MINUTES OF THE MEETING
THE GOVERNANCE COMMITTEE
December 18, 2012
Table of Contents
Subject Page No. Exhibit
1. Adoption of the December 18, 2012 Proposed Meeting Agenda 3
2. CONSENT AGENDA: 4
a. Minutes of the Regular Meeting held on July 31, 2012 5
b. Procurement and Real Estate Reports and Revised Employee 6 “2b-1” – “2b-8”
Policy for the Educational Assistance Program
c. Ethics & Compliance Program 7
§ NERC Reliability Standards Compliance
3. DISCUSSION AGENDA: 13
a. Supplier Diversity Program 13
4. Motion to Conduct an Executive Session 14
5. Motion to Resume Meeting in Open Session 15
6. Next Meeting 16
Minutes of the regular meeting of the New York Power Authority’s Governance Committee held at the Authority’s offices at 123 Main Street, White Plains, New York at approximately 10:00 a.m.
The following Members of the Governance Committee were present:
Trustee Eugene L. Nicandri, Chairperson
Chairman John R. Koelmel
Trustee Terrance P. Flynn
Trustee Joanne M. Mahoney
Also in attendance were:
R. Wayne LeChase Trustee
Gil Quiniones President and Chief Executive Officer
Judith McCarthy Executive Vice President and General Counsel
Edward Welz Chief Operating Officer
Donald Russak Chief Financial Officer
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
Brian McElroy Treasurer
Karen Delince Corporate Secretary
Dennis Eccleston Chief Information Officer
Rod Mullin Director – Fuel Planning and Operations
Debra White Director – Supplier Diversity Program
Gary Schmid Manager – Network Services
Louise Nestler Assistant Ethics Officer
Lorna Johnson Assistant Corporate Secretary
Sheila Baughman Senior Secretary, Corporate Secretary’s Office
Sheri L. Mahoney Senior Vice President, Senior Programs Manager – First
Niagara Financial Group
Chairman Eugene Nicandri presided over the meeting. Corporate Secretary Delince kept the Minutes.
Chairman Eugene Nicandri welcomed committee members; Trustee LeChase and Authority senior staff to 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 Section B(4) of the Governance Committee Charter.
1. Adoption of the Proposed Meeting Agenda
Chairman Nicandri said that, going forward, the ground rules by which the Committee will proceed has been changed. He said that at the suggestion of Authority Chairman Koelmel the Governance Committee has adopted the procedure used by the Board of Trustees, utilizing the Consent agenda for routine reports submitted regularly by staff; if a member has any questions on an item that is on the Consent agenda, a motion can be made to move it to the Discussion agenda.
By motion made and seconded the agenda for the meeting was adopted.
2. CONSENT AGENDA:
On motion made and seconded, the Consent Agenda and reports provided to members of the Governance Committee was approved.
a. Approval of the Minutes
The Minutes of the Committee’s Regular Meeting of July 31, 2012 were approved.
b. Procurement and Real Estate Reports and Revised
Policy for the Educational Assistance Program
Ms. Joan Tursi submitted the following report:
“This memorandum is to advise the Governance Committee of certain 2012 YTD activities of the Corporate Support Services / Enterprise Shared Services (‘CSS/ESS’) Business Unit, including: procurement contract activity, disposal of personal property, acquisition and disposal of real property, Supplier Diversity Program activities and plant inventory statistics, as well as fossil fuels and corporate finance activities of the Energy Resource Management and Business Services Business Units, respectively. This memorandum also advises the Committee of proposed revisions to the Employee Policy relating to the Authority’s Educational Assistance Program.
“Pursuant to Subsection C.5 of the Authority’s Governance Committee Charter relating to Reports, the Vice President Procurement and the Director Real Estate are required to report to the Committee at all regularly scheduled meetings and the Committee has the authority to require Procurement and Real Estate staff to prepare additional reports and to produce documents for Committee review.
“The reported activities are governed by various State laws and regulations and are set forth in the attached Reports.
