MINUTES OF THE REGULAR MEETING OF THE

POWER AUTHORITY OF THE STATE OF NEW YORK

 

October 19, 2005

 

Table of Contents

 

                Subject                                                                                                                             

 

Report on Authority Activities in Monroe County, Exhibit    ‘A

1.                    Minutes of the Regular Meeting held on September 20, 2005 

2.                    Financial Reports for the Nine Months Ended September 30, 2005, Exhibit  ‘2-A’                                                                                       

3.                    Report from the President and Chief Executive Officer

4.                    Allocation of 1,025 kW of Hydro Power  Resolution,  Exhibits, ‘4-A – 4-A1’ and  ‘4-B – 4-B1

5.                    Power for Jobs Program – Extended Benefits  Resolution,  Exhibits,  ‘5-A1 & 5-A2’ and  ‘5-B

6.                    Request to Approve Extension to Term of Service for Existing Economic Development Power Program Customer Resolution,  Exhibits,  ‘6-A

7.                    Economic Development Programs – Energy Cost  Savings Benefits Resolution, Exhibits,  ‘7-A1 & 7-A2

8.                    Transfers of Industrial Power  Resolution    

9.                    Economic Development Power Programs – Service Tariff  Amendments – Notice of Adoption Resolution,  Exhibits,  ‘9-A – 9-C

10.                 Government Customer Load Research Program – Capital Expenditure Approval Resolution, Exhibits, ‘10-A’

 11.                 Procurement (Services) Contract – Disaster Recovery Services – Capital Expenditure Authorization Increase and Contract Award 

12.                 Procurement (Services) Contract – St. Lawrence/FDR  Power Project Relicensing – Personal Services – Award  Resolution         

13.                 Procurement (Services) Contracts – Power Generation Maintenance Resources Management Program – Awards and Extension
Resolution

14.                 Proposed Schedule of Trustees’ Meetings in 2006 Resolution

15.                 Amendment to the Charter of the Audit Committee  Resolution                   

16.                 Appointment of Trustee Michael J. Townsend to the Audit Committee  Resolution

17.                 Motion to Conduct Executive Session       

18.                 Motion to Resume Meeting in Open Session                                    

19.                 Resolution – Timothy S. Carey                                                              

20.                 Next Meeting                                                                                             

Closing                                                                                                             

 

Minutes of the Regular Meeting of the Power Authority of the State of New York held at the Hyatt Regency in Rochester at 11:00 a.m.

 

 

Present:                  Joseph J. Seymour, Chairman

                                Frank S. McCullough, Jr., Vice Chairman

                                Elise M. Cusack, Trustee

                                Michael J. Townsend, Trustee

 

 

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Eugene W. Zeltmann                           President and Chief Executive Officer

Timothy S. Carey                                 Chief Operating Officer

David E. Blabey                                    Executive Vice President, Secretary and General Counsel

Robert A. Hiney                                   Executive Vice President – Power Generation

Vincent C. Vesce                                  Executive Vice President – Corporate Services and Administration

Steven DeCarlo                                    Senior Vice President – Transmission

Joseph Del Sindaco                             Senior Vice President and Chief Financial Officer

Angelo S. Esposito                              Senior Vice President – Energy Services and Technology

Louise M. Morman                              Senior Vice President – Marketing, Economic Development
and Supply Planning

Carmine J. Clemente                             Deputy Secretary and Deputy General Counsel

Joseph J. Carline                                  Assistant General Counsel – Power and Transmission

Arnold M. Bellis                                   Vice President – Controller

Gary Paslow                                          Vice President – Government Affairs and Policy Development

Donald A. Russak                                Vice President – Finance

Thomas A. Warmath                           Vice President and Chief Risk Officer

James H. Yates                                     Vice President – Major Accounts Marketing and Economic Development

Dennis T. Eccleston                            Chief Information Officer

John J. Suloway                                   Executive Director – Licensing, Implementation and Compliance

Jordan Brandeis                                   Director – Supply Planning, Pricing and Power Contracts

Paul F. Finnegan                                  Director – Upstate Public and Governmental Affairs

James F. Pasquale                                Director – Business Power Allocation, Regulation and Billing

Michael A. Saltzman                            Director – Public Relations

Daniel Wiese                                        Director – Corporate Security and Inspector General

Mary Jean Frank                                  Associate Secretary

Lorna M. Johnson                               Assistant Secretary

Bonnie Fahey                                       Executive Administrative Assistant

Erin Nolan                                             Secretary to Deputy Secretary and Deputy General Counsel

James Bejarano                                     Conservation Program Engineer

Terry Blaybargh                                   Director – Economic Development, Monroe County

John Graham                                         Director – Environmental Services, Monroe County

Michelle Briedenbach                         Reporter, Syracuse Post-Standard

Maggie Brooks                                     County Executive

Krista Hamburg                                    Monroe County

Ken Moore                                            Village Administrator, Village of Fairport

Mitch Wilke                                          Superintendent, Village of Fairport

 

 

 
 

Chairman Seymour presided over the meeting.  Executive Vice President, Secretary and General Counsel Blabey kept the Minutes.

 


 

Report on Authority Activities in Monroe County

Chairman Seymour introduced Monroe County Executive Ms. Maggie Brooks, who welcomed Authority Trustees and staff to Rochester and thanked Trustee Townsend for his efforts.  She then went on to thank the Authority for everything it was doing in the region in terms of economic development, emphasizing that all of the Authority’s efforts are critical to the region’s success, particularly given the rising cost of energy.  Ms. Brooks said that Monroe County looked forward to partnering with the Authority on additional projects and introduced Terry Blaybargh, Director of Economic Development, and John Graham, Director of Environmental Services for the County.  She mentioned projects in development at the County landfill and the General Motors plant in Honeoye Falls, which is working on engine parts for hybrid vehicles and said that the County would be interested in working with the Authority on other alternative energy/power projects.

Chairman Seymour thanked Ms. Brooks for her warm welcome and introduced Mr. Finnegan, asking him to give a report on the Authority’s activities in Monroe County.  Mr. Finnegan said that, in addition to being the home of Trustee Townsend, Monroe County is home to 19 of the Authority’s power business customers receiving 20 MW of low-cost power and maintaining 10,000 jobs in the County.  Among these customers are Frontier Corporation, Genesee Brewing Company and Rochester Institute of Technology.  He said the Authority also has three municipal customers in the County, the Villages of Churchville, Spencerport and Fairport.  Mr. Finnegan then introduced Mr. Ken Moore and Mr. Mitch Wilke, Superintendent and Manager, respectively, of the Village of Fairport. 

According to Mr. Finnegan, the Authority also has 20 energy services projects at 67 facilities that are either complete or under way in Monroe County, generating more than $2.6 million in annual energy savings for local taxpayers.  In addition, the Authority has several active projects in various stages of development in Monroe County.

He also noted that one of the Authority’s largest Monroe County customers is SUNY Brockport, where a $3.3 million project was recently completed on the main campus.  The project included the installation of a chilled water loop to allow a single chiller to serve several buildings when conditions are mild, an energy management system that replaced four separate existing systems, occupancy sensors and other lighting controls.

Other projects noted by Mr. Finnegan included construction for SUNY Brockport of an emergency chiller replacement and an emergency boiler replacement at the Rochester Educational Opportunity Center.  In addition, the Authority has completed a High Efficiency Lighting Program project at the main campus and a boiler replacement project at SUNY Brockport’s Metro Center, both located in Rochester.  Additional phases of work are in development for both the main campus and the Metro Center.

Finally, Mr. Finnegan noted that another prominent Authority customer in Monroe County is the City of Rochester.  The Authority very recently completed an installation of energy-efficient technologies at six facilities within the City, including City Hall, the Central Vehicle Maintenance Facility (“CVMF”), the North Street Recreation Center, the West Side Garage and two fire halls.  The $3 million project included installing water-source heat pumps and heat recovery wheels in City Hall, rooftop heating, ventilation and air-conditioning units at CVMF and the North Street Recreation Center and lighting upgrades at all the facilities.  In addition to these measures, the Authority installed an energy management system that allows the City to view and control the status of the HVAC systems from a single location.  A second phase of work is in the planning stages.

Exhibit “A” provides details on the Authority’s Power for Jobs customers in Monroe County, as well as three other municipal customers.


 

1.                   Approval of the Minutes

The minutes of the Regular Meeting of September 20, 2005 were unanimously adopted.

 

 

2.                   Financial Reports for the Nine Months Ended September 30, 2005

Mr. Bellis presented an overview of the reports to the Trustees.  In response to a question from Chairman Seymour, Mr. Bellis said that the Small Clean Power Plants (“SCPPs”) are not included under the Southeastern New York (“SENY”) government customers section of the budget because the SCPPs are not part of the SENY supply portfolio.


 

3.                   Report from the President and Chief Executive Officer

President Zeltmann asked Mr. Hiney to present a report on the progress of the 500 MW combined cycle construction project.  Mr. Hiney said that the project is well into the commissioning phase and that the plant had operated for 24 hours straight over the weekend, producing 70 MW on oil.  The objective now is to clean up the chemistry of the steam in the air-cooled condenser and the HRSG.  Of most concern are the gas compressors, which have been experiencing some problems.  There are three such compressors, two of which are needed to run at full power.  One was run at recirculation mode yesterday and the generator will be firing on gas today if things go as they should.  This will lead to a tuned-up machine and effective back-end treatment of NOx emissions.  He continued by stating that the Authority has a viable schedule for commercial operation of the plant by year’s end and that the only remaining construction jobs are the catalyst and the air-inlet chillers.  Mr. Hiney said that Slattery Skanska, Inc. (“SSI”) had met its milestone for completion of the project.  In response to a question from Chairman Seymour, Mr. Hiney said that SSI is just involved in clean-up operations now, and that the rest of the work is being carried out by General Electric and various supporting machinery vendors.  He expects that commissioning will be in the final stages by the time of the November 22nd Trustees’ Meeting at the Poletti plant.

 

4.                   Allocation of 1,025 kW of Hydro Power

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve two allocations of available Replacement Power (‘RP’) or Expansion Power (‘EP’), totaling 1,025 kW to two industrial companies.

BACKGROUND

“Under the RP Settlement Agreement, Niagara Mohawk Power Corporation (‘NiMo’), with the approval of the Authority, identifies and selects certain qualified industrial companies to receive delivery of RP.  Qualified companies are current or future industrial customers of NiMo that have or propose to have manufacturing facilities for the receipt of RP within 30 miles of the Authority’s Niagara Switchyard.  RP is up to 445,000 kW of firm hydro power generated by the Authority at its Niagara Power Project that has been made available to NiMo, pursuant to the Niagara Redevelopment Act (through December 2005) and Chapter 313 of the 2005 laws of New York.

“Under Section 1005 (13) of the Power Authority Act, as amended by Chapter 313, 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 ME of 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.

DISCUSSION

“On October 22, 2003, the Authority, NiMo, Empire State Development Corporation and the Buffalo Niagara Enterprise signed a Memorandum of Understanding (‘MOU’) that outlines the process to coordinate marketing and allocating Authority hydro power.  The entities noted above have formed the Western New York Advisory Group (‘Advisory Group’) with the intent of better using the value of this resource to improve the economy of Western New York and the State of New York.  Nothing in the MOU changes the legal requirements applicable to the allocation of hydro power. 

“Based on the Advisory Group’s discussions, staff recommends that the available power be allocated among two companies, as set forth in Exhibits ‘4-A’ and ‘4-B.’  The Exhibits show, among other things, the amount of power requested by each company, the recommended allocation and additional employment and capital investment information.  These projects will help maintain and diversify the industrial base of Western New York and provide new employment opportunities.  They are projected to result in the creation of 30 jobs.

RECOMMENDATION

“The Director – Business Power Allocations, Regulation and Billing recommends that the Trustees approve the allocation of 1,025 kW of hydro power to the companies listed in Exhibits ‘4-A’ and ‘4-B.’

“The Chief Operating Officer, the Executive Vice President, Secretary and General Counsel, the Senior Vice President – Marketing, Economic Development and Supply Planning, the Vice President – Major Accounts Marketing and Economic Development and I concur in the recommendation.”

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

RESOLVED, That the allocation of 700 kW of Replacement Power and 325 kW of Expansion Power, as detailed in Exhibits “4-A” and “4-B,” 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 President and Chief Executive Officer, the Chief Operating Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President, Secretary and General Counsel.


 

APPLICATION SUMMARY

Replacement Power

 

Company: Electro Abrasives Corporation

 

Location:                                                  Hamburg, New York

                                                                            

County:                                                     Erie

 

IOU:                                                           Niagara Mohawk

 

Business Activity:                                  Manufacturer of silicon carbide and other abrasive products

 

Project Description:                               Proposed project is to purchase new equipment and modify the company’s facility space. Electro Abrasives will add equipment to expand the capacity of its existing product lines and to increase manufacturing capability for new product lines.

