MINUTES OF THE REGULAR MEETING

OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

May 24, 2011

 

Table of Contents

 

                Subject                                                                                                                                 

 

1.                   Approval of the May 24, 2011 Meeting Agenda                                                                

2.                   Consent Agenda:                                                                                                                      

a.       Minutes of  the Annual Meeting held on March 29, and    Special Meetings held on April 4, and April 21, 2011                               

   

 

b.        Hydropower Contracts with Moog, Inc. and ITT Enidine, Inc. – Transmittal to the Governor, Exhibit - “2b-A” – “2b-C”

  

 

c.        Transfers of Industrial Power                                                                                                                      

 

d.       Procurement (Services) Contracts – Environmental, Health and Safety Compliance Audit Program Technical Support – Awards                            

Resolution  

   

 

                 

Discussion Agenda:

3.                   Q&A on Reports from:

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

b.       Chief Operating Officer, Exhibit - “3b-A”

c.        Chief Financial Officer, Exhibit  - “3c-A”

d.       Other Business                                                                                                          

4.                   Proposed Preservation Power Contracts – Notice of Public Hearing, Exhibit - “4-A”; “4-B-1” - “4-B-2”; “4-C-1” -  “4-C-2”

Resolution                                                                                                                                                                               

 

5.                   Allocation of 2,500 kW of Hydropower, Exhibit - “5-A”; “5-A-1”

Resolution

 

6.                   Adoption of Board Policy Regarding Payouts from Trust Estate                                                        

Resolution  

 

7.                   Procurement (Services) Contract – Request for Additional Funding – Pillsbury Winthrop Shaw Pittman LLC – Contract No. 4500172044
Resolution                     

 

8.                   Motion to Conduct an Executive Session                                                                           

                                                                                                                                       

 

9.                   Motion to Resume Meeting in Open Session                                                                     

10.                Next Meeting                                                                                                                            

11.                Closing                                                                                                                                                                           

 


 

Minutes of the Regular Meeting of the Power Authority of the State of New York held via videoconference at the following participating locations at approximately 11:10 a.m.

1)       New York Power Authority, 123 Main Street, White Plains, NY

2)       New York Power Authority, 501 Seventh Avenue, New York, NY

 

The Members of the Board present were:

 

                                Michael J. Townsend, Chairman

                                Jonathan F. Foster, Vice Chairman

                                D. Patrick Curley, Trustee

                                John S. Dyson, Trustee

                                Eugene L. Nicandri, Trustee

                                Mark O’Luck, Trustee

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Richard M. Kessel                               President and Chief Executive Officer

Gil C. Quiniones                                   Chief Operating Officer

Judith C. McCarthy                            Acting General Counsel

Francine Evans                                    Executive Vice President, Chief Administrative Officer

                                                                    and Chief of Staff

Elizabeth McCarthy                           Executive Vice President and Chief Financial Officer

Edward Welz                                        Executive Vice President and Chief Engineer – Power Supply

Jordan Brandeis                                   Senior Vice President – Power Resource Planning and Acquisition

Steve DeCarlo                                      Senior Vice President – Transmission

Bert Cunningham                                Senior Vice President – Corporate Communications

Thomas DeJesu                                   Senior Vice President – Public and Governmental Affairs

Paul Finnegan                                      Senior Vice President – Public, Governmental and Regulatory Affairs

William Nadeau                                   Senior Vice President – Energy Resource Management

James Pasquale                                   Senior Vice President – Marketing and Economic Development

Donald Russak                                    Senior Vice President – Corporate Planning and Finance

Joan Tursi                                             Senior Vice President – Corporate Support Services

Paul Belnick                                         Acting Senior Vice President – Energy Services and Technology

Thomas Concadoro                            Vice President and Controller

Thomas Davis                                      Vice President – Financial Planning and Budgets

Dennis Eccleston                                 Vice President – Information Technology/Chief Information Officer

Michael Huvane                                  Vice President – Marketing

John Kahabka                                     Vice President – Environmental, Health and Safety

Joseph Leary                                        Vice President – Community and Government Relations

Lesly Pardo                                           Vice President – Internal Audit

Christine Pritchard                               Vice President – Media Relations and Corporate Communications

Scott Scholten                                      Vice President and Chief Risk Officer

John Suloway                                       Vice President – Project Development, Licensing and Compliance

Vincent Esposito                                  Assistant General Counsel – Legislative and Regulatory Affairs

Gerald C. Goldstein                             Assistant General Counsel – Procurement and Contract Affairs

Andrew Neuman                                 Special Counsel

Karen Delince                                      Corporate Secretary

Brian McElroy                                     Treasurer

Paul Tartaglia                                       Regional Manager – SENY

Jill Anderson                                         Director – Supply Acquisition and Renew Energy

Michael Saltzman                               Director – Media Relations

Sarah Barish-Straus                            Special Assistant – Project Development, President's Office

Sheila Baughman                                                Senior Secretary – Corporate Secretary’s Office

John V. Connorton, Jr.                        Hawkins Delafield & Wood LLP

 


 

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


 

Chairman Michael Townsend welcomed the Trustees and staff to the meeting.

 

 

1.                   Approval of the May 24, 2011 Meeting Agenda

 

On motion made and seconded the Agenda for the Meeting was approved.

 

2.                   Consent Agenda

            Chairman Townsend said the Economic Development Power Allocation Board had recommended that the Authority’s Trustees approve item 1c (Transfers of Industrial Power) at their meeting held earlier today.

Trustee Curley recused himself from voting on the Consent Agenda because of his association with the companies in item 2b, Moog, Inc. and ITT Enidine, Inc.


 

a.                   Approval of the Minutes

 

                The Minutes of the Annual Meeting held on March 29, and Special Meetings held on April 4, and April 21, 2011were unanimously adopted.

               
 

b.                   Hydropower Contracts with Moog, Inc. and ITT Enidine, Inc.  –     Transmittal to the Governor

 

                The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve the proposed agreements (‘Agreements’) for the sale of Replacement Power (‘RP’) to Moog, Inc. (‘Moog’) and Expansion Power (‘EP’) to ITT Enidine, Inc. (‘ITT’) and to authorize their transmittal to the Governor.  The proposed agreements with Moog and ITT are attached as Exhibits ‘2b-A’ and ‘2b-B,’ respectively.

 

BACKGROUND

 

At their May 22, 2007 and July 31, 2007 meetings, pursuant to criteria set forth in §1005 (13) of the Public Authorities Law (‘PAL’), the Trustees approved 200 kW and 1,200 kW hydropower allocations for ITT and Moog, respectively, for terms of five years.  On December 13, 2010, the Trustees authorized a public hearing, pursuant to §1009 of the PAL, on the proposed Agreements to effectuate the sale of power and energy for allocation to ITT and Moog.

