July (pdf) - New York Power Authority

30, 2014. Both transfers were approved by the Authority’s Trustees and made in 2009.
The MOU provides that the obligation of the State to return all or a portion of such funds would be
subject to annual appropriation by the Legislature and would not constitute a debt of the State within the
meaning of any constitutional or statutory provision, would be deemed executory only to the extent of
monies available to the State, and no liability would be incurred by the State beyond monies available for
such purpose. Further, the MOU provides that as a condition to any such appropriation for the return of
the monies earlier than September 30, 2017 for the spent nuclear fuel reserves and earlier than September
30, 2014 for the construction projects, the Authority must certify that the monies available to the
Authority are not sufficient to satisfy the purposes for which the reserves, which are the source of the
funds for the transfer, were established. For a further discussion of this matter and litigation challenging
the asset transfers, see the Authority’s financial statements for the year ended December 31, 2010,
management’s discussion and analysis, “Economic Conditions”, and “PART 1―APPENDIX
D―Litigation―Item (b).”
Payments to the State Office of Parks, Recreation and Historic Preservation
Commencing with State Fiscal Year 2003-2004 and in connection with its Niagara and St. Lawrence-
FDR Projects, the Authority has made annual payments of $8 million to or for the benefit of the New York
State Office of Parks, Recreation and Historic Preservation (‘‘OPRHP’’) for operation and maintenance of
Robert Moses State Park, Coles Creek State Park, Artpark, and the Niagara Reservation. In connection
with the temporary transfer of funds to the State described in the preceding section, the MOU relieves the
Authority of the annual $8 million payments for OPRHP from 2011 to 2017, up to a maximum of $43
million, and relieves the Authority of its obligation under the Public Authorities Law to pay the State’s
cost recovery fee for central governmental services attributable to public authorities, from 2009 to 2017,
up to a maximum of $45 million.
The Authority has also agreed to provide $10 million to the OPRHP to fund the development of
energy efficiency measures and clean energy technologies at the Rivers and Estuaries Center in Beacon,
New York, of which approximately $2 million has been provided.
Energy Risk Assessment and Control Activities
In April 2002, the Authority created the position of Vice President, Chief Risk Officer—Energy Risk
Assessment and Control (“ERAC”). This officer is responsible for establishing policies and procedures
for identifying, reporting and controlling energy-commodity price risk and counterparty credit risk connected
with energy commodity hedging transactions. This type of assessment and control has assumed greater
importance in light of the Authority’s participation in the NYISO energy markets (see ‘‘PART 2—NEW
YORK INDEPENDENT SYSTEM OPERATOR’’), the Authority’s increased reliance on market-based
energy procurement since the sale of its two nuclear plants in 2000, and the financial market crisis that emerged
in 2008.
ERAC is aimed at measuring and mitigating forward commodity price risk in order to contain
financial outcomes within management-determined tolerances given volatile energy markets. The
program focuses on containing outcomes with respect to net income, customer revenue requirements,
Authority collateral requirements, counterparty credit exposure and other metrics as determined by
Authority management. In order to achieve commercial objectives, the Authority’s risk management
procedures are intended to provide clarity as to management and staff accountabilities, authorizations,
prohibitions and separation of duties. In May 2009, the Authority approved an initiative to create and
implement an enterprise-wide program to promote continuous improvement in risk identification and
assessment, and to enhance the Authority’s capacity to fulfill its strategic and organizational goals. The
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