MINUTES OF THE MEETING
March 21, 2013
Table of Contents
Subject Page No. Exhibit
1. Adoption of the March 21, 2013 Proposed Meeting Agenda 3
2. CONSENT AGENDA: 4
a. Minutes of the Regular Meeting held on December 18, 2012 5
Authorization Procedures and Guidelines for Procurement
Contracts and for Personal Property Disposal
e. Recent Developments and Status of NYPA’s Ethics and 14
DISCUSSION AGENDA: 22
3. Motion to Conduct an Executive Session 22
4. Motion to Resume Meeting in Open Session 23
5. Next Meeting 24
Minutes of the regular meeting of the New York Power Authority’s Governance Committee held at the Authority’s offices at 123 Main Street, White Plains, New York at approximately 8:40 a.m.
The following Members of the Governance Committee were present:
Authority Chairman John R. Koelmel
Trustee Terrance P. Flynn
Trustee Joanne M. Mahoney
Chairman Eugene Nicandri - Excused
Also in attendance were:
Gil Quiniones President and Chief Executive Officer
Judith McCarthy Executive Vice President and General Counsel
Edward Welz Chief Operating Officer
Joan Tursi Senior Vice President – Corporate Support Services
Joseph Gryzlo Vice President and Chief Ethics and Compliance Officer
Patricia Leto Vice President Procurement
Brian McElroy Treasurer
Karen Delince Corporate Secretary
Dennis Eccleston Chief Information Officer
Patrick Donnelly Director – Site Purchase, Materials Management – Real Estate
Rod Mullin Director – Fuel Planning and Operations
Gary Schmid Manager – Network Services
Wayne Slipperly NERC Reliability Compliance Program Manager
Andrew Pelletier Property Services Coordinator
Louise Nestler Assistant Ethics Officer
Lorna Johnson Assistant Corporate Secretary
Sheila Baughman Senior Secretary, Corporate Secretary’s Office
Authority Chairman John Koelmel presided over the meeting. Corporate Secretary Delince kept the Minutes.
Authority Chairman John Koelmel presided over the meeting in Chairman Nicandri’s absence. Authority Chairman John Koelmel welcomed committee members and Authority senior staff to 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 Section B(4) of the Governance Committee Charter.
1. Adoption of the Proposed Meeting Agenda
By motion made and seconded the agenda for the meeting was adopted.
2. CONSENT AGENDA:
Upon motion made and seconded, the Consent Agenda and Reports provided to members of the Governance Committee were approved.
a. Approval of the Minutes
The Minutes of the Committee’s Regular Meeting of December 18, 2012 were approved.
b. Procurement and Real Estate Reports,
Revised Expenditure Authorization Procedures and
Guidelines for Procurement Contracts and for Personal
The Senior Vice President of Corporate Support Services submitted the following report:
“This memorandum is to advise the Governance Committee of certain 2012 YTD activities of the Corporate Support Services / Enterprise Shared Services (‘CSS/ESS’) Business Unit, including: procurement contract activity, disposal of personal property, acquisition and disposal of real property, Supplier Diversity Program activities and plant inventory statistics, as well as fossil fuels and corporate finance activities of the Energy Resource Management and Business Services Business Units, respectively.
“The Governance Committee is also requested to review and recommend for approval by the full Board of Trustees the revised Expenditure Authorization Procedures governing Procurement and Real Estate, as well as various Guidelines, including: Guidelines for Procurement Contracts, Guidelines and Procedures for the Disposal of Authority Personal Property and Real Property, respectively, and Guidelines for the Acquisition of Real Property by the Authority.
“Pursuant to Subsection C.5 of the Authority’s Governance Committee Charter relating to Reports, the Vice President of Procurement and the Director of Real Estate are required to report to the Committee at all regularly scheduled meetings and the Committee has the authority to require Procurement and Real Estate staff to prepare additional reports and to produce documents for Committee review.
“The reported activities are governed by various State laws and regulations and are set forth in the attached Reports.
“As more fully described in the individual reports attached hereto as Exhibits ‘2b-1’ – ‘2b-7,’ the Procurement Contract Report summarizes activity for procurements of $5,000 or greater awarded since January 1, 1990 that were active in 2012, as identified by the Authority’s SAP computer system. The Disposal of Personal Property Report lists all personal property disposal transactions over $5,000 conducted during 2012. The Real Estate Report includes all transactions for the acquisition or disposal of real property by the Authority. The Supplier Diversity Program Activity Report summarizes dollars awarded to New York State-certified Minority and Women-owned Business Enterprises (‘MWBEs’) based on reportable expenditures. The Plant Inventory Analysis lists current stock value and compares it to that of the previous year, with a brief explanation for any significant increase or decrease, where applicable. The Fossil Fuels and Corporate Finance Reports list the fuel- and finance-related transactions conducted by the Fuel Operations and Treasury work groups, respectively.
“The Governance Committee is also requested to review the revisions to the Expenditure Authorization Procedures governing Procurement and Real Estate, respectively, (as set forth in the highlighted copy attached hereto as Exhibit ‘2c-5’) and, if appropriate, to recommend adoption by the full Board of Trustees at the annual meeting to be held on March 21, 2013.
