Minutes of the Regular Meeting of the Power Authority of the State of New York held via video conference at the Clarence D. Rappleyea Building, 123 Main Street, White Plains, New York at approximately 11:00 a.m.

Members of the Board were present at the following video conference locations:

John R. Koelmel, Chairman - Buffalo

Eugene L. Nicandri, Trustee - Massena

Jonathan F. Foster, Trustee - New York City

R. Wayne LeChase, Trustee - Rochester

Terrance P. Flynn, Trustee - Buffalo

Joanne M. Mahoney, Trustee - Syracuse

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Gil C. Quiniones President and Chief Executive Officer

Judith C. McCarthy Executive Vice President and General Counsel

Edward Welz Chief Operating Officer

Donald Russak Chief Financial Officer

Joseph Kessler Senior Vice President – Power Generation, Power Supply

William Nadeau Senior Vice President and Chief Risk Officer

James Pasquale Senior Vice President – Economic Development and Energy Efficiency

Paul Tartaglia Senior Vice President – Energy Resource Management

Joan Tursi Senior Vice President – Corporate Support Services

Bradford Van Auken Acting Senior Vice President and Chief Engineer – Operations Support Services

Jill Anderson Chief of Staff and Director Energy Policy – Special Projects and Business

Integration

John Canale Vice President – Project Management

Dennis Eccleston Vice President – Information Technology/Chief Information Officer

John Kahabka Vice President – Environmental, Health and Safety

Joseph Leary Vice President – Community and Government Relations

Patricia Leto Vice President – Procurement

Brian McElroy Treasurer

Karen Delince Corporate Secretary

Gerald Goldstein Assistant General Counsel – Procurement and Contract Affairs

Anne Cahill Principal Attorney II – Procurement and Contract Affairs

Michael Saltzman Director – Media Relations

Alice Conway Manager – Benefits

Gary Schmid Manager – Network Services Infrastructure

Reynaldo Salcedo Project Manager – Generation and Facility Improvements

Gennaro Caccavale Project Engineer

Ruth Colon Senior Business Integration Project Manager

Brian Wilkie Rotational BI Project Manager – Special Projects and Business Integration

Lorna M. Johnson Assistant Corporate Secretary

Sheila Baughman Senior Secretary – Corporate Secretary’s Office

Sheri L. Mooney Senior Vice President, Senior Programs Manager - First Niagara Financial Group

Jennifer Sanfilippo Partner – The Mullen Group

WGRZ-TV, Buffalo, NY

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

Introduction

Chairman Koelmel welcomed the Trustees and staff members who were present at the meeting. He said the meeting has been duly noticed as required by the Open Meetings Law and called the meeting to order pursuant to the Authority’s Bylaws, Article III, Section 3.

1. Adoption of the January 23, 2013 Proposed Meeting Agenda

On motion made and seconded, the meeting Agenda was adopted.

2. Consent Agenda:

On motion made and seconded, the Consent Agenda was approved.

With respect to item #2f (Procurement (Services) Contracts – Business Units and Facilities – Awards and Extensions), Trustee Mahoney was recused from the vote as it relates to C&S Engineering and O’Brien & Gere/Dewberry Energy Services Joint Venture; Trustee LeChase on C&S Engineering and Lewis Tree Service, Inc.; and Trustee Flynn on Lewis Tree Service, Inc. and O’Brien & Gere Dewberry Energy Services Joint Venture. Trustee LeChase said, in the interest of full transparency, he wanted the record to show that his firm had contracted with O’Brien & Gere/Dewberry in the past but currently have no direct contracts with the company; therefore, he plans to vote in favor of the resolution.

Trustee Nicandri said that since he serves on the Board of the Seaway Private Equity Corporation as a representative of the Authority, he is abstaining from the vote on item 2g (Seaway Private Equity Corporation – Grant Agreement Amendment).

a. Approval of the Minutes

The Minutes of the Regular Meeting held on December 18, 2012 were unanimously adopted.

b. Deferred Compensation Plan – Auditor for

Plan Assets – Contract Award

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the award and funding of a procurement contract to Rizzo DiGiacco & Hern, CPAs, PLLC of Pittsford, New York, to perform an annual audit of the assets of the Authority’s Deferred Compensation Plan (‘457 Plan’). The term of the contract is for five years. The total cost of the five-year contract shall not exceed fifty thousand dollars ($50,000).

BACKGROUND

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

“In March 1989, the Trustees approved the implementation of the 457 Plan. The 457 Plan was established primarily to provide those Authority employees covered by a collective bargaining agreement with a means of saving through a tax-deferred compensation program; the Plan is also available to salaried employees. Under the 457 Plan, employees may elect to defer receiving a portion of their salary and direct the investment of this deferred compensation in a selection of investments. As of December 31, 2011, the 457 Plan assets totaled approximately $65 million.

“The 457 Plan was established in accordance with Section 457 of the Internal Revenue Code and Section 5 of the State Finance Law of the State of New York. In accordance with Section 9005.1 of the rules and regulations (the ‘Regulations’) of the New York State Deferred Compensation Board (‘Board’), the 457 Plan Committee is required to annually prepare a financial statement of net assets available for benefits in accordance with Governmental Accounting Standards Board Statement 32 and to have those financial statements audited by a certified public accountant. The contract with the certified public accountant shall be awarded pursuant to the procedures set forth in Section 9003.1 of the Regulations. The 457 Plan Committee is chaired by Alice Conway; other Committee members are Paul Grozio, Michele LaPorte, Jeffrey Popiel and Donald Russak.

DISCUSSION

“On November 1, 2012, a Request for Proposals (‘RFP’) was published in the New York State Contract Reporter for a firm of certified public accountants to prepare a financial statement of the net 457 Plan assets. Bid documents were downloaded electronically from the Authority’s Procurement Web site by twenty-eight firms, including those that may have responded to a notice in the State Register. On or before November 26, 2012, the Authority received responses from the following three firms: Grant Thornton LLP, Rizzo DiGiacco & Hern, CPAs, PLLC, and Toski & Co., P.C.

