Relates to establishing the western New York power proceeds allocation board; repealer

Summary of provisions

Section 2 adds a new Article 6-a to the Economic Development law that:

o Creates the Western New York Power Proceeds Allocation Board that shall have six members appointed by the Governor on the recommendation of agencies that conduct economic development activities in Western New York, and specifies its powers and duties;

o Authorizes the Board to recommend to the Empire State Development Corporation (ESDC) how certain proceeds from the sale of Niagara Project Hydro-Electric expansion and replacement power ("Net Earnings") are to be granted to certain entities for economic development purposes;

o Defines economic development power for purposes of this act to include 250 MW of Expansion Power and 445 MW of Replacement Power and specifies that Replacement Power includes a certain 70 MW of Niagara Power Project that had formally been made available for other purposes;

o Authorizes the new Board to issue its own applications and conduct its own reviews;

o Requires the Board to develop an economic development plan that will guide it in the allocation of net earnings or to use an economic development plan that may be adopted by the Western New York Regional Economic Development Council, if such Council is created;

o Establishes certain criteria for use by the Board in allocating Net Earnings including economic impact, compliance with prior awards, compliance with regional economic development plans and similar criteria;

o Provides that funds can be used for certain purposes ("Eligible Projects") that must be within 30 miles of the Niagara Power project including capital investments, training, hazardous waste remediation, infrastructure, land acquisition, and certain research and development.

It also provides that funds may not be used for advertising or advocacy lobbying, political purposes, debates or discussions of public issues, legal fees, or fees related to any administrative proceeding;

o Requires NYPA to provide a full accounting of all power sales, the funds derived there from and other information;

o Requires NYPA to transfer all Net Earnings to a new fund to be held by ESDC;

o Requires NYPA to cooperate in the review and allocation process for all economic development funds;

o Directs ESDC to provide staff and other support that may be needed;

o Provides that no funds derived from these Net Earnings may be spent by NYPA or ESDC except upon the recommendation of the Board; and

o Involves ESDC in a formal role in the allocation of economic development funds.

Section 3 adds to the unconsolidated laws:

o The Western New York Hydro-Power Allocation Advisory Group that is similar in powers, duties and structure to the Western New York Advisory Group that was established in a Memorandum of Understanding signed by NYPA in 2003 and is also similar to the Western New York Power Proceeds Allocation Board;

o Provides that the New York Hydro-Power Allocation Advisory Group is to work through NYPA or ESDC to make recommendations to NYPA regarding the reallocation of certain categories of Niagara Project Expansion and Replacement Power; and

o That the Trustees of NYPA are to consider, but not be bound by, the recommendations of the Advisory Group.

Sections 4 and 5, authorizes and directs NYPA and ESDC to carry out certain activities related to the duties of the Western New York Power Proceeds Allocation Board and the Western New York HydroPower Allocation Advisory Group.

Section 6 repeals Chapter 436 of the Laws of 2010.

Justification

BACKGROUND The Niagara Power Project that is operated by the Power Authority of the State of New York ("NYPA") has two large blocks of hydro-electric power that total 695 megawatts ("MW") available for sale to industries within 30 miles of the Niagara Power Project in Lewiston New York.

In 2003, in order to better coordinate the reallocation of this power to industries, NYPA entered into a Memorandum of Understanding (112003 MOU") with what became called the Western New York Advisory Group ("WNYAG") that included Erie and Niagara County based economic

development agencies. The 2003 MOU spelled out a procedure by which NYPA would inform the WNYAG that economic development power was available, that applications had been received for such power, and that the WNYAG should comment upon and make recommendations regarding such applications for the allocation of power. Although the MOU expired in 2006, the parties, including NYPA, continued to act as though the MOU remained in effect.

Chapter 436 of the Laws of 2010 added to the duties of the WNYAG by providing that the WNYAG should recommend to NYPA that certain excess revenues earned by NYPA should be allocated to industries within 30 miles of the Power Project to support and induce economic development. The revenues affected by this law were any revenues earned by NYPA from the sale of Niagara Project economic development power on the open market (rather than to an industrial customer) to the extend such revenues exceed revenues that would have been earned by NYPA if such power had been sold to qualified industrial customers. Chapter 436 of the Laws of 2010 specifically referred to the 2003 MOU and by reference revived it and granted it additional powers.

Unlike the 2003 MOU where the recommendations of the WNYAG were advisory only (regarding power allocations), the 2010 law was binding upon NYPA with regard to the use of the proceeds from the sale of expansion and replacement power. This was accomplished by providing that NYPA could not use such excess revenues for any purpose other than as recommended by the WNYAG.

POWER AUTHORITY RESPONSE TO 2010 LAW Until passage of Chapter 436 of the Laws of 2010, there was good cooperation between NYPA and other members of the WNYAG. This cooperation has continued with regard to the recommendations for the allocation of hydropower to industries. However, NYPA has refused to cooperate in the implementation of Chapter 436. In an exchange of letters initiated by the WNYAG aimed at the cooperative implementation of the new law, NYPA has:

o contested the existence of the WNYAG, o refused to provide information requested by the WNYAG and state legislators that is needed to determine the extent that funds have been generated, o refused repeated requests for meetings, o refused to supply applications that may have been submitted by companies, and o been uncooperative with the WNYAG including with the Empire State Development Corporation, a member of the WNYAG.

At this point there is a complete impasse, in which NYPA has refused to implement the clear statutory directives of Chapter 436 of the Laws of 2010.

Justification for 2011 proposal

In order to emphasize the intent of the Legislature, to clarify certain ambiguities that might exist in the 2010 law, and to establish a sound basis to go forward with the recommendation for power allocations and the more binding recommendations for the allocation of excess revenues, it has been

decided that a bill should be introduced and passed in the 2011 session of the Legislature.

This legislation is made necessary because of NYPA's refusal to carry out the clear intent of Chapter 436 of the Laws of 2010.

This legislation will continue the process by which expansion and replacement power allocations are undertaken with the advice of economic development agencies located in Western New York. This gives greater assurance that the State's and regions' economic development activities are coordinated and thus more likely to obtain positive results.

The legislation will allow local economic development agencies through a regional collaborative decision making process to fully participate in the allocation of revenues derived from the sale of expansion and replacement power. Certain amounts of this power when not otherwise being used are now sold on the open market to users outside Western New York. These open market sales are usually at a higher price than the price charged to expansion and replacement power customers. This bill assures that the benefits of expansion and replacement power will remain within the 30 mile limit already established in law for the allocation of such power. The bill guarantees that NYPA will continue to receive the revenues it would have received if all Expansion and Replacement Power was sold to eligible Expansion and Replacement Power customers. Revenues derived from the sale of Expansion and Replacement power on the open market, to the extent such revenues exceed revenues that would have been earned if the Replacement and Expansion Power had been sold at the applicable Expansion and Replacement Power rates, are to be placed in the Western New York Economic Development Fund.

Legislative history

New bill, but follows passage of Chapter 436 of the Laws of 2010 (A.8712A)

Fiscal implications

None to the state. No new fiscal implications to NYPA. This bill does not alter the fiscal impact imposed upon NYPA by Chapter 436 of the Laws of 2010.

Effective date

Immediately.