“As more fully described in the individual reports attached hereto as Exhibits 2b-1 – 2b-8, the Procurement Contract Report summarizes activity for procurements of $5,000 or greater awarded since January 1, 1990 that were active in 2012, as identified by the Authority’s SAP computer system. The Disposal of Personal Property Report lists all personal property disposal transactions over $5,000 conducted during the reporting period and summarized year-to-date. The Real Estate Report includes all transactions over $15,000 for the acquisition or disposal of real property. The Supplier Diversity Program Activity Report summarizes dollars awarded to New York State-certified Minority and Women-owned Business Enterprises (‘MWBEs’) based on reportable expenditures. The Plant Inventory Analysis lists current stock value and compares it to that of the same period last year, with a brief explanation for any significant increase or decrease, where applicable. The Fossil Fuels and Corporate Finance Reports list the fuel- and finance-related transactions conducted by the Fuel Operations and Treasury work groups, respectively.
“The Authority is committed to helping its salaried employees pursue professional growth and development and encourages the use of the Educational Assistance Program for courses leading to an undergraduate or graduate degree or a certificate program that is of mutual benefit to employees and the Authority. The proposed revisions to the Employee Policy (attached hereto as Exhibit 2b-8) governing this Program include, but are not limited to: mirroring the language in revised Performance Planning documents (2.1 and 8.4), adding a payback clause for employees that terminate employment (3.1) and placing limitations on the number of reimbursements employees can receive (6.1).”
c. Recent Developments and Status of NYPA’s
Ethics and Compliance Program
Mr. Joseph Gryzlo submitted the following report:
ETHICS and COMPLIANCE
“The Office of Ethics and Compliance advises NYPA’s trustees, officers and employees on the legal, regulatory and NYPA Code of Conduct ethics and compliance standards relating to NYPA’s employees and operations. It coordinates the investigation of allegations and concerns involving NYPA’s assets and employees. This report highlights significant developments in NYPA’s ethics and compliance program for the period July 31, 2012 to December 18, 2012.
“The principal substantive issues arising under the NYS ethics laws and NYPA’s Code of Conduct investigated or researched since the most recent Governance Committee report on July 31, 2012 include various requests to engage in outside activities and employment and issues concerning conflicts of interest, endorsements, gifts inquiries, post-employment restrictions, securities’ ownership and unwarranted privileges.
“The Office of Ethics and Compliance provides annual training to all trustees, officers and employees to reaffirm NYPA’s commitment to prevailing ethics principles and raise awareness of the laws and regulations with which all NYS public employees are required to comply. Annual review of and certification to the NYPA Ethics Code of Conduct is implemented as an additional measure to reinforce acceptable business and professional conduct. The Office also coordinates required training for designated employees to comply with the Federal Energy Regulatory Commission’s Standards of Conduct relating to its transmission and energy marketing functions.
“The Office of Ethics & Compliance provides guidance to current and former NYPA employees, as well as prospective employees. It interprets the ethics post-employment laws to assist former employees who are recruited by NYPA to return as temporary, part time employees. In one instance during this reporting period, a former employee who retired approximately five years ago was interested in returning on a part time basis as a temporary engineer. Since leaving NYPA, this engineer had provided services to another electric utility in New York and is currently working for an affiliated utility. NYPA is working with this electric company on a transmission issue. Prior to extending an offer to this former employee, NYPA management contacted the Office to review the potential hire. It was determined that the retiree could return to NYPA, however, he would be precluded from performing any work on projects involving the other utility for whom he is currently employed.
“In another instance of pro-active outreach, NYPA’s Human Resources department asked for an opinion related to prospective new hires who own their own businesses. The Office determined that each case must be reviewed on its own merits and recommended that conflicts of interest and other ethics principles be discussed with prospective hires that are known to have outside business interests prior to NYPA making an employment offer. If the employee chooses to continue in the outside business, NYPA’s offer letter includes specific conflicts of interest, confidentiality and other ethics awareness guidance that the employee must agree to follow prior to employment. In some instances, prospective employees must choose whether to continue their outside business or become a NYPA employee.
