MINUTES OF THE REGULAR MEETING

OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

July 31, 2012

 

Table of Contents

 

 

 

                Subject                                                                                                                                  Page No.                Exhibit

 

          Introduction                                                                                                                                       3

1.       Adoption of the July 31, 2012 Proposed Meeting Agenda                                                          4

2.                   Consent Agenda:                                                                                                                        5

a.        Minutes of the Regular Meeting held on June 26, 2012                                       6

b.        Additional Funds for Electricity Savings Reimbursements                                 7

    Related to the Power for Jobs Program 

Resolution

 

c.        Extension of Hydropower Contracts with Upstate Investor-                             10                      “2c-A” – “2c-D”

    Owned Utilities for the Benefit of Rural and Domestic

    Consumers – Transmittal to the Governor 

Resolution

 

d.        Niagara Power Project – Lewiston Pump Generating Plant                                 13

    Life Extension and Modernization Program – Installation

    of Auxiliary Equipment – Contract Award

Resolution

 

e.        Niagara Power Project – Lewiston Pump Generating Plant                                 15

    Life Extension and Modernization Program – HPFF Cable

    Pressurization Systems – Contract Award

Resolution

 

f.         St. Lawrence/FDR Power Project – Architectural and                                         17

    Engineering Services for New Nature Center –

    Contract Award

Resolution

 

g.       St. Lawrence/FDR Power Project – Barnhart Island Bridge –                             20

    Painting and Rehabilitation – Contract Award  

Resolution

 

h.       Lease of Office Space – Clarence D. Rappleyea Building –                                22                      “2h-A”

    SKCG Group

Resolution

 

               


 

                Subject                                                                                                                                  Page No.                Exhibit

 

Discussion Agenda:                                                                                                                                 24

 

3.                   Reports from:

a.        President and Chief Executive Officer                                                                    24                      “3a-A”

 

b.        Chief Operating Officer                                                                                             26                      “3b-A”

 

c.        Chief Financial Officer                                                                                               27                      “3c-A”

 

4.                   Annual Review of Hydropower Allocation Job Compliance                                              29                      “4-A” – “4-C”

    Resolution

 

5.                   Allocations of Expansion Power                                                                                             38                      “5-A”; “5-A-1” &

    Resolution                                                                                                                                                         “5-A-2”

 

6.                   Temporary Discount – Blenheim-Gilboa Standard Service                                                 42                     

    Tariff Rates for Long Island Power Authority

Resolution

 

7.                   Release of Funds in Support of the Residential Consumer                                                 45

    Discount Program Incorporated in the ReCharge New

    York Power Program 

Resolution

 

8.                   Informational Item: Lewiston Pumped Generation Plant Life                                            48

    Extension and Modernization Program

 

9.                   Informational Item: 500 MW Project Maintenance Outage –                                            49

    Video Presentation

 

10.                Board Resolution – John S. Dyson                                                                                         50                      “10-A”

 

11.                Motion to Conduct an Executive Session                                                                             55     

 

12.                Motion to Resume Meeting in Open Session                                                                       56

 

13.                Next Meeting                                                                                                                              57

 

14.                Closing                                                                                                                                        58                                                     


Minutes of the Regular Meeting of the Power Authority of the State of New York held via videoconference at the Clarence D. Rappleyea Building, 123 Main Street, White Plains, New York at approximately 11:06 a.m.

 

Members of the Board present were:

 

                                John R. Koelmel, Chairman

                                John S. Dyson, Vice Chairman

                                Eugene L. Nicandri, Trustee      

                                Jonathan F. Foster, Trustee      

                                R. Wayne LeChase, Trustee     

                                Terrance P. Flynn, Trustee        

                                Joanne M. Mahoney, Trustee    

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Gil C. Quiniones                                   President and Chief Executive Officer

Judith C. McCarthy                             Executive Vice President and General Counsel

Edward Welz                                         Chief Operating Officer

Donald Russak                                     Chief Financial Officer

Jill Anderson                                        Chief of Staff and Director – Energy Policy

Thomas Antenucci                              Senior Vice President – Power Supply Support Services

Joseph Kessler                                     Senior Vice President – Power Generation, Power Supply

William Nadeau                                    Senior Vice President and Chief Risk Officer

James Pasquale                                    Senior Vice President – Economic Development & Energy Efficiency

Paul Tartaglia                                        Senior Vice President – Energy Resource Management

Joan Tursi                                             Senior Vice President – Corporate Support Services

Paul Belnick                                          Vice President – Energy EfficiencyEnergy Services and Technology

John Canale                                          Vice President – Project Management

Dennis Eccleston                                 Vice President – Information Technology/Chief Information Officer

Michael Huvane                                   Vice President – Marketing – Marketing & Economic Development

John Kahabka                                       Vice President – Environmental, Health and Safety

Joseph Leary                                        Vice President – Community and Government Relations

Patricia Leto                                          Vice President – Procurement

Lesly Pardo                                           Vice President – Internal Audit

John Suloway                                       Vice President – Project Development, Licensing and Compliance

Arthur Cambouris                                Deputy General Counsel – Litigation

Brain McElroy                                      Treasurer

Karen Delince                                       Corporate Secretary

Mike Lupo                                             Director – Marketing Analysis and Administration 

Mark O’Connor                                    Director – Real Estate

Michael Saltzman Director – Media Relations

Gerard Vincitore                                   Director – Resource Planning and Project Analysis

Timothy Muldoon                               Manager – Business Power Allocations and Compliance

Gary Schmid                                          Manager – Network Services Infrastructure

Peter Prunty                                          Network Architect – Infrastructure

Lorna M. Johnson                               Assistant Corporate Secretary

Ruth Colon                                            Senior Business Integration Project Manager

Brian Wilkie                                          Rotational Business Integration Project Manager

Sheila Baughman                                 Senior Secretary – Corporate Secretary’s Office

Kevin O’Kefee                                      Manager – Video Production Services

Trish Hennessy                                    PhotographerVideo and Photographic Services

Grant Smolen                                        Intern


 

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

   Financial Group

Jennifer Sanfilippo                               Partner - The Mullen Group

John V. Connorton, Jr.                        Partner, Hawkins Delafield and Wood LLP                                    

 


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

 


Introduction

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


 

1.                   Adoption of the July 31, 2012 Proposed Meeting Agenda

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


 

2.                   Consent Agenda:

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

 

 

 


a.                    Approval of the Minutes

 

                The Minutes of the Regular Meeting held on June 26, 2012 were unanimously adopted.


b.                    Additional Funds for Electricity Savings

                Reimbursements Related to the Power

                                for Jobs Program                                           

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize additional funding, not to exceed $25 million, for electricity savings reimbursement (‘Rebate’) payments related to all extensions of the Power for Jobs (‘PFJ’) program through the program’s expiration on June 30, 2012.

 

BACKGROUND

 

“In July 1997, New York State created the Power for Jobs (‘PFJ’) 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 received three-year contracts for PFJ electricity.

 

“The PFJ program, originally intended to last three years, has been extended many times by the Legislature.  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 were given the option to receive benefits in the form of an ‘electricity savings reimbursement’ rebate or a power contract extension.  The Authority was also authorized to voluntarily fund the rebates, if deemed feasible and advisable by the Trustees.

 

“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 the PFJ program benefits until June 30, 2007.  Chapter 89 of the Laws of 2007 included provisions extending the PFJ program benefits until June 30, 2008.  Chapter 645 of the Laws of 2008 included provisions extending the PFJ program benefits until June 30, 2009.  Chapter 217 of the Laws of 2009 included provisions extending the PFJ program benefits until May 15, 2010.  Such provisions were subsequently extended to June 2, 2010.  Chapter 311 of the Laws of 2010 included provisions extending the PFJ program benefits until May 15, 2011.  Chapter 60 of the Laws of 2011 provided for the expiration of the PFJ Program on June 30, 2012.

 

DISCUSSION

                 

                “At their meeting on August 30, 2010, the Trustees authorized payments for Rebates of up to $50 million for all PFJ extensions after May 15, 2010.  These funds were used to pay Rebates from all legislative periods excluding the latest one beyond May 15, 2011.  Additionally, $50 million was authorized by the Trustees in April 2011 for payments limited to only Rebate obligations accrued during the last legislation period of May 16, 2011 through June 30, 2012.  The PFJ program has been repealed as of June 30, 2012 and the already approved funds are not sufficient to continue the Rebate payments through June 30, 2012.  All PFJ rebate customers are eligible for rebate payments through June 30, 2012.

 

“The Trustees are requested to authorize additional funding, not to exceed $25 million (the ‘Authorized Amount’), that would be available to close out the Rebates related to all extensions of the PFJ program.

 

“Rebates will continue to be made as in prior years subject to a certification on the date of such payment by the Authority’s Treasurer or Deputy 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 Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented.

 

“Staff has reviewed the effects of the Rebate payments of up to the Authorized Amount on the Authority’s projected financial position and reserve requirements.  In addition, in accordance with the Trustees’ Policy Statement dated May 24, 2011, staff calculated the impact of these payments on the Authority’s debt service coverage ratio and determined that it would not fall below the 2.0 reference point level.  Given the current financial condition of the Authority, its estimated future revenues, operating expenses, debt service and reserve requirements, staff is of the view that it will be feasible for the Authority to make the payments of up to the Authorized Amount at this time.

 

“While the Trustees will not be asked to approve individual payment amounts, such information will be made available to the Trustees when requested.  Staff intends to return to the Trustees, as may be necessary, to address modifications to the Authorized Amount.

 

“From the inception of the rebate program in 2005 through the end of 2011, the Authority incurred about $280 million in Rebate payments to eligible customers, averaging about $40 million per year. 

 

FISCAL INFORMATION

 

At this time, the amount needed for additional Rebate payments to PFJ rebate customers for all extensions is not expected to exceed the Authorized Amount of $25 million.  Payments would be made from the Operating Fund.

 

RECOMMENDATION

 

“The Senior Vice President – Economic Development and Energy Efficiency and the Director – Market Analysis and Administration recommend that the Trustees approve the Authorize Amount for electricity savings reimbursement payments for the closure of the PFJ rebate program.

 

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

 

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

 

RESOLVED, That based on the recommendation of staff, the Trustees hereby authorize the continued payment of PFJ electricity savings reimbursements to PFJ rebate customers as discussed in the foregoing report of the President and Chief Executive Officer in the amount of up to the Authorized Amount ($25 million) for all extensions of such program; and be it further

 

RESOLVED, That it is hereby found that the foregoing amount may 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 Treasurer or Deputy 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 – Economic Development and Energy Efficiency or his designee be, and hereby is, authorized to prepare and execute any and all documents necessary or desirable to effectuate the foregoing, subject to the approval of the form thereof by the Executive Vice President and General Counsel; and be it further

 

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

 

 


 

c.                    Extension of Hydropower Contracts with Upstate

                Investor-Owned Utilities for the Benefit of Rural and

                                Domestic Consumers – Transmittal to the Governor

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to authorize the proposed contract extensions for the sale to Niagara Mohawk Power Corporation d/b/a National Grid (‘National Grid’), New York State Electric and Gas Corporation (‘NYSEG’) and Rochester Gas and Electric Corporation (‘RGE’) (hereinafter referred to collectively as the ‘Utilities’) of firm peaking hydropower, totaling 360 MW and, in accordance with Public Authorities Law (‘PAL’) §1009, to authorize transmittal of the contracts to the Governor for his approval.  The form of the contracts with National Grid, NYSEG and RGE is attached as Exhibit ‘2c-A,’ Exhibit ‘2c-B’ and Exhibit ‘2c-C,’ respectively.  This request follows the public hearing and comment period on the form of the contracts that was authorized by the Trustees at their December 15, 2011 meeting.  The public hearing was held on February 7, 2012.  The transcript of the public hearing is attached as Exhibit ‘2c-D.’

 

BACKGROUND

 

                “Under the terms of the hydropower contracts signed with the Utilities in 1990 (‘1990 Hydro Contracts’) and subsequent annual contract extensions, the Utilities have purchased from the Authority both firm power and firm peaking power generated by the St. Lawrence/FDR and Niagara Power Projects.

 

                “The Utilities purchased such power and energy at the Authority’s cost-based hydropower rate and the benefits were passed on to the Utilities’ residential and small farm customers (also referred to as ‘rural and domestic,’ or ‘R&D’ consumers), without markup, through the electric service provided by the Utilities under their retail tariffs.

