Minutes of the Special 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 11:00 a.m.

Members of the Board present were:

John R. Koelmel, Chairman

Eugene L. Nicandri, Trustee

Jonathan F. Foster, Trustee

R. Wayne LeChase, Trustee

Terrance P. Flynn, Trustee

Joanne M. Mahoney, Trustee (via telephone conference)

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Judith C. McCarthy Executive Vice President and General Counsel

Donald Russak Chief Financial Officer

Jill Anderson Chief of Staff and Director – Energy Policy

Joan Tursi Senior Vice President – Corporate Support Services

Bradford Van Auken Acting Senior Vice President and Chief Engineer –

Operations Support Services

Paul Belnick Vice President – Energy Efficiency

John Canale Vice President – Project Management

Dennis Eccleston Vice President – Information Technology/Chief Information Officer

Michael Huvane Vice President – Marketing – Marketing & Economic Development

Patricia Leto Vice President – Procurement

Brian McElroy Treasurer

Karen Delince Corporate Secretary

Mike Lupo Director – Marketing Analysis and Administration

Gary Schmid Manager – Network Services Infrastructure

Michael Mitchell Project Manager – Hydro/Transmission

Joseph Schmidberger Energy Portfolio Manager

Andrea Luongo Senior Project Engineer II

Lorna M. Johnson Assistant Corporate Secretary

Ruth Colon Senior Business Integration Project Manager

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

Financial Group

John V. Connorton, Jr. Hawkins Delafield & 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 special meeting being held to address some items from the agenda of the October meeting which was cancelled because of Hurricane Sandy. He said President Quiniones was excused since he was in the field dealing with the ramifications of the devastation of the hurricane. Chairman Koelmel continued that the meeting had 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 4.

1. Adoption of the November 9, 2012 Proposed Meeting Agenda

On motion made and seconded the meeting Agenda was adopted, as amended. Chairman Koelmel said that the Finance Committee had recommended that the Authority’s Trustees approve Item 2f (Adjustment of Payment Schedule for the Niagara Relicensing Settlement Agreement State Parks Greenway Fund and Authorization of the Issuance of the 2012 Subordinated Note) at their meeting held earlier.

2. Consent Agenda:

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

Trustee Flynn recused himself from the vote on item # 2d (Authorization for Third-Party Broker and Futures Commission Merchant Agreements for Hedging Purposes and Contracts – Awards) with respect to Deutsch Bank Securities, Inc.

a. Astoria Infrastructure Program – Phase II –

Capital Expenditure Authorization Request

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to increase the expenditure authorization limit for the Astoria Infrastructure Program (the ‘Program’) from the previous authorized capital expenditure amount of $5.3 million to $8.9 million. The increase of $3.6 million in the authorized capital expenditures is to complete Phase II of the planned Program and is based on actual bids received. On March 17, 2011, preliminary funding in the amount of $395,000 was authorized by the President and Chief Executive Officer to proceed with engineering and design services for Phase I of the work. At their meeting of June 28, 2011, the Trustees authorized $4.9 million for the Phase I work, bringing the total authorization to $5.3 million. This Project results from the closure of the Charles Poletti Power Plant in January 2010 and will provide critical infrastructure to support the Authority’s 500 MW Combined Cycle Power Plant and Administration Building.

BACKGROUND

“In accordance with the Authority’s Expenditure Authorization Procedures (“EAPs”), capital expenditure authorizations in excess of $3 million require the Trustees’ approval.

“As a result of the Charles Poletti Power Plant ceasing operations on January 31, 2010 and prior to its planned deconstruction (2013/2014), new infrastructure is required to support services for the 500 MW Power Plant Site. These services are currently routed through the Poletti Power Plant. These projects were designed by Authority engineering staff as augmented with engineering consultants. The major work already constructed under Phase I in 2011 includes a new gas main, new electric fire pump-house and new electrical feeders and equipment at the Existing Building Substation. Phase II is the final work and includes new telephone and communication circuits and Phase II equipment and enclosure installations at the Existing Building Substation. Phase II engineering was completed mid-2012 and construction is scheduled for late 2012 and into 2013. This work is required to be completed prior to the deconstruction of the Poletti Power Plant powerhouse, currently scheduled for 2013/2014.

DISCUSSION

“The costs for all these services are presented in the Capital Expenditure Authorization Request (“CEAR”) and are summarized as follows:

	Phase I	Phase II	Total
Preliminary Engineering	$ 95,000	$ 0	$ 95,000
Engineering	$ 501,000	$ 352,000	$ 853,000
Procurement	$ 96,000	$ 64,000	$ 160,000
Construction/Installation	$ 4,140,000	$ 2,862,000	$ 7,002,000
Authority Direct/ Indirect	$ 463,000	$ 322,000	$ 786,000
TOTAL:	$ 5,295,000	$ 3,600,000	$ 8,896,000

“The Phase II work will be awarded in accordance with the Authority’s EAPs.

FISCAL INFORMATION

“Payments associated with this project will be made from the Authority’s Capital Fund. Funding for Phase II of the Program has been included in the 2012 approved Capital Budget.

RECOMMENDATION

“The Acting Senior Vice President and Chief Engineer – Operations Support Services, the Vice President – Project Management, the Acting Vice President – Engineering, the Vice President – Procurement and the Regional Manager – SENY recommend that the Trustees approve an increase in the capital program to $8.9 million and authorize capital expenditures in the amount of $3.6 million to complete the Astoria Infrastructure Program at the Astoria Site.

“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 in accordance with the Authority’s Expenditure Authorization Procedures, approval is hereby granted for an increase in the capital program to $8.9 million and capital expenditures in the amount of $3.6 million to complete the Astoria Infrastructure Program at the Astoria Site, as recommended 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 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.

b. Coopers Corners Shunt Reactor Project –

Capital Expenditure Authorization Request

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize capital expenditures in the amount of $4.9 million for Engineering, Procurement, and Project Management associated with the Coopers Corners Shunt Reactor Project (‘Project’). This Project (estimated installed cost of $9.8 million) entails the installation of a 200 MVAR Shunt Reactor at the 345 kV Coopers Corners Substation, owned and operated by the New York State Electric & Gas Corporation (‘NYSEG’). The Project will eliminate the need for the Authority to perform undesirable switching operations to mitigate high voltages observed at Coopers Corners during light load operating conditions. The President and Chief Executive Officer have already approved $250,000 for Preliminary Engineering.

BACKGROUND

“In accordance with the Authority’s Expenditure Authorization Procedures (“EAPs”), capital expenditure authorizations in excess of $3 million require the Trustees’ approval.

