MINUTES OF THE REGULAR MEETING OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

September 25, 2007

 

Table of Contents

 

            Subject                                                                                                          

 

1.              Minutes of the Regular Meeting held on July 31, 2007                                  

2.              Financial Reports for the Eight Months Ended August 31, 2007, Exhibit  ‘2-A’

3.              Report from the President and Chief Executive Officer                 

4.              Power for Jobs Program – Extended Benefits, Exhibit  ‘4-A’
Resolution

5.              Allocation of 3,900 kW of Hydro Power, Exhibits ‘5-A’, ‘5-A1’ – ‘5-A2’
Resolution                                                                                                                                                

6.              Incremental Power Supply Arrangements with Full-Requirements 12   Municipal and Rural Electric Cooperative Systems, Exhibit ‘6-A’  
Resolution

7.              Village of Marathon – Increase in Retail Rates – Notice of Adoption, Exhibits ‘7-A’; ‘7-B’ –‘7-C’
Resolution

8.              Hydropower Contracts with Upstate Investor-Owned Utilities for the Benefit of Rural and Domestic Consumers – Notice of Public Hearing  
Resolution

9.              Increase in New York City Governmental Customer Rates –   Notice of Proposed Rulemaking 
Resolution

10.           Increase in Westchester County Governmental Customer Rates –  Notice of Proposed Rulemaking, Exhibits ‘10-A’ - ‘10-B’  
Resolution

11.           Budget and Financial Plan Information Pursuant to Regulations of the Office of the State Comptroller, Exhibits ‘11-A’ - ‘11-C’  
Resolution

12.           Budget Information Pursuant to Section 2801 of the Public Authorities Law, Exhibits  ‘12-A’  
Resolution

13.           Procurement (Services) Contracts – Business Units and Facilities  Awards, Exhibits  ‘13-A’  
Resolution 

14.           Procurement (Services) Contracts – Business Units and Facilities -  Extensions, Approval of Additional Funding and Increase in Compensation Ceiling, Exhibit ‘14-A’  
Resolution

15.           Issuance of the Series 2007 A, 2007 B and 2007 C Revenue Bonds , Exhibits  ‘15-A1’ - ‘15-A3’
Resolution                                                                                                                                                

16.           Motion to Conduct an Executive Session  

17.           Motion to Resume Meeting in Open Session

18.           Entergy James A. FitzPatrick and Entergy Indian Point 3 Value-Sharing Agreements – Amendments
Resolution

19.           Next Meeting                                                                                                      

            Closing                                                                                                        

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

 

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, (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)

                                Leonard N. Spano, 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

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

Thomas P. Antenucci                          Vice President – Project Management

Arnold M. Bellis                                   Vice President, Controller

John M. Hoff                                        Vice President – Procurement and Real Estate

Donald A. Russak                                Vice President – Finance

Thomas Warmath                                Vice President and Chief Risk Officer

Daniel Wiese                                        Inspector General and Vice President – Corporate Security

Brian C. McElroy                                  Treasurer – Corporate Finance

Lisa A. Cole                                          Deputy Treasurer

Anne B. Cahill                                      Corporate Secretary

Angela D. Graves                                 Deputy Corporate Secretary

Dennis T. Eccleston                            Chief Information Officer

Arthur T. Cambouris                           Assistant General Counsel and Managing Attorney – Litigation

Joseph J. Carline                                  Assistant General Counsel – Power and Transmission

Paul F. Finnegan                                  Executive Director – Public and Governmental Affairs

John J. Suloway                                   Executive Director – Licensing, Implementation and Compliance

Thomas A. Davis                                 Director – Financial Planning

Joseph Leary                                        Director – SENY – 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

Marilyn J. Brown                                  Manager – Market Pricing Analysis

Caroline G. Garcia                                 Manager – Power Contracts

Lesly Y. Pardo                                      Manager – Internal Audit

Mary Jean Frank                                  Associate Corporate Secretary

Lorna M. Johnson                               Assistant Corporate Secretary

Jack Murphy                                         Temporary Public Relations Counsel

Timothy Sheehan                                 Principal Attorney II – Financial Affairs

Felix E. DeJesus                                    Consultant – Marketing Economic Development

Oksana U. Karaczewsky                     Senior Procurement Compliance Coordinator

Jeremy Colgan                                      Bond Counsel, Hawkins Delafield and Wood, LLP

John Connorton                                   Bond Counsel, Hawkins Delafield and Wood, LLP

Michael Mace                                       Advisor, Public Financial Management, Inc.

 


 

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

 


 

1.                   Approval of the Minutes

 

                The Minutes of the Regular Meeting of July 31, 2007 were unanimously adopted.               


 

2.                   Financial Reports for the Six Months Ended August 31, 2007

Mr. Bellis presented an overview of the reports for the Trustees.


 

3.                   Report from the President and Chief Executive Officer

 

                President Roger Kelley said that on Friday, September 21, 2007, the Federal Energy Regulatory Commission (“FERC”) had issued an order denying the rehearing that had been filed by various parties following the issuance of the new Niagara license in March 2007.  This means that the Authority can continue to move forward with implementing its new license and the commitments of the settlement agreements for the benefit of the Niagara region.

                President Kelley said that he’s had a very productive couple of months and listed some of the activities in which he’s been involved since the last Trustees’ meeting in July, including:

President Kelley then mentioned that he was scheduled to give the keynote address at the Annual Fall Meeting of the Independent Power Producers of New York and would discuss, among other things, energy conservation and the Authority’s ability to bid on KeySpan’s 2,450 MW Ravenswood project in New York City. 

                He stated that on behalf of the Authority he recently attended the annual Lewiston Jazz Festival, of which the Authority is a sponsor, and participated in a recent press conference in Buffalo where he made the second $2 million installment payment to Erie Canal Harbor Development Corporation for redeveloping the Buffalo waterfront under one of the Niagara relicensing settlement agreements.

                President Kelley advised the Trustees that the Hinckley Reservoir, site of the Authority’s Jarvis hydroelectric plant, was abnormally low and that the Authority had recently sent a letter to FERC requesting an exemption from the minimum flow level requirement, since that was at odds with the Authority’s need to draw down the reservoir to run the Jarvis plant.

                Finally, President Kelley briefed the Trustees about a developing situation with four of the recently refurbished stators at the Niagara project and said that he would keep the Trustees advised as the situation develops. 

                Chairman Frank McCullough said that it’s obvious that President Kelley has been extremely busy and that he appreciated the personal attention, energy and enthusiasm he was bringing to everything he did in his 24/7 job. 


 

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 64 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.  As an alternative, such customers could choose to receive a rebate to the extent funded by the Authority from the date their contract expired as a bridge to a new contract extension, with the contract extension commencing December 1, 2004.  The new contract would be in effect from a period no earlier than December 1, 2004 through the end of the PFJ program on 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.

 

“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 September 24, 2007, EDPAB recommended that the Authority’s Trustees approve electricity savings reimbursement rebates to the 64 businesses listed in Exhibit ‘4-A.’  Collectively, these organizations have agreed to retain more than 57,000 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 $7.6 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 Exhibits in the future.

 

FISCAL INFORMATION

 

“Funding of rebates for the companies listed on Exhibit ‘4-A’ is not expected to exceed $7.6 million.  Payments will be made from the Operating Fund.  To date, the Trustees have approved $90 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.”

 

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 $7.6 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 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 resolutions, subject to the approval of the form thereof by the Executive Vice President, General Counsel and Chief of Staff.

 


 


 

 


 

5.             Location of 3,900 kW of Hydro Power

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve an allocation of available Replacement Power (‘RP’) totaling 3,900 kW to two industrial companies.

 

BACKGROUND

 

“Under Section 1005(13) of the Power Authority Act, as amended by Chapter 313 of the Laws of 2005, the Authority may contract to allocate or reallocate directly, or by sale for resale, 250 MW of firm hydroelectric power as Expansion Power and up to 445 MW of RP to businesses in the State located within 30 miles of the Niagara Power Project, provided that the amount of power allocated to businesses in Chautauqua County on January 1, 1987 shall continue to be allocated in such county.  Allocations are made pursuant to criteria set forth in Section
1002(13).

 

“On October 22, 2003, the Authority, National Grid, Empire State Development Corporation and the Buffalo Niagara Enterprise signed a Memorandum of Understanding (‘MOU’) that outlines the process to coordinate marketing and allocating Authority hydro power.  The entities noted above have formed the Western New York Advisory Group (‘Advisory Group’) with the intent of better using the value of this resource to improve the economy of Western New York and the State of New York.  Nothing in the MOU changes the legal requirements applicable to the allocation of hydro power. 

 

DISCUSSION

 

                “Staff recommends and the Advisory Group supports the available power being allocated to the two companies set forth in Exhibit ‘5-A.’  The Exhibit shows, among other things, the amount of power requested, the recommended allocation and additional employment and capital investment information.  These projects will help maintain and diversify the industrial base of Western New York and provide new employment opportunities.  They are projected to result in the creation of 58 jobs.

 

RECOMMENDATION

 

“The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees approve the allocation of 3,900 kW of hydropower to the companies listed in Exhibit ‘5-A.’

 

                “The Executive Vice President, General Counsel and Chief of Staff, 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 allocation of 3,900 kW of Replacement Power, as detailed in Exhibit “5-A,”  be, and hereby is, approved on the      terms set forth in the foregoing report of the President and Chief                                 Executive Officer; and be it further

 


 

                                                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.

 


 


 

Exhibit “5-A1”

APPLICATION SUMMARY

Replacement Power

 

Company:                                                          Devil’s Hole Distilling

 

Location:                                                               Lewiston               

 

County:                                                                  Niagara

 

IOU:                                                                       National Grid

 

Business Activity:                                               Distillery; principal product is branded luxury vodka

 

Project Description:                                           The project will include building a new 2,000-square-foot facility and then installing the equipment to manufacture the product, including distilling equipment, fermentation tanks, fruit-processing equipment, piping, an agitator and pumps.

 

Existing Allocation:                                            None

 

Power Request:                                                    600 kW

                                                                  

Power Recommended:                                        400 kW

 

Job Commitment:      

                   Existing:                                            0 jobs

                   New:                                                    8 jobs

                                                                           

New Jobs/Power Ratio:                                      20 jobs/MW

 

New Jobs -

Avg. Wage and Benefits:                                    $48,000

 

Capital Investment:                                             $600,000

 

 Capital Investment per MW:                            $1.5 million/MW

 

Summary:                                                             The company is a start-up boutique distillery whose principal product is branded luxury artisanal vodka, handcrafted in small batches from New York State-grown apples.  In addition to its flagship branded products, the company also will have the ability to produce other distilled sprits made from a minimum of 75% New York State-grown agricultural products.  Given its proximity to both Niagara County’s numerous fruit growers and Lake Ontario, the company has a competitive advantage in terms of both availability and cost in obtaining the raw materials for the distillation process.  These advantages, along with a low-cost power allocation, will allow the company to develop and maintain a competitive pricing strategy as well.


 

Exhibit “5-A2”

APPLICATION SUMMARY

Replacement Power

 

Company: Unifrax I LLC

 

Location:                                                  Tonawanda       

 

County:                                                     Erie

 

IOU:                                                           National Grid

 

Business Activity:                                  Manufacturer ceramic fiber insulation products

 

Project Description:                               The expansion project includes a facility addition along with new equipment to expand the production capacity of the Tonawanda plant.  The expansion will provide capability to support growing demand in the catalytic converter market.  The equipment to be installed will both expand papermaking capability and increase the range of products that can be produced on existing production lines.  The new equipment would include tanks, pumps, a mixer, dryers, ovens, die cutters and other processing equipment.

 

Existing Allocation:                               3,600 kW of Replacement Power

 

Power Request:                                       4,000 kW

                                                                  

Power Recommended:                            3,500 kW

 

Job Commitment:     

                   Existing:                                188 jobs

                   New:                                         50 jobs

                                                                           

New Jobs/Power Ratio:                          14 jobs/MW

Total Jobs/Power Ratio:                        34 jobs/MW (all allocations)

 

New Jobs -

Avg. Wage and Benefits:                       $63,000

 

Capital Investment:                                $20 million (an additional $1.75 million will be invested by building owner)

 

Capital Investment per MW:                $5.71million/MW

 

Summary:                                                Product improvements are essential to achieve market growth targets and support existing customer sales.  Without this expansion, capacity would most likely be pursued within European operations.  Unifrax is currently evaluating several locations for addition of this new capacity, including Indiana, China, France, Germany, Czech Republic and the United Kingdom.  All of these locations are preparing competitive proposals for this expansion and are actively soliciting local government incentives.  A low-cost power allocation would help Unifrax build its case to locate this expansion in western New York.

 


 

6.             Incremental Power Supply Arrangements with Full-Requirements Municipal and Rural Electric Cooperative Systems                    

 

                The President and Chief Executive Officer submitted the following report:

 

“The Trustees are requested to authorize the Acting Senior Vice President – Marketing and Economic Development to negotiate and execute agreements for incremental power service with any or all of the full-requirements municipal and rural electric cooperative systems.  The current 10 full-requirements municipal systems (‘munis’) and four rural electric cooperative systems (‘Coops’) are shown on the Exhibit ‘6-A.’

 

BACKGROUND

 

“The Authority presently serves 14 munis and coops (‘Customer Group’) as full-requirements systems.  Full-requirements systems are supplied all their power needs, including hydro power from the Niagara project and incremental (consisting of market purchases) by the Authority.  The Customer Group is in the last year of a 12-year contract for their incremental power.  These customers have the right to transfer to partial-requirements status, purchasing only Authority hydro power, by providing the Authority written notice.  By mid-2007, two of the munis had provided the required notice to transfer to partial-requirements status effective January 1, 2008.

 

“In 2006, annual revenues from the Customer Group were approximately $35.7 million, of which $20.8 million was for hydropower purchases and $14.9 million was for incremental power purchases.  Of this total, $8.2 million was for power transmission and wheeling.

 

DISCUSSION

 

                “At the request of the Customer Group, Authority staff has held discussions with the customers seeking to arrive at an arrangement under which these systems could remain full-requirements customers of the Authority.  An agreement has been reached by which the Authority will procure all of the Customer Group’s incremental power needs by purchasing the supply in the day-ahead market of the New York Independent System Operator (‘NYISO’). Balancing any undersupply from that scheduled in the day-ahead market will take place in the real-time market.  The customers will pay the Authority all costs it incurs to supply incremental power and energy to them.  Such costs, which will be passed through to the customers on their monthly bills, will consist of the following: 

 

·         All UCAP  purchases, if any, necessary to supply the customers;

·         All NYISO costs, including Ancillary Services 1 through 6, marginal losses, NTAC and congestion costs associated with deliveries to the customers; and

·         All Authority administrative overhead costs associated with the supply of incremental power and energy.