 

                “Anticipating the enactment of legislation creating a new hydropower-based economic development program, the Trustees approved only short-term extensions of the 1990 Hydro Contracts after the original expiration date of such contracts on August 31, 2007.

 

                “The last extension of the 1990 Hydro Contracts was approved by the Trustees at their December 13, 2010 meeting and ultimately approved by the Governor and provided for an expiration date of December 31, 2011.

 

“Chapter 60 (Part CC) of the Laws of 2011 created the ReCharge New York Power Program (‘RNY Program’).  This law authorized the Authority to redeploy firm hydropower previously sold to the Utilities for the benefit of the R&D consumers for use in the RNY Program.

 

“Effective August 1, 2011, the Authority withdrew the firm hydropower allocations from the Utilities in accordance with the terms of the 2010 extensions and the new law and terminated the firm power allocations of 189 MW for National Grid, 167 MW for NYSEG and 99 MW for RGE.

 

“As authorized by the Trustees at their December 15, 2011 meeting, staff has executed short-term contract extensions providing solely for the sale of the peaking power to the Utilities pending approval by the Governor.

 

DISCUSSION

 

                “At their meeting of December 15, 2011, the Trustees approved commencement of negotiation of contract extensions for firm peaking hydropower with the Utilities, consisting of 175 MW for National Grid, 150 MW for NYSEG and 35 MW for RGE.  The parties have reached agreement on the terms of the extensions.  These firm peaking power allocations would continue to allow the Authority to pass on the benefits of the firm peaking power to the R&D consumers through the Utilities.  The Authority would continue to have a right to withdraw the firm peaking power on 30 days’ written notice.

 

“A public hearing was held, pursuant to PAL §1009, for the contract extensions on February 7, 2012, at Syracuse University in Syracuse, New York from 3:00 p.m. – 7:00 p.m.  Following the review of the comments on the public record, it was determined that no modifications to the contract extensions are required. 

 

FISCAL INFORMATION

 

“The proposed 2011 contract extensions would provide that the Utilities continue to pay for firm peaking hydropower at the same rates they are currently charged, i.e., the cost-based rates that are currently charged to the Authority’s preference customers and determined in accordance with the Authority’s rate-setting methodologies and principles.  The Trustees approved a preference power rate increase at their November 2011 meeting, which became effective in the December 2011 billing period.  The proposed 2011 contract extensions would incorporate the new preference power rates.  As such, there will be no fiscal impact to the Authority associated with these contract extensions.

 

RECOMMENDATION

 

                “The Senior Vice President – Economic Development and Energy Efficiency and the Director – Marketing Analysis and Administration recommend that the Trustees approve: (1) the terms of the proposed contract extensions with the Utilities and (2) authorize transmittal of the contract extensions to the Governor for his consideration in accordance with Public Authorities Law §1009.

 

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

 

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

 

RESOLVED, That the Senior Vice President – Economic Development and Energy Efficiency or his designee be, and hereby is, authorized, subject to approval of the form thereof by the Executive Vice President and General Counsel, to execute any and all documents necessary or desirable to implement the contract extensions with National Grid, New York State Electric and 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 proposed contract extensions be submitted to the Governor for approval, and that the contracts be forwarded to the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee pursuant to the Public Authorities Law §1009; and be it further

 

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

 

RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer and all other officers of the Authority are, and each of them herby 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, certifications and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 


 

d.                    Niagara Power Project – Lewiston Pump Generating

                Plant Life Extension and Modernization Program –

                Installation of Auxiliary Equipment – Contract Award

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award of a two-year contract to Ferguson Electric Construction Co. Inc. of Buffalo, NY (‘Ferguson’), in the amount of $5,608,834, for the installation of auxiliary equipment for the first two unit upgrades, as part of the Life Extension and Modernization (‘LEM’) Program at the Niagara Power Project, Lewiston Pump Generating Plant (‘LPGP’).  

 

BACKGROUND

 

“In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services contracts in excess of $3 million or contracts exceeding a one-year term requires Trustee approval.

 

                “At their June 29, 2010 meeting, the Trustees approved the LPGP Life Extension Program at the estimated cost of $460 million and authorized capital expenditures in the amount of $131 million.  This requested contract award is a part of the previous capital expenditure authorization.

 

“The principal reason for the life extension work at LPGP is the condition and age of the generating equipment, including the original Generator Step-Up Transformers, Motor-Generators, Pump-Turbines, Exciters and Unit Controls, Potheads and High Pressure Fluid-Filled plants.  Failure to maintain LPGP would result in significant loss of peaking and firm capacity from the Niagara Power Project, preventing the Project from being able to meet power contracts with the Authority’s customers.

 

“This contract is for the first two of the twelve units to be upgraded as part of the LPGP LEM program so that staff can incorporate ‘lessons learned’ during the implementation into the design and procurement packages for the remaining ten units.  This approach will mitigate future scope-of-work changes and the associated cost impact.

 

                “The scope-of-work under this contract includes the installation of the following equipment furnished by other vendors under separate contracts: static exciters, generator circuit breakers, cable and unit instrumentation.  The scope-of-work also includes i) furnishing and installation of conduits and cable trays; ii) replacement of the AC and DC distribution systems equipment for the first two units; iii) furnishing the AC and DC distribution systems equipment for the remaining ten units; iv) removal of existing associated cables and conduits; and v) assistance with testing and commissioning of the first two units.

 

DISCUSSION

 

“An advertisement to procure bids was issued and appeared in the New York State Contract Reporter on May 2, 2012.  A single proposal was received on June 19, 2012 from Ferguson.  In addition, Post-Bid Addenda

 No. 1 was issued to clarify the bidder’s proposal; Ferguson’s final prices, indicated below, were received on July 2, 2012. 

 

Bidder

Location

Bid

 

 

 

Ferguson Electric Construction Co. Inc.

Buffalo, NY

$5,608,834

 

                “The proposal was reviewed by an evaluation committee (‘Committee’) with representatives from Procurement, Engineering, Niagara Project and Project Management.  Several clarifications were sent to Ferguson to clarify their proposal and to provide an opportunity to explain how they arrived at their work plan, guaranteed characteristics and pricing.  Ferguson’s responses were acceptable to the Committee.

 

                “In the recent past, Ferguson successfully completed several projects at the Niagara Power Project which includes replacement of the 115 kV oil circuit breakers with SF6 type in the switchyard and the replacement of the first two generator step-up transformers at LPGP.  In addition, Ferguson was awarded a contract in March 2012 to furnish and replace the Isolated Phase Bus at LPGP.    

 

“Ferguson has a broad experience in projects of this magnitude, has demonstrated knowledge of the scope-of-work and is capable of completing this project in a timely manner.  The Committee recommends that a contract for the work described above be awarded to Ferguson whose bid is technically and commercially acceptable.

 

                “The estimated cost of this work is within the authorization of this project which was approved by the Trustees at their June 29, 2010 meeting; this work is included in the 2012 approved Capital Budget.  Future funding will be included in the Capital Budget request for those years.

 

FISCAL INFORMATION

 

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

 

RECOMMENDATION

 

The Senior Vice President and Chief Engineer – Operations Support Services, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Procurement, the Project Manager and the Regional Manager – Western New York recommend that the Trustees approve the award of a two-year contract to Ferguson Electric Construction Co. Inc. of Buffalo, NY, in the amount of $5,608,834, for the installation of auxiliary equipment for the first two unit upgrades as part of the Life Extension and Modernization Program to renovate and modernize the Lewiston Pump Generating Plant.

 

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

 

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a two-year contract to Ferguson Electric Construction Co. Inc. of Buffalo, NY, in the amount of $5,608,834, for the Installation of Auxiliary Equipment for Unit Upgrade as part of the Life Extension and Modernization program to renovate and modernize the Lewiston Pump Generating Plant, as recommended in the foregoing report of the President and Chief Executive Officer;

 

Contractor                                                    Contract Approval

 

Ferguson Electric Construction                      $5,608,834

Co. Inc., Buffalo, NY                                                                          

 

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

 


 

e.                    Niagara Power Project – Lewiston Pump Generating

Plant Life Extension and Modernization Program –

                                HPFF Cable Pressurization Systems – Contract Award

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award of a three-year contract, in the amount of $1,979,230 to MAC Products, Inc. of Kearney, NJ (‘MAC’), for the purchase of replacement High Pressure Fluid-Filled (HPFF) cable pumping plants as part of the Life Extension and Modernization (‘LEM’) Program at the Lewiston Pump Generating Plant (‘LPGP’). 

 

BACKGROUND

 

“In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services contracts exceeding a one-year term requires Trustee approval.

 

                “At their June 29, 2010 meeting, the Trustees approved the LPGP LEM Program at the estimated cost of $460 million and authorized capital expenditures in the amount of $131 million.  This requested contract award is a part of that capital expenditure authorization. 

 

                “The HPFF cable pressurization system is comprised of two independent pumping plants that pressurize six power cables.  Four of the cables are the 230 kV cables associated with Feeders #1 through #4 for the LPGP generator step-up transformers and the remaining two cables are for the 115kV cables associated with autotransformer #2.  The existing 50 year old 115 kV and 230 kV Pipe-Type Cables were evaluated for potential pressurization failure.  Due to deterioration and the unavailability of spare parts, it is deemed prudent to replace and upgrade the HPFF pumping plants based on the latest technologies.

 

The work under this contract includes the design, fabrication, installation, testing and commissioning of two HPFF cable pumping plants.  The first pumping plant is located at the LPGP south end of the Turbine Gallery and is considered the ‘primary’ pumping plant for Feeders #1 through #4.  The second plant is located at the Switchyard Oil Handling Building and is considered the primary pumping plant for Autotransformer #2 and a back-up pumping plant to the primary pumping plant.  The scope-of-work also includes demolition and removal of the existing plants.  The installation of the first plant located at the LPGP and the second plant located in the Oil Handling Building are scheduled to start in October 2013 and June 2014, respectively.

 

DISCUSSION

 

“An advertisement to procure bids was issued and appeared in the New York State Contract Reporter on January 10, 2012.  One proposal was received on March 7, 2012 in response to the advertisement.  In addition, Post bid Addendum No. 1 was issued to clarify the bidder’s proposal.  The bidder’s final prices, indicated below, were received on June 8, 2012. 

 

Bidder                                Location

     Bid

MAC Products, Inc.           Kearney, NJ

$1,979,230

                “The proposal was reviewed by an evaluation committee with representatives from Procurement, Engineering, Niagara Project and Project Management.  Meetings were conducted with the bidder to clarify the proposal and provide an opportunity to explain how they arrived at their work plan, guaranteed characteristics and pricing. 

 

                “MAC did not take any exception to the technical and installation schedule requirements.  MAC had minor commercial exceptions that were resolved.  The company is experienced in installation of HPFF cable pumping plant systems, has demonstrated knowledge of the scope-of-work and has the capability to successfully complete the project.  MAC’s experience, safety record, resources and capabilities are sufficient to perform this work.  They have met all of the requirements of the Bidding Document and have performed satisfactorily on previous Authority projects at the St. Lawrence Facility. 

 

“The estimated cost of this work is within the authorization of this project which was approved by the Trustees at their June 29, 2010 meeting; this work is included in the 2012 approved Capital Budget.  The total cost includes $43,856 for spare parts required and additional technical support that may be necessary.  Future funding will be included in the Capital Budget request for those years.

 

FISCAL INFORMATION

 

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

 

RECOMMENDATION

 

“The Senior Vice President and Chief Engineer – Operations Support Services, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Procurement, the Project Manager and the Regional Manager – Western New York recommend that the Trustees approve the award of a three-year contract in the amount of $1,979,230 to MAC Products, Inc. of Kearney, NJ, for the High Pressure Fluid Filled cable pumping plants replacement as part of the Life Extension and Modernization Program at the Lewiston Pump Generating Plant. 

 

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

 

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a three-year contract in the amount of $1,979,230 to MAC Products, Inc. of Kearney, NJ, for the High Pressure Fluid-Filled cable pumping plants replacement as part of the Life Extension and Modernization Program at the Lewiston Pump Generating Plant, as recommended in the foregoing report of the President and Chief Executive Officer;

 

                                        Contractor                                Contract Approval

 

MAC Products, Inc.

