MINUTES OF THE
MEETING
OF
THE GOVERNANCE
COMMITTEE
November 15, 2011
A meeting of the Governance Committee was held
at the Authority’s offices at 123 Main Street, White Plains, New York at
approximately 8:30 a.m.
Trustee Eugene L. Nicandri, Chairperson
Trustee Johnathan Foster
Trustee D. Patrick Curley
Trustee John S. Dyson
Trustee Mark O'Luck
Also
in attendance were:
Gil
Quiniones Acting
President and Chief Executive Officer
Judith McCarthy Acting
General Counsel
Donald
Russak Acting
Chief Financial Officer
Thomas Antenucci Senior
Vice President – Power Supply Support Services
Joan Tursi Senior
Vice President – Corporate Support Services
Randy Crissman Vice
President – Technical Compliance
Joseph Gryzlo Vice
President and Chief Ethics and Compliance Officer
Patricia Leto Vice
President – Procurement
Lesly Pardo Vice
President – Internal Audit
Jill Anderson Director
– Business Integration
Brian McElroy Treasurer
Karen Delince Corporate
Secretary
Dennis Eccleston Chief
Information Officer
Rod Mullin Director
– Fuel Planning and Operations
Mark O’Connor Director
– Real Estate
Lorna Johnson Assistant
Corporate Secretary
Louise Nestler Assistant
Ethics Officer
Sheila Baughman Senior
Secretary, Corporate Secretary’s Office
Chairman
Nicandri welcomed staff members to the meeting.
1.
Adoption of the Proposed Meeting Agenda
By motion made and seconded, the November 15, 2011 meeting agenda was
adopted.
2.
Minutes
of the Regular Meeting of September 27,
2011
The
minutes of the Committee’s September
27, 2011 meeting were adopted.
3.
Procurement and Real Estate Reports
Ms. Joan Tursi said that status reports on
procurement and real estate activities for the period ended September 30, 2011 will be presented.
3.1 Procurement
Contract Activity
Ms. Patricia Leto highlighted the following procurement
contract activities:
·
The total expenditures for
procurement contracts for the period ended September 30, 2011 exceeded
$261 million;
·
12%
of the contracts were for
construction work;
·
44%
for the purchase of equipment and commodities;
·
15%
for personal service contracts (engineering, consulting and legal services);
·
29% for other
services service-based contracts;
·
approximately 97%
of the total amount expended
were for contracts that were competitively bid.
3.2 Disposal
of Personal Property
Ms. Leto said that under the
Public Authorities Accountability Act (“PAAA”), the Authority is required to
prepare a report listing all personal property over $5000 in value disposed of
during the reporting period. For
the period ended September 30, 2011, the Authority received $106,467.50 for the
sale of scrap copper cable and $22,563.71 for miscellaneous surplus inventory
material at the Charles Poletti Project; the Authority also received $5,100 for
scaffolding at the Blenheim-Gilboa Project.
Fleet
Operations
Ms. Leto said that during the
reporting period ended September 30, 2011 the Authority participated in one
fleet-related auction conducted by JJ Kane Auctioneers. This auction resulted in the sale of 55
units of property.
The total amount for all personal
property with a value in excess of $5,000 for the reporting period is approximately
$497,776.71.
In response to a question from Chairman
Eugene Nicandri, Ms. Leto said that the Authority conducts auctions twice per
year and that JJC Auctioneers was the lowest bidder for this service.
3.3 Acquisition and Disposal of Real Property
Mr.
Mark O’Connor reported on the acquisition and disposal of real property, as
well as leasing and permitting activities for the period July 1
through October 31, 2011.
Danger
Tree Permits
This
program allows the Authority to acquire property rights
of the transmission right-of-way to remove vegetation which has grown to
a sufficient height to threaten the safe operation of the Authority’s
transmission system. During this reporting period, staff obtained 79 danger tree permits. Of note, the recent snow storm in October resulted in the disruption of electric power, a vast majority of which was caused
by trees and high growth vegetation.
Land
Use Permits
The
Real Estate division issued six land use permits during the reporting
period. These permits are issued by the Authority to allow others to use
the Authority’s land holdings (normally easement
rights) in a safe and productive way and consistent with the safe operation of
the Authority’s transmission facilities.
Leasing
The Authority owns
the building at 123 Main Street and occupies approximately 60% of it. Approximately 40% of the building is occupied by lease-paying
tenants. This leasing operation generates about $2.7 million of
gross revenue. One of the
tenants, JPMorgan Chase, has vacated its leasehold of 29,300 square feet on the
4th floor. With the assistance of the Authority’s broker,
Newmark Knight Frank, staff is in the process of marketing this space; however,
market conditions are not favorable. More than 20% of the 5.9 million square-feet
of office in the White Plains Central Business District are considered open and
available for leasing. Further, the
trend is currently showing more commercial space available in the market than is
being absorbed. The trend is also
showing more deals for smaller spaces being requested. In addition, some of the tenants recently
contacted staff requesting concessions in their leases. Staff is working to address this issue which reflects the overall economic conditions for the
businesses involved.