“During months when there is less electric demand on the system, the New York Independent System Operator (‘NYISO’) load can reach very low levels (below 11,000 MW). While this results in lightly loaded transmission lines, the resulting voltages are above acceptable operating limits. Historically, high voltages have been observed at the Coopers Corners 345 kV Substation and surrounding area. These voltage problems may be worsened if other transmission equipment is also out-of-service (e.g. Fraser Static VAR Compensator and/or UE1-7 345 kV transmission line).

“The current NYISO mode of operation to reduce the high voltage problem is to request the Authority to perform undesirable/non-best practice switching operations such as:

- Setting the Bleheim-Gilboa units in speed-no-load or spin-pump mode.

- Operating the Marcy STATCOM fully inductive.

- Tripping the Marcy-Coopers Corners and/or the Coopers Corners-Rock Tavern 345 kV Transmission Lines.

“The above switching operations are unacceptable methods of operating the Authority’s assets. The Authority and the NYISO met in November of 2011 to discuss implementation of an improved operating protocol and agreed that installation of a shunt reactor would avoid the need for line switching and provide a ‘best practice’ long-term solution.

“The NYISO performed a System Impact Study (‘SIS’) to evaluate the impact of the Project on the reliability of the New York State Transmission System. The SIS results show that installation of a 200 MVAR shunt reactor is the ideal solution for high voltage issues during light load conditions.

“The Authority and NYSEG executed an Engineering and Procurement Agreement in July of 2012 for the installation of a 200 MVAR shunt reactor at the Coopers Corners 345 kV Substation, located in the Town of Liberty, NY. The Authority will own the shunt reactor and associated equipment; NYSEG will operate and maintain the equipment subject to an Operations and Maintenance Agreement that will be developed.

DISCUSSION

“The Project is structured to be performed in two phases:

Phase 1: Engineering, Procurement, Project Management (2012 – 2014)

Phase 2: Construction (2013 – 2014)

“Preliminary engineering was completed in August of 2012 as part of the SIS performed by NYISO. The SIS included a preliminary description of the Project’s scope-of-work (design of shunt reactor integration; system protection; civil and mechanical construction).

“The Authority issued a contract to CG Power Solutions USA Inc. (‘CGPS’) for the detailed engineering. This work is ongoing and CGPS has completed the conceptual design and major equipment specifications (200 MVAR Shunt Reactor; Circuit Breakers; Disconnect Switches).

“The Authority issued a Request for Proposals (‘RFP’) for the 200 MVAR Shunt Reactor and has completed the bid evaluation to award a contract in the amount of $2.2 million to TBEA USA Corporation (‘TBEA’), the lowest-cost and technically acceptable bidder, for design, fabrication, assembly, factory testing, delivery, field assembly, testing, and commissioning of the shunt reactor.

“This initial capital expenditure authorization for Phase 1 is comprised of the following:

Preliminary Engineering $ 100,000

Engineering/Design $ 765,000

Procurement $ 2,940,000

NYPA Direct Expense $ 605,000

NYPA Indirect Expenses $ 470,000

TOTAL $ 4,880,000

“The Trustees will be requested, at a later time, to authorize funding for Phase 2 – Construction/Installation once the proposals for construction services have been received and evaluated.

FISCAL INFORMATION

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

RECOMMENDATION

“The Acting Senior Vice President and Chief Engineer – Operations Support Services, the Vice President – Project Management, the Acting Vice President – Engineering, the Vice President – Transmission, the Vice President – Procurement, the Project Manager and the Regional Manager – Central New York recommend that the Trustees approve capital expenditures in the amount of $4.9 million for the Coopers Corners 200 MVAR Shunt Reactor Project.

“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 in accordance with the Authority’s Expenditure Authorization Procedures, approval is hereby granted to authorize capital expenditures in the amount of $4.9 million for the Coopers Corners Shunt Reactor Project, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

c. Niagara Power Project – Lewiston Pump Generating

Plant Life Extension and Modernization Program –

Increase in Expenditure Authorization

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to increase the expenditure authorization limit for the Niagara Power Project’s Lewiston Pump Generating Plant (‘LPGP’) Life Extension and Modernization Program (‘LEM Program’) from the previous authorized capital expenditure amount of $131.0 million to $252.544 million. The increase of $121.544 million in the authorized capital expenditures is for additional releases of long lead time equipment and to fund the rehabilitation work up through the sixth unit. The major equipment releases required include new: turbines, head covers, wicket gates, generator rotor poles and stator coils, unit control systems, static excitation systems and associated unit auxiliary equipment in order to maintain the schedule.

“The total estimated cost of the LPGP LEM Program will remain unchanged at $460 million.

BACKGROUND

“In accordance with the Authority’s Expenditure Authorization Procedures, capital expenditure authorizations in excess of $3 million require the Trustees’ approval.

“At their June 29, 2010 meeting, the Trustees approved the Capital Expenditure Authorization Request (‘CEAR’) for the LPGP LEM Program estimated at $460 million, to renew the generation assets of LPGP, and were informed that the LEM Program would commence and require about ten years to complete. The Trustees also authorized capital expenditures in the amount of $131 million and the award of a 10-year contract to Hitachi Power Systems America, Ltd., Basking Ridge, NJ, in the amount of $174 million, to replace 12 pump turbine runners including equipment overhauls. To date, Hitachi was only released to perform work on the first three pump turbine units.

DISCUSSION

“The objective of the LPGP LEM Program is to replace and/or rehabilitate aging generation equipment, most of which dates to 1961. A secondary objective is to increase pump and turbine efficiency, increase pump flows, increase turbine output and increase the smooth operating range of the pump turbines. Together, these improvements to the pump turbine design would allow for improved operating efficiency, increases in the amount of production re-timed to peak demand periods, and an increase in the peaking capacity of the overall Niagara Power Project. The modest increase in the plant’s pumping capacity as a result of the new pump turbines required the Authority to file an application with the Federal Energy Regulatory Commission (‘FERC’) for a non-capacity license amendment which was granted in April 2012.

“The current status of the work related to the LEM Program is as follows;

· Two new GSU’s and associated high voltage terminations and relay protection equipment have been installed.

· The remaining two GSU’s will be installed starting October 1, 2012 and February 11, 2013 and the spare GSU will be delivered in July 2013.

· The first new turbine that is scheduled to be installed in the first unit is currently being assembled in Hitachi’s facility located in Japan and is expected to be delivered in April 2013.

· The outage for the first unit overhaul will begin on December 10, 2012 and is expected to be completed in approximately eight to nine months.

· The fabrication and final designs of the units’ auxiliary systems are well underway and some systems have been delivered to the off-site warehouse.

· Units 2 through 12 will be completed in approximately seven to eight months each, with the last unit to be completed in the winter of 2020.