 

Prior Application:                                  No

 

Existing Allocation:                               None

 

Power Request:                                       900 kW

                                                                  

Power Recommended:                            700 kW

 

Job Commitment:     

                   Existing:                                23 jobs

                   New:                                       10 jobs

                                                                           

New Jobs/Power Ratio:                          14 jobs/MW

 

New Jobs –

Avg. Wage and Benefits:                       $40,000

 

Capital Investment:                                $360,000

 

Capital Investment                                  $514,000/MW

Per MW

 

Summary:                                                Located in Buffalo, Electro Abrasives Corp. provides a variety of products and services for the abrasives industry. The company’s crushing plant is designed to manufacture 12,000 tons per year of high-density silicon carbide. Electro Abrasives can custom-grade its products to meet customer needs. In addition, the company has a full testing lab on site. A hydro allocation will help Electro Abrasives stay competitive and help it expand into new markets. The company is meeting with the Erie County Industrial Development Agency and the Empire State Development Corporation regarding other economic development incentives.

 

 

APPLICATION SUMMARY

Expansion Power

 

Company: Malyn Industries Ceramics, Inc.

 

Location:                                                  Clarence, New York

                                                                            

County:                                                     Erie

 

IOU:                                                           New York State Electric and Gas Corporation

 

Business Activity:                                  Manufacturer of advanced ceramic components

 

Project Description:                               Malyn recently purchased a new building in Clarence. The company plans to expand its operation and purchase new equipment. Malyn will renovate manufacturing space to accommodate the new equipment, including hot-press furnaces, a cooling water recirculation system, induction power supply, and miscellaneous supporting equipment. The company has also purchased a small business in California and will be moving that business to its site in Clarence.

 

Prior Application:                                  No

 

Existing Allocation:                               None

 

Power Request:                                       450 kW

                                                                  

Power Recommended:                            325 kW

 

Job Commitment:     

                   Existing:                                7 jobs

                   New:                                       20 jobs

                                                                           

New Jobs/Power Ratio:                          62 jobs/MW

 

New Jobs –

Avg. Wage and Benefits:                       $43,000

 

Capital Investment:                                $460,000

 

Capital Investment                                  $1,425,000/MW

Per MW

 

Summary:                                                Malyn Industrial Ceramics, formed in 1986, has become a low- cost producer of advanced ceramic components. Some of its products included sand-blasting nozzles, boron carbide armor, and high-temperature furnacing and hot-pressing services. The company has requested a hydro allocation to keep its prices lower and to maintain and grow its jobs base.

 

 

5.                   Power for Jobs Program – Extended Benefits

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve extended benefits for 86 Power for Jobs (‘PFJ’) customers as listed in Exhibits ‘5-A’ and ‘5-B.’  These customers have been recommended to receive such extended benefits by the Economic Development Power Allocation Board (‘EDPAB’).

BACKGROUND

“In July 1997, the New York State Legislature and Governor George E. Pataki approved a program to provide low-cost power to businesses and not-for-profit corporations that agree to retain or create jobs in New York State.  In return for commitments to create or retain jobs, successful applicants receive three-year contracts for PFJ electricity.

“The PFJ program originally made 400 megawatts (‘MW’) of power available.  The program was to be phased in over three years, with approximately 133 MW made available each year.  In July 1998, as a result of the initial success of the program, the Legislature and Governor Pataki amended the PFJ statute to accelerate the distribution of the power, making a total of 267 MW available in Year One.  The 1998 amendments also increased the size of the program to 450 MW, with 50 MW to become available in Year Three.

“In May 2000, legislation was enacted that authorized another 300 MW of power to be allocated under the PFJ program.  The additional MW were described in the statute as ‘phase four’ of the program.  Customers that received allocations in Year One were authorized to apply for reallocations; more than 95% reapplied.  The balance of the power was awarded to new applicants.

“In July 2002, legislation was signed into law by Governor Pataki that authorized another 183 MW of power to be allocated under the program.  The additional MW were described in the statute as ‘phase five’ of the program.  Customers that received allocations in Year Two or Year Three were given priority to reapply for the program.  Any remaining power was made available to new applicants. 

 “In 2004, provisions of the approved State budget extended the benefits for PFJ customers whose contracts expired before the end of the program in 2005.  Such customers had to choose to receive an ‘electricity savings reimbursement’ rebate and/or a power contract extension.  The Authority was also authorized to voluntarily fund the rebates, if deemed feasible and advisable by the Trustees.

“PFJ customers whose contracts expired on or prior to November 30, 2004 were eligible for a rebate to the extent funded by the Authority from the date their contract expired through December 31, 2005.  As an alternative, such customers could choose to receive a rebate to the extent funded by the Authority from the date their contract expired as a bridge to a new contract extension, with the contract extension commencing December 1, 2004.  The new contract would be in effect from a period no earlier than December 1, 2004 through the end of the PFJ program on December 31, 2005.

“PFJ customers whose contracts expired after November 30, 2004 were eligible for rebate or contract extension, assuming funding by the Authority, from the date their contracts expired through December 31, 2005.

“Approved contract extensions entitled customers to receive the power from the Authority pursuant to a sale-for-resale agreement with the customer’s local utility.  Separate allocation contracts between customers and the Authority contained job commitments enforceable by the Authority.

“In 2005, provisions of the approved State budget extended the period PFJ customers could receive benefits until December 31, 2006, the program’s new sunset date.   

DISCUSSION

“At its meeting on October 18, 2005, EDPAB recommended that the Authority’s Trustees approve the allocations and/or electricity savings reimbursement rebates to the 86 businesses listed in Exhibits ‘5-A’ and ‘5-B.’ Exhibit ‘5-A’ lists businesses that have requested and are being recommended for contract extensions, while Exhibit ‘5-B’ lists those businesses that have requested and are being recommended for electricity savings reimbursements.  Collectively, these organizations have agreed to retain more than 81,000 jobs in New York State in exchange for the contract extensions or rebates.  The contracts will be extended and the rebate program will be in effect until December 31, 2006, the program’s sunset.  The power will be wheeled by the investor-owned utilities as indicated in the Exhibits. 

“The Trustees are requested to approve contract extensions for the companies listed in Exhibit ‘5-A,’ and the payment and funding of rebates for the companies listed in Exhibit ‘5-B’ in a total amount currently not expected to exceed $2,400,000.  Staff recommends that the Trustees authorize a withdrawal of monies from the Operating Fund for the payment of such amount, provided that such amount is not needed at the time of withdrawal for any of the purposes specified in Section 503(1)(a)-(c) of the General Resolution Authorizing Revenue Obligations, as amended and supplemented.  Staff expects to present the Trustees with requests for additional funding for rebates for the companies listed in the Exhibits in the future.

FISCAL INFORMATION

“Funding of rebates for the companies listed on Exhibit ‘5-B’ is not expected to exceed $2,400,000.  Payments will be made from the Operating Fund.

RECOMMENDATION

“The Senior Vice President and Chief Financial Officer and the Director – Business Power Allocations, Regulation and Billing recommend that the Trustees approve the contract extensions for, and the payment of electricity savings reimbursements to, the Power for Jobs customers listed in Exhibits ‘5-A’ and ‘5-B.’

“The Chief Operating Officer, the Executive Vice President, Secretary and General Counsel, the Senior Vice President – Marketing, Economic Development and Supply Planning, the Senior Vice President, Public and Governmental Affairs, the Vice President – Major Account Marketing and Economic Development and I concur in the recommendation.”

Vice Chairman McCullough noted that at the September meeting, the Economic Development Power Allocation Board (“EDPAB”) had recommended both reducing the power allocations for Power for Jobs (“PFJ”) customers not meeting their job commitments and developing criteria to be used for reconsideration of such reductions.  He said that at this month’s EDPAB meeting on the previous day, staff had presented their proposed reconsideration criteria/process, which was subsequently approved by EDPAB, and he complimented them on a job well done. 

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees, noting that EDPAB had postponed consideration of the extended benefits for Edison-Price, Inc. until its November 2005 meeting.

 

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

WHEREAS, the Economic Development Power Allocation Board has recommended that the Authority approve contract extensions and electricity savings reimbursements to the Power for Jobs customers listed in Exhibits “5-A” and “5-B,” respectively;

NOW THEREFORE BE IT RESOLVED, That to implement such Economic Development Power Allocation Board recommendations, the Authority hereby approves contract extensions for those companies listed in Exhibit “5-A,” and the payment of  electricity savings reimbursements to the companies listed in Exhibit “5-B,” as submitted to this meeting, and that the Authority finds that such extensions and  payments for electricity savings reimbursements are in all respects reasonable, consistent with the requirements of the Power for Jobs program and in the public interest; and be it further

RESOLVED, That based on staff’s recommendation, it is hereby authorized that payments be made for electricity savings reimbursements as described in the foregoing report of the President and Chief Executive Officer in the aggregate amount of up to $2,400,000, and it is hereby found that amounts may properly be withdrawn from the Operating Fund to fund such payments; and be it further

RESOLVED, That such monies may be withdrawn pursuant to the foregoing resolution upon the certification on the date of such withdrawal by the Vice President – Finance or the Treasurer that the amount to be withdrawn is not then needed for any of the purposes specified in Section 503 (1)(a)-(c) of the General Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

RESOLVED, That the Senior Vice President – Marketing, Economic Development and Supply Planning or her designee be, and hereby is, authorized to negotiate and execute any and all documents necessary or desirable to effectuate the foregoing subject to the approval of the form thereof by the Executive Vice President, Secretary and General Counsel; and be it further

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

 

6.                   Request to Approve Extensions to the Term of Service for Existing Economic Development Power Program Customer 

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve an extension to the term of service to December 31, 2006 for one existing economic development power program customer, as listed in Exhibit ‘6-A.’

BACKGROUND

“The Authority sells electricity to businesses under several State-authorized economic development programs.  These power sales are made through the Economic Development Power Program, High Load Factor Manufacturer Program, Municipal Distribution Agency Industrial Power Program and other power sales programs.  The capacity and energy for these sales are provided by market purchases and supported by other Authority sources as needed.  In some instances these customers are served directly by the Authority and in other cases the customers receive Authority power through resale arrangements with municipal distribution agencies or investor-owned utilities.  Contracts range in length from five to more than 20 years.

DISCUSSION

“Chapter 313 of the Laws of 2005 was signed into law by Governor George E. Pataki on July 26, 2005.  The new law allows certain Authority power program customers that would be exposed to price increases before December 31, 2006 to apply for an Energy Cost Savings Benefit (‘ECSB’).  Under the new law, businesses eligible to receive ECSBs are limited to Authority customers currently supplied power under the Economic Development Power, Municipal Distribution Agency and High Load Factor programs.  The ECSB will be available for the period November 1, 2005 through December 31, 2006.

“The customer mentioned above has an allocation contract previously approved by the Trustees that expires prior to December 31, 2006.  Staff is requesting the Trustees to extend this agreement until December 31, 2006 so the customer may receive the benefits associated with the recently passed law.  The extension will help maintain costs and enable this customer to compete more effectively.  In addition, it will further secure employment levels in New York State.

“The Economic Development Power Allocation Board recommended that the contract be extended at their meeting on October 18, 2005.

RECOMMENDATION

“The Director – Business Power Allocations, Regulation and Billing recommends that the Trustees approve an extension to the term of service to December 31, 2006 for one existing economic development power program customer, listed in Exhibit ‘6-A.’

“The Chief Operating Officer, the Executive Vice President, Secretary and General Counsel, the Senior Vice President – Marketing, Economic Development and Supply Planning, the Vice President – Major Accounts Marketing and Economic Development and I concur in the recommendation.”

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman Seymour, Mr. Pasquale said that Barnes & Noble’s Economic Development Power allocation agreement was being recommended for extension so that the company would qualify for Energy Cost Savings Benefits.

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

RESOLVED, That the Trustees find that staff’s review supports an extension of an allocation from Authority economic development power programs for one (1)  existing customer until December 31, 2006 and that such extension  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 President and Chief Executive Officer, the Chief Operating Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things and take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to approval of the form thereof by the Executive Vice President, Secretary and General Counsel.

 

7.                   Economic Development Programs – Energy Cost Savings Benefits

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve Energy Cost Savings Benefits (‘ECSB’) for four customers as listed in Exhibit ‘7-A.’  These customers have been recommended to receive such benefits by the Economic Development Power Allocation Board (‘EDPAB’). 

BACKGROUND

“Chapter 313 of the Laws of 2005 was signed into law by Governor George E. Pataki on July 26, 2005.  The new law allows certain Authority economic development power program customers who would be exposed to bill increases as a result of higher market prices before December 31, 2006 to apply for an ECSB.  Under the new law, businesses eligible to receive ECSBs are limited to Authority customers currently supplied power under the Economic Development Power, Municipal Distribution Agency and High Load Factor programs. 

“The ECSB will be available for the period November 1, 2005 through December 31, 2006.  Each application will be evaluated under criteria adopted by EDPAB in consultation with the Authority.  The new law states that such criteria shall include:

·         overall economic impact of the company in terms of jobs created or retained, payroll, capital investment and the use of in-state suppliers;

·         the likelihood that absent approval a company would close, contract or relocate outside of New York State;

·         the company’s compliance with prior contractual commitments to retain and/or create jobs; and

·         the extent to which a benefit would affect the overall productivity or competitiveness of the company and its existing in-state employment.

