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

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

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

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

The following Members of the Board were present at the following locations:

Frank S. McCullough, Jr., Chairman (White Plains, NY)

Michael J. Townsend, Vice Chairman, (Pittsford, NY)

D. Patrick Curley, Trustee (White Plains, NY)

James A. Besha, Sr., Trustee (White Plains, NY)

Elise M. Cusack, Trustee (Lewiston, NY)

Robert E. Moses, Trustee (White Plains, NY)

Thomas W. Scozzafava, Trustee (White Plains, NY)

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Roger B. Kelley President and Chief Executive Officer

Thomas J. Kelly Executive Vice President, General Counsel and Chief of Staff

Joseph Del Sindaco Executive Vice President and Chief Financial Officer

Gil C. Quiniones Executive Vice President – Energy Marketing and Corporate Affairs

Vincent C. Vesce Executive Vice President – Corporate Services and Administration

Steven J. DeCarlo Senior Vice President – Transmission

Angelo S. Esposito Senior Vice President – Energy Services and Technology

William J. Nadeau Senior Vice President – Energy Resource Management and Strategic Planning

Brian Vattimo Senior Vice President – Public and Governmental Affairs

Edward A. Welz Senior Vice President and Chief Engineer – Power Generation

James H.Yates Senior Vice President – Marketing and Economic Development

Arnold M. Bellis Vice President, Controller

John M. Hoff Vice President – Procurement and Real Estate

Donald A. Russak Vice President – Finance

William V. Slade Vice President – Environmental, Health and Safety

Thomas Warmath Vice President and Chief Risk Officer

Daniel Wiese Inspector General and Vice President – Corporate Security

Brian C. McElroy Treasurer – Corporate Finance

Anne B. Cahill Corporate Secretary

Angela D. Graves Deputy Corporate Secretary

Dennis T. Eccleston Chief Information Officer

Paul F. Finnegan Executive Director – Public and Governmental Affairs

James F. Pasquale Director – Business Power Allocations, Compliance and Municipal and

Cooperative Marketing

Michael A. Saltzman Director – Media Relations – Public and Governmental Affairs

Gerard R. Mullin Director – Fuel Planning and Operations – Energy Resource Management

Caroline G. Garcia Manager – Power Contracts

Lesly Y. Pardo Manager – Internal Audit

Lou Paonessa                                       Community Relations Manager – Public and Governmental Affairs
Mary Jean Frank                                 Associate Corporate Secretary
Lorna M. Johnson                               Assistant Corporate Secretary
Maribel Cruz                                        Conservation Engineer – Energy Services and Technology
William Schneider                               Contractor
Kevin O’Keefee                                   Video Consultant

Chairman McCullough presided over the meeting. Corporate Secretary Cahill kept the Minutes.

Introduction

Chairman Frank McCullough said that a short Executive Session to brief the Trustees on current contract negotiations had been added to the end of the Trustees’ Meeting agenda.

4. Power for Jobs Program – Extended Benefits

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve extended benefits for 42 Power for Jobs (‘PFJ’) customers as listed in Exhibit ‘4-A.’ These customers have been recommended to receive such extended benefits by the Economic Development Power Allocation Board (‘EDPAB’).

BACKGROUND

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

“The PFJ program originally made 400 megawatts (‘MW’) of power available. The program was to be phased in over three years, with approximately 133 MW made available each year. In July 1998, as a result of the initial success of the program, the Legislature amended the PFJ statute to accelerate the distribution of the power and increase the size of the program to 450 MW.

“In May 2000, legislation was enacted that authorized another 300 MW of power to be allocated under the PFJ program. Legislation further amended the program in July 2002.

“Chapter 59 of the Laws of 2004 extended the benefits for PFJ customers whose contracts expired before the end of the program in 2005. Such customers had to choose to receive an ‘electricity savings reimbursement’ rebate and/or a power contract extension. The Authority was also authorized to voluntarily fund the rebates, if deemed feasible and advisable by the Trustees.

“PFJ customers whose contracts expired on or prior to November 30, 2004 were eligible for a rebate to the extent funded by the Authority from the date their contract expired through December 31, 2005.