 

“In addition, the customers will be responsible for any other costs, fees, taxes or assessments imposed on the Authority by the NYISO or any other third party that are associated with the Authority’s role as load-serving entity to the customers.  The initial term of the agreement will be for the two-year period beginning January 1, 2008 and ending December 31, 2009.  Thereafter, the agreement can be renewed by mutual agreement on a year-to-year basis.  The agreement can be cancelled by the customer submitting a request in writing 90 days in advance of the proposed cancellation date.

 

RECOMMENDATION

 

“The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the Trustees authorize the Senior Vice President – Marketing and Economic Development to negotiate and execute incremental power supply agreements with the eight full-requirements municipal electric systems and the four full-requirements rural electric cooperative systems.

 

“The Executive Vice President, General Counsel and Chief of Staff, 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 adopted by a vote of 6 to 1 with Trustee Besha recusing himself.

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development, or his designee, be, and hereby is, authorized to negotiate and execute long-term power supply arrangements with any or all of the full-requirements municipal and electric rural cooperative systems as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development, or his designee, be, and hereby is, authorized to execute any and all documents necessary or desirable to effectuate the foregoing, subject to 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, 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.

 


 

Exhibit “6-A”

 

 

                                                Listing of Full Requirements Customers

 

 

Municipal Customers                                                                         Will Accept New Agreement

 

1.     Village of Fairport                                                                                        No

 

2.     Village of Greenport                                                                                     Yes

 

3.     Village of Lake Placid                                                                  Yes

 

4.     Village of Marathon                                                                                     Yes

 

5.     Village of Mayville                                                                                       Yes

 

6.     City if Sherrill                                                                                                Yes

 

7.     Village of Solvay                                                                                          Yes

 

8.     Village of Tupper Lake                                                                                Yes

 

9.     Village of Watkins Glen                                                                              Yes

 

10.   Village of Westfield                                                                                     No

 

 

Cooperative Customers

 

1.     Delaware Electric Cooperative                                                                   Yes

 

2.     Oneida Madison Electric Cooperative                                                      Yes

 

3.     Otsego Electric Cooperative                                                                      Yes

 

4.     Steuben Electric Cooperative                                                                     Yes 

 

 


 

7.             Village of Marathon – Increase in Retail Rates – Notice of Adoption

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Board of the Village of Marathon (‘Village Board’) has requested the Trustees to approve revisions to the Village of Marathon’s (‘Village’) retail rates for each customer service classification.  These revisions will result in additional total annual revenues of about $125,000, or 11%. 

 

BACKGROUND

 

                “The Village Board has requested the proposed rate increase primarily to provide additional revenues to allow for sufficient working funds and meet forecasted increases in operation and maintenance expenses and additional debt payment requirements.  The current rates have been in effect since April 1991.  

 

                “The Village Board has planned upgrades to the electric system amounting to $500,000 in order to maintain reliable service to its customers.  The upgrades will be directed primarily at substation distribution equipment, new customer meters and a load management system.  The Village is planning to debt-finance $475,000 of its capital program by issuing a new bond.

 

                “Under the new rates, an average residential customer who currently pays about 5.5 cents per kWh will pay about 6.1 cents after the increase.  A small commercial customer that currently pays 6.0 cents per kWh will pay 6.6 cents and large commercial customers that presently pay 4.6 cents per kWh will pay 5.1 cents after the increase. 

 

DISCUSSION

 

“The proposed rate revisions are based on a cost-of-service study requested by the Village and prepared by Authority staff.  A public hearing was held by the Village of Marathon on May 30, 2007.  No ratepayer comments were received at the public hearing.  The Village Board has requested that the proposed rates be approved. 

 

“Pursuant to the approved procedures, the Senior Vice President – Marketing and Economic Development requested that the Corporate Secretary file a notice for publication in the New York State Register of the Village’s proposed revision in retail rates.  Such notice was published on July 3, 2007.  No comments concerning the proposed action have been received by the Authority’s Corporate Secretary.   

 

                “An expense and revenue summary, comparisons of present and proposed total annual revenues and their corresponding rates by service classification are attached as Exhibits ‘7-A,’ ‘7-B’ and ‘7-C,’ respectively.

 

RECOMMENDATION

 

                “The Director – Business Power Allocations, Compliance and Municipal and Cooperative Marketing recommends that the attached schedule of rates for the Village of Marathon be approved as requested by the Board of the Village of Marathon, to take effect beginning with the first full billing period following the date this resolution is adopted.

 

                “It is also recommended that the Trustees authorize the Corporate Secretary to file a notice of adoption with the Secretary of State for publication in the New York State Register and to file such other notice as may be required by statute or regulation.

 

                “The Executive Vice President, General Counsel and Chief of Staff, 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 proposed rates for electric service for the Village of Marathon, as requested by the Village Board, be approved, to take effect with the first full billing period following this date, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

                RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, authorized to file a notice of adoption with the Secretary of State for publication in the New York State Register and to file any other notice required by statute or regulation; 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.


 

                                                                                                                                                Exhibit "7-A"

                                                                                                                                                               

Village of Marathon

Expense and Revenue Summary

 

                                                                                                                   Five-Year           

                                                                                                                  Average                    2006                   Proposed1

 

Purchase Power Expense

(Authority hydro and incremental)                                                      $475,296              $   638,833              $  688,655

 

Distribution Expense (Village-owned facilities)                                  187,740                   201,697                  191,443

 

Depreciation Expense

(On all capital facilities and equipment)                                                  72,413                    73,574                 154,584

 

General and Administrative Expenses                                             

(Salaries, insurance, management services and                                   102,330                  128,646                   109,461

Administrative expenses)

 

Total Operating Expenses                                                                       837,509              1,042,570               1,144,143

 

Net Rate of Return – (average 3.5%, proposed 6.9%)

(includes debt service on current and planned debt,

cash reserves and contingencies)                                                             52,231                       -0-                      110,344

 

 

Total Cost of Service                                                                               $890,010             $1,042,570              $1,254,487

 

 

Revenue at Present Rates                                                                                                                                1,129,916

               

Deficiency at Current Rates                                                                                                                                     124,571

 

Revenue at Proposed Rates                                                                                                                               $1,254,487

 

Increase % at Proposed Rates                                                                                                                                  11.0%

 

 

 

 

 

1Based on five years of historical and projected data.

 


 

                                                                                                                                                                            Exhibit "7-B"

 

 

Village of Marathon

Comparison of Present and Proposed Annual Total Revenues

 

 

 

                                                                                                                                 

                SERVICE                                                                PRESENT                  PROPOSED                     %    

                CLASSIFICATION                                              REVENUE                   REVENUE          INCREASE          

 

 

                Residential – SC1                                                 $   605,723                 $   672,504           11%

 

 

                Small Commercial – SC2                                            106,902                     118,689           11%

 

 

                Large Commercial - SC3                                            405,441                     450,140                           11% 

 

               

                Security Lights – SC4                                                    2,869                         3,185                           11%

 

               

                Street Lights – SC5                                                        8,979                        9,969                            11%

 

 

                                                                                                                               

                Total                                                                       $1,129,914                 $1,254,487                           11%

Exhibit "7-C"

               

 

                                                                                Village of Marathon           

                                                Comparison of Present and Proposed Net Monthly Rates

 

Present ¹                                                                                                                                                Proposed ¹

Rates                                                                                                                                                                      Rates

                Residential SC 1

$ 2.25                                      Customer Charge                                                                                                   $ 5.00

 

                                                                                                                                                                          Non-Winter

                                                                                                                                       (May-October)

 

$ .0488                                    Energy Charge, per kWh.                                                                                 $ .0500

                                               

                                                                                                                                                                                  Winter

                                                                                                                                                                     (November-April)

                                                Energy Charge, per kWh.                                                                     

 

$ .0488                                    First 1,000 kWh.                                                                                                    $ .0500

$ .0600                                    Over 1,000 kWh.                                                                                                     $ .0691

                                                                               

 

 

Small Commercial SC 2

 

$ 3.00                                      Customer Charge                                                                                                 $ 7.00     

 

                                                                                                                                                                          Non-Winter

                                                                                                                                                                        (May-October)

                                                                .                                                                                              

$ .0529                                    Energy Charge, per kWh.                                                                               $ .0494       

                               

 

                                                                                                                                                                            Winter

                                                                                                                                                                     (November-April)

 

$ .0595                                    Energy Charge, per kWh.                                                                               $ .0666


 

¹ Average annual purchased power adjustment reflected in present and proposed rates.

 

 

 


 

Exhibit "7-C"

                                                                                                                                                               

                                                                                 Village of Marathon           

                                                Comparison of Present and Proposed Net Monthly Rates

 

Present ¹                                                                                                                                            Proposed ¹

Rates                                                                                                                                                                           Rates

 

 

                Large Commercial  SC 3

$ 5.00                                      Demand Charge, per kW                                                                                        $ 5.50  

 

$ .0246                                    Energy Charge, per kWh.                                                                                     $ .0276

                               

 

                Security Lights  SC 4

$ 3.70                                      Facilities Charge, per lamp                                                                    $ 5.50

 

$ .0261                                    Energy Charge, per kWh.                                                                                     $ .0119

 

 

Street Lights  SC 5

 $ 4.80                                     Facilities Charge, per lamp                                                                    $ 5.37

 

$ .0261                                    Energy Charge, per kWh.                                                                                     $ .0119

                                                                

¹ Average annual purchased power adjustment reflected in present and proposed rates.

 


 

8.              Hydropower Contracts with Upstate Investor-Owned Utilities for the Benefit of Rural and Domestic Consumers –

                 Notice of Public Hearing                                                                     

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to authorize a public hearing, pursuant to Section 1009 of the Public Authorities Law, on contract extensions for sale to National Grid (formerly Niagara Mohawk Power Corporation), New York State Electric & Gas Corporation (‘NYSEG’) and Rochester Gas & Electric Corporation (‘RGE’) (hereinafter referred to collectively as the ‘Utilities’) of a total of 455 MW of firm and 360 MW of firm peaking hydropower currently being sold to the Utilities for the benefit of rural and domestic consumers.  The contracts would terminate June 30, 2008 subject to earlier termination by the Authority on 30 days’ written notice.  These contract extensions were approved on an interim basis by the Trustees at their July 31, 2007 meeting.

 

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 the benefit of 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 §1009 of the Public Authorities Law.  Under §1009, the contracts will be subject to public notice, hearing and approval by the Governor.  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’).  Based on a rigorous study, the Authority determined that there were an additional 32 MW of firm Niagara Project power available for sale as a result of completion of the Niagara Upgrade project.  Of this amount, one-half, or 16 MW, must be sold to municipal systems pursuant to federal law.  The remainder is the net available capacity resulting from the 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 ought to be ‘redeployed’ for economic development purposes.

DISCUSSION

 

                “In the recently concluded legislative session, the Power for Jobs and Energy Cost Savings Benefit Programs were extended for an additional year through June 30, 2008, (Chapter 89 of the Laws of 2007) with the understanding that a reformation of the State’s economic development power programs was necessary in order to create a long-term power resource with price stability for business, whether based on the recommendations of the Commission or some other approach.  It is anticipated that this issue will be addressed before the current programs expire in mid-2008.

 

                “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 RGE, 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.

 

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 Senior Vice President – Marketing and Economic Development recommends that the Trustees authorize a public hearing on the contract extension agreements with the Utilities to be held at Syracuse City Hall on November 8, 2007.  It is further recommended that, pursuant to Section 1009 of the Public Authorities Law, the Corporate Secretary be authorized to transmit copies of the proposed contracts to the Governor and legislative leaders.

 

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

 

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

 

RESOLVED, That the Trustees hereby authorize a public hearing on the terms of 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 to      be held at Syracuse City Hall on November 8, 2007; and be it further


 

RESOLVED, That the Corporate Secretary be, and hereby is, authorized to transmit copies of the contract extensions to the Governor, the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Committee on Ways and Means, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee pursuant to Section 1009 of the Public Authorities Law; and be it further

 

RESOLVED, That the President or his designee be, and hereby is, authorized, subject to approval of the form thereof by the Executive Vice President, General Counsel and Chief of Staff, to enter into such other agreements, and to do such other things as may be necessary or desirable to implement the contract extensions with National Grid, New York State Electric & Gas Corporation and Rochester Gas and Electric Corporation as set forth in the foregoing report of the President and Chief Executive Officer; 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.


 

9.             Increase in New York City Governmental Customer Rates – Notice of Proposed Rulemaking

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve a Notice of Proposed Rulemaking (‘NOPR’) to increase the Fixed Costs component of the production rates to be charged in 2008 to the New York City Governmental Customers (‘NYC Governmental Customers’).  This proposed action would increase the Fixed Costs component of production rates by $26.5 million as compared to 2007.  The Trustees are also requested to direct the Corporate Secretary to publish the NOPR in the State Register in accordance with the requirements of the State Administrative Procedure Act (‘SAPA’). 

 

                “This proposed action is consistent with the annual rate-setting process set forth in the Long-Term Agreements (‘LTAs’) for the purchase of electric service executed by each of the NYC Governmental Customers and the Authority.  Under the LTAs, any proposed increase in the Fixed Costs component of the Governmental Customers’ production rates must be done in accordance with a SAPA proceeding.  Since the proposed increase is greater than 2%, a public forum will be held in accordance with Authority policy.  Trustee authorization is also requested to direct the Corporate Secretary to provide all appropriate notice for such public forum.  Upon closure of the 45-day statutory comment period concerning this proposed rate action, Authority staff will take into consideration concerns that have been raised and return to the Trustees at their meeting on December 18, 2007 to seek final adoption of this proposal. 

 

BACKGROUND

 

                “In 2005, the Authority and the NYC Governmental Customers entered into LTAs for the purchase of electric service through December 31, 2017.  The LTAs replaced prior agreements entered into during the mid-1990s with most of these same NYC Governmental Customers.  The LTAs established a new relationship between the Authority and the NYC Governmental Customers that reflects the costs of procuring electricity in the restructured marketplace managed by the New York Independent System Operator (‘NYISO’).  The LTAs define specific cost categories with respect to providing electric service, and prescribe a collaborative process for acquiring resources, managing risk and selecting a cost-recovery mechanism.

