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HomeMy WebLinkAboutS Intertie Memos and Communications 1997 SCUDDER October 24, 1997 Ms. Valorie F. Walker Alaska Industrial De velo pment Deputy Director - Finance and Export Authority Alaska Industrial Development & Export Authority 480 West Tudor Road Anchorage, Alaska 99503 Re: AIDEA Anchorage Kenai Intertie Dear Valorie: The bond market survived a sharp sell-off in August, and posted positive returns for the quarter ending September 30. Two-year and thirty-year treasury yields declined 28 and 38 basis points, respectively, during that time period. Benign inflation and employment results convinced bond investors that the Federal Reserve would refrain from raising interest rates. In addition, foreign investors avoided the volatile Southeast Asia markets and pumped additional capital into the U.S. bond market. The market sees little to no pricing pressures on the horizon for the following reasons: e unemployment rates remain low e business activity is strong © consumer confidence is at record highs e inflation appears subdued Bond investors have struggled with the “deflationary growth” concept for the last few years. As a result, investors kept real interest rates (inflation-adjusted interest rates) at historically high levels. Reducing real interest rates from current levels will require a significant change in the market’s thinking. Will the market embrace what many believe is the “new paradigm”? Our view is that the longer-term trend of interest rates is lower. However, it is not clear that the “growth without inflation” scenario will hold indefinitely. The Fed is ready to pounce on any economical signs that threaten the delicate balance of a growth economy coupled with Boca Raton low inflation and low unemployment. Over the past quarter we maintained a cautiously Cheep optimistic posture with respect to interest rate exposure. We remained neutral relative to Cincinnati portfolio benchmarks. Where appropriate, we increased portfolio yields by nominal ne — reduction of treasury holdings and replacement with corporate and asset-backed or iNew YOr. “ge Philadelphia mortgage-backed securities. Portland, OR San Francisco Affiliates: London Tokyo Ms. Valorie F. Walker October 24, 1997 Page 2 As always, give me a call if enclosures bring to mind any questions. We look forward to seeing you in December. Kindest regards, Donna M. Isaac Vice President cc: Mr. Randy Simmons, Executive Director Enclosures 0) (907) 274-1056 hae FEB 0 3 1999 KETCHIKAN DAILY NEWS Client No. WOory EDITORIAL = Lobby for Ketchikan Loo AM We A370 Ketchikan identified its capital improvement priorities in antici- pation of its annual February lobbying trip to the capital coming up at the end of the month. The community's mayors and other public officials will be presenting the list to Gov. Tony Knowles and the 21st state Legislature. The priorities for the Southeast region include the Southeast Alaska electric intertie, Ketchikan’s shipyard, the bridge to Ketchikan's airport, Tongass Avenue improvements and extension of Third Avenue, and the Ketchikan juvenile detention/regional diagnostic and treatment center. In the area of education, Ketchikan lists anew elementary school and renovation of the middle school; remodeling of the university's Ketchikan Career Center in the Robertson Building on Stedman Street, and university housing in Ketchikan. In regard to health and safety projects, Saxman seeks funding for a fire engine and seaport warehouse heating system. Other items listed are replacing a water disinfection system, Tongass Avenue water main replacement, extending North Tongass Highway's water main design, funding for the South Tongass Highway sewer system, and an analysis of Ketchikan's city wastewater system. Economic development projects include the Lewis Reef access road development, Ketchikan's intermodal transportation services operations and maintenance facility, Thomas Basin harbor’s up- grade and Ward Cove re-development. Those projects are identified by the community, but those lobbying in Juneau also will support area projects listed by the state Department of Transportation for Ketchikan and the region. Those projects include ferry improvements, traffic signals, sewer im- provements and airport upgrades. Lobbying for the projects isn’t restricted to elected and public officials. Residents interested in seeing the projects started and/or completed should begin writing and calling legislators and the governor's office in an effort to bring home state dollars. The competition for dollars will be fierce with low oil prices and resulting declines in oil revenue for the state. Ketchikan needs to get its bid for dollars in early and consistently throughout the session. It isn't too soon to start; Ketchikan has projects to do. SE Tnterte Q : (907) 274-1056 Date FEB 0 4 1999 _ KETCHIKAN DAILY NEWS Client No. YBOR KPU raps Mahone Propys?: 78 SCOTT BOWLEN Daily News Staff Writer Proponents say a hydroelectric plant at Mahoney Lake could supply low- cost power within 14 months if only Ketchikan Public Utilities would agree to buy the electricity. KPU is balking at the proposed power sale agreement, saying it would jeopardize efforts to build the pro- posed and widely supported Swan Lake-Tyee Lake intertie project. On Thursday, Mahoney Lake advo- cates will present their view to the Ketchikan City Council in hopes of gaining the council's support. The Mahoney Lake project is being developed by the Ketchikan Electric Co., a joint-venture company estab- lished by the Saxman-based Cape Fox Corp. and Alaska Power & Telephone Co. Mahoney Lake's 10-megawatt gen- erating capacity would ‘boost the Ketchikan area's overall capacity to See ‘Mahoney power,’ page 5 SE Inkvtu or Mahone, lake SE Tetectie Se ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY {= ALASKA @@™™ ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 February 11, 2000 Honorable Representative Al Kookesh Alaska State Legislature State Capitol Juneau, AK 99801-1182 Dear Representative Kookesh: During the recent Community and Regional Affairs hearing on rural energy issues, you asked AIDEA to provide an update on the proposed Southeast Intertie project and funds that have been set aside for the project. While the Alaska Energy Authority has only been involved peripherally to date, I’ll share the information as we currently know it. The Southeast Intertie would connect the Swan Lake and Tyee Lake hydroelectric projects, providing excess energy available from the Tyee Lake project into the Ketchikan area. The estimated cost of the project is $77.2 million (provided in a 12/15/99 letter from the Ketchikan Public Utilities to the Denali Commission). To date, the Ketchikan Public Utilities (KPU) has expended approximately $10 million on the Swan-Tyee intertie for an environmental impact statement and engineering, design and consulting work. Not all the permits for the project have been obtained. A significant amount of money has been set aside for the Swan-Tyee intertie. Approximately $35 million in state and federal grant monies have been made available for the project, including $5 million that was set aside by the Denali Commission at their January meeting. The Denali Commission money is contingent upon several factors, including that construction begins within two years. In addition to the grant funds, in 1993 the Legislature authorized a $20 million loan for the project. The loan would carry a 3% interest rate. Other funding sources for the project include an annual revenue stream of 40 percent of the state’s Four Dam pool revenues (estimated to be approximately $4.5 million this year) which is included in the $35 million amount discussed above. The Swan-Tyee project may also receive up to $5 million of a recent $10 million federal timber compensation payment to the Ketchikan Gateway Borough. I will be meeting next week with the city officials and KPU to discuss the project and their plans to move forward. If you have any questions, please call me at 269-3000. [-— Sincerely/ Executive Diredtor ALASKA INDUSTRIAL DEVELOPMENT > ¢ AND EXPORT AUTHORITY => ALASKA ie =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 February 4, 1997 Ms. Dora Gropp Transmission and Special Projects Manager Chugach Electric Association P.O. Box 196300 Anchorage, Alaska 99519-6300 SUBJECT: USFWS Collection Agreement Southern Intertie Dear Dora: In response to Mr. Bjornstad’s January 27, 1997 letter, we do not believe it is necessary for AIDEA to authorize or approve this collection agreement since it was part of the initial Phase 1 activities and budget. Furthermore, it does not impact the budget ceiling. We presume the invoice will be processed with the normal procedure. Please let me know if any additional information is needed. Sincerely. oO) 4 bo ‘AO UC Dennis V. McCrohan, P.E. Deputy Director - Energy cc: D. Randy Simmons, AIDEA Eugene Bjornstad, Chugach Electric Association X2:S tel Te oe CHUGACH ELECTRIC 7b 20 ASSOCIATION, INC. Cine ASSOCIATION, INC. yr ? f Ly f \ e [n\ Via Fax Line: 561-8998 ih } (Hardcopy to follow, U.S. Mail) Ly OCT 21 <5 October 16, 1996 Alaska Industrial Development and Export Authority 480 West Tudor Road Alaska Industrial Deve! Anchorage, Alaska 99503 ‘and Export Authority anment Attention: Mr. William R. Snell, Executive Director Subject: Southern Intertie, EIS Process Scoping Meetings Dear Mr. Snell: Rural Utilities Service (RUS) has published the “Notice of Intent” in the Federal Register on October 9, 1996. Scoping meetings will be held as follows: November 12, 1996 (Tue.) November 13, 1996 (Wed.) November 14, 1996 (Thur.) Spenard Community Recreation Center Cooper Landing Community Hall Kenai Peninsula Borough Chambers 2020 West 48th Avenue Bean Creek Road 144.N. Binkley Street Anchorage, Alaska Cooper Landing, Alaska Soldotna, Alaska (907) 343-4160 (907) 595-1257 (907) 262-4441 5:00p.m. to 9:00p.m. 5:00p.m. to 9:00p.m. 5:00p.m. to 9:00p.m. We expect that the USFS and USFWS will be cooperating agencies with RUS. An interagency meeting has been scheduled in Anchorage for November 12, 1996. The scoping meetings will be advertised in local newspapers and it is desirable to inform as many customers of the directly impacted utilities as possible. This information should be included with the monthly bills or in a separately mailed notification. Dora Gropp and our consultants POWER Engineers/Dames and Moore will coordinate this effort and will appreciate your input in regard to format and staff member to work with. The scoping meetings will be conducted by RUS in conjunction with cooperating agencies. The meetings will be held in an “open house” style from 5 to 7 p.m., followed by a presentation by the agencies, the Project Manager and the Consultants with a public comment period afterwards. The presentation and comments will be recorded. We will appreciate your presence at these meetings if your schedule allows. Sincerely, fore Eugene N. Bjornstad General Manager exainfpaee c: Dennis V. McCrokae) jinnesota Drive * RO. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Q Quality Services (907) 274-1056 Date MAY 10 1999 _ SITKA SENTINEL Client No_4ZOP Study: Intertie Option Costly Alo & 30 31U HOA KETCHIKAN (AP) — A. state study has concluded that the proposed Swan Lake-Tyce Lake electrical inter- tie would cost more than other alter- natives and could result in higher power rates for Ketchikan Public Util- ity customers. Officials from Ketchikan Public Utility and the city say the study, con- ducted by the Alaska Industrial De- velopment and Export Authority, failed to consider the long-term bene- fits of the $77 million intertie. KPU has been pursuing the 57-mile intertie for nearly two decades. The project would tap surplus power gen- erated at the Lake Tyee Dam north of the city to help mect Ketchikan’s growing demand for electricity. The study’s criticisms won’t put an end to the project. AIDEA’s summary said several additional policy factors, including funding, must be considered before deciding the intertie’s fate. The next two years will determine whether the intertie work will contin- ue, said KPU Manager Karl Amylon. AIDEA began its study late last year after KPU proposed a new way to fund the intertie using a combina- tion of state and federal grants, timber sale credits and up to $44.6 million from the sale of state bonds. A separate analysis of the proposal by consultant CH2M Hill concluded ‘the intertic would probably cost more over a 50-year life than adding dicsel generators or building other hydro- electric plants. Ketchikan Finance Director Bob Newell has admitted that the project is not economically feasible in a pure fi- nancial sense. “The strongest and correct argu- ment for the intertie continues to be long-term economic development,”’ Newell wrote in a memo to other city officials. The intertie is important for the economic development of southern Southeast Alaska and for the devel- opment of a regional power grid, Newell argued. SE Lrtetey Quulity Services — ee (907) 274-1056 Date MAY 0 8 1993 KETCHIKAN DAILY NEWS Client No. Study: Proposed intertie more costly than other options KPU, city says AIDEA study doesn’t include all factors Nom Use Ar BNC BBE L792 By SCOTT BOWLEN Daily News Staff Writer A new state study says the proposed Swan Lake-Tyee Lake electrical intertie would cost more than other alternatives and could result in higher power rates for Ketchikan Public Utility customers. But City of Ketchikan and KPU offi- cials say the Alaska Industrial Develop- ment and Export Authority study did not consider some relevant information about funding or the long-term benefits of the $77 million intertie. The unfavorable findings don't end the project, though. AIDEA's summary said several addi- tional policy factors - including funding - must be considered when deciding the intertie's fate. The next 18 to 24 months will deter- mine whether the intertie is a viable project, said City of Ketchikan and KPU Manager Kar] Amylon in a memo to the Ketchikan City Council. Directed by the council, KPU has been pursuing the 57-mile intertie since at least the early 1980s. The project would tap surplus power generated at the Lake Tyee dam near the Bradfield Canal to help meet Ketchikan's growing demand for electricity. AIDEA began its study late last year after KPU proposed a new way to fund the intertie using a combination of state and federal grants, timber sale credits and up to $44.6 million from the sale of state bonds. Consultant CH2M Hill and financial advisor Pat Clancy of the Portland, Ore., firm of Clancy, Gardiner and Pierce participated in the study. CH2M Hill's economic and rate analy- sis compared the intertie with the fol- lowing power alternatives: * Diesel: Future demand is supplied by adding diesel generators. * Mahoney Lake: KPU would buy power from the Mahoney Lake Project proposed by the Ketchikan Electric Com- pany, a joint-venture of the Cape Fox Corp. and Alaska Power & Telephone. * Mahoney Lake and the intertie: Both projects would be built. ¢ Small hydro: The Whitman Lake and Lake Connell hydroelectric projects {now in the developmental stages) would supply additional power. CH2M Hill compared the alternatives’ cost of construction and operations over a 50-year period. It concluded that: "Under most growth scenarios, the intertie is substantially more costly than the other alternatives.” CH2M Hill also forecast the alterna- tives’ affect on power rates paid by Ketchi- kan consumers. In all but one scenario, the intertie See ‘Intertie study,’ page A-4 POT 2S option would increase KPU rates, ac- cording tothe report. Intertie rates would be lower than the diesel option in a situation of high demand growth. Richard Trimble, KPU power projects manager, responded tothe AIDEA study in amemo to Amylon. “KPU and the Four Dam Pool have always acknowledged that at full cost, the intertie is not the most cost-effective energy resource,” Trimble wrote. However, KPU's position is that state and federal grants reduce the cost of building the intertie, he wrote. Grants don't require repayment, Trimble said, so only non-grant funding should be used to compare the intertie's cest with KPU’s diesel/small hydro al- ternative. One of AIDEA's scenarios did con- sider $17.4 million in federal grants, but Trimble said federal money would prob- ably total at least $30 million - an amount that would decrease the intertie’s com- parison cost further. KPU's funding proposai relies on sell- ing bonds to obtain the remaining non- grant money (up to $44.6 million) needed to build the project. ‘ Clancy's review indicated that KPU's funding proposal wouldn't provide a “sufficient structure" for issuing the bonds. In the study he listed changes that he believes are needed. Many of those were challenged by City of Ketchikan Finance Director Bob Newell inamemo to Amylon. But anyone familiar with the intertie project shouldn't be surprised by the conclusions of the AIDEA report, said Newell. “The intertie is not and never will be economically feasible in a pure financial sense,” Newell wrote, noting that KPU's financial advisor reached the same con- clusion last year. “The strongest and correct argument for the intertie continues to be long-term economic development,” Newell wrote. The intertie is important for the eco- nomic development of southern South- east Alaska, and for the development of a regional power grid, said Newell. He added that the state has built other major infrastructure projects - such as airports, highways and the ferry system - that weren't economically feasible in the short term but are vital to the communities. In Amylon‘s written comments to the City Council, he said the AIDEA report shouldn't be considered the “last chap- ter" of the intertie. “If nothing else, the AIDEA report reinforces my belief that the project cannot be considered in isolation and an ultimate decision as to whether to pro- ceed will be influenced by a number of factors," Amylon wrote. Those factors include the potential of more federal grant funding; a realistic analysis of the future costs of diesel power; the affects that the potential state sale of the Four Dam Pool facilities might have on building the intertie; a future federal authorization of a South- east-wide power grid; and an appraisal of an Alaska Power & Telephone pro- posal to build an intertie using alterna- tive technology and a submarine trans- mission line. Alaska Power & Telephone also is a partner in the Ketchikan Electric Com- pany that wants to build a hydroelectric facility at Mahoney Lake. The company also wants to have an agreement to sell power to KPU before it builds the Mahoney Lake facility. Ketchikan Elec- tric is offering to sel] the power at a fixed rate for however long a term that KPU might want. Negotiations between KPU and Ketchikan Electric have been siow, how- ever. The sticking point has been whose power would be used first. Ketchikan Electric's proposal would require KPU to buy Mahoney Lake power before purchasing electricity from the intertie. KPU has maintained that using Mahoney power first would jeop- ardize the chances of building the inter- tie. Ketchikan Electric's partners say they support the KPU efforts to build the intertie because it has long-term merits. Yet they see the AIDEA report as con- firming their position regarding the intertie’s costs and its potential affects on power rates. “It's always nice to see an indepen- dent third party validate what you've been saying all along,” said Peter Gigante, CEO of Cape Fox Corp. Meanwhile, “We don't feel a deci- sion on the Mahoney project should be delayed while the intertie is pursued,” Gigante said. Ketchikan Electric's current offer of a 6.5 cents-per-megawatt/hour could change if interest rates rise as forecast, thereby increasing the cost of building the Mahoney Lake project, said Gigante and Bob Grimm, president of AP&T and general manager of Ketchikan Elec- tric. “What we have on the table can't stay there forever,” Grimm said. “Things are changing." Amylon said in his memo that KPU can continue discussions with Ketchi- kan Electric about Mahoney Lake - and also with Metlakatla about a link bring- ing surplus Metlakatla Power & Light electricity to Ketchikan. KPU might find that its best option is to competitively bid a bulk power sales agreement, he said. The City Council said little about the AIDEA report during its Thursday meet- ing. City Council Member Tom Friesen said he'd traveled to Washington, D.C., recently as part of a Four Dam Pool group that met with Alaska's congres- sional delegation and expressed sup- port for the intertie. “I'm happy to report that we are on ‘rack with our delegation and we have their 100 percent support," Friesen said. President Clinton's energy budget contains $20 million for power projects in Ketchikan, said Friesen. But Friesen added that he believes environmental- ists want the federal government to do another Environmental Impact State- ment process for the intertie - which Friesen said would essentially kill the proiect. During the meeting's public com- ments, Eric Hummel, project director for the Tongass Conservation Society, said the organization is concerned about the intertie’s economics and how public policy decisions are made in Ketchikan. Hummel said the project was origi- nally sold to the community as the only alternative for new power supplies while also being highlighted as a "backdoor" way to obtain a road corridor off Revillagigedo Island. The road corridor perception remains, he said. “Is it a road project or is it a power project?” he asked. Hummel proposed that the city and KPU take “a few steps back,” enlist the community's support, and clearly de- fine what and how much Ketchikan would be paying for the intertie. City Mayor Bob Weinstein responded that no road 1s planned because it was proven economically unfeasible. Also, the AIDEA report does not pro- vide definitive answers about the inter- tie, said Weinstein. Council Member Tom Coyne, an in- tertie opponent, knocked the project again Thursday. “I don't think the public is gullible enough to believe the intertie is ever going to be built," Coyne said. . ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY = ALASKA im =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 November 25, 1996 Mr. Eugene Bjornstad General Manger Chugach Electric Association P.O. Box 196300 Anchorage, Alaska 99519-6300 SUBJECT: Additional Services Southern Intertie Dear Mr. Bjornstad: We appreciate your letter of November 19, 1996, to Mr. Randy Simmons regarding additional services to support the Anchorage Community Working Group involvement. As you have described, the additional funds will come from the contingency set aside for the current phase. We do not believe our approval is necessary for this change. However, we agree with your approach and support the concept of additional community involvement. Please let me know if any additional information is needed. Sincerely, FMol— Dennis V. McCrohan, P.E. Deputy Director - Energy cc: Randy Simmons, AIDEA Valorie Walker, AIDEA Dora Gropp, CEA KOS. September 18, 1996 cER BO 2 enor? ; ; agus oe otit Alaska Electric Generation & plask® \ne ort putin Transmission Cooperative, Inc. an EXP 1018 Galena Street Fairbanks, Alaska 99709 Attention: Mr. Robert Hufman, Executive Manager Subject: Southern Intertie, EA/EIS Process Federal Lead Agency Dear Mr. Hufman: Based on letters and conversations recently with RUS, we have been informed that RUS will accept the role of lead agency. Merle Beachy confirmed this decision in a telephone conversation with our Project Manager, Dora Gropp on September 17, 1996. RUS will prepare a Notice of Intent (NOI) to be published in the Federal Register and notify the public of the project. The next step will be scoping meetings, which are anticipated to be scheduled for early November of this year. We would like to thank the RUS member utilities for their efforts in securing the agencies cooperation. The project will benefit from a lead agency with no inherent objections to any of the identified routes. Sincerely, aus wes \ —= Eugene N. Bjornstad General Manager eegfow 5601 Minnesota Drive * PO. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie Route Selection Study - Phase 1B Subject: Federal Lead Agency - EA/EIS Process W.0.