“Pursuant to the Authority’s implementation of the Public Authorities Accountability Act of 2005 (‘PAAA’), as amended, the Authority’s Governance Committee reviews the Guidelines for Procurement Contracts, the Guidelines and Procedures for Disposal of Personal Property, the Guidelines and Procedures for Disposal of Real Property and the Guidelines and Procedures for Acquisition of Real Property by the Authority annually, and approves any changes to such Guidelines. These Guidelines have been amended as deemed advisable and necessary, and reviewed and approved by the full Board of Trustees annually, most recently on March 27, 2012. The Governance Committee is requested to review the revisions to the respective Guidelines (as set forth in the redlined copies attached hereto as Exhibits ‘2c-1’ – ‘2c-4’) and, if appropriate, to recommend adoption by the full Board of Trustees at the annual meeting to be held on March 21, 2013.”
c. Review and Recommendation of Guidelines and Procedures
The Vice President of Procurement submitted the following report:
“Pursuant to the Authority’s implementation of the Public Authorities Accountability Act of 2005 (‘PAAA’), as amended, the Authority’s Governance Committee reviews the Guidelines for Procurement Contracts, the Guidelines and Procedures for Disposal of Personal Property, the Guidelines and Procedures for Disposal of Real Property and the Guidelines and Procedures for Acquisition of Real Property by the Authority annually, and approves any changes to such Guidelines.
“In addition, Annual Reports of Procurement Contracts with a value of $5,000 or greater, Disposal of Personal Property over $5,000 in value, and Disposal of Real Property over $15,000 in value will also be reviewed by the Governance Committee.
BACKGROUND AND DISCUSSION
i. Guidelines for Procurement Contracts
“In compliance with the applicable provisions of §2879 of the Public Authorities Law (‘PAL’), as amended, the Authority has established comprehensive guidelines detailing its operative policy and instructions concerning the use, awarding, monitoring and reporting of procurement contracts. The Guidelines 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-owned Business Enterprise (‘M/WBE’) requirements, employment of former officers and reporting requirements. These Guidelines, approved by the Authority’s Trustees, were initially implemented on January 1, 1990, and have been amended as deemed advisable and necessary, and reviewed and approved annually since that date, most recently on March 27, 2012.
“Staff has reviewed the Procurement Guidelines and recommends additional changes to make them more consistent with the law or to clarify or improve the Authority’s procurement process. The most significant of such changes are highlighted below:
In furtherance of the Authority’s commitment to ensure transparency and accountability of its operations, every member, officer or employee of the Authority who is contacted by a lobbyist is required to make a contemporaneous record of such contact, pursuant to Public Authorities Law § 2987 and as further set forth in the Authority’s Corporate Policy regarding this matter.
Project Sunlight (Chapter 399, Part A, Section 4 of the Laws of 2011) requires the Authority to record in a database maintained by the New York State Office of General Services certain appearances between the Authority and individuals, firms or other entities (excluding elected officials and representatives of federal, state and local agencies and authorities) relating to the procurement of a contract, with a value of $25,000 or more, for real property, goods or services. Appearances are defined as an interaction through an in-person meeting, a telephonic conversation or a video conference between covered individuals. Appearances related to emergency procurements and disposal of property through public auctions are excluded, as are appearances that take place during the formal “Restricted Period.” Covered individuals at the Authority means an individual at the Authority who has the power to exercise discretion or advises someone who exercises discretion. A covered individual outside of the Authority means both “external” (e.g., lobbyist) and “internal” (e.g., sales representative) representatives of an entity, individuals appearing on behalf of him/herself, advocacy groups or organizations or entities representing the interests or concerns of the organization or entity or of its members. All such appearances must be promptly reported to the Authority’s Ethics and Compliance Office for recording in the Project Sunlight database.
“It may also be noted that non-substantive and stylistic changes have also been made throughout the document.
“The Governance Committee is requested to review the revisions to the Procurement Guidelines (as set forth in the redlined copy attached hereto as Exhibit “2c-1”) and, if appropriate, to recommend adoption by the full Board at the annual meeting to be held on March 21, 2013. The approved Guidelines will become effective on March 31, 2013 and will be posted on the Authority’s internet website. On or before the 31st day of March, such Guidelines will also be filed 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.”
ii. Guidelines and Procedures for Disposal of
New York Power Authority Personal Property
“In compliance with Public Authorities Law (“PAL”) §2896, enacted as part of the Public Authorities Accountability Act of 2005 (“PAAA”) and amended by the Public Authorities Reform Act of 2009 (‘PARA’), the Authority established and is required to annually review and approve Guidelines for the Disposal of Personal Property. Personal Property is defined to include, but is not limited to, Authority-owned materials, tools, equipment and vehicles with a value in excess of $5,000. The Personal Property Guidelines set forth the methodology detailing the Authority’s policy regarding the use, award, monitoring and reporting of the disposal of Personal Property and designate a Contracting Officer responsible for the Authority’s compliance with, and enforcement of, such Guidelines. The Guidelines were initially approved by the Trustees in March 2006 and have been amended as deemed advisable and necessary, and reviewed and approved annually since that date, most recently on March 27, 2012.
“Staff has reviewed the Personal Property Disposal Guidelines and recommends no substantive changes. Several non-substantive changes were made to the Guidelines to clarify a few points and to reflect titular or organizational changes in the Authority.
