I.    PURPOSE

This procedure implements the Standards of Conduct adopted by the Federal Energy Regulatory Commission in Order 2004 (as modified by FERC 2004-A and FERC 2004-B, hereafter “FERC Order 2004”.) The procedure is designed to ensure New York Power Authority’s (“NYPA’s’) compliance with the FERC Order 2004 requirements for separation of functions among its Business Units.  Also, this procedure implements the Standards of Conduct adopted by FERC in Order 889, revised in Order 889-A and as set forth in the Code of Federal Regulations (C.F.R.) at 18 C.F.R. pt. 37 and pt. 358 (2004) (relating to Standards of Conduct).  The purpose of “functional unbundling” is to assure that potential customers of transmission service receive access to information that will enable them to obtain service on a non-discriminatory basis and that employees of NYPA engaged in the Wholesale Merchant Functions do not have access to any information about NYPA’s transmission system that is not available to other users of the system.  This procedure is also applicable to the Open Access Same Time Information System (“OASIS”) operating in accordance with the standardized procedures and protocols found in the Commission’s publication “OASIS Standards and Communication Protocols”.

II.  GENERAL

A.      This procedure provides for the organizational and physical separation of employees engaged in the transmission system operations and reliability functions from employees engaged in the Wholesale Merchant Functions.

Organizational separation was achieved by moving employees engaged in the “Wholesale Merchant Functions” into a separate functional area: “Energy Resource Management”. This group consists of employees involved in day-to-day bidding of NYPA’s energy resources in the NYISO marketplace.  This group also includes employees responsible for fossil fuel procurement for its generating plants located within New York City as well as on Long Island.

Physical separation is achieved by denying access to employees engaged in NYPA Wholesale Merchant Function to the Energy Control Center located in Marcy, New York as well as denying them access to the 6^th floor in NYPA’s White Plains Corporate Office where those NYPA employees engaged in transmission system operations or reliability functions are also located. The foregoing locations require the use of a coded access card.

Physical separation also involves denying employees engaged in the Wholesale Merchant Functions access, directly or indirectly, to transmission system information contained on the Corporate Bulletin Board or EMS system.

B.      This Procedure in Section V also provides for the implementation of the Standards of Conduct promulgated by the Commission at 18 C.F.R. pt. 358 (2004) (relating to Standards of Conduct). Section V substantially tracks language in the Commission’s regulations.

Individual employee actions that do not comply with the Standards of Conduct will be dealt with consistently with the applicable provisions of NYPA’s collective bargaining agreements and/or NYPA’s ethics & compliance program and such other Human Resources and corporate policies as may apply.  A Standards of Conduct Chief Compliance Officer (“CCO”) has been designated and is responsible for employee training, answering employee questions and coordinating auditing and investigation with the FERC Staff, as well as ensuring appropriate distribution of the Standards of Conduct to employees and that its employees comply with these Standards of Conduct.

III. DEFINITIONS

“Eligible Customer”: (i) any electric utility (including the Transmission Provider and any power marketer), Federal power marketing agency, or any person generating electric energy for sale for resale is an Eligible Customer under the Tariff.  Electric energy sold or produced by such entity may be electric energy produced in the United States, Canada or Mexico.  However, with respect to transmission service that the Commission is prohibited from ordering by Section 212(h) of the Federal Power Act, such entity is eligible only if the service is provided pursuant to a state requirement that the Transmission Provider offer the unbundled transmission service or pursuant to a voluntary offer of such service by the Transmission Provider; (ii) any retail customer taking unbundled Transmission Service pursuant to a state requirement that the Transmission Provider offer the transmission service, or pursuant to a voluntary offer of such service by the Transmission Provider, is an Eligible Customer under the Tariff.

“Emergency” means a condition that has resulted in a loss of reliability of NYPA’s electric system or an interconnected electric system, or that may result in such a loss of reliability if not promptly addressed.

“Energy Control Center” or “ECC” refers to that portion of the building housing, to wit, the lower level of NYPA’s Energy Control Center, located at 6520 Glass Factory Road in Marcy, New York 13403 where transmission system operations and generation control take place.

“Energy Management System” or “EMS” refers to the computer system used to monitor, control, study and coordinate the operation of a utility’s transmission and generation facilities.

“Facilities Study” means an engineering study conducted by NYPA to determine the required modifications to NYPA’s Transmission System, including the cost and scheduled completion date for such modifications that will be required to provide the requested transmission service.

