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

Staff Analysis:
As explained in detail below, the Niagara Project Upgrade was primarily a life
extension and modernization project designed to ensure the continued viability of
the entire 1880 MW of firm capacity of the Niagara Project after some 40 years of
continued operation. As such, these costs were prudently incurred in the
exercise of the Authority’s stewardship of these facilities and its broad discretion,
discretion to which each of the in-state municipal system and rural electric
cooperative customers consented in their settlement agreements with the
Authority in 2003. 3 The increased firm capacity and firm peaking capacity that
arose from the upgrade were the result of efficiency gains of the new turbines.
Increases of this sort were not, nor were ever intended to be, the primary
objective of the Niagara Project Upgrade.
Authority staff notes that it never purported to base its proposed rate increase on
the Niagara Study, which was only provided in response to data request NYAPP-
5, which concerned the Authority’s “marketing policy” for increased capacity or
efficiency gains from the Hydro Projects. 4 NYPA responded by noting that the
issue of such increases is unrelated to the proposed rates, and included the
Niagara Study as additional material relevant to that data request. However, the
Niagara Study was produced solely in accordance with the Authority’s
contractual commitment to provide preference customers with their share of
3
These settlements allow for the Authority’s “recovery in rates of all prudent Hydro Project
relicensing, life extension and modernization costs incurred by NYPA in the exercise of its broad
discretion.”
4
NYAPP-5 states:
Please explain the bases for the marketing policy of NYPA under which NYPA allows
increased capacity or efficiency gains from the projects to be marketed as increased firm
peaking power.
8