“The Governance Committee is requested to review the revisions to the Personal Property Disposal Guidelines (as set forth in the redlined copy attached hereto as Exhibit ‘2c-2’) and, if appropriate, to recommend adoption by the full Board of Trustees at the annual meeting to be held on March 21, 2013. The approved Guidelines will become effective on March 31, 2013 and will be posted on the Authority’s internet website. On or before the 31st day of March, such Guidelines will also 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.”
iii. Guidelines And Procedures For Disposal of
New York Power Authority Real Property
“In compliance with Public Authorities Law (‘PAL’) §2896, enacted as part of the Public Authorities Accountability Act of 2005 (‘PAAA’) and amended by the Public Authorities Reform Act of 2009 (‘PARA’), the Authority established and is required to annually review and approve Guidelines for the Disposal of Real Property. The Guidelines were initially approved by the Trustees in March 2006. They have subsequently been reviewed, amended as necessary, and approved on an annual basis, most recently on March 27, 2012.
“Staff has reviewed the Real Property Disposal Guidelines and recommends no substantive changes. Several non-substantive changes were made as follows: the definitions under Section II have been amended for clarity; paragraph 5.7 has been deleted and its material terms incorporated into paragraph 2.2.
“The Governance Committee is requested to review the revisions to the Real Property Disposal Guidelines (as set forth in the redlined copy attached hereto as Exhibit ‘2c-3’ and, if appropriate, to recommend adoption by the full Board of Trustees at the annual meeting to be held on March 21, 2013. The approved Guidelines will become effective on March 31, 2013 and will be posted on the Authority’s internet website. On or before the 31st day of March, such Guidelines will also 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.”
iv. Guidelines and Procedures for the Acquisition of
New York Power Authority Real Property
“In compliance with Public Authorities Law (‘PAL’) § 2896, enacted as part of the Public Authorities Accountability Act of 2005 (‘PAAA’) and amended by the Public Authorities Reform Act of 2009 (‘PARA’), the Authority established and is required to annually review and approve Guidelines for the Acquisition of Real Property. The Guidelines were initially approved by the Trustees in March 2006. They have subsequently been reviewed, amended as necessary, and approved on an annual basis, most recently on March 27, 2012.”
“Staff has reviewed the Real Property Acquisition Guidelines and recommends no substantive changes.
“The Governance Committee is requested to review the revisions to the Real Property Acquisition Guidelines (as attached hereto as Exhibit 2c-4 and to recommend adoption by the full Board of Trustees at the annual meeting to be held on March 21, 2013. The approved Guidelines will become effective on March 31, 2013 and will be posted on the Authority’s internet website. On or before the 31st day of March, such Guidelines will also 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.”
v. Expenditure Authorization Procedures
“Article VII, Section 5 of the Authority’s By-Laws requires that the Trustees adopt expenditure authorization procedures which, among other things, govern contract approval authorizations and executions, delegation of approval for claims settlements and payment for real estate.
“At their meeting of December 19, 1991, the Trustees approved modifications to the Expenditure Authorization Procedures (‘EAPs’) which ‘…delegated to the Chairman the authority to modify existing authorization and execution limits relating to the commitments for the approval of, award of, and change orders to contracts which do not require approval by the Trustees.’ At a meeting held on March 31, 2009, the Trustees approved the continuation of such authority, as well as certain modifications to the EAPs governing Procurement and Real Estate. The EAPs were last revised in 2010 with the Chairman’s approval.
“Staff has identified the need to authorize certain additional levels of personnel (titles) to approve commitments, as well as to increase the execution (signing) limits for certain purchasing and other personnel. The recommended changes will rightly place responsibility with those employees already accountable for such functions and further streamline the procurement process, while at the same time maintaining appropriate controls on the process.
“This revision to the EAPs: (1) incorporates the approval limits of additional titles (personnel) and/or titular changes for the approval of commitments per Attachments A and B and the signing of commitments per Attachment C; (2) provides additional clarification regarding Change Order limits and (3) sets new or revised approval and signatory limits for certain real estate transactions per Attachment D.
“The following summarizes the principles underlying the EAPs:
· Section 2879 of the Public Authorities Law defines procurement contracts as contracts for the acquisition of goods or services in the actual or estimated amount of $5,000 or more. Section 2879 also requires the Trustees’ approval for procurement contracts involving services (including personal and non-personal services and construction contracts) to be rendered for a period in excess of one year.
· ‘Approval’ authority for contracts awards and change orders (as set forth in EAP Attachments A and B) is part of an internal Authority process, which ensures that the appropriate level/s of internal organizational review is secured for recommendation of contract award, extension and/or funding, but does not commit the Authority to any contractual obligations with the recommended vendor/s.
· ‘Signatory’ authority and limits (as set forth in EAP Attachment C) designate and ensure that the appropriate level of authorized Authority personnel executes (signs) legally binding documents to enter into contract/s with or issue change orders to the recommended vendor/s – after the aforementioned internal approval process has been secured.