“The Committee conducted the vendor selection. One of the three bidders was eliminated from further consideration based on cost. The remaining two proposals were evaluated based on experience, hourly billing rates and the number of hours projected to perform the audit. Although both firms were found to have nearly identical overall evaluated costs, the deciding factor was the lower hourly rates of Rizzo DiGiacco & Hern, CPAs, PLLC.

“Based on the foregoing reasons, the Committee recommends the award of a contract to Rizzo DiGiacco & Hern, CPAs, PLLC, the lowest-priced, most qualified bidder.

“The Trustees are requested to authorize a contract with Rizzo DiGiacco & Hern, CPAs, PLLC for a term not to exceed five years. Approval is also requested for the total amount expected to be expended for the term of the contract, $50,000.

FISCAL INFORMATION

“Funds required to support the contract for Rizzo DiGiacco & Hern, CPAs, PLLC have been included in the O&M budget. Funds for subsequent years will be included in the budgets submittals for those years.

RECOMMENDATION

“The Vice President – Human Resources recommends that the Trustees approve the award of a five-year contract to Rizzo DiGiacco & Hern, CPAs, PLLC to perform an annual audit of the assets of the 457 Plan for the years ended 2012, 2013, 2014, 2015, and 2016.

“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 a contract to Rizzo DiGiacco & Hern, CPAs, PLLC to perform an annual audit of the Authority’s 457 Plan assets is hereby approved for a period of five years commencing February 1, 2013; 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 Executive Vice President and General Counsel.

c. Information Technology Initiatives –

Capital Expenditure Authorization Request

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize capital expenditures in the amount of $3,654,800 for the implementation of Information Technology (‘IT’) Initiatives in 2013 as per the Authority’s Expenditure Authorization Procedures (‘EAPs’). These expenditures have been included in the 2013 approved Capital budget.

BACKGROUND

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

“Each year, in concert with the Business Units, IT develops a list of initiatives designed to meet the Authority’s business needs by taking advantage of evolving technology applications. These application developments have been funded from a capital program called IT Initiatives. This capital program, which has often totaled less than $3 million annually, has been approved by the Trustees in the Authority’s Capital budget each December with funds later authorized and released by the President and Chief Executive Officer during the budget year. Since the request for 2013 is greater than $3 million, the Trustees’ approval is requested as per the Authority’s EAPs.

DISCUSSION

“The following lists the 2013 IT Initiatives, along with the estimated cost of each:

Access Information Management System (AIMS) $ 500,000

The development of a new system to control the granting and revocation of access to controlled assets to ensure compliance with North American Electric Reliability Corporation (‘NERC’) Critical Infrastructure Protection (‘CIP’) requirements. This application will provide workflow notifications for employee access qualification information such as training records and background checks.

Enterprise Training Solution $ 500,000

This initiative is to address the lack of a single enterprise training/tracking application. Currently, there are several separate training solutions in place. These disparate solutions prevent easy access to training information between groups and necessitate redundant data entry and maintenance.

Comprehensive Emergency Management Plan (CEMP)
communication backbone $ 720,800
Implementation of new integration equipment to provide the ability to have inter-operability of communication between Authority facility sites and the surrounding communities in the form of phone, data, radio and video in the event of an emergency.
Facility conference room communication enhancements $ 400,000

Major expansion of the Authority’s internal communication capabilities to allow video conferencing, ‘smart boards’ and Web meetings to be conducted in all major conference rooms. These new hardware and software solutions will improve meetings and reduce the need for travel time and costs.

High Earth Orbit Satellite Phones $ 350,000

These Satellite phones are used as a means of emergency communication between NYPA’s Control centers and the New York Independent System Operator (NYISO). NYPA’s current equipment is old and obsolete. It is the intent of this initiative to replace the phones, base stations and antennas with the same type of equipment that is currently used by NYISO.

Strategy Management System $ 500,000
This project will find and implement a new solution to utilize Performance Measures, Key Performance Indicators, and a Dashboard to track and monitor business performance for the various Business Units.
Warehouse Efficiency Initiative $ 150,000
This project represents the efforts to provide improved operation at the Authority’s warehouse facilities. New barcoding hardware and software technology will be integrated into the SAP R/3 inventory and receiving procedures. Initially, this effort will be deployed for the new warehouse at the Niagara Project.
Application / Network Monitoring Fault Manager $ 360,000
New implementation of a software product to monitor production systems, provide end-to-end performance statistics and alerting capabilities to any faults with an impact assessment and facilitate corrective actions to be taken.
HQ Overhead $ 174,000

Total $3,654,800

FISCAL INFORMATION

“Payments associated with these projects will be made from the Capital Fund.

RECOMMENDATION

“The Chief Information Officer – Information Technology recommends that the Trustees approve the Capital Expenditure Authorization Request in the amount of $3,654,800 for Information Technology Initiatives.

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

Expenditure

Capital Authorization

Information Technology

Initiatives 2013 $3,654,800

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

d. Information Technology Operations Network –

Capital Expenditure Authorization Request

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize capital expenditures in the amount of $4,731,930 for the implementation of a new Operations Network as per the Authority’s Expenditure Authorization Procedures (‘EAPs’). These expenditures have been included in the 2013 approved Capital budget.

BACKGROUND

“The Authority has a heterogeneous environment of various types of telecommunication equipment that makes up the ‘Operations network’ infrastructure. This environment has grown and evolved over the past twenty years without an integrated design philosophy. A number of issues have been identified that need to be addressed:

· Cyber Security Risks – The installation of a new Operations Network will provide additional protection for the Authority in the event of a breach of its system.

· Management Difficulties – the age and variety of telecommunication circuits from numerous carriers presents many problems in ‘Outage Events.’ For example, location of the problem; who should be called; staffing skills required to support the issue; how long the issue existed; and how long it will take to clear the ‘Outage.’

· Lack of Circuit Redundancy – many of the current circuits are ‘single path’ without ‘route diversity’ and backup.

· End of Life Technology – many of the circuits the Authority depends on are being phased out by the carriers.

DISCUSSION

“The current infrastructure that has evolved over the past twenty years supports operations at the Authority’s facilities. The types of uses include inter-facility communication of ‘Real-Time Systems,’ telemetry data acquisition for Supervisory Control and Data Acquisition (‘SCADA’) and Energy Management System (‘EMS’), communication for Remote Terminal Units (‘RTUs’), Access Control, Security, Video Surveillance, Radio communication, Protection Relay’s communication and communication with the New York Independent System Operator (‘NYISO’) and other utilities.

