123 Main Street

White Plains, New York 10601 914 681.6200

July 27, 2012

Via Electronic Filing

Honorable Kimberly D. Bose Secretary

Federal Energy Regulatory Commission 888 First Street, NE

Washington, DC 20426

Re: New York Power Authority
Docket No. ER12-___-000

Dear Secretary Bose:

The New York Power Authority (“NYPA”) hereby submits its application under
Section 205 of the Federal Power Act (“FPA”) to increase its annual revenue
requirement used to develop the charges for transmission services provided by NYPA
under the New York Independent System Operator, Inc.’s (“NYISO”) Open Access
Transmission Tariff (“OATT”). This application, which is the first update to NYPA’s
revenue requirement previously accepted by the Federal Energy Regulatory
Commission (“FERC” or “Commission”) in 1999, is made in accordance with the NYISO
OATT. While NYPA is outside FERC’s rate making jurisdiction, as a member
transmission owner of the NYISO, NYPA is subject to FERC review with respect to
changes to its transmission revenue requirement (or “RR”) which is included as part of
the NYISO OATT.1 As supported by the attached testimonies and exhibits, NYPA
respectfully submits that its proposal is just and reasonable, and should be accepted
without suspension or hearing to become effective as of August 1, 2012. The estimated
impact of the proposal would increase bills for the average residential customer by
between 5 and 8 cents per month. Based on its status as a non-jurisdictional utility,
NYPA respectfully requests that it be exempt from FERC’s filing fees.2

I. BACKGROUND

A. Description of NYPA

NYPA is a corporate municipal instrumentality and a political subdivision of the
State of New York (the “State”) and is a “state instrumentality” within the definition of §
201(f) of the FPA.3 It is engaged in the generation, sale and transmission of electric
power and energy in New York, and is a founding member of the NYISO. NYPA’s bulk
power transmission system encompasses approximately 1,400 circuit miles, and
consists of facilities ranging from 115 kV to 765 kV. NYPA’s facilities directly
interconnect with the transmission systems of all of the State’s investor-owned utilities
(“IOUs”) which include Central Hudson Gas & Electric Corporation, Consolidated Edison
Company of New York, Inc., Niagara Mohawk Power Corporation d/b/a National Grid
(“NMPC”), New York State Electric & Gas Corporation, Orange & Rockland Utilities,
Inc., Rochester Gas & Electric Corporation, as well as to the Long Island Power
Authority’s (“LIPA”) transmission system. Furthermore, NYPA’s facilities directly
interconnect with adjoining control areas through interconnections to utility systems in
Vermont, Ontario and Québec.

NYPA has no distribution facilities and virtually all of NYPA’s customers are

connected to the transmission and distribution systems of other public utilities. As the
Commission has recognized, NYPA, unlike other public utilities, does not have a
defined, integrated service area; instead, “its customers are located in the service areas
of other transmission providers, and . . . pay for transmission service based on the costs
of the transmission providers where the loads are located.”4 However, as the largest
state-owned power organization in New York, NYPA has taken the responsibility for
constructing, owning, and operating critical segments of transmission infrastructure
throughout the State.

B. NYPA Transmission Adjustment Charge

Recognizing that this infrastructure is crucial to the reliable and efficient operation
of New York’s electric grid, and to the effective operation of the NYISO, NYPA, the
NYISO, and the other New York Transmission Owners (“NYTOs”)5 agreed to establish
in the NYISO tariff a NYPA-exclusive charge, the NYPA Transmission Adjustment
Charge (“NTAC”), to recover any shortfall in NYPA’s revenue requirement that is not
recovered under other agreements under which NYPA directly bills its own customers

for transmission services.6 On January 27, 1999, FERC conditionally accepted the
proposal made by NYPA and the other NYTOs to establish the NYISO in Docket No. ER97-1523-000.7 In conjunction with that filing, on November 17, 1999, the NYTOs filed a joint settlement agreement resolving all issues set for hearing in that docket (the “NYISO Settlement”). The NYISO Settlement established the NTAC mechanism as a part of the NYISO OATT to ensure NYPA’s recovery of its transmission RR. NYPA’s RR is a component of the NTAC formula.

As codified in Attachment H to the NYISO OATT, NYPA calculates the NTAC by deducting from its Commission-approved RR a number of directly-recovered revenue
streams, such as revenues from transmission services, the sale of transmission
congestion contracts, and congestion rents.8 That portion of its RR not recovered from those separate sources is recovered as a monthly surcharge assessed to all customers taking transmission service under the NYISO OATT. The NTAC thus ensures that
NYPA is able to recover its Commission-approved RR by allocating the cost of any
unrecovered revenue requirement to transmission customers throughout the state, who benefit from the inclusion of NYPA’s transmission facilities in the NYISO control area.
The NTAC is necessary for NYPA to collect its RR because NYPA is limited in its
collections from its other revenue streams.