Kearney, New Jersey

 

$1,979,230

 

 

 

 

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

 

 


 

f.                     St. Lawrence/FDR Power Project –

                                Architectural and Engineering Services

                                for New Nature Center – Contract Award

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award of a three-year contract to Stieglitz Snyder Architecture, P.C. of Buffalo, NY (hereinafter ‘Stieglitz’), in the amount of $430,993, for architectural, engineering and design services for a new Nature Center at Robert Moses State Park (‘RMSP’), Massena, St. Lawrence County.

 

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 original Nature Center was lost due to a fire in March 2010.  As part of the Authority’s pledge after the loss, it is proposed that the Nature Center be re-built to provide a safe gateway to barrier-free learning through the provision of indoor/outdoor natural science education for the public, schools and community groups.

 

“The new Nature Center will have exhibits and classroom areas.  A consultant, Kleinschmidt Energy & Water Resource Consultants (hereinafter ‘Kleinschmidt’), was contracted to analyze and evaluate various site options in order to identify a suitable location and requirements for the new Nature Center.  Kleinschmidt’s report identifies a proposed site with conceptual drawings and features for the new building.  It also provides a conceptual design criteria and opinion of probable construction costs that meets the goal of the new RMSP Nature Center.  The proposed location of the new Nature Center, as well as its conceptual features, was also reviewed with the New York State (‘NYS’) Office of Parks Recreation and Historic Preservation and the Friends of the Nature Center.

 

DISCUSSION

 

“The scope-of-work includes architectural and engineering design services, construction drawings and specifications and technical support during construction, testing and commissioning activities.  The services are scheduled to be provided over a three-year period – architect/engineering starting in fall 2012 and building construction and occupancy in fall 2015. 

 

                “The Authority issued an advertisement to procure bids in the New York State Contract Reporter and bid packages were available as of May 10, 2012.  On June 08, 2012, six qualified proposals were received.  The proposal prices are noted below: 

 

Bidder                                                                    Location                                                    Bid Amount

 

Phinney Design Group                                        142 Grand Avenue                                   Non-responsive

                                                                                Saratoga Springs, NY 12866

 

Engineering System, P.C.                                    234 River Ave #14                                    $ 380,500            Patchogue, NY 11772

 

Stieglitz Snyder Architecture                             425 Franklin Street                                   $ 422,493           

                                                                                Buffalo, NY 14202

 

Bernier, Carr and Associates, P.C.                    327 Mullin Street                                      $ 426,600

                                                                                Watertown, NY 13601

                                               


 

Bidder                                                                    Location                                                    Bid Amount

 

C&S Companies                                                   499 Col. Eileen Collins Blvd                    $ 672,100

                                                                                Syracuse, NY 13212

 

Aubertine and Currier Architects                      522 Bradley Street                                    $ 657,071

                                                                                Watertown, NY 13601

               

                “The proposals were reviewed by an evaluation committee comprising staff from the Authority and Kleinschmidt.

 

                “Phinney Design Group was found to be non-responsive to the bidding documents as they excluded the building fire protection system design from their proposal and did not meet other requirements of the bidding documents.

 

“Engineering System submitted one of the lowest cost proposals for the work, but received the lowest overall evaluation score.  It is a three-person firm established in March 2012 with only one employee licensed as a NYS Professional Engineer.  The company does not have a licensed architect or an accredited LEED professional on the team.  They do not have any previous experience with similar nature center projects and their track record shows only three projects in California in 2006 and none in NYS. 

 

“Authority staff recommends an award to the lowest, technically acceptable bidder, Stieglitz.  Stieglitz has extensive experience in projects of this magnitude (over 30 years) and demonstrated good knowledge of the scope-of-work.  Over the years, the company has won numerous awards for the quality of its designs as well as for technological innovations, particularly energy conservation.  Stieglitz is comprised of various licensed professionals including architects, planners, LEED accredited professionals and a core of technical staff, most of who have been working together as a team for almost two decades.  The company’s in-house capabilities will be augmented by other engineering/design professionals including TVGA Consultants, for all civil and site related design; Buffalo Engineering P.C. to handle all of the Mechanical, Electrical, Plumbing and Fire Protection engineering as well as Building Energy Modeling; LF Engineers (M/WBE) for Structural engineering; Singleton Construction Consultants (M/WBE) for cost estimating services; and Hadley Exhibits for the exhibit design components.  Stieglitz has completed, or is currently working on, similar nature projects including the Buffalo Audubon Society Nature Center in Lewiston, New York and the Sustainability Center Tifft Nature Preserve in Buffalo, New York.   Stieglitz is considered to be capable of completing the Authority’s new Nature Center Project successfully and in a timely manner.

 

“Authority staff requested from Stieglitz an optional price for additional site visits in excess of a minimum of ten visits already included as part of the base bid price.  The cost of this option (10 visits at $850 per visit) is $8,500, bringing the total authorized contract amount to $430,993.  The cost for this extra work will only be released to the bidder if the need arises and will not be reflected in the total dollar amount of the Purchase Order. 

 

“Initial funding for consultant services and site preparation totaling, $859,151, has been authorized in the 2011 and 2012 budgets.  An overall Capital Expenditure Authorization Request will be prepared and submitted for Trustee Approval when the Nature Center design is complete and construction bids are received in 2013.  Additional funding for this project in the amount of $1,367,800 has been included in the 2013 Capital Budget. 

 

FISCAL INFORMATION

 

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

 

RECOMMENDATION

 

“The Senior Vice President and Chief Engineer – Operations Support Services, the Vice President – Project Management, the Vice President – Engineering and the Vice President – Procurement recommend that the Trustees approve the award of a multi-year contract to Stieglitz Snyder Architecture of Buffalo, NY, in the amount of $430,993.

 

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

 

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a three-year contract to Stieglitz Snyder Architecture of Buffalo, NY, in the amount of $430,993, for architectural and engineering services for a New Robert Moses State Park Nature Center, as recommended in the foregoing report of the President and Chief Executive Officer;

 

Contractor                                              Contract Approval

 

Stieglitz Snyder Architecture                          $430,993              

                                Buffalo, NY                                                          

 

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

 

 


 

g.                   St. Lawrence/FDR Power Project – Barnhart

Island Bridge – Painting and Rehabilitation –

                                Contract Award                                                        

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve the award of a two-year contract to Atlas Painting & Sheeting Corporation of Amherst, NY (‘Atlas’), in the amount of $10,014,000, for the Painting and Rehabilitation of the St. Lawrence/FDR Power Project’s Barnhart Island Bridge. 

 

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.  In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services, construction, equipment purchase and non-procurement contracts in excess of $3 million also requires the Trustees’ approval.

 

“The Barnhart Island Bridge is a 1,076-foot long, three-span steel through truss bridge, supported on concrete piers and abutments.  The bridge was constructed in 1956 by the Authority as the major link between the mainland and the St. Lawrence/FDR Power Project site.  Since the original construction, the bridge was repainted in 1978 and subsequently rehabilitated in 1997 with new concrete deck, additional steel to reinforce the deck framing, painting and other miscellaneous repairs.

 

“The existing paint system has exceeded its expected design life.  Since 1997, the bridge has undergone periodic maintenance patch painting.  However, this approach is not cost-effective as a long-term solution.  Bridge inspections have noted paint delamination caused by multiple layers of paint, mill scale, severe thermal cycling, age of the original primer and the overall thickness of the paint.  Therefore, it is recommended that the bridge be completely re-painted and rehabilitated to prevent further deterioration.

 

DISCUSSION

 

“The scope-of-work under this painting and rehabilitation contract includes surface preparation and painting, abrasive blasting, containment and disposal of lead-containing paint, replacement of runway rail and refurbishment of the existing maintenance trolley.  It also includes storm water collection and drainage system improvements.  The work will be performed in two phases.  The below-deck steel (substructure) will be painted in 2013 followed by above-deck (superstructure) in 2014.

 

“The Authority issued an advertisement to procure bids in the New York State Contract Reporter and bid packages were available as of April 4, 2012.  On April 30, 2012 proposals were received from five bidders.  The proposal prices are noted below: 

 

                                    Bidder                                                        Location                                        Lump Sum

 

                            Atlas Painting & Sheeting Corp.               Amherst, NY                                       $9,939,000

                            Hercules Painting Co.                                  New Castle, PA                                $14,363,000

                            Tri-State Painting (TSI)                               Tilton, NH                                         $14,491,783

                            AMSTAR of Western NY, Inc.                 Cheektowaga, NY                            $15,660,700

                            ABHE & Svoboda, Inc.                               Prior Lake, MN                 $27,479,680

                   

                “The Authority recommends an award to the lowest-priced and technically qualified bidder, Atlas.  Atlas is a leading provider of bridge painting services with extensive experience in projects of this magnitude.  They have demonstrated knowledge of the scope-of-work and are capable of completing this project in a timely manner.  

 

“The Authority requested an optional price from Atlas for the removal of up to 750 corroded rivets and replacement with high strength bolts.  The cost of this option is $75,000, bringing the total authorized contract amount to $10,014,000.  The cost for this extra work will only be released to the bidder if the need arises and will not be reflected in the total dollar amount of the Purchase Order. 

 

“Funding in the amount of $3,214,000 has been included in the 2013 O&M Budget.  Future funding will be included in the O&M Budget requests for that year.  Since this is a joint work project, Ontario Power Generation (‘OPG’) will reimburse the Authority for 50% of the cost of the project. 

 

FISCAL INFORMATION

 

“Payment associated with this project will be made from the Authority’s Operation Fund.  OPG will reimburse Authority for 50% of the cost of the project. 

 

RECOMMENDATION

 

“The Senior Vice President and Chief Engineer – Operations Support Services, the Vice President – Project Management, the Vice President – Engineering, the Vice President – Procurement, the Project Manager and the Regional Manager – Northern New York recommend that the Trustees approve the award of a multi-year contract to Atlas Painting & Sheeting Corporation of Amherst, NY, in the amount of $10,014,000.

 

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

 

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a two-year contract to Atlas Painting & Sheeting Corporation of Amherst, NY, in the amount of $10,014,000, for the Painting and Rehabilitation of the St. Lawrence/FDR Power Project’s Barnhart Island Bridge, as recommended in the foregoing report of the President and Chief Executive Officer;

 

                                Contractor                                                    Contract Approval

               

                Atlas Painting and Sheeting                             $10,014,000

                                Corporation, Amherst, NY                               

 

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

 

 


 

h.                   Lease of Office Space – Clarence D. Rappleyea

                                Building – SKCG Group                                           

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to authorize the execution of a lease for approximately 19,372 square feet of office space on the fourteenth floor of the Clarence D. Rappleyea Building (‘Rappleyea Building’), White Plains, New York by the Authority, as landlord, to Assured SKCG, Inc. (‘SKCG’), as tenant.  The proposed lease is for a term of ten years, ten months, at an average annual base rent of approximately $22.00 per square-foot, as more specifically described in Exhibit ‘A’ attached hereto.

 

BACKGROUND

 

                “The Authority acquired the Clarence D. Rappleyea Building by deed dated July 10, 1991.  This is a commercial office building with the majority of the existing space occupied by Authority personnel.  However, about 40% of the building is occupied by private tenants.  At their meeting of March 20, 2003, the Authority’s Trustees authorized entering into a lease with SKCG’s predecessor (SKCG Group, Inc.) for approximately 19,000 rentable square feet located on the 14th floor of the Building.  This lease expires January 31, 2014.

 

DISCUSSION

 

                “SKCG provides business and personal insurance services.  Although SKCG’s lease with the Authority for its space on the 14th floor of the Building does not expire until 2014, SKCG wishes to renew and extend its lease at this time.  Preliminary negotiations on this space have resulted in the basic lease terms set forth in Exhibit ‘A.’  Generally, this lease is for a term of ten years and ten months at an average annual rental of approximately $427,673.  A review of the local market conditions indicate that this transaction compares favorably with other space being offered in downtown White Plains.

 

FISCAL INFORMATION

 

                “Payment for standard brokerage commissions and tenant improvements as set forth in Exhibit ‘A’ will be made from the Operating Fund.

 

RECOMMENDATION

 

                “The Senior Vice President – Corporate Support Services, the Director – Corporate Support Services and the Director – Real Estate recommend that the Trustees approve the execution of a lease with Assured SKCG, Inc. for office space in the Clarence D. Rappleyea Building on terms substantially in accordance with the foregoing and with Exhibit ‘A’ attached hereto.

