July (pdf) - New York Power Authority

Commission in the coming months.[update] Depending on the ultimate resolution of numerous issues,
which is uncertain, including whether and to what extent Swaps are required to be cleared through
clearinghouses and/or traded on exchanges with accompanying collateral and/or margin requirements;
whether and to what extent Swaps entered into prior to the enactment of the DF Act are required to be
collateralized; and whether and to what extent public power entities such as the Authority are exempted
from these requirements, the impact of the DF Act on the Authority’s liquidity and/or future risk
mitigation activities could be significant. In the event that the DF Act provisions are applied retroactively
to Swap positions predating the enactment of the DF Act, it could require the Authority to post as much
as $180 million in collateral to maintain its open hedge positions. The Authority currently has sufficient
liquidity to post such collateral, if required. Extensive information on the DF Act is available from many
sources in the public domain, and potential purchasers of the 2011 Bonds should obtain and review such
information.
New York State Electric Utility Industry Restructuring Matters
Development of a Competitive Market for Electricity in New York
Following extensive proceedings, the PSC issued an Opinion and Order on May 20, 1996 (‘‘Order 96-
12’’) in the competitive opportunities proceeding which set forth the PSC’s goals of, among other things,
increasing competition and customer choice in the retail electric market, lowering electric rates, and
encouraging the New York investor-owned electric utilities to divest their generation assets. In Order 96-12,
the PSC required these investor-owned electric utilities (with certain exceptions) to file individual
restructuring and rate proposals that were responsive to the PSC’s goals. The PSC ultimately approved multiyear
restructuring and rate plans for each of the investor-owned electric utilities that the PSC deemed to be
consistent with its goals set forth in Order 96-12.
In its appearances in proceedings before the PSC, the Authority has been primarily concerned with the
level and structure of the utilities’ delivery rates, as well as the potential application of charges for the
‘‘stranded costs’’ of the utilities, that would be applicable to the Authority and its customers. Treatment of
these matters under the National Grid, Con Edison and NYSEG rate plans currently in effect is described
below.
National Grid
In January 2010, National Grid filed a proposed multi-year rate plan to supplant its existing rate plan
that generally governed its delivery rates through 2011. Evidentiary hearings were conducted on the filing
which concluded in September 2010. A final PSC order was issued on January 24, 2011.
National Grid’s filing would have imposed large delivery rate increases on all of the Authority’s
customers effective in 2012 and 2013; however, the company later withdrew its proposal for rate increases
in 2012 and 2013, and the proceeding only concerned the 2011 rate year. Based on stipulations reached in
the case, the final PSC order established that the delivery rates applicable to the Authority’s “existing”
allocations for RP, EP, EDP, PFJ power, and certain high load factor power would continue unchanged
through 2011 and the current broad exemption from stranded cost recovery would continue for Authority
customers through 2011. “New” allocations of Authority power, which were already subject to National
Grid’s regular tariff delivery rates, became subject to the revised delivery rates ultimately approved by the
PSC in the case. Finally, the PSC’s approved rate plan provides for National Grid’s stranded costs to be
fully recovered by the end of the 2011 rate year.
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