II. DESCRIPTION OF FILING

A.Introduction

In 1999, FERC authorized the use of the Authority’s current revenue requirement
as part of the formation of the NYISO, which has remained unchanged since that time.9
That revenue requirement was based on 1996 transmission costs. Today, NYPA
proposes a revised RR of $183,096,025 based on projected calendar year 2012 costs,
an increase of approximately $17.6 million over the current RR of $165,449,297, or a

10.7% increase. This proposed transmission RR increase is NYPA’s first such request since the commencement of NYISO operations almost thirteen years ago.

Under the NYISO OATT, NYPA is permitted to revise its revenue requirement
from time to time, subject to acceptance by the Commission. NYPA has agreed to
“FERC review and approval [of its transmission RR] on the same basis and subject to

Id.

NYISO OATT, Attachment H, Section 14.2.2.2.1.

Central Hudson Gas & Elec. Corp., et al., 86 FERC at 61,212-213.

the same standards as the Revenue Requirements of the Investor-Owned Transmission Owners” in New York.10

Although NYPA accepts FERC review pursuant to the FPA Section 205 “just and
reasonable” standard, NYPA requests exemption from the Commission’s regulatory
filing requirements under 18 C.F.R. § 35.13 (2012) (“Section 35.13”). This request is
based on the manner in which FERC applied the just and reasonable standard of review
to numerous California municipal utilities which, like NYPA, recover their transmission
revenue requirement through FERC-jurisdictional rates. Just as NYPA ensures
recovery of its RR through the application of the NTAC, a FERC-approved NYISO
OATT charge, the California municipals are able to recover their transmission revenue
requirements through their inclusion in the FERC-approved tariff charges of the
California Independent System Operator.11 Such entities have met the FPA just and
reasonable standard without being required to submit detailed cost information in
compliance with the requirements that apply to regulated utilities under Section 35.13.12
Due to its status as a non-jurisdictional utility under the FPA,13 NYPA has never been
required to file an annual FERC Form 1 report, and thus has never been obligated to
assemble its cost data in a manner that would lend itself to meeting the Section 35.13
requirements. For these reasons, NYPA respectfully requests waiver of Section 35.13.

Nonetheless, NYPA has included cost support data to meet the substance of
Section 35.13, and has included both 2012 projected and 2011 actual data. NYPA
believes this information will provide the Commission and interested parties with
sufficient information concerning NYPA’s costs to justify its instant proposal.
Accordingly, NYPA now seeks Commission acceptance of its revised transmission RR.

B. Revenue Requirement

NYPA’s proposal is to recover the costs of operating, maintaining and financing its current transmission system. Thus, the revenue request pertains to costs necessary to maintain and repair “in-kind” facilities. NYPA does not seek to upgrade or expand the capability of its transmission system through this filing.

NYISO OATT, Attachment H, Section 14.2.2.2.3.
City of Vernon, Calif., Opinion No. 479, 111 FERC ¶ 61,092, order on reh’g, Opinion No. 479-A,

1. Cost of Service

As supported by the enclosed testimony and exhibits of Thomas A. Davis,

NYPA’s proposed revenue requirement reflects established cost-of-service principles for
electric utilities and is consistent with Commission policy. Mr. Davis uses 2012
projected test year data and 2011 historic year data to support NYPA’s proposal, and
presents detailed cost information indicating the changes in NYPA’s expenses for
Operation & Maintenance (“O&M”), Administrative & General (“A&G”) and Depreciation
and Amortization related to its transmission plant. In addition, Mr. Davis provides
numerous data to develop NYPA’s transmission rate base. To calculate return on rate
base, Mr. Davis employs the Commission’s accepted methods of calculating the cost of
debt and equity. Those determinations are supported by the testimony of Richard L.
Ansaldo which is described below.

Mr. Davis also presents the estimated bill impacts of the NYPA proposal on

residential, commercial and industrial customers. His analysis indicates that the

average residential customer in each utility service territory would pay an additional 5 to

8 cents per month as a result of the proposed RR increase, which is about a one-tenth of 1% increase.

2. Return On Equity

NYPA’s proposed return on equity (“ROE”) and cost of debt are based on the

analysis and conclusions of Richard L. Ansaldo, as reflected in his enclosed testimony
and exhibits. Mr. Ansaldo concludes that a base ROE of 9.25% is appropriate. He
states that the proposed ROE is consistent with maintaining NYPA’s financial integrity
and bond rating, yet lower than returns generally allowed by other regulatory bodies and
FERC. The Commission has recognized that government-owned transmission systems
have a similar investment risk as one owned by an IOU, and thus a government-owned
utility’s ROE may be set by reference to similarly-rated entities.14 Mr. Ansaldo’s national
proxy group analysis shows an ROE range between 7.16% and 10.37%, with an
average of high and low medians of 9.24%, and also presents comparative proxy
groups that produce similar results. Consistent with Commission policy, Mr. Ansaldo
recommends including a 50 basis point adder to the base ROE reflecting NYPA’s
ongoing participation in the NYISO.15 Thus, Mr. Ansaldo recommends that NYPA’s final
ROE should be set at 9.75%.