“A bargaining unit employee asked for guidance related to his ability to bid on a request for proposal (‘RFP’) offered by the NYS Office of Parks, Recreation and Historic Preservation (‘NYS OPRHP’) to operate a concession facility at an area park. This inquiry was unique because, while NYS OPRHP maintains and operates the park, the land where it is located is owned by NYPA. NYPA pays NYS OPRHP an annual fee to maintain several properties around the state. We reviewed the bid documents and consulted with the NYS OPRHP General Counsel’s Office to determine that there were no violations of the Public Officers Law, NYPA’s Code of Conduct or general procurement rules that would prevent the employee from bidding on public concession work. The RFP includes specific documents that the bidder must complete which will satisfy any necessary disclosures about the NYPA employee’s public employment and affiliation with entities involved in this initiative.
“The Office was asked to provide an opinion concerning the ethical considerations for NYPA employees who may be involved in working on the proposed Transco project. While the opinion outlined the parameters to be considered, it also included a recommendation that a formal opinion be requested of the NYS Joint Commission on Public Ethics (‘JCOPE’) to ensure that employees working on the project clearly understand all conflicts of interest and post-employment provisions which may apply to their work. Each scenario submitted to JCOPE is reviewed on its own merits and evaluated on a case-by-case basis.
Collaboration with the New York State Inspector General’s Office
“The Ethics and Compliance Office continues to collaborate with the NYS Inspector General’s Office on investigations of allegations and complaints involving NYPA employees and business partners. Issues of corruption, fraud, criminal activity, conflicts of interest or abuse by state officers and employees relating to their office or employment, or by anyone having business dealings with covered agencies, are included within the Inspector General Office’s jurisdiction. Details of pending cases will be provided during the Governance Committee Executive Session upon request.
TRAINING AND OUTREACH
“The NYS Inspector General Office’s Director of Training made four presentations to headquarters staff in May 2012. The purpose of these training sessions was to review the jurisdiction and role of the Inspector General and highlight employees’ legal responsibility to report wrongdoing, including, abuse, bribery, conflicts of interest, fraud, theft and governmental waste.
“In the intervening months since the Inspector General Office’s presentations in White Plains, NYPA’s General Counsel and Chief Ethics & Compliance Officer visited NYPA’s Blenheim-Gilboa Project, Clark Energy Center and Albany offices to deliver the message conveyed during the Inspector General’s training sessions. These live training sessions were provided to management employees at NYPA’s facilities and addressed two primary subjects: (1) the Inspector General’s jurisdiction and State employees’ legal responsibility to report wrongdoing and (2) NYPA’s ethics and compliance program with a focus on acceptable business conduct and procedures for engaging in approved outside employment. These presentations have resulted in several outside employment disclosures and inquiries concerning appropriate usage of NYPA vehicles and various other procedures.
“Additional presentations will be made to Niagara Project, St. Lawrence Project and Southeast NY facility management employees during the fourth quarter of 2012 and first quarter of 2013.
“Project Sunlight is a component of the Governor’s 2011 Public Integrity Reform Act. Effective January 1, 2013, it requires NYPA to record in a database maintained by the NYS Office of General Services all individuals, firms or other entities (excluding other State and local governmental agencies and elected officials) that appear before NYPA on their own behalf or in a representative capacity on behalf of a client or customer for certain purposes. The covered ‘appearances’ will be limited to live exchanges (i.e. meetings, phone conversations, video conferences) and will exclude e-mails, letters and other written communications.
“The database will be available to the public and is intended to allow members of the public access to information about individuals or firms appearing before state agencies for the purpose of influencing decisions in five substantive categories: 1) procuring a state contract for real property, goods or services; 2) rate making; 3) representing clients in regulatory matters; 4) representing clients in a judicial or quasi-judicial proceeding, or 5) representing clients in the adoption or repeal of a rule or regulation.