“The total value of the contracts awarded, to date, amount to approximately $300 million and the total amount released is approximately $80 million. Costs associated with the LPGP LEM Program also include Engineering, Project Management, Plant support, site modifications, performance testing and unit auxiliary equipment. Therefore, in order to allow for the orderly execution of the LEM Program as planned, it is necessary, at this time, to commit the additional requested funding to execute the activities through the sixth unit which is scheduled to be completed in December 2016. The remaining fund balance will be requested accordingly, in order to complete the LEM Program as currently scheduled.

Engineering, Procurement, Construction, Direct and Indirect Costs

“The Trustees are also requested to approve expenditures for engineering, procurement, construction and Authority direct and indirect costs to continue the orderly planning, design and implementation of the work as follows:

	Current Total Estimate ($000)	Current Request ($000)	Balance to be Authorized ($000)
Preliminary Engineering/Licensing	1,195	945	0
Engineering and Design	12,783	4,686	3,097
Procurement/Materials	153,813	39,643	71,170
Construction	253,799	64,685	120,114
Authority Direct/Indirect	38,410	11,585	13,074
Total Authorization Requested	460,000	121,544	207,456

“Future year funding will be included in the Capital Budget requests for those years.

FISCAL INFORMATION

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

RECOMMENDATION

“The Acting Senior Vice President and Chief Engineer – Operation Support Services, the Vice President – Procurement, the Acting Vice President – Engineering, the Vice President – Project Management and the Regional Manager – Western New York recommend that the Trustees authorize additional capital expenditures in the amount of $121.544 million for the Niagara Power Project’s Lewiston Pump Generating Plant Life Extension and Modernization 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 in accordance with the Authority’s Expenditure Authorization Procedures, additional capital expenditures of $121.544 million are hereby approved for the Niagara Power Project’s Lewiston Pump Generating Plant Life Extension and Modernization Program, as recommended in the attached memorandum of the President and Chief Executive Officer; and be it further

d. Authorization for Third-Party Broker and Futures

Commission Merchant Agreements for Hedging

Purposes and Contract Awards

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize the award and funding of the contracts for Third-Party Commodity Brokers to allow for the efficient execution of commodity price hedging strategies in conformance with the Authority’s Energy Risk Management Policy. The aggregate total for Third-Party Brokerage Services is not expected to exceed $500,000 for the duration of the five-year contract.

“The Trustees are also requested to authorize the award and funding of the contracts for Futures Commission Merchants (‘FCM’) to allow for the efficient execution of commodity price hedging strategies in conformance with the Authority’s Energy Risk Management Policy. The aggregate total for FCM Services is not expected to exceed $500,000 for the duration of the five-year contract.

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.

“At their meeting of January 31, 2012, the Trustees reaffirmed the revised Governing Policy for Energy Risk Management (the ‘Policy’). In accordance with leading industry practice, the Trustees’ approval of the revised Policy served as a reaffirmation of the philosophy, framework and delegation of authority for the Authority’s Energy Risk Management Program (the ‘Program’). The Program administers a well-structured and controlled set of activities for mitigating unwanted effects of volatility in the energy commodity markets to which the Authority and its customers are routinely exposed. To conform with the Program, staff only executes hedging strategies that have been approved by the Executive Risk Management Committee (the ‘ERMC’). Such strategies have been executed for the past several years on behalf of the Authority’s New York City Governmental Customers, as well as the Authority’s own account.

“Authorized individuals enter into transactions for electricity and natural gas products only when prescribed by the approved hedging strategies. Transactions for electricity products are constrained to the eighteen counterparties with which the Authority has a direct transaction agreement and pre-established credit terms. These transactions are referred to as ‘over-the-counter’ transactions. The services of Third-Party Brokers, if approved by the Trustees, will serve to increase the number of potential counterparties with which the Authority can enter into hedging transactions. The larger number of potential counterparties will serve to increase market liquidity which will then facilitate more efficient price discovery.

“At their meeting of April 27, 2004, the Trustees authorized the Authority to enter into commodity broker (also known as futures commission merchant) agreements for hedging purposes. The Authority currently has only one approved FCM. Additional FCM agreements, if approved by the Trustees, would facilitate efficient execution of approved hedging strategies and provide staff with more efficient price discovery.

DISCUSSION

“On August 24, 2012, the Authority solicited bids for Third-Party Brokerage Services under Request for Proposal (‘RFP’) inquiry Q12-5321FS. The RFP outlined requirements for the specific markets and products associated with the services requested by the Authority. Bidders were required to respond by September 11, 2012.

“The RFP was downloaded from the Authority’s Web site by forty-two interested respondents of which three submitted a bid. The bids were distributed to an evaluation team consisting of representatives from the Authority’s Energy Resource Management, Legal and Procurement departments most closely involved with the Program work processes. Based on the review of the evaluation team, staff recommends the award of contracts to the following three firms: Amerex, LLC, Newedge USA, LLC, and Poten Energy Services, LLC. All of these firms meet the bid requirements and are qualified to provide Third-Party Brokerage Services on an ‘as needed’ basis. Staff estimates that the aggregate total cost of Third-Party Brokerage services would not exceed $500,000 for a term of up to five years.

“On August 24, 2012, the Authority also solicited bids for FCM Services under RFP inquiry Q12-5322FS. The RFP outlined requirements for the specific markets and products associated with the services requested by the Authority. Bidders were required to respond by September 11, 2012.

“The RFP was downloaded from the Authority’s Web site by twenty-nine interested respondents of which four submitted a bid. The bids were distributed to an evaluation team consisting of representatives from the Authority’s Energy Resource Management, Legal and Procurement departments most closely involved with the Program work processes. Based on the review of the evaluation team, staff recommends the award of contracts to the following four firms: Deutsche Bank Securities, Inc., Enerjay, LLC as introducing broker to Rosenthal Collins Group, Macquarie Futures USA, LLC, and Newedge USA, LLC. All of these firms meet the bid requirements and are qualified to provide FCM Services on an ‘as needed’ basis. Staff estimates that the aggregate total cost of FCM Services would not exceed $500,000 for a term of up to five years.

“The terms of these contracts will be more than one year; therefore, the Trustees’ approval is required. All of these contracts contain provisions allowing the Authority to terminate the services for the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination. These contract awards do not obligate the Authority to a specific level of expenditures. The issuance of multiyear contracts is recommended from both cost and efficiency standpoints. Since these services are typically required on a continuous basis, it is more efficient to award long-term contracts than to rebid these services annually.

FISCAL INFORMATION

“Any payments to be made under these agreements will be paid from the Operating Fund. Any costs associated with transactions executed in support of specific customer agreements will be assigned to those customers.