C. Revisions to NYISO Tariff

Pursuant to the NYISO’s electronic tariff filing practices and related FERC rules,
NYPA has coordinated with the NYISO regarding the instant filing. Accordingly, this

filing includes, both in clean and black-lined versions, Section 14.2 of Attachment H of NYISO OATT which contains the changes consistent with NYPA’s rate proposal. This OATT section includes a number of ministerial subsection renumbering changes that the NYISO has advised NYPA to make in this filing. NYPA understands that the NYISO will intervene to support the ministerial changes.

D. Proposed Effective Date; Refunds

NYPA respectfully requests that the Commission waive its notice requirements16 to permit this proposal to be accepted for filing and become effective as of August 1,
2012. This will permit NYPA to implement recovery of its increased costs as soon as
possible. FERC has consistently granted municipal utilities a waiver of its notice
requirements to make effective requested revisions to tariff rates, subject to FERC’s
decisional processes.17

As a municipal utility, NYPA notes that it is not subject to Commission orders

directing the payment of refunds or suspending proposed rates.18 Nonetheless, NYPA
submits that it will make appropriate refunds to customers for any NTAC collections
based on an RR that exceeds what FERC ultimately accepts as just and reasonable.
FERC has previously approved NYPA’s proposed refunds related to prior NTAC over
collections.19

E. Exemption from Filing Fees

NYPA respectfully requests exemption from FERC’s filing fees. As a municipal utility organized under the laws of the State, NYPA is exempt from any filing fee that would otherwise apply to this filing.20 The Commission has consistently followed this practice for municipal utilities that have filed rate proposals21 and has applied this
exemption to NYPA in a prior transmission filing.22

18 C.F.R. § 35.3 (2012).
E.g., Azusa, 138 FERC ¶ 61,049 (2012); Pasadena, 137 FERC ¶ 61,045 (2011); Riverside, 136

F. Filing Documents

NYPA’s filing is supported by the following documents included herein:

1. Exhibits PA-1 through PA-15, which include:

a. Prepared Direct Testimony of Thomas A. Davis (Exhibit PA-1)
and supporting exhibits (Exhibits PA-2 through PA-7 and PA-13
through PA-15);

b. Prepared Direct Testimony of Richard L. Ansaldo (Exhibit PA-8)
and supporting exhibits (Exhibits PA-9 through PA-12);

2.Attachment A: Revised sheets to the tariff (Clean version); and

3.Attachment B: Revised sheets to the tariff (Black-lined version).

III. PUBLIC OUTREACH

NYPA is not subject to any binding agreements to engage in outreach to its

customers or other market participants for proposed transmission RR increases.

Nonetheless, NYPA has reached out to its industrial, governmental, municipal and

electric cooperative system customers or their representatives in advance of this filing to provide them with information about NYPA’s proposal including the estimated bill
impacts. NYPA has provided similar information to the other NYTOs, as their
customers will also be affected by the proposed RR increase.

IV. CORRESPONDENCE

NYPA requests that all communications and correspondence regarding this

matter be directed to the following persons, and respectfully requests waiver of the

Commission’s regulations to permit three persons to be included on the official service list for this proceeding:

Thomas A. DavisGary D. Levenson, Esq.

Vice PresidentDavid Appelbaum, Esq.

Financial Planning & BudgetsNew York Power Authority

New York Power Authority123 Main Street

123 Main StreetWhite Plains, NY 10601

White Plains, NY 10601Tel: 914/390-8030 (Mr. Levenson)

Tel: 914/287-6813914/390-8004 (Mr. Appelbaum)

Thomas.Davis@nypa.govGary.Levenson@nypa.gov

David.Appelbaum@nypa.gov

V. SERVICE

Consistent with the NYISO’s practice of serving transmission customers with rate schedule changes, NYPA has coordinated with the NYISO to electronically serve a copy of this filing on all market participants in the NYISO, and NYPA has also served a copy of this filing on the New York Public Service Commission.

VI. CONCLUSION

For reasons stated herein, NYPA respectfully requests that the Commission

accept for filing and approve NYPA’s revised transmission RR without suspension,

condition or modification. NYPA also respectfully requests that the Commission grant any necessary waivers as discussed herein.

Respectfully submitted,

/s/ Gary D. Levenson

Judith C. McCarthyGary D. Levenson

Executive Vice PresidentPrincipal Attorney

& General CounselNew York Power Authority

New York Power Authority123 Main Street

123 Main StreetWhite Plains, NY 10601

White Plains, NY 10601Tel: 914/390-8030

Gary.Levenson@nypa.gov

David Appelbaum

Attorney

New York Power Authority 123 Main Street

White Plains, NY 10601 Tel: 914/390-8004

David.Appelbaum@nypa.gov