“The project requires the building of a new Operations Network, separate from the business Local Area Network (‘LAN’), based on new technology – Multi-Protocol Label Switching (‘MPLS’) – provided by a single carrier. This new environment will have security and monitoring built in from the ground up in order to meet and exceed current North American Electric Reliability Corporation (‘NERC’) Critical Infrastructure Protection (‘CIP’) compliance and audit requirements.

“The establishment of this new MPLS infrastructure will provide the following:

Aggregate all circuits under one contract with a single carrier
Segregation of the Operations Network from the Corporate Business Network
Provide a new environment to monitor all Operations Circuits for Cyber Security
Provide a Centralized Management of the Status and Health of all circuits
Reduce Costs of Operation

“This project is a multi-year effort that will begin in 2013 and should be completed in early 2015. It will involve engineering design, new hardware and software, installation and testing. The major components of the funding are as follows:

Engineering Design, Hardware, Software, vendor labor $ 2,800,000
NYPA staff labor at HQ and Facilities $ 1,706,600

HQ Overhead $ 225,330

Total: $ 4,731,930

FISCAL INFORMATION

“Payments associated with these projects will be made from the Capital Fund.

RECOMMENDATION

“The Chief Information Officer – Information Technology recommends that the Trustees approve the Capital Expenditure Authorization Request in the amount of $4,731,930 for Operations Network.

“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.

Expenditure

Capital Authorization

Information Technology

Operations Network $4,731,930

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 Executive Vice President and General Counsel.

e. SAP Maintenance and Support Services – Operating

Expenditure Authorization and Contract Award

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize operating expenditures in the total amount of $1.6 million and approve the award of a five-year contract to Rimini Street, Inc. (‘Rimini’) of Las Vegas, Nevada, in the amount of $1.6 million for the maintenance and support of the Authority’s suite of SAP programs. This support includes, but is not limited to, telephone/Web site/e-mail, resolution of software issues, enhancements, and business-driven updates and consulting services to provide any additional support that may be required on an ‘as needed’ basis.

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 (EPAs’), 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 acquired and implemented the SAP Enterprise Resource Program (‘ERP’) in 1998. For the past 14 years the Authority has expanded its SAP presence to include SAP’s Business Warehouse, Business Objects, and Portal product offerings. During this time, the ERP was upgraded from version 3.1H to version 4.7 and subsequently to its current release of ECC 6.0. In addition, the other SAP products were also upgraded to support the changing ERP environment. According to SAP, the current ECC 6.0 release of the ERP is expected to remain in effect until 2017.

“For the first nine years of the Authority’s SAP practice, SAP solely possessed the ability to provide SAP maintenance and support. However, over the past five years third-party providers have entered the SAP maintenance marketplace. These providers offer the support of the SAP software but are unable to offer new releases of the SAP software. This ability to acquire new releases represented the value added of retaining a Maintenance Agreement directly with SAP.

“SAP’s project support of its ECC 6.0 release until 2017 affords the Authority the ability to look beyond SAP for maintenance and support and to potentially reduce its SAP maintenance costs.

DISCUSSION

“The Information Technology (‘IT’) group, in an effort to reduce its SAP maintenance costs while ensuring the appropriate level of support is maintained for its SAP suite of software, investigated the feasibility of utilizing a third-party SAP maintenance provider.

“The Authority placed a Request for Quotation (‘RFQ’) in the New York State Contract Reporter and bid packages for SAP Maintenance Services were available as of October 3, 2012. Five proposals were received on November 8, 2012. After several post-bid inquiries, the following bids were received and evaluated:

Bidders	One Year Bid Price	Five Year Bid Price
Spinnaker Support LLC	$210,000	$1,050,000
Rimini Street Inc.	$304,418	$1,568,514
SAP	$656,303	$3,281,515
Purple Genie	$1,736,000	$8,012,825
Quintel Management Consultants Inc	$1,996,368	$11,070,632
NYPA Fair Cost Estimate	N/A	N/A

“The proposals were reviewed by an evaluation committee comprising of Authority staff from IT and Procurement.

“Spinnaker Support LLC (‘Spinnaker’) was eliminated as a candidate based on its limited SAP practice. Spinnaker has been supporting SAP for less than one year and has less than ten SAP accounts. Of these accounts, none encompass SAP customer billing, a critical component of the Authority’s SAP environment.

“Rimini Street, Inc. (‘Rimini’) has maintained an SAP practice for five years and has more than one hundred SAP support customers. Rimini was the first to introduce SAP support and has maintained its position as the leader in the SAP maintenance provider market. In addition, the company possess SAP customer billing expertise.

“SAP, the Authority’s current provider, offers the most comprehensive support but at a significantly higher price.

“The remaining two vendors, Purple Genie and Quintel Management Consultants Inc. failed to submit bids to provide SAP support services. They submitted bids to provide SAP consulting services to augment the Authority’s existing staff and were therefore rejected for not meeting the RFQ requirements.

FISCAL INFORMATION

“Payments associated with this project will be made from the Authority’s Operating Fund.

RECOMMENDATION

“The Senior Vice President – Corporate Support Services, the Vice President Information Technology and Chief Information Officer and the Vice President – Procurement recommend that the Trustees authorize operating expenditures in the amount of $1.6 million and approve the award of a multi-year contract to Rimini Street, Inc. of Las Vegas, Nevada, in the amount of $1.6 million for the support and maintenance of the Authority’s SAP product suite.

“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 and the Authority’s Expenditure Authorization procedures, approval is hereby granted to authorize the operating expenditures and award of a multi-year contract to Rimini Street, Inc. in the amount of $1.6 million to furnish SAP maintenance and support services as recommended in the foregoing report of the President and Chief Executive Officer;

Contract

Contractor Approval

Rimini Street, Inc. $1.6 million

Las Vegas, NV

f. Procurement (Services) Contracts –

Business Units and Facilities –

Contract Awards

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the award and funding of the three multiyear procurement (services) contracts listed in Exhibit ‘2f-A,’ in support of projects and programs for the Authority’s Operations Business Unit/Departments and Facilities, as well as for the Governmental Customer Energy Services Program. Detailed explanations of the recommended awards, 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 were previously set forth in Agenda Items 2c and 6, respectively, at the December 18, 2012 Trustees’ Meeting.