· The Trustees’ approval is required: (i) for the award of non-personal services, construction, equipment or non-procurement contracts with an initial value over $3 million; (ii) for the award of personal services contracts exceeding $1 million, if awarded to the low bidder, or exceeding $500,000, if awarded to other than the low bidder or on a sole or single source basis and (iii) when the cumulative Change Order value of a personal services contract exceeds $500,000, or when the cumulative Change Order value of a non-personal services, equipment purchase, construction or non-procurement contract exceeds $3 million or when the cumulative Change Order value exceeds the President’s, Chairman’s or Chief Operating Officer’s limits.
· The aforementioned Change Order limits are subject to what is referred to as the ‘25% Rule’ (more fully described on page 4 of the EAPs), which requires rebidding of contracts (or approval of the President, Chairman or Chief Operating Officer, where rebidding is not feasible) when the total value of such contracts, including Change Orders, exceeds the original amount approved by senior management or the Trustees by more than 25% (and is within the specified not-to-exceed dollar limits). Any funding in excess of 25% of the amount initially approved requires the approval of the President, Chairman or Chief Operating Officer, until either the Trustees’ approval is obtained or the contract is rebid.
“The following highlights the proposed revisions to the EAPs:
1. The EAPs governing procurement have been amended to bring the EAPs in line with both current organizational structure and with certain employees’ functional responsibilities. To that end, Directors and Program Managers in Energy Efficiency would be authorized to approve commitments per the same approval limits as Project Managers or Sr. Project Managers (Attachments A and B) and the Fleet Clerk would be authorized to sign Purchase Orders to $5,000 (Attachment C). Additional revisions include titular changes and clarifications regarding Change Order limits and the ‘25% Rule.’
2. The EAPs for real estate transactions (Attachment D) have been amended as part of an ongoing effort to more accurately reflect the manner in which Authority real property is now acquired and disposed of and to streamline and clarify the authorization process. Except as outlined below, the majority of these changes are to resolve potential ambiguities and do not affect present authorization levels.
The procedures have been materially revised to give expenditure authorization for permits and damage claims under $1,000 (including the majority of danger tree claims) to the Real Estate Administrators (or equivalent). This is aimed at delegating greater authority to personnel on the ground and improving department efficiency and responsiveness to the public. In addition, the authorization levels for the President and Chairman of the Board of Trustees have been combined. In practice, expenditures exceeding the President’s current authorization level are customarily brought directly to the Board of Trustees for approval.
“In addition, the Trustees are requested to continue the delegation to the Chairman of the Authority to modify existing authorization and execution limits of the EAPs relating to commitments for the approval of, award of and change orders to contracts that do not require approval by the Trustees, as previously approved in December 1991 and most recently in March 2009. This delegation of authority provides for a more efficient amendment process, eliminating the need to return to the Trustees each time circumstances dictate a necessary revision to the EAPs.
“Since the full Board of Trustees has not adopted EAPs since March 2009, good governance dictates that these revised EAPs be presented for Board approval. Accordingly, the Governance Committee is requested to review the proposed revisions to the EAPs (as further set forth in the highlighted copy attached hereto as Exhibit ‘2c-5’) and, if appropriate, recommend adoption by the full Board of Trustees at the annual meeting to be held on March 21, 2013.”
d. Annual Review and Approval of Authority Corporate Policies
The Senior Vice President of Corporate Support Services submitted the following report:
“The Committee is 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.
“Staff is also requesting that the President and Chief Executive Officer the Authority be delegated 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.
“This item also contains several policy changes that do not require Committee approval, but are being provided for informational purposes.
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 “A” through “L” and respectively entitled:
A. Recruitment and Job Posting (EP 1.2); last revised 3/21/13;
B. Salary Administration Policy (EP 2.1); last revised 3/27/12;
C. Salaried Non-Exempt and Facility-Based Exempt Overtime (EP 2.4),
last revised 3/27/12;
D. Variable Pay Plan (EP 2.6), Deleted 7/20/10;
E. Employee Benefits Eligibility (EP 3.1), last revised 3/27/11;
F. Reimbursement of Employee Meal Costs (CAP 1.5), last revised 3/27/12;
G. Attendance & Flexible Hours (EP 4.6), last revised 3/27/12;
H. Vacation (EP 3.2), last revised 3/27/12;
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 revised 3/21/13.
“The following Authority policies, (Exhibits “M” and “N”) do not require approval, but have been modified and are being provided for informational purposes.
M. Contributions and Sponsorships (CP 11-1), last revised 3/21/13;
N. Business Related Contributions (CP 2-16), 3/21/13.
“The revised corporate policies relating to salary, compensation, benefits and time and attendance of Authority employees, and delegation of the President and Chief Executive Officer of 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, if approved by the Governance Committee, will be presented to the full Board of Trustees for review and approval at the March 21, 2013 annual meeting.”
e. Recent Developments and Status of NYPA’s
Ethics and Compliance Program
The Vice President and Chief Ethics and Compliance Officer submitted the following report:
ETHICS and COMPLIANCE
“The Office of Ethics and Compliance advises NYPA’s trustees, officers and employees on the legal, regulatory and NYPA Code of Conduct ethics and compliance standards relating to NYPA’s employees and operations. It coordinates the investigation of allegations and concerns involving NYPA’s assets and employees. This report highlights significant developments in NYPA’s ethics and compliance program for the period December 18, 2012 to March 1, 2013.