 

                “The LTAs separate all costs into two distinct categories:  Fixed Costs and Variable Costs.  Fixed Costs include Operation and Maintenance (‘O&M’), Shared Services, Capital Cost, Other Expenses (i.e., certain directly assignable costs) and a credit for investment and other income.  Under the LTAs, the Authority must establish Fixed Costs based on Cost-of-Service (‘COS’) principles and make changes only under a SAPA proceeding.  In addition, the LTAs contemplate that year-to-year changes in Fixed Costs will be reviewed by the NYC Governmental Customers in advance of a filing made under SAPA.  Under the LTAs, the NYC Governmental Customers’ concerns must be considered prior to presenting any proposed changes to the Fixed Costs to the Trustees or issuing them for public comment. 

 

                “Under the LTAs, the Authority also develops on an annual basis the Variable Costs (i.e. fuel and purchased-power expense, risk management, NYISO ancillary services and O&M reserve, less a credit for NYISO revenues from NYC Governmental Customer-dedicated generation), which are subject to the NYC Governmental Customers’ review and comment.  Each year’s Variable Costs are determined in accordance with the methods and procedures set forth in the LTAs that were previously approved by the Trustees, and therefore are not a matter for Trustee approval.  In the rate-setting process for the 2007 Rate Year, the NYC Governmental Customers selected an ‘Energy Charge Adjustment (‘ECA’) with Hedging’ cost-recovery mechanism under which all Variable Costs are passed on to the NYC Governmental Customers.  Because the LTA prescribes that an ECA with Hedging cost-recovery mechanism, if selected, must remain in effect for two consecutive years, the 2008 Rate Year will also employ an ECA with Hedging cost-recovery mechanism for the Variable Costs.  Under this ECA mechanism, Authority invoices will include an addition or subtraction each month that reflects changes in the Variable Costs as described in the LTAs.

 

DISCUSSION

               

                “A ‘Preliminary Staff Report’ detailing the ‘Preliminary 2008 Cost-of-Service’ was published in May 2007 and submitted to the NYC Governmental Customers for their review and comment.  As part of the rate-setting process set forth in the LTAs, Authority staff provided its pro forma 2008 Preliminary COS, 2008 revenue projections (at current  rates), a comparison with pro forma 2007 costs and revenues and the cost of different risk management and cost-recovery options affecting Variable Costs that are not part of this proposed rate action.

 

                “Based on the projected 2008 Final COS, a Fixed Costs increase of $26.5 million is proposed for the NYC Governmental Customers.  Collectively, the Fixed Costs are projected to be $179.7 million in 2008 versus $153.2 million in 2007.  Contributors to the additional Fixed Costs are increases in Capital Costs, $11.1 million; O&M, $7.9 million; Shared Services, $4.4 million and Other Expenses, $2.3 million, with credit offsets bringing the net total to $26.5 million.  The $26.5 million represents a 17.3% increase in Fixed Costs and a 3.4% overall production rate increase.  As an information item, the projected Variable Costs are expected to increase nominally (less than 1%) from 2007 levels and are subject to change depending on the selected hedging strategies.  The current estimate of the 2008 production rate, combining the Fixed and Variable Costs, is projected to increase by about 3.5%.

 

                “Because this proposal would increase revenues to the Authority by more than 2%, a public forum under Authority procedures will be held on Thursday, November 15, 2007 at 10:30 a.m. at the Authority’s New York City office to solicit comments from interested parties.  Advance notice and comment procedures under the LTAs concerning changes to Fixed Costs were followed, and the NYC Governmental Customers will have opportunity to file comments in accordance with SAPA after the issuance of this NOPR in the New York State Register.               

               

                “All of the NYC Governmental Customers would be subject to this proposed increase in the Fixed Costs component of their production rates.  This proposed action does not affect Westchester County and other local governmental entities in the County, which are the subject of a separate Trustee action.        

 

“Staff anticipates returning to the Trustees at their December meeting with a request for final adoption of a Fixed Costs increase that will include an analysis of any comments received from interested parties.  Subsequent to such final adoption, staff will incorporate the approved Fixed Costs and the final Variable Costs that are determined in the rate-setting process with the NYC Governmental Customers set forth in the LTAs into new production rates to become effective with the January 2008 billing cycle.  Staff proposes to apply the increase equally to both the demand and energy rates.

 

FISCAL INFORMATION

 

                “The adoption of this proposal concerning the increase in Fixed Costs applicable to the NYC Governmental Customers under the LTAs would result in the recovery of approximately $26.5 million in additional revenues to the Authority over current rates.  These new revenues are offset by corresponding projected increases in the costs of serving the NYC Governmental Customers.

 

RECOMMENDATION

 

                “The Manager – Market and Pricing Analysis recommends that the Trustees authorize the Corporate Secretary to file a Notice of Proposed Rulemaking in the New York State Register for the adoption of an increase in Fixed Costs applicable to the New York City Governmental Customers under the Long-Term Agreements and also direct the Corporate Secretary to provide all appropriate notice for a public forum.

 

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

 

                “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, the Vice President – Controller, the Vice President – Finance, the Assistant General Counsel – Power and Transmission and I concur in the recommendations.”

 

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

 

RESOLVED, That the Authority projects an increase in the Fixed Costs of serving the New York City Governmental Customers when comparing those costs contained in current rates to 2008 projected costs; and be it further

 

RESOLVED, That the Authority has entered into supplemental Long-Term Agreements with the New York City Governmental Customers and those agreements provide for the recovery of additional Fixed Costs through a rate filing under the State Administrative Procedure Act; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development , or his designee, be, and hereby is, authorized to issue written notice of this proposed action by the Trustees to the affected customers; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file such notices as may be required with the Secretary of State for publication in the New York State Register and to submit such other notice as may be required by statute or regulation concerning the proposed rate increase; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, authorized to schedule and provide all appropriate public notice of a public forum to be held on Thursday, November 15, 2007 at 10:30 a.m. at the Authority’s New York City office for the purpose of obtaining the views of interested persons concerning the Authority’s proposed action to adjust the rates for the New York City Governmental Customers; 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.

 


 

10.          Increase in Westchester County Governmental Customer Rates - Notice of Proposed Rulemaking

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve a Notice of Proposed Rulemaking (‘NOPR’) to increase the production rates to be charged to the Westchester County Governmental Customers (‘Westchester Customers’) in 2008.  Under staff’s proposal, the production rates will increase by 18.1%, on average, as compared to 2007 rates.  The Trustees are also requested to direct the Corporate Secretary to publish a NOPR in the New York State Register in accordance with the requirements of the State Administrative Procedure Act (‘SAPA’).  Since the proposed increase is greater than 2%, a public forum will be held in accordance with Authority policy.  Trustee authorization is also requested to direct the Corporate Secretary to provide all appropriate notice for such public forum. 

 

BACKGROUND

 

“The Authority provides electricity to 104 governmental customers in Westchester County, which includes the County of Westchester, school districts, housing authorities, cities, towns and villages.  At their meeting of December 19, 2006, the Trustees approved new Supplemental Electricity Agreements (‘Agreements’) with the Westchester Customers.  The Agreements provide that, among other things:

 

 

“At their meeting of December 19, 2006, the Trustees also approved a 25.5% production rate increase for 2007, which went into effect in January 2007.  In addition, starting in March, the ECA was reinstituted.  The ECA is a monthly reconciliation of certain specified costs as projected versus actually incurred.  The difference is credited or charged (as applicable) to the Westchester Customers’ monthly invoices.

 

                “The County of Westchester, which accounts for nearly 35% of the revenues in the Authority’s Westchester Customer segment, approved and executed the Agreement in April 2007.  Subsequently, more than 70 additional Westchester Customers have signed the Agreement, with many more pending at this time.  This rate modification will also be applicable to those Westchester Customers that have not executed the Agreement, as the Authority can modify their rates in accordance with the terms and conditions of their Original Application for Service.

 

DISCUSSION

 

                “Consistent with the Authority’s past rate-making practices and with the rate-setting process set forth in the Agreements, the proposed increase is based on a pro forma COS.  Under the Agreements, the Authority must provide at least 30 days’ notice to the Westchester Customers of any proposed increase and the increase is also subject to their review and comment.  Notice was sent to all Westchester Customers on August 24, 2007.

 

                “The pro forma Preliminary 2008 COS for the Westchester Customers, which is summarized in Exhibit ‘10-A,’ is $48.9 million, and revenues at current production rates are expected to be $41.4 million, resulting in a projected revenue deficiency of $7.5 million.  Contributors to the increase in costs are additional Capital Costs of $1.1 million; O&M, $0.1 million; Shared Services, $0.2 million and a projected increase in the cost of purchased power and New York Independent System Operator (‘NYISO’) ancillary services charges required to serve the Westchester Customers.

                “Therefore, staff is recommending that base production rates be increased by 18.1 % over 2007 rates.  On a total bill basis, the proposed increase would be 11% on average for the Westchester Customers, excluding a significant proposed increase in delivery charges by Consolidated Edison Company of New York, Inc.  Staff proposes to apply the production increase equally to both the base demand and energy rates.  Both the current and proposed new rates are contained in the table in Exhibit ‘10-B.’ 

 

                “Since the new rates would increase Westchester Customer revenues by more than 2%, a public forum will be held in accordance with Authority policy.  The forum will be held at 10:30 a.m. on November 14, 2007 at the Authority’s White Plains Office.

               

                “After the 45-day statutory comment period concerning this proposed rate action, Authority staff will address any concerns that have been raised by the Westchester Customers and interested parties at the public forum and in comments filed with the Authority, make any necessary changes to the proposed rate increase and return to the Trustees at their December 18, 2007 meeting to request approval of a rate modification for 2008. 

 

FISCAL INFORMATION

 

                “The proposed rate increase is expected to collect $7.5 million in additional production revenue from the Westchester Customers through the end of 2008, excluding any charges and credits through the ECA mechanism.

 

RECOMMENDATION

 

                “The Manager – Market and Pricing Analysis recommends that the Trustees authorize the Corporate Secretary to file a Notice of Proposed Rulemaking in the New York State Register for the adoption of a production rate increase applicable to the Westchester County Governmental Customers, and because the proposed new rates will increase Authority revenues by more than 2%, be authorized to schedule, and issue appropriate notices for, a public forum on this proposed action.

 

                “It is also recommended that the Senior Vice President – Marketing and Economic Development, or his designee, be authorized to issue written notice of the proposed action to the affected customers under the provisions of the Authority’s tariffs.

 

                “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, the Vice President – Controller, the Vice President – Finance, the Assistant General Counsel – Power and Transmission and I concur in the recommendation.”

 

                Ms. Marilyn Brown presented the highlights of staff’s recommendations to the Trustees.  In response to questions from Chairman McCullough and Mr. Thomas Kelly, Ms. Brown said that the rates for the Westchester governmental customers had been frozen since 1995, with increases of 2.4%, 2.4% and 25.8% in 2005, 2006 and 2007, respectively.  Responding to another question from Mr. Kelly, Mr. James Yates said that the Authority had been diligent in reaching out to the Westchester customers so that the 2008 rate increase did not catch them by surprise.  Chairman McCullough said that he had actually received letters from some of the affected communities thanking the Authority for keeping them informed about the rate increase.


 

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

 

RESOLVED, That the Authority proposes an increase in the production rates applicable to the Westchester County Governmental Customers as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development, or his designee, be, and hereby is, authorized to issue written notice of this proposed action by the Trustees to the affected customers; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file such notices as may be required with the Secretary of State for publication in the New York State Register and to submit such other notice as may be required by statute or regulation concerning the proposed rate increase and proposed tariff modification; and be it further

 

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, authorized to schedule and provide all appropriate public notice of a public forum to be held on Wednesday, November 14, 2007 at 10:30 a.m. at the Authority’s White Plains office for the purpose of obtaining the views of interested persons concerning the Authority’s proposed action to adjust the rates for the Westchester County Governmental Customers; 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 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.

               


 

11.          Budget and Financial Plan Information Pursuant to Regulations of the Office of the State Comptroller

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“In accordance with regulations of the Office of the State Comptroller (‘OSC’), the Trustees are requested to approve for public release a proposed 2008 budget and four-year financial plan; authorize making the proposed budget and four-year financial plan available for public inspection at not less than five convenient public places throughout New York State and authorize posting of the proposed budget and four-year financial plan on the Authority’s website.

 

BACKGROUND

 

                            “OSC implemented new regulations in March 2006 that address the preparation of annual budgets and four-year financial plans by ‘covered’ public authorities, including the Authority.  (See 2 NYCRR Part 203 (‘Part 203,’) attached as Exhibit ‘11-A.’)  These regulations establish various procedural and substantive requirements, discussed below, relating to the budgets and financial plans of public authorities.

 

DISCUSSION

 

                “Part 203 sets forth specific requirements in connection with submitting, formatting, preparing supporting documentation for and monitoring annual budgets and financial plans of public authorities.

 

“Under Part 203, the Authority’s proposed budget and four-year financial plan (Exhibit ‘11-B’) must be made available for public inspection at least 30 days before approval by the Trustees of a final budget and financial plan and not less than 60 days before commencement of the next fiscal year.  The availability for public inspection must be for a period of not less than 45 days and in not less than five convenient public places throughout the State. The regulations also require the Authority to post the proposed budget and four-year financial plan on its website.

 

                “Under Part 203, each proposed budget and four-year financial plan must be shown on both an accrual and cash basis and be prepared in accordance with generally accepted accounting principles; be based on reasonable assumptions and methods of estimation; be organized in a manner consistent with the public authority’s programmatic and functional activities; include detailed estimates of projected operating revenues and sources of funding; contain detailed estimates of personal service expenses related to employees and outside contractors; list detailed estimates of non-personal service operating expenses and include estimates of projected debt service and capital project expenditures. 

               

“Other key elements that must be incorporated in each proposed budget and four-year financial plan are a description of the budget process and the principal assumptions, as well as a self-assessment of risks to the budget and financial plan.  Additionally, the proposed budget and financial plan must include a certification (Exhibit ‘11-C’) by the chief operating officer (defined as the executive officer responsible for overseeing the day-to-day activities of an authority) that, to the best of his or her knowledge and belief after reasonable inquiry, the proposed budget and financial plan are based on reasonable assumptions and methods of estimation and that the Part 203 regulations have been satisfied.