 

In return for the 200 kW allocation, ITT committed to invest $2.5 million to expand its facility and install new production machinery and equipment.  The project would create 20 new jobs in addition to the existing 200 jobs.  Moog’s allocation was approved based on its facility expansion of 70,000 sq. ft. of manufacturing and office space and installation of machinery and equipment totaling $16.8 million.  The project would create 140 new jobs in addition to the existing 2,306 jobs.

 

“On February 1, 2011, the Authority and Moog signed an ‘Interim Agreement for the Sale of Replacement Power and Energy.’  The purpose of the Interim Agreement was to enable Moog to accept delivery of its RP allocation upon completion of its facility expansion.  Also, included in the Interim Agreement was an Appendix co-signed by the Authority, Moog and the delivering utility, New York State Electric and Gas Corporation (‘NYSEG’), to effectuate a March 1, 2011 delivery arrangement.  The Interim Agreement expires the earlier of July 31, 2011, or upon execution of a long-term contract, which is the Agreement now before the Trustees.

 

DISCUSSION

 

                “A public hearing was held on March 15, 2011 at the Frank S. McCullough, Jr. Hawkins Point Visitors’ Center at the St. Lawrence/FDR Power Project in Massena.  There were no oral statements made at the public hearing nor were written statements submitted.  The official transcript of the public hearing is attached as Exhibit ‘2b-C.’

 

RECOMMENDATION

 

The Manager – Business Power Allocations and Compliance recommends that the Trustees approve the proposed Agreements for the sale of Replacement Power to Moog, Inc. and Expansion Power to ITT Enidine, Inc. and authorize the transmittal of the Agreements to the Governor for his 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 Replacement Power and Expansion Power Agreements for the sale of hydroelectric power and energy generated by the Authority for sale to Moog, Inc. and ITT Enidine, Inc., respectively, are in the public interest and should be submitted to the Governor for approval, and that the agreements, along with the record of the public hearing thereon, be forwarded to the Speaker of the Assembly, the Minority Leader of the Assembly, the Chairman of the Assembly Ways and Means Committee, the Temporary President of the Senate, the Minority Leader of the Senate and the Chairman of the Senate Finance Committee; and be it further

 

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

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development, or his designee, be, and hereby is, authorized, subject to the approval of the form thereof by the First Deputy General Counsel, to negotiate and execute any and all documents necessary or desirable to implement the agreements with Moog, Inc. and ITT Enidine, Inc., as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

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

         

c.                    Transfers of Industrial Power

 

The President and Chief Executive Officer submitted the following report:

SUMMARY

 

                “The Trustees are requested to approve the transfer of power allocations for six existing customers that have changed their corporate name for various business reasons.  All six companies have agreed to continue to honor the terms and conditions of existing contracts with the Authority.

 

BACKGROUND

 

                “This is an administrative item brought to the Trustees at regular intervals.  Five of the six companies are requesting that the Trustees approve a transfer of their existing power allocation to a new corporate entity.  The power allocation and/or benefits for these five customers will continue to be delivered to the same location.  One of the customers is requesting a physical allocation transfer due to relocating from one facility to another.  All of the customers will continue to provide the same products and/or services as they did prior to the transfers.  The reasons for such transfer requests are described below.

 

                “The Power for Jobs (‘PFJ’) and High Load Factor (‘HLF’) power allocations involved in this item were approved by the Economic Development Power Allocation Board (‘EDPAB’) at their May 24, 2011 meeting, as required under Economic Development Law Section 186. 

 

“The Trustees have approved transfers of this nature at past meetings.

DISCUSSION

               

“The proposed transferees are as follows:

 

Aerospace Avionics, located in Bohemia, New York, produces integrated electronic and mechanical systems for commercial and military aircrafts.  In May 2007, the company was acquired by General Electric.  Under General Electric’s ownership, the company is operating as GE Aviation Systems, LLC at the facility located at 1000 MacArthur Memorial Highway in Bohemia, New York.  The company wishes to transfer its 650 kW PFJ allocation to GE Aviation Systems, LLC.  The company agrees to meet all contract commitments made for the allocation through the allocation’s expiration date.  

 

BOC Gases, Inc. (‘BOC’), with facilities in Buffalo and Selkirk, New York, is a gas and engineering company that has been in operation for over 30 years.  Over the years, the company has experienced many ownership changes, originally known as Airco and more recently, as The BOC Group, Inc.  In January 2008, the company’s name was changed to Linde, Inc. and on April 1, 2009, it was merged with its parent company, Linde LLC.  The company wishes to transfer its 15,750 kW and 2,500 kW HLF power allocations and 10,500 kW Expansion Power (‘EP’) allocation to Linde LLC.  The company will continue to honor all contract terms and commitments it holds with the Authority.

 

Climax Manufacturing Company is a paperboard manufacturer with mills located in Lowville and nearby Carthage, New York.  The company was approved for a 1,500 kW PFJ allocation that was split between the two facilities.   In June 2008, as allowed in PFJ Extended Benefits Legislation, the company elected to receive benefits in the form of an Electricity Savings Reimbursement payment (‘rebate’) instead of a power allocation.  The company currently receives its rebate as one payment based on an aggregation of the two facilities’ electricity use.  Due to a reconfiguration of the business in 2010, the Carthage facility is now operating as Climax Paperboard Inc.  The company has requested that the PFJ rebate benefits continue to be split between the two facilities, acknowledging that each is doing business under a distinct name with different tax ID numbers for each physical facility.  Climax Manufacturing Company, as parent corporation, agrees to honor the terms of the existing contract.

 

Cooper Hand Tools, located in Cortland, NY, specializes in metal machining and casting for the electrical power distribution industry.  On July 4, 2010, Cooper Hand Tools and Danaher Tools formed a joint venture named Apex Tool Group.  The operations at its Cortland facility remain the same.  The company wishes to transfer its 1,330 kW PFJ contract with the Authority to Apex Tool Group in order to continue to receive rebate until the expiration of the program.  All existing contract commitments will remain in effect.

 

PCB Machining Solutions, Inc., (‘PCB MSI’) specializes in precision machine components for the industrial, medical, aerospace and defense industries.  PCB MSI is a wholly-owned subsidiary of PCB Piezotronics, Inc. (‘PCB Piezotronics’), both being located in adjacent facilities in Depew, NY.  The company intends to merge PCB MSI with and into PCB Piezotronics and is requesting a transfer of its 250 kW Replacement Power (‘RP’) allocation to the surviving corporate entity, PCB Piezotronics, Inc., upon completion of the merger.  PCB Piezotronics agree to continue honoring all terms and conditions of its RP contract.

 

Westchester Arc, provides support services to mentally disabled citizens.  The company has recently moved from its original site at 121 Westmoreland Avenue in White Plains to a new headquarters in Hawthorne, NY, and is in the process of selling the White Plains facility.  Westchester Arc has requested to transfer its 375 kW PFJ allocation to its new headquarters at 265 Saw Mill River Road, Hawthorne, NY.  The company is meeting its job commitments and agrees to honor the terms and conditions of the existing contract for the remainder of the program.