“NYPA provided its input to the Governor’s Counsel’s Office for inclusion in the guidelines for the implementation of this project. It is anticipated that only employees serving in positions that have decision making authority, including Trustees, will be required to submit covered interactions with individuals or firms subject to Project Sunlight’s disclosure requirements. While formal guidelines are still forthcoming, the intent of this legislation is to encourage full disclosure and the active participation of all agencies and authorities to identify and remove conflicts of interest.
“It is expected that the Ethics and Compliance Office staff will record NYPA’s contacts in the Project Sunlight database after they have been identified and provided by NYPA’s business units. Further information, including required training on Project Sunlight, will be forthcoming as it becomes available.
RELIABILITY STANDARDS COMPLIANCE
“This report highlights important aspects of NYPA’s reliability standards compliance program for the period August 1, 2012 to November 17, 2012. A brief background statement is followed by discussion of specific reliability standards-related topics affecting the enterprise.
Following the 2003 Northeast blackout, the Energy Policy Act of 2005 was passed and gave the Federal Energy Regulatory Commission (‘FERC’) the power to establish mandatory standards for electric reliability. FERC named the North American Electric Reliability Corporation (‘NERC’) as its Electric Reliability Organization (‘ERO’) and charged it with developing and enforcing reliability standards. The Northeast Power Coordinating Council (‘NPCC’) is NERC’s enforcement agent for the Northeast U.S. NERC established an organization and processes for developing, implementing and enforcing standards. The initial set of standards became enforceable on June 18, 2007. Since then, the standards have continued to be expanded and revised to address known gaps in the standards or gaps discovered from lessons learned from analyses of more recent system disturbances and blackout events.
“NYPA is currently registered, under the NERC functional registration model, as a Transmission Owner, Generator Owner, Generator Operator, Purchasing and Selling Entity, and Load Serving Entity. Recently, NYPA requested de-registration as a Load Serving Entity. Under these registrations, NYPA is subject to 115 standards containing 379 requirements. The standards cover a wide range of NYPA’s operation and maintenance activities and processes. In addition, NYPA is subject to some more stringent standards and reliability requirements established by NPCC.
NERC Reliability Standards Compliance Enforcement Actions
“During the reporting period, NYPA staff managed compliance enforcement actions related to several of the NERC Reliability Standards that are applicable to NYPA’s NERC registrations. The actions and statuses are briefly stated below:
Possible Violation Concern Investigations
“During the reporting period, Technical Compliance investigated several possible NERC Reliability Standards compliance concerns identified by the staff pursuant to an internal procedure entitled ’Possible NERC Reliability Standards Compliance Violation.’ The compliance concerns were associated with the Protection and Control (PRC), Critical Infrastructure Protection (CIP), Modeling, Data, and Analysis (MOD), and Facilities Design, Connections, and Maintenance (FAC) NERC reliability standards. These investigations are typically concluded within 30 days with a recommendation to either self-report a possible violation to NPPC or not. Any self-reports that are recommended by this process are reported above. This internal process is viewed by the regulator as evidence that NYPA has a strong internal compliance program.
Self-Certifications of Compliance
“During the reporting period, NYPA successfully completed forty-one (41) self-certifications of compliance for NERC reliability standards associated with Protection and Control (PRC), Critical Infrastructure Protection (CIP), Interconnection Reliability Operations and Coordination (IRO), and Facilities Design, Connections, and Maintenance (FAC) related to NYPA’s NERC registrations. Technical Compliance has established a rigorous process to ensure that compliance evidence is updated before NYPA self certifies compliance.
BULK ELECTRIC SYSTEM DEFINITION (BES)
“The relevant background on this topic is contained in the July 31, 2012 report to the Governance Committee.
