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PUBLIC POWER AGENCY MEETING MINUTES
January 24, 2008 at 4:00 p.m.
Members Present: John Montone, Chairperson, William Graney, Mike Luksa, Krste Biljanoski, Dennis Zack, Matthew Smith
Member Absent: Luke Rybarczyk (called on vacation), Vijay Mital, Nicholas Brindak
Staff Present: Mark Palesh, Michael Long, and Andy Fusco
Meeting of the Public Power Agency was called to order by Chairperson John Montone at 4:00 p.m. on January 24, 2008. Motion to approve the minutes from the December 13, 2007 meeting made by William Graney and seconded by Mike Luksa, all in favor.
First item on agenda review of natural gas agreement at the landfill, this is a pipeline that we have discussed many times. Andy has been here before and gave us an opinion on it about a year ago. All came back up again because Mayor Quill questioned it and the other fellow that has been appointed to the agency here has questioned it. There is a rumor out there that we are going to utilize this pipeline for the digester project and all that and we had discussed us doing that and that really is not the fact at this point. It got back into the idea that we could get this gas at wellhead price, Andy pursued it and can talk about it.
Andy proceeded to give background and his analysis of the situation. We originally entered into an agreement with the Meridian Gas Company predecessor in interest to Appalachian the current owner of the line. In 1988 to give them an easement for the purposes of installing a gas line which we did and unfortunately we built a street over the top of it which may or may not have a impact on this. Consideration in the 1988 agreement was $1/foor for 3,000 feet $3,000 max. Agreement filed at County Clerk’s Office. Also language in the 1988 agreement, which said they will sell us gas and it seems to be separate and distinct from the consideration for the easement, they will sell us gas if the following five conditions are met. A. They have the availability of gas. B. That they
have an access of gas. C. Successfully and mutually agreed upon Gas Purchase Contract. D. Everything that we agree with is consistent with PFC and E. A sentence I don’t really understand, subject to prior commitments of the grantee regarding same. Shortly thereafter we entered into an agreement with Meridian for the provision of case in that pipe and apparently in early years of that agreement, according to John’s files, they did supply it to us at wellhead price. Those appear to be all contracts that were of a short duration, probably year to year. That would have been in the late ‘80’s or ‘90’s. There came a time in the later ‘90’s when they were providing this gas in this pipeline for a price greater than wellhead price. It is clear to me that the price that they were selling to us in 1995, 1996 and 1997 was greater than wellhead price at that time 70 to 80 cents greater than
wellhead price. We enter into a contract with them in 200 to provide gas to us at a certain price for one year. That price ended up being less than wellhead at the end of the 2001 contract back on tract with only one year in length they stopped providing gas. So they haven’t sold us any gas since 2001. With that as a back what Mike and attempted to do last year was to enter into some type of agreement with them regarding provisional gas and the entire issue broke down over two points: A. price and B. and reconnecting the line. Their claim is the line is actually quite disconnected now, John says it is just a matter of two points that need to be screwed back together, I don’t know if that is the case, they contend that the source of this line out in the Town of Sennett has now been significantly severed and they don’t want to incur the price of having to reconnect it, so we didn’t get that far in determining what
would be the cost of reconnection.
Other problem we had last summer Mike Long and I were talking to them about this was price, and at that time they quoted us a price of like $1.00 over Dominion and Dominion is the price that is quoted every day on a future’s market and Mike and I had spoken with brokers at the time and we could get a price of 73 cents over Dominion or 76 cents or something like that. Simply wasn’t a good deal, a couple other issues, the gas Appalachian has it in deodorized form it has to odorized, there is an expense for that as well, so for a variety of reason, also the line which is a very small line and it probably really doesn’t meet our needs. There were many problems that we encountered last year in trying to re-up this deal and it just didn’t seem worth it and I think I would report to this board
accordingly. Now the urban legend tract is re-fired and so we are back to where we were a year ago when apparently the rumor mill has generated the concept that some how we have an absolute guaranteed right to get this stuff at wellhead price and why aren’t we doing it. I have read the 1988 contract, no where does that provide us a perpetual right to even get gas, much less at a certain price. The provision of gas is contingent upon things that I read you earlier and they are answering us saying they don’t have any excess. Trying to prove that in a Court of law I think would be a foolish case. So the notion that we have some type of right to gas simply isn’t supported in the documents in the County Clerk’s Office. The notion that we have some type of right enforceable right in a Court of law to gas at a certain price isn’t supported in the signed contracts that we have had over the years, because they were year to
year, in fact never renewed after the 2000 agreement. There is a Statute of Limitations problem on contracts it is 6 years, we are dealing with 1988 agreement, the last renewal was 2000 that expired at the end of 2000, there are a lot of legal impediments to doing what we all want to do to make them give us this gas at wellhead price. It comes up all the time and no matter how often I explain it, it keeps coming back. What we need to do is determine what do we want, if we were to sue them for breach of 1988easement agreement they probably would default and say you can have your easement back. They probably would be interested in getting rid of the line, I don’t know what the condition of the line is presently, in fact it is under blacktop means ascertaining the condition of the line difficult, but what we would like is extinguishment of the easement and of by the way can you give us the line for $1.00. That might be doable; I don’t think
they want it any more. They don’t want the liability so that if we want the line, that is what we want to get out of this, that may be a doable deal. There must be a way to test the line, plug up both ends and see if it leaks. That would be something that I would be more than willing to approach them on abandonment of the line and easement, give us the line for $1.00 we will assume the liability and now the question for this board is to decide if this is something we want. Is it going to be any good to us is it something we can use, is it something we can now incorporated into the digester project?