 

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

 

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

 

RESOLVED, that the President and Chief Executive Officer, the Senior Vice President – Corporate Support Services or the Director – Real Estate be, and hereby is, authorized to enter into a Lease Agreement between the Authority and Assured SKCG, Inc., on substantially the terms set forth in the foregoing report of the President and Chief Executive Officer and subject to the approval of the documents by the Executive Vice President and General Counsel, or her designee; and be it further

 

RESOLVED, That the Senior Vice President – Corporate Support Services or the Director – Real Estate be, and hereby is, authorized on behalf of the Authority to execute any and all other agreements, papers or instruments that may be deemed necessary or desirable to carry out the foregoing, subject to the approval by the Executive Vice President and General Counsel; and be it further

 

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

 

 

 


 

3.                   Discussion Agenda:

 

a.                    Report of the President and Chief Executive Officer

 

Corporate Performance Measures

President Gil Quiniones provided an update of the Authority’s performance as reflected in the corporate performance matrix developed by Authority staff and approved by the Trustees.  He said, based on the performance metrics, the Authority is performing well.  Transmission reliability was below the monthly target due to outages at Massena Substation and Clark Energy Center.  These outages, however, did not result in any negative impacts on the state’s electric system.   President Quiniones said the Authority will be able to meet its milestones by the end of the year.

Summer 2012

President Quiniones said that the New York Independent System Operator (“NYISO”) forecasted that the summer peak demand would reach approximately 33,000 MW.  However, despite the heat waves experienced to date, the Authority’s generation and transmission systems are performing well.  In response to a question from Chairman Koelmel, President Quiniones said the 33,000 MW summer peak load is based on the prediction set by the NYISO and, in terms of reliability, the Authority has sufficient capacity, including imports from New Jersey, New England and the mid-Atlantic, to meet the state’s summer peak demand.

Energy Efficiency

President Quiniones said that the Authority is the lead agency, on behalf of the state,  to implement the Governor’s energy efficiency initiative, branded “Build Smart New York,” to retrofit state buildings in order to reduce energy consumption by 20% over the next seven years.   A Web site and database of public buildings is currently being developed.  President Quiniones said the initiative is being coordinated by Messrs. James Pasquale and Paul Belnick and the Trustees will be provided periodic updates as the work progresses.   In response to a question from Trustee Foster, President Quiniones said the Authority will provide a turnkey service to the state.  The Authority will commission its energy efficiency providers to work with the state in upgrading its facilities and also provide low-cost financing for the projects.  In response to further question from Trustee Foster, President Quiniones said the Authority receives a fee to recover its costs.

In response to a question from Chairman Koelmel, President Quiniones said, going forward, the Authority will be working to achieve an orderly succession plan since 30 – 40 percent of its employees are eligible to retire in the next five years.

 


 

b.                    Report of the Chief Operating Officer

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

Performance Summary

 

Construction Update

 

St. Lawrence/FDR Power Project Life Extension and Modernization Program:

Niagara Power Project – Unit 2 Standardization:

Lewiston Pumped-Generation Plant Life Extension and Modernization Program:

 

Organizational Review – Succession Planning

 

                As a follow-up to his last report, Mr. Welz outlined further organizational changes in the Operations Business Unit as it relates to succession planning and the imminent retirement of senior staff.


 

c.                    Report of the Chief Financial Officer

 

                Mr. Donald Russak provided highlights of the financial report to the Trustees.

Net Income

Net income through June was $152.3 million, prior to the recognition of the voluntary contribution to New York State.  Results for the period, including the voluntary contributions, were $77.3 million compared to a budget of $38.7 million, resulting in a $38.6 million favorable variance.  This variance is primarily due to higher net margins on sales, timing differences on expenditures and lower interest costs due to lower rates.

Year-End Projection

Developing trends indicate year-end net income for 2012 is expected to under-run by about $8 million relative to the $167 million budget. These trends include:

·         Energy Prices – A mild winter and low natural gas prices continue to depress market prices for energy, which are presently forecasted to be approximately 30% lower than budget.

·         Capacity Prices – An increase in market-based capacity prices are being observed as a result of an increase in reserve requirements and the announced “moth-balling” of several generating stations throughout New York in response to lower prices and lower demand.

·         Hydro Flows – Net generation at the Niagara and St. Lawrence hydroelectric facilities, which was running above budget during the early part of the year, is now expected to under-run for the latter part of the year due to several months in succession of below average precipitation over the Great Lakes.

·          O&M and Other Expenses – O&M, under-running by $12 million year-to-date due to timing differences, is expected to finish the year near target.  The remainder of the voluntary contribution to the state, currently $10 million under budget, is expected to be considered for payment at a later date and therefore the full amount of $85 million is included in the year-end projections.

At currently projected levels, business requirements for cash flow (debt service coverage) and liquidity are expected to be met.

Responding to a question from Chairman Koelmel, Mr. Russak said the year-end projections as outlined in his report and the Authority’s performance matrix are on target.

Responding to a question from Trustee Wayne LeChase, Mr. Russak said the International Joint Commission is exploring new regulations but they are not expected to have significant effects on the operations of the Authority’s St. Lawrence facility.  Staff will, however, be monitoring the proposals.  In response to further question from Trustee LeChase, Mr. Russak said the Commission has not yet made a decision on the new proposals.

In response to a question from Trustee Eugene Nicandri, Mr. Russak said although the capacity market prices have been going up, it has only a modest effect on the Authority’s business since only a small portion of the Authority’s power and energy, primarily from the Blenheim-Gilboa facility, is sold in the wholesale marketplace. 

 


 

4.                   Annual Review of Hydropower Allocation Job Compliance

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“Staff has conducted its annual review of hydropower allocation job compliance covering the reporting period from January through December 2011.  The Trustees are requested to not take action regarding 18 non-compliant allocations held by companies reporting employment at or above 80% of job commitment levels.  The Trustees are also requested to defer action regarding 9 non-compliant allocations held by companies reporting employment below 80% of job commitment levels until further research can be conducted.

 

BACKGROUND

                                                                                            

“Each year staff performs a review of all in-service hydropower allocation contracts for compliance with agreed-upon job commitment levels.  The contracts contain a customer commitment to retain and add a specific number of jobs within a specified timeframe.  For compliance evaluation, customers are required by contract to report the monthly employment numbers for calendar year 2011 by February 29, 2012.    

 

If the reported twelve-month average employment level is below the compliance threshold of 90% of the job commitment (or below 80% of the 2-year average in the case of ‘vintage’ customers, i.e., those having allocations awarded prior to 1988), the Authority may reduce that customer’s power allocation proportionately. 

 

                This year’s compliance review also incorporates information from a job reporting audit performed by the auditing firm Dannible & McKee (‘D&M’).  Each year an independent auditor randomly selects customers to review the accuracy of their annual employment filing.  This year D&M’s audit consisted of 35 randomly selected customers of which 12 are among the non-compliant group.  These 12 customers showed varying degrees of accuracy in their job reporting, however, each remained non-compliant based on the audited number.  Similarly, compliant allocations that were in the job reporting audit sample remained compliant, measured against the audited number.  The auditors reported that in many cases, the discrepancies are attributed to the methodology used in the audit differing to some degree with the companies’ method.  All 35 customers will receive feedback discussing the results of the job reporting audit, including guidance for future submittals.  For this annual compliance review, results are considered using the audited number instead of the company reported number, as noted herein.

 

DISCUSSION    

 

In 2011, the Authority had 110 hydropower customers holding 195 Replacement Power (‘RP’), Expansion Power (‘EP’), and Preservation Power (‘PP’) allocation contracts.  Of these, a total of 105 customers held 186 contracts that required the customers to report job levels for 2011.  The 186 contracts and allocation commitments reviewed by staff represent total power allocations of 1,061 MW and total employment commitments of 29,950 jobs.  In the aggregate, these customers reported actual employment of 32,965 jobs.  This represents 110% of the total job commitment for hydropower customers reporting in 2011.   

 

For the year 2011, 138 of the 186 contracts reviewed were found to be compliant.  These compliant contracts are held by 88 companies.  Additionally, there were 19 companies with 20 contracts that, although reporting employment below their total commitment, contractually have more time to attain the commitment levels.  These companies, included for information purposes, have newer allocations that are still within the timeframe allowed per contract to create the new jobs committed to when the allocations were awarded.  These 20 contracts, together with the 138 compliant contracts, comprise 85% of the allocations reviewed and are listed in Exhibit ‘4-A.’

 

Nevertheless, 22 customers with 28 contracts (or 21% of the 105 companies with one or more allocations reviewed) reported actual 2011 job levels below the compliance threshold.  One of these non-compliant customers, Malyn Industrial Ceramics, reported meeting 77% of its job commitment but terminated its 150 kW EP allocation effective May 1, 2012.

 

The main cause of the under-performance of the remaining 21 customers with 27 non-compliant allocations was the lingering effects of the 2009 recession and continued lack of growth of the national and global economies.  During 2011, many customers were again faced with the difficulty of meeting their job commitments while trying to cope with the lackluster business climate.  Although some industries and companies experienced improving conditions in 2011, the businesses that did not meet job commitment levels cited continued challenges from the 2009 recession, including the loss of business stemming from decreased sales and increased costs for raw materials.  As evidenced by the persistently high national unemployment rate, non-compliant customers have struggled to increase employment during this extended period of economic malaise.  

 

The non-compliant companies have expressed varying degrees of optimism for future job growth while being resigned to the uncertain prospect of a national and/or global economic turn-around.  Understanding that, for many of these companies, reducing the low-cost power allocation will only increase business challenges and potentially hasten job losses, staff is recommending that reductions in allocation amounts are not made to those companies reporting at or above 80% of job commitment levels.  These 15 companies are within reasonable distance of meeting the compliance threshold with even a modest economic turn-around, and are detailed in Section I and listed in Exhibit ‘4-B.’  It is important to note that the Trustees approved job commitment reductions for many of these allocations, effective commencing July 2013, as part of the Western New York (‘WNY’) contract extension initiative undertaken in 2010, and as noted herein. 

 

Staff has found that most of the non-compliant companies have consistently been missing their job number over several years.  Job commitments set at the time of the allocation award, in many cases more than a decade ago, may no longer be realistic for changing industry business models.  In the meantime, to better understand what is happening within the businesses and various industries, staff is recommending the Trustees defer action regarding the non-compliant allocations with reported 2011 employment below 80% of job commitment levels until further research can be conducted.  These 7 companies and their non-compliant allocations are detailed in Section II and listed in Exhibit ‘4-C.’

 

Empire State Development Corporation (‘ESD’) has offered the Authority its economic development specialists to visit these companies for further research.  ESD, in consultation with the Authority, will perform an outreach and develop a plan for managing the individual business’ cases in terms of, not only its hydropower incentive, but any other state or local economic incentives.  This holistic review may determine, for example, more appropriate employment levels per new industry standards, areas of further support and availability of such to enhance a businesses’ future viability in WNY, or whether a pull-back of hydropower, and/or state and local resources is appropriate.  One potential outcome would be a recommendation to remove these companies from the recurring cycle of non-compliance by effectively right-sizing commitments for their current and/or future business models.  ESD will study industry and individual company employment trends over many years, as well as bring to bear its expert knowledge in economic development best practices.

 

To allow time for an in-depth ESD review, staff is requesting that the Trustees defer compliance action on the 9 allocations listed in Exhibit ‘4-C’ until the resultant findings can be provided.  Staff will present ESD’s findings to the Trustees at a future meeting and/or provide a report detailing the results and potential recommended actions.