RECOMMENDATION

 

                “The Manager – Business Power Allocations and Compliance recommends that the Trustees approve the transfer of power allocations for six existing customers that have changed their corporate name for a variety of business reasons while maintaining the same industry operations and contractual commitments.

 

“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 Authority hereby authorizes the transfers of six industrial power customers’ allocations in accordance with the terms described in the foregoing report of the President and Chief Executive Officer; and be it further

 

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


 

d.                   Procurement (Services) Contracts – Environmental, Health and Safety Compliance Audit Program Technical Support – Awards

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve the award and funding of procurement contracts to URS of New York, New York and Shaw Environmental, Inc. of Latham, New York.  The contracts will provide technical teams to assist the Authority in conducting environmental, health and safety compliance audits.  The term of the contracts will be for up to five years.  The total cost of the five-year contracts is estimated at $750,000.

 

BACKGROUND

 

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

 

              “The Authority adheres to an Environmental, Health and Safety Audit Program (‘Program’) pursuant to established corporate policies.  The objectives of the Program are to:  l) ensure that each Authority operating project is in compliance with all applicable environmental, health and safety laws, regulations, ordinances, permits, policies and procedures; and (2) provide senior management with an evaluation of the effectiveness of the Authority’s efforts in meeting all applicable environmental, health and safety requirements.  The Program is implemented through systematic audits of the operating projects.

 

              “Since 2006, thirty-nine audits have been conducted.  With the expiration of consultant contracts in 2010, staff recognized the need to engage additional consultants to assist in conducting the environmental, health and safety compliance audits.

 

 DISCUSSION

 

              “On February 23, 2011, a Request for Proposals (‘RFP’) was published in the New York State Contract Reporter for two or more consultants to provide technical teams to assist in conducting environmental, health and safety compliance audits from 2011 through 2015.  Having two consultants provides flexibility in the event one consultant is not available for scheduled audits.

 

              “Thirteen bids with total 2011 costs ranging from $78,420 to $753,516 were received on March 18, 2011.  Since the facilities to be audited in 2012-2015 have not yet been identified, billing rates were provided for those years.  The bids were evaluated from both a technical and a commercial perspective.

 

              “The lowest-priced proposals from URS and Shaw Environmental, Inc. met the technical requirements of the RFP.  Based on the credentials and experience of the staff proposed, Authority staff is confident that the proposed consultant teams are capable of providing the required services.  These firms have satisfactorily performed these types of services for the Authority in the past.  The cost estimates and hourly rates are reasonable.

 

              “Each consultant will assist in conducting a portion of the nine audits scheduled for 2011, as well as those scheduled for 2012-2015.  The locations of the 2012-2015 audits have not yet been selected.  The total estimated cost is $750,000. 

 

              “The Trustees are requested to authorize contracts with URS and Shaw Environmental, Inc. for up to $750,000 for a term of up to five years.  Funding will be authorized in accordance with the limits set forth in the Authority’s Expenditure Authorization Procedures.

 


 

FISCAL INFORMATION

 

              “Funds required to support these contracts in 2011, as described above, have been included in the 2011 approved O&M Budget.  Each of the consultants will spend a portion of their estimated costs because staff will be dividing the work between two consultants.  Funds for subsequent years will be included in the budget submittals for those years.

 

RECOMMENDATION

             

              “The Vice President – Technical Compliance recommends the Trustees’ approval of the award of procurement contracts to URS and Shaw Environmental, Inc. for the purposes and in the amounts set forth 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.”

 

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the award and funding of contracts to URS and Shaw Environmental, Inc. are hereby approved for the period of time indicated, in the amounts and for the purposes listed therein, as recommended in the foregoing report of the President and Chief Executive Officer.

 

Contractor                                   Contract Approval

 

                URS                                                        $375,000

 

                Shaw Environmental, Inc.               $375,000

 

AND BE IT FURTHER RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Financial 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 and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Acting General Counsel.                          

 


 

3.       a.   Report of the President and Chief Executive Officer

 

                President Richard Kessel referenced the allocations of Replacement and Expansion Power to Moog, Inc. and ITT Enidine, Inc. on the Consent Agenda and said that he and Trustee Curley recently toured Moog’s facilities and were impressed by the work they do there.  President Kessel also said that the allocation, which is a part of the Authority’s economic development program to provide low-cost power to companies in the state, in particular, companies in upstate New York, is an important allocation, and encouraged the other Trustees to visit the facility when they meet next at the Niagara Power Project.

Authority Summer Readiness Program

With regard to the Authority’s readiness for the summer, President Kessel said that Mr. Edward Welz, Executive Vice President and Chief Engineer, made a presentation to the Executive Management and senior staff, a copy of which was provided to the Board members.  President Kessel continued that load forecast reported by NYISO for this summer is 33,025 MW and that he had discussion with Mr. Welz who assured him that the Authority’s facilities have been prepared and will be able to manage the summer load this year. 

Astoria Energy 2 Project

                President Kessel said that notwithstanding skepticism, regulatory issues and other challenges, the Astoria Energy 2 Project is scheduled to go into commercial operation about July 1, 2011.  He said that the project provided a number of construction jobs and will be a major generation addition to the grid, especially with the closure of the Poletti Plant.  President Kessel also invited the Trustees to the tour of Astoria Energy 2 Plant this summer.

 

Harlem River Small Clean Power Plant

President Kessel said that there were some issues with a transformer at the Harlem River Unit#1, SCPP, but it is expected to return to service after the transformer is replaced on or about July 1st.  He added that the Authority is considering having spare transformers stored at one of its sites for use if and when necessary.

Emergency Planning

President Kessel said that Mr. Frank Ryan, who is in charge of Emergency Planning, with the assistance of NYC of Emergency Planning staff, consultants and experts in emergency planning, have developed a comprehensive emergency plan for the Authority.  He said that the plan includes any emergency that may occur and that Board members would be kept informed as to how the Authority is reacting to an emergency, especially with the approaching hurricane season.  He continued that, as part of its emergency plan, the Authority will be participating in a “Table-Top Drill” to be conducted for White Plains and Westchester County on June 1st.  

                In response to a question from Trustee Mark O’Luck, President Kessel said that the Authority has real time capabilities to interact with local and state emergency operations during an emergency.  He said that the Authority has a location equipped to deal with emergencies and that its emergency plan team knows where to go in the event of an emergency. 

                President Kessel’s community outreach activities since the last Trustees’ Meeting included a visit to the St. Lawrence Power Plant in Lewiston and Robert Moses Plant in Niagara.  He plans to visit Clark Energy Center in June and Blenheim-Gilboa Plant in July to continue his interaction with employees at the Authority’s facilities.