“PFJ customers whose contracts expired after November 30, 2004 were eligible for rebate or contract extension, assuming funding by the Authority, from the date their contracts expired through December 31, 2005.

“Approved contract extensions entitled customers to receive the power from the Authority pursuant to a sale-for-resale agreement with the customer’s local utility. Separate allocation contracts between customers and the Authority contained job commitments enforceable by the Authority.

“In 2005, provisions of the approved State budget extended the period PFJ customers could receive benefits until December 31, 2006. Chapter 645 of the Laws of 2006 included provisions extending program benefits until June 30, 2007. In 2007, a new law (Chapter 89 of the Laws of 2007) included provisions extending program benefits until June 30, 2008.

“At its meeting of October 18, 2005, EDPAB approved criteria under which applicants whose extended benefits EDPAB had reduced for non-compliance with their job commitments could apply to have their PFJ benefits reinstated in whole or in part. EDPAB authorized staff to create a short-form application, notify customers of the process, send customers the application and evaluate reconsideration requests based on the approved criteria.

DISCUSSION

“At its meeting on November 27, 2007, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 42 businesses listed in Exhibit ‘4-A.’ Collectively, these organizations have agreed to retain more than 42,000 jobs in New York State in exchange for the rebates.

“The Trustees are requested to approve the payment and funding of rebates for the companies listed in Exhibit ‘4-A’ in a total amount currently not expected to exceed $2.7 million. Staff recommends that the Trustees authorize a withdrawal of monies from the Operating Fund for the payment of such amount, provided that such amount is not needed at the time of withdrawal for any of the purposes specified in Section 503(1)(a)-(c) of the General Resolution Authorizing Revenue Obligations, as amended and supplemented. Staff expects to present the Trustees with requests for additional funding for rebates to the companies listed in the Exhibit in the future.

FISCAL INFORMATION

“Funding of rebates for the companies listed in Exhibit ‘4-A’ is not expected to exceed $2.7 million. Payments will be made from the Operating Fund. To date, the Trustees have approved $101.5 million in rebates.

RECOMMENDATION

“The Executive Vice President and Chief Financial Officer and the Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommend that the Trustees approve the payment of electricity savings reimbursements to the Power for Jobs customers listed in Exhibit ‘4-A.’

“The Executive Vice President, General Counsel and Chief of Staff, the Senior Vice President – Marketing and Economic Development, the Senior Vice President – Public and Governmental Affairs and I concur in the recommendation.”

Mr. James Pasquale presented the highlights of staff’s recommendations to the Trustees. In response to a question from Chairman McCullough, Mr. Pasquale said that the Trustees have approved $101.5 million in Power for Jobs rebates, with another $54 million projected to be issued by the program’s sunset date of June 30, 2008. Chairman McCullough said that this was a significant amount of money.

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

WHEREAS, the Economic Development Power Allocation Board (“EDPAB”) has recommended that the Authority approve electricity savings reimbursements to the Power for Jobs (“PFJ”) customers listed in Exhibit “4-A”;

NOW THEREFORE BE IT RESOLVED, That to implement such EDPAB recommendations, the Authority hereby approves the payment of electricity savings reimbursements to the companies listed in Exhibit “4-A,” and that the Authority finds that such payments for electricity savings reimbursements are in all respects reasonable, consistent with the requirements of the PFJ program and in the public interest; and be it further

RESOLVED, That based on staff’s recommendation, it is hereby authorized that payments be made for electricity savings reimbursements as described in the foregoing report of the President and Chief Executive Officer in the aggregate amount of up to $2.7 million, and it is hereby found that amounts may properly be withdrawn from the Operating Fund to fund such payments; and be it further

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

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

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

5. Hydropower Contracts with Upstate Investor-Owned Utilities for Resale to Rural and Domestic Consumers – Transmittal to the Governor

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the attached contract extensions for sale to National Grid (formerly Niagara Mohawk Power Corporation), New York State Electric & Gas Corporation (‘NYSEG’) and Rochester Gas & Electric Corporation (‘RG&E’) (hereinafter referred to collectively as the ‘Utilities’) of a total of 455 MW of firm and 360 MW of firm peaking hydropower and authorize their transmittal to the Governor for his approval. The contract extensions with National Grid, NYSEG and RG&E are attached as Exhibits ‘5-A,’ ‘5-B’ and ‘5-C,’ respectively.