 

 

Section I

 

Non-Compliant Allocations to Continue With No Change

 

Aurubis Buffalo, Inc., (formerly Luvata Buffalo), Erie County

Allocation:                            250 kW of RP

Jobs Commitment:                831 jobs

 

Background:  Aurubis Buffalo Inc. (‘Aurubis’), formerly known as Luvata Buffalo, manufactures copper and brass sheets and rolls.  For the past year, the company averaged 634 jobs, i.e., 76% of its contractual commitment.  This is an increase (5 jobs) from the previous years’ average.  Aurubis has two other allocations that are meeting its employment commitments.  Business improved during 2011 and the trend is positive.  The company was selected for the year 2011 external job audit and was found to have under-reported its employment level by 8 jobs.  Using the audited employment level of 642 jobs, the company achieved 77% of its commitment.  Although reporting below 80%, this allocation is compliant when considered against the reduced July 2013 commitment of 575 jobs that was approved by the Trustees as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

Bernzomatic – Worthington Cylinder, Medina, Orleans County

Allocation:                            600 kW of Expansion Power (‘EP’)

Jobs Commitment:              210 jobs

 

Background:  Bernzomatic – Worthington Cylinder (‘Bernzomatic’) manufactures handheld torches and components at its Medina plant.  In 2011, Bernzomatic reported an average of 186 jobs, i.e., 89% of its commitment.  The company was selected for the year 2011 external job audit and was found to have over-reported its employment level by 7 jobs.  Using the audited employment level of 179 jobs, the company achieved 85% of its commitment.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

C & S Wholesale Grocers, Inc., Lancaster, Erie County

Allocation:                            550 kW of EP

Jobs Commitment:              682 jobs

 

Background:  C & S Wholesale Grocers, Inc. (‘CSWG’) provides warehousing and distribution services to supermarket chains, independent grocers and military facilities across the nation.  In 2011, CSWG reported an average of 559 jobs, or 82% of its contractual commitment.  The company was selected for the year 2011 external job audit and was found to have over-reported its employment level by 11 jobs.  Using the audited employment level of 548 jobs, the company achieved 80% of its commitment.  The company is below its job commitment due to the continued effects of, and slow recovery from the 2009 recession.  The Trustees previously approved a reduction to the company’s job commitment to 560 jobs commencing July 2013 as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

CertainTeed Corporation, Buffalo, Erie County  

Allocation:                            3,100 kW of EP  

Jobs Commitment:              157 jobs

 

Background:  CertainTeed Corporation (‘CertainTeed’), a wholly-owned subsidiary of the Saint–Gobain company, is a vinyl fence, deck and railing manufacturer.  In 2011, Certain Teed reported an average 113 jobs, or 72% of its contractual commitment.  The company was selected for the year 2011 external job audit and was found to have over-reported its employment level by 7 jobs.  Using the audited employment level of 106 jobs, the company achieved 68% of its commitment.  The company was directly impacted by the challenging economic conditions of the building industry, experiencing a significant reduction in demand for its products over the last several years.  The company continues investing in research and development and capital equipment at the Buffalo facility and has increased employment in 2012 to 148 jobs as sales volume has increased.  Although reporting below 80%, this allocation is compliant when considered against the reduced July 2013 commitment of 113 jobs that was approved by the Trustees as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

Ford Motor Company, Buffalo, Erie County

Allocations:                          4,300 kW and 2,900 kW of EP

Jobs Commitments:            950 jobs

 

Background: Ford Motor Company (‘Ford’) opened its Buffalo Stamping Plant in 1950 where it manufactures doors, floor pans, quarter panels and some inner-body components.  The components then go to other Ford assembly plants and distribution centers throughout the U.S and Canada.  In 2011, Ford averaged 773 jobs, or 81% of its contractual commitment.  This is a significant decrease from the previous year’s average of 840 jobs.  The automotive industry has undergone a dramatic transformation over the past several years.  The downturn in the economy forced significant changes in the way Ford does business, which has adversely affected employment levels at the Buffalo plant.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

Greatbatch, Inc., Clarence / Alden, Erie County

Allocation:                            1,500 kW of EP  

Jobs Commitment:              368 jobs

 

Background: Greatbatch is a leading developer and manufacturer of battery and precision engineered components used in medical devices as well as for commercial applications.  For the past year, Greatbatch reported an average of 305 jobs, i.e., 83% of its contractual commitment.  This is a decrease from the previous year of 317 averaged jobs.  The company was selected for the year 2011 external job audit and was found to have over-reported its employment level by one job.  Using the audited employment level of 304 jobs, the company still achieved 83% of its commitment.  The economic climate continued to be challenging in 2011, however, the company was able to increase employment levels by 15 jobs during the first quarter of 2012.  The Trustees previously approved a reduction to its job commitment to 333 jobs commencing July 2013 as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

Ingram Micro Corporation, Williamsville, Erie County

Allocation:                            900 kW of EP

Jobs Commitment:              1,525 jobs

 

Background:  Ingram Micro Corporation (‘Ingram’) is a leading wholesale distributor of microcomputer products worldwide, including hardware, software and networking equipment.  For the past year, Ingram reported an average  of 1,336 jobs, i.e., 88% of its job commitment.  The company anticipates that employment will continue to trend upward during 2012.  The company was selected for the year 2011 external job audit and was found to have over-reported its employment level by 78 jobs.  Using the audited employment level of 1,258 jobs, the company achieved 82% of its commitment.  Ingram stated that the company continues to invest in its state-of-the-art facility to remain competitive.  The Trustees previously approved a reduction to its job commitment to 1,293 jobs, commencing July 2013, as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

International Imaging Materials, Inc., Amherst, Erie County

Allocations:                          1,000 kW of EP and 250 kW of RP

Jobs Commitments:            499 jobs and 393 jobs, respectively

 

Background:  International Imaging Materials, Inc. (‘International Imaging’) manufactures thermal transfer ribbons.  For the past year, International Imaging reported an average of 337 jobs, i.e., 68% and 86% of its contractual commitments, respectively.  This is an increase from the previous year’s average of 326 jobs.  The company was selected for the year 2011 external job audit and was found to have over-reported its employment level by 6 jobs.  Using the audited employment level of 331 jobs, the company achieved 66% and 84% of its commitment.  The company has been able to add additional employees in early 2012 and is cautiously optimistic about this year’s growth.  Although the EP allocation is below 80% of its job commitment, it is compliant when considered against the reduced July 2013 commitment of 310 jobs that was approved by the Trustees as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 


 

Lockheed Martin, Niagara Falls, Niagara County

Allocation:                             250 kW of RP

Jobs Commitment:              45 jobs

 

Background:  Lockheed Martin (‘Lockheed’) manufactures gravity gradiometer technology for the U. S. Navy and commercial use.  For the past year, Lockheed averaged 37 jobs, i.e., 83% of its contractual commitment and a slight increase from the previous year.  Due to the state of the economy and restrictions on defense spending, the Lockheed Niagara Falls facility did not experience growth in 2011.  The company managed to maintain about the same employment levels as the previous year and anticipates the same job levels throughout 2012.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

Niagara LaSalle Corporation, Buffalo, Erie County

Allocation:                            700 kW and 700 kW of RP respectively

Jobs Commitment:              164 jobs and 92 jobs respectively

 

Background:  Niagara LaSalle Corporation (‘Niagara LaSalle’) manufactures cold-finished and thermal-treated steel bars.  Niagara LaSalle averaged 75 jobs, i.e., 46% and 82% of its contractual commitments, respectively.  This is an average increase of two jobs from the previous year.  The Buffalo facility was not immune to corporate-wide staffing reductions at all of its facilities over the last several years.  Conditions stabilized and improved throughout 2011, however, employment increases are tied directly to an improving economy.  The company is optimistic that sales volume and employment levels will increase in the near future.

 

Recommendation:  Staff recommends that the Trustees take no action at this time regarding Niagara LaSalle’s 700 kW RP allocation with an employment commitment of 92 jobs.

 

PEMCO – Precision Electro Minerals Co., Inc., Niagara Falls, Niagara County

Allocation:                            800 kW of RP

Jobs Commitment:              22 jobs

 

Background:  PEMCO – Precision Electro Minerals Co., Inc. (‘PEMCO’) makes and sells fused silica for use in the foundry and refractory industry.  For the past year, PEMCO averaged 18 jobs, i.e., 81% of its contractual commitment.  During the second quarter of 2011 the company reached a headcount of 22 jobs; however, due to fluctuating demand of the solar energy business, PEMCO was later forced to reduce employment.  The company stated that in 2012 it is positioned for growth when the solar industry restarts its upward trajectory.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

Rosina Food Products, Inc., Cheektowaga, Erie County

Allocation:                            200 kW of EP

Jobs Commitment:              270 jobs

 

Background:  Rosina Food Products Inc., (‘Rosina Food’) manufactures food products that are distributed nationally from its production facility in Buffalo.   For the past year, Rosina Food averaged 219 jobs, or 81% of its contractual commitment.  The company’s overall sales volume declined in 2011, due to the ‘soft’ national economy, increased beef and pork prices, and other competitive pressures.  Rosina has two other allocations that are meeting commitment levels.  The Trustees previously approved a reduction to its job commitment to 235 jobs commencing July 2013 as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 


 

The Carriage House Companies - Dunkirk Facility, Dunkirk, Chautauqua County

Allocation:                            500 kW of EP

Jobs Commitment:              199 jobs

 

Background:  The Carriage House Companies (‘Carriage House/Lakeside’) is a storage facility for both raw materials and finished products associated with syrups.  For the past year, the company reported an average of 169 jobs, or 85% of its contractual commitment.  The company operates a sister facility in nearby Fredonia which also has a hydropower allocation.  Taken together, the company’s commitment is 639 jobs and actual jobs reported for both were 643 jobs for 2011, representing a combined average of 101%.   It is important to note that the company was selected for the year 2011 external job audit and was found to have under-reported its employment level by one job, thereby still achieving 85% of its commitment using the audited job number.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

Tulip Corporation,              Niagara Falls, Niagara County

Allocations:                          300 kW of EP and 1,200 kW of RP

Jobs Commitments:            110 jobs and 122 jobs respectively

 

Background:  Tulip Corporation (‘Tulip’), an injection-molding company, recycles rubber and plastic and manufactures battery cases for the major battery manufacturers.   For the past year, Tulip reported an average of 92 jobs, or 84% of its EP allocation commitment and 75% of its RP allocation.  The RP allocation is a ‘vintage’ contract, with an 80% ratio threshold.  This represents an increase of 16 jobs from the previous year.  The company was selected for the year 2011 external job audit and was found to have over-reported its employment level by 5 jobs.  Using the audited employment level of 87 jobs, the company achieved 79% of its EP commitment and 71% of its RP commitment.  Tulip stated that continued hydropower availability is vital to its recovery effort.  During the last quarter of 2011, the job count was trending up, averaging 97 jobs.  Although reporting below 80%, Tulip’s allocations are compliant when considered against the reduced July 2013 commitment of 70 jobs that was approved by the Trustees as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

Washington Mills Electro Minerals Corp., Niagara Falls, Niagara County

Allocation:                            9,700 kW of RP

Jobs Commitment:              171 jobs

 

Background:  Washington Mills Electro Minerals Corp. (‘Washington Mills) manufactures abrasive grains for sandpaper and grinding wheels.  For the past year, Washington Mills reported an average of 104 jobs, i.e., 61% of its commitment.  This is a slight decrease from the previous year.  The company was selected for the year 2011 external job audit and was found to have under-reported its employment level by 7 jobs.  Using the audited employment level of 111 jobs, the company achieved 65% of its commitment.  Market conditions in most of the company’s businesses have been unfavorable, affecting its workforce.  The company is experiencing a slow recovery in sales volume, but remains hopeful sales will turn around with the economy, leading to increased hiring.  Although reporting below 80%, the allocation is compliant when considered against the reduced July 2013 commitment of 107 jobs that was approved by the Trustees as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees take no action at this time.

 

 


 

Section II

 

Non-Compliant Allocations Recommended for ESD Review

 

 

Buffalo Newspress Inc., Buffalo, Erie County

Allocation:                            200 kW of EP

Jobs Commitment:              149 jobs

 

Background:  Buffalo Newspress Inc. (‘Buffalo Newspress’), founded in 1979, prints advertising inserts, brochures and weekly newspapers.  For the past year, Buffalo Newspress reported an average of 111 jobs, which is 74% of its contractual commitment and down two jobs from the previous years’ average.   The company was selected for the year 2011 external job audit and was found to have under-reported its employment level by 4 jobs.  Using the audited employment level of 115 jobs, the company achieved 77% of its commitment.  Buffalo Newspress saw improved sales volume as business stabilized and began to turn around, finishing the year up nearly 10% over its low point of 2009.  The company has added 14 jobs to its 2011 average, thus far, in 2012, with a continued positive outlook for the remainder of the year. 

 

Recommendation:  Staff recommends that the Trustees defer compliance action and enlist ESD for further review of this company.