#E9590081 Preceding letter with copies of above titled report from Chugach was sent to IPG Utility General Managers and also a copy to AIDEA as follows: Alaska Electric Generation & Transmission Cooperative, Inc. Attention: Mr. Robert Hufman 1018 Galena Street Fairbanks, Alaska 99709 Alaska Industrial Development & Export Authority Attention: Mr. William R. Snell, Executive Director 480 West Tudor Road Anchorage, Alaska 99503 Anchorage Municipal Light and Power Attention: Mr. Thomas Stahr, General Manager 1200 East First Avenue Anchorage, Alaska 99501 City of Seward, Light and Power Division Attention: Mr. Dave Calvert, Utility Manager P.O. Box 167 Seward, Alaska 99664 Fairbanks Municipal Utilities System Attention: Mr. Frank Biondi, General Manager P.O. Box 72215 Fairbanks, Alaska 99707 Golden Valley Electric Association, Inc. Attention: Mr. Michael Kelly, General Manager P.O. Box 71249 Fairbanks, Alaska 99707 Homer Electric Association, Inc. Attention: Mr. Norm Story, General Manager 3977 Lake Street Homer, Alaska 99603 Matanuska Electric Association, Inc. Attention: Mr. Wayne Carmony, General Manager P.O. Box 2929 Palmer, Alaska 99645 H\ANNALISA\WPDOCS\E9S90081\MAILTECH.GM September 19, 1996 a File— Seathin CHUGACH ELECTR Cin ASSOCIATION, INC. February 11, 1999 Via Fax Line: 269-3044 yall 'S \ q Alaska Industrial Development aD * “i & \ \) and Export Authority Dye . 480 West Tudor Road ( 4 a 4009 Anchorage, Alaska 99503 ) FES +” nent \ Deve Attention: Mr. Dennis V. McCrohan, P.E., Deputy Director, Energy Alaské se : um avihet WY Subject: Souther Intertie Project - Funding and BxPe Dear Mr. McCrohan: The budget for Phase I of subject project was amended to a total of $5,900,000 at the June 16, 1998 meeting of AIDEA’s Board of Directors. The increase had been estimated to allow completion of the NEPA process. Continued changes in direction from one of the federal agencies governing the process for the preparation of the Environmental Analysis (EVAL) have resulted in the need for additional funds for that task. An estimated $500,000 are needed to complete the EVAL. The work to be performed is explained in detail in Power Engineers’ letter of February 8,1999 (copy attached). The IPG has authorized us in their meeting on February 10, 1999 to amend Power Engineers’ contract by $465,215 and utilize funding available at this time. Completion of the EVAL and submittal to RUS and the USFWS with a permit application is now estimated for July 1999. We have cancelled a previous amendment to Power Engineers’ contract in the amount of $678,069, which had been executed to pay for their assistance during the EIS/ROD preparation by RUS’ contractor. This leaves total commitments well within the authorized budget. Funding needs for the EIS/ROD process will be reassessed after the USFWS has accepted the application for a project permit in the Kenai National Wildlife Refuge. At that time we may request further adjustments to funding under Phase I of the project. We are presently preparing new cash flow estimates and will submit them for your use shortly and trust that funds can be advanced in agreement with the Memorandum of Understanding entered into by the IPG on 6/8/95 as last amended 02/10/99. If there are any questions, please don't hesitate to contact me at (907) 762-4626 by telephone or by fax to (907) 762-4617. My e-mail address is dora_gropp@chugachelectric.com. Sincerely, Dora L. Gropp, P.E. Manager, Transmission & Special Projects DLG/ah ‘CNDATAUANNALBATWORDOCSGROPP299SAIDEDOC Attachment: Power Engineers’ letter of February 8,1999 c Lee Thibert Joe Griffith Mike Massin W.0.#E9590081, Sec., 1 RF 5601 Minnesota Drive ¢ P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 ¢ FAX 907-562-0027 Sous _ February 8, 1999 Dora L. Gropp, P.E. Manager, Transmission & Special Projects Chugach Electric Association, Inc. 5601 Minnesota Drive, Bldg. A Anchorage, AK 99518 Subject: 120376-05 Southern Intertie, Phase IB - Chugach Contract #820 POWER Project 120376 - Additional Work Scope to Complete the EVAL Dear Ms. Gropp: We appreciated the opportunity to meet with you and Chugach management on January 22 to discuss in detail the difficulties that have been encountered in attempting to finish the EVAL. As discussed, continued and unpredictable changes in direction and introduction of new data from the US Fish and Wildlife Service (FWS) has substantially affected our scope of work, and the schedule and budget for completion of the EVAL. In order to complete the EVAL, additional funding in the amount of $465,215 is required at this time. We have requested, and Dames & Moore has prepared a detailed memorandum explaining the changed conditions to the scope of work since the September 1998 meetings with FWS and the Kenai National Wildlife Refuge (KNWR), and outlining the remaining work to be done to complete the EVAL. Our previous budget request of October 1998 for completion of the EVAL was based on agreements reached with the FWS during the September 1998 meetings. Based on the September meetings with FWS, it was expected that FWS comments received through September could be incorporated into the EVAL, and that the FWS would be available to review the revised maps and text between September and November. This was to result in a completed EVAL by last December. The KNWR staff was not available to review the text and many of the maps until January. As a result, the EVAL completion schedule has had to be extended. In addition, new comments have been continually received from the FWS and KNWR since September, resulting in the need for considerable additional changes to the biology text and maps. These changes should be addressed so that FWS input is reflected in the EVAL. The most recent FWS comments were received in writing on January 15, and from a meeting between Dames and Moore and the KNWR on January 21. Also, in attempting to work closely with the FWS to incorporate their comments and new data, Dames and Moore has experienced problems with the data provided by FWS, and addressing ongoing and often conflicting comments. The attached memorandum from Dames & Moore provides details on these issues and the tasks needed to complete the EVAL. HLY 23-036 (1/29/99) Ik POWER Engineers, Incorporated 1 einer RRR cA ARATE 3940 Glenbrook Dr. + P.O. Box 1066 Phone (208) 788-3456 Hailev. Idaho 83333 eg) ree eg ees Chugach Electric Association, Inc. February 8, 1999 Page 2 The continual changes to the draft EVAL have resulted in an open-ended situation with respect to both the budget and schedule for completion of the EVAL. In order to gain control of the schedule and budget, it is proposed to complete the EVAL with limited additional FWS review. In addition, the impact assessment approach will be revised so that it is not dependent on qualitative judgements that would require concurrence from the federal agencies. Dames & Moore has discussed these approaches with FWS and RUS, and have received informal agreement. The only additional input will be through the Interagency Brown Bear Study Team, and from a FWS review of the biology impact section. Changes that result from this review that can be easily implemented will be incorporated into the EVAL. However, any changes in direction from this FWS review would not be included in the EVAL, but would be submitted to RUS for consideration during the EIS preparation. This will allow Dames & Moore to complete the EVAL under a more predictable schedule and budget. A revised budget for the additional scope of work is attached. The additional funding would allow the EVAL document to be completed in compliance with the MOU, as explained in Dames and Moore’s memo. Dames & Moore has proposed a 20-week schedule to complete the EVAL and the ANILCA Application. For example, if approval for this proposed budget is received by February 22, 1999, the EVAL and ANILCA Application would be completed by the week of July 5, 1999. Summary of attachments included with this letter: 1. Budget Summary 2. Memorandum from Tim Tetherow, Dames & Moore, to Randy Pollock, POWER Engineers dated January 26, 1999 describing in detail the justification for this additional budget request. After you have had opportunity to review these materials, I will call you to see if further clarification or discussion is needed. Sincerely, _ POWER Engineers, Inc. Randy Pollock, P.E. Sr. Project Manager RP/Ik Enclosures cc: Mike Walbert (PEI) nies Tim Tetherow (D&M) File: 120376-05-55-00-30 HLY 23-036 (1/29/99)Ik Fi #) pi Southern Intertie Project Budget Summary Task 5 Scope Additions to Complete the EVAL Feaeea Engineering Support & Project Coordination [Total Requested] $38,125 $415,325 $423,632 Notes: 1. The Dames and Moore proposed budget request and justification is described in detail in Tim Tetherow's memo to Randy Pollock dated January 26, 1999 (attached). 2. The Power Engineers proposed budget provides for engineering support for completion of the EVAL for the 20 week completion schedeule outlined in the Dames and Moore memo. The budget includes one trip to Anchorage and one trip to Phoenix (Dames&Moore) for Randy Pollock. 3. Given that there are no more changes in our scope of work to complete the EVAL, this budget will provide for completion of the EVAL by the week of July 5, given approval of this budget by February 22, 1999 (a 20 week completion schedule). The budget for Task 6 - ANILCA Application already provides for completion and submission of the ANILCA Application, and Dames and Moore anticipates that application would be ready to be filed at the same time the EVAL is completed. HLY 23 -___(1/29/99) 120376-05 DCm (@_ DAMES & MOORE fefXelUT =A DAMES & MOORE GROUP COMPANY 7500 North Dreamy Draw Drive Suite 145 Phoenix, Arizona 85020 602 371 1110 Tel 602 861 7431 Fax Action Info File Randy Pollock, POWER Garlyn Bergdale 09203-009-050 Engineers, Inc. From Tim Tetherow \t \ Date 5 February 1999 Southern Intertie Project - Budget Request to Complete the Environmental Analysis Subject Report (EVAL) The purpose of this memo is to outline the budget requirements to complete the EVAL for the Southern Intertie Project, as a result of changes in conditions since September 1998. In the Budget Request for Additional Mapping and Required Supporting Analysis (October 13, 1998) we outlined the background of the Project, and our efforts to gain agency direction for and acceptance of the environmental studies for the Project since November 1996. Since the September 1998 meetings with FWS, we have encountered several unforeseen setbacks that have lead us to the recommended changes in this memo to regain control of the schedule and budget for the EVAL completion. The over all permitting process for the Project falls into three stages: preparation of the EVAL, preparation of the EIS, and the Record of Decision and appeal process. The urgency of the current situation is that after having initiated Project scoping 26 months ago, and completing two drafts of the EVAL and portions of the final report, we have reached a stalemate in the first stage of the overall permitting process. Our efforts to conform to the agreements on the Memorandum of Understanding (MOU) have not produced a final EVAL to submit to the Rural Utilities Service. Because of the duration of the work to date, and the complexity, this memo has been organized into four parts: recommendations, background, activities and issues, tasks to complete the EVAL, and schedule and cost. RECOMMENDATIONS While we have made every effort to address FWS’s issues and respond to their comments, there continue to be changes in direction from FWS. After over a year of continued effort to finalize the EVAL, we are now concerned that it has become an open-ended process with no way to manage the schedule and costs. To gain control of the schedule and costs to finalize the EVAL, we are proposing to complete the EVAL with limited additional input and review from FWS, and to streamline the impact assessment approach. H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC pany © February 1999 Cr Technical input will be for resolution of the brown bear mapping and impact assessment criteria from the Interagency Brown Bear Study Team (IBBST). FWS review will consist of a two-week review of the biology impact section. Any additional FWS comments will be included in EVAL for consideration for the EIS. We will respond to minor comments as appropriate in the Final EVAL. This approach will provide assurance to RUS that the FWS, as the cooperating agency for the EIS, has reviewed the pertinent sections of the EVAL prior to beginning the preparation of the EIS. This recommendation has been prepared in coordination with FWS. They agree that we have been provided adequate direction with which to complete the EVAL, however they have made the request to review all of the biology sections of the EVAL before it is submitted to RUS. Brian Anderson contacted both Dora and myself (February 4, 1999) to request that FWS be given the opportunity to review the biology section of Chapter 4 the document. This approach will allow the project to advance to the EIS preparation phase, comply with the MOU, and gain control of the schedule and budget. We are also recommending that the impact assessment be modified so that quantification and descriptions of impacts will replace the qualitative approach of characterizing high, moderate, and low impacts. This will enable us to incorporate diverse sources of data provided by the FWS, and prepare an assessment that will be flexible for refinement by the agencies in the EIS. This approach was received favorably in initial discussions with FWS Reality Division, Anchorage (January 25, 1999); and RUS (January 26, 1999). BACKGROUND The Lead and Cooperating Federal agencies — RUS is the Lead Federal agency that is responsible for preparing the Southern Intertie EIS, with the assistance of the Cooperating agency, FWS. RUS has retained Mangi Environmental Group to prepare the EIS for the agencies, and as a result, Mangi has been assisting RUS in the reviews of the EVAL. The MOU requires that the EVAL will provide the basis for the content of the EIS, and that the EVAL will be prepared under the direction of the Lead and Cooperating Agencies. The Alaska Department of Transportation, Alaska Department of Fish and Game (ADF&G), Kenai Peninsula Borough (KPB), and Municipality of Anchorage have also reviewed drafts of the EVAL. MOU -- In order to comply with the MOU, Dames & Moore and POWER Engineers have responded to all of the RUS and FWS comments on two drafts of the EVAL. To manage the preparation of the EVAL, we have been going through a systematic process, including: (1) meeting with the Agencies to discuss issues and approaches to complete the EVAL; (2) preparing meeting notes and comment tracking tables to document the approach for responding to each comment; and (3) submitting our notes for review by the agencies to ensure that we are in agreement on the specific direction of each comment. In this manner, we expected that there would be clear communication and agreement on the scope of each comment, and the approach for addressing comments in the EVAL. H:ADATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC Denyy © February 1999 x Page 3 Goal of the EVAL — Our goal has been to complete the EVAL in conformance with the Southern Intertie MOU, and to submit a product that is generally ready for use in the preparation of the EIS. To date, our approach has been to submit drafts of the report to the FWS for review, upon which we are provided comments for incorporation into the document. This process has been recurring for the over a year without completion, as the FWS continues to change direction on the content of the EVAL and the scope of our work. As a result we have recommended limiting continued FWS review, and assuming that while the EVAL will have been reviewed by the agencies, all comments may not be incorporated prior to submitting the EVAL to RUS. EVAL Review - RUS and Mangi dominated comments on the Ist Draft of the EVAL. They focused on the purpose and need for the project and the formatting of the EVAL. Following the submission of the first draft of the EVAL in November 1997, we met with RUS, FWS and KPB in March 1998 to discuss their comments, issues and appropriate responses. At that time, the majority of the comments that we received were from RUS and Mangi (46 pages). After the IPG proposed to cross the Kenai National Wildlife Refuge (KNWR) by paralleling the Enstar pipeline, the U.S. Fish and Wildlife Service (FWS) began refining the approach and data to assess impacts on wildlife, recreation, and scenery. Their comments dominated the review of the 2"! Draft of the EVAL. FWS submitted nine pages of comments on the first draft of the EVAL in February 1998. They stated in their cover letter to RUS that “the document adequately identifies the range of issues, and that ample opportunity was provided for agency and community input.” They also stated that, “in the event that the IPG were to file a right-of- application with the FWS, the additional public process required under Title XI of the Alaska National Interest Lands Conservation Act (ANILCA) may lead to the identification of additional issues.” On February 25, 1998, the IPG notified the FWS and RUS that they would be filing an ANILCA Application for the Enstar route through the KNWR. The IPG will need to submit an ANILCA Application to FWS in order to initiate the preparation of the EIS. We responded to the RUS and FWS comments on the first draft of the EVAL, and prepared a second draft of the EVAL that was submitted in May 1998. We met with the FWS and RUS on June 23 through 25 to discuss their comments on the second draft. The FWS had not completed preparing their comments for these meeting. On July 24 we received 40 pages of comments from FWS, which covered new areas of concern and identified new requirements for the EVAL to address. Due to the nature of their written comments a second meeting was held with them on September 8 through 10. These meetings resulted in substantial additional changes in direction from FWS. We agreed that Dames & Moore and POWER Engineers would finalize the EVAL based on the combination of the written comments and direction from the June and September meetings. The only additional review would be of the biology sections for Chapter 3, Affected Environment and Chapter 4, Environmental Consequences by FWS. Meeting notes and all of the comments from FWS and RUS were compiled and submitted for review on October 7. We received responses from FWS on November 5, stating the following: We appreciate you including the comment-tracking sheet, which provides Dames & Moore’s response to our July EVAL comments. We found this useful since some of these items were not discussed during the September meeting. H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC 5 February 1999 Page 4 In general, the minutes reflected the discussions that occurred. However, we have identified a number of minor corrections in our review of the minutes, Map Revision Summary, and Comment Tracking Sheet. Since September 1998, we have been processing additional FWS wildlife data in our efforts to finalize the EVAL. Our efforts have centered on revising the project base map to meet FWS requirements; processing their electronic data for new wolf, lynx, moose, brown bear, caribou, bald eagle, waterfowl, and swan habitat maps; assembling the cumulative impact assessment; and revising the biology section of Chapter 3. We submitted these products for FWS review on November 24, 1998, and received additional 35 pages of comments on January 15, 1999. Their comments include changes in direction from our September meetings. January 21 Meeting/FWS Focus - We met with FWS on January 21 to discuss their comments. The focus of FWS’s concerns is for cumulative impacts of the Enstar route on wildlife habitat, particularly for brown bears. The basis of their concerns is the continued development on the Kenai Peninsula and within the KNWR, and the ability to sustain adequate brown bear habitat. They have stated that because of the concerns for the brown bear on the Kenai Peninsula, the FWS’s credibility is on the line. The EIS will be viewed as their statement on the brown bear and the associated effects of the Project. At the meeting on January 21, 1999, FWS indicated that the brown bear might become a candidate for listing as a threatened or endangered species on the Kenai Peninsula if their numbers continue to decline. The KNWR staff indicated that the proposal to build the Project along the Enstar pipeline increases FWS concerns for the future of the brown bear habitat. They are concerned that the Project could trigger a decision to list the brown bear as a protected species on the Kenai Peninsula. The ADF&G want to avoid any listing of brown bears in Alaska. As a result, the KNWR stated that the public and other agencies would give the assessment of brown bear impacts in the Southern Intertie EVAL and EIS close attention. January 21 Meeting/Mapping - At the meeting we informed the FWS/KNWR that their recent written request (January 15) for separating the inventory and impact maps was in total conflict with our previous discussions and direction. At the September 1998 meetings we had been directed to combine the inventory and impact mapping to facilitate public review. We proposed a change in the impact assessment approach to the FWS at the meeting, which would streamline the assessment process. Rather than mapping low, moderate and high impacts along alternative routes, we proposed to: quantify relevant environmental features (i.e., distance and area of wildlife habitat distribution types and numbers of stream crossings); describe the types of impacts that could occur; and assess the significance of the impacts based on NEPA and FWS criteria. This approach will allow us to integrate all of the input that we have received from FWS and other agencies (i.c., ADF&G) focus on impact significance, minimize potential controversy over impact levels. It would also eliminate the need for impact maps. We discussed this change in impact assessment approach with Larry Wolfe, RUS (January 26, 1999), and he was very supportive of a simpler and less qualitative approach for comparing alternative routes on the Kenai Peninsula. In discussions with Brian Anderson, FWS (January 25,1999), he agreed that the emphasis of the impact assessment should be on impact significance, rather than qualitative levels of impact. He requested an example of our proposed H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1 .DOC Pane 5S February 1999 ox Page 5 approach. We also discussed the request for a black bear map. This was another case where there is a change in direction from last September. No agreement was reached at the meeting regarding the scope or content of a black bear map. Brian Anderson has indicated that a black bear map would be desirable because it is one of the selected species for analysis (January 25). A decision has not been made on the content of a black bear map, or whether to produce a map (please see Tasks to Complete the EVAL). We also reviewed their comments on all on the wildlife habitat maps that we had prepared since last September. After having spent the last three months preparing new maps with data provided by FWS, the KNWR staff requested changes in the mapping, which will involve incorporating additional data. These changes will be made and affect the preparation of ten maps. ACTIVITIES AND ISSUES SINCE SEPTEMBER 1998 The following provides a general chronology of work activities since the September 1998 meetings; the status of work accomplished, and associated issues. As a result of the September 1998 meetings, it was agreed that we would be working closely with the FWS to complete the EVAL by December 1998. The plan was to submit new maps and text that were based on FWS data for their review. The following is a summary of our activities and other pertinent events since the meeting with the FWS in September 1998. e We have organized all comments and developed strategies to respond to the new direction for the EVAL - We summarized meeting notes and prepared tracking tables for all text and map comments from RUS/Mangi and FWS. These notes were submitted to reviewers for their