“The principal substantive issues arising under the NYS ethics laws and NYPA’s Code of Conduct investigated or researched since the most recent Governance Committee report on December 18, 2012 include various requests to engage in outside activities and employment and issues concerning conflicts of interest, gifts inquiries, pre-employment reviews and post-employment restrictions questions.
“The Office of Ethics and Compliance provides annual training to all trustees, officers and employees to reaffirm NYPA’s commitment to prevailing ethics principles and raise awareness of the laws and regulations with which all NYS public employees are required to comply. Annual review of and certification to the NYPA Ethics Code of Conduct is implemented as an additional measure to reinforce acceptable business and professional conduct. The Office also coordinates required training for designated employees to comply with the Federal Energy Regulatory Commission’s (‘FERC’) Standards of Conduct relating to its transmission and energy marketing functions and FERC Rules designed to prevent manipulation of energy markets.
“The Ethics and Compliance Office reviewed 30 cases since the last report to the Governance Committee and handled 136 cases in calendar year 2012. The case total for 2012 included the following categories: 15 allegations; 9 appearances of impropriety; 3 conflicts of interest; 10 general inquiries; 30 gifts questions; 15 outside activities and 32 outside employment reviews; 2 political inquiries; 5 post-employment questions; 2 securities investment questions; 11 issues related to unwarranted privilege and 2 assessments relating to appropriate use of NYPA assets. These cases originated from all NYPA facilities, with a concentration from the White Plains Office. There has been a steady increase in ethics inquiries from NYPA’s facility employees, including those represented by bargaining units.
“Cases of interest since the last report to the Governance Committee included several outside employment reviews, including a partnership in a helicopter tour company, a family ice cream parlor business, a mobile notary public and several employees engaged by municipalities as part-time police officers.
“Several pre-employment ethics issues were also reviewed during this reporting period. NYPA’s Human Resources Department has been evaluating new hires for any ethical concerns during the interview process. If NYPA is considering extending an employment offer to an individual that has disclosed ownership in a business or a desire to continue providing services to another firm after becoming a NYPA employee, Human Resources facilitates a discussion between the Office of Ethics and Compliance and the prospective employee to ensure that there are no impermissible conflicts of interest and required approvals are obtained. After review, the Office of Ethics and Compliance provides a written opinion to the prospective employee and his/her supervisor which contains the ethics guidelines that must be adhered to if the individual is permitted to continue with the outside employment or activities. The prospective employee must agree to the guidelines in writing and a copy is placed in the person’s employment file.
Collaboration with the New York State Inspector General’s Office
“The Office of Ethics and Compliance continues to collaborate with the NYS Inspector General’s Office on investigations of allegations and complaints involving NYPA employees and business partners. Issues of corruption, fraud, criminal activity, conflicts of interest or abuse by state officers and employees relating to their office or employment, or by anyone having business dealings with covered agencies, are included within the Inspector General’s Office jurisdiction. Details of pending cases will be provided during the Governance Committee Executive Session upon request. On February 28, 2013, NYPA’s Executive Vice President and General Counsel and Vice President and Chief Ethics and Compliance Officer attended a training program provided by the Inspector General’s Office. This presentation provided a detailed review of the Public Officers Law and expectations for covered agencies relating to the reporting of wrongdoing and implementation of ethics program protocols.
Training and Outreach
“The Inspector General’s Director of Training made four presentations to headquarters staff in May 2012. The purpose of these training sessions was to review the jurisdiction and role of the Inspector General and highlight employees’ legal responsibility to report wrongdoing, including, abuse, bribery, conflicts of interest, fraud, theft and governmental waste. NYPA’s strong working relationship with the Inspector General’s Office was cited during the training and employees were encouraged to continue to consult with and report wrongdoing to the Office of Ethics and Compliance.
“In the intervening months since the Inspector General presentations in White Plains, NYPA’s Executive Vice President and General Counsel and Vice President and Chief Ethics and Compliance Officer visited NYPA’s Blenheim-Gilboa Project, Clark Energy Center, Albany Office, Niagara Project and SENY 500MW Plant to deliver the message conveyed during the Inspector General’s training sessions. These live training sessions were provided to management employees at NYPA’s facilities and addressed two primary subjects: (1) the Inspector General’s jurisdiction and State employees’ legal responsibility to report wrongdoing and (2) NYPA’s ethics and compliance program with a focus on acceptable business conduct and procedures for engaging in approved outside employment. The Niagara Project and SENY 500 MW Plant programs included a presentation on Project Sunlight, which became effective on January 1, 2013 and requires certain NYPA employees to record various business contacts in a database which will be made available to the public. These presentations have resulted in several outside employment disclosures and inquiries concerning compliance with NYPA’s policies and procedures, including those governing the use of NYPA’s information technology assets and fleet vehicles. Similar training will be conducted at the St. Lawrence Project and Flynn Plant.
“The Office of Ethics and Compliance developed and issued its annual FERC Standards of Conduct training to the trustees and designated marketing, transmission and other required employees during the first quarter of 2013. The purpose of this mandatory training is to reaffirm FERC’s rules relating to (i) the maintenance of the independent operation of NYPA’s transmission and marketing functions; (ii) transparent disclosures of actions that could create an undue preference for market participants; and (iii) non-discrimination in the treatment of NYPA’s transmission customers.