 

“The Trustees will be asked to approve the Authority’s final budget and four-year financial plan, including any modifications and amendments to the proposed budget and financial plan, at their meeting of December 18, 2007. 

 

FISCAL INFORMATION

 

                “There is no anticipated fiscal impact.

 


 

RECOMMENDATION

 

                “The Vice President – Controller recommends that the Trustees approve for public release the proposed 2008 budget and four-year financial plan; authorize making the proposed budget and four-year financial plan available for public inspection at no less than five convenient public locations and authorize posting of the proposed budget and four-year financial plan on the Authority’s website.

 

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

 

                Mr. Thomas Davis presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman McCullough, Mr. Davis said that, in the event of a change in circumstances, the Authority would be able to update the budget and financial plan information through the electronic reporting system provided by the Authority Budget Office.  Chairman McCullough said that he knew that the production of this document had been a major undertaking and thanked staff for a job well done.

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

 

RESOLVED, That pursuant to 2 NYCRR Part 203, the proposed budget and four-year financial plan, including its certification by the President and Chief Executive Officer, is approved for public release in accordance with the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That pursuant to 2 NYCRR Part 203, the Corporate Secretary be, and hereby is, authorized to make the proposed budget and four-year financial plan available for public inspection at not less than five convenient public places throughout New York State, to notify the Office of the State Comptroller of said locations and to post the proposed budget and four-year financial plan on the Authority’s website; 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 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. 


 

12.          Budget Information Pursuant to      Section 2801 of the Public Authorities Law

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize the Corporate Secretary to submit budget information to the Governor and legislative leaders pursuant to Section 2801 of the Public Authorities Law.

 

BACKGROUND

 

              “In January 2006, the Public Authorities Accountability Act of 2005 (‘PAAA’) was signed into law, reflecting the State’s commitment to maintaining public confidence in public authorities by ensuring that the essential governance principles of accountability, transparency and integrity are followed at all times.  To facilitate these objectives, the PAAA established an Authority Budget Office (‘ABO’) that monitors and evaluates the compliance of State authorities with the requirements of the Act.  Among other things, the PAAA amended Section 2801 of the Public Authorities Law to require that budget reports by a State authority be submitted to designated governmental officials 90 days, rather than 60 days, before the start of the Authority’s fiscal year.

 

DISCUSSION

 

              “The Trustees are requested to authorize the Corporate Secretary to file the attached budget information (Exhibit ‘12-A’) pursuant to Section 2801(1) of the Public Authorities Law, which provides as follows:

 

State authorities.  Every state authority or commission heretofore or hereafter continued or created by this chapter or any other chapter of the laws of the State of New York shall submit to the governor, chairman and ranking minority member of the senate finance committee, and chairman and ranking minority member of the assembly ways and means committee, for their information, annually not less than ninety days before the commencement of its fiscal year, in the form submitted to its members or trustees, budget information on operations and capital construction setting forth the estimated receipts and expenditures for the next fiscal year and the current fiscal year, and the actual receipts and expenditures for the last completed fiscal year.

 

“As provided in Executive Order No. 173, this information will also be submitted to the State Division of the Budget.

 

FISCAL INFORMATION

 

                “There is no anticipated fiscal impact.

 

RECOMMENDATION

 

                “The Vice President – Controller recommends that the Trustees authorize submittal of the attached budget information (Exhibit ‘12-A’) as discussed herein.

 

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


 

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

 

RESOLVED, That pursuant to Section 2801 of the Public Authorities Law, the Corporate Secretary be, and hereby is, authorized to submit to the Governor, the Chairman and Ranking Minority Member of the Senate Finance Committee, the Chairman and Ranking Minority Member of the Assembly Ways and Means Committee, the Division of the Budget and the Authority Budget Office the attached budget information on operations and capital construction setting forth the estimated receipts and expenditures for the next fiscal year and the current fiscal year, and the actual receipts and expenditures for the last completed fiscal year in accordance with the foregoing report of the President and Chief Executive Officer; 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 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.

 


 

Exhibit “12-A”

 

Power Authority of the State of New York

Estimated Receipts and Expenditures 2007 and 2008

Actual Receipts and Expenditures 2006

(in millions)

 

 

 

 

 

 

Actuals

 

Forecast

 

Estimated

 

 

 

 

 

2006

 

2007

 

2008

Revenue Receipts :

 

 

 

 

 

 

 

 

     Sale of Power, Use of Transmission Lines,

 

 

 

 

 

            Wheeling Charges and other receipts

$2,674.7

 

$2,804.1

 

$2,973.6

     Earnings on Investments and Time Deposits

$31.8

 

$42.5

 

$42.8

Total Revenues

$2,706.5

 

$2,846.6

 

$3,016.4

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

    Operation and Maintenance, including Transmission

 

 

 

 

 

            of Electricity by others, Purchased Power and

 

 

 

 

 

            Fuel Purchases

($2,306.1)

 

($2,572.0)

 

($2,571.9)

 

 

 

 

 

 

 

 

 

 

Debt Service :

 

 

 

 

 

 

 

 

     Interest on Bonds and Notes / Commercial Paper Paydown

($105.4)

 

($107.3)

 

($116.4)

     General Purpose Bonds Retired

($310.7)

 

($132.0)

 

($147.0)

     Notes Retired

($5.7)

 

($6.1)

 

($6.0)

Total Debt Service

($421.8)

 

($245.4)

 

($269.4)

 

 

 

 

 

 

 

 

 

 

Total Requirements

($2,727.9)

 

($2,817.4)

 

($2,841.3)

 

 

 

 

 

 

 

 

 

 

Net  Operations

($21.4)

 

$29.2

 

$175.1

 

 

 

 

 

 

 

 

 

 

Capital Receipts :

 

 

 

 

 

 

 

 

    Sale of Bonds, Promissory Notes & Commercial  Paper

$386.4

 

$600.6

 

$112.2

    Less : Repayments / Commercial Paper Paydown

($227.1)

 

($138.1)

 

($49.3)

    Earnings on Construction Funds

$4.9

 

$6.0

 

$8.5

    DSM Recovery Receipts

$58.0

 

$43.5

 

$60.7

    Other

$93.7

 

$93.7

 

$30.0

Total Capital Receipts

$315.9

 

$605.7

 

$162.1

 

 

 

 

 

 

 

 

 

 

Capital Additions & Refunds :

 

 

 

 

 

 

     Additions to Electric Plant in Service and

 

 

 

 

 

             Construction Work in Progress, and Other costs

($167.4)

 

($351.1)

 

($255.0)

     Construction Escrow

$101.9

 

($80.6)

 

$34.6

 

 

 

 

 

              

 

              

 

              

Total Capital Additions & Refunds

($65.5)

 

($431.7)

 

($220.4)

 

 

 

 

 

 

 

 

 

 

Net  Capital

$250.4

 

$174.0

 

($58.3)

 

 

 

 

 

 

 

 

 

 

Net Increase/(Decrease)

$229.0

 

$203.2

 

$116.8

 


 

13.                Procurement (Services) Contracts – Business Units and Facilities – Awards

 

SUMMARY

“The Trustees are requested to approve the award and funding of the multiyear procurement contracts listed in Exhibit ‘13-A’ for the Authority’s Business Units/Departments and Facilities.  Detailed explanations of the nature of such services, the bases for the new awards if other than to the lowest-priced bidders and the intended duration of such contracts are set forth in the discussion below.

BACKGROUND

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

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

DISCUSSION

“The terms of these contracts will be more than one year; therefore, the Trustees’ approval is required.  Except as noted, all of these contracts contain provisions allowing the Authority to terminate the services for the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  Approval is also requested for funding all contracts, which range in estimated value from $25,000 to $9,657,259.  Except as noted, these contract awards do not obligate the Authority to a specific level of personnel resources or expenditures.

“The issuance of multiyear contracts is recommended from both cost and efficiency standpoints.  In many cases, reduced prices can be negotiated for these long-term contracts.  Since these services are typically required on a continuous basis, it is more efficient to award long-term contracts than to re-bid these services annually.

Contracts in Support of Business Units/Departments and Facilities:

Business Services

“Due to the need to commence services immediately, the contract with R. W. Beck, Inc. (4500145933) became effective on September 5, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for consulting services for the development and implementation of an Enterprise-wide Risk Management (‘EWRM’) function and a Disaster Recovery/Business Continuity Planning Process for the Authority.  Such services include, but are not limited to, assessing the Authority’s current risk management practices and processes, identifying and prioritizing major risks facing the Authority, performing analyses and recommending metrics to monitor and measure EWRM risks, in order to assist the Authority in developing and implementing strategies and risk profiles to manage the identified major risks facing the Authority.  Bid documents were downloaded electronically from the Authority’s Procurement website by 22 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Seven proposals were received and evaluated.  Based on the responsiveness of their proposals, technical qualifications and overall experience, three finalists were invited to make presentations to Authority staff.  In addition to the aforementioned criteria, based on further detailed review of the bids, superior presentation and level of understanding of the Authority and its needs, as well as satisfactory schedule for all phases of the work scope, staff recommended award of the subject contract to R. W. Beck, the most technically qualified firm with reasonable pricing.  The intended term of this contract is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $430,000, including contingency for potential future additional work.

“The contracts with AmSpec Services, LLC and Saybolt LP (‘AmSpec and Saybolt’; QFS-2007-43; PO#s TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of these contracts is to provide for independent petroleum inspection services for No. 6 residual oil, distillate oil and biodiesel fuel within the New York Harbor and Long Island areas.  Services include inspection, measurement and testing of bulk oil deliveries made via barge, tanker, pipeline or truck to the Authority’s generating stations and storage facilities situated within the aforementioned areas.  The resulting data on oil quantity and quality provide the basis for both paying for oil delivered and assessing penalties for non-conforming oil, and evidence of compliance with environmental quality regulations.  Since the existing contracts for such services expire at the end of the year, and the need for such services is ongoing, staff prepared a new Request for Proposals.  Bid documents were sent to nine firms, including those that may have responded to a notice in the New York State Contract Reporter.  Eight proposals were received and evaluated.  Staff recommends award of contracts to AmSpec and Saybolt, the lowest-priced bidders that were responsive to the bid requirements and are qualified to perform the work.  The benefits of awarding two contracts include increased operational flexibility and enhanced competitiveness, consistent with standard industry practice.  The intended term of these contracts is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the combined total amount expected to be expended for the term of the contracts, $28,000.

Corporate Services and Administration

“The contract with Kleinschmidt Associates, PA, PC (‘Kleinschmidt’; Q07-4119; PO# TBA) would become effective on October 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for engineering design services for the Nichols Island and Little Sucker Brook Habitat Improvement Projects (‘HIPs’) at the St. Lawrence/FDR Power Project, in compliance with the requirements set forth in the New License and the Comprehensive Relicensing Settlement Accord.  Services also include, but are not limited to, preparing operational manuals, providing permitting support, assisting Authority staff with the evaluation of construction bids (as needed), providing support during construction, and performing or arranging for the performance of technical studies to complete the design (as may be required).  Bid documents were downloaded electronically from the Authority’s Procurement website by 36 firms, including those that may have responded to a notice in the New York State Contract Reporter.  One proposal (from Kleinschmidt, with Gomez and Sullivan Engineers and Soil Metrics as subcontractors) was received and evaluated.  The Authority’s evaluation team considered Kleinschmidt’s experience with similar projects, as well as the qualifications, experience, expertise and availability of the bidder’s proposed team, and the overall organization proposed for managing the work.  Based on the initial evaluation, the evaluation team concluded that the bidder’s proposal demonstrated a thorough understanding of the work.  After additional clarifications regarding Kleinschmidt’s proposed personnel/team and the roles of the subcontractors were submitted by the bidder, the evaluation team concluded that Kleinschmidt, in collaboration with the two subcontractors, was technically qualified to provide the design and support services required for the two HIPs.  Staff therefore recommends award of a contract to Kleinschmidt, the sole responding bidder, which meets the bid requirements, is qualified to perform such services and has reasonable pricing.  The intended term of this contract is three years and three months, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $579,000 (including additional studies and contingency).

Energy Services and Technology

“The contract with Bulcast LLC (Q02-4085; PO# TBA) would become effective on October 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for the upgrade and repair of the existing active cathodic protection system for the Y-49 self-contained fluid-filled cable located in the Long Island Sound between New Rochelle and Hempstead, New York.  The subject contract is awarded on a sole source basis, since Bulcast is the original equipment manufacturer that designed, developed, tested and installed the original system eight years ago and, as such, is uniquely qualified to assess the existing equipment and to perform the actual upgrade.  A notice of the Authority’s intent to enter into a sole source contract for such services was published in the New York State Contract Reporter.  The intended term of this contract is three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $650,000 (including contingency).  It should be noted that all costs will be recovered by the Authority from the Long Island Power Authority.

“The contract with Veolia ES Technical Solutions, LLC (‘Veolia’, formerly known as Onyx Environmental Services, LLC) (Q07-4124; PO# TBA) would become effective on November 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for recycling and disposal of lamps and light ballasts, as well as other mercury-containing equipment, batteries, small capacitors, etc., in connection with the Authority’s Energy Services Programs.  Services include furnishing, or arranging for furnishing, all labor, supervision, material, equipment, laboratory facilities, transportation including vehicles, fuel, tolls, highway use taxes, insurance, spill prevention control and countermeasure equipment and materials and federal, state and local permits, licenses and other approvals necessary to manage the waste from its point(s) of generation within New York State to the point(s) of ultimate disposition.  Bid documents were downloaded electronically from the Authority’s Procurement website by three firms, including those that may have responded to a notice in the New York State Contract Reporter.  One proposal was received and evaluated.  Staff recommends award of a contract to Veolia, the sole responding bidder, which is qualified to perform such services and meets the bid requirements.  The intended term of this contract is up to four years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $700,000.  It should be noted that all costs will be recovered by the Authority.