With regards to the Authority’s leasehold at 501
Seventh Avenue, staff has made a determination not to renew this leasehold when
it expires on August 31, 2012. This
leasehold has an annual net rental of $277,000.
St.
Lawrence Lands
One
of the major commitments the Authority made during the relicensing of the St.
Lawrence/FDR Power Project was to convey certain Authority-owned lands, identified as
surplus, to either municipalities or landowners who owned adjoining property to these lands. To date, staff
has conveyed all of the lands committed to various municipalities of Lisbon,
Louisville, Waddington and Massena. In addition, of the 520 parcels
committed to private landowners, approximately 412 parcels have been conveyed.
In
response to a question from Trustee Jonathan Foster, Mr. O’Connor said that staff is
developing a model office to show prospective tenants how smaller spaces can be
utilized.
In response to a question from Chairman Nicandri, Mr.
O’Connor said that staff has been contacted by two tenants requesting that the
Authority take back some of the space leased to them. Staff will be working with these tenants
and will report the outcome to the Committee at the next meeting.
In response to further question from Chairman Nicandri, Mr. O’Connor
said that the creation of a trail at St. Lawrence for horseback riding would
require some funding from the Parks Department which has indicated that it does not have the revenues for such project.
3.4 Supplier Diversity
Program Activities
Ms. Leto reported that for the period July 1 through September 30, 2011, the
Authority awarded $34.6 million (15.11%) of its reportable expenditures to New York State
Certified Minority and Women-Owned Business Enterprises (M/WBEs). M/WBEs financial dealers transacted over
$267.4 million (27.01%) in principal sales and purchases for the Authority. The
Authority’s efforts with regard to M/WBEs were recognized and applauded by the
Empire State Development Corporation for yielding the highest expenditures in the
State for SFY 2009-2010. Also, the
Authority’s Director of Supplier Diversity, Ms. Debra White, is listed as a
“2011 Champion of Diversity” in the September/October 2011 issue of Diversity
Plus Magazine.
In response to a question from Chairman
Nicandri, Ms. Leto said that based on discussions with Ms. White, it is more
prudent to set the Authority’s M/WBE goal plan at 10% rather than setting it
too high.
Responding to a question from
Trustee Mark O’Luck, Ms. Leto said that the Authority’s energy efficiency
projects will help it exceed the Governor’s goal for
M/WBE firms to account for 20% of the State’s business.
In response to a question from
Trustee Curley, Ms. Leto said that staff will look
into the issue of contractors who use specialized equipment not manufactured in
the United States being removed from the denominator when computing the
Authority’s results for M/WBE contracts.
Ms. Leto reported that as of September 30, 2011, the total stock value of the
Authority’s inventory was $89,796,575. This includes the $1.6 million for field poles issued for the Niagara Project’s Rotor Poles Replacement Project in December 2010.
The Construction of the new Niagara Warehouse which began in March 2010 is complete and procurement and warehouse staffs have relocated to the new facility. The remainder of the staff is scheduled to relocate by January 2012.
Mr. Rod Mullin
said that the total fuel purchases and related costs for the period July 1 thru September
30, 2011 was $94.5 million. Of this total, $86 million was spent on Natural Gas purchases and
associated costs and $8.5 million on Fuel Oil purchases and related costs. There were 28 natural gas and oil contracts in total, all of
which were competitively bid. To date, the Authority has transacted
approximately $4 million of business with the firm of YAKA Energy, a certified
M/WBE.
Two
oil purchases associated with the Commercial Operation Date of the Astoria
Energy II plant on July 1, 2011were made. The first purchase was made directly with Astoria Energy for the oil
remaining in the storage tank after the plant completed its testing (the
quantity covered 2 days worth of oil operation) and the second was made in
order to increase the inventory level to provide for 3 additional days of
operation on oil. Pursuant to the
Authority’s Gas Transportation Agreement with Con Edison, the Authority needs
to maintain sufficient oil inventory to sustain plant operation for 5 days on
oil in the event of gas system curtailments or plant operational issues.
Fuel
Prices for products that impact the Authority’s cost of doing business are as
follows:
·
Crude Oil, currently
trading at $98/barrel
·
No. 2 Heating Oil (used
at the Flynn Plant), currently trading at $132.30/barrel
·
Jet/Kero (used for the 500
MW unit) currently trading at $136.50/barrel
·
ULSD (used at the Astoria
Energy II Plant) currently trading at $138.60/barrel
Fuel Oil Prices for products that the Authority use in its
fossil plants range from $23-24/Mmbtu and are expected to remain high relative
to natural gas prices.