RECOMMENDATION

“The Energy Portfolio Manager, the Director – Market Analysis and Hedging and the Senior Vice President – Energy Resource Management recommend that the Trustees:

(1) authorize the award and funding of Third-Party Commodity Brokerage Services contracts to Amerex, LLC, Newedge USA, LLC, and Poten Energy Services, LLC to be executed by the Senior Vice President – Energy Resource Management, subject to the approval of the Executive Vice President and General Counsel, or her designee, and the Senior Vice President and Chief Risk Officer, or his designee;

(2) authorize the award and funding of Futures Commissions Merchant Services contracts to Deutsche Bank Securities, Inc., Enerjay, LLC as introducing broker to Rosenthal Collins Group, Macquarie Futures USA, LLC, and Newedge USA, LLC to be executed by the Senior Vice President – Energy Resource Management, subject to the approval of the Executive Vice President and General Counsel, or her designee, and the Senior Vice President and Chief Risk Officer, or his designee;

“For the reasons stated, I recommend 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 adopted with Trustee Flynn being recused from the vote with respect to Deutsch Bank Securities, Inc.

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award five-year contracts to Amerex, LLC, Newedge USA, LLC, and Poten Energy Services, LLC, with an aggregate total expenditure of $500,000, for Third-Party Brokerage Services under the Request For Proposal (“RFP”), inquiry No. Q12-5321FS, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award five-year contracts to Deutsche Bank Securities, Inc., Enerjay, LLC as introducing broker to Rosenthal Collins Group, Macquarie Futures USA, LLC, and Newedge USA, LLC, with an aggregate total expenditure of $500,000, for Futures Commissions Merchant Services under the Request For Proposal, inquiry No. Q12-5322FS, as recommended in the foregoing report of the President and Chief Executive Officer; and be it further

e. Adjustment of Payment Schedule for the Niagara Relicensing

Settlement Agreement State Parks Greenway Fund and

Authorization of the Issuance of the 2012 Subordinated Notes

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve an adjustment to the payment schedule for the Niagara Relicensing Settlement Agreement State Parks Greenway Fund pursuant to the terms of the Relicensing Settlement Agreement entered into by the Authority and the New York State Office of Parks, Recreation and Historic Preservation (‘OPRHP’) at the request of OPRHP, and to approve the issuance of the Authority’s 2012 Subordinated Notes (‘Notes’) to support the State Parks Greenway Fund as described below.

BACKGROUND

“On July 18, 2005, the Authority executed the Relicensing Settlement Agreement Addressing New License Terms and Conditions (‘Settlement Agreement’) entered into by several parties to the relicensing of the Niagara Project, including OPRHP. Section 3.1 of Appendix E of the Settlement Agreement provides for the establishment of a Relicensing Settlement Agreement State Parks Greenway Fund, which is to be funded by the Authority in the amount of $3 million per year for the term of the 50-year License. The State Parks Greenway Fund was established to support the construction and/or rehabilitation of parks, recreation and related facilities in and around the Niagara River Greenway. A State Parks Standing Committee was created to administer and oversee projects financed by the State Parks Greenway Fund.

“The Settlement Agreement further provides that the Authority may elect to adjust the schedule of payments after consultation with OPRHP. OPRHP, in order to accelerate the funding of certain projects it wants to complete in the region, has requested of the Authority that it elect to make an adjustment to the schedule of payments as allowed under the terms of the Settlement Agreement. Specifically, OPRHP has identified approximately $25 million of qualifying improvements it wishes to make in the next few years.

DISCUSSION

“OPRHP initially requested that the Authority consider accelerating approximately half of the $3 million annual payments over a period of up to twenty-five years to provide a lump-sum amount payable now such that the present value of the revised payment stream would be the same as in the original agreement, as required by the terms of the Settlement Agreement. However, the discount rate required by the Settlement Agreement is somewhat higher than today’s borrowing rates. As a more cost-effective alternative, OPRHP requested that the Authority consider issuing Notes to a third-party investor for which the proceeds may be deposited into the State Parks Greenway Fund and a portion of the Authority’s annual payments which would otherwise be deposited to the State Parks Greenway Fund would be used to repay the Notes. The New York State Environmental Facilities Corporation (‘EFC’) was identified as a potential third-party participant in this process. Pursuant to a Note Purchase Agreement between EFC and the Authority (a draft of which is attached as Exhibit ‘2e-A’), EFC has advised that it would purchase the Notes and expects to hold it in its portfolio as an authorized investment. The Authority would issue the Notes pursuant to a Resolution Authorizing Subordinated Notes (Federally Taxable), attached hereto as Exhibit ‘2e-B.’ Approval of certain provisions of such resolution by the State Comptroller under Section 1010-a of the Power Authority Act will be sought.

“The Authority’s financial advisor, Public Financial Management, will advise Authority staff and verify the reasonableness of the interest rates employed in the transaction. Upon the execution and closing of such Notes, the net proceeds received by the Authority shall immediately be deposited into the State Parks Greenway Fund and made available for qualifying projects as set forth in the Section 3 of Appendix E of the Settlement Agreement. The Authority will continue to make $3 million per year available for the State Parks Greenway Fund for the term of the License with the payment schedule adjusted to reflect the use of a portion of the $3 million provided each year for up to twenty-five years to pay the debt service associated with the Notes. After the payment of the debt service, all the remainder of the annual $3 million amount will be deposited into the State Parks Greenway Fund and made available for qualifying projects.

FISCAL INFORMATION

“The fiscal impact on the Authority in negligible. The transaction is revenue neutral to the Authority and would result in only a nominal increase to the amount of the Authority’s subordinated debt outstanding. The Authority is currently obligated to make the $3 million per year payment under the Relicensing Settlement Agreement. A portion of these payments will be used to pay debt service on the Notes.

RECOMMENDATION

“It is recommended that the Trustees approve an adjustment to the payment schedule for the Niagara Relicensing Settlement Agreement State Parks Greenway Fund pursuant to the terms of the Relicensing Settlement Agreement entered into by the Authority and the New York State Office of Parks, Recreation and Historic Preservation, and to approve the issuance of the 2012 Subordinated Notes to be funded by such adjusted payment schedule as described above. The Finance Committee considered this item at their meeting earlier today and is also recommending its approval.