Internal Audit and Compliance

“Due to the need to commence services, the contract with Pro-Comply (4500144569) became effective on August 1, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for Authority employee training on the Federal Energy Regulatory Commission (‘FERC’) Order No. 670 relating to Market Anti-Manipulation Regulations, via an online and DVD-based video training module customized for the Authority.  Services also include, but are not limited to, providing a mechanism for the Authority to track the trainees’ completion, with the ability to generate written certification of participation and to create progress reports on demand, and other administrative functions.  Bid documents were downloaded electronically from the Authority’s Procurement website by 12 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommended award of a contract to Pro-Comply, the lowest-priced qualified bidder that met the bid requirements and is qualified to provide such services.  The intended term of this contract is up to two years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $25,000.

Power Generation

“Due to the need to commence services, the contract with Coverco Inc. (4600001808) became effective on July 1, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for plumbing pipe insulation services for the Niagara Power Project.  Services include all supervision, labor, equipment and materials to insulate piping and valves to retrofit equipment or re-insulate deteriorated piping and valves, on an as ‘needed basis’.  Bid documents were sent to eight firms, including those that may have responded to a notice in the New York State Contract Reporter.  Three proposals were received and evaluated.  Staff recommended award of the subject contract to Coverco, the lowest-priced evaluated bidder that is qualified to perform such work.  The intended term of this contract is up to four years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total amount expected to be expended for the term of the contract, $30,000.

“The contract with FPI Mechanical, Inc. (Q07-4120; PO# TBA) would become effective on or about September 26, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for the services of an experienced HVAC contractor to furnish, deliver and install four identical air-handling units to upgrade the Isolated-Phase Bus Cooling Systems at the Blenheim-Gilboa Power Project, as part of the Life Extension and Modernization program.  Services also include, but are not limited to, demolition of the existing air-handling units and related ductwork, as well as system testing, adjusting, balancing, commissioning, startup, training and final reporting.  Bid documents were downloaded electronically from the Authority’s Procurement website by 24 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommends award of the subject contract to FPI Mechanical, the lowest-priced bidder that meets the bid requirements and is qualified to provide such equipment and services. The intended term of this contract is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $663,383.

“The contract with GE Energy Services (‘GE Energy’; Q07-4115; PO# TBA) would become effective on or about September 26, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for the rehabilitation/upgrade of the remaining three motor-generator (‘M-G’) units and associated starting motors at the Blenheim-Gilboa Power Project, as part of the Life Extension and Modernization program.  Services include, but are not limited to, refurbishing of M-G rotor poles and replacement of associated bus, cleaning of M-G rotor and stator, testing/measuring/re-rounding of M-G stator, as well as cleaning, minor repair and testing of two starting motors and complete refurbishment (rewind) of the starting motor for Unit 4.  Bid documents were downloaded electronically from the Authority’s Procurement website by 17 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommends award of the subject contract to GE Energy, the lowest-priced bidder that is qualified to perform the work and meets the bid requirements.  The intended term of this contract is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $9,657,259.

“Due to schedule constraints, the need to commence services and the criticality of completing this work, the contract with GE Packaged Power, Inc. (4500145410) became effective on September 1, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for Hot Section Overhauls and Service Bulletin implementation for three of the Authority’s Small Clean Power Plant LM6000 gas turbines.  Two firms were invited to bid on an expedited basis, since they were the only known firms qualified to perform such work.  This work is typically performed by the original equipment manufacturer, which has the proprietary design information for the equipment, but the other firm also has this capability as a licensed agent (the only one in North America).  Due to the aforementioned reasons, no notice was published in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommended award of the subject contract to GE Packaged Power, the lower-priced bidder and original equipment manufacturer.  The intended term of this contract is approximately 16 months, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $4.5 million (including contingency for extra work as units are inspected in GE’s shop, transportation costs and potential lease of a replacement engine during the repair period).  The Authority’s exposure for planning for and removal of the first engine by September 15, 2007 will not exceed $300,000 prior to ratification and approval by the Trustees.

“The contract with General Electric International Inc. (‘GEII’; Q02-4062; PO# TBA) would become effective on October 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for Technical Assistance Services, on an ‘as needed’ basis, to support the Authority’s 500 MW Combined Cycle Plant.  The subject contract is awarded on a sole source basis, since GEII is the original equipment manufacturer and, as such, is uniquely qualified to provide such services.  Rates for the field engineer and specialty rates will be based on GE’s published rates in effect at the time of service.  The intended term of this contract is three years and three months, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $300,000.

“The contract with Medicus, P.C. (Q07-4094; PO# TBA) would become effective on January 1, 2008, subject to the Trustees’ approval.  The purpose of this contract is to provide for medical services, including a Consulting Medical Director, Medical Review Officer, Medical Doctor and staff to perform physical examinations, and a Medical Program Coordinator.  Services will also include medical record retention and miniaturization services for all Authority headquarters offices and sites.  Bid documents were downloaded electronically from the Authority’s Procurement website by four firms, including those that may have responded to a notice in the New York State Contract Reporter.  Three proposals were received and evaluated.  Staff recommended award of the subject contract to Medicus, the lowest-priced bidder that meets the bid requirements and is qualified to provide the services.  Medicus has a qualified licensed physician on staff who is board certified in occupational medicine and is certified as a Medical Review Officer.  Medicus also has the personnel and facilities to handle and store the centralized medical records, and has a subcontracted record miniaturization service in place.  Services also include coordinating a program of medical examinations for Authority employees and contractors, as required by applicable safety and health standards, federal or State requirements or Authority policy.  Such examinations include, but are not limited to the following:  respirator clearance for users of respiratory equipment, exposure to asbestos or high noise, crane operators and specialized Coast Guard and Federal Aviation Administration examinations and executive physicals.  The intended term of this contract is up to five years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $312,500.

“Due to the need to commence services, the contract with Precision Actuation Systems (‘PAS’; 4500142526) became effective on June 18, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for all labor, supervision, tools and equipment to perform repairs on Limitorque and AUMA actuators for the Charles Poletti and 500 MW Power Plants, on an ‘as needed’ basis.  Services include troubleshooting and disassembly of actuators, providing written inspection reports with recommendations for repairs and providing machine shop facilities with the capability to perform such repairs on- or offsite.  Bid documents were downloaded electronically from the Authority’s Procurement website by 10 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommended award of the subject contract to PAS, the lower-priced evaluated bidder, which is qualified to provide such services.  The intended term of this contract is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $300,000.

“Due to the need to commence services immediately, the two contracts with S.M. Electric Company, Inc. and Eaton Electrical Services & Systems, respectively (‘SME’ and ‘Eaton’; Q07-4107; 4600001838 and 4600001837), became effective on September 17, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of these contracts is to provide for the installation of electrical equipment, wiring, and materials to support the plant Control Systems Integration (CSI) work associated with the upgrade of Units 1, 3 and 4 at the Blenheim-Gilboa Power Project
(‘B-G’), as part of the Life Extension and Modernization program.  (B-G Unit 2 was completed in May 2007 under a different contract.)  Services include, but are not limited to, furnishing and installation of cable trays and conduits; interconnecting wiring from the various electrical equipment being upgraded to the Unit Control Boards; replacement of the existing rotating exciter with a new Authority-provided static excitation system; modifications and/or replacement of Unit Control Board devices and installation of other Authority-provided miscellaneous electrical equipment.  Bid documents were downloaded electronically from the Authority’s Procurement website by 25 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated: one from Eaton and one from SME.  Following receipt of the original proposals, a Post-Bid Addendum was issued to both bidders to seek alternate pricing for splitting the various tasks between the two firms, in order to optimize the schedule and potentially reduce overall costs.  Based on a detailed review of both proposals for the entire work scope, as well as splitting various tasks between the two bidders, it became evident that there was a significant cost reduction to the Authority if the award was split between the two bidders.  The estimated total potential savings exceed $450,000 for all three B-G Units.  Staff therefore recommended the award of two contracts, one to SME and one to Eaton, for different tasks that collectively comprise the entire scope of work.  The intended term of these contracts is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contracts, $457,253 for SME and $2,236,574 for Eaton (including contingency).

“Due to the need to commence services, the contract with TRC Environmental Corp. (‘TRC’; 4500143289) became effective on August 1, 2007, subject to the Trustees’ subsequent approval as soon as practicable, in accordance with the Authority’s procurement policies and EAPs.  The purpose of this contract is to provide for Relative Accuracy Test Audit (‘RATA’) services of the continuous emissions monitoring system and to test for nitrous oxide, oxygen, carbon monoxide and ammonia at six of the Authority’s Small Clean Power Plant LM6000 gas turbine sites in compliance with all applicable regulatory requirements.  Bid documents were downloaded electronically from the Authority’s Procurement website by 13 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Five proposals were received and evaluated.  Staff recommended award of the subject contract to TRC, the lowest-priced bidder that is qualified to perform the work.  The intended term of this contract is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $150,000.

“The contract with United Industrial Services (a Division of United Oil Recovery) (‘UIS’; Q07-4092; PO# TBA) would become effective on October 1, 2007, subject to the Trustees’ approval.  The purpose of this contract is to provide for transportation of hazardous materials, as well as hazardous, universal and industrial waste, from designated Authority and customer facilities, on an ‘as needed’ basis.  Services include all labor, supervision, material, equipment, transportation vehicles, fuel, tolls, highway use taxes, insurance, spill prevention control and countermeasure equipment and materials, as well as federal, State and local permits, licenses and other approvals necessary to transport waste from the point(s) of generation within New York State to the point(s) of ultimate disposition of the waste.  Bid documents were downloaded electronically from the Authority’s Procurement website by 17 firms, including those that may have responded to a notice in the New York State Contract Reporter.  Two proposals were received and evaluated.  Staff recommends award of the subject contract to UIS, the lower-priced bidder, which is qualified to provide such services.  The intended term of this contract is up to three years, subject to the Trustees’ approval, which is hereby requested.  Approval is also requested for the total estimated amount expected to be expended for the term of the contract, $90,000.

FISCAL INFORMATION

“Funds required to support contract services for various Business Units/Departments and Facilities have been included in the 2007 Approved O&M Budget.  Funds for subsequent years, where applicable, will be included in the budget submittals for those years.  Payment will be made from the Operating Fund.

“Funds required to support contract services for capital projects have been included as part of the approved capital expenditures for those projects and will be disbursed from the Capital Fund in accordance with the project’s Capital Expenditure Authorization Request.  Payment for the contract in support of Energy Services Programs will be made from the Energy Conservation Effectuation and Construction Fund.  All costs, including Authority overheads and the cost of advancing funds, will be recovered by the Authority consistent with other Energy Services and Technology Programs.

RECOMMENDATION

“The Senior Vice President – Public and Governmental Affairs, the Senior Vice President – Energy Resource Management and Strategic Planning, the Vice President – Procurement and Real Estate, the Vice President – Engineering, the Vice President – Project Management, the Vice President – Environment, Health and Safety, the Vice President and Chief Risk Officer, the Director – Energy Services, the Chief Technology Development Officer, the Director – Corporate Support Services, the Manager – Internal Audits, the Regional Manager – Northern New York, the Regional Manager – Western New York, the Regional Manager – Central New York and the Regional Manager – Southeastern New York recommend the Trustees’ approval of the award of multiyear procurement contracts to the companies listed in Exhibit ‘13-A’ for the purposes and in the amounts set forth above.

                “The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Corporate Services and Administration, the Executive Vice President – Chief Financial Officer, the Senior Vice President – Energy Services and Technology, the Senior Vice President and Chief Engineer – Power Generation 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 Guidelines for Procurement Contracts adopted by the Authority, the award and funding of the multiyear procurement services contracts set forth in Exhibit “13-A,” attached hereto, are hereby approved for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further
 

RESOLVED, That 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.


 

14.                Procurement (Services) Contracts – Business Units and Facilities – Extensions, Approval of Additional

                Funding and Increase in Compensation Ceiling          

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

“The Trustees are requested to approve the continuation and funding of the procurement (services) contracts listed in Exhibit ‘14-A’ in support of projects and programs for the Authority’s Business Units/Departments and Facilities.  The Trustees are also requested to approve an increase in the aggregate compensation ceiling of the contracts with Chu & Gassman Constructing Engineers, PC, CDM Constructors, Inc., DMJM + Harris, Inc. and PB Power, Inc.  Detailed explanations of the nature of such services, the reasons for extension, the additional funding required and the projected expiration dates are set forth below.

BACKGROUND

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

“The Authority’s Expenditure Authorization Procedures (‘EAPs’) require the Trustees’ approval when the cumulative change order value of a personal services contract exceeds the greater of $250,000 or 35% of the originally approved contract amount not to exceed $500,000, or when the cumulative change order value of a non-personal services, construction, equipment purchase or non-procurement contract exceeds the greater of $500,000 or 35% of the originally approved contract amount not to exceed $1 million.

DISCUSSION

“Although the firms identified in Exhibit ‘14-A’ have provided effective services, the issues or projects requiring these services have not been resolved or completed, and the need exists for continuing these contracts.  The Trustees’ approval is required because the terms of these contracts exceed one year and/or because the cumulative change order limits will exceed the levels authorized by the EAPs in forthcoming change orders.  All of the subject contracts contain provisions allowing the Authority to terminate the services at the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  These contract extensions do not obligate the Authority to a specific level of personnel resources or expenditures.

“Extension of each of the contracts identified in Exhibit ‘14-A’ is requested for one or more of the following reasons: (1) additional time is required to complete the current contractual work scope or additional services related to the original work scope; (2) to accommodate an Authority or external regulatory agency schedule change that has delayed, reprioritized or otherwise suspended required services; (3) the original consultant is uniquely qualified to perform services and/or continue its presence and re-bidding would not be practical or (4) the contractor provides a proprietary technology or specialized equipment, at reasonably negotiated rates, that the Authority needs to continue until a permanent system is put in place.

Contracts in Support of Business Units/Departments and Facilities:

Corporate Services and Administration

“At their meeting of March 30, 2004, the Trustees approved the award of a contract to Bernier, Carr & Associates, PC (‘Bernier Carr’; 4500087783), in the amount of $1.2 million, to provide for construction management and other related technical and administrative services in support of implementation of recreation and environmental improvements at the St. Lawrence/FDR Power Project, in compliance with the requirements set forth in the New License Settlement Agreement.  The original award, which was competitively bid, became effective on April 1, 2004 for an initial term of 3.75 years, with an option to extend for up to two additional years.  Bernier Carr has satisfactorily provided these services for improvements to local recreation facilities (such as the Massena Intake boat launch, Whalen Park, Massena Country Club and Waddington Town Beach), shoreline stabilization work and several habitat improvement projects (such as Blandings turtle and grassland bird nesting habitat improvements, common loon and osprey nesting platforms and Coles Creek wetland improvements).  Through 2009, Bernier Carr will provide similar services for improvements at the Wilson Hill Wildlife Management Area, as well as construction of four habitat improvement projects (such as a walleye spawning bed in Brandy Brook, sturgeon spawning beds in the St. Lawrence River, a controlled level pond at Little Sucker Brook Pond and at Nichols Island) and additional shoreline stabilization measures.  A two-year extension is therefore requested to exercise the contract option in order to continue the aforementioned services through project completion.  The current contract amount is $1.2 million; it is anticipated that no additional funding will be required for the extended term.  The Trustees are requested to approve the extension of the subject contract through December 31, 2009, with no additional funding requested.