concurrence. (October) - We conducted an analysis of the comments from the meetings and developed approaches for responding to each of the separate issues that were discussed at the September meetings. (September and October) e We have experienced significant delays during September and October - We have experienced difficulties in utilizing GIS data provided by FWS either because it was incomplete, or due to formatting problems that made it incompatible with Dames & Moore’s ArcInfo GIS system. This delayed the revisions requested for creating new lynx, eagle, swan, wolf, and moose habitat maps. We had expected to complete the maps during September and October 1998 by utilizing FWS electronic data in a cost efficient manner. Instead, we experienced considerable difficulties in utilizing FWS data, delays in obtaining the data, and continued updates to the data as the maps were being produced. We H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC Mm 5 February 1999 oc Sm Page 6 GROUP Issues were unable to complete these maps until December. The combination of the extended time, multiple changes in maps resulted in additional costs of approximately $25,000 that were not anticipated when the October 1998 budget increase was granted. We had been informed by FWS that the brown bear map had been updated by the IBBST. We then learned that the Forest Service had not revised the IBBST brown bear map for Indian Creek and Little Indian Creek. As a result, there were delays in getting direction from the Forest Service so that we could finalize the map. (October 1998). The costs incurred in preparing this map of approximately $12,000 were not anticipated. We received extensive comments on the base map after the September meeting. We were provided with new data from FWS for surface water, roads, pipelines for use in revising the base map (October and November 1998). Costs to change the base map, estimated at $16-18,000, were not expected. In October 1998 we learned that the KNWR staff would not be available to review maps and text until mid-November, due to fieldwork. As a result, we had to delay our reviews with FWS, and the EVAL completion date was extended to February 1999. When we received comments from Brian Anderson and Vicki Davis on the notes and tracking tables, revised base map and draft inventory maps, we found disagreements between their comments, as well as with NEPA compliance (October and November 1998). For example, we pointed out to Brian (November 13, 1998) that Vicki was asking for a “worst case analysis” where there is a lack of data, and told him that NEPA no longer requires this. Brian provided a Clarification Memo (November 25, 1998) stating those NEPA requirements for a “worst case” analysis had been rescinded in 1986. The NEPA direction is to do a “most probable analysis.”). There was also disagreement between FWS comments (and still is) on the map titles. The estimated costs of $35,000 in management time for project delays, handling unexpected comments, preparing responses, and coordinating ongoing changes with the Dames & Moore staff were not anticipated in our budgeting. The following are a summary of the problems that have led to conflicting directions and scope changes in preparing the final EVAL: - Lack of clear direction from FWS — the regional office and KNWR staffs are not coordinated, and there is no “effective” single point of contact. In addition, the KNWR is not certain about the products that they have requested, resulting in continued changes to 11 maps and text. - No cle ar avenue for conflict resolution — both the regional office and KNWR are claiming leadership and “the last word” on issues and interpretation of data requirements for the EVAL (text and 11 maps). H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC pYanyy 5S February 1999 Gu Page 7 We have been informed (Anderson, February 4, 1999) that FWS is working on resolving these issues. Status of Mapping Base map — completed; all comments from FWS have been addressed. Cumulative Impact Map — A draft map has been prepared and discussed with Brian (December 28, 1998), and the KNWR staff (January 21, 1999). We do not have their final comments from KNWR. We plan to complete the map with comments received from Brian Anderson (December 28, 1998). Moose Habitat — A draft of the completed map has been produced, illustrating FWS habitat data that was provided in October 1998, and cumulative impacts within both the study area and KNWR. We also illustrated direct impacts along the route on this example, however, we are now proposing to limit the mapping to inventory data with the quantitative table of habitat area disturbance. Brian Anderson reviewed this product on December 28, 1998 and with the KNWR staff on January 21. We have sufficient input from FWS to complete the mapping. Vegetation and wildlife habitat mapping — Bald eagle, waterfowl, swan, wolf, lynx, brown bear, anadromous fish, and caribou maps have been completed and submitted to FWS for comments (November 25, 1998). Comments that were expected from FWS by January 8, 1999 were finally received on January 15, 1999. We received further comments on these maps from the KNWR staff on January 21, 1999, which included requirements for additional revisions based on new data and direction from FWS. Each of the wildlife maps requires additional data and/or editing due to new data and titles requirements by the FWS. Wolf pack map displaying ten pack areas — A wolf pack map has been completed and was submitted January 8, 1999. Upon their review, KNWR staff determined that they had sent us incorrect data from which to prepare the wolf pack map. Based on our meeting on January 21, they will be sending us new data so that we can prepare a new map of the ten wolf packs. We were notified on February 3 that FWS could not complete the wolf pack map for all of the data from 1982 to 1998. We suggested that the 5 years of data that they do have mapped for wolf pack territories would sufficient to display the patterning of wolf packs in the study area. FWS will decide by 02/10/99 whether to use 5 year data or omit the wolf pack information. Land use and visual resource map revisions — These maps need to be revised due to recently released new data. Recent Kenai Peninsula Borough land status mapping (July 1998) needs to be incorporated in the land use and land jurisdiction mapping. Status of EVAL Text Chapter 1 -— This Chapter is complete and camera ready (RUS/Billington, Philpott and Morgan comments addressed). H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC pYanyy 5 February 1999 Chapter 2 — This chapter is complete, with the exception of the comparison of alternatives (RUS/Billington, Philpott, Morgan, and Sargent and Lundy comments addressed). The comparison of alternatives cannot be completed until the biology impact assessment has been completed. Chapter 3 - Biology - All FWS comments on the 2" draft EVAL have been addressed, and a revised biology section was submitted to FWS for review (24 November 1998). We received comments from Brian Anderson (December 28, 1998), and from KNWR on January 15, 1999. At our meeting with the KNWR staff on January 21, we were informed that if Dames & Moore makes all of the map and changes requested that the biology section of Chapter 3 will be satisfactory. Brian Anderson is currently reviewing KNWR comments to determine if they are reasonable. Other sections — land use, recreation, and visual — need to be finalized. Chapter 4 — We are recommending a change to the impact assessment approach. Rather than summarizing direct and indirect impacts by high, moderate and low levels, they will be documented by quantifying the types of resources effected, and describing the types of impacts and differences between alternatives in text and table formats. The description of impacts will need to be edited for all resource sections. Biology — The methodology for impacts has been revised and submitted to FWS for review (December 20, 1998). Informal comments from Brian Anderson (December 28, 1998) indicate that the cumulative impact assessment should be for the entire study area. Previous direction at the September meeting was for the KNWR only. At this time we have established a program that allows us to quantify cumulative impacts for the study area and the KNWR. The model has been run for moose habitat. We have established the direct impact assumptions for all other wildlife and vegetation impacts. We have also prepared a draft impact assessment approach and conducted most of the additional research requested by FWS and RUS/Mangi regarding beluga whales, songbirds, edge impacts on general habitats, wolves in south central Alaska, and bird collision. This will be incorporated into the Chapter 4 section. The biology section for Chapter 4 is approximately 15-20 % complete. Environmental Justice — The updated analysis has been completed. Construction Worker impacts — The updated analysis has been completed. Cumulative Rate Impacts on the Railbelt — This analysis has been completed. Subsistence — This section has been revised. Land Use and Visual Impacts — Responses to comments need to be completed. TASKS TO COMPLETE THE EVAL The previous discussions have outlined and summarized the background and issues regarding the status of the EVAL. This section is directed toward looking forward to the completion of the H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC Yan 5 February 1999 Gu Page 9 EVAL. While progress has been made, there is considerable work to be done in order to complete the EVAL. Much of the work that was done for biology over the past three months to respond to the FWS now requires revisions and completion. In addition, the impact assessment for all resources will need to be edited, and the comparative analysis of alternatives will be redone. We have re-scoped the effort to complete the EVAL within the following tasks 5a — d: - Task 5a Comment Organization We will update the comment tracking tables for maps and text to incorporate all comments that we have received since October 1998. This will include the most recent comments (January 15,1999) and direction from the January 21 meeting with the KNWR staff. As a part of the comment organization, we will document the proposed change in direction regarding completing the EVAL with limited review from FWS, and modifying the assessment approach. This new direction has been reviewed with Brian Anderson, FWS Reality Division (January 25, 1999), and Larry Wolfe, RUS (January 26, 1999). Both were in agreement with the proposals. - Task 5b — Revise the EVAL Chapter 2 - The comparative analysis of alternatives needs to be revised and incorporated into Chapter 2. The FWS requested that we expand the comparison of alternative routes to include the 11 individual wildlife species, incorporate cumulative impacts, and to provide more detail in the description of alternative route comparisons. This will require re-formatting of the data from the impact assessments of all resource topics in three comparison tables (Tables 2 —22, 2 -23, and 2 —24). The comparison of impacts for alternatives has been organized into three areas: Kenai Peninsula, Turnagain Arm and Anchorage. Chapter 3 - The focus of the effort for Chapter 3 will be in the response to the most recent comments received from FWS, January 15, 1999 on the text and maps for biology. General editing and completing responses to comments from RUS/Mangi and FWS are required to complete this chapter. There are updates that will be necessary to the land use data to incorporate the Municipality of Anchorage and Kenai Borough new general plans and new development plans; the Cook Inlet Oil lease sales; and new land use data from the Kenai Peninsula Borough. In addition we will need to update the visual inventory to address FWS comments. Chapter 4 - Changes to the assessment of direct, indirect and cumulative impacts for biology, land use and visual impacts are the main emphasis of this chapter. Direct and indirect impacts — With the change in the impact assessment approach, we will be dropping reference to qualitative levels of low, moderate and high impacts. Instead, there will be an