“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 Trustees hereby authorize a modification of the Authority’s payment schedule under the Niagara Relicensing Settlement Agreement to utilize a portion of the $3 million provided each year for up to twenty-five years to pay the debt service associated with the 2012 Subordinated Notes on the terms and conditions and for the purposes set forth in the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That the Trustees hereby adopt the Resolution Authorizing Subordinated Notes, Series 2012 (Federally Taxable), attached hereto as Exhibit “2e-B,” together with such subsequent changes, insertions, deletions, amendments and supplements thereto as the Chairman or President and Chief Executive Officer of the Authority may approve which shall be deemed to be part of such resolution, as adopted; and be it further

RESOLVED, That the Chairman, President and Chief Executive Officer, Executive Vice President and General Counsel, Executive Vice President and Chief Financial Officer, Treasurer and Deputy Treasurer be, and each of them hereby is, authorized on behalf of the Authority to execute a Note Purchase Agreement with the New York State Environmental Facilities Corporation (in substantially the form attached hereto as Exhibit “2e-A”), with such changes, insertions, deletions, amendments and supplements thereto as such authorizing executing officer deems in such officer’s discretion to be necessary or advisable, such execution to be conclusive evidence of such approval; subject to the approval of the form hereof by the Executive Vice President and General Counsel, and be it further

RESOLVED, That in connection with the issuance of the Subordinated Notes, the Chairman, President and Chief Executive Officer, Executive Vice President and General Counsel, Executive Vice President and Chief Financial Officer, Treasurer and Deputy Treasurer be, and each of them hereby is, authorized on behalf of the Authority to deliver the audited financial statements of the Authority to the purchaser of the Subordinated Notes; and be it further

RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer, the Treasurer and Deputy Treasurer, and all other officers of the Authority be, and each of them hereby is, authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any and all actions and execute and deliver any and all certificates, agreements and other documents, which they, or any of them, may deem necessary or advisable in order to carry out, give effect to and consummate the transactions contemplated by the foregoing resolutions and the documents referenced herein subject to the approval of the form thereof by the Executive Vice President and General Counsel.

f. Proposed Schedule of Trustees’ Meetings in 2013

The Corporate Secretary submitted the following report:

“The following schedule of meetings for the year 2013 is recommended:

Date Location Time

January 23, 2013 (Wednesday) WPO 11:00 a.m.

February 26, 2013 (Tuesday) WPO 11:00 a.m.

March 21, 2013 (Annual) (Thursday) WPO 11:00 a.m.

APRIL NO MEETING SCHEDULED

May 21, 2013 (Tuesday) Albany 11:00 a.m.

June 25, 2013 (Tuesday) Niagara 11:00 a.m.

July 30, 2013 (Tuesday) WPO 11:00 a.m.

AUGUST NO MEETING SCHEDULED

September 24, 2013 (Tuesday) WPO 11:00 a.m.

October 22, 2013 (Tuesday) WPO 11:00 a.m.

NOVEMBER NO MEETING SCHEDULED

December 17, 2013 (Tuesday) WPO 11:00 a.m.

RECOMMENDATION

“The Chairman and the President and Chief Executive Officer support the proposed schedule for the Authority’s Trustees’ Meetings for the year 2013, as set forth in the foregoing report.

“I recommend the approval of the proposed schedule by adoption of a resolution in the form of the attached draft resolution.”

The following resolution, as submitted by the Corporate Secretary, was unanimously adopted.

RESOLVED, That the schedule of Trustees’ Meetings for the year 2013, as set forth in the attached memorandum of the Corporate Secretary, be, and hereby is, approved.

3. Proposed Agreement and Tariff Relating to the

Sale of Recharge New York Power and Energy

to the Griffiss Business and Technology Park

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve: (1) the attached draft form of contract (the ‘Agreement’) for the sale of Recharge New York (‘RNY’) power and energy between the Power Authority of the State of New York (‘Authority’), GUSC Energy Inc. (the ‘Customer’), and Griffiss Utility Services Corporation (‘GUSC’) (collectively, ‘Griffiss Entities’); and (2) the attached draft form of tariff (currently denominated as ‘Service Tariff No. RNY-2A’). Drafts of the Agreement and Service Tariff No. RNY-2A are attached as Exhibit ‘3-A’ and Exhibit ‘3-B,’ respectively.

BACKGROUND

1. The RNY Power Program

“Chapter 60 (Part CC) of the Laws of 2011 (‘Chapter 60’) created the RNY Power Program. The RNY Power Program makes 910 megawatts (‘MW’) of RNY Power available to ‘eligible applicants’ for the purpose of attracting new businesses and retaining and expanding existing businesses throughout the State of New York.

“RNY Power is comprised of: (1) fifty percent (50%) of firm hydroelectric power from the Authority’s Niagara and St. Lawrence/FDR hydroelectric projects (‘RNY Hydropower’) that was withdrawn, effective August 1, 2011, from the utility corporations that had purchased such power for the benefit of domestic and rural consumers; and (2) fifty percent (50%) of market power procured by the Authority from market or other appropriate sources (‘RNY Market Power’).

“Pursuant to Chapter 60, the Authority is authorized, beginning July 1, 2012, to ‘make available, contract with and sell’ to eligible applicants such RNY Power allocations as are recommended by the Economic Development Power Allocation Board (‘EDPAB’). RNY Power awards will consist of equal parts of RNY Hydropower and RNY Market Power. The award is referred to in the Agreement and Service Tariff No. RNY-2A as an ‘Awarded Allocation.’

“Persons who receive Awarded Allocations have the option to elect to purchase from the Authority either: (1) the entire amount of the Awarded Allocation (i.e., the RNY Hydropower component and the RNY Market Power component); or (2) solely RNY Hydropower component (which is 50% of the amount of the total amount of the Awarded Allocation). The portion of the Awarded Allocation the awardee elects to purchase from the Authority is referred to as the ‘Accepted Allocation.’

“Eligible applicants may not transfer Awarded Allocations or Accepted Allocations to a different recipient, different owner or operator of a facility, or different facility, unless approved by EDPAB as being consistent with the criteria and requirements of the program.

2. RNY Power Allocation to Griffiss

“The Griffiss Business and Technology Park located in Rome, New York (‘Griffiss Park’ or ‘Park’) hosts many tenants consisting of a number of business enterprises that employ thousands of people focusing on technology, manufacturing, aviation and other fields. The Park and its tenants make a significant contribution to the Rome and Mohawk Valley area economies.

“The Customer applied for an allocation of RNY Power for the purpose of providing RNY Power to the business enterprises located within the Park.

“On April 24, 2012, EDPAB recommended, and the Trustees approved, an allocation of RNY Power to the Customer in the amount of 6,730 kilowatts for distribution by GUSC to eligible businesses within the Griffiss Park.

“As discussed in more detail below, the Agreement and Service Tariff No. RNY-2A would set forth the terms and conditions that would apply to (i) the allocation and sale of the Accepted Allocation to the Customer, (ii) the sale of Awarded Allocation by the Customer to GUSC which can distribute RNY Power, and (iii) the sale and distribution of the Accepted Allocation to eligible businesses in the Park (referred to as ‘Eligible End Users’ in the Agreement.