John said the only purpose it would serve us is to if it is worth pursuing we need to find out for sure if we can use it as a back up to the digester from a natural pipeline where we wouldn’t have to lay pipe because we are going to need a back up to supplement the methane gas and this is running right in the area where we need to be. Mark stated that they talked some time ago actually drilling gas wells some place close by would this be close to that line? John said it comes in and goes out of the area. Mike Luksa asked if there was enough there to make it worth it. John said through ECOTS and the digester project we can make that determination, is it in our way for one thing, has it been in the way of any construction going on down there and also can we utilize it, it is a 4 inch gas main. Mark stated it would serve a well. John said if we could get that company Appalachian to say we will abandon it from point A to point B, and the we make a decision what we are going to do
with it. Last year they were willing to give it to us for a $1.00. Andy stated we never got that far because we were more interested was trying to force them to give us gas at a cheap price. John said we should wait until we can make a decision can we utilize this in the project. Denny asked if this was the first gas field on North Division Street is that where it goes to and John stated it did. We should get an overall map of the area. Andy said we need a physical description, there is an Exhibit A and no one has a copy. We have a natural industrial agreement with them too and we also have the right of way agreement, two agreements in place. They utilize it they actually took gas from it for the Wastewater Treatment Plant and the incinerator. Bill stated that Mark Storrs always said there was low pressure in that line. John said to get an answer from ECOTS where we are with it and we can give Andy an answer. Mark
stated there at least maybe if we decide to find something else we can get this easement and either abandon it and don’t have to worry about going around it, still a savings to us. John stated their could be a problem if there was some other type of construction going on and sitting right on their easement. Mike stated that the main part of the easement is the main road through Tech Park.
Andy said the point he wants to make in summary is that we heard often from Mayor Lattimore that he honestly believed that we had some type of perpetual right to gas at wellhead price as consideration for this easement and that simply isn’t true and I think he accepted that last year and now the new Mayor now believes what Tim did last year. The notion that the 1988 agreement gives us a perpetual right to have gas at wellhead prices is simply incorrect. Mark stated we spend a lot of time every two years redoing certain things as people come in with these preconceived notions and we should at least have closure in a file, a legal opinion, this is what we have done and this is our feeling on it. Andy said he is willing to do such a memo and put it in the file. John said there are two issues are
can we utilize it, can we get them to abandon the right of way and we will take it over and if you feel in your legal opinion that there is no sense trying to pursue, we know they came back a dollar over Dominion we can buy at market face rate and reattach the pipe, why should we pay a middle man.
Andy said he will try to negotiate the extinguishment of the easement and the remains of the line to us for $1, I think that is a doable thing. Bill asked if we take it over for a dollar is we responsible for it and Andy said we are. Bill asked why would we want it. John said that is the third issue if we don’t take it over and it is sitting there dormant and you want to do something at the landfill, they still have the right of way to it and as Andy said they won’t help us one way but would they another way, it is on the City’s property. Denny stated the biggest advantage if we look at doing the gas well it is a cheap buck and it doesn’t cost that much to have that line pressure tested. Mark asked if there were any environmental issues that we know about with the line, he
thought they would be minimal, just a gas line, might be worth taking the risk. John said let the ECOT people look at this and see where we are at and if this can be utilized with the digester project or we might save some money in infrastructure and do a gas well we may be smart to do it.