“As stated in that report, on June 21, 2012 FERC issued a proposal that would approve NERC’s revisions to the definition of the bulk electric system to provide greater clarity and ensure consistency in identifying system elements across the nation’s reliability regions. Under the new definition, all assets operating at 100 kV or greater will be elements of the bulk electric system. NERC’s Notice of Proposed Rulemaking (‘NOPR’) also proposed to approve NERC’s new rules of procedure for adding elements to and removing them from the definition on a case-by-case basis. While proposing to approve the revisions to the definition of the BES, the NOPR also seeks comment on certain issues, including the exclusion of certain facility configurations from the definition. In August, NYPA staff worked with NPCC and LPPC members in developing responses to FERC’s questions. The responses were submitted to FERC on September 5.
“During the reporting period, NYPA staff continued is reliability compliance gap analysis for its 41 newly identified BES elements transmission assets applicable under NYPA’s current NERC functional registrations. This gap analysis will be completed by the end of 2012. Technical Compliance does not expect to discover any gaps.
“As stated in the July 31, 2012 report, the adoption of the new BES definition may require NYPA to register as a Transmission Operator (TOP) and/or a Transmission Planner (TP), which would require NYPA to demonstrate compliance with additional reliability standards. In October, NYPA met with the NYISO to discuss the assignment of TOP and TP compliance responsibilities and accountabilities for NYPA’s newly identified BES assets. The NYISO agreed, in principle, to take compliance responsibility and accountability for approximately 50% of NYPA’s 41 newly identified assets, since the NYISO already has operational control of those assets pursuant to existing agreements with NYPA. NYPA also plans to engage NPCC and other New York Transmission Owners (TO) regarding reliability standards compliance responsibilities and accountabilities for the remaining assets. In addition, NYPA may be able to exclude certain of these new assets from being subject to the reliability standards. In parallel to these discussions, NYPA continues to meet with the NYISO and the NYTOs to discuss and develop an action plan to address the statewide impacts of the implementation of the new BES definition. This group has been meeting regularly to clarify the impacts with respect to functional responsibility and compliance accountability for the TOP and TP Standards. The team met several times during the reporting period.
NERC RECOMMENDATIONS TO INDUSTRY – Facility Ratings for Transmission Lines
“During the reporting period, NYPA continued to implement its work plan for responding to NERC’s October 7, 2010 ‘NERC Alert – Recommendation to Industry’ requiring NYPA to review its current Facility Ratings Methodology for its solely- and jointly-owned transmission lines to verify that the methodology is based on actual field conditions (in particular, line clearances). As stated in the July 31, 2012 Governance Committee report, the assessment discovered about 260 line clearance discrepancies in NYPA’s 1,400 miles of transmission lines; about 50 of which are on lines rated as high priority. Staff has engaged contractors and other utilities to remediate the discrepancies on the high priority lines; the work on the high priority lines will be completed by the end of 2012. Remediation of discrepancies on the medium priority lines is being planned for completion in 2013.
CYBER SECURITY DEVELOPMENTS
“During the reporting period, NYPA staff continued to monitor the progress toward implementation of Version 5 of NERC’s CIP reliability standards. The industry approved Version 5 in October and NERC Board of Trustees approved Version 5 in November. It is anticipated that the revised standards will become effective in early 2015. Furthermore in September, the FERC announced the creation of a new FERC office that will help the Commission focus on potential cyber and physical security risks to energy facilities under its jurisdiction. The Office of Energy Infrastructure Security (OEIS) will provide leadership, expertise and assistance to the Commission to identify, communicate and seek comprehensive solutions to potential risks to FERC-jurisdictional facilities from cyber-attacks and such physical threats as electromagnetic pulses. Legislatively, both the U. S. House of Representatives and the U. S. Senate have pending bills that are aimed at further strengthening cyber security. The President is also considering issuing an Executive Order to strengthen national cyber security. Technical Compliance and Information Technology are monitoring these developments on an ongoing basis to assess technical and financial impacts to NYPA’s cyber security infrastructure and compliance management.