“EDPAB can recommend a partial or complete withdrawal of the ECSB if the company fails to maintain mutually agreed-upon commitments, including jobs, capital investment and power utilization.

“The legislation also authorizes the sale of Authority power into the wholesale market with net earnings from such sales (and other funds deemed feasible and advisable by the Trustees) to be used for the ECSBs.  Power available to fund ECSBs includes:

·         up to 70 MW of unallocated replacement power;

·         up to 38.6 MW of preservation power relinquished or withdrawn after the effective date of the new legislation; and

·         up to 20 MW of power from the St. Lawrence/FDR project for the period ending December 31, 2006.

DISCUSSION

“As a result of its meeting, EDPAB recommended that the Authority’s Trustees approve ECSBs to the four businesses listed in Exhibit ‘7-A.’  Collectively, these organizations have agreed to retain more than 940 jobs in New York State in exchange for these benefits.  The companies will be eligible to receive these benefits until December 31, 2006. 

“The Trustees are requested to approve the payment and funding of ECSBs for the companies listed on Exhibit ‘7-A.’  Staff recommends that the Trustees authorize a withdrawal of monies from the Operating Fund for the payment of  such amount, provided that such amount is not needed at the time of withdrawal for any of the purposes specified in Section 503(1)(a)-(c) of the General Resolution Authorizing Revenue Obligations, as amended and supplemented.  Staff expects to present the Trustees with requests for additional funding for rebates for the companies listed in Exhibit ‘7-A’ in the future.

“Completed applications were reviewed by EDPAB and recommendations were made at their meeting on October 18, 2005.

FISCAL INFORMATION

“Funding of ECSBs for all the companies participating in the program is not expected to exceed $7,500,000.  Payments will be from the Operating Fund.

RECOMMENDATION

“The Senior Vice President and Chief Financial Officer and the Director – Business Power Allocations, Regulation and Billing recommend that the Trustees approve the payment of Energy Cost Savings Benefits to the customers listed in Exhibit ‘7-A.’

“The Chief Operating Officer, the Executive Vice President, Secretary and General Counsel, the Senior Vice President – Marketing, Economic Development and Supply Planning, the Senior Vice President, Public and Governmental Affairs, the Vice President – Major Account Marketing and Economic Development and I concur in the recommendation.”

Mr. Pasquale presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman Seymour, Mr. Pasquale said that funding for the Energy Cost Savings Benefits would come from the Authority’s General Operating Fund.

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

WHEREAS, the Economic Development Power Allocation Board has recommended that the Authority approve the payment of Energy Cost Savings Benefits to the customers listed in Exhibit “7-A”;

NOW THEREFORE BE IT RESOLVED, That to implement such Economic Development Power Allocation Board recommendations, the Authority hereby approves the payment of Energy Cost Savings Benefits to the companies listed in Exhibit “7-A” as submitted to this meeting, and that the Authority finds that such payments for Energy Cost Savings Benefits are in all respects reasonable, consistent with the requirements of the Authority’s economic development programs and in the public interest; and be it further

RESOLVED, That based on staff’s recommendation, it is hereby authorized that payments be made for Energy Cost Savings Benefits as described in the foregoing report of the President and Chief Executive Officer in the aggregate amount of up to $7,500,000 for all companies participating in the program including those on Exhibit “7-A”, and it is hereby found that amounts may properly be withdrawn from the Operating Fund to fund such payments; and be it further

RESOLVED, That such monies may be withdrawn pursuant to the foregoing resolution upon the certification on the date of such withdrawal by the Vice President – Finance or the Treasurer that the amount to be withdrawn is not then needed for any of the purposes specified in Section 503 (1)(a)-(c) of the General  Resolution Authorizing Revenue Obligations, as amended and supplemented; and be it further

RESOLVED, That the Senior Vice President – Marketing, Economic Development and Supply Planning or her designee be, and hereby is, authorized to negotiate and execute any and all documents necessary or desirable to effectuate the foregoing, subject to the approval of the form thereof by the Executive Vice President, Secretary and General Counsel; and be it further

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

 

8.                   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 eight existing customers that have either changed their names for various business reasons and/or moved the location of their business.   

BACKGROUND

“Seven companies have requested that the Authority grant approval of their requests for the continued delivery of Authority power allocations to facilities that have all gained prior approval for an allocation with pre-existing company names and ownership.  The present owners of these same facilities are now requesting that the Authority authorize continuation of the power allocations granted to the previous company names and ownership associated with these facilities. 

“In addition, one company has requested that the Authority grant approval of its request to transfer its allocation to other facilities for the reasons indicated below.

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

DISCUSSION

“The proposed transferees are as follows:

Bristol-Myers Squibb Co. is a large pharmaceutical corporation that manufactures drug and healthcare products.  Its subsidiary, Westwood-Squibb Pharmaceuticals, Inc., located in Buffalo, New York, produces pharmaceutical and dermatological products.  The Trustees approved a 1,000 kW Expansion Power (‘EP’) allocation for the company at their August 29, 1989 meeting in return for 610 jobs.  The Trustees approved a reduction of the EP allocation to 750 kW with a 450-job commitment at their September 26, 2000 meeting.  Subsequently, the Trustees approved an EP contract extension and reduction of job commitments to 265 at their September 28, 2004 meeting.  The Trustees also approved a 500 kW Replacement Power (‘RP’) allocation for the company at their meeting of April 30, 1991.  Subsequently, the Trustees approved a reduction of the RP allocation to 250 kW at their meeting of September 28, 1999, with the original job commitment reduced from 657 positions to 329 jobs. 

“Production volume at the plant has declined over the last decade and the corresponding job numbers have also declined to 255 jobs.  Bristol-Myers Squibb was faced with the prospect of uneconomic and unsustainable production and a potential plant closing, putting these remaining jobs at risk.  In August 2005, the company completed an asset sale agreement with Contract Pharmaceuticals Limited Niagara (‘CPL’).  CPL, a private Delaware corporation, purchased all buildings and equipment and agreed to offer employment to all existing employees at the Buffalo facility.  The agreement calls for the new company to continue manufacturing the same products for Bristol-Myers Squibb while expanding the plant’s production for new products and customer markets.  CPL will leverage unused capacity for contract pharmaceutical manufacturing, as well as offering analytic laboratory and product development services.  Additionally, CPL is investing $7 million in new and upgraded equipment and facilities over a three-year timeframe.  The company anticipates growth in employment and requests a transfer of the existing EP and RP allocations.

“The facility is in job compliance with the EP contract, but is at 78% of its RP job commitment.  However, CPL is confident that as its strategy is implemented, it will increase production and jobs at the facility.  Staff therefore recommends transferring the current EP and RP allocations with a review of the job status to be performed within six months.

Diemolding Corporation (‘Diemolding) manufactures components for the automobile industry using thermoset materials with compression, transfer, and injection process technologies.  The company has a facility in Canastota.  It was allocated an Economic Development Power (‘EDP’) allocation of 800 kW for 186 jobs by the Trustees at their meeting of May 23, 1995.  Diemolding wishes to transfer the allocation from the Canastota plant to its other facility in Wampsville in order to take advantage of more efficient processing equipment at that facility.  The two plants are two miles apart and are served by the same utility.  The company is in job compliance and will continue to employ the same labor force and produce the same products.  Diemolding will honor the employment commitments and all other terms and conditions of its contract.

“Fortwest LLC (‘Fortwest’) is a retailer of consumer goods with a large facility in White Plains.  The Trustees approved an allocation to Fortwest of 2,000 kW of Municipal Distribution Agency (‘MDA’) power through the County of Westchester Public Utility Service Agency (‘COWPUSA’) in return for 450 jobs at their meeting of March 30, 2004.  In early 2005, the company requested that its name be changed from Fortwest LLC to M. Fortunoff (‘Fortunoff’).  There was no change in ownership or financial transaction and the company continues the same business operations at the same location.  The Trustees approved the company for a contract extension to December 31, 2006 at a reduced allocation of 1,689 kW and a commitment of 380 jobs at their meeting of September 20, 2005.

Gray-Syracuse, Inc. is a manufacturer of precision components for the aerospace, gas turbine, micro-turbine, and other industrial market segments.  The company has a facility in Chittenango.  At their meeting of October 27, 1998, the Trustees approved Gray-Syracuse for a 1,250 kW Power for Jobs (‘PFJ’) allocation in return for 395 jobs.  The company changed its name to ESCO Turbine Technologies – Syracuse.  There was no financial transaction, nor asset acquisition; rather, the company changed the legal entity name in order to be more in line with corporate branding strategy.  All aspects of the Syracuse facility’s operations remain the same.  ESCO Turbine Technologies is in job compliance and the Trustees approved a PFJ extended benefits contract extension at their meeting of September 20, 2005.  The company will honor all contract terms and conditions, including job commitments.

“Medeva Pharmaceuticals Manufacturing, a Rochester company, was approved for a 2,000 kW allocation of PFJ power in return for 475 jobs by the Trustees at their meeting of April 28, 1998.  The company’s parent, Celltech Group PLC, was acquired in 2004 by UCB SA, a Belgian company.  This company subsequently changed the name of the manufacturing operation in Rochester to UCB Manufacturing Inc., which continues to manufacture pharmaceutical products at the same facility.  At their meeting of September 20, 2005, the Trustees approved the company for a PFJ extended benefits contract extension with a reduced allocation of 1,600 kW and a reduced job commitment of 380.  The company will honor all extended benefits contract terms and conditions, including job commitments.

New Venture Gear, Inc. is a large manufacturer of automotive parts in East Syracuse.  At their meeting of December 16, 1997, the Trustees approved the company for a 5,000 kW allocation of PFJ power in return for 3,200 jobs.  The New Venture Gear plant merged with Magna International and formed New Process Gear Inc., a division of Magna Powertrain.  The merger took effect September 29, 2004, with the new company 80% owned by Magna International and 20% by DaimlerChrysler.  New Process Gear Inc., which continues to produce the same types of products at the East Syracuse facility, is in job compliance.  The company agrees to honor all contract terms and conditions, including job commitments.

Spectronic Instruments produces diffraction gratings and manufactured scientific instruments and optical components in Rochester as a wholly owned subsidiary of Thermo Electron.  At their meeting of March 31, 1998, the Trustees approved the company for an 800 kW PFJ allocation in return for 178 jobs.  Thermo Electron subsequently moved the scientific instruments operation to Wisconsin, including the jobs associated with that part of the business.  In July 2004, Thermo Electron sold the remaining Rochester operations to Newport Corporation of Irvine, CA, in an asset-and-liability transfer.  Newport subsequently changed the name to Newport Rochester Inc.  The new company currently maintains 42 jobs in Rochester and continues to provide the same products and services.  Because it is below its job commitment, the company’s PFJ extended benefits will be reduced accordingly at the time of Trustee approval.

STS Duotek, Inc. is a contract assembler, sterilizer, packager, and testing laboratory for the medical device and pharmaceutical industries.  The Trustees approved the company’s facility in Henrietta for a 175 kW PFJ allocation in return for 55 jobs at their meeting of April 27, 1999.  The company was acquired by Ethox Corporation of Buffalo in an asset-and-liability purchase in February 2005.  Ethox Corporation will maintain the current employment level and continue to provide the same products and services; operations at the facility remain the same.  The company will honor all contract terms and conditions, including job commitments.

RECOMMENDATION

“The Director – Business Power Allocations, Regulation and Billing recommends that the Trustees approve the transfers of Authority power allocations to the eight companies described herein.

“The Chief Operating Officer, the Executive Vice President, Secretary and General Counsel, the Senior Vice President – Marketing, Economic Development and Supply Planning, the Vice President – Major Account Marketing and Economic Development and I concur in the recommendation.”

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

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

9.                   Economic Development Power Programs – Service Tariff Amendments – Notice of Adoption 

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve amendments to the Authority’s tariffs for High Load Factor (‘HLF’), Economic Development Power (‘EDP’) and Industrial Economic Development served by Municipal Distribution Agencies (‘IED/MDA’) (collectively, ‘Power Programs’) to increase rates for certain of the Power Program customers that receive Energy Cost Savings Benefit Awards (‘ECSB Awards’) in accordance with recently passed legislation.  The proposed rates reflect the large increase in purchased-power costs projected to be incurred by the Authority to serve these customers throughout calendar year 2006, as partially offset by receipt of such Awards consistent with the new legislation.  Thereafter, barring further legislative action or approval of additional ECSB Awards to the affected customers by the Economic Development Power Allocation Board (‘EDPAB’), the customers would be subject to full cost-based commodity rates under the proposed tariffs. 

“This action would also amend one HLF tariff and the IED/MDA tariff to ensure the continued collection of New York Independent System Operator (‘NYISO’) costs beyond the expiration date of these customers’ contracts.  These amendments will make these tariffs consistent with the Authority’s tariffs affecting virtually all other business customers with respect to NYISO costs. 