Next John talked about the NYSEG agreement on the hydro sites, N. Division Street Bob Pass said there is an agreement and Mike Long said the existing agreement is for 8.6 cents a kilowatt hour runs until 2011 and then after that there is another rate. We are still making money. John stated that if it goes to 2011 at the current rate that is higher than the market rates right now. If we believe what they are reading on the meter, we are making money at that site and that is where the problem lies it is a revenue meter and they only have access to it, they go down with a laptop and do it and we are taking their word for it. John talked to the people that put the transformer about putting a revenue meter on our side. We would have access to read on a weekly basis, right now all we are doing they
are giving us a credit on the overall City bill and the agreement is silent on the credits because at the time of the agreement there was no green power credits that means according to Jeff Ginzer because the agreement is silent those credits come back and should come back to us. We need to pursue that end of it this could go back to when the green power credits started and that is per kilowatt-hour, it could amount to thousands and thousands of dollars. Bill asked if an energy audit could be done and Mike Long said as John said first of all we should put a meter on. Denny asked if we could scroll that digital meter to get readings and John said he hasn’t looked at it but was told by Tony DeCaro they read it through a laptop, Denny said he would take a look at it. John said we should pursue the green credits they are not going to offer them to us and that is the same thing that is going on at the Mill Street Dam and did get an opinion back from Jeff
Ginzer and on that particular agreement is expired because we defaulted because we hadn’t been producing power on it and selling that power to them and at that time it was 2 cents a kilowatt hour, we were losing money, we were basically giving it to them. The cost of refurbishing seems to be too far out of whack in some other people’s opinions and we have asked Central Hudson to start looking at it and Mike Bolts is telling us that maybe we can look into that in partnership with them and doing something very similar that we did with the digester purchase power agreement. What we want to do here today is maybe assign a couple of you guys to work towards that goal with those people. Mike Long said the Feds are saying since we are not producing power we need to give them a plan to continue to maintain and run it or are we going to de-commission it. They want a time schedule of what we are going to. John said a letter was sent to the Manager
from FERC saying if we don’t do something they are going to pull our license or whatever we have there and we told them we are doing this and we haven’t done it, this time we have to do it. Bill Graney asked when we would bid this out and Mike said we could enter into a lease agreement and they can do a physical improvement to it and at the end of the term it reverts back to the City, that is one way. John said that is the way we did it with the digester. Bill asked if we could put a request for proposal out and John said if you are actually considering privatizing all of them and we are talking about a partnership type situation, there are two different scenarios there and we probably should discuss that, do a request for proposal and see who comes back. We have to tell them what we want to, do we want to be a partner in it, we want you to put all the money up and we will do a purchase power agreement. Mark stated there is a person that wants to
purchase the Wadsworth Park, right now it is a brownfields, he wants to use the waterway to put in some hydro power, he has 6 some place and he is just starting to put this in, my first thought was why would we partner that decision is important do we really want to do this, maybe that we allow him access to the river and sell a certain portion and then look at the whole thing as one deal. Denny asked if it was worth looking into wheeling it directly to the pump house ourselves or City Hall? Mike Luksa stated that was our thought in the beginning until we found out how much it was to rebuild and it brings us back to if you have a partner what are you going to do say here is the site, do as you please, either put a new one in or rebuild this one or whatever. John stated that Central Hudson has told us they would be willing to look all the hydro sites, including the Dunn & McCarthy site. Mike Long said they would do an analysis and say this is one to
rebuild, this is one to reconstruct, put in new systems. Denny asked if we could find the original hydraulic studies to see how much horsepower is really there and whether it can be increased over what we got. John said we have a study done by Acres and said he may have it. On the Mill Street Dam Tony and Denny got some quotes on rebuilding the one that is there one is over $100,000, you are utilizing a piece of equipment that was used when it was put in back the 1950’s. Krste said the hydro site lifetime is 10 years. John said the newer technology the low head flow, Marble is the company I want to get in here, they do low flow conditions, very small, very light weight, economically that may be the way for us to go. Krste said N. Division Street is a 800 kilowatt, Mill Street is 400 kilowatt, same water going through why we don’t use all the water and have the same amount of money, if you sell something like that everyone wants to
have access to Owasco Lake for the control of the levels, optimize every drop of water that goes to the hydro site and we need to have something to control the lake. John said they want some kind of agreement from us that the flow is going to be there. John said we need to do is make a decision to make a request to the City Council to pursue it with a RFP. The State Dam is another issue that we keep bringing up because it was in the Army Corp of Engineers and money was appropriated for that and we didn’t want to mess it up. Mike Long stated that we have State DEC money NYS Bond Act in the Army Corp Program and it was resurrected again this year. John said it was important to put a motion out for a RFP and see where we go with it. Denny would you be willing to sit on a sub-committee with Krste. We also need to decide in our own minds how we want to handle it does the City still want to pursue and own it, do privatization, or partnership
somehow Purchase Power Agreements. I will accept a motion to make a request to City Council to do an RFP on this. Denny Zack so moved and Krste Biljanoski seconded. All in favor.