BACKGROUND

“The Utilities had been receiving a total of 553 MW of firm power from the St. Lawrence/FDR and Niagara Power Projects and 360 MW of firm peaking hydropower from the Niagara Project for resale to rural and domestic consumers under contracts that expired on August 31, 2007. At their July 31, 2007 meeting, the Trustees approved an extension of these contracts to take effect on an interim basis on September 1, 2007, pending completion of the formal contract approval process under Section 1009 of the Public Authorities Law. The contract extensions reflect a reduction in the amount of firm hydropower to be sold to the Utilities from 553 MW to 455 MW. The allocations of firm peaking hydropower would remain unchanged. The power is purchased at the cost-based hydropower rate and the benefits are passed on to the Utilities’ residential and small farm customers (the rural and domestic, or ‘R&D,’ customers) without markup under Public Service Commission tariffs.

“The Authority had been selling a total of 1,936 MW of firm Niagara power, 56 MW in excess of the 1,880 MW of firm Project Power determined to be appropriate by the Federal Power Commission (‘FPC’) in 1976. In addition, the Authority made commitments in connection with relicensing the Niagara Project to allocate 58 MW of Niagara Project power for the benefit of the Host Communities, Erie County and the City of Buffalo, the Tuscarora Nation and Niagara University (‘Relicensing Customers’). The completion of the Niagara Upgrade project added 32 MW of firm Niagara Project power available for sale. Of this amount, 16 MW must be sold to municipal systems pursuant to federal law. The remaining 16 MW is the net available capacity resulting from the Niagara Upgrade project.

“Other than the 553 MW sold to the Utilities, the entire firm output from the St. Lawrence/FDR and Niagara Projects is sold under contracts extending beyond August 31, 2007, or otherwise required to be used for specific purposes under law. As of September 1, 2007, 98 MW (58 MW to the Relicensing Customers plus 56 MW oversold less 16 MW of additional capacity) of the 553 MW of St. Lawrence/FDR and Niagara Project firm power previously sold to the Utilities was withdrawn. This left 455 MW of firm power and 360 MW of firm peaking power to be sold to the Utilities.

“Chapter 59 of the Laws of 2006 (Part U) authorized the creation by the Governor of a ‘Temporary State Commission on the Future of New York State Power Programs for Economic Development’ (‘Commission’). The charge to the Commission was to recommend to the Governor and the Legislature on or before December 1, 2006 ‘whether to continue, modify, expand or replace the state’s economic development power programs, including but not limited to the power for jobs program and the energy cost savings benefit program. . . .’

“On December 1, 2006, the Commission issued its report, which included an array of findings and recommendations. A key recommendation of the report was that, among other things, hydropower now sold to the Utilities be ‘edeployed’ for economic development purposes.

DISCUSSION

“The contract extensions would continue the sale of firm and firm peaking hydropower to the Utilities in the amounts approved by the Trustees at their July 31, 2007 meeting. Specifically, for National Grid, 189 MW of firm and 175 MW of firm peaking; for NYSEG, 167 MW of firm and 150 MW of firm peaking and for RG&E, 99 MW of firm and 35 MW of firm peaking. These amounts would be sold to the Utilities through June 30, 2008 subject to withdrawal upon 30 days’ written notice by the Authority for reallocation as may be authorized by law or as otherwise may be determined by the Trustees.

“In addition to the withdrawals specified above, the Authority may reduce or terminate service if it is determined to be necessary to comply with any ruling, order or decision by a regulatory or judicial body or the Trustees relating to hydropower and energy allocated under the proposed contracts.

