facility, e.g., field machining the discharge ring.  Additional funding was subsequently authorized by the Trustees, most recently at their meeting of September 23, 2008, for turbine overhaul and associated work under the subject contracts, increasing the aggregate compensation ceiling to $33.3 million. Alstom has been successfully furnishing and rehabilitating the units in accordance with the LEM schedule, currently expected to be completed by the end of 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:  1) lead and PCB paint abatement of the intermediate and outer head covers at Alstom’s facilities; 2) additional shop work related to additional stiffeners on the outer and intermediate head covers, turbine guide bearing support, turbine shaft, servo motors and wicket gate levers at Alstom’s facilities; and 3) additional site work related to Non-Destructive Testing and weld repair of the bottom ring, the addition of 30 stiffeners to the stayring, stayring flange repairs, wall repair plates for the discharge ring and stayring flange weld build-up. Staff estimates that an additional $4.5 million will be required to correct as-found conditions with the turbine components for the balance of LEM and to accommodate the aforementioned additional required scope.  The Trustees are requested to approve the additional funding requested, increasing the aggregate compensation ceiling to $37.8 million. It should be noted that this amount is within the previously approved Capital Expenditure Authorization Request (‘CEAR’).

“Blueback herring has been identified by the U.S. Fish and Wildlife Service (‘FWS’), the New York State Department of Environmental Conservation (‘DEC’) and the Federal Energy Regulatory Commission (‘FERC’) as the key fish species requiring downstream passage protection at the Crescent Hydroelectric Project (‘Project’). Pursuant to the FERC Orders of January and July 2007, the Authority was mandated to install and test an acoustic fish deterrence system at the Project. On June 29, 2010, the Authority awarded a competitively bid contract to Normandeau Associates, Inc. (4500190871), for a one-year term and an approved amount of $425,000, to conduct a hydroacoustic study at the Project.  The purpose of the study was to ascertain the effectiveness of the reconfigured fish deterrence system on juvenile blueback herring (‘JBBH’) as they out-migrate.  Near-drought conditions followed by a major flood event in 2010 precluded the collection of sufficient useful data to assess the effectiveness of the acoustic fish deterrence system and resulted in cessation of the study; the appropriate regulatory agencies were duly notified.  In January 2011, FERC issued a letter requiring that a new study be performed in 2011, in accordance with FERC’s 2007 Orders.  A two-year extension is now requested to comply with this mandate and to allow Authority staff and contractors sufficient time to ensure the acoustic deterrence system is performing optimally.  Preliminary information collected in 2010 suggests that the system may need to be adjusted to more effectively inhibit JBBH from approaching the Project.  Furthermore, depending upon the results of a separate contract to install, maintain and recommend improvements to the current system, Authority staff may request that Normandeau delay the hydroacoustic study until 2012, subject to approval by the appropriate regulatory agencies.  The current contract amount is $424,291; staff anticipates that an additional $425,000 will be required for the extended term.  The Trustees are requested to approve the extension of the subject contract through June 28, 2013, as well as the additional funding requested, thereby increasing the approved compensation ceiling to $850,000.

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 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 Vice President – Information Technology and Chief Information Officer, 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 contracts to the companies listed in Exhibit ‘1e-A,’ and the extension and/or additional funding of the procurement contracts listed in Exhibit ‘1e-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 Exhibit “1e-A,” attached hereto, are hereby approved for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the contracts listed in Exhibit “1e-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.


 

f.                    Annual Review and Approval of Guidelines and Procedures for and Annual Report of  the Disposal of Personal Property

 

                The President and Chief Executive Officer submitted the following report:

 

 

SUMMARY

 

“The Trustees are requested to review and approve the Guidelines and Procedures for the Disposal of Personal Property (‘Personal Property Guidelines’), which address the disposal of Authority-owned materials, tools, equipment and vehicles with a value in excess of $5,000, in compliance with the Public Authorities Accountability Act (‘PAAA’) of 2005 and the Public Authorities Law (‘PAL’), as set forth in Exhibit ‘1f-A’ and attached hereto.  The Trustees are also requested to review and approve the 2010 Annual Report of the Disposal of Personal Property, as set forth in Exhibit ‘1f-A-1’ and attached hereto.

 

 

BACKGROUND

 

“On January 13, 2006, Governor Pataki signed the PAAA into law, codifying the Model Governance Principles established for public authorities in 2004 by the Governor’s Advisory Committee on Authority Governance.  Among its provisions, the PAAA established rules for the disposal of public authority personal property.  The law also required each authority to draft guidelines consistent with the legislation dealing with these issues, to review and approve such guidelines annually and to prepare an annual report of the disposal of personal property (including the full description, name of the purchaser and price received for all such property disposed of by the authority during such period).  Such Guidelines were initially approved by the Trustees at their meeting of March 28, 2006 and have been reviewed annually and amended as deemed advisable and necessary since then.

 

“Chapter 506 of the Laws of 2009 made substantial amendments to the PAL, including changes to certain procedures governing the disposal of personal property that were incorporated in the Authority’s Personal Property Guidelines.  Such Guidelines, as last amended and presented to the Authority’s Governance Committee on February 23, 2010, were reviewed and approved by the full Board of Trustees at their meeting of the same date.

 

 

DISCUSSION

 

“The Personal Property Guidelines set forth the methodology detailing the Authority’s policy regarding the use, award, monitoring and reporting of contracts for the disposal of personal property and designate a Contracting Officer responsible for the Authority’s compliance with, and enforcement of, such Guidelines.

 

“Staff has reviewed the Personal Property Guidelines and recommends additional changes to make them more consistent with the law, to clarify or improve the Authority’s disposal process, and also to reflect titular or organizational changes in the Authority.  The most significant of such changes, as reviewed by the Governance Committee on March 14, 2011, are highlighted below:

 

 

 

 

 

 

 

 

“Such changes, as well as a number of non-substantive and editorial or stylistic changes, were made to the Guidelines, as set forth in the redlined copy attached hereto as Exhibit ‘1f-A.’

 

“After being reviewed and approved annually by the Trustees on or before the 31st day of March, the Guidelines and corresponding Annual Report must be filed with the State Comptroller, the Director of the Division of the Budget, the Commissioner of General Services, the State Legislature and the Authorities Budget Office and posted on the Authority’s internet website.

 

 

FISCAL INFORMATION

 

“There will be no financial impact on the Authority.

 

 

RECOMMENDATION

 

“The Vice President – Procurement and the Vice President – Internal Audits recommend that the Trustees approve the Guidelines and Procedures for the Disposal of Personal Property for the disposition of Authority-owned materials, tools, equipment, and vehicles with a value in excess $5,000, and the corresponding 2010 Annual Report of the Disposal of Personal Property, as set forth in Exhibits ‘1f-A’ and ‘1f-A-1,’ respectively.

 

“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 provisions of the Public Authorities Accountability Act of 2005 and the Public Authorities Law, the Authority hereby reviews and approves the Guidelines and Procedures for the Disposal of Personal Property, as set forth in Exhibit “1f-A” and attached hereto; and be it further

 

RESOLVED, That pursuant to the provisions of the Public Authorities Accountability Act of 2005 and the Public Authorities Law, the Authority hereby reviews and approves the 2010 Annual Report for the Disposal of Personal Property, as set forth in Exhibit “1f-A-1” and attached hereto; 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.


 

g.                   2010 Annual Report of Procurement Contracts, Guidelines for Procurement Contracts and Annual  Review of Open Procurement Service Contracts   

                       

 

The President and Chief Executive Officer submitted the following report:

 

 

SUMMARY

 

                “The Trustees are requested to approve the 2010 Annual Report of Procurement Contracts (‘Annual Report’) (Exhibit ‘1g-A-3’) and the Guidelines for Procurement Contracts (‘Guidelines’) (Exhibit ‘1g-A-2’) and to review open service contracts exceeding one year that were active in 2010 as detailed in the Annual Report (Exhibit ‘1g-A-3’).  An Executive Summary is set forth

in Exhibit ‘1g-A-1.’

 

 

BACKGROUND

 

                “Section 2879 of the Public Authorities Law (‘PAL’) governs the administration and award of procurement contracts equal to or greater than $5,000.  Section 2879 of the PAL requires public authorities to adopt comprehensive guidelines detailing their operative policy and instructions concerning the use, awarding, monitoring and reporting of procurement contracts.  The Authority’s Guidelines were adopted by the Trustees at their meeting of October 31, 1989 and were implemented as of January 1, 1990.  The Guidelines have been amended as deemed advisable and necessary, and reviewed and approved annually since that date.  The current Guidelines were last approved by the Trustees at their meeting of February 23, 2010.

 

“Section 2879 of the PAL also requires authorities to review and approve such guidelines annually and to file a report regarding procurement contracts with the Director of the Division of the Budget, the Department of Audit and Control, the Department of Economic Development, the Senate Finance Committee, the Assembly Ways and Means Committee and the Authorities Budget Office.  The Annual Report must include a copy of the Authority’s current Guidelines, details concerning any changes to the Guidelines during the year and particular information concerning procurement contracts.  For each procurement contract included in the report, the following information must be identified:

 

[A] listing of all procurement contracts entered into [by the Authority], all contracts entered into with New York State business enterprises and the subject matter and value thereof, all contracts entered into with foreign business enterprises, and the subject matter and value thereof, the selection process used to select such contractors, all procurement contracts which were exempt from the publication requirements of article four-C of the economic development law, the basis for any such exemption and the status of existing procurement contracts.

 

                “Lastly, Section 2879 of the PAL requires an annual review by the Trustees of open service contracts exceeding one year.  Those long-term service contracts exceeding one year and awarded after January 1, 1990 are also included in the Annual Report.

