Minutes of the Annual Meeting of the Power - New York Power ...

April 24, 2007
8. Increase in Hydroelectric Preference Power Rates – Notice of Adoption
SUMMARY
The President and Chief Executive Officer submitted the following report:
“The Trustees are requested to approve an increase in the hydroelectric rates supplied from the Niagara and
St. Lawrence/FDR Hydroelectric Projects (individually, ‘Niagara Project’ and ‘St. Lawrence Project,’ and
collectively, the ‘Hydro Projects’) proposed at the January 30, 2007 meeting of the Trustees. Such rates apply to the
Authority’s sales of Preference Power to, among others, the municipal electric systems and rural electric cooperative
customers, the neighboring state customers and the upstate utilities. The final rates are for the 2007 and 2008 rate
years, which extend from May 1, 2007 to April 30, 2008 and from May 1, 2008 to April 30, 2009, respectively.
This action accepts one significant adjustment to the final rates based on the customer comments on the amount of
Shared Services includable in rates. As a result, this modified proposal would increase rates for a typical preference
power customer by 5.5% in the first rate year and by 5.9% in the second rate year. A detailed analysis of the Costof-Service
(‘CoS’) issues is presented in the ‘Staff Analysis of Public Comments and Recommendations, Rate
Modification Plan, April 2007’ (‘Staff Analysis’; see Appendix ‘8-A’).
BACKGROUND
“At their meeting of January 30, 2007, the Trustees authorized publication in the New York State Register
of a Notice of Proposed Rulemaking to increase the hydroelectric preference power rates. The proposed rate plan
was prepared by Authority staff and explained in its January 2007 report on ‘Hydroelectric Production Rates, Rate
Modification Plan – 2007 and 2008 Rate Years’ (see Appendix ‘8-B’; referred to herein as ‘Rate Modification
Plan’). The two-year rate plan was based on the results of a preliminary 2007-08 CoS study. The January proposed
rulemaking would have increased rates for the typical preference customers by 7.1% in the first rate year and 5.8%
in the second.
“The current rate plan, which ends April 30, 2007, is based on CoS principles approved by the Trustees at
their meeting of April 29, 2003, all of which the municipal systems, rural electric cooperatives and neighboring state
customers agreed to either through settlements or in their contracts concerning their purchases of Preference Power.
Those CoS principles are continued in this Rate Modification Plan.
“The Rate Modification Plan details the costs of production at the Hydro Projects. The major cost
components are: (1) Capital Costs; (2) Operations and Maintenance; (3) Relicensing; (4) Indirect Overheads, and (5)
Other Postemployment Benefits. After summing the CoS components, a credit was calculated based on the
embedded costs of producing regulation service, operating reserves, voltage support and black-start service from the
Hydro Projects to meet contract customers’ needs for those four ancillary services. This credit is calculated in the
same manner as under the current rate plan approved in 2003.
“The customers were provided with written notice of the Rate Modification Plan and notice of a public
forum on February 5, 2007. The Notice of Proposed Rulemaking was published in the New York State Register on
February 14, 2007, and the public forum was held on March 22, 2007 for the purpose of obtaining the views of
interested parties.
DISCUSSION
“After issuing the Rate Modification Plan, Authority staff responded to 159 data requests from the
following organizations: the Municipal Electric Utilities Association (‘MEUA’), the New York Association of
Public Power (‘NYAPP’) and the Neighboring States Preference Customers (‘NS Customers’). Many requests were
answered with work papers supporting the CoS calculations, but others required detailed explanations.
“On March 22, 2007, the public forum was held in Albany. The forum was conducted in accordance with
the terms of the Policy and Procedures – Public Forum on Rate Proposals adopted by the Authority’s Trustees at
their meeting of November 27, 1990. Authority staff spoke at the forum to explain the procedures and summarize
the results of the CoS and proposed rates. Nine representatives of various customers attended. Speakers included
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