BACKGROUND

“At their meeting of July 26, 2005, the Trustees authorized the filing of notice with the New York State Department of State for publication in the New York State Register of the Authority’s proposed action to adopt tariff amendments.  The amendments would increase total or delivered rates by 5% on February 1, 2006 and an additional 6% on August 1, 2006 and include language in two tariffs (ST-1S and ST-35) that would permit recovery of ISO costs and make them consistent with similar tariffs (ST-1 and ST-50).  In that proposal, staff estimated that the Authority would absorb approximately $36 million to subsidize the customers after both the proposed rate increase and certain hydropower revenues that helped support the ECSB Awards were applied to the Power Programs.

“This action is justified because the Authority’s forecasts of forward prices for electricity show a significant run-up in purchased-power costs for 2006 over previous years, even without the impact of the most recent disruptions caused by the recent hurricanes on the Gulf Coast.  For example, the average day-ahead market price for electricity in NYISO Zone A in 2004 was $52/MWh.  This has risen substantially such that the as-experienced price so far in 2005 is $67.50/MWh, an increase of almost 30%. 

“Chapter 313 of the Laws of 2005, which was approved by Governor Pataki on July 26, 2005, among many other significant amendments to the Authority’s economic development power programs, created the ECSB Awards Program.  The legislation authorizes up to 70 MW of unallocated Replacement Power from the Niagara Power Project, up to 20 MW of currently unallocated power from the St. Lawrence/FDR Project and up to 38.6 MW of power from the St. Lawrence/FDR Project voluntarily given up by businesses in the future to be sold by the Authority in the wholesale market.  The net earnings from such sales along with such other funds of the Authority as deemed feasible and advisable by the Trustees are then earmarked for ECSB Awards, to be awarded on EDPAB’s recommendation.

“The legislation provides that for the period commencing on November 1, 2005 and ending on December 31, 2006, ECSB Awards shall be available only to Economic Development Power, High Load Factor power and Municipal Distribution Agency power customers whose power prices would be subject to increase before December 31, 2006.  As a result, approximately 70 companies with more than 60,000 jobs in the economic development power programs will be eligible to receive ECSB Awards by agreeing to keep their jobs in New York.  In connection with enactment of the legislation, the legislative leaders and the Governor expressed their desire that EDPAB and the Authority administer the ECSB Award program such that the Power Program customers will, in general, not have any rate increase until February 1, 2006, at which time there would be an estimated 5% increase in total as-delivered charges.  Later, on August 1, 2006, there would be an additional estimated increase of 6% in total as-delivered charges.  The proposed rate action is intended to implement this program.  Trustee approval of the funding to achieve this goal for the particular customers was the subject of a separate resolution at the September meeting, taken on recommendation of EDPAB.

DISCUSSION

“On August 10, 2005, the notice of proposed rulemaking and the notice of public forum were published in the New York State Register.  A public forum was held on September 13, 2005 at the Authority’s New York City’s office.  Public comments were received at the public forum from Norampac Inc., Niagara Falls Division (‘Norampac’), the County of Westchester Public Utility Service Agency (‘COWPUSA’) and Ms. Catherine Luthin of Luthin Associates, Inc. Energy Management Consulting.  All comments delivered at the public forum were preserved in transcript form.  (Page references to the transcript will be designated ‘Tr. [page #:line #]’.)  Written comments, which were submitted though September 26, 2005 in accordance with the public comment period prescribed by the State Administrative Procedure Act (‘SAPA’), were received from COWPUSA, the Multiple Intervenors, Nassau County, New York City Economic Development Corporation (‘NYCEDC’), the New York Post, Norampac and Ultra Flex Packaging Corporation (‘Ultra Flex’).

“All public comments, including the transcript from the public forum, are included in Exhibit ‘9-A’ to this item.  The proposed rates for 2006 and beyond are essentially unchanged from the July proposal.  The tariffs marked to show changes from the existing tariffs are included in Exhibit ‘9-B’.  Exhibit ‘9-C’ includes the final proposed tariffs, including Tables I and II applicable to all four tariffs, which contain the revised rates commencing February 1, 2006.

“The public comments addressed a number of issues, summarized below and followed by the Authority’s analysis and recommendations for each issue. 

                1.             2006 Rate Increase

“Public Comments:  The Authority notes that most commentators raised no specific objections to the proposed 2006 rate increases, or accepted them as necessary in light of current electricity commodity price conditions.  COWPUSA, a municipal distribution agency which purchases Authority power to be resold to industrial customers in Westchester County, noted that the Authority’s rates had ‘remained constant for several years, and the Agency accepts them as necessary.’  COWPUSA Comments at 1.  Similarly, Norampac, a manufacturer of corrugated paper products in Niagara Falls, did not find the proposed 2006 rate increases objectionable.  Tr. 15:4-9.  Although NYCEDC raised certain other objections to the 2006 increase, the agency observed that it is ‘undoubtedly true that some rate adjustments are necessary, given the fact rates have not changed since 1993, and NYPA has itself experienced higher costs with the advent of the New York Independent System Operator (NYISO), and the many market changes in New York State in the last several years.’  NYCEDC Comments at 2.  NYCEDC’s comments were filed on behalf of the New York City Public Utility Service (‘NYCPUS’), a municipal distribution agency that purchases Authority power to be resold to commercial and industrial customers in New York City.

“Multiple Intervenors (‘MI’), which represents 55 commercial and industrial consumers throughout New York State that purchase HLF and EDP power, objects that the Authority has not provided ‘any basis’ for its proposal, which would result in a combined 11% increase in the total delivered charges for 2006, and says that the Authority’s proposed action must have a ‘rational basis.’  MI contends that a rate increase of less than 11% is required if the Authority cannot justify its proposal.  MI Comments at 3.  MI also notes that its members have already experienced large increases as a result of Authority tariff changes earlier this year that authorized the pass-through of NYISO costs.  Id. 

“MI objects on two separate grounds to the proposed tariff provision that would permit the Authority to raise its production rates up to the full costs incurred by the Authority prior to December 31, 2006 if the Trustees determine in their sole discretion that such action is necessary based on the Authority’s financial condition.  First, MI contends that such a provision would be contrary to the statute requiring the allocation of ECSB Awards for current customers through the end of December 31, 2006.  Id. at 5.  Second, MI insists that such a provision permitting a rate change without notice is contrary to the notice requirements of SAPA and the Authority’s rules and regulations.  Id. at 5-6.

“NYCEDC protests the proposed 2006 rate increases insofar as they are scheduled to commence in February 2006, on the grounds that (1) the recent Gulf Coast hurricanes are estimated to produce sharp increases in winter fuel prices, which would compound the burden on New York City’s customers, and (2) the Authority has previously deferred the imposition of NYISO costs in a recent proceeding.  NYCEDC Comments at 2-3.  NYCEDC requests that the Authority consider deferral of a ‘few months’ and use a longer phase-in period.  Id. at 3.

“NYCEDC also asserts that it should receive underlying documentation for the proposed rate increases.  Id. at 1, 3.

Staff Analysis:  The proposed 2006 rate increase is justifiable given the large increase in commodity costs for power that the Authority now incurs and is expected to incur for these customers through December 31, 2006.  As MI indicates, the run-up in commodity costs has been made worse by the recent hurricanes, which disrupted natural gas production in the Gulf.  Further, as some of the commentators acknowledge, the production rates to these customers have remained constant since January 1993.  Thus, an increase in rates is necessary.  Given the market-based electricity costs incurred by the Authority to serve the customers, a justifiable rate increase would recover the entirety of these costs and thus be much higher than the proposed 11% increase.  In fact, as shown below, the rate proposal for 2006 reflects pricing substantially below the costs to serve such customers. 

“As Authority staff first explained in support of the related July trustee action, the proposed rate increase is expected to recover only an additional $5.4 million from the Power Program customers.  As a result, the proposed rates for 2006 will still be collecting revenues significantly below the cost of providing electric service, even after the value of the hydropower resources allocated for ECSB Awards is factored in.  Based on the staff’s current estimates of forward prices for electricity, under current rates the Authority expects to subsidize this customer class by about $12.9 million for the 14-month period from November 1, 2005 through December 31, 2006, as shown in the table below:

Authority Estimate of Net Subsidies at Current Rates for 14-Month Period

 

                                                                                                                            11/1/05-12/31/06 ($ millions)

                                Costs of service                                                                        (144.2)

                                Revenues under current rates                                                    74.9_

                                Revenue shortfall                                                                       (69.3)

                                Net earnings from 90 MW hydropower                                  56.4_

                                Net subsidies                                                                              (12.9)

“Thus, after the additional $5.4 million is recovered from the proposed rate increase, the Authority will still be subsidizing these customers by about $7.5 million.  As mentioned in July, the industrial incentive awards from Expansion Power Net Revenues, estimated to be $4.5 million for the 14-month period, have been and will continue to be applied to the Power Programs.  As a result, a new Authority subsidy of $3.0 million would be provided for the benefit of the Power Program customers.  The Authority has revised its July estimate that showed it would be providing a $36 million subsidy to serve these customers.  Updated estimates now show, among other things, greater revenues from the 90 MW of hydropower made available from Chapter 313 of the Laws of 2005 to support the ECSB Awards, but a significant under-recovery remains overall.  The above table reflects staff’s ‘base case’ analysis, i.e. estimates based on projected future average electricity costs.  Because it is an estimate, the actual amount of the Authority’s subsidy will not be known until the end of 2006.  Nonetheless, staff has reasonably demonstrated that the costs of providing service will exceed expected revenues under the proposed rate increase, plus all hydropower revenues provided in accordance with Chapter 313 of the Laws of 2005 including the Expansion Power Net Revenues, by at least $3.0 million.  Consequently, it cannot be rationally concluded that there must be a lesser increase.  Thus, the Authority’s proposal to increase rates in 2006 by an amount that does not even permit full recovery of the costs incurred to serve the Power Programs customers is fully supported.

“Staff agrees with MI’s point concerning the Authority’s right to raise rates ‘immediately to a level up to full cost’ prior to December 31, 2006 under the currently proposed tariffs.  Chapter 313 of the Laws of 2005 provides that certain hydropower resources ‘shall be allocated by the authority . . . for energy cost savings benefits pursuant’ to the Public Authorities Law (emphasis added).  The Authority agrees that its tariff proposal should be modified so that all net earnings from the sale of the earmarked hydropower resources are assigned to the benefit of the customers under the tariff and that any such unexpected rate increase needed due to the Authority’s financial condition reflects the availability of such earnings. 

“Staff, however, does not agree that the proposed rate change provision ‘vitiates the public notice requirements’ of SAPA or Authority regulations.  This provision is similar to a utility tariff that would automatically pass through higher fuel costs through a fuel adjustment clause.  A tariff that contains such a self-executing rate change mechanism does not violate SAPA.  Contrary to MI’s assertions, the Authority’s regulations are also no bar to such a rate change provision.  The regulation MI cites, 21 NYCRR §455.1(a), requires notice to change any Authority tariff.  The Authority is in compliance with such notice requirements here.  If the Authority lawfully changes a tariff to include a provision allowing automatic recovery of costs, the notice requirements of Section 455.1(a) no longer apply because the tariff is self-executing, just like a typical utility formula rate or fuel clause adjustment. 

“With respect to NYCEDC’s argument to defer the imposition of increased rates, the Authority notes that its proposal already embodies a very significant subsidy as well as a deferral.  Despite the run-up in commodity costs to serve these customers, the Authority has agreed to refrain from charging higher rates starting November 1, 2005, the date on which both the proposed tariff changes would become effective and the ECSB Awards commence.  The Authority voluntarily elected to delay the imposition of the higher rates until February 1, 2006.

“Second, there is no assurance that 2006 spring and summer fuel prices with natural gas on the margin for generation will be any less of a hardship than the natural gas prices that NYCPUS’s customers will face in the winter.  Because the New York City region is summer-peaking for electricity use, the February 1st commencement date may actually have a less burdensome effect on certain customers.

Staff Recommendation:  Staff recommends that the proposed 2006 rate increases be adopted as originally recommended to the Trustees.  However, in light of MI’s arguments concerning the Authority’s ability to raise rates prior to December 31, 2006 up to full costs, staff recommends that this provision be modified.  Instead, the provision, as further revised in the attached tariffs, will permit the Authority to raise rates to a level up to the full costs incurred by the Authority, less the value of the hydropower net earnings that have been allocated to the customers consistent with Chapter 313 of the Laws of 2005.

                2.             Rates in 2007 and Beyond

 

Public Comments:  The commentators are nearly uniform in objecting to the imposition of full cost-based rates commencing in 2007, as currently proposed.  Many parties note that there is no plan to extend the ECSB Awards beyond 2006.  NYCEDC requests that the Trustees ‘provide [an] extension’ of the ECSB Awards for beyond 2006.  NYCEDC Comments at 3.  MI argues that the revised statutes governing these power programs do not authorize the Authority to charge full cost-based rates starting in 2007, and states that economic development goals of the Authority compel the continued mitigation of electric rates for MI’s members through the proceeds of Authority hydropower sales.  MI Comments at 3-4.  MI urges the Authority to forge a long-term solution with interested stakeholders to ensure rate stability and low-cost power for New York State industries.  Id. at 7-8. 