 

Coyne Textile Services, Buffalo, Erie County

Allocation:                            350 kW of EP  

Jobs Commitment:              93 jobs

 

Background:  Coyne Textile Services, (‘CTS’) is a family-owned business that provides textiles rental products (work uniforms, shop floor mats, etc.) and laundering services.  For the past year, CTS reported an average of 41.6 jobs, or 44% of its contractual commitment.  It is important to note the company was selected for the year 2011 external job audit and was found to have under-reported its employment level by 3 jobs.  Using the audited employment level of 44 jobs, the company achieved 47% of its commitment.  CTS was unable to increase its headcount last year, citing the difficult economy and decline in its customer base.  The company completed a growth and training plan, which certified workers at its Buffalo location to be more attractive to food-based customers from restaurant, chain store and food processing plants.  The Trustees previously approved a reduction to its job commitment to 52 jobs, commencing July 2013, as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees defer compliance action and enlist ESD for further review of this company.

 

Niagara Ceramics Corporation, Buffalo, Erie County

Allocations:  850 kW of RP & 250 kW of EP

Jobs Commitments:            190 jobs

 

Background:  Niagara Ceramics Corporation (‘Niagara Ceramics’), founded in 2003, produces dinnerware.  For the past year, Niagara Ceramics reported an average of 94 jobs, i.e., 49% of its contractual commitmentsThe company was selected for the year 2011 external job audit and was found to have over-reported its employment level by 3 jobs.  Using the audited employment level of 91 jobs, the company achieved 48% of its commitment.  The company continues to struggle in 2012 due to losses from a competitive import market which have resulted in a slowdown in its incoming order volume.  The company is currently working with two major restaurant chains to secure more business.  The Trustees previously approved a reduction to its job commitment to 140 jobs, commencing July 2013, as part of the WNY contract extension initiative.

 

Recommendation:  Staff recommends that the Trustees defer compliance action and enlist ESD for further review of this company.

 


 

Niagara LaSalle Corporation, Buffalo, Erie County

Allocation:                            700 kW and 700 kW of RP respectively

Jobs Commitment:              164 jobs and 92 jobs respectively

 

Background:  Niagara LaSalle Corporation (‘Niagara LaSalle’) manufactures cold-finished and thermal-treated steel bars.  Niagara LaSalle averaged 75 jobs, i.e., 46% and 82% of its contractual commitments, respectively.  This is an average increase of 2 jobs from the previous year.  The Buffalo facility was not immune to corporate-wide staffing reductions at all of its facilities over the last several years.  Conditions stabilized and improved throughout 2011, however, employment increases are tied directly to an improving economy.  The company is optimistic that sales volume and employment levels will increase in the near future.

 

Recommendation:  Staff recommends that the Trustees defer compliance action regarding Niagara LaSalle’s 700 kW RP allocation with an employment commitment of 164 jobs and enlist ESD for further review of this company.

 

Nuttall Gear Company, Niagara Falls, Niagara County

Allocation:                            350 kW of EP

Jobs Commitment:              135 jobs

 

Background:  Nuttall Gear Company (‘Nuttall’) manufactures enclosed gear drives for industrial, commercial, transportation and utility applications.  For the past year, Nuttall averaged 95 jobs, or 70% of its contractual commitment.  This is a slight increase from the previous year.  The company was forced to operate with fewer employees in 2011 due to continuing soft economic conditions.  Nuttall has added one employee to its headcount thus far, in 2012. 

 

Recommendation:  Staff recommends that the Trustees defer compliance action and enlist ESD for further review of this company.

 

RubberForm Recycled Products, LLC, Lockport, Niagara County  

Allocation:                            500 kW of EP

Jobs Commitment:              30 jobs

 

Background:  RubberForm Recycled Products, LLC (‘RubberForm’) is a start-up company manufacturing products made from 100% New York recycled crumb rubber, such as traffic sign bases, parking lot wheel stops, speed bumps, dock bumpers, and various other products.   For the past year, RubberForm averaged 14 jobs, i.e. 47% of its contractual commitment.  This is an increase from the previous year of 5 jobs on average. 

 

Recommendation:  Staff recommends that the Trustees defer compliance action and enlist ESD for further review of this company.

 

TAM Ceramics Group of New York, LLC, Niagara Falls, Niagara County

Allocations:                          7,000 kW of RP & 500 kW of EP

Jobs Commitments:            100 jobs

 

Background:  TAM Ceramics Group of New York, LLC (‘TAM’) is a supplier of dielectric powder to the passive electronic component industry and zirconia-based ceramic powders.  For the past year, TAM averaged 57 jobs, i.e. 57% of its job commitment.  These two allocations are ‘vintage’ contracts with an 80% job ratio based on a 2-year average.  In 2011, the company developed several new products that will result in expanding its business.  The company anticipates adding 20 to 30 jobs to this facility and it is optimistic that with continued investments and projected sales growth over the next year, it will be able to meet its job commitment levels.

 

Recommendation:  Staff recommends that the Trustees defer compliance action and enlist ESD for further review of this company.

 

 


 

                Mr. Michael Huvane presented highlights of staff’s recommendation to the Trustees.  Responding to a question from Trustee Jonathan Foster, Mr. Huvane said after the Board’s approval of staff’s recommendations, Empire State Development Corporation (“ESD”), which has expertise in economic development, and Authority staff, will meet with the seven companies that are below 80% of their job commitment levels.  A determination will then be made as to what action should be taken with regards to the contracts with these non-compliant companies.  In response to a question from Chairman Koelmel, Mr. Huvane said most of the Authority’s contracts have a 90% threshold for meeting job commitment levels; therefore, staff’s recommendation for no action regarding companies within 80% of their job commitment levels is reasonable, taking into account the recession and economic conditions.  He said 22 companies reported job commitment levels within the 80 – 90 % threshold.  Responding to further question from Chairman Koelmel, Mr. Pasquale said contracts for the businesses that reported job commitment levels below 80% date back to the 1980s; so staff may need to refresh their job commitment levels – set appropriate job levels or adjust the allocations – bearing in mind that if the Authority take away the hydropower the company could go out of business.  He continued that, following the Board’s approval of staff’s recommendations and discussions with the ESD, staff will report the findings and recommendations to the Board.  

Trustee Flynn recused himself from the discussions and any actions taken as it relates to the following companies: API Heat Transfer, Inc., Ceres Crystal Industries Inc., Citigroup, Inc., Globe Metallurgical Inc., Globe Specialty Metals Inc., General Mills, General Motors Corporation, Goodyear Dunlop Tires N. America Ltd., Honeywell International, Moog, Inc.,  North American Hoganas, Olin Corporation Chlor-Alkali Products, Praxair, Inc., RHI Monofrax, Ltd., Saint Gobain – Boron Nitride Division, Saint Gobain – Structural Ceramics, Saint Gobain Abrasives Company, Western New York Energy, LLC, CertainTeed Corporation, Ford Motor Company and RubberForm Recycled Products.

 


 

5.                   Allocations of Expansion Power      

 

The President and Chief Executive Officer submitted the following report:

               

SUMMARY

 

                “The Trustees are requested to approve allocations of 2,000 kW and 130 kW of Expansion Power (“EP”) respectively, to Blackrock, Inc. (“Blackrock”) and Graphic Controls Acquisition Corporation (“Graphic Controls”) as described herein and in Exhibit ‘5-A.’  The allocations of hydropower will support capital expansion of $38.26 million and the creation of 50 jobs in Western New York.

 

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 megawatts (‘MW’) of firm hydroelectric power as EP and up to 445 MW of Replacement Power (‘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. 

 

“Each application for an allocation of EP or RP must be evaluated under criteria that include, but need not be limited to, those set forth in Public Authorities Law Section 1005(13) (a), which sets forth general eligibility requirements.

 

“Among the factors to be considered when evaluating a request for an allocation of hydropower are the number of jobs created as a result of the allocation; the business’ long-term commitment to the region as evidenced by the current and/or planned capital investment in the business’ facilities in the region; the ratio of the number of jobs to be created to the amount of power requested; the types of jobs created, as measured by wage and benefit levels, security and stability of employment and the type and cost of buildings, equipment and facilities to be constructed, enlarged or installed.

 

“The Authority works closely with business associations, local distribution companies and economic development entities to garner support for the projects to be recommended for allocations of Authority hydropower.  Discussions routinely occur with National Grid, Empire State Development Corporation (‘ESD’), the Buffalo Niagara Enterprise (‘BNE’), Niagara County Center for Economic Development (‘NCCED’) and Erie County Industrial Development Agency (‘ECIDA’) to coordinate other economic development incentives that may help bring projects to New York State (‘NYS’).  Staff confers with these entities to help maximize the value of hydropower to improve the economy of Western New York and the State of New York.

 

DISCUSSION

 

                “At this time, there is 8,975 kW of unallocated EP available to be awarded to businesses under the criteria set forth in PAL Section 1005(13)(a).  There is also 26,818 kW of unallocated RP for a total of 35.8 MW of unallocated hydropower available for Western New York business expansions.  Staff is recommending that EP allocations totaling 2,130 kW be awarded to the companies set forth in Exhibit ‘5-A.’  The exhibit shows, among other things, the amount of power requested by the applicants, the recommended allocation amounts and the commitment to job creation and capital investment to be made by these companies.  Additional information on each project is contained in the application summaries attached as Exhibits ‘5-A-1’ and ‘5-A-2’as well as in the individual expansion project descriptions below.

 

                Blackrock, Inc.

 

                “Blackrock is an independent investment management firm headquartered in New York City.  The company provides a range of investment and risk management services, serving as a fiduciary and deriving all of its revenues from client business.  Clients include pension funds, endowments, insurance companies, central banks, sovereign wealth funds and retail investors.  The company competes nationally and internationally with banking and financial services companies including foreign and out-of-state financial institutions.  Blackrock currently has approximately 2,000 employees in NYS.

 

                “Blackrock is proposing to construct and develop a data center in one of three proposed locations in and around Amherst, New York, to serve as one of its primary communications and processing hubs for its global investment operations.  It will be sized for future growth in capacity and computing needs, and facilities will be included to handle technical support operations in the near term.  In keeping with NYS’s emphasis on energy conservation and efficiency, indirect evaporative cooling and ultra-high efficiency uninterruptable power supply (‘UPS’) technologies will be built into the infrastructure.

 

                “The project would require construction of a 50,000 square-foot facility, the purchase and installation of $37.5 million in electrical, cooling and Information Technology (‘IT’) equipment, along with other physical plant and site development.  Blackrock has requested an allocation of 2,500 kW to support the anticipated electric demand of the proposed project. 

 

                “The facility would support the addition of 25 high-paying jobs in Western New York.  The project’s job ratio of 12.5 new jobs per MW, based on a recommended allocation amount of 2,000 kW, is below the recent historical average of 17.9 new jobs per MW for hydropower allocations approved by the Trustees since January 2009. 

 

                “The capital investment for this project includes $37.5 million, comprised of approximately $30 million for IT equipment and installation; $3 million for cooling equipment; and the remaining $4.5 million for UPS equipment, in addition to the building construction costs.  The capital investment ratio for this project is $18.75 million per MW, which is below the historical average of $22.0 million per MW for hydropower allocations approved by the Trustees since January 2009.

 

                “While Blackrock prefers to grow its primary data center operations in Western New York due to the proximity of low-cost power and fiber optic cable systems and the quality-of-life aspects that the Buffalo area offers prospective high technology workers, it has been presented with several options, including southern Canada and Pennsylvania.  Since electricity cost is a significant portion of the operating cost of any data center, an allocation of hydropower is critical to the decision to move forward with this project.  A hydropower allocation would help offset the large upfront investment and help make this site a viable expansion solution.  If the project is successful, the company would look to consolidate technical staff from other Northeast operations as the facility expands.  Staff recommends that an allocation of 2,000 kW be awarded to Blackrock in return for an investment of $37.5 million and the creation of 25 new jobs in Western New York.

 

                Graphic Controls Acquisition Corporation

 

                “Graphic Controls Acquisition Corp. (‘Graphic Controls’) owns and operates printing presses which primary products are casino slot machine tickets and medical device charts.  The company currently employs 265 people at its Buffalo facility and has a 250 kW RP allocation, a 120 kW EP allocation and a 155 kW ReCharge New York allocation for which it is meeting contractual commitments.  Graphic Controls is considering locating a new manufacturing line either at its Buffalo facility or at an alternate company site in Germany. 