Energy Services and Technology

“The contract with Sebesta Blomberg & Associates, Inc. (4500129571) provides for Leadership in Energy and Environmental Design (‘LEED’) accreditation training sessions for Authority employees, customers and other State agency/authority staff.  The purpose of such training is to educate participants about sustainable design principles, as well as construction and green building operation practices embodied in the LEED rating system, familiarize them with programmatic requirements regarding the LEED certification process and prepare them for the LEED professional accreditation exam.  The original award, which was competitively bid, became effective on September 15, 2006 for a term of up to one year.  To date, the Authority has sponsored eight such one-day LEED training sessions for more than 200 participants, in various locations throughout the State.  An interim extension to extend services through September 25, 2007 was subsequently authorized in accordance with the Authority’s Guidelines for Procurement Contracts and EAPs.  A three-month extension is now requested in order to allow the Authority to host additional sessions, as needed.  The current contract amount is $126,000; it is anticipated that no additional funding will be required for the extended term.  The Trustees are requested to approve the extension of the subject contract through December 31, 2007, with no additional funding requested.

Increase in Aggregate Compensation Ceiling:            

                “At their meeting of July 27, 2004, the Trustees approved the award of contracts to five firms, Chu & Gassman Consulting Engineers, PC (4600001303), CDM Constructors, Inc. (4600001308), Consolidated Edison Solutions (4600001338), DMJM + Harris, Inc. (4600001307) and PB Power, Inc. (4600001309), and an initial aggregate amount of $150 million, to provide for program management and implementation services in connection with the Southeastern New York Energy Services Programs (‘SENY ESP’) for Governmental Customers.  The contracts, which were competitively bid, became effective on August 1, 2004 for an initial term of three years, with an option to extend for two additional years.  Such option was subsequently exercised for four of the subject contracts, with the exception of Consolidated Edison Solutions.  The aforementioned Trustee Item also advised the Trustees that additional funding of up to $100 million might be needed to complete the work assigned under these contracts, based on program participation, and the Trustees’ authorization for the release and allocation of such additional funding would be requested as such needs were identified.  The current ‘Target Values’ total $145,093,364; staff anticipates that an additional aggregate $100 million (in excess of the originally approved $150 million) will be required for projects to be completed during the remaining contract term.  Such projects include, but are not limited to:  New York City Housing Authority (‘NYCHA’) Rutgers Houses ($7 million), Arthur Kill Correctional Facility ($10 million), NYCHA Castle Hill Houses ($13 million), City University of New York (‘CUNY’) College of Staten Island ($11 million), Hot Water Storage Tank Replacements in various NYCHA developments – Releases 6 through 8 ($18 million), Port Richmond Waste Water Treatment Plant ($13 million), CUNY City College ($13 million) and State University of New York at Purchase ($6 million).  The Trustees are requested to authorize the release and allocation of the additional funding requested from the previously approved Capital Expenditure Authorization Request (‘CEAR’), thereby increasing the aggregate compensation ceiling to $250 million.  It should be noted that all costs will be recovered by the Authority.


 

Power Generation

“Blueback herring has been identified by regulating agencies (U. S. Fish and Wildlife Service and the New York State Department of Environmental Conservation) as the key species requiring downstream passage protection at the Authority’s Crescent Hydroelectric Project (‘Crescent’) located on the Mohawk River in Albany County.  To this end, the Authority proposed an underwater acoustic system that projected a high-frequency sound field outward from the powerhouse dam to guide downstream migrants away from the headrace toward bypasses located on the adjacent spillway dams.  Pursuant to the Federal Energy Regulatory Commission’s (‘FERC’) order, the Authority solicited proposals to conduct a study of the effectiveness of its downstream passage facilities with respect to the migration of adult blueback herring at Crescent following the seasonal spawn, resulting in the award of a contract to Kleinschmidt Associates (‘KA’; 4600001729).  The original award became effective on November 20, 2006 for an initial term of less than one year (as noted in Change Order No. 2), with an option for an additional year, subject to the Trustees’ approval.  During the initial term, a pilot study was conducted to determine if it was possible to effectively collect adult blueback herring above Crescent when they ascend the Mohawk River during the spring to spawn, implant in them a radio tag and track the tagged fish when they migrate downriver after spawning.  Based on successful completion of the pilot study and FERC requirements, a comprehensive study would be conducted in the second year to assess the effectiveness of the Authority’s plan for providing downriver passage of adult blueback herring at Crescent.  In the interim, the Authority proposed a change in its plan for downriver passage, involving the redesign and relocation of its acoustic system; such plan was recently approved by FERC.  Since the acoustic system is scheduled to be installed in the summer of 2008 and since most adult blueback herring will have migrated downriver past Crescent by that time, the comprehensive study must be deferred until 2009 and, therefore, cannot be completed within the originally projected term.  A 2.5-year extension is now requested in order to allow sufficient time to complete the comprehensive study, including resolution of any follow-up questions or issues that may be raised by the various regulatory agencies, which may further expand the scope of work and/or increase the cost of the study.  The current ‘Target Value’ is $407,857; staff estimates that an additional $75,000 may be required for the extended term ($25,000 for additional work or modified tasks based on results of the pilot study and for the term extension, and an estimated additional $50,000 in contingency for addressing regulatory comments).  The Trustees are requested to approve the extension of the subject contract through May 31, 2010, as well as the additional funding requested, including contingency.  (A comprehensive study for juvenile blueback herring, also required by a recent FERC Order, will be performed under a separate contract.)

FISCAL INFORMATION

“Funds required to support contract services for various Headquarters Office Business Units/Departments and Facilities have been included in the 2007 Approved O&M Budget.  Funds for subsequent years, where applicable, will be included in the budget submittals for those years.  Payment will be made from the Operating Fund.

“Funds required to support contract services for capital projects have been included as part of the approved capital expenditures for those projects and will be disbursed from the Capital Fund in accordance with the Project’s Capital Expenditure Authorization Request (‘CEAR’).  Payment for the implementation contracts in support of the Energy Services Program will be made from the Energy Conservation Effectuation and Construction Fund.  All costs, including Authority overheads and the cost of advancing funds, will be recovered by the Authority, consistent with other Energy Services and Technology Programs.

RECOMMENDATION

The Senior Vice President – Public and Governmental Affairs, the Vice President – Procurement and Real Estate, the Vice President – Environment, Health and Safety, the Executive Director – Licensing, Implementation and Compliance, the Director – Energy Services, the Regional Manager – Northern New York and the Regional Manager – Central New York recommend the Trustees’ approval of the extensions, additional funding and increase in aggregate compensation ceiling of the procurement contracts discussed within the item and/or listed in Exhibit ‘14-A.’

“The Executive Vice President, General Counsel and Chief of Staff, the Executive Vice President – Chief Financial Officer, the Executive Vice President - Corporate Services and Administration, the Senior Vice President – Energy Services and Technology, the Senior Vice President and Chief Engineer – Power Generation 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 Guidelines for Procurement Contracts adopted by the Authority, each of the contracts listed in Exhibit “14-A,” attached hereto, is hereby approved and extended for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That pursuant to the Authority’s Expenditure Authorization Procedures, an increase in the aggregate compensation ceiling of the contracts with Chu & Gassman Consulting Engineers, PC, CDM Constructors, Inc., DMJM + Harris, Inc. and PB Power, Inc., is hereby approved, as recommended in the foregoing report of the President and Chief Executive Officer, in the amounts and for the purposes listed below:

 

                                Energy Conservation                                            Contract Approval                             Projected

Effectuation &                                                            (Increase in                                       Closing

Construction Fund                                              Compensation Ceiling)                            Date  __

 

Provide for program manage-

ment and implementation
                                services for SENY Energy
                                Services Programs for Govern-

mental Customers:

 

Chu & Gassman Consulting

Engineers, PC

4600001303

 

CDM Constructors, Inc.

4600001308

 

DMJM + Harris, Inc.

4600001307

 

PB Power, Inc.

4600001309

 

Previously approved aggregate

Amount                                                                  $  150,000,000                                     07/31/09

 

Additional amount requested                               100,000,000

 

REVISED AGGREGATE                                     $250,000,000

COMPENSATION CEILING


 

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.


 
15.          Issuance of the Series 2007 A, 2007 B and 2007 C Revenue Bonds

 

 

                Mr. Brian McElroy presented the highlights of staff’s recommendations to the Trustees and Mr. Timothy Sheehan provided an overview of the resolutions the Trustees were being asked to vote on.  President Kelley thanked staff for all of the work they had done in pulling this financing together, saying it was the result of a very good effort.  In response to a question from Trustee James Besha, Mr. McElroy said that the Series B bonds were taxable because of the nature of the end uses for the funding.   

 


 

POWER AUTHORITY OF THE STATE OF NEW YORK

 

Excerpts from the minutes of a regular meeting of the Power Authority of the State of New York (the “Authority”) held at the Authority’s offices at 123 Main Street, White Plains, New York 10601, on Tuesday, September 25, 2007, at 11:00 A.M.

 

There were present:

Frank S. McCullough, Jr., Chairman
Michael J. Townsend, Vice Chairman
Elise M. Cusack
Robert E. Moses

Thomas W. Scozzafava

James A. Besha, Sr.

Leonard N. Spano

 

constituting a majority of the trustees and a quorum.

 

Also present were:

 

Roger B. Kelley, President and Chief Executive Officer

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

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

Joseph M. Del Sindaco, Executive Vice President and Chief Financial Officer

Donald A. Russak, Vice President – Finance

Brian McElroy, Treasurer

Timothy P. Sheehan, Principal Attorney II

Anne B. Cahill, Corporate Secretary

Michael Mace, Public Financial Management, Inc., Financial Advisor to the Authority

John V. Connorton, Jr. and Jeremy S. Colgan, of Hawkins Delafield & Wood LLP,

Bond Counsel to the Authority

 

Mr. McCullough, Jr., Chairman, presided and Ms. Cahill, Corporate Secretary, kept the minutes.

 

PLAN OF FINANCE IN CONNECTION WITH THE ISSUANCE OF DEBT

 

The Chairman stated that a matter to be presented at the meeting was consideration of a plan of finance comprised of a bond financing transaction to (1) current refund a portion of the Authority’s outstanding Commercial Paper Notes and to finance a portion of the costs of the relicensing and modernization of the Authority’s St. Lawrence-FDR Project and of the relicensing of the Niagara Project; (2) concomitantly terminate a related interest rate swap and pay or receive swap termination amounts depending on market conditions; (3) advance refund a portion of the Authority’s outstanding Series 2002 A Revenue Bonds; and (4) enter into one or more interest rate swap agreement(s) in order to hedge potential savings associated with the refunding of the Series 2002 A Revenue Bonds.

 

Proposed Issuance of Series 2007 A and 2007 B Revenue Bonds to Current Refund Commercial Paper Notes and to Finance a Portion of the Costs of the Relicensing and Modernization of the Authority’s St. Lawrence-FDR Project and of the Relicensing of the Niagara Project

 

The Authority proposes to issue not more than $375,000,000 principal amount of Series 2007 A and 2007 B Revenue Bonds (respectively the “Series 2007 A Revenue Bonds” and the “Series 2007 B Revenue Bonds” and together with the Series 2007 C Revenue Bonds (as defined below) the “Bonds”) in a fixed interest rate mode not to exceed seven and a half percent (7.5%).

 

The purposes for which the Series 2007 A Revenue Bonds may be issued shall include to (i) provide moneys to finance a portion of the costs of the relicensing of the Niagara Project and to refund the portion of its tax-exempt Commercial Paper Notes, Series 2 issued to finance the relicensing and modernization costs of the Niagara Project, (ii) pay financing costs related to the issuance of the Series 2007 A Revenue Bonds, including underwriters’ discount, structuring fees, any insurance premiums related to the purchase of any municipal bond insurance policy determined to be necessary or desirable and other costs incurred by the Authority.

 

The purposes for which the Series 2007 B Revenue Bonds may be issued shall include to (i) provide moneys to finance a portion of the costs of the relicensing and modernization of the Authority’s St. Lawrence-FDR Project and the relicensing of the Niagara Project and to refund the portion of its taxable Commercial Paper Notes, Series 3 issued to finance the relicensing and modernization of the Authority’s Niagara Project, (ii) pay the termination amount, if any, incurred in connection with the termination of the 2006 Swap Agreement (defined below) and (iii) pay financing costs related to the issuance of the Series 2007 B Revenue Bonds, including underwriters’ discount, structuring fees, any insurance premiums related to the purchase of any municipal bond insurance policy determined to be necessary or desirable and other costs incurred by the Authority.

 

Proposed Termination of the 2006 Swap Agreement

 

The Authority also intends to contemporaneously terminate at the time of pricing of the Series 2007 B Revenue Bonds and in any event not later than the mandatory termination date of October 16, 2007, a floating-to-fixed interest rate swap agreement dated February 15, 2006, in the aggregate notional amount of $290,000,000 with Goldman Sachs Mitsui Marine Derivative Products, L.P. (Swaps Transaction LTAA1705611999.1 / 00683699301) (the “2006 Swap Agreement”).  The Authority entered into the 2006 Swap Agreement to manage interest rate volatility in connection with the proposed issuance of the Series 2007 B Revenue Bonds being authorized at this meeting.

 

Under current market conditions, the termination of the 2006 Swap Agreement would result in a payment to the Authority by Goldman Sachs Mitsui Marine Derivative Products, L.P. (the “Counterparty”).  However, it is possible that market conditions could change and result in the Authority being required to make a termination payment to the Counterparty which could be substantial depending on market conditions at the time.  In such case, the termination payment would be funded from the proceeds of the Series 2007 B Revenue Bonds.  If, consistent with current market conditions, the Authority receives a termination payment, such payment will be applied either to reduce the principal amount of Series 2007 B Revenue Bonds to be issued or to refund project costs or costs incurred in connection with the issuance of the Series 2007 B Revenue Bonds.