BACKGROUND

“The proposed awards to C&S Engineers, Inc. and Lewis Tree Service, Inc., included in the aforementioned December Consent Agenda Item 2c, as well as the proposed award to O’Brien & Gere / Dewberry Energy Services Joint Venture, included in December Discussion Agenda Item 6, were not adopted by the Trustees because they were unable to attain the required number of votes based on conflicts of interest filed by some of the Board members. Therefore, the proposed awards to these three firms are resubmitted for the Board’s consideration with the intent of achieving the required quorum for adoption.

DISCUSSION

“A detailed summary of each recommended contract award was set forth in the respective Items at the December 18, 2012 meeting; a brief synopsis follows.

“At their meeting of December 18, 2012, staff recommended (Item 2c) the award of contracts to 12 firms (Q12-5249) to provide for ‘on-call, as required’ consulting engineering services to support the operation and maintenance of the Authority’s hydroelectric, pumped storage and fossil-fuel generation projects, as well as its transmission and other ancillary facilities throughout New York State. For the reasons stated above, the Trustees approved the award of contracts to 11 of these firms and an aggregate total amount of $15 million. Staff now resubmits a request for approval to award a contract to the 12thfirm, C&S Engineers, Inc. (‘C&S’), to enable the Authority to utilize the firm’s specialty skills and expertise, as needed. The contract would become effective on or about February 1, 2013 for an intended term of approximately five years (through December 31, 2017, coterminous with the other 11 previously-approved contract awards), subject to the Trustees’ approval, which is hereby requested. C&S Engineers would share in the previously-approved aggregate total.

“In the same Item, staff also recommended the award of a contract to Lewis Tree Service, Inc. (‘Lewis Tree’) (Q12-5315) to provide for Right-of-Way (‘ROW’) vegetation management services for the next four-year treatment cycle, including various chemical and mechanical/manual treatments, over a range of vegetation sites within the ROW of high-voltage transmission lines under the Authority’s maintenance jurisdiction, covering approximately 16,000 managed acres. However, this proposed award was not adopted due to the reasons indicated above. Staff therefore resubmits a request for approval to award a new contract to Lewis Tree for the subject services, which are required by various regulatory agencies including, but not limited to, the Federal Energy Regulatory Commission (‘FERC’), the National Electric Reliability Council (‘NERC’) and the New York State Public Service Commission (‘NYS PSC’). The contractor will supply all necessary labor, supervision, materials, chemicals, tools and equipment to control undesirable target trees along more than 1,400 miles of high-voltage transmission lines. The new contract would become effective on or about April 1, 2013 for an intended term of up to four and one-half 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, $9 million.

“At their meeting of December 18, 2012, staff recommended (Item 6) the award of contracts to 19 firms (Q12-5243) to provide for various services to support the Authority’s Governmental Customer Energy Services Program (‘GCESP’), including any or all of the following: energy auditing, engineering and design, construction management and construction trade management services, as well as procurement of equipment and installation services. Due to the reasons stated above, the Trustees approved the award of contracts to 18 of these firms and an aggregate total amount of $750 million. Staff now resubmits a request for approval to award a contract to the 19th firm, O’Brien & Gere / Dewberry Energy Services Joint Venture, to enable the Authority to avail itself of their experience and expertise, as needed, in auditing, design, construction management and turnkey implementation services in connection with the GCESP. The contract would become effective on or about February 1, 2013 for a term of approximately five years (through December 31, 2017, coterminous with the other 18 previously-approved contract awards). O’Brien & Gere will share in the previously-approved aggregate total.

FISCAL INFORMATION

“Funds required to support contract services for the Operations Business Unit/Departments and Facilities have been included in the 2013 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. Payment for the contract in support of the Governmental Customer Energy Services Program will be made from the Commercial Paper Program, the Operating Fund and the Petroleum Overcharge Restitution (‘POCR’) Fund, as further set forth in December Agenda Item 6.

RECOMMENDATION

“The Senior Vice President – Operations Support Services and Chief Engineer, the Senior Vice President – Power Generation, the Vice President – Engineering, the Vice President – Procurement, the Acting Vice President – Transmission, the Vice President – Energy Efficiency, the Regional Manager – Northern New York, the Regional Manager – Western New York, the Regional Manager – Central New York and the Regional Manager – Southeastern New York recommend that the Trustees approve the award of multiyear procurement (services) contracts to the three companies listed in Exhibit ‘2f-A,’ for the purposes and in the amounts discussed herein and/or listed in Exhibit ‘2f-A.’

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

The following resolution, as submitted by the President and Chief Executive Officer, was adopted with Trustees Flynn and Mahoney being recused as it relates to the aforementioned companies.

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the award and funding of the three multiyear procurement services contracts set forth in Exhibit “2f-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 as further set forth in Agenda Items 2c and 6, respectively, at the December 18, 2012 Trustees’ Meeting; and be it further

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

g. Seaway Private Equity Corporation –

Grant Agreement Amendment

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve an amendment to the Amended and Restated Grant Agreement with the Seaway Private Equity Corporation (‘SPEC’) to increase the amount set aside for legal and administrative expenses by authorizing SPEC to use the interest earned on the unexpended principal for such expenses.

BACKGROUND

“By resolution approved September 20, 2005, as part of the St. Lawrence Relicensing Settlement Agreements, the Trustees authorized the Authority to negotiate the terms and conditions of a grant agreement (‘Grant Agreement’) with a St. Lawrence County not-for-profit corporation, subsequently incorporated as SPEC. Pursuant to that grant agreement, the Authority would provide a grant of $10 million to be invested by SPEC under a capital commitment agreement (‘Capital Commitment Agreement’) with Golden Technology Management, LLC (‘Golden’). Golden, in turn, would raise an additional $20 million in private equity funds for the purpose of establishing a pool for investments in technology businesses to promote economic development and increase employment and the tax base in St. Lawrence County.