 

 

DISCUSSION

 

                “The 2010 Annual Report is attached for the Trustees’ review and approval (Exhibit

‘1g-A-3’).  The Annual Report reflects activity for all procurement contracts equal to or greater than $5,000, as identified by the Authority’s SAP computer system, that were open, closed or awarded in 2010, including contracts awarded in 1990 through 2010 that were completed in 2010 or were extended into 2011 and beyond.  In addition, fossil fuels transactions reported by the Fuels Planning and Operations group and financial-related services reported by Corporate Finance (of the Energy Resource Management and Business Services Business Units, respectively), are included in the Annual Report of Procurement Contracts.  All additional information required by the statute is also included.  The Trustees are requested to approve the attached Annual Report pursuant to Section 2879 of the PAL prior to submittal thereof to the Director of the Division of the Budget, the Department of Audit and Control, the Department of Economic Development, the Senate Finance Committee, the Assembly Ways and Means Committee and the Authorities Budget Office.

 

                “A copy of the Guidelines effective March 31, 2011 (Exhibit ‘1g-A-2’) is attached to the Annual Report.  These Guidelines are amended in accordance with recently enacted provisions of Sections 2879 and 2879-a of the PAL, as further set forth in Exhibit ‘1g-A-1.’

 

“The Guidelines generally describe the Authority’s process for soliciting proposals and awarding contracts.  Topics detailed in the Guidelines include solicitation requirements, evaluation criteria, contract award process, contract provisions, change orders, Minority/Women Business Enterprise (‘M/WBE’) requirements, employment of former officers and reporting requirements.

 

RECOMMENDATION

 

                “The Vice President – Procurement recommends that the Trustees approve the 2010 Annual Report of Procurement Contracts, the Guidelines for Procurement Contracts and the review of open service contracts as attached hereto in Exhibits ‘1g-A-1’ through ‘1g-A-3.’

 

“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 Section 2879 of the Public Authorities Law and the Authority’s Procurement Guidelines, the Annual Report of Procurement Contracts, as listed in Exhibit “1g-A-3,” and the Guidelines for the use, awarding, monitoring and reporting of Procurement Contracts (Exhibit “1g-A-2”), as amended and attached hereto, be, and hereby are, approved; and be it further

 

RESOLVED, That the open service contracts exceeding one year be, and hereby are, reviewed and approved; 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.

 


 

h.                   Annual Review and Approval of Guidelines and Procedures for the Disposal of Real Property, Guidelines and Procedures for the Acquisition of

                Real Property and Annual Report for the Disposal of Real Property   

                                   

The President and Chief Executive Officer submitted the following report:

 

 

SUMMARY

“The Trustees are requested to review and approve the following, which comply with the requirements of the Public Authorities Accountability Act of 2005 (‘PAAA’) as amended by the Public Authorities Reform Act, Chapter 506 of the Laws of 2009:  (1) 2011 Guidelines and Procedures for the Disposal of Real Property (‘Real Property Disposal Guidelines’) for transfers of land or interests in land; and (2) 2011 Guidelines and Procedures for the Acquisition of Real Property (‘Real Property Acquisition Guidelines’).  The Guidelines are set forth in Exhibits ‘1h-A’ and ‘1h-B’ attached hereto.  In addition, the Trustees are also requested to review and approve the 2010 Annual Report of the Disposal of Real Property set forth in Exhibit ‘1h-C’ attached hereto.
 

BACKGROUND

“On January 13, 2006, Governor Pataki signed the PAAA into law, codifying the Model Governance Principles established for public authorities in 2004 by the Governor’s Advisory Committee on Authority Governance.  The PAAA was subsequently amended by the Public Authorities Reform Act (Chapter 506 of the Laws of 2009) which Governor Paterson signed into law on December 11, 2009.  Among its provisions, the PAAA established rules for the disposal and acquisition of real property owned by public authorities.  In addition to requiring each authority to draft and annually review and approve guidelines consistent with the legislation, each authority must also prepare an annual report of all real property of such authority having an estimated fair market value in excess of fifteen thousand dollars that the authority acquires or disposes of during such period.  The report shall contain the price received or paid by the authority and the name of the purchaser or seller for all such property sold or bought by the authority during such period.
 

DISCUSSION

“The 2011 Real Property Disposal Guidelines and the 2011 Real Property Acquisition Guidelines set forth the methodology detailing the Authority’s policy regarding the use, award, monitoring and reporting of contracts for the disposal and acquisition of real property and designate a Contracting Officer responsible for the Authority’s compliance with, and enforcement of, such Guidelines.  At their meeting of February 23, 2010, the Trustees reviewed and approved the Authority’s 2010 Guidelines and Procedures for the Disposal of Real Property (Real Property Disposal Guidelines) and the 2010 Guidelines and Procedures for the Acquisition of Real Property (Real Property Acquisitions Guidelines).  The only substantive change in the 2011 Guidelines is a title change, which reflects operational changes made within the past year. The Vice President – Enterprise Shared Services is named as the Authority’s contracting officer in place of the Senior Vice President – Enterprise Shared Services (a position that no longer exists).

“The Real Property Disposal Report lists the real property disposal transactions conducted during the reporting period having an estimated fair market value in excess of $15,000, including a description of the property, the purchaser’s name and the price received by the Authority, as required by New York Public Authorities Law §2800.  The Real Property Acquisition Report lists the real property acquisition transactions conducted during the reporting period having an estimated fair market value in excess of $15,000, including a description of the property, the seller’s name and the price received by the Authority, as required by New York Public Authorities Law §2800. 

 

“These acquisitions and dispositions were among those reviewed and approved by the Authority’s Governance Committee at their meeting of March 14, 2010.  The Trustees are now requested to review and approve the Authority’s 2010 Annual Report of the Disposal of Real Property and the Authority’s 2010 Annual Report of the Acquisition of Real Property.

 

 “The 2011 Real Property Disposal Guidelines and the 2011 Real Property Acquisition Guidelines, if approved, will be posted on the Authority’s internet website.  On or before the 31st day of March, the Real Property Disposal Guidelines, the Real Property Acquisition Guidelines and the corresponding 2010 Annual Reports, as reviewed and approved by the Trustees, will be filed with the State Comptroller, the Director of the Budget, the Commissioner of General Services, the State Legislature and the Authorities Budget Office.  The 2010 Annual Reports will also be posted on the Authority’s internet website.


 

FISCAL INFORMATION

 

“There will be no financial impact on the Authority.
 

 

RECOMMENDATION

“The Vice President – Enterprise Shared Services and the Director of Real Estate recommend that the Trustees approve the amended Guidelines and Procedures for the Disposal of Real Property, the amended Guidelines and Procedures for the Acquisition of Real Property and the 2010 Annual Report of the Disposal of Real Property as set forth in the attached 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 provisions of the Public Authorities Accountability Act of 2005, as amended by the Public Authorities Reform Act, Chapter 506 of the Laws of 2009, the Authority hereby reviews and approves the 2011 Guidelines and Procedures for the Disposal of Real Property and the 2011 Guidelines and Procedures for the Acquisition of Real Property as set forth in Exhibits “1h-A” and “1h-B” attached hereto; and be it further

 

RESOLVED, That pursuant to the provisions of the Public Authorities Accountability Act of 2005, as amended by the Public Authorities Reform Act, Chapter 506 of the Laws of 2009, the Authority hereby reviews and approves the 2010 Annual Report for the Disposal of Real Property as set forth in Exhibit “1h-C” attached hereto; and be it further

 

RESOLVED, That Authority staff may take any and all steps necessary or convenient to implement such Guidelines; 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.


 

 

i.                     Annual Review and Approval of Certain Authority Policies

                                 

The President and Chief Executive Officer submitted the following report:


 

SUMMARY

 

                “The Trustees are requested to approve certain Authority policies as required by Section 2824 of the Public Authorities Law and Section 2 of Article II of the Authority’s By-laws.

 

                “The Trustees are also requested to delegate to the President and Chief Executive Officer the authority to modify these policies, as necessary, except in the event that any powers, duties or obligations of the Trustees would be affected by such modification.
 

 

BACKGROUND AND DISCUSSION

 

                “Section 2824 of the Public Authorities Law requires the Authority’s Trustees to, among other things, establish policies regarding the payment of salary, compensation and reimbursements to, and establish rules for the time and attendance of, the chief executive and senior management; and Section 2 of the Authority’s By-laws requires the Authority’s Trustees to review and approve annually the policies and procedures governing: (i) the salary, (ii) compensation, (iii) benefits and (iv) time and attendance of the chief executive and senior management.

 

                “The Authority’s policies relating to salary, compensation, benefits and time and attendance of its employees, inclusive of the chief executive and all senior management, are attached as Exhibits ‘1i-A’ through ‘1i-L’ and respectively entitled:

 

A.            Recruitment and Job Posting (EP 1.2), last revised 1/13/11;

B.            Salary Administration Policy (EP 2.1), last revised 8/18/10;

C.            Salaried Non-Exempt and Facility-Based Exempt Overtime (EP 2.4), last revised 3/23/11;

D.            Variable Pay Plan (EP 2.6), Deleted 7/20/10;

E.            Employee Benefits Eligibility (EP 3.1), last revised 7/15/09;

F.             Reimbursement of Employee Meal Costs (CAP 1.5), last revised 2/25/10;

G.            Attendance & Flexible Hours (EP 4.6), last revised 12/1/09;

H.            Vacation (EP 3.2), last revised 5/13/09;

I.             FMLA (EP 3.3), last revised 5/19/10;

J.             Sick Time (EP 3.9), last revised 2/20/09;

K.            Relocation Benefits for New and Transferred Employees (EP 3.8), last revised 1/1/10; and

L.            Travel (CP 2-1), last revised11/15/06.
 

 

RECOMMENDATION

 

                “It is recommended that the Trustees approve the Authority’s policies related to salary, compensation, benefits and time and attendance, which are applicable to all Authority employees, including the chief executive and senior management.  It is further recommended that the Trustees delegate to the President and Chief Executive Officer the authority to modify these policies, as necessary, except in the event that any powers, duties or obligations of the Trustees would be affected by such modification.