 

                “Graphic Controls submitted an application for hydropower requesting 130 kW to serve a proposed new manufacturing line at its facility that will produce syringe filters.  Graphic Controls would make a capital investment of $760,000 to build a clean-room that will house a new product line to manufacture syringe filters that are used in medical and pharmaceutical processes.  Some of the equipment to be installed consists of injection molding machines and assembly machinery.  If the Buffalo site is chosen, the project is estimated to be complete and operations begin in January 2013.  The cost of electricity as a percentage of production at the facility is over 2% and the company maintains a ‘24/7’ operation.  An allocation of hydropower will significantly help lower costs and incentivize this company to locate the new product line in Western New York.

 


 

“Graphic Controls will commit to creating 25 new jobs in Western New York as a result of this expansion and retain the existing employment at the facility.  The job creation ratio is 192 new jobs per MW.  This ratio is well above the recent historic average of 17.9 new jobs per MW.  The company’s capital investment of $760,000 results in a ratio of $5.8 million dollars per MW.  This ratio is below the recent historic average of $22.0 million per MW.

 

                “An allocation of hydropower would support Graphic Controls’ commitment to Western New York.  The company’s plans will further solidify the 265 existing jobs and enable the creation of 25 more jobs.  Staff recommends that an allocation of 130 kW be awarded to Graphic Controls in return for an investment of $760,000 and creation of 25 jobs at its facility.

 

                “Based upon a review and evaluation of the two applications for hydropower as detailed above, staff recommends that a 2,000 kW EP allocation be awarded to Blackrock and a 130 kW allocation be awarded to Graphics Controls, as set forth in Exhibit ‘5-A.’  In total, the companies will commit to $37.5 million and $760,000 of capital investment, respectively, and to create 25 new jobs each.  The recommended allocation will help Blackrock and Graphics Controls decide to move forward with expansion plans in the Buffalo region, thus improving and diversifying the economy of Western New York.

 

RECOMMENDATION

 

“The Manager – Business Power Allocations and Compliance recommends that the Trustees approve the allocations of hydropower totaling 2,000 kW to Blackrock, Inc. and 130 kW to Graphic Controls Acquisition Corporation as detailed in Exhibit ‘5-A.’  

 

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

 

Mr. Michael Huvane presented highlights of staff’s recommendation to the Trustees.  Responding to a question from Trustee Foster, Mr. Huvane said Data Centers are capital intensive and are driven by large uses of power.  Also, depending on the efficiency of the facility, 30 – 50 percent of its costs are energy related.  He said other factors beyond jobs/MW were taken into consideration in staff’s decision for this recommendation.  Blackrock has also indicated that a hydropower allocation is important for the company to do business in New York State.

                Trustee Nicandri added that, the business climate in upstate New York has changed, in that, there has been a transition from manufacturing to other businesses.  This allocation, therefore, is a signal to attract new industries/companies to locate their businesses in upstate New York and that the state is willing to assist these businesses to locate there.  Although this allocation may not be directly related to number of jobs per megawatt,  it is part of changing the perception of what upstate New York offers and what the Authority plays in that role. 

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

 

RESOLVED, That the allocation of  2,000 kW of Expansion Power to Blackrock, Inc., and 130 kW of Expansion Power to Graphic Controls Acquisition Corporation, 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 Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 


 

6.                   Temporary Discount – Blenheim-Gilboa

Standard Service Tariff Rates for Long Island

Power Authority                                                         

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

“The Trustees are requested to approve a negotiated discount for the Long Island Power Authority (‘LIPA’) off the current Blenheim-Gilboa (‘B-G’) pumped-storage hydropower service contract rate for capacity, effective for the period November 1, 2012 through October 31, 2013.

 

BACKGROUND

 

                The Authority and LIPA are parties to a March 1989 agreement for the sale to LIPA of 50 megawatts (‘MW’) of B-G firm pumped-storage power service, which has an expiration date of April 30, 2015 (‘1989 Agreement’).  When the New York Independent System Operator, Inc. (‘NYISO’) began operations in 1999, the implementation of a new market structure for electricity rendered the 1989 Agreement economically unfeasible.  In response, the parties entered into a new agreement in 2000 which modified the nature of the transaction (‘Temporary Agreement’).  Under the Temporary Agreement, the 50 MW sale is handled financially rather than through the physical delivery of power.  The Temporary Agreement had a one-year term, which the parties have agreed to extend annually, and may be terminated upon two weeks’ written notice by either party.  Most recently, the parties executed an extension of the Temporary Agreement through June 30, 2013, pending approvals required by LIPA’s contract review process.  Should the parties, in the future, agree to let the Temporary Agreement expire, the underlying 1989 Agreement would set the commercial terms of the transaction.

 

                “The 1989 Agreement was further modified in 2004 by Letter Agreement to permit LIPA to terminate the Agreement by providing at least six months written notice to the Authority, with such termination being effective at the start of a Winter or Summer Capability Period, as such periods are defined by the NYISO.

 

DISCUSSION

 

                “In March 2012, LIPA informed the Authority that it was interested in terminating the 1989 Agreement as of the commencement of the Winter Capability Period (November 1, 2012) for the purpose of attempting to secure a more favorable rate on capacity.  The prevailing market UCAP prices for 2010 and 2011 were about $0.90 per kilowatt-month versus the B-G contract’s effective rate of $2.75 per kilowatt-month.  The same pricing relationship continued into the early months of 2012.  Such termination would have required LIPA’s written notice to the Authority by May 1, 2012.   

 

                “The parties determined that it may be possible to meet their respective business interests if an agreement can be reached on a revised capacity rate within the parties’ existing contract relationship.  In order to provide additional time to negotiate a revised rate, on April 30, 2012 the Authority and LIPA agreed to extend the notice period under the 1989 Agreement to June 1, 2012. 

 

“The current NYPA UCAP forecast estimates that market prices will increase substantially over the upcoming year due mainly to announced generation plant closings and market prices which could surpass the B-G contract rate.  Nonetheless, the forecast is not a certainty, while the continuation of the LIPA contract with the temporary discount does provide revenue certainty for the Authority.  It also allows LIPA to continue with the B-G contract and not foreclose on the opportunity to protect itself against potentially rising market prices.  Both parties should have a clearer and more uniform view of the UCAP market as 2013 unfolds.

 

                “Subsequently, the parties agreed, in principle, that LIPA would receive a $0.50 per kilowatt temporary discount off the current contract rate for capacity that would become effective November 1, 2012 and extend through October 31, 2013 (the end of the 2013 Summer Capability Period). 

 

               


“The parties anticipate that additional time will be needed to formalize the discount.  While staff is now requesting the Trustees’ authorization to enter into an agreement implementing the discount, it is anticipated that the LIPA Board will provide its approval no earlier than September 2012.  To accommodate this schedule, the parties extended the date by which LIPA would need to give the Authority notice of termination under the 1989 Agreement to October 1, 2012.   

 

                “It is envisioned that the temporary discount would remain in place through October 31, 2013.  To ensure that this occurs, it will be necessary for the parties to extend the Temporary Agreement from July 1, 2013 to at least October 31, 2013.  Otherwise, the contemplated temporary discount would be coterminous with the extended Temporary Agreement ending June 30, 2013.  If the Trustees approve the temporary discount, Authority staff will make any necessary contract extensions to implement the temporary discount. 

 

“The Authority would effectuate the temporary discount by providing a credit on LIPA’s monthly bill from the Authority for B-G service for the term of the discount agreement.

 

FISCAL INFORMATION

 

“While the temporary discount will result in a negative fiscal impact of $300,000 over the twelve-month period November 2012 through October 2013 relative to the current rate level, it will provide a measure of revenue stability for the Authority.  Overall, the decrease in revenues will have a de minimis effect on the debt service coverage ratio.

 

RECOMMENDATION

 

                “The Director – Marketing Analysis and Administration recommends that the Trustees approve the negotiated temporary discount off the Blenheim-Gilboa contract capacity rate and authorize the execution of appropriate contract documents.

 

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

 

Mr. Mike Lupo presented highlights of staff’s recommendation to the Trustees.  Responding to a question from Trustee Nicandri, Mr. Lupo said the temporary discount to LIPA is for a period of one year and will result in a reduction of the Authority’s revenues.   Mr. Donald Russak added that staff’s recommendation for the temporary discount is a way of preserving the Authority’s contractual relationship with LIPA at a time when capacity market prices are rising.  However, when the market settles, the Authority expects to obtain full cost recovery on the contract.  The discount, therefore, is the cost of getting the Authority through this phase of capacity market pricing.

                In response to a question from Trustee Mahoney and Chairman Koelmel, Mr. Lupo said the discount is contingent on LIPA extending its contract to June 2013.  Also, staff is presently negotiating for a two-year extension with LIPA and will be coming back to the Board with a recommendation at a later date.

               


 

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

 

RESOLVED, That the Senior Vice President – Economic Development and Energy Efficiency or his designee be, and hereby is, authorized by the Executive Vice President and General Counsel to execute any and all documents necessary or desirable to implement the temporary discount off the Blenheim-Gilboa contract capacity rate applicable to Long Island Power Authority, as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer and all other officers of the Authority are, and each of them herby 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, certifications and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

 

 


 

7.                   Release of Funds in Support of the Residential

Consumer Discount Program Incorporated in the

ReCharge New York Power Program                          

 

The President and Chief Executive Officer submitted the following report:

SUMMARY 

The Trustees are requested to approve the release of funds of up to $50 million in support of the next six months (beginning August 2012 and ending January 2013) of the Residential Consumer Discount Program incorporated in the ReCharge New York (‘ReCharge NY’) Power Program as authorized by Chapter 60 of the Laws of 2011.  The release of these funds was reflected in the Authority’s 2012 Operating Budget approved by the Trustees at their December 15, 2011 meeting.

 

BACKGROUND

 

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

 

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

 

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

DISCUSSION

 

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

 

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

 


 

“The Authority is authorized to use the revenues from the sale of the withdrawn power into the wholesale market, together with any other funds of the Authority as the Trustees may deem feasible and advisable, to support the Residential Consumer Discount Program.  The Department of Public Service staff reported that during 2010 the 455 MW of hydropower used for the benefit of the utilities’ residential consumers provided $102 million in net value for residential consumers.  On the basis of this analysis, and because the 455 MW of withdrawn hydropower was not scheduled to be allocated to eligible ReCharge NY program customers until July 1, 2012, it was estimated at the time of the passage of the legislation that the sale of this power into the wholesale market would produce approximately the $100 million required on an annualized basis to fund the Residential Consumer Discount Program for the first year.  Given the volatility in market prices, however, there is no assurance that the sale of this power will produce sufficient net revenues to cover the full amount of the residential discount.  Therefore, Authority funds may be needed to supplement the market revenues.  At their June 28, 2011 and January 31, 2012 meetings, the Trustees approved the release of funds in support of the first year of the Residential Consumer Discount Program.  Under consideration today, is the next six months (August 2012 through January 2013) of the Residential Consumer Discount Program.

 

“Following the July 1, 2012 start of business customer allocations under the ReCharge NY program, the source of funding for the residential discount is expected to shift over time to other Authority funds.  As the ReCharge NY program is replacing the PFJ and ESCB programs, the funds previously used to support the PFJ customer rebates and the ESCB program are available for the ReCharge NY residential discounts. 

 

“Staff has reviewed the effects of the anticipated payments of the Residential Consumer Discount Program (up to $50 million) on the Authority’s projected financial position and reserve requirements.  In addition, in accordance with the Board’s Policy Statement, staff calculated the impact of these amounts on the Authority’s debt service coverage ratio and determined it would not fall below the 2.0 reference point level.  Given the current financial condition of the Authority, its estimated future revenues, operating expenses, debt service and reserve requirements, staff is of the view that it will be feasible for the Authority to provide up to $50 million of the Residential Consumer Discount Program at this time.

 

“Staff intends to return to the Trustees with a recommendation as to the release of any future amounts related to the Residential Consumer Discount Program based on how the overall program is progressing as well as the financial circumstances of the Authority at the time such payments are to be considered.

 

FISCAL INFORMATION

 

“Staff has determined that sufficient funds are available in the Operating Fund to provide up to $50 million in support of the Residential Consumer Discount Program authorized by the ReCharge NY Program at this time and that such Authority funds are not needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s Bond Resolution.  The release of up to $50 million associated with the Residential Consumer Discount Program payments was anticipated and reflected in the Authority’s 2012 Operating Budget approved by the Trustees at their December 15, 2011 meeting.  The net cost to the Authority, after consideration of the value of the unallocated power being sold into the wholesale market, is estimated to be between $20 and $25 million during this six-month period.  These payments will be recorded as an expense at the time of payment.