“FERC” or “Commission” means the Federal Energy Regulatory Commission.

“IT” means Information Technology and refers to the business unit within NYPA responsible for such functions.

“LAN” or “Local Area Network” means work stations that are connected to each other electronically through one computer that is designated and functions as the server.  This set-up allows for the exchange of information as needed through one shared drive on the server, while maintaining the privacy of all other files.

“NYISO” means the New York Independent System Operator, a not-for-profit corporation that administers energy markets, ancillary service markets, etc, in the State of New York.

“OASIS” or “Open Access Same Time Information System” means the information system in 18 C.F.R. pt. 37 (2004) and associated Standards of Conduct contained in 18 C.F.R. pt. 358 (2004).

“Open Access Transmission Service” means transmission service offered under the New York Power Authority’s Open Access Transmission Tariff.

“Order 889” means the Final Rule issued by the Commission on April 24, 1996 at Docket No. RM95-9-000 and published at Volume 61, Federal Register 21,737 et seq. (1996).

“Order 889-A” means the Order on Rehearing issued by the Commission on March 4, 1997 at Docket No. RM95-9-001 and published at Volume 62, Federal Register 12,484 et seq. (1997).

“Order 2004” means the final rule issued by the Commission on November 25, 2003 at Docket No. RM01-10-000, as modified by Order 2004-A at 107 F.E.R.C P61, 032 (2004) and 2004-B at 108 F.E.R.C. P61, 118 (2004).

“Service Agreement” means the initial agreement and any amendments or supplements thereto entered into by the Transmission Customer and NYPA for service under the Tariff.

“Standards of Conduct” means the Standards of Conduct codified at 18 C.F.R. pt. 358 (2004).

“System Impact Study” means an assessment by NYPA of (i) the adequacy of the Transmission System to accommodate a request for either Firm Point-to-Point Transmission Service or Network Integration Transmission Service and (ii) whether any additional costs may be incurred in order to provide transmission service.

“Tariff” means the New York Power Authority’s Open Access Transmission Tariff, as it may from time to time be amended.

“Transmission Customer” means any Eligible Customer (or its designated agent) that (i) executes a service agreement or (ii) submits to the dispute resolution procedures of Section II any of the terms and conditions of the Service Agreement on which the Eligible Customer and the Transmission Provider cannot agree.

“Transmission System” refers to the facilities owned, controlled or operated by NYPA that are used to provide transmission service under Part II and Part III of the Tariff.

“Transmission Provider” means NYPA.

“White Plains Corporate Office” refers to the building housing NYPA’s office at 123 Main Street, White Plains, New York 10601.

“Wholesale Merchant Functions” means the sale for resale of electric energy in interstate commerce.

“Chief Compliance Officer” (or ”CCO”) means the NYPA Vice President – Internal Audit and Corporate Compliance, with office located at 123 Main Street, White Plains, NY 10601.

IV. FUNCTIONAL SEPARATION OF TRANSMISSION SYSTEM OPERATIONS AND WHOLESALE   MERCHANT FUNCTION

A.   COMMITMENT TO COMPLY WITH STANDARDS OF CONDUCT

In this procedure, NYPA has committed itself to fully complying with the letter and intent of the Commission’s Standards of Conduct at 18 C.F.R. pt. 358 (2004), as those regulations may from time to time be amended, in order to achieve the functional separation of its transmission system operations and reliability functions from its Wholesale Merchant Functions

B.   PHYSICAL SEPARATION

1.    Separate Offices. All employees of NYPA engaged in the Wholesale Merchant Functions are located on the 11^th floor of NYPA’s White Plains Corporate Office.  No such employees will have access to the Energy Control Center or to similar facilities used for transmission operations or reliability functions that differ in any way from the access available to other open access transmission customers. In addition, employees engaged in the Wholesale Merchant Function are denied unrestricted access to the 6^th floor within the White Plains Corporate Office where transmission operations or reliability functions are also located.

NYPA’s Niagara, St. Lawrence and Blenheim Gilboa hydro facilities along with its Energy Control Center are physically remote from its White Plains Corporate office. Also, NYPA’s Clark Energy Center where the management of the maintenance and modifications of all of NYPA’s transmission lines and overhead substation facilities takes place is located in the upper levels of the building that houses the Energy Control Center located in Marcy, New York. 

