In addition, the Trustees are requested to direct the Corporate Secretary to file the NOPR with the New York State Department of State for publication in the New York State Register in accordance with the requirements of the State Administrative Procedure Act (“SAPA”). Following the publication of this NOPR in the State Register, the 60-day public comment period will begin on October 16, 2019 and close on December 16, 2019.

Although rates are projected to decrease, since the proposed decrease includes an increase to the Fixed Costs by more than 2.0%, a public forum will be held in accordance with the Authority’s policy. The Trustees’ authorization is also requested to direct the Corporate Secretary to provide all appropriate notice for such public forum.

Upon closure of the aforementioned public comment period, Authority staff will take into consideration any concerns that have been raised and return to the Trustees at their January 2020 meeting to seek final adoption of this proposal.

BACKGROUND

The Authority provides electricity to governmental customers in Westchester County, which includes the County of Westchester, school districts, housing authorities, cities, towns and villages. The County of Westchester is the largest single customer in this group, accounting for about one-third of total sales.

The basis of providing service is contained in the Supplemental Electricity Agreements (“Agreements”) with the Customers. The Agreements were approved by the Trustees at their December 19, 2006 meeting, and were signed by each of the Customers. Among other things, the Agreements permit the Authority to modify the Customers’ rates (for Rate Years subsequent to 2007) at any time based on a fully supported pro forma Cost of Service (“COS”) subject to Customer review and comment and compliance with the SAPA process, and allow the Authority to apply an Energy Charge Adjustment (“ECA”) mechanism to the Customers’ bills each month.

The current 2019 base production rates were adopted by the Trustees at their January 2019 meeting, when they approved a 0.95% decrease over the 2018 rates. Staff is proposing another rate decrease for 2020, which is largely due to the projected lower purchase power expenses.

The Authority’s policies and procedures call for a public forum if the Fixed Costs component of the proposed rate change exceeds a 2.0% increase. Since the proposed increase is greater than 2.0%, Authority staff recommends that a public forum be held. A public forum allows the Customers an additional opportunity to voice their concerns regarding the increase in the proposed 2020 Fixed Costs component. The Trustees’ authorization is also requested to direct the Corporate Secretary to provide all appropriate notice for such public forum.

DISCUSSION

Consistent with the Authority’s past ratemaking practices and with the rate-setting process set forth in the Agreements, the proposed production rate decrease is based on a pro forma COS for next year. The Preliminary 2020 COS for the Westchester Customers is $26.16 million, compared to $29.55 million in 2019.

The Fixed Costs component is projected to increase in 2020, from $1.23 million to $1.32 million, an approximate $80,000, or 6.8%, increase as compared to the Final 2019 COS. This increase is primarily driven by Operations and Maintenance expenses due to an increase in non-recurring projects. Pursuant to the Authority’s policies and procedures, this increase in Fixed Costs is subject to a public forum.

Offsetting the increase in Fixed Costs, the Variable Costs component is projected to decrease from $28.32 million to $24.85 million, an approximate $3.47 million, or 12.3%, decrease as compared to those costs included in the rates that are currently in effect. The primary cost element, Energy Purchase Power cost, is $19.31 million and accounts for 74% of the total production costs. Although these Customers receive a pro-rated share of energy revenues from the small hydro generation facilities, their energy requirements are purchased from the market (in NYISO Zones “A” (Western New York), “D” (Northern New York) and “G” (Hudson Valley)). The 2020 Energy Purchase Power costs are expected to decrease by $2.09 million as compared to those prices projected for 2019 and incorporated into the rates that are currently in effect. This decrease is primarily driven by an expected $1.4 million decrease in Zone G 2020 purchases, as well as a $0.9 million decrease in congestion costs. Slightly offsetting the Variable Costs decrease is a $0.93 million decrease in net Transmission Congestion Contracts (“TCC”) revenues compared to prior year, as a result of a $0.84 million decrease in expected TCC rents.

Applying current rates to the 2020 Customer sales forecast results in projected revenues of $28.85 million, representing an over-collection of $2.69 million from the Customers. Therefore, staff is proposing a 9.32% decrease in base production rates.

Under SAPA, there is a 60-day public comment period on the rate change. At the close of the comment period, Authority staff will review any comments which have been filed and if warranted, staff will make any necessary changes to the proposed rates to address any concerns raised. Staff will return to the Trustees at their January 2020 meeting to request an approval of the final production rate modification, to become effective with the January 2020 billing period. Subsequent to the approval of this proposed action by the Trustees, the Final Staff Report containing the Final 2020 COS will be made available to the Customers.

FISCAL INFORMATION

The proposed production rates are cost-based, and with the application of the Energy Charge Adjustment mechanism, staff anticipates that the Authority will recover all costs incurred in serving the Customers.

RECOMMENDATION

The Director – Revenue & Pricing Analysis and the Vice President – Finance recommend that the Trustees authorize the Corporate Secretary to file a Notice of Proposed Rulemaking in the New York State Register for the adoption of a production rate decrease applicable to the Westchester County Governmental Customers.

It is also recommended that the Vice President – Finance, or his designee, be authorized to issue written notice of the proposed action to the affected Customers under the provisions of the Authority’s tariffs.

For the reasons stated, I recommend the approval of the above-requested action by adoption of the resolution below.

Gil C. Quiniones President and Chief Executive Officer

RESOLUTION

RESOLVED, That the Vice President – Finance, or his designee, be, and hereby is, authorized to issue written notice to the affected Customers of this proposed action by the Trustees for a projected 9.32% decrease in the production rates applicable to the Westchester County Governmental Customers as set forth in the foregoing memorandum of the President and Chief Executive Officer; and be it further

RESOLVED, That the Corporate Secretary of the Authority be, and hereby is, directed to file such notices as may be required with the Secretary of State for publication in the New York State Register and to submit such other notice as may be required by statute or regulation concerning the proposed rate decrease, and proposed tariff modification; and be it further

RESOLVED, That the Chairman, the Vice Chairman, the President and Chief Executive Officer, the Chief Operating Officer and all other officers of the Authority are, and each of them hereby is, authorized on behalf of the Authority to do any and all things, take any and all actions and execute and deliver any and all agreements, certificates and other documents to effectuate the foregoing resolution, subject to the approval of the form thereof by the Executive Vice President and General Counsel.

Statements and analyses are not submitted with this notice because the proposed rule is within the definition contained in section 102(2)(a)(ii) of the State Administrative Procedure Act.