RECOMMENDATION

The Chief Financial Officer recommends that the Trustees affirm the release of up to $50 million related to Residential Consumer Discount Program is feasible and advisable and to authorize such payments.

 

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

 

                Mr. Gerard Vincitore provided highlights of staff’s recommendation to the Trustees. Vice Chairman Dyson said the Trustees had previously approved the debt service coverage ratio level in order to maintain the Authority’s AA rating.  In response to a question from Chairman Koelmel, Mr. Russak said the payment, which was authorized by the ReCharge New York legislation, was included in the budget approved by the Trustees at the December 2011 meeting.

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

RESOLVED, That the Trustees hereby authorize the release of up to $50 million from the Operating Fund to support the Residential Consumer Discount Program as authorized by the ReCharge New York Power Program as set forth in Chapter 60 of the Laws of 2011 as discussed in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the amount of up to $50 million to be used for the Residential Consumer Discount Program described in the foregoing resolution is not needed for any of the purposes specified in Section 503(1)(a)-(c) of the Authority’s General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

 

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

 

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

 


 

8.                   Informational Item:  Lewiston Pumped Generation Plant

Life Extension and Modernization Program                             

 

Mr. John Canale provided an update of the Lewiston Pumped Generation Plant Life Extension and Modernization Program to the Trustees.  Responding to questions from Chairman Koelmel and Trustee Foster, Mr. Canale said one of the lessons learned in managing the project is ensuring that the Authority has a presence at the manufacturing facility to ensure proper QA of the equipment being built.  President Quiniones added that a combination of Authority staff and contractors are present at the site on a “24/7” basis to ensure that the product meets the Authority’s specification.  In response to a question from Chairman Koelmel, Mr. Welz said that based on the nature of the work to be done, award of contracts to qualified, most economical bidders will be a challenge for the Authority.  Mr. Antenucci added that until recently, there were not many U.S. manufacturers of components used by the Authority, and they usually price themselves out of the competition.  Although the Authority uses manufacturers outside the U.S., including the additional funding for QA overseas, it is still cost-effective.  Responding to a question, from Trustee Mahoney Mr. Canale said, from discussions with the Procurement Department, the Authority is allowed to consider the location of the bidder provided that the associated cost to support QA is factored in the Request for Proposals.  Responding to a question from Trustee LeChase, Mr. Welz said it has not been the Authority’s practice to have QC staff on projects on a “24/7” basis; however, it was necessary to have continuous QC for this project.


 

9.                   Informational Item: 500 MW Project Maintenance Outage – Video Presentation

 

A video presentation on the 500 MW Project Maintenance Outage was made to the Trustees.  Mr. Michael Saltzman said the video was produced in-house by Mr. Kevin O’Keeffe and his team of videographers.  Responding to a question from Chairman Koelmel, Mr. Saltzman said, in consultation with the Governor’s Press Office, the video will be streamed on the internet.


 

10.              Board Resolution – John S. Dyson

Trustee Eugene Nicandri read the resolution honoring Vice Chairman John Dyson.   On motion made and seconded, the following resolution was unanimously adopted.

                WHEREAS, John S. Dyson stands as a towering figure in the annals of the New York Power Authority and of public service in New York State, having forged a record of bold leadership and enduring accomplishment that dates to the 1970s; and 

 

                WHEREAS, more than a quarter-century after serving as one of the Power Authority’s great Chairmen and Chief Executive Officers, Mr. Dyson returned in March 2011 as a singularly influential Trustee and, ultimately, Vice Chairman, with a Gubernatorial mandate to resolve a series of issues that tested NYPA’s operational and financial well-being; and

 

              WHEREAS, displaying his signature outspokenness, integrity and intelligence while dedicating countless hours to this assignment, Mr. Dyson righted the ship and set the Authority on a course to secure its vital role in meeting the State’s energy and economic development challenges; and

               

            WHEREAS, his achievements-- which prompted a New York City newspaper to rightfully proclaim that the Governor “would do well to make John Dyson the standard for all his picks”-- have included renegotiating a problematic contract for a new transmission line, implementing senior management changes, refocusing the Authority on its core mission of strengthening its infrastructure, and setting clear guidelines for NYPA’s financial relationship with the State; and

 

                WHEREAS, Mr. Dyson has been at the forefront in formulating major State initiatives such as the Energy Highway and new energy efficiency programs; and

 

                WHEREAS, as Chairman and CEO from 1979 to 1985, he devised a diverse program to cut dependence on foreign oil and, to that end, led the fight to license the Marcy-South transmission line, negotiated a large contract for hydroelectric purchases from Quebec, oversaw conversion of NYPA’s only oil-fueled plant to permit use of natural gas and presided over completion of its first two small hydro projects; and

 

                WHEREAS, he launched NYPA’s initial energy efficiency and economic development programs, foreshadowing future growth in these areas; and

 

                WHEREAS, his exemplary career has included service as State Commissioner of Agriculture and Markets, as Commissioner of Commerce

-- a position in which he directed creation of the “I Love New York” campaign and also helped to bring 750,000 jobs to the State -- and as a New York City Deputy Mayor, as well as notable successes as Chairman of his own private investment firm and as proprietor of several superb wineries; and

 

               


 

WHEREAS, Mr. Dyson served his country with great distinction as a U.S. Army officer in Vietnam, earning the Bronze Star; and

 

                 WHEREAS, he is resigning from this Board after having burnished his vast legacy;

 

                NOW THEREFORE BE IT RESOLVED, That the Trustees of the Power Authority of the State of New York express their gratitude to John S. Dyson for his immense contributions to the Authority and the people of New York State; their admiration for his commitment to public service and the standards he has set; and their warmest wishes to him; his wife, Kathe; and their family for many years of health, happiness and continued fulfillment.

 

July 31, 2012

 

Chairman Koelmel expressed that the Authority owes a gratitude for the service Vice Chairman Dyson provided the Authority.

 President Quiniones made the following remarks on behalf of the Authority's executive management and staff:

“Mr. Chairman, with your permission, I have a few comments on behalf of the Executive Management Committee and the entire NYPA staff.

As we’ve heard, John Dyson has meant a great deal to the Power Authority.  But, equally important, the Power Authority has meant a great deal to John Dyson.

That’s the reason he returned to NYPA as a Trustee some 25 years after having served with such distinction as Chairman and CEO.  After all that time, John still cared very much about the Power Authority.  And he put all his heart into taking on a number of challenges that he saw here. 

John, for example, recognized that investing sufficiently in our generation and transmission infrastructure had to be a top priority for the Authority -- and he made sure that it was.

As a Trustee, he saw that it was taking too long to fill vacancies on the staff--particularly in critical operational areas--as people retired or left for other reasons.  So, he worked diligently to ease the logjam--mainly by urging promotions from within.

He strongly advocated training and continuing education and professional certification for staff members--union and non-union--as part of a vigorous succession planning process.  Indeed, he has proposed that NYPA establish a training and work force development center for its own employees--and for veterans of Iraq and Afghanistan who could become valuable additions to our staff.  We hope that becomes a reality.  And, if it does, it will be a tribute to John Dyson.

John has also strengthened our strategic planning.  And, as much as anything, he has infused the Power Authority with a renewed sense of professionalism -- A sense of pride -- A sense that we can again do big things – like building a Niagara Power Project or a Marcy-South Transmission Line.

Personally, I’m grateful to John--at least on most days--for having been my most influential reference for the job I now have.  His ongoing support and guidance have been invaluable to me--and to our leadership team, which he helped to create.  He has, without question, laid the foundation for our future success.

So, John, thank you for what you’ve done for us and brought to us.  All of us at NYPA wish you good health and every success in your future endeavors.

Thank you, Mr. Chairman.” 

 

Trustee Foster said Vice Chairman Dyson provided extraordinary service to the Authority and the public sector and has shown how success in the private sector can be effective in the public sector.  He has been a mentor to him and he wishes him health, happiness and success.

Trustee Nicandri said he appreciated Vice Chairman Dyson’s guidance and support during the time they served on the Board.

In response, Vice Chairman Dyson said he echoed the comments by Chairman Koelmel that it is a bitter sweet moment.  He said he would sum up the eighteen months spent at the Authority and made the following remarks: 

 “The achievements we have all made together come in three categories:

1.        Restructuring the Executive Staff – this could be considered as the corporate turn-around.  We have a new Chief Executive Officer, new Chief Financial Officer, new Chief Operating Officer, and new General Counsel.  Equally important, many changes have been made below these levels.  These changes were important for two reasons: 1) to get the Authority back on track as it had lost its bearings; and 2) to prepare the Authority for new missions ahead.

We needed a restructuring to do this.  However, without dedicated workforce, including our union employees, the very best ideas of this kind of leadership cadre could not be implemented.

2.       Create New Missions – The ReCharge New York Power Program, with more than 900 applications, was remarkably handled by Jim Pasquale and his team – It is fair to say only the Authority could pull this off.

·   Energy Highway – There is a need for new transmission since none was made in more than 20 years to the New York State system’s grid.  This project has been adopted by the Governor as the “Energy Highway Project.”

·   TransCo Proposal – I worked with John Suloway and his group on the new proposal that will allow upgrades (new and rebuild) to the transmission system (how it is to be done and paid for) – as it would be difficult for the Authority to be compensated under the new deregulation plan – one of the reasons, among others, why a new transmission system has not been built in the state.

·   Energy Conservation – The Authority participated boldly in energy conservation.  We started with small energy conservation programs – $5 million in its first year.  This year, we will complete projects at a cost of approximately $200 million and these programs are set up in a manner to allow them to pay for themselves -- The Authority is a revenue-based Authority and we do not take money from the State and I think our independence is very valuable to the State -- We did the energy audits and the work; it was a turnkey operation.  When we started, it was to replace coal-fired furnaces in the schools in the City of New York.  We replaced approximately 2,500 boilers in schools and housing projects – an amazing accomplishment for the Authority.

3.        We cleaned up some old “chestnuts”:

·    we did hydro rate adjustments because we were not recovering our costs as required by the law;

·   we paid professional stipends that had been blocked for a number of years;

·   we streamlined headquarter Operations and Expenses – we applied a new discipline to grants that the Authority makes to other entities and returned to having the grants be for things that are more directly related to our mission.

·   We finally signed a 20-megawatt deal for Massena, with the help of Judith McCarthy and other Authority staff.

·   We did bond issuance which was oversubscribed by five times.  With Don Russak’s leadership, we sold at a terrific price, and, as a consequence, we reaped 16% Net Present Value savings.

So, now, with new staff, new missions, old issues resolved, new Chairman, new Trustees ready to take on the challenges, I think the Authority is positioned to make major differences for a lot of New Yorkers.  For me, it’s been a long 18 months, but a pleasure to work with all of the people in this room – and some who are not here – but it is time for me to return to my private and business lives, which have suffered because of carrying this burden.  I am going to miss you all, and, as I said to the Chairman, I am only a phone call away; anytime I can be of help personally or professionally to this organization, I’m happy to do so.  The state’s motto is “Excelsior” which means “ever upward.”  I think the Authority is now positioned to adopt that motto for itself. 

Thank you.”

 

Chairman Koelmel then read a letter from Governor Cuomo to Vice Chairman Dyson thanking him for his service (Exhibit “10-A”) and said Vice Chairman Dyson has set the standards for which we all are the benefactors.


 

11.                Motion to Conduct an Executive Session

 

                Mr. Chairman, I move that the Authority conduct an executive session pursuant to the Public Officers Law of the State of New York section 105 to discuss matters leading to the award of contracts to particular corporations.  On motion duly made and seconded, an Executive Session was held.

 

 

 


12.                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.


 

                                                                                                                                               

13.                Next Meeting

 

The next regular meeting of the Trustees will be held on Thursday, September 20, 2012, at 11:00 a.m., at the Albany Office, 30 South Pearl Street, Albany, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.

 

 

 


Closing

                On motion made and seconded, the meeting was adjourned by the Chairman at approximately 2:00 p.m.

 

 

Description: Delince Signature

 

Karen Delince

Corporate Secretary