“At their meeting on September 25, 2007, the Trustees authorized the holding of a public hearing, pursuant to Section 1009 of the Public Authorities Law, on the contract extensions. Copies of the proposed form of the contracts were transmitted to the Governor and the leaders of the State Legislature. In accordance with Section 1009, notice of such public hearing was published once each week for at least 30 days in at least six newspapers throughout the State. During that period, copies of the form of the contracts were made available for public inspection in the offices of the Authority and at other places throughout the State designated by the Authority, as well as on the Authority’s website.

“The public hearing on November 8, 2007 was held at Syracuse City Hall. The final transcript of the hearing is attached hereto as Exhibit ‘5-D.’ Staff has reviewed the transcript of the hearing, including the 25 written statements submitted for inclusion in the record.

“The seven speakers at the hearing were: Thomas G. Slocum, Shop Chairman, UAW Local 2367, Revere Copper Products, Inc.; William M. Murphy, President, UAW Local 2367, Revere Copper Products, Inc.; Mike C. Bambury, Citizen Action Program Chairman, UAW Local 2367, Revere Copper Products, Inc.; James D. Beckman, President, Crucible Specialty Metals; Corporate Vice President, Crucible Materials Corporation; Brian O’Shaughnessy, President, Revere Copper Products, Inc.; Michael J. Bebon, P.E., Deputy Director, Operations, Brookhaven National Laboratory and Randy Wolken, President, Manufacturers Association of Central New York.

“All of the speakers represented organizations that currently receive Authority power through one or more of its economic development programs. These speakers expressed their concern for the future of the Authority’s economic development programs, detailing how challenging it is for them to do business in New York State and how critical the Authority’s programs are to controlling some of their costs. To one extent or another, the speakers expressed frustration with New York’s high electricity rates and emphasized how urgent it is for the State to do something for the long term in order to help them. The speakers outlined the steps they have taken to control their costs and expressed their frustration with having to fight a yearly battle for the Power for Jobs and other economic development power programs, asking for a comprehensive, long-term solution to reduce high electricity costs in the State. In addition, 12 representatives of various other business interests submitted written statements supporting the concerns raised by the speakers at the public hearing.

“Five written statements were submitted by residential customers in support of extending the contracts with the Utilities. In general, these residential customers also asked that this power continue to be sold to residential consumers and not be reallocated in the future to businesses since, according to these individuals, businesses have other ways to cut their costs, while residential customers do not. A joint written statement submitted by NYSEG and RG&E stressed the value of this hydropower to residential customers and supported the continued allocation of the power for residential use.

“While all of the parties presenting oral or written statements differed on the ultimate disposition of the 455 MW of hydropower power, none of them objected to the proposed contract extensions with the Utilities.

FISCAL INFORMATION

“The contract extensions provide that the Utilities continue to pay for hydropower at the same rates they are currently charged, that is, determined in accordance with the ratemaking principles incorporated in the Auer Settlement and subsequent rate settlements. At their April 24, 2007 meeting, the Trustees approved an increase in these rates effective May 1, 2008. Accordingly, there will be no fiscal impact associated with the power sold on a month-to-month basis.

RECOMMENDATION

“The Manager – Power Contracts recommends that the Trustees authorize the transmittal of the contract extensions to the Governor for his approval.

“The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President and Chief Financial Officer, the Senior Vice President – Marketing and Economic Development and I concur in the recommendation.”

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

RESOLVED, That the contract extensions for the sale of hydroelectric power and energy generated by the Authority for sale to National Grid, New York State Electric & Gas Corporation and Rochester Gas & Electric Corporation are in the public interest and should be forwarded with a recommendation that they be approved, along with the record of the public hearing thereon, to the Governor, the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee; and be it further

RESOLVED, That the Chairman and the Corporate Secretary be authorized and directed to execute such contract extensions in the name of and on behalf of the Authority after the agreements have been approved by the Governor; and be it further

RESOLVED, That the Senior Vice President – Marketing and Economic Development or his designee be, and hereby is, authorized to negotiate and execute any and all documents necessary or desirable to effectuate such contract extensions; and be it further

RESOLVED, That the Chairman, the President and Chief Executive 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, General Counsel and Chief of Staff.