 

                “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 Section 2824 of the Public Authorities Law and Section 2 of Article II of the Authority’s By-laws, the below-listed policies of the Authority relating to salary, compensation, benefits and time and attendance of its employees, including the chief executive and senior management, are hereby approved:

 

A.    Recruitment and Job Posting (EP 1.2), last revised 1/13/11;

B.    Salary Administration Policy (EP 2.1), last revised 8/18/10;

C.    Salaried Non-Exempt and Facility-Based Exempt Overtime (EP 2.4), last revised 3/23/11;

D.    Variable Pay Plan (EP 2.6), Deleted 7/20/10;

E.    Employee Benefits Eligibility (EP 3.1), last revised 7/15/09;

F.    Reimbursement of Employee Meal Costs (CAP 1.5), last revised 2/25/10;

G.    Attendance & Flexible Hours (EP 4.6), last revised 12/1/09;

H.    Vacation (EP 3.2), last revised 5/13/09;

I.     FMLA (EP 3.3), last revised 5/19/10;

J.     Sick Time (EP 3.9), last revised 2/20/09;

K.    Relocation Benefits for New and Transferred Employees (EP 3.8), last revised 1/1/10; and

L.    Travel (CP 2-1), last revised11/15/06.

                                         

                                AND BE IT FURTHER RESOLVED, That the President and Chief Executive Officer is authorized to modify the foregoing policies, as necessary, except in the event that any powers, duties or obligations of the Trustees would be affected by such modification; 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.


 

j.                     Annual Review and Approval of Guidelines for the Investment of Funds and 2010 Annual Report on Investment of Authority Funds 

 

                                 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to review and approve the attached 2010 Annual Report on Investment of Authority Funds which includes the Guidelines for the Investment
of Funds (Exhibit ‘1j-A’).
 

 

 BACKGROUND

 

                “Section 2925 of the Public Authorities Law requires the review and approval of an annual report on investments.  Pursuant to the statute, the attached report includes Investment Guidelines that set standards for the management and control of the Authority’s investments; total investment income; a statement of fees paid for investment management services; the results of an independent audit; a detailed inventory report for each of the Authority’s nine portfolios as of December 31, 2010; and a summary of transactions with brokers, dealers and banks.  The approved annual report is filed with the State Division of the Budget, with copies to the Office of the State Comptroller, the Senate Finance Committee and the Assembly Ways and Means Committee.  The report is also available to the public upon written reasonable request. 

 
 

DISCUSSION

 

                “In 2010, the Authority’s investment portfolios, exclusive of the separately managed Other Post-Employment Benefits Trust Fund and Nuclear Decommissioning Trust Fund, averaged $1.05 billion with a December 31, 2010 cost of $1.226 billion and market value of $1.249 billion, representing a positive mark-to-market of $23.05 million.  At year-end, $1.07 billion in cash and investments was held in the Authority’s Operating Fund.  The Operating Fund was created by the Authority’s General Resolution authorizing Revenue Obligations adopted on February 24, 1998.  A number of internal reserves have been established within the Operating Fund, as follows (year end balances noted in parentheses):

 

·         Debt Service Reserve ($80 million) – The Debt Service Reserve is funded monthly to ensure that sufficient amounts are available to pay debt service obligations when due.  The Authority’s scheduled principal and interest payments total approximately $180 million per year, with principal payment dates set each February and November.  

 

·         Energy Hedging/Fuel Reserve ($71 million) – This Reserve was established to have funds available for use as collateral that may be required to support the Authority’s authorized fuel and energy hedging transactions and to maintain funds to match a federal obligation to pay for the processing and final disposition of spent nuclear fuel burned by the Authority when it owned the Indian Point #3 and James A. FitzPatrick nuclear plants.  On February 3, 2009, the Trustees approved the temporary transfer of $215 million held in the Energy Hedging/Fuel Reserve for the spent fuel obligation to the State of New York (‘State’) to assist with the State’s budgetary deficits.  The temporary asset transfer was completed on February 25, 2009 and is in accordance with the terms and conditions of a Memorandum of Understanding between the State and the Authority.  The December 31, 2010 spent fuel obligation was $216 million.

 

·         Capital Project Reserve ($617 million) – This amount is being set aside to partially fund any major new investments in energy infrastructure by the Authority.  In order to minimize customer costs, maintain the Authority’s financial metrics and maintain ready access to the capital markets, it has been determined that the next major investment should be financed with a portion funded by debt and a portion funded by Authority cash or, in effect, its ‘equity.’  This Reserve has been established to provide this equity.  On February 3, 2009, the Trustees approved a temporary transfer of $103 million from the Capital Project Reserve to the State to assist with the State’s budgetary deficits and reaffirmed the transfer on July 28, 2009.   The temporary asset transfer was completed in September 2009 and is in accordance with the terms and conditions of a Memorandum of Understanding between the State and the Authority.   

 

·            Operating Reserve ($301 million) – The Operating Reserve includes a reserve for working capital and emergency repairs to the Authority’s projects.  The Authority’s Trustees have established a minimum reserve amount of $175 million for this purpose and funds cannot be released for ‘any lawful corporate purpose’ (pursuant to Section 503(1)(e) of the Bond Resolution) unless this minimum reserve level is satisfied.  The December 31, 2010 Operating Reserve of $301 million reflects this $175 million minimum, plus the amount staff deems prudent to provide for uncertainties in cash flows.   

 

“In addition to the Operating Fund, as of December 31, 2010, the Authority separately held a total of $167 million from the proceeds of bond and note issuances in its Energy Services, Note Debt Reserve and Construction portfolios.  These funds are earmarked for construction projects currently under way, such as the St. Lawrence Life Extension and Modernization Project and various Energy Services initiatives.

 

“In 2010 and 2009, the Authority’s portfolios earned approximately $30 million and $38 million in investment income, respectively.  The decrease in investment earnings is primarily due to the Federal Reserve’s continued accommodative monetary policy aimed at stimulating economic growth.  The policy has resulted in historically low interest rates.  In 2010, the Authority’s portfolios had an average yield of 2.79%, exceeding the Authority’s targeted performance by 13 basis points (13/100 of 1%).  Targeted performance for 2010 was the three-year rolling average yield of the two-year Treasury note with an average added yield of 93 basis points.

 

                “As of December 31, 2010, the portfolio was comprised of various government-sponsored agency securities (80.7%), municipal securities (9.1%), mortgages guaranteed by the U. S. government (5.9%) and certificates of deposit and repurchase agreements (4.3%).
 

 

Other Post-Employment Benefits Trust

 

“The Authority’s Other Post-Employment Benefits Trust (‘OPEB Trust’) was established in 2007 as authorized by the Authority’s Trustees at their December 19, 2006 meeting to provide for medical, prescription drug, life and other long-term care benefits offered by the Authority for retirees and eligible beneficiaries.  The OPEB Trust allows for investments in a diversified portfolio of assets, including domestic and international equity securities, fixed-income securities, public Real Estate Investment Trusts and a U. S. Treasury Money Market fund.  During 2007 and 2008, the Authority deposited a total of $225 million into the OPEB Trust to partially fund its actuarial accrued liability which, at December 31, 2010, was approximately $419 million. 

 

                “As of December 31, 2010, the OPEB Trust’s market value was approximately $240 million, representing a gain of 10.32% for 2010.  This positive performance was the result of a continued rebound in the financial markets.

 

                “Investment management and advisory fees associated with the OPEB Trust Fund totaled $972,244 in 2010 and were paid from such Trust Fund.  These fees and the firms paid are detailed in Section III (B) of the attached report.
 

 

Nuclear Decommissioning Trust

 

“On November 21, 2000, the Authority completed the sale of its Indian Point #3 and James A. FitzPatrick nuclear plants to two subsidiaries of Entergy Corporation pursuant to a purchase-and-sale agreement dated March 28, 2000.  In accordance with the Decommissioning Agreements, the Authority retains contractual decommissioning liability until license expiration, a change in the tax status of the fund or any early dismantlement of the plants, at which time the Authority will have the option to terminate its decommissioning responsibility and transfer the plant’s fund to the Entergy subsidiary owning the plant.  At that time, the Authority will be entitled to be paid an amount equal to the excess of the amount in the fund over the Inflation Adjusted Cost Amount (a fixed estimated decommissioning cost amount adjusted in accordance with the effect of increases and decreases in the U. S. Nuclear Regulatory Commission minimum cost-estimate amounts applicable to the plant), if any.  The Authority’s decommissioning liability is limited to the lesser of the Inflation Adjusted Cost Amount or the amount of the plant’s fund, guaranteeing that no additional cost burdens may be placed on the Authority. 

 

                “As of December 31, 2010, the Nuclear Decommissioning Trust’s market value was approximately $1.03 billion, representing a gain of 9.67% for 2010.  As previously noted, the positive performance was the result of a continued rebound in the financial markets, as well as a partial recovery on commercial and residential mortgage-backed securities held in the Trust from severely distressed levels.

 

                “Investment management and advisory fees associated with the Nuclear Decommissioning Trust Fund totaled $1,369,903 in 2010 and were paid from such Trust Fund.  These fees and the firms paid are detailed in Section III (C) of the attached report. 

 

                “In connection with its examination of the Authority’s financial statements, KPMG LLP (‘KPMG’) performed tests of the Authority’s compliance with certain provisions of the Investment Guidelines, the State Comptroller’s Investment Guidelines and Section 2925 of the Public Authorities Law.  KPMG’s report, a copy of which is attached as Exhibit ‘1j-B,’ states that the Authority complied, in all material respects, with the requirements during the year ended December 31, 2010.  Consequently, staff believes the Authority is in compliance with the Investment Guidelines, the State Comptroller’s Investment Guidelines and Section 2925 of the Public Authorities Law.

 

“The Investment Guidelines and procedures have not been amended since last presented to and approved by the Trustees at their meeting of March 23, 2010.  They remain fundamentally sound and meet the requirements of the Authority.  Furthermore, these Guidelines continue to meet the requirements of Section 2824(1)(e) of the Public Authorities Law, which requires the Authority’s Trustees to establish written policies and procedures with respect to investments.
 

 

RECOMMENDATION

 

                “The Treasurer recommends that the Trustees approve the attached 2010 Annual Report on Investment of Authority Funds.

 

“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 2010 Annual Report on Investment of Authority Funds be, and hereby is, approved; 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.

