July (pdf) - New York Power Authority

ural electric cooperatives in New York State, three industrial plants at Massena, New York, the MTA,
NFTA, seven neighboring state customers, seven Niagara host communities, Niagara University, the
Tuscarora Nation and beginning in January 2011, the U.S. Department of Energy. Energy is also sold to
the St. Lawrence Seaway Development Corporation and to the New York State Office of Parks,
Recreation and Historic Preservation. Service is provided to the three investor-owned utilities under
contracts providing for sale of 455 MW of firm and 360 MW of peaking capacity through December 31,
2011, subject to withdrawal upon thirty days’ notice by the Authority as may be authorized by law or
otherwise as may be determined by the Trustees. The 455 MW of firm power is expected to be
withdrawn by the Authority on August 1, 2011 and will be utilized in the new Recharge New York Power
Program (see “PART 2—POWER SALES—Marketing Issues and Developments—Item (4)”). Contracts
expiring on June 30, 2013 provide for the sale of up to 250 MW of Expansion Power (“EP”) to National
Grid and NYSEG for resale to industries generally located within 30 miles of the Niagara Project. Contracts
expiring on December 31, 2012 provide for the sale of up to 445 MW of Replacement Power (“RP”) for
industries located in the vicinity of the Niagara Project. In December 2010, the Governor approved the
extension of virtually all RP and EP contracts through the end of 2020.
Contracts are in place through September 1, 2025 with entities that were part of the Niagara Project
relicensing settlement agreements. Total power allocations for these entities amount to 25 MW, which is
distributed among seven host communities, Niagara University and the Tuscarora Nation, with an additional 7
MW of power being sold into the NYISO market for the host communities’ benefit. The Authority also has an
annual minimum obligation of $5 million and $1.5 million respectively to the Host Community Fund and the
Erie/Buffalo Waterfront Development Funds which is met via the monetization of power sales made into the
market.
Contracts with ALCOA for an aggregate of 478 MW have been extended through December 31, 2013
under a supplemental agreement executed in 2011. The contracts with ALCOA provide for rate adjustments
based upon a formula containing various indices and provision for job credits. The indices used in the
ALCOA contracts are the average of the monthly United States Department of Labor, Bureau of Labor
Statistics Producer Price Indices for Industrial Power and Industrial Commodities less fuel, which reflect the
cost of electricity used by industry and the price of materials used by industry, and a third index based on
the average revenues per kilowatt-hour for electric sales to the industrial sector in ten specified states, the
bulk of which are in the northeast region. In February 2009, ALCOA entered into a long term contract with
the Authority for the sale of 478 MW, effective July 1, 2013, for an initial term of 30 years with an option to
extend for an additional 10 years under certain circumstances. The recent supplemental agreement changes the
contract start date to January 1, 2014. The contract provides for rate adjustments based upon a formula
containing various indices, and has provisions for price adjustments based on the price of aluminum on the
London Metal Exchange. The contract has job compliance provisions based on employment commitments.
The supplemental agreement provides for ALCOA to invest at least $600 million in a new East Plant, and
construction of that plant must commence by June 2013 in order for the new long term contract to take effect.
Contracts for the sale of up to 764.8 MW of firm and 3.6 MW of peaking power through August 31,
2025 with the 47 municipal electric systems and four rural electric cooperatives which own their own
electric distribution systems are in effect. A contract with the MTA for 10 MW expired in July 2000, but
the Authority is continuing to provide service to the MTA on a month-to-month basis. Service to NFTA is
also on a month-to-month basis.
In September 2010, the Authority’s Trustees approved a contract for the sale of 1.3 MW of
Preservation Power to Florelle Tissue Corporation (located in Jefferson County) that was subsequently
approved by the Governor. In May 2011, the Authority’s Trustees approved two Preservation Power
allocations totaling 8 MW to Newton Falls Fine Paper and Upstate Niagara Cooperative. A contract for
the sale of 20 MW of power to the Massena Electric Department (“MED”) to be used for economic
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