Prices for Natural Gas, the primary fuel for the Authority’s downstate units, are relatively low at $3.60/Mmbtu ($24/barrel) due to weak demand, high storage levels and increased supply and deliverability to the Northeast.
3.7 Corporate Finance Activity
Mr. Brian McElroy said
that for the period ended September 30, 2011, the
Authority expended approximately $3.4 million on financial-related agreements
primarily supporting the administration of the Authority’s debt program. Eighty percent of these administrative fees
are related to Revolving Credit Facilities for the Authority’s Variable Rate
Note programs. The short-term
markets continue to be supported by the Federal Open Market Committee’s (“Fed”)
decision to target a Federal funds rate between 0 and 25 basis points. The Authority’s Commercial Paper Notes
are currently being remarketed between 15 and 20 basis points. Staff expects the Fed to maintain its
target rate through 2012; therefore, the Authority’s Commercial Paper Notes
should continue to be remarketed in its current range for the foreseeable
short-term future.
4.
Recent Development and Status of
NYPA’s Ethics and Compliance Program
Mr. Joseph Gryzlo provided an update of the Authority’s
Ethics and Compliance program. He
said that the Ethics and Compliance office continues to receive ethics inquiries from staff, the
main categories of which include
outside employment, post-employment, gift restrictions and conflicts of interest. He then reported that, of note, is an incident whereby one
of the Authority’s temporary staff vendors filed a complaint alleging that competitor vendors
were not properly accounting for payroll and other taxes in connection with Authority contracts. The
Ethics and Compliance office subsequently evaluated the allegations with the Law Department and, after review by Internal
Audit, the allegations were substantiated that two firms were not fulfilling
the terms of their contracts with the Authority. Based on the findings, the Authority rescinded the contracts with the
two vendors and terminated the services of
the temporary staff employed by those vendors.
In response to a question from Chairman Nicandri, Mr. Gryzlo said, and Mr. Lesly Pardo confirmed,
that Internal Audit conducts audits of Authority contracts with vendors and contractors. In response to further question from Chairman Nicandri, Mr. Pardo said that the contract with the vendors states that all personnel assigned to the
Authority shall be employees of the vendor. It did not provide for “per diem”
compensation and they violated that requirement.
In response to a question from Trustee Mark O’Luck,
Mr. Gryzlo said that after consultation with the Law Department, it was
determined that it was not the Authority’s responsibility to report the vendors
to the State government; the incident was dealt with as to their compliance
with the Authority’s contract. Ms.
Judith McCarthy added that, although it may not have been illegal for the
contractors to employ someone on a per diem basis, it was a violation of the
Authority’s contract with them which required them to engage
salaried employees. In response to further
question from Trustee O’Luck, Ms. Leto said that the vendors are not disbarred
from consideration for future contracts with the Authority.
In response to a question from Trustee Curley, Mr.
Gryzlo said that he would explore whether these companies engaged in an illegal
act because of their violation of the Authority’s contract. Responding to further question from Trustee
Curley, Mr. Gryzlo said that the vendor that brought the allegation to the
Authority’s attention engages temporary staff employees for the Authority. This vendor was
previously investigated by the Authority for similar practices and that
may be the reason for their vigilance with their competitors. Ms Leto added that the firm did not
benefit financially by bringing this allegation to the Authority’s attention,
in that, replacement contractors were not hired through this firm.
In response to a comment from Trustee Dyson, Mr.
Gryzlo said that as regards vendors’ requirements, the Authority plans to
compose its contract language to be more specific in order to reduce the
prospect of other vendors engaging in similar conduct without the Authority’s
knowledge. Mr. Pardo added that the
Internal Audit division schedules several contract audits each year to verify
compliance with contract terms. The
Internal Audit staff is committed to conduct audits of similar contracts in the
future to determine if there are any unusual activities.
Mr. Gryzlo continued that since the last meeting,
the Ethics and Compliance office has conducted supervisor development training
for new supervisors. They have also
conducted ethics training with the Payroll department, at their request. Mr. Gryzlo ended by stating that the
Board of Trustees would be receiving the annual Ethics Code of Conduct and FERC
Standard of Conduct training for their completion.
Compliance
Update
Mr. Randy Crissman gave an update of the
Authority’s Environmental Health and Safety audit program and the North
American Electric Reliability Corporation (“NERC”) Reliability Standards
Compliance Program.