 

 

k.                   New York Power Authority’s Annual Strategic Plan 

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are presented with the Authority’s proposed 2011 Strategic Plan, set forth in Exhibit ‘1k-A’ attached hereto, and are requested to adopt the Strategic Plan and authorize the filing of the mission statement and performance measures with the Authorities Budget Office as required by Section 2824-a of the Public Authorities Law.

                                                                                                                                             

BACKGROUND

 

                “Chapter 506 of the Laws of 2009 added a new Section 2824-a in the Public Authorities Law requiring state and local public authorities to develop and adopt a mission statement.  The law also requires public authorities to develop performance measures to assist the authority in determining how well it is carrying out its mission.  Pursuant to this section, each state authority was to provide a copy of its mission statement and performance measures to the Authorities Budget Office on or before March 31, 2010 and to post and maintain its mission statement and performance report on its web site.  The Authority fulfilled each of these requirements.

 

                “For subsequent reporting years, the mission statement is to be included as part of the Annual Report required to be filed with the Authorities Budget Office pursuant to Section 2800 of the Public Authorities Law.  Every public authority is also expected to annually review its mission statement and measures and publish a measurement report.

 

                “The Authority has for many years annually reviewed and updated, as necessary, its mission statement and performance measures.  The Authority’s By-Laws (Article VII, Section 2) provide that ‘the Trustees shall annually review a Strategic Plan developed by the Executive Management Committee which shall become the basis for the development of departmental plans, the annual budget and the capital expenditure plan.’

 

DISCUSSION

 

                “In 2007, Authority staff undertook a wholesale review its annual strategic planning process wherein the content of the Strategic Plan was redesigned to make more clear the Authority’s role and intentions so that stakeholders may form a better understanding of the driving forces behind the Authority’s direction and decisions.  In addition, the strategic planning process was reformed from the prior, shorter-term tactical view to a longer-term strategic view of the work plan.  Additional efforts by staff in 2010 provided greater linkage between the Strategic Plan and each organizational unit and employee within the Authority through the development of business plans for each of the major functional areas within the Authority.  The Authority’s Strategic Plan, which is attached as Exhibit ‘1k-A,’ is presented in the following format: 

 

·         Mission Statement – A mission statement is a clear definition of the charter and underlying purpose of the organization, articulating the aims, focus, and emphasis of the organization.

·         Vision Statement – The vision statement articulates the direction(s) that the organization will pursue.  It implicitly recognizes the underlying Mission, but provides a clear statement of upcoming priorities and focus for the management team.

·         Values – Values articulate the underlying principles and aims of the business philosophy that guide the conduct, practices and decisions toward which the organization will consistently strive.

·         Strategic Goals – Strategic goals are the specific programs that focus the organization’s resources and efforts over the horizon of the strategic plan.  Strategic goals are supported by business unit initiatives that are projects with defined objectives and a clear beginning and end.  Each business unit organization must balance the incremental effort defined by these initiatives with management of the ongoing business of the enterprise.

·         Balanced Scorecard – The balanced scorecard sets the performance goals and targets and captures the performance results by which the organization measures its success in achieving its mission.

 

                “The Mission Statement, Vision Statement and Values remain unchanged from the prior year.  The supporting business plans, which are represented in the Strategic Goals and Balanced Scorecard performance measures, cover planned work and anticipated resource requirements for the period 2011 through 2015, and have been updated by each of the respective departments.  The business plans have been designed to both complement and translate the 2011 Strategic Plan goals into operational plans for each of the business units.  There is direct line-of-sight between the 2011 Strategic Plan goals and many of the business unit initiatives detailed in each business plan.  More importantly, the business plans were designed to describe all the responsibilities and functions carried out within each business unit, including the day-to-day baseline work, specific business unit initiatives required to improve the effectiveness or efficiency of the core business, and the resources required to perform the Authority’s business activities.  By taking this holistic view, it is possible to gain a broad view of the total resource requirements – people, O&M dollars, and capital dollars – necessary to complete both the baseline work, as well as work associated with one-time initiatives.

 

                “On March 1, 2010, the Authorities Budget Office issued a Policy Guidance statement concerning the implementation of Chapter 506 of the Laws of 2009.  In addition to the filing of the mission statement and performance measures as part of the Annual Report filed pursuant to Section 2800 of the Public Authorities Law, the ABO has requested that each authority provide responses to five questions related to matters of the mission and to certain policy issues regarding the role of the Board and the appointment and role of management.  These matters are clearly spelled out in the Authority’s By-Laws, last approved by the Trustees at their October, 2010 meeting.  Exhibit ‘1k-B’ attached hereto, lists the additional questions and responses that are to be filed with the mission statement and performance measures.
 

 

RECOMMENDATION

 

                “The Senior Vice President – Corporate Planning and Finance recommends that the Trustees adopt the 2011 Strategic Plan presented herein and authorize the filing of the Mission Statement and Performance Measures document with the Authorities Budget Office as required by Section 2824-a of the Public Authorities Law.    

 

“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 Trustees hereby acknowledge that they have read, understand and adopt the Authority’s 2011 Strategic Plan attached hereto as Exhibit “1k-A” as discussed in the foregoing report of the President and Chief Executive Officer; and be it further

 

  RESOLVED, That pursuant to Section 2824-a of the Public Authorities Law, the Corporate Secretary be, and hereby is, authorized to file with the Authorities Budget Office the mission statement and performance measures contained in the Authority’s Strategic Plan and post such information on the Authority’s website; and be it further

 

  RESOLVED, That pursuant to the Policy Guidance issued by the Authorities Budget Office on March 1, 2010, the Trustees hereby acknowledge that they have read, understand and adopt and the Corporate Secretary be, and hereby is, authorized to file with the Authorities Budget Office the responses to the additional questions posed by such Office attached hereto as Exhibit “1k-B”; 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.
 


 

2.                   Discussion Agenda

 

a.                   Report of the President and Chief Executive Officer

President Richard Kessel reported that he continues to travel around the state on behalf of the Authority.   He said that he has begun a tour of the Authority’s operating facilities in the state and, to date, has visited the Niagara and St. Lawrence facilities.  He plans to visit the Flynn plant in Holtsville, Blenheim-Gilboa plant and the smaller facilities around the state.

President Kessel said that despite the challenges facing the Authority, its operations are in good condition and its facilities are expected to be operating at full capacity this summer. 

President Kessel said that he looks forward to working with the Authority’s newly appointed Trustee, John Dyson, and the other Trustees toward the goals and objectives of the Authority.

He also welcomed Mr. Timothy Carey, former Trustee and President and Chief Executive Officer of the Authority to the meeting.

Community Outreach – Upstate/Downstate:  President Kessel participated in the following  events/ meetings around the state:

·         Dedication of new Ice Rink in Niagara Falls (1/26)

·         Lake Placid Tri-Lakes Summit; meeting with local officials (2/9 and 2/10)

·         Meetings with Lt. Governor Duffy, Senators Fuschillo, Grisanti and Griffo (2/14)

·         Advanced Energy Research and Technology Center Tour (2/15)

·         Meeting with Tuscarora Nation and delivery of weatherization kits to them (2/17)

·         Meeting with Niagara employees celebrating the Niagara Power Project’s 50th Anniversary (2/17)

·         Meeting with Town of Niagara Mayor Steve Richards; Town of Lockport Mayor Marc Smith; City of Lockport Mayor Mike Tucker (2/17)

·         Hydro Quebec Meeting (3/2)

·         Meeting with Elise Cusack on Erie Harbor Project; meeting with Buffalo Mayor Byron Brown (3/3)

·         Brookhaven Lab – Speech (3/4)

·         Hudson Transmission Partnership Meeting (3/9)

·         CDC Keynote Address (3/14)

·         Meeting with RVRDA, Massena (3/15)

·         Meeting with Western New York delegation, Albany (3/21)

·         Mineola Kiwanis – Speech (3/28)

 

                In response to a question from Vice Chairman Foster, President Kessel said that contributions to organizations are in keeping with Board policy, which was enacted based on the Attorney General’s Opinion regarding grants, sponsorships or donations by state authorities.  He continued that the Authority gives grants and sponsorships to organizations as regards to energy-related activities.  He said that a large portion of grants and sponsorships are given to upstate New York as part of the relicensing of the Authority’s hydro facilities agreement; a small portion is given to organizations in downstate New York and Long Island.  With regards to the comment that the Authority does not service Long Island, President Kessel said that the Authority has a generating plant in Holtsville; a plant in Brentwood; underwater transmission lines; a number of energy efficiency projects and Power for Jobs customers in Long Island.  In conclusion, President Kessel said that the Attorney General’s letter was not based on facts, but on a media report.  He said that the Authority will, however, suspend all grants and sponsorships until there is an independent review of all such activities and he looks forward to working with the Board on this review.

Chairman Townsend then read a portion of the Attorney General’s letter which states, “It has come to our attention via published press reports that NYPA may be making financial contributions that do not directly relate to NYPA’s powers, duties, or purposes” and said that this statement would suggest that the Attorney General’s office did not conduct an independent investigation regarding the reports on the Authority’s grants and sponsorships.  Chairman Townsend added that the Board is concerned about this matter; therefore, in order to bring clarity and transparency to it, he has instructed the legal department to review the matter and report their findings to the Board so that it can be resolved.

In response to a question from Vice Chairman Foster, Chairman Townsend said that the legal department will provide a report on this investigation before the next Board meeting.

 

 

b.                   Report of the Chief Operating Officer

Mr. Gil Quiniones provided highlights of the report to the Trustees.  In response to a question from Chairman Townsend, Mr. Quiniones said that water levels are lower than the projected long-term average, which results in lower net generation.  In response to a question from Trustee Nicandri, Mr. Quiniones said that the forced outage at Niagara was not caused by Authority-owned transmission.  It was caused by an issue with the New York grid’s system and this limited the Authority’s ability to generate power.  Mr. Quiniones also said that staff is monitoring the situation in Japan as the Authority has contracts with Japanese companies.  He said that if there are any impacts with regard to supplies for the Authority’s Life Extension and Modernization projects, he will report it to the Board at the next meeting.

Chairman Townsend said that the Authority won a safety award from the American Public Power Association and congratulated Mr. Quiniones and his staff for the work they do.