“The sale of RNY Power in this case is being styled as a wholesale transaction given that, among other things, the Authority is not selling RNY Power directly to Eligible End Users, the Authority will not be serving as the New York Independent System Operator, Inc. (‘NYISO’) Load Serving Entity (‘LSE’) for Accepted Allocation, and the local electric utility will be delivering the Accepted Allocation in accordance with a wholesale, not a retail, tariff.

DISCUSSION

“Like previous RNY Power sale arrangements, the Agreement and Service Tariff No. RNY-2A reflect the following RNY Power Program-specific features as well as other appropriate terms and conditions: (1) the Awarded Allocation is comprised of 50% RNY Hydropower and 50% RNY Market Power; (2) the Authority will be offering two separate ‘energy products’ under the Agreement, a ‘blended’ product consisting of 50% RNY Hydropower and 50% RNY Market Power, and a ‘RNY Hydropower only’ product; (3) the Customer must elect to purchase either the ‘RNY Hydropower only’ or the RNY ‘Blended’ product from the Authority.

“The following is a summary of some key features of the proposed Agreement:

· The Authority will sell RNY Power associated with the Accepted Allocation to the Customer. The Customer will resell the Accepted Allocation to GUSC. GUSC, in turn, will distribute and resell the Accepted Allocation to Eligible End Users.

· RNY Power associated with the Accepted Allocation will be sold to Eligible End Users at a price equal to the amount the Customer pays to the Authority for such RNY Power.

· The Agreement will memorialize, as part of the terms and conditions applicable to the sale of the Accepted Allocation, the collective employment and capital investment commitments that will apply as consideration for the Accepted Allocation. The commitments will represent an aggregate amount of employment and capital investments that will be undertaken by the GUSC Entities and Eligible End Users.

· Eligible End Users will be identified in the Agreement as supplemented by an annual report filed by the Customer.

· One or more of the Griffiss Entities will function as the New York Independent System Operator, Inc. (‘NYISO’) Load Serving Entity (‘LSE’).

· The Griffiss Entities will be required to conduct an energy audit in the manner provided for in the Agreement at least once during the term of its RNY Power allocation.

· The term of the Awarded Allocation is seven (7) years.

· In the event of a curtailment of hydropower produced by the Authority’s hydroelectric projects, the Authority will supply and the Customer will purchase ‘Substitute Energy’ procured by the Authority.

· The Customer may only sell the RNY Power comprising the Accepted Allocation to GUSC, and GUSC may only sell such RNY Power to Eligible End Users.

“The following is a summary of some key provisions of Service Tariff No. RNY-2A, which will be part of the Agreement:

· The monthly base rate if the Customer elects the RNY Hydropower only option is the Authority’s Preservation Power Rate. The monthly base rate if the Customer elects the RNY Blended option is comprised of the Authority’s Preservation Power Rate, a Capacity Component, and a Market Energy Component.

· The Authority will bill the Customer for electric service on a regular basis and expects to render bills on or about the fifteenth (15th) business day of the month for charges due for the previous Billing Period and any other amounts due and owing.

· If the actual costs vary from those estimated in the base rate components, the difference will be reconciled through a monthly billing mechanism designed to recover actual costs incurred (referred to in the tariff as the ‘Energy Charge Adjustment’).

· The Tariff provides for a pass-through to the Customer of all taxes, assessments and other charges or costs imposed by third-parties in connection with the sale of RNY Power.

· The Authority, in contrast to the local electric utility, will calculate all ‘loads splits’ for the purpose of apportioning an appropriate amount of energy, demand and NYISO installed capacity to the Accepted Allocation.

· Service Tariff No. RNY-2A provides for a ‘periodic rate adjustment process’ or ‘PRAP’ on annual basis or at other times as deemed necessary by the Authority. The PRAP will also address an Annual Adjustment Factor process for Preservation Power rate components as well as adjustments to all other rate components and other appropriate factors.

“The Agreement and Service Tariff No. 2A include other terms which are largely standard terms and conditions for Authority power contracts and tariffs relating to such matters as prohibitions on the transfer of RNY Power allocations, metering arrangements, and modification and termination of allocations and the Agreement.

“The proposed Agreement and Service Tariff No. RNY-2A may be subject to modifications before execution as the parties to the transaction attempt to address the Park’s unique circumstances as well as delivery-related arrangements with the local electric utility that serves the Park.

FISCAL INFORMATION

“The proposed RNY rates will result in increased hydropower revenues for the Authority when compared to the previously accrued hydropower revenues from the domestic and rural customers. The Agreement and Service Tariff No. RNY-2A would provide for full cost recovery.

RECOMMENDATION

“The Senior Vice President – Economic Development and Energy Efficiency and the Director – Marketing Analysis and Administration recommends that the Trustees approve the form of the proposed Agreement and Service Tariff No. RNY-2A.

“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. In response to a question from Trustee Nicandri, Mr. Lupo said that the list of customers that have applied for the Recharge New York (“RNY”) low-cost power have been vetted by staff; some have already been eliminated since the initial application process because staff determined that they were not qualified end users under the contract. The program will start with customers who have all been considered eligible as provided for in the contract. Mr. Huvane added that the contract with Griffiss Entities (“Griffiss”) is unique because they own the Industrial Park and also the utility which is a separate legal entity. Responding to a question from Trustee Mahoney, Mr. Huvane said that the utility aspect makes it unique. In response to a question from Trustee LeChase, Mr. Huvane said Griffiss can only sell the RNY power to “eligible end users” as defined in the contract. Also, Griffiss is under a contractual commitment to ensure that only such “eligible end users” receive the benefits of the allocation made to Griffiss. In response to further question from Trustee Nicandri, Mr. Huvane said they do have some metering; the utility can allocate the electricity to the appropriate tenants as it is used. Also, Griffiss is responsible to report to the Authority the employment and capital investments committed to in Griffiss’ application. Mr. Lupo added that the entire aspect of the delivery to the Industrial Park and ultimate delivery to the end user has been thoroughly evaluated by staff and staff has been assured by Griffiss that the benefit of the low-cost RNY power will flow directly to “eligible end users” as provided for in the contract.

Ms. Judith McCarthy added, and Mr. Lupo concurred, that the agreement between the Authority and Griffiss defines “eligible end user” consistent with the RNY statute and references the relevant section of the statute in the Agreement. This would, therefore, not permit any business that is excluded from the definition of “eligible applicant” (e.g. retail business) under the statute to receive the low-cost power. She continued that the agreement between the Authority and Griffiss addresses the concern that a company which would be disqualified under the RNY statute would not receive the benefit.