“The original Grant Agreement was amended (‘Amended and Restated Grant Agreement’) to: (i) clarify the definitions of business development firms in which SPEC may invest, (ii) allow SPEC to invest in firms other than Golden, (iii) allow SPEC to invest in firms that are not ‘new technology’ firms (requiring a two-thirds vote of the SPEC Board), and (iv) require that the Authority approve any alternate business development firms prior to SPEC investment.

“On July 28, 2009, the Trustees approved two amendments to the Amended and Restated Grant Agreement with SPEC to: (i) authorize SPEC to waive provisions of the standard-form Amended and Restated Capital Commitment Agreement upon a vote of two-thirds of its Board of Directors and (ii) increase the amount set aside for legal and administrative expenses, from $250,000 to $500,000 by authorizing SPEC to use the interest earned on the principal for such expenses.

“Since its inception, SPEC has invested approximately $6,899,824.00 of the original $10,000,000 in firms located in St. Lawrence County. The fund has a balance of $3,803,723.72 (including earned interest less expenses).

“SPEC has now requested that the cap on administrative expenses be increased from $500,000 to $750,000. Currently, approximately $450,000 has been expended by SPEC for administrative expenses. To date, the principal grant amount has earned $1,151,189.66 in interest. It is recommended that the cap on administrative expenses be increased to $750,000, with such increase to be paid out of the interest earned.

RECOMMENDATION

“The Executive Vice President and Chief Financial Officer recommends that the Trustees approve an amendment to the Amended and Restated Grant Agreement with the Seaway Private Equity Corporation to increase the amount set aside for legal and administrative expenses from $500,000 to $750,000 using the interest earned on the principal for such expenses.

“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 adopted with a vote of 5-1with Trustee Nicandri abstaining.

RESOLVED, That an amendment to the Amended and Restated Grant Agreement with the Seaway Private Equity Corporation (“SPEC”) to increase the amount set aside for legal and administrative expenses from $500,000 to $750,000 using the interest earned on the principal for such expenses, be, and hereby is, approved on the terms set forth in the foregoing report of the President and Chief Executive Officer; and be it further

h. Transmission Life Extension and Modernization

Program - On-Call Engineering and Project

Management Services – Contract Award

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to award a five-year contract for the On-Call Engineering and Project Management Services for the Authority’s Transmission Life Extension and Modernization (‘T-LEM’) program in the aggregate not-to-exceed amount of $10 million to the three most technically acceptable bidders - CH2M Hill Inc. (‘CH2M’) of Englewood, CO; CHA Consulting Inc. (‘CHA’) of Albany, NY; and RCM Technologies Inc. (‘RCM’) of Pennsauken, NJ.

BACKGROUND

“In accordance with the Authority’s Expenditure Authorization Procedures, the award of Personal Services contracts in excess of $1 million and contracts exceeding a one-year term require Trustee approval.

“T-LEM is a multiyear program that will upgrade the Authority’s existing transmission system to maintain availability, increase reliability, and ensure regulatory compliance. The Program encompasses Authority transmission assets in the Central, Northern and Western regions and has been divided into several projects. The Program is estimated to cost $726 million and includes:

- Upgrades, refurbishments and replacements associated with switchyards and substations

- Transmission line structures or towers and associated hardware, including tower painting

- Replacement of the submarine cable on PV-20

- Work along rights-of-way, including access roads

“The scope is a result of internal and external assessments and recommendations. Funding will be requested in a tiered approach for each project as the complete plan of work develops.

“In order to supplement the Authority’s resources and ensure the proper implementation of the T-LEM program, additional engineering and project management services are required.

DISCUSSION

“In response to the Authority’s request for proposal (‘RFP’) advertised in the New York State Contract Reporter on June 21, 2012, eighty-one firms downloaded the bid documents and twelve proposals were received on July 26, 2012 for On-Call Engineering and Project Management Services.

“The proposals were evaluated based on:

- Price

- Resource availability

- Transmission industry experience

“The proposals were first ranked from a cost standpoint. After the proposals were ranked by cost, each proposal was individually evaluated from resource availability and transmission industry experience standpoints. For consideration of an award, the firms were required to have, at a minimum, prior experience with designing, managing and implementing transmission or distribution related projects and availability of internal resources to support the Authority’s T-LEM program.

“CH2M, CHA and RCM (the ‘Firms’) are considered the lowest-priced, technically qualified bidders. The Firms did not take any exception to the bid documents. They were interviewed to determine their capabilities, experience and resource availability.

“The Firms demonstrated the capability and experience required to successfully execute and implement transmission related projects. The Firms’ experience and capabilities were validated by their prior experience working with the Authority or other New York State transmission owners. In addition, the Firms’ experience included facility construction projects which will support the Authority’s facility upgrade projects for the Plattsburgh and Saranac substations.

“The Firms will provide a dedicated team of experts that will bring knowledge and experience from a wide range of transmission projects. The Firms will support the Authority’s T-LEM program by providing project management, construction management and engineering services. These services include project administration, scheduling, cost estimating, cost control, design, drafting, constructability reviews, construction inspections, quality assurance, project controls and document management.

“Services under this contract will be provided on an as-needed basis and/or availability, using the hourly rates presented in the proposals.

FISCAL INFORMATION

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

RECOMMENDATION

“The Senior Vice President and Chief Engineer – Operations Support Services, the Vice President – Project Management, the Vice President – Procurement and the Project Manager recommend that the Trustees approve the award of a five-year contract for the On-Call Engineering and Project Management Services for the Authority’s Transmission Life Extension and Modernization program in the aggregate not-to-exceed amount of $10 million to CH2M Hill Inc., CHA Consulting Inc., and RCM Technologies Inc.