 

 c.                    Report of the Chief Financial Officer

Ms. Elizabeth McCarthy provided highlights of the financial reports to the Trustees.  She said that for the reporting period the Authority’s net income was $6.4 million, which was below the amount budgeted.  She indicated that this was due to low water flows and the need to purchase power to support the Authority’s customer load, due to the transmission outage.  She concluded that at the end of the reporting period the Authority had $1.1 billion in cash and liquidity, which is invested in a variety of instruments.

In response to a question from Trustee Nicandri, Ms. McCarthy said that the transmission outage is the same as mentioned in Mr. Quiniones’ report.  She said that the transmission line was not owned by the Authority, however, the outage impacted the Authority’s ability to transport power, therefore, the Authority had to buy power for its customers.


 

3.                   NYPA’s Governmental Customer Production Rate and Delivery Rate Structure Redesign Notice of Proposed Rulemaking
 

SUMMARY

                “The Trustees are requested to approve a Notice of Proposed Rulemaking (‘NOPR’) to redesign 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 would properly align costs with rates, and eliminate cross-subsidization between Customers. 

 

                “Second, the Trustees are requested to authorize and direct the Corporate Secretary to file the NOPR with the New York State Department of State for publication in the New York State Register in accordance with the requirements of the State Administrative Procedure Act (‘SAPA’).

 

                “This rate redesign proposal is intended to be revenue-neutral to NYPA and does not attempt to modify the method of calculating total costs of serving this customer base.  Rather, the proposed rulemaking would make corrections to how these costs are allocated among the individual Customers.  With respect to delivery rates, the proposed redesign would correct an estimated annual $9.6 million over-collection by NYPA embedded in current delivery rates. 

“Extensive customer outreach was undertaken to develop the proposal, with consensus forged between NYPA and Customers regarding (i) production (i.e. demand and energy) rate redesign, (ii) the need for new delivery rates to be aligned with Consolidated Edison Company of New York, Inc. (‘Con Edison’) delivery service charges to NYPA, (iii) cost-of-service methodology and (iv) and the need to refund accumulated over-collections.

                “NYPA staff recommends an immediate phase-in of redesigned production rates for all Customers, a four-year phase-in to the full realignment of delivery rates for the NYC Governmental Customers, and an immediate implementation of realigned delivery rates for the Westchester Governmental Customers. 

                “The ‘Recommended Plan’ (attached as Exhibit ‘3-A’) is a detailed explanation of the NYPA rate redesign recommendations.  It is expected that the rate redesign changes, which are subject to this NOPR, will commence with the July 2011 service period or as soon thereafter as is possible based on the completion of the SAPA process.  

                “As a result of this rate design study, NYPA recognizes the existence of an accumulated over-collection of delivery revenues.  Accordingly, NYPA staff informs the Trustees that it intends to make repayment of over-collected amounts[1] to individual Customers whose delivery rates from NYPA were set too high, commencing no later than the July 2011 service period.  Such repayments are outside the NOPR for which approval is requested today.
           

BACKGROUND

                 “NYPA has served the Customers since their transfer from Con Edison beginning in 1976 as part of the NYPA’s purchase of the Indian Point 3 Nuclear and Charles Poletti Power (then the Astoria 6) Plants.  A total of 115 governmental Customers located in New York City[2] and Westchester County[3] purchase NYPA electricity in order to serve a myriad of government facilities, including office buildings, public schools, public housing, hospitals, water and wastewater treatment plants, parks and police and fire stations. 

                With respect to production rates, NYPA’s rate design for the Customers has remained unchanged for over twenty years.  Cost increases/decreases were made in an across-the-board fashion to existing production rate classes, and there had been no thorough examination over this duration to check whether the allocation of costs among classes followed cost-of-service principles.

 

                Similarly, NYPA’s delivery rate design has also not been subject to thorough review.  When NYPA began providing electric service to these Customers in the 1970s, it inherited Con Edison’s delivery service classifications.  In the 1980s Con Edison redesigned its delivery rates.  The impacts were not significant initially, but the two rate structures became more misaligned over time.  These impacts were aggravated by other differences between Con Edison and NYPA, such as the methods the respective utilities have used for calculating estimated bills and the lack of a minimum bill provision in the NYPA billing system (but which is part of the Con Edison billing system). 

NYPA and the Customers indicated a willingness to start to address this problem in 2005, when NYPA and the NYC Governmental Customers agreed to modify the terms and conditions of their 1970s era contracts through a ‘Long Term-Agreement’ (‘LTA’) entered into between NYPA and each of the NYC Governmental Customers.  When the LTA was negotiated, the parties agreed to include a provision addressing rate design.  No recent studies had been done, but there was a growing sense that the parties needed guidance on whether production rates and delivery rates were in alignment. 

“Accordingly, in Article VI of the LTA, the parties agreed that the Authority would complete an evaluation of the production (i.e. demand and energy) and delivery charges in order to produce a redesigned rate structure for the NYC Governmental Customers.  As stated in the LTA, Art. VI,

 . . . such studies shall be performed with input and concurrence from the NYC Governmental Customers . . . it being the goal of the Parties to . . . redesign rates so that the rates charged to the NYC Governmental Customers are aligned with costs, all on a basis that is revenue neutral to NYPA and in a manner that recognizes individual customer bill impacts and ameliorates such impacts.

“In accordance with this provision, NYPA completed a two-year study of its rate structure.  To ensure that all Customers would be eligible to receive the benefits of this type of study and redesign work, NYPA extended its analysis to include the Westchester Governmental Customers.  NYPA staff procured the services of the consulting firm Black & Veatch (‘B&V’) to assist them with this rate design study. 

“NYPA staff has reviewed the B&V study[4] and endorses its conclusions.  Accordingly, based on the results of the B&V study, NYPA staff recommends a redesign of the production and delivery service structure contained in NYPA’s Service Tariff No. 100 applicable to the NYC Governmental Customers and NYPA’s Service Tariff No. 200 applicable to Westchester Governmental Customers.
 

DISCUSSION

 A.  Production Rate Structure Redesign

                “Production rate structure design at NYPA was last altered over twenty years ago when NYPA introduced in 1988 time-of-day (‘TOD’) production rates for the Customers, and later refined this design in 1989.  However, since that time, production revenue requirement cost increases/decreases have been reflected in equal, across-the-board increases/decreases to existing demand and energy rates.  During this period, as market prices have become more time sensitive and volatile, production rates have become increasingly disconnected from the government’s price structure.  Accordingly, it became important to align the Customers’ price signals (production rates) more closely with the allocated production cost of service and market prices.  Further, cost-based rates also encourage the efficient use of electricity by sending market price signals to customers as to when it is most cost effective to conserve energy. 

                “Production rate structure analysis was based on satisfying such key objectives as avoidance of undue discrimination, customer understanding and acceptance, practical and cost-effective to implement, price signals that encourage efficient electricity usage, rate stability to avoid price changes that induce rate shock, reasonable apportionment of costs among customers and recovery of the revenue requirement.
 

 “Based on the study results, staff recommends that both production demand and energy rates be modified to reflect the revenue increase or decrease indicated for each NYPA service class as reflected by the new production cost study.  The production rate structure changes are designed to collect allocated fixed and variable costs from the final 2011 production cost-of-service studies for the Customers, both in total and by each fixed cost and variable cost element.  Variable costs are collected predominantly via the kilowatt-hour (kWh) energy charges, and fixed costs are collected predominantly via the kilowatt (kW) demand charge. In cases where there are no demand charges, all costs are recovered in kWh energy charges.

“The production rate review also included a marginal cost study to assess the appropriateness of the Authority’s existing conventional and TOD energy rates.  Based upon study results, staff recommends, with the exception of the Street Lighting Service Class, to introduce seasonal summer and winter production energy rates rather than just a single non-seasonal energy rate for conventional service classes. With respect to TOD service classes, NYPA staff recommends that rates be structured to have seasonal summer and winter on-peak and off-peak energy rates, rather than non-seasonal on-peak and off-peak rates.  These new rates provide Customers a strong price signal to conserve energy when it is most cost effective.  The Street Lighting classes, namely SC80 and SC66, are excluded from the implementation of seasonality.

“Further, staff recommends that due to the similar usage characteristics of Service Classes 64 and 69,[5] the new rate structure merges these two as justified by the two-year evaluation and to follow Con Edison’s current Service Class groupings. 

“Last, the proposed rulemaking includes the implementation of standby and net metering tariff provision, and minimum billing production charges.[6]  The development of standby and net metering tariff provisions reflects the need to integrate the Customers’ use of on-site generation including renewable resources such as solar and wind, and mirrors the tariff treatment of Con Edison.  These changes are necessary as NYPA has been receiving increasing numbers of inquiries related to installation of cogeneration and solar projects at Customer sites, so by providing a tariff rate structure, NYPA will help facilitate the Customers’ development of such projects. 

“In total, NYPA staff believes that the proposed production rate design is 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.  NYPA staff believes that this proposed production rate design has widespread support among the Customers.

 “The proposed changes to the production rates are explained further in the Recommended Plan (Exhibit ‘3-A’).

 
B.  Delivery Rate Structure Redesign

 “Currently, Con Edison levies 10 rates to the Authority for delivery service.  In total, these delivery costs are passed on to the Customers by the Authority via an alternative rate structure that has approximately 80 rate components and contains declining block demand and energy delivery rates.  Also, there is a mismatch between the current NYPA charges to Customers and the Con Edison charges to NYPA.  On an annual basis, this mismatch over-collects $9.6 million from Customers based on the latest available[7] data.

“As noted, this mismatch occurred due to rate design changes implemented by Con Edison in the 1980s.  Over the years this mismatch grew more pronounced, leading the parties to include a provision in the LTA that NYPA would conduct a rate redesign study and make the changes necessary to ensure that rates are properly aligned with costs.

                “Staff recommends implementing new, revenue-neutral to NYPA, cost-based delivery rates for all Customers.  The recommended delivery rate structure is designed to match NYPA’s delivery rates to Customers to the rates Con Edison charges NYPA, including minimum delivery bill provisions. Further, staff recommends an immediate rate structure change for Westchester Governmental Customers and a phase-in plan for the NYC Governmental Customers, removal of the NYPA declining block rate structure – all necessary to eliminate the over-collection and to manage Customer impacts.