emphasis qualitative data, types of impacts and mitigation. The reason for this change is to establish a product that will not be subject to debate over the qualitative issues of impact levels during the EIS preparation. The biology H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM 'SB~1.DOC section must address the 11 different analysis species (bald eagles, waterfowl, trumpeter swans, anadromous fish, beluga whales, brown bears, black bears, wolves, lynx, caribou, and moose) with respect to new FWS data. The impact summary tables (Tables 4 — 6 in the EVAL) will require re-formatting and expanding to respond to FWS requirements for the assessment of individual wildlife species. All resource impacts will need editing to conform to the revised descriptive impact assessment approach. Cumulative impacts - The assessment of cumulative impacts will be conducted by utilizing the model that we developed for the Kenai Peninsula. Through an overlay process, we will document and quantify the area of disturbance from past, present and future development activities within the study area and the KNWR. This will be done for each of the 11 wildlife analysis species, as well as for recreation management activities. A summary discussion on cumulative impacts will be prepared for earth resources, biology, land use, visual, and cultural resources. Task 5 c - Maps and Graphics Completing the analysis and display of wildlife habitat and impacts will be based on responding to comments from FWS. At the January 21, 1999 FWS meetings we were also directed to prepare a black bear map, and make additional changes the bald eagle, trumpeter swan, waterfowl, brown bear, wolf, lynx, moose, caribou, and anadromous fish maps with new FWS and ADF&G data. Revisions may also be required as a result of the direction of the IBBST. Costs to make these changes are expected to generally fall with in the $3-6,000/map cost range, with the exception of the anadromous fish map labeling, which will require data transfer. No agreements were reached on the scope or content of the black bear map at the meeting. If the FWS can provide meaningful habitat mapping for black bears in an ArcInfo compatible electronic format, we will prepare the map. The typical cost of this type of map production ranges from $2-3,000 with data that is easily transferable. Otherwise, we have found that if there are difficulties in transferring FWS data or if there is interpretation involved, costs for this map could range from $6-12,000. A decision on this map is expected to be made at the IBBST meeting on 02/10/99. Other biology mapping efforts that are required include the incorporation of new ADF&G bald eagle, brown bear and moose habitat mapping in the Anchorage area. The quantification of the cumulative impacts for the 11 biology maps and recreation resources maps will be incorporated on to each map, and will be utilized in the description of impacts and EVAL tables 2 —22 to 24, and 4 — 6. Additional required mapping efforts include updating land jurisdiction mapping with the 1998 Kenai Peninsula Borough data, and revision to the recreation visibility map to respond to FWS comments for views with the KNWR. H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC BYanyy © February 1999 Task 5 d — Finalize EVAL The EVAL will be reviewed along with the ANILCA application (Task 6) by Chugach Electric Association and FWS. We will review the FWS comments and respond to those that are minor and easily incorporated. Other FWS comments will be included in the EVAL for later consideration during the EIS preparation stage. We will we will finalize the document based on final comments, and print 50 copies. SCHEDULE AND COSTS Schedule - The following tasks are required to complete the EVAL. The overall assumed time frame to complete the following tasks is 20 weeks from an approval date. For example, from an assumed approval and start date of February 22, the EVAL and ANILCA Application would be ready to file the week of July 5. 5a — Comment organization — timeframe: three weeks - Analyze recent FWS comments and requested changes to maps 5b — EVAL Revisions — Timeframe: twelve weeks - Finalize Chapter 2 comparison of alternatives, and complete Chapters 3 and 4. 5c — Map Revisions - Timeframe: twelve weeks - Finalize biology habitat maps, update land use maps, and conduct cumulative assessment 5d — Finalize EVAL — Timeframe: five weeks - Respond to Chugach Electric review, incorporate comments, and print EVAL Costs - Dames & Moore has expended $154,000 since last September, and as a result we are $53,000 over budget. As indicated above, an estimated $88-90,000 was spent on activities that were not planned for. The following are total estimated costs Tasks 5a — 5d. Included are out — of — scope costs that were not included in the November and December 1998 billings ($53,018), and costs to complete the EVAL ($362,307). Detailed cost estimates are attached. - Estimated costs to complete the EVAL are provided below by task. Included are unbilled costs that were incurred in October and November. Task 5 a 46,707 Task 5 b 173,205 (26,750 unbilled in Nov. and Dec. 1998 invoices) Task 5 c 139,789 (26,268 unbilled in Nov. and Dec. 1998 invoices) Task 5 d 55,624 Total costs $415,325 (including total unbilled - $53,018) H:\DATA\DOCUMENTISOUTHTIE\POWER\TIM'SB~1.DOC pyanyy 5 February 1999 ba Page 12 We have included costs for three trips to Alaska in this budget. These trips are in anticipation of meeting with the IPG, FWS (Division of Reality), KPB, and Chugach for updating information. H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC Transmission Report Date/Time Local ID Local Name Company Logo This document was confirmed. (reduced sample and details below) Document Size Letter-s CHUGACH ELECTRIC het SS February 11, 1999 Via Fax Line: 269-3044 ‘Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503 ‘Attention: Mr. Dennis V, MeCrohen, P.E., Deputy Director, Energy Subject: Southem Interte Project - Funding Deer Mr. McCrohan. “The budget for Phaso af subject project was amended to a tots! of $5,900,000 at the Sune 16, 1998 meeting of AIDEA’s Board of Directors. The increase had been estimated to allow completion of the NEPA process. Continued changes in. direction from ane of the federat agencies goveming the process for the preparation of the Environmental Analysis (EVAL) have resulted in the need for adcktional funds for thet task An estimated $500,000 are neded to complete the EVAT. The ‘work 1o be performed is explained in dete in Power Engineers’ letter of February 8,199 (copy attached). ‘The IPG has authorized us in their meeting on February 10, 1999 to amend Power Engineers® contract by $465,215 and utilize funding available at this time. Completion of the EVAL and submittal to RUS and the USFWS with a permit application is now estimated for July 1999. We have cancelled a previous amendment to Power Engineers” contract in the amount of $678,069, which had been executed to pay for their assistance during the EIS/ROD preparation by RUS? contractor. This leaves total commitments well within the authorized budget Funding needs far the EIS/ROD process will be reassessed afte the USFWS as accepted the application for a project pect im the Kenai National Wildlife Refuge Ai thal time we may request further adjustments to funding under Phase | of the project. We are presently preparing new cash flow estimates and will submit them for your use sbortly and trust that funds can be edlvanced in agreement with the Memorandum of Understanding entered into by the IPG on 6/8/95 as lest amended 02/10/99. If there are any questions, please don't hesitate 10 contact me at (907) 762-4626 by telephone ar by fix to (907) 762-4617. My e-mail address is dora_yrupp@chugechelectric.com., Attachment: — Power Engineers’ letter of February 8,1999 © Lee Thibert Mike Massin — W.0.#69590081, Sec, 1 RF Joe Griffith, 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563 7494 FAX 907-562-0027 2-11-99; 2:40PM 907 7624614 Total Pages Scanned 16’ Total Pages Confirmed : 16’ No. Doc|Remote Station Start Time Duration|Pages Mode comments|/Results 1]/012|92693044 2-11-99; 2:27PM 12732”| 16/7 16 G3 cP 14400 xx Notes ** EC: Error Correct RE: Resend PD: Polled by Remote MB: Receive to Mailbox BC: Broadcast Send MP: Multi-Poll PG: Polling a Remote Pl: Power Interruption CP: Completed RM: Receive to Memory DR: Document Removed Ti: Terminated by user LS: Local Scan LP: Local Print FO: Forced Output WT: Waiting Transfer 2-11-99; 2:27PM; 3907 7624614 SHA af _, February 8, 1999 ‘Dora L. Gropp, PE. Manager, Transmission & Special Projects 5601 Minnesota Drive, Bldg. A Anchorage, AK 99518 \ Subject: 120376-05 Souther Intertie, Phase IB - Chugach Contract #820 POWER Project 120376 - Additional Work Scope to Complete the EVAL Dear Ms. Gropp: We appreciated the opportunity to meet with you and Chugach management on January 22 to discuss in detail the difficulties that have been encountered in attempting to finish the EVAL. As discussed, continued and unpredictable changes in direction and introduction of new data from the US Fish and Wildlife Service (FWS) has substantially affected our scope of work, and the schedule and budget for completion of the EVAL. In order to complete the EVAL, additional funding in the amount of $465,215 is required at this time. : We have requested, and Dames & Moore has prepared a detailed’ memorandum explaining the changed conditions to the scope of work since the September 1998 meetings with FWS and the Kenai National Wildlife Refuge (KNWR), and outlining the remaining work to be done to complete the EVAL. Our previous ‘budget request of October 1998 for completion of the EVAL was based on agreements reached with the FWS during the September 1998 meetings. ! Based on the September meetings with FWS, it was expected that FWS comments received through September could be incorporated into the EVAL, and that the FWS would be available to review the revised maps and text between September and November. This was to result in a completed EVAL by last December. The KNWR staff was not available to review the text and many of the maps until January. As a result, the EVAL completion schedule has had to be extended. In addition, new comments have been continually received from the FWS and KNWR since September, resulting in the need for considerable additional changes to the biology text and maps. These changes should be addressed so that FWS input is reflected in the EVAL. The most recent FWS comments were received in writing on January 15, and from a meeting between Dames and Moore and the KNWR on January 21. Also, in attempting to work closely with the FWS to incorporate their comments and new data, Dames and Moore has experienced problems with the data provided by FWS, and addressing ongoing and often conflicting comments. The attached memorandum from Dames & Moore provides details on these issues and the tasks needed to complete the EVAL. HILY 23-036 (1/29/99) Ik. POWER Engineers, Incorporated 3940 Glenbrook Dr. * * P.O. Box 1066 Phone (208) 788-3456 . Hailey, Idaho 83333 ce 5 otthous watch e iG Paw £9008) 78820 2-11-99; 2:27PM; 3907 7624614 # 37 16 Chugach Electric Association, Inc. February 8, 1999 Page 2 The continual changes to the draft EVAL have resulted in an open-ended situation with respect to both the budget and schedule for completion of the EVAL. In order to gain control of the schedule and budget, it is proposed to complete the EVAL with limited additional FWS review. In addition, the impact assessment approach will be revised so that it is not dependent on qualitative judgements that would require concurrence from the federal agencies. Dames & Moore has discussed these approaches with FWS and RUS, and have received informal agreement. — The only additional input will be through the Interagency Brown Bear Study Team, and from a FWS teview of the biology impact section. Changes that result from this review that can be easily implemented will be incorporated into the EVAL. However, any changes in direction from this FWS review would not be included in the EVAL, but would be submitted to RUS for consideration during the EIS preparation. This will allow Dames & Moore to complete the EVAL under a more predictable schedule and budget. A revised budget for the additional scope of work is attached. The additional funding would allow the EVAL document to be completed in compliance with the MOU, as explained in Dames and Moore’s memo. Dames & Moore hes proposed a 20-week schedule to complete the EVAL and the ANILCA Application. For example, if approval for this proposed budget is received by February 22, 1999, the EVAL and ANILCA Application would be completed by the week of July 5, 1999. ~ Summary of attachments included with this letter: 1. Budget Summary i 2. Memorandum from Tim Tetherow, Dames & Moore, to Randy Pollock, POWER Engineers dated January 26, 1999 describing in detail the justification for this additional budget request. After you have had opportunity to review these materials, I will call you to see if further clarification or discussion is needed. Sincerely, i POWER Engineers, Inc. Randy Pollock, P.E. Sr. Project Manager RP/k . Enclosures cc: Mike Walbect (PEI) wee, Tim Tetherow (D&M) File: 120376-05-55-00-30 BLY 23-036 (1/29/99) . . r ' . : *) Povniseaey eter 2-11-99; 2:27PM; 3907 7624614 # 47 Southern Intertie Project Budget Summary Task 5 Scope Additions to Complete the EVAL sas00 | $2057 $47,641 | $47,641 ales $121,985 | $17,804 | $139,789 | $2,796 ness $142,585 eet eet eer ee tee Notes: 1. The Dames and Moore proposed budget request and justification is described in detail in Tim Tetherow's memo to Randy Pollock dated January 26, 1999 (attached). 