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

RESOLVED, That the Trustees hereby approve the proposed form of: (1) the “Agreement Relating to the Sale of Recharge New York Power and Energy at Wholesale Between Power Authority of the State of New York, GUSC Energy Inc., and Griffiss Utility Services Corporation” (“Agreement”); and (2) the “Wholesale Schedule of Rates Relating to Sale of Recharge New York Power Service Tariff No. RNY-2A (Griffiss Business and Technology Park)” (“Service Tariff No. RNY-2A”); and be it further

RESOLVED, That the President and Chief Executive Officer or his designee be, and hereby is, authorized, subject to approval of the form thereof by the Chief Operating Officer and the Executive Vice President and General Counsel, to do such other things as may be necessary or desirable to finalize the form of the Agreement and Service Tariff No. RNY-2A as set forth in the foregoing report of the President and Chief Executive Officer, and to execute the Agreement; 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 as may be necessary or desirable to finalize the form of the Agreement and Service Tariff No. RNY-2A, 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.

4. Adjustment of Payment Schedule for the Niagara Project

Host Community Relicensing Settlement Agreement

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize Authority staff to take all actions necessary to modify the timing of a portion of the Authority’s current payment stream under the Niagara Host Community Relicensing Settlement Agreement Addressing Non-License Terms and Conditions dated June 27, 2005 (‘Settlement Agreement’) to provide near term funding support for the City of Niagara Falls, at the request of the City, such that the present value of the payment stream remains unchanged.

BACKGROUND

“The Authority executed the Settlement Agreement with several parties to the relicensing of the Niagara Project, referred to as the Host Communities[*], including the City of Niagara Falls. Section 4.1 of the Settlement Agreement provides for the establishment of a Host Communities Fund, which is to be funded by the Authority in the amount of $5 million per year for the term of the 50-year Niagara Project License, which results in a present value of approximately $89.93 million. As part of the Settlement Agreement, the Host Communities allocate the annual payments from the Authority amongst its members in accordance with agreed-upon percentages. The City of Niagara Falls’ share is 17% or $850,000 per year. The Host Communities agreed that the funds shall be expended on capital projects and infrastructure that benefit the general public and promote economic development, public health and safety. To date, six such disbursements have been made under the Settlement Agreement, leaving another 44 payments remaining.

DISCUSSION

“The City of Niagara Falls has requested that the Authority consider accelerating its share of the relicensing settlement payments to accommodate a current financial need of the City resulting from an on-going dispute concerning the disposition of certain Seneca Tribal Council casino revenues, a share of which had been provided to the City of Niagara Falls. While a number of the Authority’s relicensing settlement agreements with various other parties specifically provides for such a modification, the Host Communities’ Settlement Agreement is silent with respect to this provision. Therefore, any such modification to the payment stream will require an amendment to the Settlement Agreement or some other form of agreement to effectuate the change.

“The Host Communities’ Settlement Agreement sets forth a discount rate to be employed in carrying out certain provisions of the Agreement. This rate is the same as that contained in all of the other various Niagara relicensing settlement agreements. By employing a consistent rate, the Host Communities, specifically Niagara Falls, would be treated no differently than other relicensing entities that have accelerated their payment stream. The Authority would convert the annual $850,000 payment stream for the remaining 44 years to an equivalent (in present value terms) lump-sum payment of approximately $13.45 million. To ensure that the funds are being utilized for their intended purpose, i.e., capital projects and infrastructure that benefit the general public and promote economic development, public health and safety, the agreement to modify the payment stream should provide for a report to the Authority on the use of these funds.

“Representatives of the City of Niagara Falls have also indicated that if there is a near-term resolution to the on-going dispute that is causing the current financial need, the City would like to reimburse the Authority for the advance of the funds, taking into account the time value of money at the contractually stated discount rate, and revert back to the annual payment stream as originally contemplated by the Settlement Agreement. Authority staff is amenable to this and will incorporate it into the agreement between the City and the Authority to effectuate this arrangement.

FISCAL INFORMATION

“The Authority has sufficient reserves to accommodate this transaction and since the conversion of the Settlement Agreement’s payment stream to a lump-sum amount rather than the 44 remaining annual payments will not change the value of the Settlement Agreement in present value terms, the modification will not have a significant impact on the Authority’s finances.

RECOMMENDATION

“It is recommended that the Trustees authorize a conversion of the Authority’s payment schedule under the Settlement Agreement to an equivalent (in present value terms) lump-sum payment of approximately $13.45 million for the City of Niagara Falls, as described above.

“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. Donald Russak presented highlights of staff’s recommendation to the Trustees. In response to a question from Chairman Koelmel, Mr. Russak said the Settlement Agreement, states that the Host Communities have agreed that the monies would be spent only on capital projects and infrastructure that would benefit the general public and promote economic development, public health and safety. The agreement with the City of Niagara Falls to accelerate its share of the payments would continue to include that provision. In response to further question from Chairman Koelmel, Mr. Russak said the City of Niagara Falls made this request in order to get through a near-term fiscal crisis. Its long-term goal is to revert back to the annual cash flow stream after having addressed its budget crisis and ultimately employ the funds in the manner previously stated. Responding to a question from Trustee Foster, Ms. McCarthy said the City of Niagara Falls does not have any current litigation against the Authority. Responding to a question from Trustee Nicandri, Mr. Russak said the state Comptroller does not have to approve this financing for the city of Niagara Falls.

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

RESOLVED, That the Trustees hereby authorize a modification of the Authority’s payment schedule for the City of Niagara Falls under the Niagara Host Community Relicensing Settlement Agreement Addressing Non-License Terms and Conditions dated June 27, 2005 to an equivalent (in present value terms) lump-sum payment of approximately $13.45 million as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

5. Hurricane Sandy Disaster Recovery Rebates

for Recharge New York Customers

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize up to $10 million to provide rebates for the Authority’s Recharge New York Customers affected by Hurricane Sandy on Long Island, in New York City and the Lower Hudson Valley region. The rebates will help cover the cost of replacing critical energy-related equipment damaged by the storm and will be provided through the Authority’s existing Energy Services Programs (‘ESP’). The Authority will coordinate this program with similar initiatives that are being undertaken by the New York State Energy and Research Development Authority (‘NYSERDA’), the Long Island Power Authority (‘LIPA’) and the area investor-owned utilities.

BACKGROUND

“New York State was devastated by the effects of Hurricane Sandy. Strong winds and sustained storm surge upwards of 13 feet of water paralyzed the entire Eastern Seaboard, most significantly, Long Island and New York City and the majority of counties in the Lower Hudson Valley region and surrounding area. Millions of people were without power for a week or more and significant numbers are still without power. Water damage from the storm surge is still being assessed and businesses may take years to recover their losses.