“If the delivery rate design changes were all made immediately, the Westchester Governmental Customers would experience bill savings, while certain NYC Governmental Customers would face large bill increases, which is inconsistent with the ratemaking principle of gradualism.  For NYC Governmental Customers, it is estimated that at least six service classes would receive rate decreases of 20% while Service Classes 85 (MTA traction facilities) and 98 (NYC wastewater treatment plant) would receive rate increases of approximately 200% under the proposed new delivery rates.  Thus, the Recommended Plan advocates a bifurcated approach whereby the Westchester Governmental Customer changes would be implemented immediately in July 2011, while the NYC Governmental Customers are phased-in to the new delivery rates over four years. 

                “The terms of the Westchester and NYC electricity supply agreements with NYPA support this bifurcated approach.  For the Westchester Governmental Customers, the terms and conditions of their long-term contract with NYPA have been modified through a 2007 ‘Supplemental Agreement’ entered into between NYPA and each of the Westchester Governmental Customers.  Each Supplemental Agreement requires the pass-through of Con Edison delivery costs to each of the Westchester Customers.  On the other hand, the LTA calls for the aggregate of Con Edison delivery charges to be assessed to the NYC Governmental Customers as a whole, and, in terms of rate design, directs NYPA to consider individual customer impacts and ameliorate such impacts.  Therefore, a phase-in to the correct rate design over a period of four years, which is consistent with the gradualism principle, is appropriate.  In the first year of phase-in, it is recommended that the existing conventional demand and energy blocking be eliminated along with the $9.6 million over-collection.  During subsequent phase-in years, over and under collections among customer service classes would be harmonized such that by 2014, NYPA’s delivery rates to NYC Customers would be fully synchronized with Con Edison’s on a basis that is revenue neutral to NYPA.

“In total, NYPA staff believes that the proposed delivery rate design is 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 delivery revenue requirement (based on what Con Edison charges NYPA) is allocated to each service class by identifying appropriate linkages between elements of cost and particular customer service classes. 

“While NYPA staff anticipates that the proposed phase-in schedule will not garner unanimous support from the Customers, staff is nonetheless very confident that the end-state delivery rate design proposed here does have widespread support among the Customers.  Because NYPA highly values its responsibility to administer rates in a manner that recognizes individual Customer bill impacts and ameliorates such impacts, staff believes that the proposed four-year phase-in is a sensible way to correct a significant rate design problem.

“Further details of NYPA delivery rate redesign proposal are explained in the attached Recommended Plan (Exhibit ‘3-A’).
 

C.  For Trustees Information - Refund of Over-collections

                “NYPA and the Customers reached agreement for the need to refund NYPA’s accumulated over-collections of delivery charges.  Such accumulations have been tabulated since 1996.  The accumulated total will be refunded over twelve months commencing no later than the implementation of redesigned delivery rates to customers whose delivery charges exceeded Con Edison’s delivery charges to NYPA, on a customer-by-customer basis, based upon the percentage allocations determined by the B&V study.[8] 

                “While NYPA staff has not reached a consensus with the Customers regarding the proposed allocation methodology for the accumulated over-collections, staff believes the methodology is fair and reasonable, and expects that the Customers will agree.  Should it determine to modify this refund plan, staff will inform the Trustees no later than their June 2011 meeting.
 

D.  Customer Outreach and Implementation

                “With respect to the proposed redesign for production and delivery rates, the revisions to the rate structure would go into effect in July 2011.  Throughout 2010, NYPA conducted numerous joint customer meetings, joint technical conferences, individual customer and consultant meetings and teleconferences in support of conducting the study, disseminating and explaining results, and obtaining verbal and written feedback.  As a result, the Recommended Plan is built on the foundation of customer feedback and, where practical and feasible, NYPA sought customer consensus on a plan that would eliminate the production and delivery rate service class imbalances and mitigate large bill impacts.

                “The proposed production and delivery Customer rate structure changes will be implemented in accordance with a SAPA proceeding, as required by the LTA.  Thus, in addition to the input already received from Customers in the course of the rate design study, the Customers and other interested parties will have opportunity to file comments in accordance with SAPA after the issuance of the NOPR.  The B&V study, which was given to Customers, will be available to interested parties upon request.  After closure of the 45-day statutory comment period concerning this proposed rulemaking, NYPA staff will take into consideration concerns that have been raised and will return to the Trustees to seek final adoption of the new rate structure, which would be incorporated into revised tariff leaves in NYPA Service Tariff Nos. 100 and 200.

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 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 refund will not impact net revenues in the year it is paid.

 RECOMMENDATION

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

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

 

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

 

 

 RESOLVED, That the Authority completed a Production Rate study and a Delivery Rate study in accordance with the terms of the Long-Term Agreements with the New York City Governmental Customers and such Agreements provide for a public comment and approval process under the State Administrative Procedure Act to adopt appropriate tariff modifications to implement the changes identified in such studies; and be it further

 

RESOLVED, That the Authority also completed a Production Rate study and a Delivery Rate study related to the Westchester Governmental Customers; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file such notices as may be required with the Secretary of State for publication in the New York State Register and to submit such other notice as may be required by statute or regulation concerning the proposed tariff modifications to implement the changes identified in the Production Rate and Delivery Rate studies; 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.

 


 

4.                   2010 Financial Reports Pursuant to Section 2800 of the Public Authorities Law and Regulations of the Office of the State Comptroller

               

         The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the financial report for the year ended December 31, 2010 and authorize the Corporate Secretary to submit this report to the Governor, legislative leaders and the State Comptroller pursuant to Section 2800 of the Public Authorities Law, as amended by the Public Authorities Accountability Act of 2009 (‘PAAA’).  In accordance with regulations adopted by the Office of the State Comptroller (‘OSC’), the Trustees are also requested to approve and authorize posting of a report of actual vs. budgeted results for the year 2010 on the Authority’s web site.

 

BACKGROUND

 

              “The PAAA reflects the State’s commitment to maintaining public confidence in public authorities by ensuring that the essential governance principles of accountability, transparency and integrity are followed at all times.  To facilitate these objectives, the PAAA established an independent Authorities Budget Office (‘ABO’) that monitors and evaluates the compliance of State authorities with the requirements of the Act.  The PAAA became effective with the Authority’s fiscal year beginning January 1, 2006.  The PAAA amended Section 2800 of the Public Authorities Law to require that financial reports submitted by a State authority under Section 2800 be certified by the chief executive officer and chief financial officer and approved by the authority’s board.

 

                            “Following rulemaking proceedings undertaken pursuant to the State Administrative Procedure Act, OSC implemented regulations on March 29, 2006 that address the preparation of annual budgets and related reporting requirements by ‘covered’ public authorities, including the Authority.  These regulations establish various procedural and substantive requirements relating to the budgets and require the chief financial officer to report publicly not later than 90 days after the close of each fiscal year on actual versus budgeted results. 

 

DISCUSSION

 

“The Trustees are requested to approve the required financial report for the year ended December 31, 2010 (Exhibit ‘4-A’) and authorize the Corporate Secretary to submit this report to the Governor, legislative leaders, the State Comptroller and the ABO pursuant to Section 2800 of the Public Authorities Law, as amended by the PAAA.  This report was reviewed by the Audit Committee at its meeting of March 14, 2011.  The Trustees are also requested to approve a report of actual vs. budgeted results for the year 2010 (Exhibit ‘4-B’) and authorize posting it on the Authority’s website.


 

FISCAL INFORMATION

 

                “There is no anticipated fiscal impact.
 

 

RECOMMENDATION

 

                “The Vice President and Controller recommends that the Trustees approve and authorize submittal of the attached reports (Exhibits ‘4-A’ and ‘4-B’) as discussed herein.

 

“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.

 

 

WHEREAS, pursuant to Section 2800(1) of the Public Authorities Law, the Authority is required to annually submit to the Governor, the Chairman and Ranking Minority Member of the Senate Finance Committee, the Chairman and Ranking Minority Member of the Assembly Ways and Means Committee, the State Comptroller and the Authorities Budget Office, within 90 days after the end of its fiscal year, a complete and detailed report or reports setting forth certain information regarding, among other things, certain financial information; and

 

WHEREAS, pursuant to Section 2800(3), financial information submitted under Section 2800 shall be approved by the Authority’s Board of Trustees and shall be certified in writing by the Chief Executive Officer and the Chief Financial Officer of the Authority that based on the officer's knowledge the information provided therein (a) is accurate, correct and does not contain any untrue statement of material fact; (b) does not omit any material fact which, if omitted, would cause the financial statements to be misleading in light of the circumstances under which such statements are made and (c) fairly presents in all material respects the financial condition and results of operations of the Authority as of, and for, the periods presented in the financial statements; and

 

WHEREAS, the Chief Executive Officer and Chief Financial Officer have so certified as to the financial information contained within the attached reports for the fiscal year ending December 31, 2010 as evidenced by a writing dated even date hereof;

 

 NOW THEREFORE BE IT RESOLVED, That pursuant to Section 2800 of the Public Authorities Law, the financial reports attached hereto are adopted and the Corporate Secretary be, and hereby is, authorized to submit to the Governor, the Chairman and Ranking Minority Member of the Senate Finance Committee, the Chairman and Ranking Minority Member of the Assembly Ways and Means Committee, the State Comptroller, and the Authorities Budget Office the attached financial report for the year ending 2010 in accordance with the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That pursuant to 2 NYCRR Part 203, the attached report of actual vs. budgeted results for the year 2010 is approved in accordance with the foregoing report of the President and Chief Executive Officer; and the Corporate Secretary is authorized to post the report on the Authority’s website; and be it further 

 

RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer, the Executive Vice President and Chief Financial 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.