 

b.             Report of the Chief Operating Officer

 

Mr. Gil Quiniones provided highlights of the report to the Trustees. He said that, as an addition to President Kessel’s report on the Astoria Energy 2 Project, although the plant is owned and maintained by the developers, Astoria Energy 2, the Authority is responsible for the plant’s operation including buying and managing the fuel and bidding in the ISO market.  It is therefore a substantial addition to the Authority’s operations.  He ended by stating that the Authority is in good shape for the summer, both on the O&M and commercial side of its business.

                President Kessel added that the community opposed the building of this plant; however, the Authority continues discussions with representatives of the community including City Councilman Peter Valone, NYS Senator Michael Gianano, and the Queens Borough President to keep the plant in Astoria.


 

c.             Report of the Chief Financial Officer

 

Ms. Elizabeth McCarthy provided highlights of the financial report to the Trustees.  She said that the Authority’s net income at the end of April was 48.4 million, which is $3.2 million below budget.   She concluded that at the end of the reporting period the Authority had approximately $1.1 billion in cash and liquidity, which has been invested in a variety of instruments.

In response to a question from Vice Chairman Foster, Ms. McCarthy said that the $200 million of unrealized losses in hedges are the medium-term hedges the Authority entered into on behalf of its SENY customers and that the cost of the unrealized hedges will be recovered from them.  In response to a question from Chairman Townsend, Ms. McCarthy said that the SENY customers participated in the negotiation and execution of the hedges agreement.  She also said that the Authority has an outreach program with its SENY customers whereby the Authority proactively report to them on the status of those programs.

                In response to a question from Trustee Nicandri, Ms. McCarthy said that lake levels have improved, therefore hydro flows to Niagara will move toward what was forecasted. In response to a question from Trustee Curley, Ms. McCarthy said that forecasts are updated monthly.

 
 

d.             Other Business

 

                Chairman Townsend said that he read an article in the Watertown Daily Times regarding the transfer of various parcels of land to towns for subsequent sales to private citizens.  The article mentioned the Authority’s restrictive covenant on easements, and alleged that the properties have no market value.  He then asked that the legal staff look into this matter with a view to seeing what the Authority can do to facilitate these transfers.   Ms. Judith McCarthy said that the Legal Department will look into the matter and report its findings to the Trustees.

Recharge New York Program

Chairman Townsend said that he and Trustee Curley were invited by the Governor to the unveiling of the Recharge New York program and asked Trustee Curley to say a few words about it.  Trustee Curley said this industry and community event was a great opportunity for the Authority and those attending appreciated not only the presence of the Chairman and himself, but also the efforts of the Authority to make the Recharge New York program a reality.  Chairman Townsend added that it was very gratifying to visit the small manufacturing concerns in Massena and Niagara County, and to see the real impact the Authority has on people’s lives and the debt of gratitude they feel toward the Authority for what it is doing for them in terms of jobs it provides through its programs.

President Kessel added that, under previous programs, with the limited industrial incentive awards, the Authority was restricted in how it could assist companies.  When the new Recharge New York program becomes effective, businesses in upstate and central New York, particularly dairy businesses, will benefit from the program since they will be able to expand their businesses and create jobs.  He ended by saying that the Authority will play a big role in helping the dairy industries in the state once the Recharge New York Program takes effect.

Niagara Power Project’s 50th Anniversary Celebration

President Kessel said that the next meeting of the Board will be at the Niagara Project; after the meeting there will be a celebration recognizing the Project’s 50 years in service.  The Trustees, current and past employees, union officials, community representatives and elected officials will be invited to attend.

  

 

4.       Proposed Preservation Power Contracts – Notice of Public Hearing   

               

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve allocations of 5,000 kW and 3,000 kW of Preservation Power (‘PP’), respectively, to Newton Falls Fine Paper Company, LLC (‘NFFP’) and Upstate Niagara Cooperative, Inc. (‘Upstate Niagara’).  The Trustees are also requested to authorize a public hearing, pursuant to Section 1009 of the Public Authorities Law, on the proposed contracts (‘Contracts’) for the allocations.

 

BACKGROUND

 

“In 2005, the New York State Legislature enacted, and the Governor signed, Chapter 313 of the Laws of 2005, which established the PP program set forth in Section 1005(13) of the Public Authorities Law.  Preservation Power allows businesses in northern New York State to be served with low-cost hydroelectric power from the Authority’s St. Lawrence/FDR Power Project.  This program governs the allocation of any power relinquished from the block of 490 MW of St. Lawrence/FDR Project firm and interruptible power currently sold to Alcoa and MLC Corp. (formerly GM).  The law authorizes allocation of power to businesses in Franklin, Jefferson and St. Lawrence counties and applies the same allocation criteria as pertain to allocations of Replacement and Expansion Power.

 

“Each application for an allocation of PP must be evaluated under criteria that include, but need not be limited to, those contained in Public Authorities Law Section 1005(13)(a), which sets forth general eligibility requirements.  There is currently 8.7 MW of PP available to allocate to qualified businesses.

 

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

 

“On November 24, 2008, the Authority, National Grid, Empire State Development Corporation (‘ESDC’) and Franklin, Jefferson and St. Lawrence counties signed a Memorandum of Understanding (‘MOU’) that outlines the process to coordinate marketing and allocating PP.  The entities noted above formed the Northern New York Advisory Group (‘Advisory Group’) with the intent of better using the value of this resource to improve the economy of northern New York and the State of New York.  Nothing in the MOU changes the legal requirements applicable to the allocation of PP and the Authority’s Trustees are the sole decision makers regarding allocations of PP, subject only to the Governor’s contract approval role under Section 1009 of the Public Authorities Law.

 

DISCUSSION

 

                Newton Falls Fine Paper Company, LLC

 

                “NFFP is proposing to reopen its idled paper mill in Newton Falls, St. Lawrence County.  The plant was one of the few manufacturing or industrial facilities in the Adirondack Park.  The company’s project would include refurbishing existing and installing new paper-making machinery and building a biomass cogeneration plant to self-supply steam and electricity within three years.  NFFP is wholly-owned by Scotia Newton, a Delaware Corporation, which is, in turn, wholly-owned by Scotia Investments Limited (‘SIL’), a Canadian firm based in Hantsport, Nova Scotia. 