“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 authorize the award of a five-year contract for the On-Call Engineering and Project Management Services for the Authority’s Transmission Life Extension and Modernization program in the aggregate not-to-exceed amount of $10 million to CH2M Hill Inc., CHA Consulting Inc., and RCM Technologies Inc., as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

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

i. Release of Funds in Support of the Residential

Consumer Discount Program Incorporated in the

Recharge New York Power Program

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the release of funds during 2013 in support of the of the monthly Residential Consumer Discount Program incorporated in the Recharge New York (‘Recharge NY’) Power Program, as authorized by Chapter 60 of the Laws of 2011. A portion of the approximately $8.3 million per month authorized for the Residential Discounts in 2013 ($100 million in total) is to be off-set mainly from the sale of unallocated Recharge NY hydropower into the wholesale market such that the net cost to the Authority of the Discounts in 2013 is estimated to be approximately $34 million. The release of these funds was anticipated and reflected in the Authority’s 2013 Operating Budget approved by the Trustees at their December 18, 2012 meeting.

BACKGROUND

“The Authority is requested, from time to time, to make financial contributions and transfers of funds to the State or to otherwise provide financial support for various State programs including the Residential Consumer Discount Program related to Recharge NY.

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

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

DISCUSSION

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

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

“The Authority is authorized to use the revenues from the sale of the withdrawn power, together with any other funds of the Authority as the Trustees may deem feasible and advisable, to support the Residential Consumer Discount Program. The net cost to the Authority of the Residential Discounts after taking into account the resale of the power following the withdrawal from its prior use to supply certain utility companies for the benefit of their residential consumers, is projected to be $34 million for 2013. Given the volatility in market prices, however, there is no assurance that the sale of this power will produce sufficient revenues to cover this amount of the residential discounts.

“The Trustees have previously approved the release of funds in support of the Residential Consumer Discount Program, the most recent action being taken at the July 31, 2012 meeting. Under consideration today are payments for 2013. Staff intends to return to the Trustees with a recommendation as to the release of any future amounts related to the Residential Consumer Discount Program based on how the overall program is progressing as well as the financial circumstances of the Authority at the time such payments are to be considered.

“Staff has reviewed the effects of the anticipated payments of the Residential Consumer Discount Program (up to $100 million) on the Authority’s projected financial position and reserve requirements. In addition, in accordance with the Board’s Policy Statement, staff calculated the impact of these amounts on the Authority’s debt service coverage ratio and determined it would not fall below the 2.0 reference point level. Given the current financial condition of the Authority, its estimated future revenues, operating expenses, debt service and reserve requirements, staff is of the view that it will be feasible for the Authority to provide up to $100 million of the Residential Consumer Discount Program at this time.

FISCAL INFORMATION

“Staff has determined that sufficient funds are available in the Operating Fund to provide up to $100 million in support for the Residential Consumer Discount Program authorized by the Recharge NY program at this time and that such Authority funds are not needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s Bond Resolution. The release of up to $100 million associated with the Residential Consumer Discount Program payments was anticipated and reflected in the Power Authority’s 2013 Operating Budget approved by the Trustees at their December 18, 2012 meeting. The net cost to the Authority after consideration of the value of the unallocated power being sold into the wholesale market is estimated to be $34 million during 2013. These monthly payments will be recorded as an expense at the time of payment.

RECOMMENDATION

“The Treasurer recommends that the Trustees affirm the release of up to $100 million related to Residential Consumer Discount Program is feasible and advisable and to authorize such payments.

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

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

RESOLVED, That the Trustees hereby authorize the release of up to $100 million from the Operating Fund during 2013 to support the monthly Residential Consumer Discount Program as authorized by the Recharge New York Power Program as set forth in Chapter 60 of the Laws of 2011 as discussed in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That the amount of up to $100 million to be used for the Residential Consumer Discount Program described in the foregoing resolutions is not needed for any of

the purposes specified in Section 503(1)(a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

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

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

3. Discussion Agenda:

a. Report of the President and Chief Executive Officer

President Gil Quiniones said that in the year 2012, the Authority had performed well in each of the performance metrics outlined in the Performance Scorecard. He said although the metrics indicate that the Authority did not meet its goals in environmental and safety incidents, it had performed above industry standards. He said the Authority will be examining leading indicators and actions that can be implemented to improve and enhance its safety and environmental record.

CORPORATE MEASURES

President Quiniones said that for the year 2012 the Authority exceeded its Net Income target. Operations and Maintenance was under budget by approximately $7 million, and this was due mainly to reductions in Authority overhead and indirect costs. He said that Standard & Poor’s revised its credit outlook for NYPA to positive from stable and that Fitch reaffirmed NYPA’s AA credit rating.

Trustee Nicandri said he wanted to acknowledge the efforts of former Vice Chairman John Dyson who worked diligently to stabilize the Authority’s bond rating. President Quiniones added that former Vice Chairman Dyson assisted the Authority in filing its new hydro rates and planning its transmission rate case. He was also very instrumental in restructuring and strengthening the Authority’s financial position by his recommendations to discontinue projects, such as the Great Lakes Off-shore Wind and the 100 MW Solar projects, which were not cost-effective. Trustee Mahoney said she serves on the Moreland Commission with former Vice Chairman John Dyson and would covey the Board's comments to him.

President Quiniones continued that during the year 2012 the Authority invested approximately $124 million in upgrading its aging infrastructure. He said the Authority also invested approximately $260 million in energy efficiency projects, a very significant achievement by the Authority’s Energy Efficiency division which mandate is to ensure that the Authority supports the Governor’s “Build Smart New York” initiative by making the State’s public buildings, schools and hospitals energy efficient.

St. Lawrence/FDR Power Plant

President Quiniones said that the Authority completed the St. Lawrence/FDR Power Project’s Life Extension and Modernization program on time and under budget. He said that this 15-year project involved the renewal of 16 units at the Authority’s hydroelectric project in upstate New York. President Quiniones said that the Trustees approved an investment of $726 million for a period of 15 years for the Life Extension and Modernization Program to renew the Authority’s transmission system. The Trustees also approved a $460 million investment to upgrade the Authority’s Lewiston Pumped-Generating unit at the Niagara Power Project. President Quiniones ended by saying that the investments in the Authority’s infrastructure are consistent with the Governor's policy, under the “New York Works” Program to renew the State’s infrastructure.

Diversity, Environmental Justice and Sustainability

President Quiniones said that the Authority has launched a Diversity Program with the goal of generating excellence through diversity and inclusiveness. He said that the Authority has also launched an Environmental Justice program which goal is to generate energy and environmental equality by ensuring that communities that are disproportionately impacted by the Authority’s facilities are treated fairly and that the Authority is operating in a sustainable manner.