 

 


 

5.                   RM Flynn Power Plant 2011 Major OutageCapital Expenditure Authorization Request

           

The President and Chief Executive Officer submitted the following report:
 

 

SUMMARY

 

                “The Trustees are requested to approve capital expenditures of $7.195 million for projects associated with the 2011 RM Flynn Power Plant’s (‘Flynn’) major outage and subsequent replacement or upgrade of critical parts for the RM Flynn gas turbine.
 

 

BACKGROUND

 

                “In accordance with the Authority’s Expenditure Authorization Procedures, Trustees’ approval is required for capital expenditures in excess of $3 million.

 

“Flynn has been in service since May 1994.  The plant consists of gas turbine and steam turbine.  The timing of major overhauls and large projects at the plant is based on the recommended maintenance cycles of the Siemens V84.2 gas turbine.  Siemens recommends that the gas turbine be completely overhauled and upgraded approximately every 33,000 operating hours, which is once every four years.  When the plant is shutdown, other projects which cannot be done while the plant is in service are completed.  Flynn’s major outages were completed in 1996, 1999, 2003 and 2007.  The next major outage is scheduled for October and November 2011.  The projects described in the discussion section below are crucial to the safe, reliable and efficient operation of the plant.

 

DISCUSSION

 

                “The Siemens V84.2 gas turbine has two large mixing elbows that are in the hot gas path section which direct the combustion gases to the turbine section.  The mixing elbows that will be removed in 2011 have been in service for approximately 100,000 hours and are the end of their useful life.  New mixing elbows will be purchased for inventory.

 

                “The gas turbine industry in general and Siemens specifically, have determined that the material used to make the blade wheel in stage 4 of the turbine becomes brittle over time and may fracture under certain conditions.  If the disc fails to pass Non Destructive Examinations (‘NDE’) it will be declared unusable.  Published lead time for this part is over one year.  Flynn staff has determined that the safe and prudent action is to replace the disc.  The disc in service will have approximately 150,000 operating hours at the time of the 2011 major outage.

 

                “If compressor blades or diaphragms fail in service, it usually causes severe damage to the turbine.  All of Flynn’s seventeen compressor stages are original and running well beyond the 100,000 hours, the time in which Siemens recommends replacement.  Based on fleet history, Siemens has identified certain stages that are more prone to failure.  Using Siemens’ recommendations, Flynn staff has selected stages 2, 4 and 7 for replacement in 2011.

 

                “Flynn’s gas turbine generator has six lead bushings which connect the generator output to the transmission system.  Some have had component failures related to vibrations. Certain failures have the potential to damage the generator.  Flynn staff thinks it is prudent to replace the bushings in 2011.

 

                “During the 2007 outage, divided seal rings were identified as worn; staff recommends that they be replaced in 2011.

 

                “At the 2011 major outage, the turbine’s stage 3 blades and stage 2 vanes will be at the end of their useful life.  New blades and vanes will be purchased for inventory.

 

                “The Siemens V84.2 gas turbine has two distinct burner decks each of which has six burners.  Each deck has four control valves for fuel gas and fuel oil.  The actuators for these valves have typically required frequent maintenance and have the potential to fail in ways that damage the gas turbine.  Siemens has developed actuators that are more robust.  Flynn staff has determined that upgrading these actuators will enhance the gas turbines reliability.

 

                “Flynn’s gas turbine controls were upgraded to a TXP level in 2003.  The rest of the plant controls and the steam turbine controls were upgraded to a T3000 level in 2007.  For continued reliability and serviceability the gas turbine controls need to be brought up to the T3000 level. The North American Electric Reliability Corporation’s (‘NERC’) Critical Infrastructure Protection rules also require that the TXP controls be upgraded to T3000.              

 

                “Following the 2011 major outage, critical gas turbine parts will be sent out for refurbishment and upgrade.  They will then be ready for the next major outage.  These refurbishments are long-lead activities and need to be done promptly in order to protect the plant from an extended shutdown in the event that one of them fails in service. The parts will be sent out in early 2012 and, most likely, would be returned to inventory in 2012 or 2013.  Included in this category are HR3 burners, Compressor Inner Diffuser, Turbine Blades and Vanes and the Inner Case.

 

                “Flynn’s major outages will occur in October and November of 2011.  The shipment of critical parts for refurbishment will occur in early 2012.

 

                “Total projects costs for these capital procurements are as follow:

 

                                                                     2011                                       2012                                       Total

                Engineering                           $   100,000                            $     35,000                            $   135,000

                Procurement                         $3,840,000                           $2,580,000                           $6,420,000

                Installation                           $   132,000                                                                            $   132,000

                NYPA Direct                         $   135,000                            $     15,000                            $   150,000

                NYPA Indirect                      $   227,000                            $   131,000                            $   358,000

                Total                                      $4,434,000                           $2,761,000                           $7,195,000

 

FISCAL INFORMATION

 

                “Payment will be made from the Authority’s Capital Fund.  The amount of $4.43 million is an increase from the original $3.5 million that was included in the 2011 Capital Budget Submission Plan.  The change is primarily due to costs related to turbine blades, turbine vanes and mixing elbows.

 

RECOMMENDATION

 

                “The Vice President – Project Management, the Vice President – Engineering, the Regional Manager – Southeastern New York and the Director of Operations – RM Flynn Power Plant recommend that the Trustees authorize Capital Expenditures in the amount of $7.195 million for the completion of projects, upgrade of critical components and purchase of critical components for the 2011 RM Flynn Power Plant Major Outage.

 

“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 Tartaglia presented highlights of staff’s recommendation to the Trustees.  In response to a question from Chairman Townsend, Mr. Tartaglia said that staff routinely analyzes the contract to determine whether or not the level of service and technical expertise pertaining to the type of machine remains competitive.  In response to another question from Chairman Townsend, Mr. Tartaglia said that that Authority has a long-term agreement with Seimens, the original equipment manufacturers.  In response to further questions from Chairman Townsend, Mr. Tartaglia said that staff reviews the contract periodically to ensure that the prices are competitive.

 

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, capital expenditures in the amount of $7.195 million are hereby authorized in accordance with and as recommended in the foregoing report of the President and Chief Executive Office, in the amount and for the purpose listed below:

 

                                                                Capital                                  Expenditure Approval

                                                                                                                                Flynn                    

                               

Engineering, Procurement,                             $6,555,000

                                                Installation                                                          $   132,000

                                                Authority Direct & Indirect                            $   508,000   

                                                                                                                Total      $7,195,000

               

AND BE IT FURTHER RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer and all other offices 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.


 

 

6.                   Niagara Power Project – Lewiston Pump Generating Plant Life Extension Modernization Program GSU Installation 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 to Ferguson Electric Construction Co., Inc. (‘Ferguson’) of Buffalo, New York, in the amount of $4.05 million to install four new generator step-up transformers (‘GSU’), as part of the Life Extension and Modernization (‘LEM’) program at the Lewiston Pump Generating Plant (‘LPGP’).

 

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.

 

“At their June 29, 2010 meeting, the Trustees approved capital expenditures in the amount of $131 million for the Niagara Power Project – LPGP LEM program.  The total estimated cost of the LPGP LEM program is unchanged at $460 million.

 

“The principal driver for life extension work at LPGP is the condition and age of generating equipment, including the original transformers, motor-generators, pump-turbines, exciters and controls, potheads and High Pressure Fluid-Filled (‘HPFF’) plants.  Failure to maintain LPGP would result in significant loss of peaking and firm capacity from the Niagara Power Project, preventing the Project from being able to meet power contracts with the Authority’s customers.

 

“As a result of the modernization, an increase in pump efficiency will be realized; the GSUs require an increase in capacity rating to support the pumping capacity increase.  To this end, at their May 26, 2010 meeting, the Trustees approved a multi-year contract, in the amount of $6.5 million, with JSHP Transformer USA Corporation, to furnish and deliver five new GSUs, which includes one spare GSU. 

 

DISCUSSION

 

                “The scope-of-work under this contract includes the removal and disposal of the existing transformers, as well as the installation of the new GSUs procured under a separate contract (due to long lead time and coordination).  The scope-of-work also includes the demolition and replacement of the deluge fire suppression system; structural repairs to the GSU containment pits and access hatches; demolition of the oil coolers and associated piping; demolition of the GSU and feeder relay protection and installation of the new relay protection cabinets procured under a separate contract.  This work will be performed in four phases as follows:

 

                Feeder 2:  October 2011 – December 2011

                Feeder 3:  March 2012 – April 2012

Feeder 1:  October 2012 – November 2012

Feeder 4:  March 2013 – April 2013

 

                “The Authority issued an advertisement to procure bids in the New York State Contract Reporter and bid packages were available as of December 10, 2010.  The bid documents were downloaded by 87 potential bidders and 6 potential bidders participated in a site visit on December 21, 2010.

               


 

“The following three proposals were received on February 3, 2011:

 

                                Bidder                                                           Location                       Lump Sum

 

                                Ferguson Electric Construction Co.          Buffalo, NY                 $4,045,000.00

 

                                O’Connell Electric Co.                                Victor, NY                     $4,046,597.00

 

                                Eaton Corporation                                      East Syracuse, NY       $4,957,044.39

 

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

 

                “Ferguson’s bid was the lowest in price and was also technically acceptable.  Ferguson, which has extensive experience in electrical 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 estimated cost of this work is within the authorization of this project which was approved by the Trustees at their June 29, 2010 meeting; this work is included in the 2011 approved Capital Budget.  Future funding will be included in the Capital Budget request for that year.

 

FISCAL INFORMATION

 

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

 

RECOMMENDATION

 

“The Project Manager, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Procurement, the Regional Manager – Western New York and the Senior Vice President – Power Supply Support Services recommend that the Trustees approve award of a contract to Ferguson Electric Construction Co., Inc. of Buffalo, NY in the amount of $4.05 million to install the new generator step-up transformers as part of the Life Extension and Modernization program to renovate and modernize the Lewiston Pump Generating Plant.

 

“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 recommendations to the Trustees.  In response to a question from Trustee Nicandri, Mr. Canale said that this contract award is for work that is a continuation of the Project’s Life Extension and Modernization program.