 

                “In 2007, SIL purchased NFFP and rehired 100 former mill workers who were laid off when the plant closed in 2000.  The company invested $45 million in modernization and efficiency improvements to help produce lightweight printing papers.  However, the facility was closed at the end of 2010 due to low product margins and high operational costs.  The company is reassessing its strategy with an objective to operate a business that is sustainable operationally, environmentally and financially.  To meet this objective, the company’s plan includes equipping the plant to enable production of higher-margin specialty papers.  Regarding operations and the environment, the company proposes to have its energy requirements, both steam and electricity, met through a biomass cogeneration facility.  The source of the fuel is wood chips grown and harvested exclusively from Adirondack suppliers.  By using wood chips as the boiler fuel source instead of No. 6 fuel oil, there will be significant reductions in emissions, including NOx, CO and O2

 

                “Authority staff has completed a review of NFFP’s application for PP.  NFFP has requested an allocation of 6.3 MW to be used for a temporary period not to exceed three years.  The company’s request for a temporary allocation is based on the anticipated timeframe to build the cogeneration plant.  If the company were to receive an allocation, it would restart the mill, investing $6.7 million for installation and refurbishment of machinery and equipment to enable production of high-quality, heavyweight paper grades with high recycled content.  NFFP would re-hire 87 employees in the first year and 4 additional employees in year two of its re-started operations. 

 

                “The anticipated cost savings derived from the hydropower allocation over three years would enable the company to move forward immediately with plans to build the cogeneration plant.  A new energy efficient building would be constructed to house the biomass boiler and ancillary equipment.  Wood chip processing and storage areas containing trailers, choppers, mills and conveyers would be sited near the displaced fuel storage tanks.  It is anticipated that 60-70 permanent, indirect biomass jobs would be created related to using wood as the new energy source.  The boiler will incorporate state-of- the-art design, maximizing boiler efficiency while minimizing emissions.  The construction of the biomass cogeneration plant would provide 60 temporary construction jobs. 

 

“Based on a review of the application and further discussion with the applicant, staff recommends and the Advisory Group supports a temporary allocation of 5,000 kW of PP for a term of three years, as set forth in Exhibit ‘4-A.’  The recommendation is in consideration of NFFP’s agreement to invest $6.7 million to purchase and install new and used equipment and to refurbish existing equipment in order to re-hire workers to begin producing paper products in the short-term.  The recommendation is also in consideration of the company’s investment of $15.0 million to build the biomass cogeneration plant to be in operation within three years.  The total investment of $21.7 million results in a capital investment ratio of $4.3 million per MW, which is lower than the two-year historic average of $25.3 million per MW.   In addition, as a result of this project, the company agrees to create 91 jobs beyond current employment level of 18.  The ratio of jobs created per MW is 18.2 higher than the historic average of 14.5 jobs created per MW.  Further details of the application are included in Exhibit ‘4-B-1.’

 

“NFFP has applied and been approved for various other economic development and energy efficiency incentives from Empire State Development, National Grid and NYSERDA.  The company has garnered broad community and agency support including from St. Lawrence County Industrial Development Agency.

 

Upstate Niagara Cooperative, Inc.

 

“Upstate Niagara Cooperative, founded in 1965, is a food and beverage cooperative owned by 375 New York State dairy farmers.  The New York State company, with a total of approximately 700 employees, operates milk processing and distribution centers in Buffalo and Rochester, a cultured dairy product plant in West Seneca and distribution centers in Syracuse and Watertown.  Upstate Niagara produces dairy products that are sold and distributed across the nation.  Its West Seneca plant receives a hydropower allocation and the Buffalo facility has a Power for Jobs allocation; the company is meeting job commitments for both allocations.

 

“Upstate Niagara has an opportunity to purchase a recently closed dairy processing facility located in North Lawrence, St. Lawrence County.  The facility, in operation since 1920 under various ownerships, most recently was producing yogurt for a national brand.  As the contract to make the branded yogurt at the facility was approaching expiration, the owners, based in Colorado, decided to consolidate production to other plants outside of New York and 132 employees were laid off this April. 

 

“Upstate Niagara has been seeking opportunities to expand its production capacity to keep up with growing demand, particularly in the fast growing yogurt product market segment.  The company has been looking at out-of-state opportunities, for example, a potential business partnership in Phoenix, AR, to better and more cost-effectively serve its West Coast markets.  Upstate Niagara has submitted an application for Preservation Power, requesting 3,000 kW to help enable a decision to move forward with a plan to purchase the North Lawrence facility.  The plan is to re-start existing yogurt production equipment and also to install two new state-of-the-art high-speed production lines at $3.0 million each.  The project, which could be completed as early as September 2011, would enable Upstate Niagara to re-hire 60 employees within the first year and an additional 20 by the end of three years.  The plan would also anticipate future growth with a five-year plan of reaching a 100-person employment level.

 

“Based on the review of the application and discussions with the applicant, staff recommends and the Advisory Group supports an allocation of 3,000 kW to Upstate Niagara for a term of five years, as set forth in Exhibit ‘4-A.’   The recommendation is in consideration of the company’s commitment to invest a total of $11.0 million to purchase and re-open the dairy processing facility; install two new high-speed productions lines and re-hire workers to begin producing dairy products, i.e., yogurt.  Roughly, $5.0 million of the total investment would be spent on the existing facility purchase and re-start, with the remaining $6.0 million for the new production equipment and installation.  The total investment of $11.0 million results in a capital investment ratio of $3.7 million per MW which is lower than the two-year historic average of $25.3 million.  The company agrees to create 80 jobs within three years as a result of this project.  The ratio of jobs created per MW is 26.7, nearly twice the historic average of 14.5 jobs per MW.  Further details of the application are included in Exhibit ‘4-B-2.’

 

“The purchase and operation of this St. Lawrence dairy product manufacturing facility would be integrated with Upstate Niagara’s other operations, enabling the company to achieve production and corporate efficiencies.  Although logistically not optimal, the project’s expanded capacity would help strengthen Upstate Niagara’s position in the highly competitive marketplace and would significantly benefit its New York dairy farmers.  The redevelopment and reopening of the facility by a New York State-based firm is important, not only for the direct employees and the community, but also for hundreds of New York State-based suppliers.  The project would bring plant modernization and more local control to the facility, as well as provide experienced, professional, New York State-based ownership and management attention to secure the plant’s long-term future.

 

“Upstate Niagara is diligently assessing the plan’s financial viability, including current negotiations for the plant’s purchase.  Along with PP, the company is concurrently seeking various forms of assistance from Empire State Development and the St. Lawrence County Industrial Development Agency.  An allocation of PP is one of several critical components the company needs to bring together to move forward with this project in the North Country.

 

Proposed Preservation Power Contracts

 

“The proposed Contracts are attached as Exhibits ‘4-C-1’ and ‘4-C-2.’  The firm electric service under the Contracts will be equivalent to that provided to all other Authority firm hydropower customers and subject to pro-rata curtailment when there is insufficient generation at the Niagara and St. Lawrence/FDR facilities to meet the energy requirement of the firm hydropower customers.

 

                “The allocations will be subject to enforceable employment commitments.  In the case of NFFP, the company commits to a total employment of 109 jobs, comprised of the 18 existing employees and the hiring of 91 new employees within two years of operation.  Upstate Niagara commits to creating 80 new jobs within three years of operation.  The Contracts include an annual job reporting requirement with a job compliance threshold of 90%.  Should the ratio of actual jobs reported to jobs committed fall below the compliance threshold, the Authority has the right to reduce the hydropower allocation on a pro-rata percentage basis.