NERC Reliability
Standards Compliance Program
NYPA’s
Internal Compliance Program and NPCC Culture of Compliance Survey:
·
In 2011, the
Northeast Power Coordinating Council (“NPCC”) conducted a Culture of
Reliability Compliance survey of its approximately 350 registered entities, which
includes the Authority. Based on the
Authority’s response to the survey, NPCC concluded that the Authority met or
exceeded all of the minimum characteristics of a favorable culture of
compliance. The philosophy has been
that entities with an effective compliance program are given favorable
treatment with respect to penalties and sanctions for any violations of the
standards.
NYPA’s
Registration as a Load Serving Entity (LSE):
·
The
Authority registered as a LSE in June 2007 for its municipal customers and
ALCOA, an Authority industrial customer.
·
In
2009, NPCC determined that the Authority’s municipal customers should be
registered as LSEs; the Authority should not be acting on their behalf. These municipal customers have since
registered as LSEs.
·
In
December 2010, NPCC notified ALCOA that it was reviewing the LSE registration
applicable to ALCOA and in July 2011, at NPCC’s request, staff provided NPCC
with a position paper on LSE registration for the ALCOA load. The Authority has not received a
response from NPCC; staff plans to have further discussions with NPCC on this
matter in the near future.
NERC
Recommendation to Industry – Facility Ratings for Transmission Lines:
·
On
October 7, 2010, NERC issued a “NERC Alert – Recommendation to Industry”
requiring transmission owners to review the clearances for their transmission
lines.
·
On
January 18, 2011, the Authority submitted a plan for responding to NERC’s
recommendation and the initial assessment phase is on track to be completed by
the end of the year or shortly thereafter.
·
If
issues are discovered, they will need to be discussed with the NYISO so that
the Authority can develop a mitigation strategy that will satisfy NERC’s
expectations.
·
The
Authority’s next report to NERC on this matter is due in January 2012.
Mr. Crissman also reported that FERC and NERC
are in the process of developing a revised definition of the Bulk Electric
System (“BES”) to include transmission assets at or above 100 kV. The new definition will be effective in
2012. The Authority’s assets that
become part of the BES under the new definition will be subject to enforcement
of the applicable standards in 2014.
A new version of the Critical Infrastructure
Protection (“CIP”) standards is being developed to address FERC’s Order 706
regarding cyber security in the electric utility industry. It is expected that this new version of
the CIP standards will be adopted in 2012 and become enforceable in 2014.
Staff will keep the Committee apprised of these
new developments as it is expected to have potentially significant impacts on
the Authority during the next one to three years.
Environmental
and Health and Safety Audit Program
·
Since
the September meeting of the Committee, staff conducted an environmental,
health and safety audit at the Poletti Power Project’s decommissioning
site. There were some findings
related to required inspections under health and safety regulations and
updating of certain plans to notify agencies that the Plant has been
decommissioned.
·
The
scope of the 2011 audit of the Authority’s Southeast New York facilities has
been confined to the requirements of the Resource Conservation and Recovery Act
hazardous waste management activities.
Audits of these requirements were
conducted at the Hell Gate, Harlem River and Gowanus Power Projects, which
generate very little hazardous waste.
·
Several
good management practice findings were identified during the audits.
Responding to a question from Trustee O’Luck, Mr. Crissman
said that although the Authority has 115 kV lines and substation that are not a
part of the BES, the Authority has to make sure that the maintenance of the
lines are in keeping with the standards. Acting President Quiniones said that the requirement, which is the same
standard for all transmission lines, which authority was delegated by NERC, was
implemented as a result of the Northeast blackout in 2003.
In response to a question from Trustee Dyson, Mr. Crissman
said that if the Authority discover a potential issue
with its transmission lines it would first have to contact the NYISO.
5. 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 appointment, employment, promotion, demotion,
discipline, suspension, dismissal or removal of a particular person or
corporation.
On motion made and
seconded, an Executive Session was held.
6.
Motion to Resume Meeting in Open
Session
Mr. Chairman, I move to resume the meeting in Open
Session. On motion made and seconded, the
meeting resumed in Open Session.
7.
Appointments of President and Chief Executive and
Executive Vice President and General Counsel
On motion made and seconded the Governance
Committee unanimously approved the selection of Mr. Gil C. Quiniones as
President and Chief Executive Officer of the Authority, subject to confirmation
by the New York State Senate. The Committee also unanimously approved
the appointment of Ms. Judith C. McCarthy as Executive Vice President and General
Counsel of the Authority.
8. Next
Meeting
The
next regular meeting of the Governance Committee will be held on Tuesday, March 27, 2012, at 8:30 a.m., at the Clarence D. Rappleyea Building in White Plains, New
York.
On motion made and seconded the meeting adjourned at
approximately 10:20 a.m.