 

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 Ferguson Electric Construction Co., Inc. of Buffalo, New York, in the amount of $4.05 million to install four new generator step-up transformers as part of the Life Extension and Modernization program to renovate and modernize the Lewiston Pump Generating Plant, as recommended in the foregoing report of the President and Chief Executive Officer;

 

                               

Contractor                                              Contract Approval

                               

                                Ferguson Electric Construction

                                Co., Inc.  Buffalo, NY                                        $4.05 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.

 

 
 

7.                   Niagara Power Project – Lewiston Pump Generating Plant Life Extension and Modernization Program Pothead 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 $2.96 million, to Welsbach Electric Corporation, (‘Welsbach’), of College Point, New York, an indirect wholly-owned subsidiary of EMCOR Group, Inc.,  to replace the existing transmission voltage terminations (‘Potheads’) for the 230 kV High Pressure Fluid-Filled (‘HPFF’) Cables, as part of the Life Extension and Modernization (‘LEM’) program to renovate and modernize the Lewiston Pump Generating Plant (‘LPGP’).

 

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.

 

At their June 29, 2010 meeting, the Trustees approved capital expenditures in the amount of $131 million for the Niagara Power Project’s LPGP LEM program.  The total estimated cost of the LPGP LEM program is unchanged at $460 million.

 

“The principal driver for life extension work at LPGP is the condition and age of generating equipment, including the original transformers, motor-generators, pump-turbines, exciters and controls, Potheads and HPFF plants.  Failure to maintain LPGP would result in significant loss of peaking and firm capacity from the Niagara Power Project, preventing the Project from being able to meet power contracts with the Authority’s customers.

 

“At their May 26, 2010 meeting, the Trustees approved a multi-year contract in the amount of $6.5 million with JSHP Transformer USA Corporation to furnish and deliver five new generator step-up transformers (‘GSUs’) which includes one spare GSU.  In order to take advantage of the individual outages to replace the GSUs, it would be advantageous to replace the high voltage cable Potheads simultaneously.  This would minimize future planned outages.

 

DISCUSSION

 

“The scope of work under this contract includes the disconnection, removal, disposal and replacement of the existing Potheads for the 230 kV HPFF Cables.  There are three individual cables connected between each of the four GSUs and the LPGP switchyard that contains a Pothead; each cable end has a Pothead for a total of 24 Potheads.  In addition, three spare Potheads will be procured.  This work will be performed in four phases as follows:

 

                Feeder 2:  October 2011 – December 2011

                Feeder 3:  March 2012 – April 2012

Feeder 1:  October 2012 – November 2012

Feeder 4:  March 2013 – April 2013

 

                “The Authority issued an advertisement to procure bids in the New York State Contract Reporter and bid packages were available as of December 10, 2010.  The bid documents were downloaded by 82 potential bidders and six potential bidders participated in a site visit on December 21, 2010.

               


 

“The following three proposals were received on February 3, 2011:

 

                                Bidder                                       Location                           Lump Sum

 

                                Welsbach Electric Corp.         College Point, NY            $2,957,390.00

 

                                W.A. Chester, LLC                  Lanham, MD                   $3,268,000.00

 

                                Hawkeye, LLC                        Hauppage, NY                 $3,507,937.64

 

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

 

                “Welsbach’s bid was the lowest in price and was also technically acceptable.  Welsbach, which has extensive experience in electrical 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 estimated cost of this work is within the authorization of this project which was approved by the Trustees at their June 29, 2010 meeting; this work is included in the 2011 approved Capital Budget.  Future funding will be included in the Capital Budget request for that year.

 

FISCAL INFORMATION

 

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

 

RECOMMENDATION

 

“The Project Manager, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Procurement, the Regional Manager – Western New York and the Senior Vice President – Power Supply Support Services recommend that the Trustees approve award of a contract to Welsbach Electric Corporation of College Point, New York, in the amount of $2.96 million, to replace the existing transmission voltage terminations for the 230 kV High Pressure Fluid-Filled Cable, as part of the Life Extension and Modernization program to renovate and modernize the Lewiston Pump Generating Plant.

 

“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 Welsbach Electric Corporation of College Point, New York, in the amount of $2.96 million, to replace the existing transmission voltage terminations for the 230 kV High Pressure Fluid-Filled Cables, as part of the Life Extension and Modernization program to renovate and modernize the Lewiston Pump Generating Plant, as recommended in the foregoing report of the President and Chief Executive Officer;

 

                                                                           Contractor                                                 Contract Approval

                                                Welsbach Electric Corporation,                  

                                                College Point, NY                                               $2.96 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.                   NERC Reliability Standards Compliance Security Upgrades – Capital Expenditure Authorization Request

               

 

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 $8.4 million for the North American Electric Reliability Corporation (‘NERC’) Reliability Standards Compliance security upgrades at various Authority facilities over the next three years.

 

BACKGROUND

 

“In accordance with the Authority’s Expenditure Authorization Procedures, Trustees’ approval is required for capital expenditures in excess of $3 million.

               

“NERC is the Electric Reliability Organization certified by the Federal Energy Regulatory Commission (‘FERC’) to establish and enforce reliability standards to ensure the reliability of the bulk-power system in North America.  NERC Reliability Standards are mandatory for users, owners and operators of the bulk-power system.  The Authority is registered as a Generation Owner, Generation Operator, Transmission Owner, Purchasing and Selling Entity and Load Serving Entity with NERC and, therefore, must comply with the applicable NERC Reliability Standards. 

 

“NERC’s Critical Infrastructure Protection (‘CIP’) reliability standards are a subset of the NERC Reliability Standards which define the requirements for protecting critical assets and critical cyber assets used in the bulk-power system and the systems that support those assets. NERC CIP consists of nine standards covering security of electronic perimeters, physical security of cyber assets, disaster recovery, personnel and training and security management.  

 

  “One of NERC’s statutory roles is to conduct periodic, independent assessments of the reliability and adequacy of the bulk-power system in North America.  NERC has a rigorous program of monitoring, audits and investigations and the imposition of financial penalties and other enforcement actions for non-compliance with its Reliability Standards.  Fines and civil penalties can be up to $1 million dollars per day, per violation.  NERC also issues recommendations that require specific actions be taken by registered entities.

 

“This CEAR is for security upgrades to implement the NERC CIP Reliability Standard requirements, as well as electronic and physical security mitigation measures at various Authority facilities over the next three years as part of Phase I. 

 

“Other NERC mandates are being evaluated separately with O&M funding.  Remediation of concerns encountered subsequent to the evaluation will require additional funding.  Any future NERC mandates will also require additional funding.

 

DISCUSSION

 

“NERC Reliability Standards, including the NERC CIP Standards, apply to entities that are owners, operators and users of any portion of the bulk-power system that materially impact the reliability of the system.  As a registered generator owner, generator operator, and transmission owner, the Authority must comply with the applicable NERC Reliability Standards. 

 

“The Authority has performed a review of existing critical assets, critical cyber assets and Information Technology (‘IT’) infrastructure at its generation and transmission facilities to identify a number of security upgrades (both physical and cyber) that are required for the Authority to be compliant with applicable NERC CIP Standards.  The review resulted in a need for the following NERC CIP related upgrades:

 


 

-          Establish physical security perimeters for Control Buildings and Turbine Galleries

-          Install physical security systems for exiting physical security perimeters

-          Upgrade cyber network equipment and IT firewalls

-          Upgrade physical security perimeter and electronic security perimeter procedures and documentation

 

“The identified upgrades will be required at each of the regional facilities – St. Lawrence/ FDR Power Project, Clark Energy Center, Blenheim-Gilboa Power Project, Niagara Power Project, Southeastern New York, White Plains Office – as well as remote substations.  The work is anticipated to be performed over a three-year period.

 

                “The total project cost over the three-year period is estimated at $8.4 million, as follows:

 

                                Engineering/Design                              $1,540,000                          

 

                                Construction/Installation                   $5,700,000

 

                                Authority Direct Expenses                 $   760,000

 

                                Authority Indirect Expenses              $   400,000

                               

                                                                TOTAL                  $8,400,000

 

“For the current fiscal year, $751,000 was budgeted.  Based on updated information and the recent NERC mandates, the expenditures for 2011 are anticipated to be approximately $2.9 million.

 

FISCAL INFORMATION

 

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

 

RECOMMENDATION

 

“The Senior Vice President – Power Supply Support Services, the Senior Vice President – Transmission, the Vice President – Project Management and the Vice President – Procurement recommend that the Trustees authorize capital expenditures in the amount of $8.4 million for security upgrades at various Authority facilities over the next three years.

 

“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 capital expenditures in the amount of $8.4 million for security upgrades at various Authority facilities over the next three years; 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.                   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.

 


 

10.                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.


 

11.                Next Meeting

 

The next regular meeting of the Trustees will be held on Tuesday, May 24, 2011, at 11:00 a.m., at the Clarence D. Rappleyea Building, 123 Main Street, 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 12:20 p.m.

 

 

 

Karen Delince

Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                

 

 

 

 

 

MAR MINS.11

 


 

[1]  The balance of accumulated over-collection in delivery revenues was $39.1 million through the end of January 2011, and would be adjusted to include any changes in this accumulated amount through the refund implementation date.

[2]   The NYC Governmental Customers consist of the City of New York (‘NYC’), the Metropolitan Transportation Authority (‘MTA’), the New York City Housing Authority, the Port Authority of New York and New Jersey, the State of New York Office of General Services and six smaller governmental entities located in the New York City area.

[3]   The Westchester Governmental Customers consist of the County of Westchester plus 103 cities, towns, villages, school districts, fire districts and other local government agencies located in the County of Westchester.

[4]  The B&V study consists of a Base Report dated January 2010, an Updated Report dated September 2010 and an Addendum dated March 2011.

[5]   Class 64 pertains to Commercial Industrial Redistribution.  Service Class 69 pertains to General Large.

[6]   The implementation schedule of these provisions might vary to ensure proper functioning within NYPA’s billing system.

 

[7]  The estimated over-collection in delivery revenues was developed using Con Edison delivery rates to NYPA effective April 2010 applied to historical calendar year 2009 billing determinants.

[8]   As of the end of January 2011, such accumulated charges totaled $39.1 million.