2. The Power Engineers proposed budget provides for engineering support for completion of the EVAL for the 20 week complction schedeule outlined in the Dames and Moore memo. The budget includes one trip to Anchorage and one trip to Phoenix (Dames&Moore) for Randy Pollock. 3. Given that there are no more changes in our scope of work to complete the EVAL, this budget will provide for completion of the EVAL by the week of July 5, given approval of this budget by February 22, 1999 (a 20 week completion schedule). The budget for Task 6 - ANILCA Application already provides for completion and submission of the ANILCA Application, and Dames and Moore anticipates that application would be ready to be filed at the same time the EVAL is completed. HLY 23 -___ (1/29/99) 120376-05 2-11-99; 2:27PM; 3907 7624614 # 5/7 16 DCm (Gam DAMES & MOORE feel’ =A DAMES & MOORE GROUP COMPANY 7500 North Dreamy Draw Drive Suite 145 Phoenix, Arizona 85020 602 371 1110 Tel 602 861 7431 Fax Action Info File Randy Pollock, POWER Garlyn Bergdale 09203-009-050 Engineers, Inc. From Tim Tetherow (t \ Date 5 February1999 Southern Intertie Project - Budget Request to Complete the Environmental Analysis Subject Report (EVAL) The purpose of this memo is to outline the budget requirements to complete the EVAL for the Southern Intertie Project, as a result of changes in conditions since September 1998. In the Budget Request for Additional Mapping and Required Supporting Analysis (October 13, 1998) we outlined the background of the Project, and our efforts to gain agency direction for and acceptance of the environmental studies for the Project since November 1996. Since the September 1998 meetings with FWS, we have encountered several unforeseen setbacks that have lead us to the recommended changes in this memo to regain control of the schedule and budget for the EVAL completion. The over all permitting process for the Project falls into three stages: preparation of the EVAL, preparation of the EIS, and the Record of Decision and appeal process. The urgency of the current situation is that after having initiated Project scoping 26 months ago, and completing two drafts of the EVAL and portions of the final report, we have reached a stalemate in the first stage of the overall permitting process. Our efforts to conform to the agreements on the Memorandum of Understanding (MOU) have not produced a final EVAL to submit to the Rural Utilities Service. Because of the duration of the work to date, and the complexity, this memo has been organized into four parts: recommendations, background, activities and issues, tasks to complete the EVAL, and schedule and cost. RECOMMENDATIONS While we have made every effort to address FWS’s issues and respond to their comments, there continue to be changes in direction from FWS. After over a year of continued effort to finalize the EVAL, we are now concerned that it has become an open-ended process with no way to manage the schedule and costs. To gain control of the schedule and costs to finalize the EVAL, we are proposing to complete the EVAL with limited additional input and review from FWS, and to streamline the impact assessment approach. H:\DATA\DOCUMENT\SOUTHTIEWO WER\TIM'SB~1.DOC 2-11-99; 2:27PM; 3907 7624614 # 6/ 16 iyeavy 5 February 1999 CG Page 2 rons Technical input will be for resolution of the brown bear mapping and impact assessment criteria from the Interagency Brown Bear Study Team (IBBST). FWS review will consist of a two-week review of the biology impact section. Any additional FWS comments will be included in EVAL for consideration for the EIS. We will respond to minor comments as appropriate in the Final EVAL. This approach will provide assurance to RUS that the FWS, as the cooperating agency for the EIS, has reviewed the pertinent sections of the EVAL prior to beginning the preparation of the EIS. This recommendation has been prepared in coordination with FWS. They agree that we have been provided adequate direction with which to complete the EVAL, however they have made the request to review all of the biology sections of the EVAL before it is submitted to RUS. Brian Anderson contacted both Dora and myself (February 4, 1999) to request that FWS be given the opportunity to review the biology section of Chapter 4 the document. This approach will allow the project to advance to the EIS preparation phase, comply with the MOU, and gain control of the schedule and budget. We are also recommending that the impact assessment be modified so that quantification and descriptions of impacts will replace the qualitative approach of characterizing high, moderate, and low impacts. This will enable us to incorporate diverse sources of data provided by the FWS, and prepare an assessment that will be flexible for refinement by the agencies in the EIS. This approach was received favorably in initial discussions with FWS Reality Division, Anchorage (January 25, 1999); and RUS (January 26, 1999). BACKGROUND The Lead and Cooperating Federal agencies — RUS is the Lead Federal agency that is responsible for preparing the Southern Intertie EIS, with the assistance of the Cooperating agency, FWS. RUS has retained Mangi Environmental Group to prepare the EIS for the agencies, and as a result, Mangi has been assisting RUS in the reviews of the EVAL. The MOU requires that the EVAL will provide the basis for the content of the EIS, and that the EVAL will be prepared under the direction of the Lead and Cooperating Agencies. The Alaska Department of Transportation, Alaska Department of Fish and Game (ADF&G), Kenai Peninsula Borough (KPB), and Municipality of Anchorage have also reviewed drafts of the EVAL. MOU - In order to comply with the MOU, Dames & Moore and POWER Engineers have responded to all of the RUS and FWS comments on two drafts of the EVAL. To manage the preparation of the EVAL, we have been going through a systematic process, including: (1) meeting with the Agencies to discuss issues and approaches to complete the EVAL; (2) preparing meeting notes and comment tracking tables to document the approach for responding to each comment; and (3) submitting our notes for review by the agencies to ensure that we are in agreement on the specific direction of each comment. In this manner, we expected that there would be clear communication and agreement on the scope of each comment, and the approach for addressing comments in the EVAL. HADATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1. DOC 2-11-99; 2:27PM; 3907 7624614 # 77 16 pyar 5 February 1999 Cr Page 3 Goal of the EVAL — Our goal has been to complete the EVAL in conformance with the Southern Intertie MOU, and to submit a product that is generally ready for use in the preparation of the EIS. To date, our approach has been to submit drafts of the report to the FWS for review, upon which we are provided comments for incorporation into the document. This process has been recurring for the over a year without completion, as the FWS continues to change direction on the content of the EVAL and the scope of our work. As a result we have recommended limiting continued FWS review, and assuming that while the EVAL will have been reviewed by the agencies, all comments may not be incorporated prior to submitting the EVAL to RUS. EVAL Review - RUS and Mangi dominated comments on the Ist Draft of the EVAL. They focused on the purpose and need for the project and the formatting of the EVAL. Following the submission of the first draft of the EVAL in November 1997, we met with RUS, FWS and KPB in March 1998 to discuss their comments, issues and appropriate responses. At that time, the majority of the comments that we received were from RUS and Mangi (46 pages). After the IPG proposed to cross the Kenai National Wildlife Refuge (KNWR) by paralleling the Enstar pipeline, the U.S. Fish and Wildlife Service (FWS) began refining the approach and data to assess impacts on wildlife, recreation, and scenery. Their comments dominated the review of the 2 Draft of the EVAL. FWS submitted nine pages of comments on the first draft of the EVAL in February 1998. They stated in their cover letter to RUS that “the document adequately identifies the range of issues, and that ample opportunity was provided for agency and community input.” They also stated that, “in the event that the IPG were to file a right-of- application with the FWS, the additional public process required under Title XI of the Alaska National Interest Lands Conservation Act (ANILCA) may lead to the identification of additional issues.” On February 25, 1998, the IPG notified the FWS and RUS that they would be filing an ANILCA Application for the Enstar route through the KNWR. The IPG will need to submit an ANILCA Application to FWS in order to initiate the preparation of the EIS. We responded to the RUS and FWS comments on the first draft of the EVAL, and prepared a second draft of the EVAL that was submitted in May 1998. We met with the FWS and RUS on June 23 through 25 to discuss their comments on the second draft. The FWS had not completed preparing their comments for these meeting. On July 24 we received 40 pages of comments from FWS, which covered new areas of concern and identified new requirements for the EVAL to address. Due to the nature of their written comments a second meeting was held with them on September 8 through 10. These meetings resulted in substantial additional changes in direction from FWS. We agreed that Dames & Moore and POWER Engineers would finalize the EVAL based on the combination of the written comments and direction from the June and September meetings. The only additional review would be of the biology sections for Chapter 3, Affected Environment and Chapter 4, Environmental Consequences by FWS. Meeting notes and all of the comments from FWS and RUS were compiled and submitted for review on October 7. We received responses from FWS on November 5, stating the following: We appreciate you including the comment-tracking sheet, which provides Dames & Moore’s response to our July EVAL comments. We found this useful since some of these items were not discussed during the September meeting. H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC 2-11-99; 2:27PM; 3907 7624614 # 87 16 Yea S February 1999 (Gx Page 4 In general, the minutes reflected the discussions that occurred. However, we have identified a number of minor corrections in our review of the minutes, Map Revision Summary, and Comment Tracking Sheet. Since September 1998, we have been processing additional FWS wildlife data in our efforts to finalize the EVAL. Our efforts have centered on revising the project base