2.    Access to Electronic Information. Employees engaged in the Wholesale Merchant Functions will not have access, directly or indirectly, to transmission system information on the White Plains Office LAN Corporate Bulletin Board.  Employees engaged in the Wholesale Merchant Functions have electronic access to the EMS.  Access to transmission data on the EMS will be restricted to employees engaged in the transmission system operations or reliability functions.

C.      ORGANIZATIONAL SEPARATION. In order to comply with the Standards of Conduct, NYPA has designed its organizational structure to assure that there is no overlap between personnel engaged in the Wholesale Merchant Functions and personnel engaged in the transmission system operations or reliability functions.  NYPA posts on its OASIS organizational charts which identify those employees who are engaged in transmission system operations or reliability functions and those employees engaged in wholesale merchant functions, as well as the chain of command and functional area job descriptions.  Also included on its organizational charts are those employees engaged in its marketing functions as well as certain lawyers including the respective chain of command and functional area-job descriptions.

With respect to Section 358.4(a)(4) of Order 2004 regarding the sharing of field and maintenance employees with Marketing and Energy Affiliates, there are services performed by NYPA’s Generation Business Unit (“GBU”) for its Transmission Business Unit (“TBU”).  At all of NYPA’s generating units, certain GBU personnel are assigned to perform designated tasks in the associated substations and switchyards, and at certain facilities; this work includes maintenance of, and switching transmission facilities out of service,  which is done under the direction of the ECC.  The ECC, in turn, obtains approval of all non-emergency transmission outages from the NYISO.  If a transmission facility suffers an unforeseen outage or is taken out for emergency reasons, the NYISO is immediately informed and the NYISO immediately places this information on its OASIS.

The GBU personnel who perform these switching functions on behalf of the TBU are qualified bargaining unit personnel having appropriate technical qualifications. These personnel operate equipment and perform purely technical duties like the “field technicians” described in Paragraph 105 of Order 2004. These shared workers do not control either the generating or transmission facilities in the sense set forth in Paragraph 105 because, under normal operating conditions, they do not have the ability on their own initiative to control operations or restrict or shutdown the operation of facilities.

The GBU shared personnel would not ordinarily have any need to share with anyone other than the ECC information about transmission switching operations.  However, this will be made the subject of SOC training within NYPA, so it will be explicit that there will be no passing of such information in a manner prohibited by Order 2004.

Interaction between the TBU and other business units had been strictly circumscribed in accordance with Order 889, but as a result of Order 2004, there were certain modifications in NYPA procedures that were undertaken.  This specifically involved the services formerly provided by TBU’s Scheduling and Settlement (“S&S”) personnel to the Marketing and Economic Development Business Unit (“MED”).

S&S personnel submit load schedules for all of NYPA’s customers to the NYISO.  These schedules are determined by external customers, MED, or by automated forecasting software.  If S&S personnel observe what appears to be erroneous schedules, S&S personnel will notify the appropriate entity telephonically or electronically of the observation.

S&S personnel provide MED and the other external entities on behalf of which they submit schedules to the NYISO an opportunity to submit formulas or programs that can automatically modify schedules to correct errors or reflect changed circumstances such as weather conditions. If such formulas or programs are made available to S&S personnel, they are used by S&S staff.  If such formulas or programs are not made available to S&S, those entities can direct S&S telephonically or electronically to make modifications to schedules.  

D.   Information Access. Employees of the Energy Control Center transfer generation and load forecast data to the Wholesale Merchant Employees. Those receiving the data have no access to transmission system data.

E.   Identification of Affiliates. NYPA does not have any affiliates.

F.   Responsibility for Administering the Tariff and the OASIS.  NYPA’s Power System Operations function is responsible for administering and providing service under the Tariff and for implementing part 37 of title 18 of the C.F.R.

G.   Responsibility for Reliability Functions.  The Senior Vice-President -Transmission is responsible for the system reliability functions of the NYPA system.  The Director-Power Systems Operation and the Manager-Operations Planning report directly to the Senior Vice-President – Transmission.

H.   Distribution of the SOC Procedure. The CCO shall provide a copy of the SOC procedures to corporate officers; employees directly engaged in the transmission system operation and reliability functions; Wholesale Merchant Function employees; support function staff and other such NYPA staff as deemed appropriate by the CCO. The distribution will be made either electronically or physically.