Last item on agenda is the Central Hudson digester situation and Central Hudson released a bid package, 3 bidders, Biothane, Schmack and PPS asking them to propose design ideas and offer all inclusive pricing for a turnkey project and after reviewing the bids they believe in each bid the scope is too uncertain and the pricing was too high. Our budget was $11.6 million. They also believe they will spend more time and incur some costs to better find a project and then go out to bid for construction and based on detailed design and specifications. They intend to select the generator set provider and a digester process design company. The intention then would be to complete further design for each segment of the project individually. They also assured us they will not exceed the budget in the agreement and
that is a cap that we put on there. We have this $492,000 grant that we think we can use toward the infrastructure of the substation and the distribution lines. Original turnkey is they would have built it and we own that substation except for the distribution lines. We are getting prices back at $1.5 million for substation. Prices are way out of whack. What ECOTS is going to do is hire consulting engineers, do the design work, and we think we can come under that $500,000 budget. The City will own the substation and the distribution lines and we need to pursue the interconnect agreement and those different things and Central Hudson will be working with us. If we own all this we are going to get the revenue coming back in for different companies that we need to set up a meeting with which is McQuay and whoever is down at Tech Park and see their feeling on this, would they be willing to swing over to us. This whole project, the
substation everything else will be under budget if pursued the right way. Mike Long said that Kamyar ordered the engines, 3 at 1.6 megawatts each. Also met Stearns & Wheeler met with DEC to go through the environmental permits, went well, very positive, very supportive Kamyar is also going to give us a bi-weekly report on the projects. Denny said on the sale of excess power is that going to be limited to Tech Park or do the closest neighbors have a shot at it? John said the interconnect will be into NYSEG’s 12,000 line, have to do that through ISO so it is credits which we want to get paid for, source of this revenue and Casey Park and those other areas there, yes, that is what I was talking about the distribution lines. Have to look at how to structure if direct connect go distribution line and still be paid transmission rates, lock in agreement, possible to pursue, I think we need to talk with McQuay and all the people down
there, we can send out a letter to them and have them come to a meeting. This is something I put out in case when someone asks a question, prepared by ECOTS, sale of credits, incinerator savings, savings in energy costs, in costs of electricity supplies and the additional sludge revenue, now that $2 to $3 million does not include the revenue that the power agency will be taking in every single day for the electricity and hot water that we will be selling to the companies that are down there. That is an additional source of revenue. The hot water is an issue that we have to decided on how we are going to sell it. Mike Long said we have a company that is interested in using the hot water as part of the digester project also electricity and energy more than we can use they are interested in doing a project energy is the main thing they are concerned about. Looking at a sustainable environmental process and they like the things that we are doing and
location. John said that is something we are going to own too, pipe that is going to be going to Tech Park and use it at Casey Park, need to pursue line to Casey Park you will see real savings there with the ball park. That is where we are at with the digester. Mark asked if we had a prioritization of use of the power, City first, economic development. John said it hasn’t been discussed probably a good idea. Mike Long stated he felt it should be used to subsidize the use of the Wastewater Treatment Plant first so we don’t have to pay for that. John said that is a megawatt of power there. Mark said if we can attract a business of it, it may be that we shouldn’t see it to the City first because we get a double payment then from having a new business, jobs and sales tax, land development, increasing property values and I wouldn’t pay more if we get all that. I think we need to look at that and have a philosophy. John agreed and said that is why we need to get some of these
people in a talking session, are they willing, if they are going to look at a lower cost power than what they are paying now, their questions are going to be about reliability and all of those different things and we need to make a decision, like you said if we have economic development coming in and you know there are going to be 100 jobs or 200 jobs you don’t want a plant there that has only 5 jobs and taking 3 megawatts. Mike Luksa suggested offering something to the existing people that we have. John said the savings at the treatment plant is about $700,000 a year and you are helping out the taxpayers and ratepayers. Little companies down there probably are willing to jump on. Mike Long said we need to set up an ISO so that we can buy power so that we have more because 3 megawatts isn’t going to do anything. John said we want to jump all these figures up, we could be up to 5 or 10 megawatts, that is enough for the whole
City. Company we talked to is interested in 5 megawatts. John said they may be willing to invest some in the infrastructure to boast it up and be paid for through cost of service. At our next meeting we should probably discuss and try and get a meeting with all the businesses down there. Important to help the ones that are there too, job retainage and the whole thing. McQuay is about 2 megawatts, wastewater is about 1, this is a decision we need to make how to divide this up, maybe better off just putting into grid and taking the credits and offer them savings through that. Mike Luksa asked if there was anything new with NYSEG? John said NYSEG has refused at this point to meet with us. I think we should another letter out to them at least on the street lighting issue, get them to the table.
Mike Luksa made a motion to get pricing for meters and Denny Zach seconded. All in favor.
Mike Luksa asked about gas well and Mike Long said he contacted NYSERDA and haven’t heard back yet. Bill Graney asked for a sub-committee on this. Bill Graney and Mike Luksa agreed to be on this sub-committee.
Motion to adjourn made by Krste Biljanoski and seconded by Bill Graney. All in favor.
Meeting adjourned at 5:10 p.m.
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