“NYPA submitted its annual Financial Disclosure Program report to the NYS Joint Commission on Public Ethics (‘JCOPE’) on February 27, 2013. NYPA reported 678 participants in the Financial Disclosure program. Of those 678, 156 were designated as holding ‘policy-making’ positions and 131 were serving in title exempt positions or held individual exemptions based upon their job duties as authorized by JCOPE or its predecessor Ethics Commissions.
“The salary threshold for inclusion in the annual JCOPE Financial Disclosure program remains $88,256 for calendar year 2013. Individual forms are due on May 15, 2013. Notifications are expected to be sent to all required filers at their NYPA e-mail address during the month of March and will inform them of their obligation to complete the annual filing or apply for an individual exemption before the May 15th filing deadline. The Office of Ethics and Compliance will alert required filers to the Financial Disclosure Program requirements and issue compliance reminders prior to the May 15 filing deadline. The Office is available to assist filers with any program eligibility and interpretation questions or concerns.
“Project Sunlight is a component of the Governor’s 2011 Public Integrity Reform Act. Effective January 1, 2013, it requires NYPA to record in a database maintained by the NYS Office of General Services (‘OGS’) all individuals, firms or other entities (excluding other State and local governmental agencies and elected officials) that appear before NYPA on their own behalf or in a representative capacity on behalf of a client or customer for certain purposes. The covered ‘appearances’ are limited to live exchanges (i.e. meetings, phone conversations, video conferences) and exclude e-mails, letters and other written communications. These covered appearances are required to be recorded in Project Sunlight within five business days of their occurrences.
“To meet its obligations under Project Sunlight, NYPA has developed its own internal website which includes the Project Sunlight Policy, Frequently Asked Questions and a PowerPoint training developed by the Governor’s Counsel’s Office. The webpage includes a form to be used by employees to submit covered appearances electronically. After submission, this electronic form is automatically forwarded to the Office of Ethics and Compliance for review and then uploaded to the OGS database. All records will be retained in accordance with NYPA’s records retention policy.
“In addition, NYPA has developed two portable tools to assist employees in capturing the required data for covered appearances. The first is a laminated reference card which outlines Project Sunlight and contains the required fields to capture for each covered appearance. The second is a paper form which can be completed by participants during a covered appearance. Both of these tools will be widely distributed to all business units and NYPA facilities.
“The Office of Ethics and Compliance has conducted approximately 20 live training sessions with NYPA’s trustees, executive management committee members, business unit and department managerial staff and operating facilities’ management employees. In addition, an electronic Project Sunlight training slide deck will be disseminated through NYPA’s Learning Management System in the second quarter of 2013. This training will be sent to all NYPA salaried and bargaining unit employees whose job duties include the procurement of goods, services or real estate or otherwise relate to the business categories included in Project Sunlight (e.g. rate-making, rule-making, regulatory matters and judicial or quasi-judicial proceedings).
“During the second quarter of 2013, NYPA will develop a compliance plan as required under Project Sunlight. This compliance plan will address training requirements, an audit function and progressive discipline, up to and including termination, for employees who fail to comply with the Project Sunlight mandates.
“As of February 28, 2013, NYPA has recorded approximately 60 covered appearances in the OGS Project Sunlight database.
NERC RELIABILITY STANDARDS COMPLIANCE
NERC Reliability Compliance Program Manager submitted the following report:
“This report highlights important aspects of NYPA’s reliability standards compliance program for the period December 19, 2012 to March 1, 2013. A brief background statement is followed by discussion of specific reliability standards-related topics affecting the enterprise.
“Following the 2003 Northeast blackout, the Energy Policy Act of 2005 was passed and gave the Federal Energy Regulatory Commission (‘FERC’) the power to establish mandatory standards for electric reliability. FERC named the North American Electric Reliability Corporation (‘NERC’) as its Electric Reliability Organization (‘ERO’) and charged it with developing and enforcing reliability standards. The Northeast Power Coordinating Council (‘NPCC’) is NERC’s enforcement agent for the Northeast U.S. NERC established an organization and processes for developing, implementing and enforcing standards. The initial set of standards became enforceable on June 18, 2007. Since then, the standards have continued to be expanded and revised to address known gaps in the standards or gaps discovered from lessons learned from analyses of more recent system disturbances and blackout events.
“NYPA is currently registered, under the NERC functional registration model, as a Transmission Owner, Generator Owner, Generator Operator, Purchasing and Selling Entity, and Load Serving Entity. Recently, NYPA requested de-registration as a Load Serving Entity. Under these registrations, NYPA is subject to 115 standards containing 379 requirements. The standards cover a wide range of NYPA’s operation and maintenance activities and processes. In addition, NYPA is subject to some more stringent standards and reliability requirements established by NPCC.
NERC Reliability Standards Compliance Enforcement Actions
“During the reporting period, NYPA staff managed compliance enforcement actions related to several of the NERC Reliability Standards that are applicable to NYPA’s NERC registrations. There are currently eight (8) active enforcement actions related to self-reports of possible violations of the standards. One of these was submitted to the NPPC in 2011, one in 2012, and six in January and February 2013. For those submitted in 2011 and 2012, NYPA is awaiting the initiation by NPCC of settlement discussions. For those submitted in 2013, mitigation plan documents are being developed and will be submitted to NPCC as part of the enforcement process.