 

Proposed Issuance of Series 2007 C Revenue Bonds to Advance Refund Series 2002 A Revenue Bonds

 

The Authority issued $532,250,000 of Series 2002 A Revenue Bonds (the “Series 2002 A Bonds”) to (i) finance the costs of construction of the 500-MW combined‑cycle electric generating plant located in New York City and (ii) refund related Commercial Paper Notes.  The proposed issuance of the Series 2007 C Revenue Bonds (as defined below) contemplates the refunding and legal defeasance of up to $278,000,000 principal amount of the outstanding $479,205,000 principal amount of Series 2002 A Bonds.  Such bonds are callable at par on or after November 15, 2012. 

 

To effect the refunding, the Authority expects to issue not more than $300,000,000 principal amount of Series 2007 C Revenue Bonds (the “Series 2007 C Revenue Bonds”) in a fixed rate interest rate mode.  The Authority’s senior finance staff in consultation with The PFM Group (the “Financial Advisor”) do not intend to issue the Series 2007 C Revenue Bonds unless (i) present value savings realized by the Authority meets or exceeds 3% of the principal amount of the Series 2002 A Bonds to be refunded, and (ii) unless individual maturities of the Series 2002 A Bonds so refunded generate positive present value savings. 

 

The proceeds of Series 2007 C Revenue Bonds and/or monies already accrued in the Operating Fund for such purpose will be used to purchase Defeasance Securities (as defined in the General Resolution) to be held in escrow, together with any available monies, and to be sufficient in timing and amount to pay the redemption price of the refunded Series 2002 A Bonds on November 15, 2012.

 

The proceeds of the Series 2007 C Revenue Bonds will also be used to pay the termination amount, if any, incurred in connection with the termination of the 2007 Swap Agreement(s) (as defined below) and financing costs related to the issuance of the Series 2007 C Revenue Bonds, including underwriters’ discount, structuring fees, any insurance premiums related to the purchase of any municipal bond insurance policy determined to be necessary or desirable and other costs incurred by the Authority.

 

Proposed Execution of one or more Interest Rate Swaps Associated with the Issuance of the Series 2007 C Revenue Bonds to Advance Refund a Portion of the Series 2002 A Revenue Bonds

 

Subject to market conditions, the Authority may execute one or more floating-to-fixed rate, interest rate swap agreements to hedge the interest rate volatility associated with the refunding of the Series 2002 A Bonds prior to pricing the Series 2007 C Revenue Bonds (the “2007 Swap Agreement(s)”).  The proposed agreements would consist of at least one Securities Industry and Financial Markets Association (“SIFMA”) Municipal Swap Index based swap in an aggregate notional amount not to exceed $278 million.  The 2007 Swap Agreement(s) would be awarded through a competitive bidding process that would be managed on behalf of the Authority by Public Financial Management-Asset Management LLC (“PFM-AM”), a wholly owned subsidiary of the Authority’s Financial Advisor.

 

Under the proposed 2007 Swap Agreement(s), the Authority would pay the counterparty(ies), during the term of the swap commencing on or after September 25, 2007, a fixed rate of not greater than 5.5% on the notional amount of the swap(s) relating to the Series 2002 A Bonds.  The counterparty(ies), in turn, would pay the Authority payments equal to the notional amount of the related swaps multiplied by the SIFMA Municipal Swap Index.

 

It may be advisable in connection with the 2007 Swap Agreement(s) to execute credit support annexes (“CSAs”).  The CSAs would obligate the Authority and the counterparties to provide collateral to support the 2007 Swap Agreement(s) if the Authority’s or the counterparties’ credit ratings were downgraded.  Such CSAs would contain provisions that would limit the aggregate amount of collateral to be transferred without further approval by the Trustees to $25 million.  If the Trustees were to decline to approve such additional collateral, the counterparty to the 2007 Swap Agreement in question would have the option to terminate the swap agreement, with payment to be made in accordance with whether market conditions favored the Authority or the counterparty.

 

As the 2007 Swap Agreement(s) would be executed to hedge interest rate volatility, the Authority expects to terminate the 2007 Swap Agreement(s) when the Bonds are priced.  Accordingly, at the time of such termination, if interest rates are higher than the fixed payer rate of the swaps, the Authority would be the recipient of a termination payment by the counterparty(ies).  The Authority would then issue fixed-rate bonds (reduced by an amount equal to the swap termination payment received) in the higher interest rate environment.  Conversely, if interest rates are lower, the Authority would be required to make a termination payment to the counterparty(ies).  The Authority would issue fixed-rate bonds (increased by an amount equal to the swap termination payment payable) in the lower interest rate environment.  In both cases, by virtue of entering into the proposed swap(s), it is expected that the Authority would have substantially hedged its interest rate risk.

 

The Authority’s senior finance staff in consultation with the Financial Advisor and PFM-AM have analyzed and explained the risks to the Trustees associated with the 2007 Swap Agreement(s) including without limitation, risk associated with the spread between the different interest rates payable by the parties, the risk that the counterparty(ies) may default resulting in additional cost to the Authority and the risk that market conditions may delay or prevent the issuance of the Series 2007 C Revenue Bonds leaving the Authority in a position where a substantial termination amount may be payable without a source of bond proceeds.

 

AUTHORIZATION OF SERIES 2007 A,  SERIES 2007 B AND SERIES 2007 C REVENUE BONDS

 

The Chairman stated that a matter to be presented at the meeting was consideration of the advisability of adopting the Eighth Supplemental Resolution Authorizing Series 2007 A, Series 2007 B and Series 2007 C Revenue Bonds (the “Eighth Supplemental Resolution”), which authorizes the issuance of (a) the Series 2007 A and 2007 B Revenue Bonds in an aggregate principal amount not to exceed $375,000,000 such that the Series 2007 A Revenue Bonds are to be used to (i) provide moneys to finance a portion of the costs of the relicensing of the Niagara Project and to refund the portion of its tax-exempt Commercial Paper Notes, Series 2 issued to finance the relicensing and modernization of the Niagara Project, (ii) pay certain costs and expenses associated with the issuance of the Series 2007 A Revenue Bonds, including underwriters’ discount, structuring fees, municipal bond insurance premium costs and reimbursement of costs and expenses expended by the Authority in connection therewith; and the Series 2007 B Revenue Bonds are to be used to (i) provide moneys to finance a portion of the costs of the relicensing and modernization of the Authority’s St. Lawrence-FDR Project and the relicensing of the Niagara Project and to refund the portion of its taxable Commercial Paper Notes, Series 3 issued to finance the relicensing and modernization of the Authority’s Niagara Project, (ii) pay the termination amount, if any, incurred in connection with the termination of the 2006 Swap Agreement and (iii) pay financing costs related to the issuance of the Series 2007 B Revenue Bonds, including underwriters’ discount, structuring fees, any insurance premiums related to the purchase of any municipal bond insurance policy determined to be necessary or desirable and other costs incurred by the Authority and (b) the Series 2007 C Revenue Bonds in an aggregate principal amount not to exceed $300,000,000 in order to (i) provide moneys to redeem a portion of the Authority’s Series 2002 A Revenue Bonds, including the redemption price of, and accrued interest to the date of redemption on, such bonds, (ii) pay the termination amount, if any, incurred in connection with the termination of the 2007 Swap Agreement(s) and (iii) pay certain costs and expenses associated with the issuance of the Series 2007 C Revenue Bonds, including underwriters’ discount, structuring fees, municipal bond insurance premium costs and reimbursement of costs and expenses expended by the Authority in connection therewith.  The respective principal amounts of the Series 2007 A, 2007 B and 2007 C Revenue Bonds will be determined at the time of the pricing of the Bonds, subject to the overall caps stated above.

 

On motion duly made and seconded, the Eighth Supplemental Resolution (attached hereto as Exhibit A-1), together with such changes, insertions, deletions and amendments thereto as the Chairman or President and Chief Executive Officer of the Authority may approve, which shall be deemed to be part of such resolutions as adopted, was unanimously adopted.

 

CONTRACT OF PURCHASE, PRELIMINARY OFFICIAL STATEMENT
AND OFFICIAL STATEMENT FOR SERIES 2007 A, 2007 B AND 2007 C REVENUE BONDS

 

The Chairman presented a copy of a form of Contract of Purchase proposed to be entered into with Citigroup Global Markets Inc., J.P. Morgan Securities Inc., Goldman Sachs & Co. and Merrill Lynch & Co. providing for the sale of the Series 2007 A, 2007 B and 2007 C Revenue Bonds to said purchasers.  The Chairman also presented a draft form of the Preliminary Official Statement relating to the Bonds (attached hereto as Exhibit A-2).  Said proposed Contract of Purchase and draft form of the Preliminary Official Statement were considered by the Trustees, and thereupon, on motion duly made and seconded, the following resolutions were unanimously adopted:

 

RESOLVED, that one or more series of the Bonds shall be sold, subject to the limitations described below, to Citigroup Global Markets Inc., J.P. Morgan Securities Inc., Goldman Sachs & Co. and Merrill Lynch & Co., or such other purchasers that may be approved by the Chairman or President and Chief Executive Officer (collectively, the “Underwriters”), at such prices, with accrued interest, if any, on such Bonds from the date of issue of said Bonds to the date of delivery and payment for said Bonds, as the Chairman or President and Chief Executive Officer may accept and as will be in compliance with the requirements of the Eighth Supplemental Resolution, pursuant to a Contract of Purchase, in substantially the form of the Contract of Purchase relating to the Bonds submitted at this meeting (attached hereto as Exhibit A-3), as such Contract may be modified as hereinafter provided, and upon the basis of the representations therein set forth; and

 

FURTHER RESOLVED, that the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Vice President-Finance, Treasurer and Deputy Treasurer be, and each of them hereby is, authorized on behalf of the Authority, subject to the limitations described below, to execute a Contract of Purchase substantially in the form submitted at this meeting, providing for the sale of one or more series of the Bonds to said purchasers, with such changes, insertions, deletions, amendments and supplements as the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Vice President-Finance, Treasurer or Deputy Treasurer may approve, subject to the requirements of the Eighth Supplemental Resolution, and to deliver it to said purchasers; and that said officers and all other officers of the Authority are hereby authorized and directed to carry out or cause to be carried out all obligations of the Authority set forth in said Contract of Purchase upon execution thereof and that the execution of the Contract of Purchase relating to the Bonds by said authorized officers be conclusive evidence that any conditions imposed by the Trustees have been satisfied and the sale and issuance of the Bonds has been authorized by the Authority’s Board of Trustees; and

 

FURTHER RESOLVED, that the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Vice President-Finance, Treasurer and Deputy Treasurer be, and each of them hereby is, authorized to make such changes, insertions, deletions, amendments and supplements, to or from the draft form of the Preliminary Official Statement relating to the Bonds as may be approved by such officer, and upon the completion of any such modifications, such officer is authorized to execute such certificates as may be requested by the Underwriters to certify on behalf of the Authority that such Preliminary Official Statement is “deemed final” for purposes of Rule 15c2-12 under the Securities Exchange Act of 1934, subject to the omission of such information as is permitted by the Rule, and the distribution of the Preliminary Official Statement relating to the Bonds of the Authority is hereby approved to all interested persons in connection with the sale of such Bonds; and

 

FURTHER RESOLVED, that the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer and Vice President-Finance be, and each of them hereby is, authorized to adopt and execute on behalf of the Authority a final Official Statement of the Authority relating to the Bonds, in such form and substance as the Chairman or President and Chief Executive Officer deems necessary or desirable, and the delivery of said Official Statement to the purchasers of said Bonds is hereby authorized, and the Authority hereby authorizes said Official Statement and the information contained therein to be used in connection with the sale and delivery of the Authority’s Bonds; and

 

FURTHER RESOLVED, that, if it is determined to be necessary or advisable,  the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Executive Vice President, General Counsel and Chief of Staff, Vice President-Finance, Treasurer, Deputy Treasurer and all other officers of the Authority be, and each of them hereby is, authorized on behalf of the Authority to obtain one or more commitment letter(s) and municipal bond insurance policy(ies) for the Bonds with such terms and conditions as such officer deems necessary or advisable from such municipal bond insurance issuer(s) as the President and Chief Executive Officer or Chairman may select, covering scheduled payments of principal of and interest on such Bonds, including mandatory sinking fund redemption payments; and

 

FURTHER RESOLVED, that the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Executive Vice President, General Counsel and Chief of Staff, Vice President-Finance, Treasurer, Deputy Treasurer and all other officers of the Authority be, and each of them hereby is, authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents, including but not limited to those actions, certificates, agreements and other documents described in the Eighth Supplemental Resolution, the Contract of Purchase and the other documents approved today or required in connection with the obtaining of one or more municipal bond insurance policy, which they, or any of them, may deem necessary or advisable in order to (i) consummate the lawful sale, issuance and delivery of the Bonds, (ii) implement any action permitted to be taken by the Authority under the Eighth Supplemental Resolution, the Contract of Purchase relating to the Bonds and the other agreements and documents approved today following the issuance of the Bonds, and (iii) effectuate the purposes of the transactions and documents approved today.

 

APPOINTMENT OF REGISTRAR, PAYING AGENT AND ESCROW AGENT UNDER GENERAL RESOLUTION

 

RESOLVED, that The Bank of New York Trust Company, N.A. is hereby appointed as Registrar and Paying Agent for the Series 2007 A, 2007 B and 2007 C Revenue Bonds under the General Resolution and as Escrow Agent for the refunded Series 2002 A Revenue Bonds.

 

AUTHORIZATION OF CONTINUING DISCLOSURE AGREEMENTS

 

RESOLVED, that the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Vice President-Finance, Treasurer and Deputy Treasurer be, and each of them hereby is, authorized to execute a Continuing Disclosure Agreement relating to the Series 2007 A, 2007 B and 2007 C Revenue Bonds, between the Authority and The Bank of New York Trust Company, N.A., as Trustee under the General Resolution, in substantially the form set forth in Appendix C to Part 1 of the draft Preliminary Official Statement to be issued in connection with the sale of the Series 2007 A, 2007 B and 2007 C Revenue Bonds, submitted at this meeting, each with such changes, insertions, deletions, and supplements, as such authorized executing officer deems in his discretion to be necessary or appropriate, such execution to be conclusive evidence of such approval.