“COWPUSA argues that the rates its customers would face in 2007 would be particularly onerous.  It states that, while the 2006 increases would result in a 5.14 cents/kWh commodity charge from August through December 2006, full cost-based pricing could result in a commodity price of as much as 14.98 cents/kWh, which was Con Edison’s cost for the commodity it supplied to Westchester County customers in August 2005.  COWPUSA Comments at 2.  COWPUSA, too, urges the Authority to devote more hydropower resources for the benefit of economic development in downstate communities such as Westchester County, and states that downstate use would yield more jobs per megawatt than is currently achieved by upstate industries.  Id. at 3. 

“NYCEDC similarly points out that the 50,000 jobs supported by the Authority’s allocations to New York City and its 435 jobs per megawatt was a ‘highly favorable’ ratio.  NYCEDC Comments at 1.  NYCEDC believes that the continuation of the ECSB Awards past 2006 would provide significant economic benefits to the New York City economy.  Id. at 2-3. 

“Norampac described its recent manufacturing history and short- and long-term business plans.  The product of a joint venture between two Canadian paper companies in 1997, Norampac successfully retooled an existing Niagara Falls facility and invested $40 million to become a profitable enterprise.  Its plant employs 130 full-time workers.  Norampac Comments at 1.  However, the company is extremely concerned about the pending full cost-based rates that would be imposed starting in 2007.  It emphasizes that the corrugated box market is subject to global competition, and that maintaining low electricity costs is essential for the company to grow.  Id. at 2.  Moreover, the Niagara Falls site is a candidate for future expansion by Norampac, but if electricity costs do not remain favorable, the company would have to target other states or provinces for such an expansion.  Id. at 3; Tr. 14-15.  And, if prices got bad enough, the company would have to consider a shutdown of the plant.  Tr. 16.  Because 2007 is not too far away, Norampac’s ‘long-term’ strategy is closely tied to what happens in the short term.  Tr. 15:10-21.

“The New York Post, a daily newspaper with operations in New York City that receives low-cost Authority power through its contract with NYCPUS, expresses deep dissatisfaction with the prospect of facing full cost-based rates in 2007.  The Post contends that it entered into an agreement with NYCPUS in 2001 under which NYCPUS, in consideration of the Post’s $177 million in plant investments and equipment in the City and the maintenance of 475 jobs in the City, agreed to provide a 50-year power supply contract to the Post.  Now, contends the Post, the Authority and NYCPUS are ‘walking away’ from the deal, because it appears that low-cost power will vanish in 2007.  Post Comments at 2.  The Post contends that it could not have anticipated a rate increase of this magnitude, id. at 2, and questions the purpose of the Authority’s economic development programs if customers such as the Post, which is subject to job retention and investment commitments, are forced to compete for power supplies with others who have made no such commitments.  Id. at 2-3.

“The Post objects to the limitations on the Authority’s hydropower resources for downstate purposes and observes that the Niagara Redevelopment Act, the federal statute channeling most of the Niagara Project’s output to upstate customers, is set to expire shortly.  Accordingly, urges the Post, the Authority should seek legislative reforms that would permit the use of this power for downstate economic development purposes.  Id. at 3. 

“Finally, the Post urges the Authority to ‘take concrete actions’ to deliver low-cost power to those companies that have made an economic commitment to the City and to ‘pursue smart, aggressive procurement strategies, after timely and meaningful consultation with its customers.’  Id. at 4.  Absent such efforts, the Post questions whether the Authority should continue to receive the support of the public.  Id.

Ms. Luthin also registers her concern that, rather than impose market-based rates in 2007, the Authority needs to do more to promote economic development.  In particular, she urges the Authority to procure long-term supply contracts that hedge ‘for the long-term.’  Tr. 24-25. 

“Finally, Nassau County comments that its businesses have been served under Authority economic development programs for more than 20 years, and that this low-cost power has permitted these businesses to remain in the County and create jobs.  The County expresses the hope that cooperative efforts of the State Legislature and the Governor will permit the Authority to continue to provide power programs to help its businesses lower their energy costs.  Nassau County Comments at 1.

Staff Analysis:  Staff observes that the Authority’s ability to devote additional hydroelectricity for economic development purposes is limited by law, even after the recent amendments to the Authority’s statutes that permitted certain hydropower resources to be devoted to this customer class.

“With respect to the requests by NYCEDC and MI to extend the ECSB Awards beyond 2006, the Authority cannot make any rate commitments at this time based on the use of those resources.  The Economic Development Law as amended permits only current customers that would otherwise be exposed to rate increases prior to December 31, 2006 to receive the ECSB Awards through that date, but thereafter, ECSB Awards will be awarded by EDPAB to ‘eligible businesses.’  N.Y. Economic Development Law § 183(h)(1).  Thus, barring amendment of the statute, starting in 2007, the potential recipients of those awards will not be limited to the current customers.  Hence, because the disposition of ECSB Awards beyond December 31, 2006 is within EDPAB’s purview, the Authority is unable to make any commitments to extend the value of the ECSB Awards beyond that date.[1]

“The urgings of COWPUSA and the New York Post that additional hydropower resources should be allocated to downstate customers are noted, but as those commentators must certainly recognize, the use of hydropower beyond the quantities identified in Chapter 313 of the Laws of 2005 for economic development is a matter within the purview of the State Legislature.  Thus, the Authority is unable to provide such additional hydropower benefits under current legislative mandates. 

“As COWPUSA, the Post, MI and Norampac claim, an increase to recover the full costs of purchasing electricity commodity would impose substantial burdens on businesses throughout the State.  However, as noted above, the Authority does not have the means unilaterally to subsidize power rates for all business customers exposed to market-driven cost increases.  Absent legislative or other solutions that address the root causes of the problem, the Authority, as a self-sustaining revenue-financed organization, needs to recover its costs of serving these customers.

“The Post’s comments leave the impression that the newspaper has a contractual relationship with the Authority that will somehow be breached by the proposed action.  The Post’s contract is with NYCPUS, not the Authority.  More importantly, the Authority’s contract with NYCPUS contains no rate protections for end-use customers and NYCPUS has total discretion to pass through all or part of this increase to the Post. 

“The Authority welcomes the suggestions raised by the Post, Ms. Luthin and MI that the Authority develop a long-term strategy to foster low-cost economic development power for businesses, through additional power supply procurements, hedging contracts or otherwise.  The Authority has not foreclosed making additional procurements or other long-term hedges effective post-2006 that would provide rate stability to its customers receiving economic development power.  Indeed, the Public Authorities Law countenances competitive solicitations to procure power supplies as one manner of meeting this end.  Such arrangements, however, require parallel commitments from customers to pay all the costs of such forward hedges and commitments.  Because of this and the uncertainty concerning the provision of attractive pricing beyond 2006, the resolution of which depends on possible future legislative action, the Authority cannot begin any such program of hedging and long-term power supply commitments.

Staff Recommendation:  Staff does not recommend any changes to its current proposal to impose full cost-based rates commencing in 2007.  Until alternative means to lower the costs of supplying this customer class are found, either through legislative solutions or otherwise, the tariffs’ pricing for 2007 and thereafter should be adopted as proposed.

3.                   The Authority’s Rulemaking Process

Public Comments:  NYCEDC protests that the Authority’s form of notice is ‘inadequate’ for a rate increase of the magnitude proposed.  NYCEDC Comments at 2.  The Post contends that there was little opportunity to comment on the Authority’s proposal, and that the September 13th public forum held at the Authority’s New York City offices provided ‘no opportunity for questions or comments.’  Post Comments at 2.  Ms. Luthin similarly objected that questions were not entertained at the public forum.  Tr. 11:17-25. 

Staff Analysis:  With respect to notice concerns, Authority staff finds that all notice requirements were observed.  In accordance with SAPA, a notice of proposed rulemaking was published in the New York State Register, after which the statutory 45-day comment period was observed.  Seven parties submitted written comments.  At the public forum, three parties delivered oral comments on the record, and a number of other parties were in attendance.  In addition, the Authority’s decision to hold a public forum was an additional opportunity to permit the public to comment and is not required by law.  Customers will rarely, if ever, agree that the time permitted to review a rate proposal is sufficient.  However, the commentators do not raise any convincing arguments to persuade the staff that notice was inadequate. 

“With respect to the conduct of the public forum, the Authority noted on the record that the event was not designed for Authority staff to engage in a question-and-answer session with customers.  Tr. 11-12.  Nonetheless, parties were encouraged to express their views, id. at 12, and all such views conveyed became a part of the official record in this proceeding and presented to the Trustees.  As this proceeding nears its conclusion, staff observes that the public forum served a valuable public purpose.

Staff Recommendation:  Staff does not recommend any changes to the Authority’s procedural practices with respect to tariff changes.

4.                   Miscellaneous Issues

“Public Comments:  MI comments that the Authority’s tariff amendments would delete the requirement to provide 90 days’ notice prior to raising its rates.  MI protests that removing this requirement would remove customers’ ability to plan for any proposed rate increase, and would eliminate the SAPA requirement to provide at least 45 days’ notice.  MI Comments at 6-7.

“Ultra Flex, a packaging manufacturer in Brooklyn receiving Authority power through its contract with NYCPUS, objects to the proposed ST-35 amendments only to the extent that they would collect the NYISO costs associated with the electricity sold to customers.  Ultra Flex argues that when it entered into its contract with NYCPUS in 2001, it understood that the Authority had ‘exempt status’ under the Federal Power Act, and was not regulated by the New York State Public Service Commission.  Because of this earlier understanding, Ultra Flex now expresses its surprise that it would be subject to its share of NYISO costs under the proposed tariff amendments.  Ultra Flex Comments at 1-2.  Ultra Flex also complains that the Authority failed to disclose to Ultra Flex that it had voluntarily joined NYISO.  Id. at 2.  Ultra Flex disagrees with the Authority’s efforts to recover NYISO costs and states that the imposition of such costs will put its business at risk.  Id.

Staff Analysis:  Staff notes that because the proposed tariff amendments would permit rate increases to recover the full costs experienced in the market of providing electricity to the customers (minus the value of the hydropower resources allocated to the customers through December 31, 2006), it is not sensible to retain a 90-day notice provision.  Charging prices reflective of month-to-month changes in the market is not compatible with providing 90 days’ notice.  Because staff continues to recommend the adoption of the rate change provisions as explained in sections 1 and 2 of this Discussion, MI’s arguments to retain the 90-day notice provision are without merit.  For the same reasons discussed in section 1, MI’s argument that SAPA applies here is also without merit.

“The Authority’s participation in NYISO has been common knowledge since NYISO’s inception in November 1999.  Even though the Authority is aware that the imposition of NYISO costs has resulted in delivery rate increases for the affected customers, such transmission grid costs are real expenses incurred by the Authority as a load-serving entity for customers and thus must be recovered in the rates.  The Authority is required to be a member of NYISO in order to serve NYCPUS, which in turn serves Ultra Flex.  If NYCPUS were served by a supplier other than the Authority, it would still be subject to the same NYISO costs incurred by that load-serving entity.  Since Ultra Flex is NYCPUS’s customer, ultimately it will be up to NYCPUS to decide whether to pass through NYISO costs to Ultra Flex.  The Authority understands that some industrial customers may be unfamiliar with the details surrounding NYISO charges, and the Authority’s staff will be available to answer any questions that Ultra Flex or any other NCYPUS customer may have concerning NYISO charges or practices.

Staff Recommendation:  Staff recommends no change to the proposed tariff amendments that would delete the 90-day notice provisions.  Staff also recommends no change to the tariff amendments that would impose NYISO costs on customers.

 FISCAL INFORMATION

“The 5% and 6% rate increases effective February 2006 and August 2006, respectively, are expected to produce an estimated $5.4 million in additional revenues.  The tariff amendments to ST-1S and ST-35 will also ensure that the Authority can recover NYISO costs incurred for these customers. 

“The cost of the Authority subsidy is estimated to be $7.5 million for the 14-month period from November 1, 2005 to December 31, 2006 after the estimated $5.4 million in additional revenues from this Trustee action is considered.  A subsidy exists because despite the increased revenues, the staff calculates that the rates will not result in the full recovery of the costs incurred by the Authority.  Since part of this subsidy will be derived from the expected $4.5 million in industrial incentive awards from Expansion Power Net Revenues, the amount of the new Authority subsidy arising from action is estimated to be $3.0 million.

RECOMMENDATION

“The Director – Supply Planning, Pricing and Power Contracts recommends that the attached schedules of tariff amendments be approved.

“It is also recommended that the Secretary be authorized to publish notice of this action in the New York State Register.

“The Chief Operating Officer, the Executive Vice President, Secretary and General Counsel, the Senior Vice President – Marketing, Economic Development and Supply Planning, the Senior Vice President and Chief Financial Officer and the Vice President – Major Account Marketing and Economic Development and I concur in the recommendations.”