Possible Violation Concern Investigations
“During the reporting period, self-reports of possible violations submitted to NPCC resulted in investigations of compliance concerns identified by the staff pursuant to an internal procedure entitled ‘Possible NERC Reliability Standards Compliance Violation.’ The compliance concerns were associated with the Voltage and Reactive (‘VAR’), Critical Information Protection (‘CIP’), Protection and Control (‘PRC’) and Modeling, Data and Analysis (‘MOD’) reliability standards. This internal process is viewed by the regulator as evidence that NYPA has a strong internal compliance program.
Self-Certifications of Compliance
“During the reporting period, NYPA successfully completed eight (8) self-certifications of compliance for NERC reliability standards associated with PRC, Facilities Design, Connections, and Maintenance (‘FAC’), VAR, MOD and Transmission Operations (‘TOP’) related to NYPA’s NERC registrations. Technical Compliance has established a rigorous process to ensure that compliance evidence is updated before NYPA self-certifies compliance.
Bulk Electric System (“BES”) Definition
“The relevant background on the BES is contained in the July 31, 2012 report to the Governance Committee.
“FERC approved the new BES definition on December 20, 2012. The new definition will provide greater clarity and ensure consistency in identifying system elements across the nation’s reliability regions and will require transmission assets above 100 kV to be subject to the NERC Reliability Standards. NYPA staff continued work to identify any compliance gaps for 40 newly identified BES elements under NYPA’s current NERC registrations.
“As stated in the July 31, 2012 report, the adoption of the new BES definition may require NYPA to register as a TOP and/or a Transmission Planner (‘TP’), which would require NYPA to demonstrate compliance with additional reliability standards. In October 2012, NYPA met with the New York Independent System Operator (‘NYISO’) to discuss the assignment of TOP and TP compliance responsibilities and accountabilities for NYPA’s newly identified BES assets. The NYISO agreed, in principle, to take compliance responsibility and accountability for approximately 50% of NYPA’s 41 newly identified assets, since the NYISO already has operational control of those assets pursuant to existing agreements with NYPA. NYPA has engaged NPCC and other New York Transmission Owners (‘NYTO’) regarding reliability standards compliance responsibilities and accountabilities for the remaining assets. In addition, NYPA may be able to exclude certain of these new assets from being subject to the reliability standards. In parallel to these discussions, NYPA continues to meet with the NYISO and the NYTOs to discuss and develop an action plan to address the statewide impacts of the implementation of the new BES definition. NYPA staff, having knowledge of these matters, met several times during the reporting period to further clarify the impacts with respect to functional responsibility and compliance accountability for the TOP and TP Standards.
“The State of New York Department of Public Service (‘DPS’), in a letter dated February 11, 2013, requested information from NYPA related to its newly identified BES. The request is for a list of the newly identified assets, including facilities qualifying for exclusion and facilities that may qualify for an exception under the new definition. In addition, the DPS is requesting estimates of capital expenditures required to upgrade these assets and estimates of increases in annual costs for reporting and maintenance to satisfy the requirements of the reliability standards. Technical Compliance is preparing a response for submission to the DPS by April 1, 2013.
NERC Recommendations to Industry – Facility Ratings for Transmission Lines
“During the reporting period, NYPA continued to implement its work plan for responding to NERC’s October 7, 2010 ‘NERC Alert – Recommendation to Industry’ requiring NYPA to review its current Facility Ratings Methodology for its solely- and jointly-owned transmission lines to verify that the methodology is based on actual field conditions (in particular, line clearances). As stated in the July 31, 2012 Governance Committee report, the assessment discovered about 260 line clearance discrepancies in NYPA’s 1,400 miles of transmission lines; about 50 of which are on lines rated as high priority. Staff has engaged contractors and other utilities to remediate the discrepancies on the high priority lines by the end of 2012. However, completion of the work on the high priority lines was delayed due to Hurricane Sandy. Currently, there is one outstanding high priority discrepancy pending resolution by National Grid. The remediation of discrepancies on the medium priority lines is being planned for completion in 2013.
Cyber Security Developments
“During the reporting period, NYPA staff continued to monitor the progress toward implementation of Version 5 of NERC’s CIP reliability standards. NERC filed the Critical Infrastructure Protection (‘CIP’) Version 5 Reliability Standards with FERC for approval on January 31, 2013. FERC’s approval is pending. The President issued an Executive Order on February 13, 2013 to improve critical infrastructure cyber security. Pursuant to the Executive Order, the National Institute of Standards and Technology (‘NIST’) has reached out to industry stakeholders to gather information for developing a voluntary framework for reducing cyber risks to critical infrastructure. The Framework will consist of standards, guidelines and best practices to promote the protection of information and information systems supporting critical infrastructure operations. Technical Compliance and Information Technology are working to respond to the NIST inquiry and provide information to support the development of this Framework.