 

“The rates for PP are also contained in Exhibits ‘4-C-1’ and ‘4-C-2,’ ‘Schedule of Rates for Sale of Firm Power to Preservation Power Customers - Service Tariff No. 10.’  The NFFP contract will have a three-year term from the initial start of power takedown based on the time required for the cogeneration plant to become fully operational.  Upstate Niagara’s contract will have a five-year term from the initial delivery of the allocation.

 

RECOMMENDATION

 

“The Manager – Business Power Allocations and Compliance recommends that the Trustees approve the allocations of Preservation Power to Newton Falls Fine Paper Company, LLC and Upstate Niagara Cooperative, Inc., as detailed in Exhibit ‘4-A,’ and that the Trustees authorize a public hearing on the proposed Preservation Power Contract for each allocation to be held at the Frank S. McCullough, Jr. Hawkins Point Visitors Center at the St. Lawrence/FDR Project in Massena, New York, on a date to be determined in 2011.  It is further recommended that, pursuant to Section 1009 of the Public Authorities Law, the Corporate Secretary be authorized to transmit copies of the proposed contracts to the Governor and legislative leaders, and to arrange for the publication of a notice of public hearing in six newspapers throughout the State in accordance with the Public Authorities Law.

 

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

 

Mr. Michael Huvane presented highlights of staff’s recommendation to the Trustees.  In response to a question from Trustee O’Luck, Mr. Huvane said that the Newton Falls Fine Paper Company will be off the grid as soon as the biomass facility is up and running.  He added that the company will then be able to supply all of its steam and electric needs, hence only a three-year contract with the Authority.

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

 

RESOLVED, That the allocations of 5,000 kW of Preservation Power to Newton Falls Fine Paper Company, LLC, and 3,000 kW of Preservation Power to Upstate Niagara Cooperative, Inc., as detailed in Exhibit “4-A,”  be, and hereby are, approved on the terms set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

RESOLVED, That the Trustees hereby authorize a public hearing on the terms of the proposed contracts for the sale of Preservation Power to Newton Falls Fine Paper Company, LLC and Upstate Niagara Cooperative, Inc., to be held at the Frank S. McCullough, Jr. Hawkins Point Visitors’ Center at the St. Lawrence/FDR Project in Massena, New York; and be it further

 

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

 

RESOLVED, that the Corporate Secretary  be, and hereby is, authorized to arrange for the publication of a notice of public hearing in six newspapers throughout the State, all done in accordance with the provisions of Section 1009 of the Public Authorities Law; and be it further

 

RESOLVED, That the Senior Vice President – Marketing and Economic Development, or his designee, be, and hereby is, authorized, subject to the approval of the form thereof by the Acting General Counsel, to enter into such agreements, and to do such other things, as may be necessary or desirable to implement the contract with Newton Falls Fine Paper Company, LLC, and Upstate Niagara Cooperative, Inc., as set forth in the foregoing report of the President and Chief Executive Officer; and be it further

 

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

 
 

5.                   Allocation of 2,500 kW of Hydropower  

 

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

 

                “The Trustees are requested to approve an allocation of available Expansion Power (‘EP’) to Falls Metal Recycling, LLC (‘Falls Metal Recycling’) as described herein and in Exhibit ‘5-A.’  The allocation of hydropower will support capital expansion of $14.6 million and the creation of 45 jobs in Western New York.

 

BACKGROUND

 

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

 

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

 

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

 

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

 

DISCUSSION

 

                “At this time, there is 11,425 kW of unallocated EP that is available to be awarded to businesses under the criteria set forth in PAL Section 1005(13)(a).  Staff recommends an EP allocation totaling 2,500 kW be awarded to Falls Metal Recycling as set forth in Exhibit ‘5-A.’  The exhibit shows, among other things, the amount of power requested by the applicant, the recommended allocation amount and the commitment to job creation and capital investment to be made by Falls Metal Recycling.  Additional information on the project is contained in the application summary attached as Exhibit ‘5-A-1,’ as well as in the individual expansion project description below.

 

                “Falls Metal Recycling has submitted an application requesting 5,200 kW for building a metals recycling facility in Niagara Falls.  The company would purchase a 14-acre site in Niagara Falls, roughly half of which is brownfield property.  The facility would incorporate state-of-the-art metal recycling technology, including installation of a 4,000 horsepower shredder and a metal separation process.  The raw materials – scrap cars, appliances and sheet metal, etc. – would be purchased locally and in Canada.  The recycled material would be sold in both the national and international markets.

 

                “The new facility would allow the company to enter the New York market, joining its other regional metals recycling facilities.  There is another potential New York site, but the Niagara Falls selection would help the prospective customer to optimize operational costs through the low-cost hydropower allocation.  Although the cost of electricity is estimated to be about 1% of the cost of production, metals’ recycling is a commodities business characterized by thin margins and volatile raw material costs.  The company’s most significant cost of production is the scrap metal feedstock which is currently high, based on today’s scrap metal prices.

 

                “The facility would create 45 new jobs with a high average total compensation of $60,500 per job.  The jobs ratio for a recommended 2,500 kW allocation is 18 new jobs per MW, which is above the two-year historic average of 14.5 new jobs per MW.  The capital investment per MW ratio for the allocation is $5.8 million, which is below the two-year historic average of $25.3 million per MW.  The project would also be responsible for creating an estimated 15 indirect jobs due to the transporting of raw materials and distribution of the new facility’s output.  If Falls Metal Recycling moves forward, this project has the added benefit of bringing a brownfield site back to productive use.

 

SUMMARY         

 

                “Based upon a review and evaluation of the company’s application for hydropower as detailed above, staff recommends an EP allocation be awarded to Falls Metal Recycling, as set forth in Exhibit ‘5-A.’  In total, the company will commit to $14.6 million of capital investment and to creating 45 new jobs.  The recommended allocation will help Falls Metal Recycling decide to move forward with expansion plans in the Niagara region, thus improving and diversifying the economy of Western New York.

 

RECOMMENDATION

 

“The Manager – Business Power Allocations and Compliance recommends that the Trustees approve the allocation of available Expansion Power to Falls Metal Recycling as set forth in Exhibit ‘5-A.’

 

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

               

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

 

RESOLVED, That the allocation of 2,500 kW of Expansion Power to Falls Metal Recycling, as detailed in Exhibit “5-A,” be, and hereby is, approved on the terms set forth in the foregoing report of the President and Chief Executive Officer; and be it further

               

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

 


 

6.                   Adoption of Board Policy Regarding Payouts from Trust Estate

 

The Chairman and Trustee Dyson submitted the following report:

 

BACKGROUND

               

“The Authority participates in a capital intensive business.  In support of its mission, the Authority invests and reinvests in major energy infrastructure projects.  In addition, the Authority considers, from time to time, a number of contractual arrangements that are supportive of broader public policy goals such as system reliability, economic development, environmental considerations and/or fuel diversity.  These arrangements, if effectuated, can require financial support from the Authority.