I.    Training on the Standards of Conduct.  The CCO shall coordinate mandatory training on Standards of Conduct procedures, including corporate officers, employees directly engaged in the transmission system operation and reliability functions and Wholesale Merchant Function, support functions and other NYPA staff as required to ensure compliance with Order 2004.  The training will be made available either electronically or other appropriate training mechanisms.

V.  PROCEDURES IMPLEMENTING STANDARDS OF CONDUCT

A.    Preamble. This section is intended to implement the Standards of Conduct established by the Commission in its regulations codified at 18 C.F.R. pt. 358 (2004).

B.     General Rules.

1.    Except as provided for in paragraph B.2, employees engaged in transmission system operations and reliability functions must function independently of employees engaged in the wholesale merchant functions.

2.    In the event of an emergency, NYPA may take whatever steps necessary to keep its system in operation.  To the extent that an emergency results in any deviation from the Commission’s Standards of Conduct, Power System Operations shall alert the CCO and report to the Commission and on the OASIS each such deviation as soon as possible, but not later than within 24 hours.

3.    The CCO is responsible for rendering all decisions with respect to the interpretation of NYPA’s Standards of Conduct.

C.      Rules Governing Employees Engaged in Wholesale Merchant Functions. No NYPA employee engaged in the wholesale merchant functions:

1.    Shall conduct transmission system operations or reliability functions.

2.    Shall have access to NYPA’s Energy Control Center or to similar NYPA facilities used for transmission operations or reliability functions that differs in any way whatsoever from the access available to open access transmission customers.  As used in this paragraph, access includes not only physical access to the Energy Control Center, or to similar facilities, but also access to transmission system information on any LAN that is or may in the future be used in connection with such operations.

3.    Have access to any information about the transmission system that is not publicly available to all users on the OASIS.

4.    Shall communicate any information about NYPA’s transmission system (including information about available transmission capability, price, curtailments, ancillary services, and the like) that is not otherwise publicly available through the OASIS.

D.   Rules Governing Employees Engaged in Transmission System Operations or Reliability Functions.  No employee of NYPA engaged in transmission system operations or reliability functions:

1.    Shall communicate to any employee of NYPA engaged in the wholesale merchant functions any information concerning the transmission system of NYPA or the transmission system of any other entity (including information received from non-affiliates or information about available transmission capability, price, curtailments, ancillary services, etc.) through non-public communications conducted off the OASIS, through access to information already publicly available.

2.    In the event an employee of NYPA in transmission system operations or reliability functions communicates information not already public on the OASIS in a manner contrary to the requirements of the Standards of Conduct or this procedure, that employee must immediately report such fact to the CCO and to such other personnel as may be designated thereby so that such information is immediately posted on the OASIS.

3.    No employee of NYPA may share any market information acquired from a Transmission Customer or a potential Transmission Customer, or developed in the course of responding to requests for transmission or ancillary service on the OASIS, to any employee of NYPA engaged in the wholesale merchant functions, except to the limited extent NYPA must post such information on the OASIS in accordance with applicable communication standards and protocols and the Commission’s regulations.

E.       Tariffs to be Administered in a Nondiscriminatory Manner.  All Tariffs are administered by the NYISO in a nondiscriminatory manner.

F.      Transfer of Employees Between Transmission System Operations or Reliability Functions and Wholesale Merchant Functions.  In accordance with section 37.6(g)(3) of title 18 of the C.F.R., the CCO shall post on the OASIS notices of any employee transfer between transmission system operations or reliability functions and the wholesale merchant functions, including an  identification of the transferring employee, the respective titles (pre and post-transfer) and the effective date of the transfer.  NYPA shall retain such postings for 90 days.

G.        Maintenance of Books and Records.  

According to section 358.4(d) of title 18 of the C.F.R., NYPA will maintain its books of account and records as prescribed under Parts 101 and 125 of the FERC’s regulations.

 H.  Procedures Implementing Standards of Conduct Will Be Publicly Available.  NYPA shall maintain a copy of this written procedure for public inspection at its White Plains Corporate Office and the Energy Control Center.

VI. ADMINISTRATION OF OASIS

The OASIS for the New York Control Area which includes all of NYPA’s Transmission system is administered by the NYISO.  

OASIS Database Transactions will be available for Audit.  Power System Operations is responsible for assuring OASIS database transactions shall be stored, dated, time-stamped and available for Commission audit in accordance with section 37.7 of title 18 of the C.F.R.