July (pdf) - New York Power Authority

July 26, 2011
7. Increase in Hydroelectric Preference Power Rates –
Notice of Proposed Rule Making and Reinstatement of
Tariff Provisions for Preference and Industrial Power Rates
SUMMARY
The President and Chief Executive Officer submitted the following report:
“The Trustees are requested to approve a Notice of Proposed Rule Making (‘NOPR’) to increase the rates
for preference power supplied from the Niagara and St. Lawrence Hydroelectric Projects (‘Hydro Projects’). In
accordance with the requirements of the State Administrative Procedure Act (‘SAPA’), the Trustees are also
requested to direct the Corporate Secretary to publish the NOPR in the New York State Register. This proposed rate
action would, if approved, implement the first preference power rate increase since May 2008, as the Trustees in
March 2009 withdrew a previous NOPR which sought to raise such rates effective May 2009.
“The Authority’s preference rates apply generally to sales to forty-seven municipal electric systems, four
rural electric cooperatives (collectively, ‘M&C customers’), three upstate investor-owned utilities (for the benefit of
their residential customers), the ‘Neighboring States’ customers 1 and the Niagara Project relicensing host
communities. In total, 1,892 MW of power and energy sold by the Authority is currently subject to the preference
power rate. Staff recommends that the proposed rates be phased-in over a 42-month period from November 2011
through April 30, 2015. This three and a half-year rate proposal will help mitigate customer bill impacts to a great
extent.
“Further, the Trustees are requested to authorize the Secretary to schedule a public forum for obtaining the
views of interested parties, consistent with Authority ratemaking policy. After the 45-day comment period required
under SAPA, Authority staff will address any filed comments, including any comments raised at the public forum,
and return to the Trustees to seek final adoption of the revised preference power rates, which is anticipated to occur
at the October 25, 2011 Trustee meeting.
“The Trustees are also requested to approve the removal of their earlier suspension of two annual contractbased
rate adjustment mechanisms: the Rate Stabilization Reserve (or ‘RSR’) 2 applicable to preference power rates
and the price indices applicable to the production rates for a number of classes of Authority industrial customers
receiving hydroelectric power. Such suspensions were approved at the March 31, 2009 Trustee meeting affecting
sales to Replacement Power (‘RP’) and Expansion Power (‘EP’) customers and sales to General Motors (‘GM’) and
ALCOA/Reynolds.
BACKGROUND
Preference Power Rates
“At their April 24, 2007 meeting, the Trustees adopted a two-year rate plan for the 2007 and 2008 rate
years which extended from May 1, 2007 to April 30, 2009. No increase to these rates has occurred since May 2008,
the start of the final rate year under the two-year plan.
“Though the Trustees authorized a NOPR in January 2009 to increase the preference power rates for rate
years 2009 and 2010, this was later withdrawn. That proposal called for increasing revenues in the 2009 rate year
by $9.7 million as compared to the rates in effect in the 2008 rate year and increasing revenues in the 2010 rate year
by $14.6 million as compared to the rates in effect in the 2008 rate year. Based on public comments, consideration
of the national economic downturn and the extent to which the downturn had adversely affected the region’s
customers, the Trustees, on March 31, 2009, approved the withdrawal of the NOPR, deferring the recovery of costs.
This action also included a suspension of the RSR, a contractual rate adjustment for preference power customers, to
ensure that the tariff rates do not over-collect or under-collect costs.
1 These customers are certain municipal utility systems in the states of Connecticut, Massachusetts, New Jersey,
Ohio, Pennsylvania, Rhode Island and Vermont.
2 The RSR is explained in the Discussion section, below.
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