KEY INITIATIVES:

Recharge New York (“RNY”)

President Quiniones said last year the Governor requested that the Authority support three initiatives. Following the Board’s approval, Authority staff launched the RNY Power Program which was very successful. The program allows for the allocations of low-cost hydropower to eligible businesses in an effort to support the retention and creation of jobs, especially in upstate New York.

New York Energy Highway

President Quiniones said that the Energy Highway Task force issued, and the Governor accepted, the actions recommended in the New York Energy Highway Blueprint to revitalize New York State’s generation and transmission infrastructure. By June 2013, all of the actions recommended in the Blueprint are scheduled to be launched. President Quiniones said more than $5 billion will be invested in this initiative by its scheduled completion date of 2020.

Build Smart NY

President Quiniones said the Governor requested that the Authority take the lead in the “Build Smart NY” initiative. The program, scheduled for 5 – 7 years, will provide $800 million in low-cost financing, turnkey energy efficiency services to ensure that the State’s public facilities, and also county, municipal and local buildings are energy efficient.

In closing, President Quiniones said 2012 was a banner year for the Authority and thanked Authority staff for a job well done. He also thanked the Trustees for their support, guidance and advice during the year.

Chairman Koelmel said that on behalf of the Trustees, he commended President Quiniones for his leadership in guiding the Authority on a positive path.

b. Report of the Chief Operating Officer

Mr. Edward Welz provided highlights of the report to the Trustees.

Generation

· Generation market readiness was 99.2 percent in December 2012, compared with the monthly target of 99.4 percent. Year-to-date generation market readiness was at 99.7 percent.

· In 2012, the Operations Business Unit (“Operations”) requested Enterprise Risk Management to collaborate and better define the Generator Market Readiness targets for 2013.

· Operations continue to collaborate with Enterprise Risk Management on Workforce Development and Succession Planning.

· Operations is also collaborating with Enterprise Risk Management to identify a more quantitative method for prioritizing and planning its Capital and O&M budget.

In December, there were no significant unplanned generation events.

· St. Lawrence Unit 28 remains out-of-service due to rotor repairs. Expected return-to- service date is 02/15/2013.

· B-G Unit #2 failed Generator Step-Up transformer has been removed and replaced with the pre-LEM spare transformer. B-G Operations is collaborating with Engineering/Asset Management to ensure real-time monitoring of equipment is properly calibrated.

Transmission Performance

Transmission reliability in December 2012 was 97.43 percent, which was above the target of 95.91 percent. Year-to-date, transmission reliability is 97.64 percent; this is above the target of 96.56 percent.
There were no significant unplanned transmission events to report in December.

Environmental

There were three reportable environmental incidents for December 2012. For the year, there have been 35 reportable incidents against a target of 29.

· Operations implementing leading measures in 2013, including job briefings, implementation and tracking of specific EPRI “Good Management Practices” recommendations.

Safety

NYPA did not achieve its target for the Safety Recordable Incidents Rate. However, it should be noted that NYPA’s target is intentionally aggressive, and NYPA has performed above industry standards.

In response to Safety issues, Operations has taken some steps to address this concern in 2013:

· In collaboration with the Technical Training Department and consultant, Beacon Associates, Operations is implementing a comprehensive safety training matrix.

· Colden Corporation provided a draft report evaluating the practices in the Authority’s SENY Region.

· Colden will also assist in the design of a safety management system.

· After an in-depth review, staff will determine if there is anything in the recommendations that warrant Board action.

· Joe Kessler has been assigned as executive sponsor of the SAWC – immediate action items from each region will be addressed.

· Mandated Monthly Training in all regions.

· Creating a measure to track “close-out” of near-miss reports.

· Tracking Severity Rate.

Key Issues:

Life Extension and Modernization Projects (“LEM”)

· The Authority completed the St. Lawrence Power Project’s LEM, and maintained its schedule of the Lewiston Pumped-Generation Project’s LEM.

· The Authority will move forward on its Transmission-LEM and small hydro LEMs in 2013.

Compliance

· Authority met all FERC commitments and compliance in 2012, and had no penalties for violations of NERC Reliability Standards.

· Authority continues to demonstrate its robust culture of compliance… this will be a moving target as staff identify impacts of the new BES definition.

· Environmental challenges with deconstruction of the Poletti Plant.

Emergency Preparedness

· Successful development of Emergency Operation Centers and regular functional exercises enhanced the Authority’s preparedness during Super-storm Sandy.

· Staff will be taking a serious look at lessons learned in 2013, and will keep the Board advised.

Personnel

· Rebuilt Leadership Team - 75% of Operations staff are in different roles than they were in 2012.

· Operations collaborating with HR on interview process to select Vice President of Transmission.

· In 2013, Operations is committed to the development of staff to strengthen the Unit.

· Reviewed Operations in 2012 in terms of “best in class” training, environmental targets and Occupational Health & Safety Management Systems.

· Staff Development – Technical Training – implementing recommendations to close gaps in becoming “Best in Class”

· Operations continue to work collaboratively with UWUA and IBEW as negotiations continue.

Global Sourcing and Quality Control:

Operations will address the Board’s concerns on Global Sourcing and Quality Control and will give a full report at an upcoming Board meeting on some of the measures now being taken, and propose, going forward, to protect NYPA’s interests (IP, QA, Costs, etc.) in procuring specialized equipment.

In response to a question from Trustee LeChase, Mr. Welz said the leading measures for safety and environmental incidents and the plan to achieve them will be included in the Reports. Also, additional definitions will be added to each of the incidents.

In response to a question from Trustee Nicandri, Mr. Welz said each facility has a target for reporting “near misses.” However, staff has concluded that, although the target is good measure, a better leading measure would be the percentage of “near misses” that were addressed; staff will therefore be tracking the percentage of “near misses” in 2013.

c. Report of the Chief Financial Officer

Mr. Donald Russak provided highlights of the financial report to the Trustees. He said that based on the Performance Scorecard, the Authority performed very well financially for the year 2012. Net Income for the year was $175 million versus budget of $167 million. Overall, it was a very positive year for the Authority and its customers. He continued that, as President Quiniones pointed out, two of the rating agencies have reaffirmed the Authority’s rating; Fitch Ratings at AA and Standard & Poor’s at AA-, changing the outlook to positive.