 

“In order to provide better assurances as to the sufficiency of funds to meet the Authority’s liabilities under these arrangements, as well as provide the funds for needed upgrades and refurbishment of existing facilities, the Authority has considered placing certain guidelines on the Authority’s ability to pay-out or withdraw funds from the Trust Estate for any lawful corporate purpose, including any annual transfer payments – or voluntary contributions – to New York State or its agencies or authorities. 

 

DISCUSSION

 

“The Authority is requested, from time to time, to make financial contributions and transfers of funds to the State or its agencies or to otherwise provide financial support for various State programs.  Such financial support has come in the form of direct transfers to the State’s general fund, rebates to customers of the Power for Jobs (‘PFJ’) Program, the provision of below-cost energy to the beneficiaries of the State’s Energy Cost Savings Benefits Program and contributions toward the operation and maintenance expenses for State parks in the vicinity of the Niagara and St. Lawrence projects. 

 

“Over the past five years, the Authority has averaged about $110 million per year in voluntary contributions to the State and another $50 million per year in customer rebates under the State’s PFJ Program. 

 

“Any such contribution or transfer of funds must: (1) be authorized by the Legislature; (2) be approved by the Trustees ‘as feasible and advisable’ and (3) satisfy the requirements of the Authority’s General Resolution Authorizing Revenue Obligations, dated February 24, 1998, as amended and supplemented (‘Bond Resolution’).  The Bond Resolution’s requirements to withdraw monies ‘free and clear of the lien and pledge created by the [Bond] Resolution’ are as follows: that such withdrawals (a) are for a ‘lawful corporate purpose as determined by the Authority’ which the Authority has taken to mean pursuant to authorizing legislation, and (b) after consideration of the anticipated future receipt of revenues or other moneys constituting part of the Trust Estate, that the funds to be so withdrawn are not needed for (i) payment of reasonable and necessary operating expenses, (ii) an Operating Fund reserve for working capital, emergency repairs or replacements, major renewals or for retirement from service, decommissioning or disposal of facilities, (iii) payment of, or accumulation of a reserve for payment of, interest and principal on senior debt or (iv) payment of interest and principal on subordinate debt.  The Bond Resolution’s requirements are part of the Authority’s contractual commitment to the Authority’s bondholders.

 

“In order to maintain its AA rating, which has been demonstrated repeatedly over the years to be important in the capital-intensive electric power industry, especially to provide power at attractive rates for its citizens and business customers, Authority staff considers the feasibility of any potential transfers based on the following criteria: (a) that the Authority maintains an adequate coverage ratio (at or above the median coverage ratio for comparable public power systems); and (b) that the Authority maintains adequate liquidity to support its continued operations.  Following such an evaluation by Authority staff, the Authority’s Trustees would then determine the ‘feasibility and advisability’ of any requested payment.

 

“Fitch Ratings (“Fitch”) annually publishes its Public Power Peer Review in which it reports on financial metrics for various public power systems by ratings category.  Over the last 5 years, Fitch reports the median for AA rated wholesale and retail public power entities to be 1.7X and 2.1X, respectively.  While the Authority is principally a wholesale entity, it nevertheless has over 2,500 MW of retail load and, therefore, must pay attention to both statistics.  Accordingly, the Authority targets earnings at 2.0X or better.  It is the intention of this resolution to establish 2.0X debt coverage ratio as the reference point in reviewing future requests of this nature.

 

“In order to provide better assurance of the Authority’s continued ability to maintain its existing assets, invest in new energy-related infrastructure and to meet the obligations of any Public Policy Contracts (as described below) while maintaining its financial standing and to draw an appropriate balance between this and its ability to accommodate certain cash requests for State programs, we recommend that the Authority adopt the following Policy Statement with Respect to the Withdrawal of Funds from the Trust Estate of the Bond Resolution.

 

It is hereby declared that it is the policy of the Power Authority of the State of New York that prior to the pay-out or withdrawal of any funds from the Trust Estate pursuant to Section 503(1)(e) of the Authority’s General Resolution Authorizing Revenue Obligations dated February 24, 1998, as amended and supplemented, in addition to any determinations required under such General Resolution, the Trustees shall, use a debt service coverage ratio of 2.0 as a reference point in considering any such pay-out or withdrawal.

 

“In order to effectuate this policy, the Trustees shall consider whether the amount so withdrawn exceeds ‘Available Net Revenues’ as of any date of calculation.  ‘Available Net Revenues’ shall mean an amount equal to (a) minus (b), where:

(a) equals the sum for the twelve month period ending with the latest calendar quarter (i.e., ending March, June, September or December) of (i) Net Cash from Operating Activities (including consideration of any net revenues or expenses of Public Policy Contracts and Prior Contributions to the State during such period), (ii) Cash Flow from Entergy Value Sharing Agreement, (iii) Cash Flow from Entergy Notes Receivable, (iv) Earnings Received on Investments and (v) the interest portion of Energy Conservation  Program payments received from participants, each as reported in the Authority’s Statement of Cash Flows prepared on a basis consistent with the Authority’s latest audited financial statements; and

(b) equals the sum of (i) the Debt Service Coverage Requirement and (ii)  Prior Contributions to the State (not considered in (a) above), and where:

               

‘Debt Service Coverage Requirement’ shall mean an amount equal to two times the sum of all interest and scheduled principal payments on Obligations, Parity Debt and Subordinated Indebtedness and payments arising from debt-related Subordinated Contract Obligations estimated to be due in the succeeding twelve months.

 

‘Prior Contributions to the State’ shall include the sum of all amounts withdrawn or paid-out, directly or indirectly to the State or any of its political subdivisions, agencies, public authorities or entities, from the Trust Estate pursuant to Section 503(1)(e) of the Authority’s General Resolution Authorizing Revenue Obligations dated February 24, 1998 during the prior twelve-month period ending with the latest calendar quarter.

 

‘Public Policy Contract’ shall mean any contract entered into by the Authority in support of public policy goals, such as system reliability, environmental considerations, economic development or fuel diversity which is designated at the time of execution as a Public Policy Contract by the Trustees.

               

“The implementation of and compliance with this Policy would result in the Authority applying this standard as a reference point for the Trustees in considering any future requests for ‘voluntary contributions’ to the State, its subdivisions or for Public Policy Contracts.

 

FISCAL INFORMATION

 

                “The Policy established herein will allow the Authority to better manage the forward impacts and uncertainty surrounding such Public Policy Contracts and Contributions to the State, while still providing funds for the essential maintenance of its facilities and the construction of needed new transmission lines, upgrades to the same or new power generating facilities.

RECOMMENDATION

 

                “For the reasons stated, we recommend the approval of the above Policy Statement by adoption of the attached draft resolution.”          