ENVIRONMENTAL, HEALTH AND SAFETY AUDITS
“This report highlights aspects of NYPA’s environmental, health and safety compliance audit program for the period from September 27, 2011 to October 10, 2012. Per the procedure for the program, reports to the Governance Committee are made annually. A brief background statement is followed by discussion of specific topics affecting the audit program.
“Since 2006, NYPA has conducted environmental, health and safety audits at its facilities to ensure that they are operated and maintained in compliance with applicable laws, regulations, permits, policies and procedures. The audit findings identified various regulatory, policy and preferred management practice deficiencies which are being addressed by appropriate staff. They are categorized into three (3) levels which are prioritized based on risk.
“Overall, NYPA’s facilities have maintained substantial compliance with environmental, health and safety laws and regulatory requirements. The findings are primarily administrative in nature or address housekeeping issues which do not rise to a high risk level.
Environmental Safety and Health Audits
“Audits were conducted at St. Lawrence Power Project; Hawkins Point Visitors Center; Massena Intake; Wilson Hill Wildlife Management Area; Flynn Power Plant; Harlem River, Hell Gate and Gowanus Power Projects; Research and Development Program; Blenheim Gilboa Power Project; Lansing Manor Visitors Center, a communication tower near Blenheim Gilboa and the Albany office. The audits are divided into program audits and comprehensive environmental, health and safety audits.
“To date, the most significant findings have been at the Poletti Power Project, the Niagara Power Project and Poletti Decommissioning. For Poletti, certain air quality reports had not been filed with the regulatory agency. At Niagara, incompatible materials were being stored together and a construction area was not properly cordoned off. At the Poletti Decommissioning, a confined space program did not include an inventory of confined spaces, and two areas had potential electrical hazards. These issues have been remedied.
“The ‘Addendum to the Environmental Risk Assessment’ to address health and safety compliance issues is being reviewed by staff. It will be finalized shortly. Per the procedure for the program, the Internal Audit Committee will meet later this year to discuss the status of the program and suggestions to improve the program.”
3. DISCUSSION AGENDA:
a. Supplier Diversity Program
Ms. Debra White, Director of Supplier Diversity Program, provided an update of the Authority’s diversity supply program. She said the Authority provides a report on its diversity efforts to the State on a yearly basis. To date, the Authority has expended $65 million or 19.9% with New York State firms. Ms. White ended by saying that the Authority is on track to achieve the state-mandated goad of 20% of its reportable expenditures to New York State Certified Minority and Women-Owned Business Enterprises (“MWBEs”) for the year 2012.
In response to a question from Chairman Nicandri Ms. White said the Authority’s expenditures in this effort was more than 20% and it will meet the 20% state mandated goal this year. In response to further question from Chairman Nicandri, Ms. White said there were no indications that the State intends to move the target above 20%.
In response to a question from Trustee LeChase, Ms. White said the 20% requirement includes contracts to both direct contractors and subcontractors, and that the Authority uses the Directory of the New York State certified contractors for its program. If a firm is not certified the Authority cannot count it towards its goal.
In response to a question from Trustee Mahoney, Ms. White said although the majority of its contracts are to direct contractors, there is no requirement for the overall amount expended; the 20% goal is achievable among direct contractors and subcontractors.
President Quiniones said Ms. White and the other Authority business units should be commended for their efforts in meeting the goal for contract awards to MWBEs set by the Governor. Chairman Koelmel said that the diversity program is an opportunity for the Authority to “lead by example” and afford MWBEs an opportunity to do business in the State. President Quiniones added, and Ms. White concurred, that the Authority is among the top agencies in amounts expended in this program.
4. 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. Upon motion made and seconded an Executive Session was held
5. Motion to Resume Meeting in Open Session
Mr. Chairman, I move to resume the meeting in Open Session. Upon motion made and seconded the meeting resumed in Open Session.
6. Next Meeting
The next regular meeting of the Governance Committee is to be determined.
On motion made and seconded, the meeting was adjourned by the Chairman at approximately