6. Procurement (Services) Contract - Term Natural Gas Supply Contracts for the 500 MW Combined Cycle Power Plant

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the award of three contracts for the supply of natural gas for the 500 MW Power Project (‘Project’) to Colonial Energy, Inc. (‘Colonial’), UBS Energy LLC (‘UBS’) and Virginia Energy Marketing, Inc. (‘VPEM’), at an estimated annual cost of $122 million over a two-year term for a total estimated cost of $245 million.

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

“The Authority’s Expenditure Authorization Procedures require the Trustees’ approval for the award of non-personal services, construction 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.

“The subject gas supply contracts, which total 35,000 MMBtu per day, will cover approximately half of the Project’s gas supply requirements, providing for a reliable supply of natural gas on a firm basis regardless of market conditions. The Project’s incremental gas requirements will be satisfied through short-term, spot-market purchases as part of a balanced supply portfolio. The need for securing gas supply contracts at this time is due to the expiration of the Authority’s existing term supply contracts with VPEM and BP Energy Company effective December 31, 2007.

DISCUSSION

“In accordance with the Authority’s competitive bidding requirements, bids were solicited from 22 potential suppliers for the supply and delivery of natural gas to the New York city-gate on a firm, non-recallable basis. Eight bids were received and evaluated by staff. The three lowest-priced responsive bidders were Colonial, UBS and VPEM, all of which have access to firm transportation capacity, which is critical to ensuring the reliable supply of natural gas to the New York city-gate on a year-round basis. The pricing structure under the Colonial, UBS and VPEM contracts will consist of indexed prices that will be fixed monthly or daily at the Authority’s option based on published price postings, including fixed contract adders (or premiums). The contract adders represent the seller’s assessment of volatility, potential lost opportunity costs and margin. The quantities, prices and other relevant details are set forth in the three Term Sheets provided to the Trustees under separate cover.

FISCAL INFORMATION

“Payment will be made from the Fuel Reserve Account (Operating Fund). The cost of fuel purchased under these term agreements will be recovered from the New York City Governmental Customers.

RECOMMENDATION

“The Senior Vice President – Energy Resource Management and Strategic Planning and the Director – Fuel Planning and Operations recommend that the Trustees approve the award of term natural gas supply contracts to Colonial Energy, Inc., UBS Energy LLC and Virginia Power Energy Marketing, Inc., having terms and conditions substantially consistent with those set forth in the three Term Sheets provided to the Trustees.

“The Executive Vice President and Chief Financial Officer, the Executive Vice President, General Counsel and Chief of Staff and I concur in the recommendation.”

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 for fuel purchases, approval is hereby granted for the total purchase of 25,550,000 MMBtu of natural gas supplies from Colonial Energy, Inc., UBS Energy LLC and Virginia Power Energy Marketing, Inc., under two-year term contracts, as recommended in the foregoing report of the President and Chief Executive Officer, in the amounts listed below:

Fuel Reserve Account Contract Projected

(Operating Fund) Approval Closing Date

Furnishing & Delivery of

Natural Gas Supplies

Colonial Energy, Inc. $105,000,000 12/31/09

UBS Energy LLC 70,000,000 12/31/09

Virginia Power Energy

Marketing, Inc. 70,000,000 12/31/09

$245,000,000

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

7. Informational Presentation from Energy Services

Chairman McCullough said that Mr. Angelo Esposito was going to make the first in a series of presentations to the Trustees that he hopes will encourage dialogue between the Trustees and staff on current issues facing the Authority. He said that Trustee Besha, as well as other Trustees, had suggested these dialogues in order to engage the Trustees in substantive discussions on Authority priorities on a more current, forward-looking basis.

Mr. Esposito’s presentation (attached) provided the Trustees with an overview of the Authority’s Energy Services Programs (“ESP”). Following the presentation, the Trustees and Authority staff engaged in a dialogue about the ESP that touched on the types of projects that are eligible for ESP support and the Authority’s efforts to expand the program, including the current legislative barriers to such expansion. Chairman McCullough thanked Mr. Esposito for a thorough and informative presentation.

Table of Contents

SUMMARY

DISCUSSION

FISCAL INFORMATION

RECOMMENDATION

10. Next Meeting