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

WHEREAS, on July 26, 2005, the Trustees authorized the Secretary to file notice of proposed action to amend certain tariffs (ST-1S and ST-35) to provide for the recovery of New York Independent System Operator (“NYISO”) costs and increase total rates by 5% and 6% on February 1, 2006 and August 1, 2006, and approve funding of the Energy Cost Savings Benefits Awards in order to offset the cost of electrical commodity supply incurred for serving customers of the Authority’s High Load Factor, Economic Development Power and Industrial Economic Development programs; and

WHEREAS, such notice was duly published in the New York State Register on August 10, 2005 and more than 45 days have elapsed since such publication; and

WHEREAS, the public comments received at the Public Forum and in writing on the proposed action have been considered by the Trustees;

NOW THEREFORE BE IT RESOLVED, That the proposed tariff amendments be adopted allowing the recovery of NYISO costs and the 5% and 6% production increases, based on total delivered rates, effective February 1, 2006 and August 1, 2006, subject to the availability of funds in the Energy Cost Savings Benefits Awards; and be it further

 

RESOLVED, That the Senior Vice President – Marketing, Economic Development and Supply Planning or her designee(s) be, and hereby is, authorized to take such other and further actions as may be necessary to effectuate the foregoing; and be it further

RESOLVED, That the Secretary of the Authority be, and hereby is, authorized to file notice of adoption with the Secretary of State for publication in the New York State Register; and be it further

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

 

10.                Government Customer Load Research Program – Capital Expenditure Approval

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to authorize capital expenditures of $3.5 million to implement a Government Customer Load Research Program (‘Load Research Program’) for the Southeastern New York (‘SENY’) service area over a three-year period beginning January 1, 2006.  Additionally, once the Load Research Program is in place, there will be ongoing operation and maintenance expenditures of $275,000 annually.  The entire cost of the Load Research Program will be recovered through rates, pursuant to Article VI of the recently executed Government Customer Long Term Agreements (‘LTA’).   

BACKGROUND

“A majority of the Government Customers have entered into new LTAs with the Authority.  Article VI of the LTAs provides for, among other things, the completion of a cost-of-service study and a rate redesign of demand, energy and delivery charges.  The cost of the study, including the cost of metering equipment or other equipment required to provide data for the study or to implement the study results, is to be included in the electric cost of service and paid for by the Government Customers.

“With respect to Article VI, meetings with the Government Customers were held on August 11 and September 15, 2005.  The meetings focused on describing the goals of the upcoming Load Research Program to ensure early customer feedback.  Both the City of New York and the Metropolitan Transportation Authority inquired as to how the load research data would be used to represent their interests.  On a combined basis, these customers represent approximately 80% of the Government Customer peak load.

DISCUSSION

“Load research uses 15-minute-interval load data for a small sample of customers in order to understand the characteristics of an entire population.  To do this, load-profile recorders are installed to gather time-of-day information at sample locations.  Statistical techniques are used to estimate an overall sample size for each service class and the specific accounts contained in the sample. 

“Government Customer Load Research was first formally addressed by the Authority in the 1980s and revised a few years later.  It was most recently updated in 1993 under severe economic constraints that precluded additional load-profile recorders from being installed.  Staff has determined that the Authority’s initial load research effort and subsequent update no longer represent a statistically valid sampling of its current customer mix.  Furthermore, the 1993 and earlier sampling plans, which were developed during the New York Power Pool era, were not designed to meet any of the additional requirements resulting from the establishment of the New York Independent System Operator.  Additionally, staff determined that some of the installed load-profile recorders are no longer usable.

“At the customer meetings, it was acknowledged that the Authority’s load research preplanning had been well grounded since it relied heavily on usable historical interval load data.  Customers also agreed on how this data should be used as an appropriate measure of customer-to-customer variability, allowing for the right sample size to be selected.  As a result, a revitalization of the Authority’s existing Load Research Program was selected as the most prudent approach to meet its contractual commitment under the LTAs.

“At present, 826 metering points are in place in the SENY service area.  The Authority’s revitalization efforts will use approximately 674 of these existing load-profile recorders.  The other 152 existing load-profile recorders will not be usable due to sample design requirements and because some of them were not providing accurate or reliable results.  Staff expects to install an additional 540 load-profile recorders, for a total of 1,214 sample metering points.

“The sample population of 1,214 metering points will represent the entire population of approximately 11,500 accounts.  The statistical techniques used in the Load Research Program will strive for good precision for each service class with a large contribution to peak load.  The anticipated precision of the load research sample is estimated to be +/- 2.5% for service classes with large contributions to peak demand and to +/- 20.0% for the one service class with a small contribution to peak demand.  The overall anticipated precision of the load research sample is estimated to be very good, at +/- 2.3%.

“Exhibit ‘10-A’ contains a summary of the final sample design.  It details the number of active accounts by service classification, the available and usable existing metering points, the sample size, the required new meter installations and the anticipated precision levels.  Staff believes the Government Customers are comfortable with the anticipated results, with most of the service classes designed to meet or exceed the industry standard of +/- 10% precision at the 90% confidence level. 

“The Load Research Program will be implemented in phases, taking into account the time necessary to install meters, collect data and complete the required studies under the LTAs.  Phase I will take up the first year of the program.  It includes appropriate customer communications, including gaining access to the metering sites, a site survey and equipment purchase, setup and installation.  Replacement metering sites will also be established at the beginning of Phase I in the event a primary site cannot be accessed.

“Phase II of the Load Research Program will involve ongoing data collection, data validation and data estimation.  This phase should last one year and ideally span a full-summer and full-winter capability period without interruption.  Data collection will be handled remotely using either land-based or cellular communications equipment specified by the Meter Engineering Group.  Data collection and storage will likely use the Authority’s existing MV90 system.  Final data validation, verification and estimation will be handled through purchased software.  In addition, purchased software will have the capability to make the interval load data available to customers through a secure Internet site.

“At the start of Phase II, staff will report back to the Trustees with an assessment of the assumptions made in the original budget projections.  The assessment will include an analysis of the meter installation schedule and revised cost estimates based on actual, rather than planned, meter installations and actual, rather than estimated, meter installation costs.  In developing the cost estimates, staff has tried to be as accurate as possible, with the realization that some meter installations will be more complicated than others.  To help minimize the cost of installation, the Meter Engineering Group will be provided a back-up list and instructions on when it is appropriate to substitute a replacement location for a primary sample point.

“Phase III, the final stage, will start after a full year of data has been collected.  The collected data will be analyzed and standardized reporting will be used for cost-of-service study and rate-design purposes.  The goal will be to develop appropriate factors for allocating the cost to serve each service class.  The sample has been designed in a manner to allow for maximum flexibility in developing specific allocation factors.  Phase III is anticipated to be completed by April 2008.

FISCAL INFORMATION

“Project costs will be associated with three Business Units:  Marketing, Economic Development and Supply Planning, Transmission (Metering Engineering Group) and Information Technology.  Payment associated with this project will be made from the fund for capital expenditures and operation and maintenance expenditures will be requested annually during the yearly budget process. 

“As previously mentioned, Article VI of the LTA provides for the full cost recovery of the Load Research Program through Government Customer rates.  Currently, a preliminary cost-recovery plan is being worked out with the customers.  This plan includes recovery of the capital portion of the costs over a three-year period.  For example, 2006 capital costs will be recovered over the years 2007, 2008 and 2009.  Operations and maintenance expenditures are expected to be recovered the year after they are incurred.  Staff will finalize cost-recovery plans with the Government Customers prior to 2006.

RECOMMENDATION

“The Senior Vice President – Marketing, Economic Development and Supply Planning and the Vice President – Major Accounts Marketing and Economic Development recommend that the Trustees authorize the capital funding of $3.5 million for the Government Customer Load Research Program.

“The Chief Operating Officer, the Executive Vice President, Secretary and General Counsel, the Senior Vice President and Chief Financial Officer and I concur in the recommendation.”

Mr. Yates presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman Seymour, Mr. Yates said this program would entail a separate Capital Expenditure Authorization Request (“CEAR”), with the money drawn from the CEAR as is done with other capital projects.  Responding to a question from Vice Chairman McCullough, Mr. Yates said that the payback from rates would take place over three years, although some customers had proposed five years as the payback period.

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

RESOLVED, That approval is hereby granted for capital expenditures in accordance with the Authority’s Expenditures Procedures for the Government Customer Load Research Program as recommended in the foregoing report of the President and Chief Executive Officer, in the amount listed below:

                                                                            Current

                                                                        Expenditure

Capital                                                              Request   

 

Government Customer

Load Research Program                            $3,484,000

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

 

Final Sample Design

 

 

 

 


 

11.                Procurement (Services) Contract – Disaster Recovery Services – Capital Expenditure Authorization Increase and Contract Award

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve additional capital funding for the implementation of an information technology disaster recovery solution (‘hot site’) in the amount of $1,316,000.  This will result in a total capital expenditure of $3,900,000.

“In addition, the Trustees are requested to approve the award of a $2,400,000 five-year contract to SunGard Availability Services (‘SunGard’) for managed services for the hot site.

BACKGROUND

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

“In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services or equipment purchase contracts in excess of $3,000,000, as well as personal services contracts in excess of $1,000,000 if low bidder, or $500,000 if sole source or non-low bidder, require the Trustees’ approval.

“Business and technology environments have grown in complexity and companies rely heavily on their computer systems to control and account for their daily business operations.  Companies are more vulnerable to catastrophic losses if their computer operations are significantly interrupted as a result of fire, flood, long-term power outages or other unanticipated events.  The Authority’s operational systems, daily energy trading system and Energy Resource Management System need to be available 24 hours a day, seven days a week. 

“In order to minimize the risk of loss, precautionary steps need to be taken to protect the Authority’s information assets.  Foremost among these are alternative processing sites, i.e., ‘hot sites,’ where critical processing can be restored in a timely manner in the event of a declared disaster.

“In 2003, the President and Chief Executive Officer approved the amount of $2,584,000 for this project in accordance with the Authority’s Expenditure Authorization Procedures.

“The estimate was based on the following assumptions:

·         The Clark Energy Center (‘CEC’) would be the hot site of choice based on the existing telecommunication infrastructure to the Authority’s facilities;

·         Key application servers had direct attached storage for data; and

·         Tape backup and recovery technology in use in 2002 would be adequate to meet the Authority’s requirements.

“In 2003, Information Technology (‘IT’) began working with consultants that had expertise in disaster recovery plans.  A review of the applications in the Authority’s portfolio, existing infrastructure, existing telecommunications capabilities and the potential use of CEC as a hot site indicated that a number of changes would be required for recovery of core applications to occur within 24 hours of a disaster.  A disaster recovery strategy and plan were developed.  It was ultimately determined that the use of CEC as a hot site was not prudent since it had the potential to be disrupted.  The core technologies in use within the IT data center did not easily support recovery to an external hot site.  Key recommendations included the following:

 

·         Use a national hot site provider;

·         Move disk storage from direct attached to Storage Area Networks (‘SAN’);

·         Move telecomm from ‘point-to-point’ to a meshed network;

·         Replicate data from the existing data center in the White Plains Office (‘WPO’)

to a hot site using SAN-to-SAN communication configurations; and

·         Replace the water fire-suppression system at the WPO data center.

“IT has been implementing these recommendations over the past two years.  The increase in capital expenditures can be directly attributed to the following changes: 

·         Implementing SAN technology, both in the WPO data center and to be installed

at the SunGard facility, represents $1,100,000 of the increase; and

·         Replacing the fire-protection system with one that does not use water

represents $200,000 of the increase.

 

“The Authority has developed a Disaster Response Plan (‘Plan’) identifying essential information systems and network infrastructure components that require recovery in the event of a significant disruption to the WPO data center.  The Plan identifies those systems that are vital to the Authority’s business operations and assigns specific Recovery Time Objectives and Recovery Point Objectives for the restoration of those systems. 

·          The vendor must have significant disaster recovery experience and numerous

physical locations for alternate hot sites;

·          To prevent loss of operations in the event of a regional disaster, the vendor’s primary

hot site location must not be within close proximity of the Authority’s WPO data center;

·          The vendor must have a comprehensive testing methodology and experience in

developing and testing disaster recovery scripts;

·          The vendor must exhibit flexibility in meeting the Authority’s objectives in the event

of an extended outage;

·          The vendor must have qualified staff to support the Authority’s requirements.

“Proposals from the following four vendors were received in March 2005:

·          SunGard Availability Services, New York, NY

·          IBM Business Continuity Services, Wappingers Falls, NY

·          UCA Computer Systems, Inc.,  Denville, NJ

·          Invision.com Inc.,  Commack, NY

“The four proposals were compared in detail by the Authority’s evaluation team.  The proposals from UCA Computer Systems, Inc. and Invision.com Inc. were eliminated for failure to meet the minimum criteria set for consideration and/or for incompleteness of their responses.  In both cases, the proposed location for the hot site was also considered to be less than ideal.