 

ESCROW DEPOSIT AGREEMENT

 

RESOLVED, that the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Vice President–Finance, Treasurer and Deputy Treasurer be, and each of them hereby is, authorized on behalf of the Authority to execute one or more Escrow Deposit Agreements between the Authority and The Bank of New York Trust Company, N.A., for the purpose of accomplishing the refunding of a portion of the Authority’s Series 2002 A Revenue Bonds in accordance with the Eighth Supplemental Resolution, such execution to be conclusive evidence of such approval.

 

2006 Swap Agreement

 

RESOLVED, that the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Executive Vice President, General Counsel and Chief of Staff, Vice President-Finance, Treasurer and Deputy Treasurer be, and each of them hereby is, authorized to terminate the Authority’s interest rate swap agreement dated February 15, 2006 with Goldman Sachs Mitsui Marine Derivative Products, L.P. (Swaps Transaction LTAA1705611999.1 / 00683699301) in the aggregate notional amount of $290,000,000 and pay any termination amounts from the proceeds of the Series 2007 B Revenue Bonds.

 

2007 Swap Agreement(s)

 

RESOLVED, That the Chairman, President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer, the Vice President-Finance, and the Treasurer be, and each hereby is, authorized to execute on behalf of the Authority one or more floating-to-fixed-rate, interest rate swap agreements with entities to be selected by the Vice President-Finance or the Treasurer as a result of a competitive bidding process, provided that: (1) the agreements shall consist of at least one swap based on the Securities Industry and Financial Markets Association (‘SIFMA’) Municipal Swap Index in an aggregate notional amount not to exceed $278 million as a hedge for the Series 2007 C Revenue Bond issuance being contemplated for October 2007; (2) the term of the agreements shall not exceed November 15, 2021; (3) during the term of the agreements, the Authority shall not pay a fixed rate greater than 5.5% on the notional amount of the swap(s), and the counterparty(ies), in turn, shall pay the Authority payments equal to the notional amount of the swaps multiplied by the SIFMA Municipal Swap Index; (4) any credit support annexes shall allow for transfer of up to an aggregate of $25 million in collateral without further approval of the Trustees; (5) the swap agreements may provide for their termination if the Authority declines to provide additional collateral beyond the $25 million discussed in clause (4) above; and (6) such agreements shall have such terms and conditions, not inconsistent with the requirements set forth in clauses (1)-(5) above, as the Executive Vice President and Chief Financial Officer, the Vice President - Finance or the Treasurer each in his discretion shall deem necessary or advisable, with execution of the agreements constituting conclusive evidence of such approval; and be it further

 

RESOLVED, That the Chairman, President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer, the Vice President-Finance, the Treasurer, the Deputy Treasurer and each of them hereby is, authorized to terminate on behalf of the Authority the 2007 Swap Agreement(s) and pay any termination amounts from the Series 2007 C Revenue Bond proceeds or from the Operating Fund;

 

RESOLVED, That prior to the release of any monies from the Operating Fund for the payment of collateral under any credit support annexes, the Executive Vice President and Chief Financial Officer, the Vice President-Finance or the Treasurer shall certify that any such amount to be withdrawn for such purpose shall not be needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

 

RESOLVED, That the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer, the Vice President - Finance, the Treasurer, the Deputy Treasurer and all other Authority officers be, 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 this resolution, subject to the approval of the form thereof by the Executive Vice President, General Counsel and Chief of Staff.

 

AGREEMENTS FOR BOND AND SPECIAL COUNSEL SERVICES

 

RESOLVED, that the Executive Vice President, General Counsel and Chief of Staff be, and hereby is, authorized on behalf of the Authority to execute letter agreements between the Authority and the law firm of Hawkins Delafield & Wood LLP for the provision by such firm of bond counsel services to the Authority, and with the law firm of Nixon Peabody LLP for the provision by such firm of special counsel services to the Authority, all in connection with the Series 2007 A, 2007 B and 2007 C Revenue Bonds and the related transactions authorized hereby, with such agreements having such terms and conditions as the Executive Vice President, General Counsel and Chief of Staff may approve.

 

ADDITIONAL AUTHORIZATION

 

RESOLVED, that the Chairman, President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, Executive Vice President, General Counsel and Chief of Staff, Vice President-Finance, Treasurer, Deputy Treasurer and all other officers of the Authority be, and each of them hereby is, authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents, which they, or any of them, may deem necessary or advisable in order to effectuate the foregoing resolutions.

 

 

EXHIBITS

 

Exhibit A-1            Eighth Supplemental Resolution Authorizing Series 2007 A Revenue Bonds,

Series 2007 B Revenue Bonds and Series 2007 C Revenue Bonds

 

Exhibit A-2            Draft Preliminary Official Statement

 

Exhibit A-3            Draft Contract of Purchase

 

 

 

 

 

 


 

16.          Motion to Conduct an Executive Session

 

“Mr. Chairman, I move that the Authority conduct an Executive Session pursuant to Section 105(1)(d) of the Public Officers Law to discuss issues associated with pending litigation with: (i) General Electric et al. and (ii) Entergy Nuclear Fitzpatrick, LLC and Entergy Nuclear Indian Point 3, LLC.”  On motion duly made and seconded, an Executive Session was held.


 

17.          Motion to Resume Meeting in Open Session

                “Mr. Chairman, I move to resume the meeting in Open Session.”  On motion duly made and seconded, the meeting resumed in Open Session.


 

18.          Entergy James A. FitzPatrick and Entergy Indian Point 3 Value-Sharing Agreements - Amendments                  

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve amendments to the Value-Sharing Agreements (‘VSAs’) entered into between the Authority and Entergy Nuclear Indian Point 3, LLC (‘Entergy IP3’) and Entergy Nuclear Fitzpatrick, LLC (‘Entergy JAF’) in connection with the sale in 2000 by the Authority of the Indian Point 3 (‘IP3’) and James A. FitzPatrick (‘JAF’) nuclear units to Entergy IP3 and Entergy JAF (collectively, ‘Entergy’).  The amendments are intended to resolve disagreements between the Authority and Entergy about the administration of the VSAs.

 

BACKGROUND

 

                “On March 28, 2000, the Authority entered into a contract to sell IP3 and JAF to Entergy IP3 and Entergy JAF, respectively.  The sale closed on November 21, 2000.  The sale was conducted through an auction process followed by negotiations in which Entergy, and at least one other large nuclear operator, presented comprehensive offers for IP3 and JAF.  The Authority accepted Entergy IP3’s and Entergy JAF’s bid, which included $966.84 million in cash payments to be received over a number of years, plus multiyear power purchase agreements (‘PPAs’) extending through December 2004, through which Entergy IP3 and Entergy JAF agreed to sell the energy output of IP3 and JAF to the Authority at negotiated prices.  In addition to the sale contract, the PPAs and certain other agreements, the transaction included two substantially identical contingent payment contracts, one with Entergy IP3 and one with Entergy JAF.

 

                “These two contracts (the VSAs) are dated as of November 21, 2000 and are entitled ‘Value-Sharing Agreement (Indian Point 3)’ and ‘Value-Sharing Agreement (Fitzpatrick).’

 

                “The purpose of the VSAs was to provide additional compensation to the Authority for the plants if the market price of electricity shifted in future years above the levels assumed by the Authority and Entergy and reflected in the determination of the purchase price.  To achieve that goal, the VSAs provided that, for each calendar year from 2005 through 2014, Entergy and the Authority would share equally if market prices based on actual sales from IP3 or JAF exceeded an agreed-upon set price for each plant.

 

                “In 2005, the first year for which Entergy was required to calculate whether a payment was due to the Authority under the VSAs, a dispute arose as to the treatment of cash settlement prices for financial swap transactions entered into by Entergy.  Entergy took the position that the price received from its swap partner (not the price actually received by Entergy from its sale of that power into the market) should be used to calculate the VSA amount; the Authority took the contrary view.  The same thing happened with respect to the 2006 calculation.  Additional disagreement emerged over the use in the calculations under the VSAs of Entergys internal transfer prices for sales to a captive affiliate, Entergy Nuclear Power Marketing (‘ENPM’) and the Authority’s entitlement to VSA payments with respect to energy produced by plant up-rates performed after Entergy acquired the units. The amounts in dispute for years 2005 and 2006 totaled about $144 million.

 

                “Beginning in 2006 and continuing through March 2007, the parties exchanged information and attempted to resolve the matters in dispute.  On or about May 10, 2006, the Authority filed a Notice of Dispute demanding arbitration with respect to amounts in dispute for 2005, and on or about March 23, 2007, the Authority advised Entergy IP3 and Entergy JAF that it disagreed with Entergy's calculations of the 2006 VSA amount and provided formal Notice of Dispute with respect to that period.

 

                “Arbitration proceedings before the American Arbitration Association commenced and after three days of hearings before an arbitrator, final briefs were filed on August 10, 2007.  In the meantime, the parties continued discussing resolution of the disputed issues.  In late August, the parties appeared to be close to reaching agreement on the terms of a settlement and advised the arbitrator not to issue his decision. 


 

DISCUSSION

 

                “Following the arbitration and before any decision was issued by the arbitrator, the parties reached an agreement in principle to resolve the current controversy and amend the VSAs in an effort to avoid future disputes during the remaining eight-year term of the VSAs. 

 

                “This agreement changes in two fundamental respects the calculation of the annual amounts owed to the Authority under the original VSAs.  First, the agreement replaces the uncertainty and complexity of computing the megawatt hour (‘MWH’) price used to calculate the VSA amount with an agreed price per MWH for each plant.  Second, it provides a cap for the total annual VSA amounts owed the Authority in any year for each plant where the original VSAs contained no annual maximum.

 

                “Currently, to arrive at the price of energy for the purpose of calculating the VSA amount, the parties make distinctions between how the energy was sold for purposes of valuing a MWH, i.e., via physical power sales, financial swaps or sales into the New York Independent System Operator.  Under the amended agreement, the parties have agreed on a specific dollar amount (different for each plant) that will be multiplied by all metered MWHs from each plant (up to a maximum annual amount for each plant) to arrive at the VSA amount due each year.  Specifically, the amount owed the Authority under the VSAs will be based on $6.59 per MWH for IP3 and $3.91 per MWH for JAF.  The maximum annual payment for IP3 is $48 million and for JAF is $24 million.  These amounts, it should be noted, are about equal to the annual amounts due the Authority for each of the first two years under the Authority's interpretation of the original VSAs.  The first payment will be due on January 15, 2008 and thereafter on January 15 of each succeeding year through January 15, 2015.

 

                “In all other material respects, the amended VSAs afford the Authority the same, or greater, rights than the original VSAs.  Under the amended VSAs, the annual maximum amounts are based on the assumption that each plant generates at least 85% of its stated capacity, the same 85% cap found in the original VSAs.  Under both the amended and original VSAs, decreased production at either plant for whatever reasons may reduce the VSA amount.  In addition, sale of the plants to entities that are not affiliates of Entergy will, under both the amended and original VSAs, effectively terminate Entergy’s obligations.

 

                “It is in this nonaffiliated-sale scenario that the amended VSAs will provide the Authority more benefits than the original VSAs.  The amended VSAs provide that in the event of such a sale, the Authority retains the right to obtain whatever VSA amount is due at the time of the sale.  That payment obligation did not exist under the original VSA.  Even more significant, under the amended VSAs, the Authority is guaranteed the full value of whatever VSA amount it is due for calendar years 2007 and 2008 regardless of Entergy’s sale of the plants to a nonaffiliate in those years.

 

                “In sum, Authority staff recommends that the Trustees approve the above-described amended VSAs, which will effectuate a resolution of the pending controversy and chart a course for the Authority to receive the value of those VSAs for the next eight years.  This recommendation is also supported by the Authority’s outside counsel.  As noted, this agreement with Entergy ends the pending VSA dispute without incurring the risks of an adverse arbitration decision and additional legal costs.  It also provides a workable roadmap for calculating future VSA payments and allows Entergy and the Authority to continue what has to date been a productive business relationship.

 

                “The final version of these amended VSAs will not likely change any of the material terms outlined above.  If, in the opinion of the Executive Vice President, General Counsel and Chief of Staff, these terms are changed in significant respects, the amended VSAs will not be signed until the Trustees have an opportunity to review and approve the final versions of the amended VSAs.

 

FISCAL INFORMATION

 

“The amended VSAs would provide a maximum of $72 million per year in revenues to the Authority during their term.  Such revenues, as described above, are contingent on certain production levels at each plant.


 

RECOMMENDATION

 

                “The Executive Vice President, General Counsel and Chief of Staff and the Executive Vice President and Chief Financial Officer recommend that the Trustees approve amendments to the Value-Sharing Agreements entered into between the Authority and Entergy Nuclear Indian Point 3, LLC and Entergy Nuclear Fitzpatrick, LLC, which amendments are, in the opinion of the Executive Vice President, General Counsel and Chief of Staff, consistent with the terms set forth above and I concur with the recommendation.”

 

                Mr. Kelly presented the highlights of staff’s recommendations to the Trustees.  Mr. Del Sindaco acknowledged the efforts of Mr. Arnold Bellis, Mr. Donald Russak, Mr. Edward DeGennaro, Mr. Arthur Cambouris, Ms. Denise D’Ambrosio and Mr. Joseph Carline for the tremendous amount of time and effort they and others had put into negotiating these amendments, with which Mr. Kelly concurred.  Chairman McCullough said that he knew that this was the culmination of many months of effort, day in and day out, and that the negotiations had been difficult.  He thanked staff, including Mr. Joseph Del Sindaco and Mr. Kelly, for a job well done.

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

RESOLVED, That the Trustees approve amended Value-Sharing Agreements with Entergy Nuclear Indian Point 3, LLC and Entergy Nuclear Fitzpatrick, LLC, which, in the opinion of the Executive Vice President, General Counsel and Chief of Staff, are consistent with the terms set forth in the foregoing report of the President and Chief Executive Officer; 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 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.


 

19.          Next Meeting

The next Regular Meeting of the Trustees will be held on Tuesday, October 30, 2007, at 11:00 a.m., at the Clarence D. Rappleyea Building, White Plains, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.


 

Closing

On motion duly made and seconded, the meeting was adjourned by the Chairman at approximately
1:03pm.

 

 

 

 

Anne B. Cahill

Corporate Secretary