July (pdf) - New York Power Authority

development purposes within St. Lawrence County was disapproved by the Governor in December 2010.
The Authority is currently considering alternative approaches to the disapproved contract under which
MED would be eligible to receive allocations of hydropower to use for economic development purposes.
A contract executed in 2010 provides for the Authority’s sale of 15 MW to LIPA for resale to the U.S.
Department of Energy (“DOE”) at Upton, New York, for a term of ten years with an option for the
Authority to extend the contract for an additional five years. Sales under the contract commenced in
March 2011.
Contracts with the seven out-of-state customers are in effect through August 31, 2025 and provide for
the sale of 191.2 MW of firm and the 40.9 MW of peaking power from the Niagara Project. The new
license issued to the Authority in 2003 for the St. Lawrence-FDR Project provides for the sale of
approximately 4.25% of Project power, amounting to 34.5 MW of firm allocations to six neighboring state
customers, along with a corresponding share of non-firm energy, at cost-based rates under contracts with
terms through April 30, 2017.
The charges for firm power and associated energy sold by the Authority to the three investor-owned
utility companies for the benefit of rural and domestic customers, the municipal electric systems and rural
electric cooperatives in New York State, the MTA, the NFTA and seven neighboring state customers have
been established in the context of an agreement settling litigation respecting rates for hydroelectric power,
judicial orders in that litigation, and contracts with certain of these customers. Essentially, the settlement
agreement and relevant judicial orders define the rates charged to these customers as cost-based rates and
specifically permit the inclusion of interest on indebtedness and continuing depreciation and inflation
adjustment charges with respect to the capital costs of the Niagara and St. Lawrence-FDR Projects and
preclude the inclusion of any expense associated with debt service for non-hydroelectric projects in the
hydroelectric rates charged to wholesale customers for the benefit of rural and domestic customers. The basic
rates for RP and EP have been set above costs and are subject to annual adjustment in May of each year,
based on four economic indices. This pricing arrangement will continue through June 30, 2013. At their
September 2010 meeting, the Trustees approved a new service tariff for all RP and EP customers that is
scheduled to begin on July 1, 2013 and which provides for a three year phase-in to the new rates which
will be based on Preservation Power rates. The new service tariff was incorporated into the extension of
the RP and EP contracts through 2020, which were approved by the Governor in December 2010.
Contracts with National Grid, NYSEG and RG&E relating to hydroelectric power from the plants
contain various limitations on the obligations of parties under particular circumstances, including, among other
things, provisions allowing for withdrawal of power and energy to comply with the NRA, the Authority’s
Niagara and St. Lawrence-FDR licenses, and orders of FERC. The Authority may discontinue service
upon 15-days’ written notice for non-payment of bills and terminate any such contract upon 60-days’ notice
for violations of the terms thereof. A utility company may elect to terminate its contract for any reason on
one year’s notice to the Authority and on 90-days’ notice in the event that the charge for service is increased
or the terms, conditions or rules governing the service are materially modified without the agreement of
the utility.
Blenheim-Gilboa
The Authority has contracts for the sale of 50 MW of capacity from the Blenheim-Gilboa Pumped
Storage Power Project (‘‘Blenheim-Gilboa Project’’) to LIPA and 250 MW of capacity to its NYC
Governmental Customers pursuant to the 2005 Agreements, each sale at a tariff rate established on the
basis of cost. The remainder of the Project’s capacity is used to meet the requirements of the Authority’s
business and governmental customers and to provide services in the NYISO market generally at the
market-clearing price for capacity.
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