“After a thorough evaluation of the remaining two bidders’ proposals, SunGard, the low bidder, was selected as the preferred vendor.  The total submitted cost based on a three-year period was $1,280,292 for SunGard and $1,417,887 for IBM Business Continuity Services.   SunGard received the top score from the evaluation team in every category, particularly in the areas of experience, quality and location of a hot site and alternate sites, and ability to implement the Authority’s preferred design.  The evaluation team recommends the award of a contract to SunGard in the amount of $2,400,000 based on a five-year term and the projected cost of other systems that may need to be added to the hot site during the term of the contract.  The total projected annual recurring costs are shown below:

 

 SunGard Availability Services

 

Year 1

 

$446,984

Year 2

 

$452,032

Year 3

 

$473,104

Year 4

 

$495,229

Year 5

 

$518,460

 

Total

$2,385,809

 

FISCAL INFORMATION

“Payments for capital expenditures will be made from the Capital Fund.  O&M expenditures required to support contract services have been included in the 2005 Approved O&M Budget.  Funding for subsequent years will be included in the budget submittals for those years.  

RECOMMENDATION

“The Chief Information Officer – Information Technology recommends that the Trustees approve additional capital expenditures of $1,316,000 for an information technology disaster recovery solution and that the Trustees approve the award of a $2,400,000 five-year contract to SunGard Availability Services.

“The Chief Operating Officer, the Executive Vice President – Power Generation, the Executive Vice President, Secretary and General Counsel, the Executive Vice President – Corporate Services and Administration, the Senior Vice President and Chief Financial Officer and I concur in the recommendation.”

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

RESOLVED, That capital expenditures are hereby approved in accordance with the Authority’s Expenditure Authorization Procedures, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount and for the purpose listed below; and be it further

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, the award and funding of the multiyear procurement contract is hereby approved for the period of time indicated, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount and for the purpose listed below:

                                                                                     Expenditure

Capital                                                                      Authorization

 

Disaster Recovery Project

Previously Authorized                                             $2,584,000

Current Request                                                         1,316,000

 

Total Authorized                                                       $3,900,000

 

 

 

 

                                                        Contract                 Closing

O&M                                                Amount                   Date  

 

SunGard Availability                  $2,400,000       Dec. 31, 2011

Services 5-year term

                               

Implementation and

Operation of a Disaster

Recovery Data Center

Hot Site

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


 

12.                Procurement (Services) Contract – St. Lawrence/FDR Power Project Relicensing – Personal Services – Award

The President and Chief Executive Officer submitted the following report:

SUMMARY

“The Trustees are requested to approve the award of a procurement contract to Bernier-Carr & Associates, P.C. (‘Bernier-Carr’) for engineering and permitting services for small shoreline stabilization projects at the St. Lawrence/FDR Power Project (‘St. Lawrence’).  The term of the contract will be through 2008, with options for extensions through 2010.  The total cost of the contract for five years is $390,500.  The Trustees are being requested to approve the full five-year term of the contract.

BACKGROUND

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

“The Federal Energy Regulatory Commission (‘FERC’) issued the New License for St. Lawrence on October 23, 2003.  The Trustees accepted the New License at their meeting of November 25, 2003.  As part of the FERC-approved Shoreline Stabilization Plan required by the license, the Authority will provide funding and engineering and permitting assistance for adjoining landowners to stabilize eroding segments of the shoreline of the St. Lawrence River and its tributaries within the project boundary. 

DISCUSSION

“To meet the requirements of the New License, the Authority needs to hire a firm to work with Authority staff to provide engineering and permitting services for adjoining landowners who have applied for funding for small shoreline stabilization projects. 

“In August 2005, the Authority issued a Request for Proposal (‘RFP’) for the above services, including a notice in the New York State Contract Reporter.  Proposals were received from:  (1) Bergmann Associates (‘Bergmann’), (2) Bernier-Carr, (3) Gomez & Sullivan Engineers, P.C. (‘Gomez & Sullivan’) and (4) TDK Engineering Associates, P.C. (‘TDK’).

“Staff from the Authority’s Licensing, Environmental and Procurement Divisions evaluated the proposals for technical qualifications and rates for proposed personnel.  The technical evaluation considered the bidders’ and their personnel’s qualifications, their experience with the types of projects they will be engaged in with the Authority and their experience with State and federal permitting agencies.  The overall organization proposed for managing the work was also reviewed.  Based on the evaluations, the technical aspects of three of the four proposals generally met the bid requirements.

Bergmann presented very little experience with permitting of shoreline stabilization projects.  Given that such permitting constitutes approximately half of the work requested in the RFP, they were not given further consideration.  Bergmann’s bid cost was between the highest and the lowest.  The proposal from TDK, which received the lowest ranking of the four proposals based on the technical aspects stated above, was also the highest-cost proposal.  The TDK proposal was given no further consideration.

“The remaining two bids, from Gomez & Sullivan and Bernier-Carr were very competitive, with both having experience in the subject areas specified in the RFP.  Gomez & Sullivan has provided engineering and design services for the Authority and Bernier-Carr is currently providing construction management and field engineering for the Authority.   Both firms have performed well in their respective roles and it is expected that they would fulfill the requirements of this contract satisfactorily.  The engineers listed by each bidder with the primary responsibilities for executing work under this contract had relatively comparable résumés. 

  “Following the technical evaluation, the proposals were examined for price using an estimated annual total number of hours for the work and the unit prices proposed by each bidder.  The Authority’s estimate for this work was $60,000 per year at an estimated 597 hours per year.  The prices for Gomez & Sullivan and Bernier-Carr were $78,181.20 and $71,130.00, respectively.  The primary difference in the respective costs for each firm resulted from the staff loading for the tasks.  The higher-cost bidder, Gomez & Sullivan, included additional personnel to be involved in each task which would increase the cost of those tasks and, potentially, the overall contract.  The lower-priced bidder, Bernier-Carr, did not take any commercial exceptions to the bid documents and its proposal was found to be commercially acceptable. 

FISCAL INFORMATION

“As these expenditures are related to the implementation of commitments in the New License and the settlement agreements, payments will be made from the Capital Fund. 

RECOMMENDATION

“The Senior Vice President – Public and Governmental Affairs recommends that the Trustees authorize award of a contract to Bernier-Carr & Associates, P.C. for $390,500 for engineering and permitting services to support the Adjoining Landowner Stabilization Program in compliance with the FERC-approved Shoreline Stabilization Plan.

“The Chief Operating Officer, the Executive Vice President, Secretary and General Counsel, the Executive Vice President – Corporate Services and Administration, the Senior Vice President and Chief Financial Officer and I concur in the recommendation.”

Mr. Suloway presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Vice Chairman McCullough, Mr. Suloway said that Bernier-Carr, the winning bidder for the contract, was from Watertown, New York, and that all of the bidders were local firms.

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

RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, approval is hereby granted to award a contract to Bernier-Carr & Associates, P.C. in the amount not to exceed $390,500 for engineering and permitting services for small shoreline stabilization projects at the St. Lawrence/FDR Power Project as recommended in the foregoing report of the President and Chief Executive Officer, in the amount listed below:

Contractor                                                    Contract Approval

Bernier-Carr & Associates, P.C.            $390,500

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

13.                Procurement (Services) Contracts – Power Generation Maintenance Resources Management Program – Awards and Extension                

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 MRO Software, Inc., H. B. Maynard and Company, Inc., Work Technology Corp. and the continuation and funding of the contract with Phalanx Computing, Inc.  A detailed explanation of the nature of such services, the reasons for extension, the funding required and the projected expiration dates is set forth below.

BACKGROUND

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

“In accordance with the Authority’s Expenditure Authorization Procedures, the award of non-personal services or equipment purchase contracts in excess of $3,000,000, as well as personal services contracts in excess of $1,000,000 if low bidder, or $500,000 if sole source or non-low bidder, requires the Trustees’ approval.

“The Authority’s revised Expenditure Authorization Procedures require the Trustees’ approval when the cumulative change order value of a personal services contract exceeds the greater of $250,000 or 35% of the originally approved contract not to exceed $500,000, or when the cumulative change order value of a non-personal services, construction, equipment purchase or non-procurement contract exceeds the greater of $500,000 or 35% of the originally approved contract amount not to exceed $1,000,000. 

“In 1994, Power Generation began instituting new work control processes for its maintenance, engineering and project management activities under a Maintenance Resource Management (‘MRM’) program.  These processes focused on continuous improvement in the use of management and craft labor resources, as well as reliability-based asset management. 

“The program has resulted in sustained increases of direct activity within Power Generation over the past several years.  (Direct activity is the time a person is engaged in a specific work task at the job site.)  This has enabled the site’s labor resources to replace contract labor on major upgrade tasks and overhaul work, in addition to reducing overtime costs.  An ongoing review of the maintenance program has also lead to the elimination or reduction in frequency of certain tasks that will not aversely affect plant performance.

“The Trustees first approved the implementation of the MRM program at their meeting of December 15, 1994.  The program was renewed at the Trustees’ meetings of December 14, 1999 and December 17, 2002.  MRM processes are now established as business practice within Power Generation.  The objectives of the program are currently focused on sustaining and improving on the accomplishments of the past 11 years.

DISCUSSION

“All of the subject contracts will contain provisions allowing the Authority to terminate the services for the Authority’s convenience, without liability other than paying for acceptable services rendered to the effective date of termination.  These contracts do not obligate the Authority to a specific level of personnel resources or expenditures.

“Sole-source award of the subject contracts is requested for one or more of the following reasons:  (1) the original consultant is uniquely qualified to perform services and/or to continue its presence and rebidding would not be practical, or (2) the contractor provides a proprietary technology or specialized product at reasonably negotiated rates.

“The Trustees are requested to authorize the continuation of four software and personnel service contracts with firms essential to the MRM program with respect to: (1) maintenance management software and support and (2) productivity improvement support.

Maintenance Management Software and Support

“The contract with MRO Software (‘MRO’; S93 51382), which was initially competitively bid, provided for specialized application software (Maximo), and associated maintenance services and licensing fees, training and software consulting services to support the MRM program.  In addition to providing the software vehicle with which to issue, plan and control work orders, the software is used to effect the integration between the work control and planning environment with resource scheduling and the Authority’s material management and financial management software.  In addition, the Maximo software is used to initiate requirements for safety tagging of equipment under maintenance.  The MRO software has become integral to the MRM program and has demonstrated its flexibility and robustness to accomplish the goals of the program.  Due to its proven relationship in the established work management program and the proprietary nature of the programming code, MRO is uniquely qualified to continue to provide these services and therefore a new sole-source award is justified.  The Authority has also included a notice in the New York State Contract Reporter of its intention to enter into such a sole-source contract.  It is estimated that $825,000 will be required for the term of the contract.

“A contract with Work Technology Corporation (‘Worktech’; S98 07027) provided for specialized application software used to increase the effectiveness of the Maximo work management software.  Worktech’s proprietary software products enabled Authority staff to consolidate each of the seven pre-existing work management databases into one enterprise system.  Consolidating will result in greater standardization and resource sharing (material and labor) across the Authority’s generation and transmission facilities.  Because of its central role in establishing a consolidated enterprise system for the use of Maximo as Power Generation’s work management software, and the requirement to keep the specialized application software updated to address emergent functional issues and in recognition of the proprietary nature of the programming code, Worktech is uniquely qualified to continue to provide these services and therefore a new sole-source award is justified.  The Authority has also included a notice in the New York State Contract Reporter of its intention to enter into such a sole-source contract.  It is estimated that $225,000 will be required for the term of the contract.

“Power Generation has an extensive metric performance system as an adjunct to the work management software previously described.  The metric system provides information on labor estimating accuracy of planned work, compliance with work schedules and other important indices that monitor the effectiveness of the work planning processes.  The metric system was developed using software provided by Phalanx Computing, Inc. (‘Phalanx’; 4500108006).  The contract with Phalanx, which became effective on May 25, 2005 for an initial term of one year, provides for specialized proprietary application software (dBReport), associated maintenance and consulting services.  Because of the proprietary nature of the programming code on which the metric system is based and the recurring need to update the system to address emergent requirements, an extension to the original contract is requested.  The current contract amount is $75,000; it is anticipated that an additional $90,000 will be required for the extended term.  The Trustees’ approval is requested to extend the subject contract through December 31, 2008 and to approve the additional funding.

Productivity Improvement

“Since inception of the MRM program, Power Generation has had a contract with H.B. Maynard and Company, Inc. (‘Maynard’; S95-68327) that provides staff with work management consultation support and specialized software tools to improve productivity.

“The contract with Maynard, which was initially competitively bid, provided for the development of maintenance labor standards (i.e., time standards), sophisticated software tools, maintenance management training and work sampling (the measurement of worker utilization through direct observation).  Labor standards provide an objective benchmark of the labor requirements for maintenance tasks based on the particular methods used by Authority staff and provide a gage to measure productivity.  The use of labor standards permits concise management of the tasks and allows for early intervention in work management problems.  The observation of work site utilization provides an objective empirical gauge to determine the effectiveness of work management processes.  Throughout the development of the MRM program, professional work planners within the Authority have obtained the knowledge to use and maintain the expertise derived from Maynard.  Maynard is uniquely qualified to ensure the continuity of data integrity obtained from work sampling, which has been embedded in the MRM program, and to provide continued support for its sophisticated labor estimating software tools (which are based on proprietary programming code); therefore, a new sole-source award is justified.  The Authority has also included a notice in the New York State Contract Reporter of its intention to enter into such a sole-source contract. 