 

Ms. Elizabeth McCarthy provided highlights of staff’s recommendation to the Trustees.  Chairman Townsend said he wanted to acknowledge Trustee John Dyson’s efforts with respect to his work on the policy and asked him to comment on it. 

Trustee Dyson said that because of the various pressures placed on the Authority’s funds, the Authority needs to take into account major capital investments to be made in order to maintain its aging facilities and its AA credit rating.  To that end, after discussions with the Trustees, it was agreed that the language in the Authority’s Bond covenants is vague and proposed a Policy to be used as a guiding principal or reference point for future payouts from the Authority’s Trust Estate.

Vice Chairman Foster said that the adoption of this policy is a step in the right direction as regards the Authority’s credibility and the role of the Trustees under the PAAA.  He noted that this is a Board Policy, as opposed to being part of the Authority’s Bond covenant, and is therefore subject to change by a future board.   He also stated that, going forward, he hopes the Authority’s relationship with Albany will improve, since this policy will afford them a more definitive view of the Authority’s capital structure.

Trustee Nicandri agreed with the comments of Vice Chairman Foster and added that it is important for the Trustees to recognize their responsibilities so that when issues come up the Trustees understand what their responsibilities are as it relates to a particular issue. 

Chairman Townsend added that, over the last several years, the administrations looked at the Authority as a kind of “cash cow” to deal with issues not related to its business and that the Authority should start using its earnings in a way that is more consistent with its mission statement.

The following resolution, as submitted by the Chairman and Trustee Dyson, was unanimously adopted.

 

RESOLVED, That the Authority hereby adopts a Policy Statement with Respect to the Withdrawal of Funds from the Trust Estate of the Bond Resolution as described in detail in the foregoing report; and be it further

 

RESOLVED, That the Chairman, the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer, the Acting General Counsel, the Senior Vice President – Corporate Planning and Finance, the Treasurer and the Deputy Treasurer are, and each of them hereby is, authorized to do and perform or cause to be done and performed in the name and on behalf of the Authority, all other acts to execute and deliver or cause to be executed and delivered all other notices, requests, directions, consents, approvals, orders, applications, agreements, certificates and further documents or other communications of any kind under the corporate seal of the Authority or otherwise as he, she or they may deem necessary, advisable or appropriate to effect the intent of the foregoing resolution, subject to the approval as to the form of such certificates, agreements and other documents by the Acting General Counsel.


 

7.                   Procurement (Services) Contract – Request for Additional Funding –  Pillsbury Winthrop Shaw Pittman LLC – Contract No. 4500172044

                         

The President and Chief Executive Officer submitted the following report:

 

SUMMARY

“The Trustees are requested to approve additional funding in the amount of $175,000 for the multi-year legal services contract the Authority has with the law firm Pillsbury Winthrop Shaw Pittman LLC to support the Authority’s damage claim against the federal government for the government’s breach of its contractual promise with respect to spent nuclear fuel and high level radioactive waste.

 

BACKGROUND

 

“The Authority’s Expenditure Authorization Procedures (‘EAPs’) require the Trustees’ approval when the cumulative change-order value of a personal services contract exceeds $500,000.

 

“On the eve of the November 2000 sale of the James A. FitzPatrick and Indian Point No. 3 nuclear power plants to Entergy Nuclear, Inc., the Authority retained Shaw Pittman, LLP (now Pillsbury Winthrop Shaw Pittman LLC) to provide legal representation in its breach of contract lawsuit against the United States.  In the Court of Federal Claims, Washington, D.C., the Authority is seeking monetary damages caused by the federal government’s failure to start accepting spent nuclear fuel and high level radioactive waste from the FitzPatrick and Indian Point power plants.  The government, whose liability for its failure to perform under the 1983 contract has been established, has been vigorously defending the 74 damage claims brought principally by the nation’s nuclear power utilities.  Since the fall of 2009 to present, the government has engaged the Authority in time intensive pre-trial discovery and motion practice.  This process was further complicated as the Authority needed to coordinate the litigation with Entergy as Entergy maintains many of the relevant documents and many of the witnesses are Entergy’s present or former employees.  The presiding judge has scheduled the Authority’s case for trial this coming fall.

“The Authority and the United States have reached a settlement of the Authority’s claims in the amount of approximately $10.9 million, subject to agreement upon the other settlement terms.

 

DISCUSSION

 

“At their meeting of March 31, 2009, the Trustees approved an award of a new, five-year, $700,000 contract to Pillsbury Winthrop Shaw Pittman, LLC.  These funds were for the firm’s legal fees and for the services of The Kendrich Group LLC and Energy Resources International, Inc., experts who prepared and supported the Authority’s damages case.  Pursuant to the EAPs, the President and Chief Executive Officer, in February 2010, authorized an additional $500,000 to this contract for the same purposes.

 

“The additional requested funds are required to pay law firm and consultant fees incurred in prosecuting the Authority’s claim and to cover the costs associated with effectuating the settlement with the government.  The original term of the contract remains unchanged.

 

FISCAL INFORMATION

 

“Payments to support this contract will be made from the Authority’s Operating Fund.

 

RECOMMENDATION

 

“The Acting General Counsel recommends that the Trustees approve the additional funding for this contract.  I concur in the recommendation.

 

  “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. Judith McCarthy presented highlights of staff’s recommendation to the Trustees.  In response to a question from Trustee O’Luck, Ms. Judith McCarthy said that the Authority had agreed in principle to a $10.9 million settlement with the US Government.  The additional $175,000 is for additional services provided by Pillsbury Winthrop Shaw Pittman and for expert services provided by The Kendrich Group and Energy Resources International.  

In response to another question from Trustee O’Luck, Ms. McCarthy confirmed that on March 31, 2009 the Trustees approved a five-year, $700,000 contract with Pillsbury Winthrop Shaw Pittman that was subsequently amended to an additional $500,000 and an additional $175,000 is now being requested for approval.

In response to further questioning from Trustee O’Luck, Ms. McCarthy said that the total cost of the contract was approximately $1.375 million.  Ms. McCarthy added that the cost of litigation was taken into consideration when evaluating the settlement.

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

 

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the additional funding for the multi-year service contract is hereby approved in the amount and for the purposes as recommended in the foregoing report of the President and Chief Executive Officer; and it be further

 

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

 

 

 

8.                   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.

 


 

9.                   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.


 

10.                Next Meeting

 

The next regular meeting of the Trustees will be held on Tuesday, June 28, 2011, at 11:00 a.m., at the Power Vista, Niagara Power Project, Lewiston, New York, unless otherwise designated by the Chairman with the concurrence of the Trustees.

 

 

 


 

Closing

                On motion made and seconded, the meeting was adjourned by the Chairman at approximately 2:25 p.m.

 

 

 

Karen Delince

Corporate Secretary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                

 

 

 

 

 

MAY MINS.11