For the year 2013, Mr. Russak said that the Authority has projected Net Income of $130 million. He said, with regard to Authority risk, staff will be tracking its operations and maintenance and capital investments during the year to ensure that these expenditures remain on target. With respect to the payments to the State, the Authority has included this payment in its budget plan for 2013. Mr. Russak concluded by saying that, overall, the Authority is projecting another positive year for 2013.

In response to a question form Chairman Koelmel, President Quiniones said that the Authority is in the process of preparing its metrics for 2013 and will present it to the Board at the next meeting. In addition, the Authority is also organizing a Strategic Planning session to discuss its outlook for 2013 and plans for the next five years and he will also report on its progress at the next Board meeting.

4. St. Lawrence/FDR Power Project – Generator Step-up

Transformer Replacement – Capital Expenditure

Authorization Request and Contract Award

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize capital expenditures in the amount of $36.0 million for the engineering, design, manufacture, shipment, installation, testing and commissioning of twelve single phase generator step-up (“GSUs”) transformers and one spare dual voltage transformer (The ‘Program’) as replacements for the existing units at the St. Lawrence/FDR Power Project. The Trustees are also requested to approve the award of a multi-year turnkey services contract in the amount of $22.2 million to ABB Inc. of Raleigh, NC, to design, fabricate, test, deliver and install these transformers. The President and Chief Executive Officer has approved $138,000 for Preliminary Engineering.

BACKGROUND

“The Authority’s Expenditure Authorization Procedures (EPAs’), 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 St. Lawrence/FDR Power Project (‘STL’) has sixteen generating units and has been in operation since 1958. A group of four generating units terminate into GSU bank, for a total of four banks. Each bank consists of three GSUs for a total of twelve, single phase, 86MVA GSUs (six at 13.2kV/115kV and six 13.2 kV/230kV), and one dual-winding (115kV/230kV) spare GSU, that is configured to provide back-up in case of a single unit failure.

“The GSUs and the dual-winding spare are original plant equipment. The units are to be replaced as they are approaching the end of design life and pose the risk of a transformer failure. At STL, any single GSU failure could take four generators out of service, and due to the long lead time (1.5 years) for a replacement of a GSU, it could result in a significant loss of generation revenues.

DISCUSSION

“In response to the Authority’s Request for Proposals (‘RFP’) advertised in the New York State Contract Reporter on June 6, 2012, one hundred and eight firms downloaded the bid documents and eight proposals were received on August 8, 2012 for procurement and associated services for twelve GSUs.

“All proposals were evaluated by a committee of Authority Engineering, Plant Maintenance and Operations, Quality Assurance, Asset Management, Project Management and Procurement staffs.

“The proposals were evaluated based on:

- Compliance with commercial, technical and quality assurance requirements

- Transformer Load Losses

- Price

- Engineering and Quality Assurance support and travel associated with overseeing the design, fabrication, and testing.

“As part of the bid evaluation process, written technical clarifications were required of all bidders. Follow-up clarifications were requested of the technically qualified bidders to provide written clarifications of their manufacturing and design capabilities, understanding of the bidding documents, and shipping and transportation logistics. An optional price for one spare dual-winding GSU to be furnished as part of the scope-of-work was requested from the two lowest-cost, technically qualified bidders.

“As set forth in the award recommendation, ABB was determined to have submitted the lowest, evaluated bid. ABB demonstrated an understanding of the project and the ability to successfully complete the project as planned.

“ABB is the original manufacturer of the existing STL GSUs. The company has the most familiarity of the STL site and staff and holds the design records for the existing GSUs.

“The Program work will be performed over a five-year period with design taking place in 2013. Manufacturing, shipment, installation, testing and commissioning will commence in 2014 and will be completed in 2017.

“The capital expenditure authorization request is compromised of the following:

Preliminary Engineering (previously authorized) $ 138,000

Engineering and Design $ 880,000

Procurement $ 24,358,000

Construction/Installation $ 7,590,000

Authority Indirect and Direct Expenses $ 3,020,000

TOTAL: $ 35,986,000

FISCAL INFORMATION

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

RECOMMENDATION

“The Senior Vice President and Chief Engineer – Operations Support Services, the Vice President – Project Management, the Vice President – Engineering, the Acting Vice President – Transmission, the Vice President – Procurement, the Project Manager, and the Regional Manager – Northern New York recommend that the Trustees authorize capital expenditures in the amount of $36.0 million and approve the award of a multi-year contract to ABB Inc., in the amount of $22.2 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.”

Mr. John Canale presented highlights of staff’s recommendation to the Trustees. In response to a question from Trustee Foster, Mr. Canale said eight firms provided proposals in response to the Authority’s Request for Proposals (“RFP”); six of these bidders’ proposals did not comply with the technical requirements of the specification and were eliminated from consideration, therefore, only two bidders were evaluated. In response to further question from Trustee Foster, Mr. Canale said the $3 million allocated for Authority Indirect and Direct expenses is for existing expenses and is approximately ten percent of the overall capital costs for support staff and administrative costs.

In response to a question from Trustee Nicandri, Mr. Canale said the contractor provided the original equipment at the St. Lawrence Project and added that the new transformers will be fabricated in St. Louis, Missouri.

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 $36.0 million are hereby authorized in accordance with, and as recommended in, the foregoing report of the President and Chief Executive Officer; and be it further;

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a multi-year contract to ABB Inc. of Raleigh, NC, in the amount of $22.2 million to provide twelve generator step-up transformers and one dual voltage transformer for use at the St. Lawrence/FDR Power Project, as recommended in the foregoing report of the President and Chief Executive Officer:

Contractor Contract Approval

ABB Inc. $22.2 million

Raleigh, NC

5. 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. Upon motion made and seconded an Executive Session was held.

6. Motion to Resume Meeting in Open Session

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

7. Next Meeting

The next Regular Meeting of the Trustees will be held on February 26, 2013, at 11:00 a.m., at the Clarence D. Rappleyea Building in White Plains, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.