“It is estimated that $450,000 will be required for the term of the contract.

FISCAL INFORMATION

“Funds required to support these contract services for Power Generation will be included in the 2006 O&M Budget.  Funds for subsequent years will be included in the budget submittals for those years.  Payment will be made from the Operating Fund.

RECOMMENDATION

“The Vice President and Chief Engineer – Power Generation, the Vice President – Procurement and Real Estate and the Chief Information Officer recommend the Trustees’ approval of the sole-source award, extensions and additional funding of the subject procurement contracts.

“The Chief Operating Officer, the Executive Vice President – Power Generation, the Executive Vice President, Secretary and General Counsel, the Executive President – Corporate Services and Administration and I concur in the recommendation.”

Mr. Hiney presented the highlights of staff’s recommendations to the Trustees.  In response to a question from Chairman Seymour, Mr. Hiney said that the software contracts were sole-source contracts because once a particular software is picked for this type of application, the proprietary nature of the software necessitates working with the original software firm on additional project phases.

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 and the Expenditure Authorization Procedures, a contract with MRO Software to provide for maintenance services for furnished software, training, consultant services and specialized application software in connection with the Power Generation Maintenance Resource Management Program, is hereby approved through December 31, 2008, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount  listed below:

                                                                                                   Projected                   Estimated

                                                                                                     Closing                     Contract

                                                O&M                                             Date                        Amount

 

                                                MRO Software, Inc.              12/31/2008                 $825,000

AND BE IT FURTHER RESOLVED,  That pursuant to the Guidelines for Procurement Contracts adopted by the Authority, a contract with Work Technology, Inc., to provide for maintenance services for furnished software, consultant services and specialized application software in connection with the Power Generation Maintenance Resource Management Program, is hereby approved through December 31, 2008, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount listed below:

                                                                                                   Projected                       Estimated                                                                                                                                Contract End              Contract

                                                O&M                                             Date                            Amount

                                                Work Technology, Inc.         2/31/2008                      $225,000

AND BE IT FURTHER RESOLVED,  That pursuant to the Guidelines for Procurement Contracts adopted by the Authority and the Expenditure Authorization Procedures, a contract with Phalanx Computing, Inc., to provide for maintenance services for furnished software, consultant services and specialized application software, in connection with the Power Generation Maintenance Resource Management Program is hereby approved and extended through December 31, 2008, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount listed below:

                                                                                                       Projected                   Estimated                                                                                                                                Closing                            Contract                       

                                                O&M                                                 Date                        Amount

 

                                                Phalanx Software, Inc.               12/31/08                    $90,000

AND BE IT FURTHER RESOLVED, That pursuant to the Guidelines for Procurement Contracts adopted by the Authority and the Expenditure Authorization Procedures, a contract with H. B. Maynard and Company, Inc. to provide for maintenance services for furnished software, consultant services and specialized application software in connection with the Power Generation Maintenance Resource Management Program is hereby approved through December 31, 2008, as recommended in the foregoing report of the President and Chief Executive Officer, in the amount listed below:

                                                                                                       Projected                   Estimated                                                                                                                                Closing                            Contract                       

                                                O&M                                                 Date                        Amount

 

                                                H.B. Maynard and                       12/31/08                    $450,000

                                                Company, Inc.

 

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

 

14.                Proposed Schedule of Trustees’ Meetings in 2006

The Executive Vice President, Secretary and General Counsel submitted the following report:

The following schedule of meetings for the year 2006 is recommended:

Date                                                                        Location                                                Time

January 31, 2006                                                   UTICA                                                   11:00 a.m.

February 28, 2006                                                 WPO                                                      11:00 a.m.

March 28, 2006                                                     WPO                                                      11:00 a.m.

April 25, 2006 – Annual                                      WPO                                                      11:00 a.m.

May 23, 2006                                                         ALB                                                        11:00 a.m.

June 27, 2006                                                         WPO                                                      11:00 a.m.

July 25, 2006                                                          ST. LAWRENCE                                  11:00 a.m.

                                                                    No Meeting in August

September 26, 2006                                              WPO                                                      11:00 a.m.

October 24, 2006                                                   B-G                                                         11:00 a.m.

November 28, 2006                                               ALB                                                        11:00 a.m.

December 19, 2006                                               NYC                                                        11:00 a.m.

RECOMMENDATION

“The President and Chief Executive Officer and I support the proposed schedule for the Authority’s Trustees’ Meetings for the year 2006, as set forth in the foregoing memorandum.”

Mr. Blabey presented the highlights of staff’s recommendations to the Trustees.  Vice Chairman McCullough noted that he had potential problems with two of the meeting dates later in the year and Mr. Blabey said that the meeting dates could be changed upon concurrence of the Trustees.

The following resolution, as submitted by the Executive Vice President, Secretary, and General Counsel, was unanimously adopted, as amended.

RESOLVED, That the schedule of Trustees’ Meetings for the year 2006, as set forth in the foregoing report of the Executive Vice President, Secretary and General Counsel, be, and hereby is, approved.


 

15.                Amendment to the Charter of the Audit Committee

The Chairman submitted the following report:

SUMMARY

“The Trustees are requested to approve an amendment to the Charter of the Authority’s Audit Committee to provide that Audit Committee members serve terms coterminous with their terms of office as Trustees.

BACKGROUND

“On December 17, 1996, the Trustees amended the Authority’s By-Laws to establish an Audit Committee consisting of two Trustees.  The Audit Committee serves an advisory function to the Trustees and its principal responsibilities are oversight of the Authority’s relationship with its independent accountants, oversight of the Authority’s internal audit process, oversight of the Authority’s internal control system and oversight of issues arising from the Authority’s Code of Conduct.  In establishing the Audit Committee, the Trustees also approved the Charter of the Audit Committee, which provides for the Audit Committee’s members to serve terms of two years, with reelection for additional one-year periods being authorized.

DISCUSSION

“Considering the scope and complexity of the Audit Committee’s functions, it is recommended that the term of service on the Committee be lengthened to be coterminous with each member’s term of office as a Trustee.  The amendment would also allow additional service on the Audit Committee if a member’s term of office as a Trustee is extended.  In this way, the value of the Audit Committee members’ knowledge and expertise acquired during their service on the Committee will be maximized to the benefit of the Authority and Trustees.  The amendment would take effect immediately and apply to existing Audit Committee members.

RECOMMENDATION

“I recommend the change discussed above to the Audit Committee Charter.  The recommendation is supported by the President and Chief Executive Officer, the Chief Operating Officer and the Executive Vice President, Secretary and General Counsel.”

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

RESOLVED, That the Charter of the Audit Committee be amended as follows:

Term

Committee members shall serve for a period of [two] years [subject to] coterminous with their term of office as Trustees under Section 1003 of the Public Authorities Law.  Committee members may be reelected to serve for additional periods [of one year subject to their] coterminous with any new term of office.  A Committee member may resign his or her position on the Committee while continuing to serve as a Trustee.  In the event of a vacancy on the Committee due to death, resignation or otherwise, a successor shall be selected in the manner and for the period described above.

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

 

16.                Appointment of Trustee Michael J. Townsend to the Audit Committee

 

The Chairman submitted the following report:

SUMMARY

“In accordance with the Article V, Section (2) of the By-laws of the Power Authority of the State of New York, adopted December 17, 1996, and as amended from time to time, and in accordance with the Charter of the Audit Committee, as adopted at that same meeting, the Trustees are requested to select Michael J. Townsend as a member of the Audit Committee, effective October 19, 2005.

BACKGROUND

“Section 2 of Article V of the Authority’s By-laws provides for the establishment of an Audit Committee of the Board consisting of two Trustees other than the Chairman.

“The Charter of the Audit Committee, adopted by the Trustees on December 17, 1996, provides that neither Audit Committee member should serve as Chief Executive Officer or in any other position of Authority management.  Audit Committee members are to be selected from eligible Trustees by vote of the Trustees.  Audit Committee members serve for a period of two years subject to their term of office, and may serve for additional periods subject to their term.

“The Audit Committee is currently composed of Vice Chairman Frank S. McCullough, Jr., who has served on the Committee since December 19, 2000.  The second member of the Audit Committee was Trustee Timothy S. Carey, who resigned from the Board on September 16, 2005.    

DISCUSSION

“In view of Timothy S. Carey’s resignation from the Board, it is desirable for the Trustees to select another eligible Trustee to serve on such Committee.  Trustee Michael J. Townsend has indicated his willingness to serve in that position.  Accordingly, his selection as an Audit Committee member is recommended.” 

RECOMMENDATION

The following resolution, as recommended by the Chairman, is recommended for adoption.

Mr. Blabey presented the highlights of the Chairman’s recommendation to the Trustees.  Chairman Seymour expressed his appreciation for the expertise Trustee Townsend would be bringing to the Audit Committee, as well as for his willingness to step up to the task.

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

RESOLVED, That Michael J. Townsend is hereby selected as a member of the Audit Committee, effective October 19, 2005, to serve for a term ending October 19, 2007.


 

17.                Motion to Conduct Executive Session

“Mr. Chairman, I move that the Authority conduct an Executive Session to discuss potential administrative and judicial litigation relating to particular persons and corporations.”  Upon motion moved and seconded, an Executive Session was held.

 

18.                Motion to Resume Meeting in Open Session

“Mr. Chairman, I move to resume the meeting in Open Session.”  Upon motion moved and seconded, the meeting resumed in open session.

 

19.                Resolution – Timothy S. Carey

Chairman Seymour read a resolution on behalf of the Trustees thanking Mr. Carey for his service as a Trustee and then thanked Mr. Carey personally.

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

WHEREAS, Timothy S. Carey was a distinguished member of the New York Power Authority’s Board of Trustees from November 2000 through September 2005, a period in which the Board and the Authority benefited immensely from his sound judgment, his sure instincts and his unswerving dedication to public service; and

WHEREAS, during Mr. Carey’s tenure, and with his strong support, the Authority built significantly on its record as a leader in the vital areas of energy efficiency, new energy technologies, and clean transportation, helping to clean the air and reduce the nation’s dependence on foreign oil; and

WHEREAS, Mr. Carey’s years on the Board also saw such notable accomplishments as the Authority’s installation of small, clean power plants at seven locations in New York City and on Long Island to assure reliable electric service in those areas; its construction of a highly efficient 500-megawatt plant in Queens; and its receipt of a new 50-year federal license for the St. Lawrence-Franklin D. Roosevelt hydroelectric project; and

WHEREAS, Mr. Carey served with extraordinary distinction for more than six years as President and Chief Executive Officer of the Hugh L. Carey Battery Park City Authority, a post he has relinquished to assume his new duties at the Power Authority; and

WHEREAS, in the Battery Park City position, he successfully directed that community’s recovery from the September 11, 2001, attack on the neighboring World Trade Center; presided over the adoption of guidelines to assure environmentally positive development of the Battery Park complex and oversaw construction of The Solaire, the first sustainable “green” residential high-rise building in the United States; and

WHEREAS, Mr. Carey’s varied and productive career has also included service for five consecutive terms on the Westchester County Board of Legislators, as Governor George E. Pataki’s Director of Intergovernmental and Legislative Affairs, as Chairman and Executive Director of the New York State Consumer Protection Board and as a member of the Board of the New York State Energy Research and Development Authority; and

WHEREAS, Mr. Carey’s firm commitment to educational opportunity has been demonstrated through his service since April 2000 as Chairman of the Board of Trustees of Westchester Community College and his membership on that Board since 1997; and

WHEREAS, Mr. Carey has accepted a critical and challenging new assignment as the Power Authority’s Chief Operating Officer;

NOW THEREFORE BE IT RESOLVED, That the Trustees of the Power Authority of the State of New York convey their gratitude to Tim Carey for the insight, the work ethic, the wisdom, and the wit he has brought to his duties as a member of this Board; that they express their full confidence that these traits will continue to stand him and the Power Authority in good stead as he undertakes his full-time responsibilities at the Authority; and that they wish him well as he embarks on the latest chapter in a singular career of service to the people of New York State.

October 19, 2005


 

20.                Next Meeting

The next Regular Meeting of the Trustees will be held on Tuesday, November 22, 2005, at 11:00 a.m., at the New York Office, unless otherwise designated by the Chairman with the concurrence of the Trustees.  The meeting location was re-scheduled to take place at the Charles Poletti Power Project, Astoria, NY.

 

Closing

On motion duly made and seconded, the meeting was adjourned by the Chairman at approximately
12:45 p.m.

 

 

David E. Blabey

Executive Vice President,

Secretary and General Counsel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Text Box: OCTMINS.05

 

 

 


 

[1]   With respect to MI’s comment that the law does not authorize charging full cost-based rates in 2007, staff notes that the legislation imposes no prohibitions in that regard.  Current State law does not impose any particular pricing level for serving this customer class.