“Governor Cuomo declared a State of Emergency and asked the State’s Authorities to assist those impacted by the storm. In response to the Governor’s request, the Authority developed a program to provide rebates to eligible Recharge New York power allocation customers on Long Island, in New York City, and Westchester and Rockland counties and other areas in New York State that may subsequently be subject to a major federal disaster declaration relating to Hurricane Sandy under the Authority’s existing energy efficiency programs. It is anticipated that up to $10 million will be required to fund the rebate program.

DISCUSSION

“Since the 1980s, the Authority, through its Energy Services Programs (‘ESP’), has offered various types of energy services and clean energy technology programs to participants throughout the State to help them lower their energy usage and achieve cleaner and more efficient use of energy and natural resources.

“In 2009, and then amended in 2011, Chapter 477 of the Laws of 2009 (Public Authorities Law Section 1005(17), clarified and expanded the Authority’s ability to carry out energy efficiency projects for all eligible public entities in New York State as well as facilities of the Authority’s power allocation customers including, most recently, the Recharge New York program.

“In light of the significant damage incurred by New York State as a result of Hurricane Sandy, and in coordination with NYSERDA, LIPA and the area investor-owned utilities, Authority staff developed an energy efficiency rebate program to provide aid to those most severely impacted by the storm to supplement the current ESP program. The Authority’s offering will be made available to eligible Recharge New York businesses and not-for-profit organizations on Long Island, in New York City and Westchester and Rockland counties and other areas in New York State that may subsequently be subject to a major federal disaster declaration relating to Hurricane Sandy, included in PAL 1005(17), and will enable these customers to purchase critical energy-related equipment to help restore their facilities.

“Initial assessments indicate that 120 Recharge New York businesses and not-for-profit organizations will be eligible to apply for the rebates based on the following criteria:

a) The business or not-for-profit organization shall be a recipient of power on or before October 29, 2012;

b) The equipment being replaced shall have been installed and in service as of October 29, 2012;

c) The equipment lost or damaged was impaired as a direct impact of Hurricane Sandy;

d) Additionally, the purchase of equipment replacing the lost or damaged equipment must be deemed energy efficient by the Authority.

“Currently, Authority staff is developing a menu of items for which rebates will be offered including energy efficient furnaces, boilers, water heaters, compressors and air handlers. The level of rebate available, as well as a maximum total rebate amount per customer, will be incorporated into the offering to ensure the availability of funds to the maximum number of eligible program recipients.

“The rebates will be made available through an application process with an open enrollment through June 30, 2013 or until program funding is exhausted.

FISCAL INFORMATION

“Funding will be provided from the Operating Fund in the amount of up to $10 million. The amount of the rebate cannot exceed the cost of the equipment, less any additional financial reimbursement from other rebate programs, insurance and/or Federal Emergency Management Agency (‘FEMA’) relief.

RECOMMENDATION

“The Senior Vice President – Economic Development and Energy Efficiency, the Vice President – Energy Efficiency and the Vice President – Marketing recommend that the Trustees approve the implementation of the project, as discussed above.

“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.”

Ms. Helen Eisenfeld presented highlights of staff’s recommendation to the Trustees. In response to a question from Chairman Koelmel, Ms. Eisenfeld said that Mr. Russak, along with staff from Marketing and Legal departments reviewed the NYSERDA, LIPA and other utilities rebate programs and established the threshold of up to $10 million for the Authority’s program. This analysis took into consideration the possibility that other counties may be designated a disaster area and the Authority may have to include other recipients for rebates.

In response to a question from Trustee Foster, Ms. Eisenfeld said staff’s recommendation of up to $10 million will ensure that staff does not have to request additional funds from the Trustees if other areas were deemed eligible for disaster recovery. Mr. Huvane added that staff contacted its customers regarding damages they have incurred as a result of the storm. He said there are a variety of customers with damages but the Authority is limited to rebates for critical energy-related equipment. Mr. Russak added that the compilation of $10 million was as a result of staff’s analysis of other comparable rebate programs (NYSERDA and the other utilities). The Authority wanted to be consistent with its program; taking into consideration the number of potential customers, staff computed a maximum of $10 million in rebates. He continued that, at this point, staff does not foresee any issues that would require the threshold to be above $10 million.

Chairman Koelmel said the Authority has to ensure that the focus of its commitment is to be part of a solution and that the messaging and the positioning is appropriate in terms of the Authority’s customers and the market at large.

In response to a question from Trustee LeChase, Ms. Eisenfeld said staff had discussions with NYSERD, LIPA and the other utilities as part of the coordination of its storm-related rebate program; therefore, there will not be any duplication in administering the program. Customers cannot receive more than 100% of the cost of the equipment damaged and the rebate will be less amounts from insurance, FEMA reimbursement or other utility rebates.

Responding to a question from Trustee Nicandri, Ms. McCarthy said the intent of the Authority is to work on a parallel track with FEMA and to ensure that rebates the Authority provides under its program is reduced by the amount of reimbursements the Customer receives from other sources. Ms. Eisenfeld added that NYSERDA has requested that staff provide a list of the Authority’s customers who are eligible to receive rebates. She said staff has started that process and vetting of the applications will avoid any duplication; also, staff will track rebates the Authority will be paying out as opposed to other entities.

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

RESOLVED, That the Trustees authorize funding in an amount not to exceed $10 million to provide rebates to eligible Recharge New York power allocation customers for the purchase of energy efficient equipment to replace equipment damaged or lost in Hurricane Sandy. The Authority’s offering will be made available to businesses and not-for-profit organizations on Long Island, in New York City and Westchester and Rockland counties and other areas in New York State that may subsequently be subject to a major federal disaster declaration relating to Hurricane Sandy. Criteria for eligible customers has been established as outlined the foregoing report of the President and Chief Executive Officer; and be it further

RESOLVED, That Operating Fund monies be used to fund energy efficiency rebates for eligible Recharge New York customers in the amount and for the purpose listed below:

Expenditure Authorization

Operating Funds (not to exceed)_____

Hurricane Sandy Disaster $10 million

Recovery Rebate Program

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.

6. Next Meeting

The next Regular Meeting of the Trustees will be held on Tuesday, December 18, 2012, at 11:00 a.m., at the Clarence D. Rappleyea Building in White Plains, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.

[*] The Host Communities include the Niagara Power Coalition, City of Niagara Falls, Town of Lewiston, Town of Niagara, Niagara County, Lewiston Porter School District, Niagara Wheatfield School District and the City of Niagara Falls School District.