“In addition, NYPA received an official request for information from Congressmen Markey and Waxman regarding NYPA’s efforts to ensure that its electric grid assets are protected from a cyber or physical attack or geomagnetic storm. NYPA coordinated its response with the Large Public Power Council (‘LPPC’) and it was submitted on February 14, 2013.”
f. Review and Recommendation of Ethics
and Compliance Program Documents
The Vice President and Chief Ethics and Compliance Officer submitted the following report:
“The Governance Committee is requested to adopt: (i) a new Ethics and Compliance Program corporate policy (Exhibit ‘A’), (ii) revisions to the Authority’s Code of Conduct (Exhibit ‘B’) and (iii) revisions to CP 1-7, ‘Anti-Retaliation Policy’ (Exhibit ‘C’) which will conform with the applicable provisions contained within the NYS Public Authorities Law, NYS Public Officers Law and guidance provided by the NYS Joint Commission on Public Ethics (‘JCOPE’) and NYS Office of the Inspector General (‘IG’).
“The new Ethics and Compliance Program Policy and revised Code of Conduct and Anti-Retaliation Policy will cover all Authority Trustees, officers and employees.
“The Authority is committed to complying with all applicable legal, regulatory and other mandatory standards and maintaining the highest level of ethical conduct of its Trustees, officers and employees. To meet these responsibilities, the Authority has created an Office of Ethics and Compliance which reports to the Executive Vice President and General Counsel and the Governance Committee of the Board of Trustees. This Office assists the Authority in achieving its mission and business objectives by evaluating and enhancing the Authority’s legal and regulatory compliance posture and communicating and applying the required standards of ethical conduct to the Authority’s Trustees, officers and employees.
“The Trustees adopted a ‘Conflicts of Interest Policy’ in 1988 to address important aspects of ethical conduct. The Trustees revised the policy in 1994 and renamed it the ‘Code of Conduct.’ The Code of Conduct was revisited again in 1998 and 2009 when the Trustees addressed conflicts of interest relating to employees’ trading in or acquiring the securities of utility companies operating in New York State and incorporated enhanced ethical standards for public employees contained in the amended NYS Public Officers Law. The 2009 adopted Code of Conduct clarified prior legal and technical provisions and replaced them with clear and concise language to be utilized by a more diverse Authority workforce.
“In furthering its commitment to legal and regulatory compliance and ethical conduct, the Authority revised its ‘Anti-Retaliation Policy’ in 2010, which encourages Trustees, officers and employees to report and participate in the investigation of, among other things, wrongdoing and violations of law, regulations, policies, procedures and the Code of Conduct. This policy protects Trustees, officers and employees from discrimination, harassment or retaliation of any kind for ‘good faith’ reporting of and participation in the investigation of, these events.
“The proposed Ethics and Compliance Program Policy (Exhibit ‘A’) sets forth the Authority’s commitment to legal and regulatory compliance and the highest ethical conduct of its employees. It contains the responsibilities expected of the Authority’s Trustees, officers and employees and clarifies the role of the Office of Ethics and Compliance in meeting the policy’s objectives. It formalizes the establishment of the Authority’s Ethics and Compliance Program and represents its overarching governance document consistent with best practices for an effective ethics and compliance program. The Authority’s Internal Audit Department had recommended the adoption of an Ethics Charter after conducting an audit of the Ethics Program. The proposed policy was also developed to implement that recommendation and goes further by incorporating the Authority’s comprehensive Compliance commitments and resources.
“The NYS Public Authorities Law Section 2824(1)(d) requires board members of state authorities to ‘adopt a code of ethics applicable to each officer, director and employee, that, at a minimum, includes the standards established in section seventy-four of the public officers law.’ The proposed revisions to the Code of Conduct (Exhibit ‘B’) clarify and update various provisions and conform with the requirements of the NYS Public Officers Law and guidance provided by the JCOPE and the IG. They include the requirements that Trustees, officers and employees disclose any and all professional and personal conflicts of interest and subsequently recuse themselves from engaging in any Authority business activity where a conflict appears or exists. In addition, Trustees, officers and employees will be prohibited from seeking or accepting a monetary loan from any employee under one’s supervisory authority or providing a monetary loan to one’s immediate supervisor and anyone to whom that individual reports, up to and including the Board of Trustees. In response to recent JCOPE Advisory Opinions, the Code of Conduct is being further revised to include the requirement that the Office of Ethics and Compliance be consulted prior to the re-employment of any former Authority employee to conduct an evaluation of the post-employment restrictions contained in the NYS Public Officers Law. All other standards and sections of the Code of Conduct have been preserved.
“The NYS Public Authorities Law Section 2824(1)(e) requires board members of state authorities to ‘establish written policies and procedures on personnel including policies protecting employees from retaliation for disclosing information concerning acts of wrongdoing, misconduct, malfeasance, or other inappropriate behavior by an employee or board member of the authority,….’ The Authority revised its initial Anti-Retaliation Policy and issued CP 1-7, ‘Anti-Retaliation Policy’ (Exhibit ‘C’) in 2010, and is now seeking formal adoption of the policy in accordance with the NYS Public Authorities Law and a recent recommendation made by Internal Audit Department. In addition, the policy is being revised to clarify certain reporting options and encourage employees to expeditiously report events covered within its scope.”
3. 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
4. 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.
5. Next Meeting
The next regular meeting of the Governance Committee will be held on Tuesday, July 23, 2013, at 8:30 a.m. at the Authority’s White Plains Office.
Upon motion made and seconded, the meeting was adjourned by the Chairman at approximately