map to meet FWS requirements; processing their electronic data for new wolf, lynx, moose, brown bear, caribou, bald eagle, waterfowl, and swan habitat maps; assembling the cumulative impact assessment; and revising the biology section of Chapter 3. We submitted these products for FWS review on November 24, 1998, and received additional 35 pages of comments on January 15, 1999. Their comments include changes in direction from our September meetings. January 21 Meeting/FWS Focus - We met with FWS on January 21 to discuss their comments. The focus of FWS’s concerns is for cumulative impacts of the Enstar route on wildlife habitat, particularly for brown bears. The basis of their concerns is the continued development on the Kenai Peninsula and within the KNWR, and the ability to sustain adequate brown bear habitat. They have stated that because of the concerns for the brown bear on the Kenai Peninsula, the FWS’s credibility is on the line. The EIS will be viewed as their statement on the brown bear and the associated effects of the Project. At the meeting on January 21, 1999, FWS indicated that the brown bear might become a candidate for listing as a threatened or endangered species on the Kenai Peninsula if their numbers continue to decline. The KNWR staff indicated that the proposal to build the Project along the Enstar pipeline increases FWS concerns for the future of the brown bear habitat. They are concerned that the Project could trigger a decision to list the brown bear as a ‘protected species on the Kenai Peninsula. The ADF&G want to avoid any listing of brown bears in Alaska. As a result, the KNWR stated that the public and other agencies would give the assessment of brown bear impacts in the Southern Intertie EVAL and EIS close attention. January 21 Meeting/Mapping - At the meeting we informed the FWS/KNWR that their recent written request (January 15) for separating the inventory and impact maps was in total conflict with our previous discussions and direction. At the September 1998 meetings we had been directed to combine the inventory and impact mapping to facilitate public review. We proposed a change in the impact assessment approach to the FWS at the meeting, which would streamline the assessment process. Rather than mapping low, moderate and high impacts along alternative routes, we proposed to: quantify relevant environmental features (i.e., distance and area of wildlife habitat distribution types and numbers of stream crossings); describe the types of impacts that could occur; and assess the significance of the impacts based on NEPA and FWS criteria. This approach will allow us to integrate all of the input that we have received from FWS and other agencies (i.e. ADF&G) focus on impact significance, minimize potential controversy over impact levels. It would also eliminate the need for impact maps. We discussed this change in impact assessment approach with Larry Wolfe, RUS (January 26, 1999), and he was very supportive of a simpler and less qualitative approach for comparing alternative routes on the Kenai Peninsula. In discussions with Brian Anderson, FWS (January 25,1999), he agreed that the emphasis of the impact assessment should be on impact significance, rather than qualitative levels of impact. He requested an example of our proposed H:\DATA\DOCUMENT\SOUTHTIB\POWER\TIM'SB~1_ DOC 2-11-99; 2:27PM; 3907 7624614 # Yara 5S February 1999 7 Page 5 approach. We also discussed the request for a black bear map. This was another case where there is a change in direction from last September. No agreement was reached at the meeting regarding the scope or content of a black bear map. Brian Anderson has indicated that a black bear map would be desirable because it is one of the selected species for analysis (January 25). A decision has not been made on the content of a black bear map, or whether to produce a map (please see Tasks to Complete the EVAL). We also reviewed their comments on all on the wildlife habitat maps that we had prepared since last September. After having spent the last three months preparing new maps with data provided by FWS, the KNWR staff requested changes in the mapping, which will involve incorporating additional data. These changes will be made and affect the preparation of ten maps. ACTIVITIES AND ISSUES SINCE SEPTEMBER 1998 The following provides a general chronology of work activities since the September 1998 meetings; the status of work accomplished, and associated issues. As a result of the September 1998 meetings, it was agreed that we would be working closely with the FWS to complete the EVAL by December 1998. The plan was to submit new maps and text that were based on FWS data for their review. The following is a summary of our activities and other pertinent events since the meeting with the FWS in September 1998. e We have organized all comments and developed strategies to respond to the new direction for the EVAL - We summarized meeting notes and prepared tracking tables for all text and map comments from RUS/Mangi and FWS. These notes were submitted to reviewers for their concurrence. (October) - We conducted an analysis of the comments from the meetings and developed approaches for responding to each of the separate issues that were discussed at the September meetings. (September and October) e We have experienced significant delays during September and October - We have experienced difficulties in utilizing GIS data provided by FWS either because it was incomplete, or due to formatting problems that made it incompatible with Dames & Moore’s ArcInfo GIS system. This delayed the revisions requested for creating new lynx, eagle, swan, wolf, and moose habitat maps. We had expected to complete the maps during September and October 1998 by utilizing FWS electronic data in a cost efficient manner. Instead, we experienced considerable difficulties in utilizing FWS data, delays in obtaining the data, and continued updates to the data as the maps were being produced. We HADATA\DOCUMENT\SOUTHTIE\WOWER\TIM'SB~1.DOC g7 1 2-11-99; 2:27PM; 3907 7624614 # 107 16 pYamey 5 February 1999 ym Pages were unable to complete these maps until December. The combination of the extended time, multiple changes in maps resulted in additional costs of approximately $25,000 that were not anticipated when the October 1998 budget increase was granted. - We had been informed by FWS that the brown bear map had been updated by the IBBST. We then learned that the Forest Service had not revised the IBBST brown bear map for Indian Creek and Little Indian Creek. As a result, there were delays in getting direction from the Forest Service so that we could finalize the map. (October 1998). The costs incurred in preparing this map of approximately $12,000 were not anticipated. - We received extensive comments on the base map after the September meeting. We were provided with new data from FWS for surface water, roads, pipelines for use in revising the base map (October and November 1998). Costs to change the base map, estimated at $16-18,000, were not expected. - In October 1998 we learned that the KNWR staff would not be available to review maps and text until mid-November, due to fieldwork. As a result, we had to delay our reviews with FWS, and the EVAL completion date was extended to February 1999. When we received comments from Brian Anderson and Vicki Davis on the notes and tracking tables, revised base map and draft inventory maps, we found disagreements between their comments, as well as with NEPA compliance (October and November 1998). For example, we pointed out to Brian (November 13, 1998) that Vicki was asking for a “worst case analysis” where there is a lack of data, and told him that NEPA no longer requires this. Brian provided a Clarification Memo (November 25, 1998) stating those NEPA requirements for a “worst case” analysis had been rescinded in 1986. The NEPA direction is to do a “most probable analysis.”). There was also disagreement between FWS comments (and still is) on the map titles. The estimated costs of $35,000 in management time for project delays, handling unexpected comments, preparing responses, and coordinating ongoing changes with the Dames & Moore staff were not anticipated in our budgeting. e Issues The following are a summary of the problems that have led to conflicting directions and scope changes in preparing the final EVAL: - Lack of clear direction from FWS — the regional office and KNWR staffs are not coordinated, and there is no “effective” single point of contact. In addition, the KNWR is not certain about the products that they have requested, resulting in continued changes to 11 maps and text. - No clear avenue for conflict resolution — both the regional office and KNWR are claiming leadership and “the last word” on issues and interpretation of data requirements for the EVAL (text and 11 maps). HADATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC 2-11-99; 2:27PM; 3907 7624614 Ad Yarn) 5 February 1999 Gi Page 7 We have been informed (Anderson, February 4, 1999) that FWS is working on resolving these issues. e Status of Mapping Base map — completed; all comments from FWS have been addressed. Cumulative Impact Map —- A draft map has been prepared and discussed with Brian (December 28, 1998), and the KNWR staff (January 21, 1999). We do not have their final comments from KNWR. We plan to complete the map with comments received from Brian Anderson (December 28, 1998). Moose Habitat — A draft of the completed map has been produced, illustrating FWS habitat data that was provided in October 1998, and cumulative impacts within both the study area and KNWR. We also illustrated direct impacts along the route on this example, however, we are now proposing to limit the mapping to inventory data with the quantitative table of habitat area disturbance. Brian Anderson reviewed this product on December 28, 1998 and with the KNWR staff on January 21. We have sufficient input from FWS to complete the mapping. Vegetation and wildlife habitat mapping — Bald eagle, waterfowl, swan, wolf, lynx, brown bear, anadromous fish, and caribou maps have been completed and submitted to FWS for comments (November 25, 1998). Comments that were expected from FWS by January 8, 1999 were finally received on January 15, 1999. We received further comments on these maps from the KNWR staff on January 21, 1999, which included requirements for additional revisions based on new data and direction from FWS. Each of the wildlife maps requires additional data and/or editing due to new data and titles requirements by the FWS. Wolf pack map displaying ten pack areas — A wolf pack map has been completed and was submitted January 8, 1999. Upon their review, KNWR staff determined that they had sent us incorrect data from which to prepare the wolf pack map. Based on our meeting on January 21, they will be sending us new data so that we can prepare a new map of the ten wolf packs. We were notified on February 3 that FWS could not complete the wolf pack map for all of the data from 1982 to 1998. We suggested that the 5 years of data that they do have mapped for wolf pack territories would sufficient to display the patterning of wolf packs in the study area. FWS will decide by 02/10/99 whether to use 5 year data or omit the wolf pack information. Land use and visual resource map revisions — These maps need to be revised due to recently released new data. Recent Kenai Peninsula Borough land status mapping (July 1998) needs to be incorporated in the land use and land jurisdiction mapping. e Status of EVAL Text Chapter 1 — This Chapter is complete and camera ready (RUS/Billington, Philpott and Morgan comments addressed). H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB-1 DOC 2-11-99; 2:27PM; 3907 7624614 # 12/7 16 Yan 5 February 1999 (Ga Page 8 Celie] td Chapter 2 — This chapter is complete, with the exception of the comparison of alternatives (RUS/Billington, Philpott, Morgan, and Sargent and Lundy comments addressed). The comparison of alternatives cannot be completed until the biology impact assessment has been completed. Chapter 3 - Biology - All FWS comments on the 2™ draft EVAL have been addressed, and a revised biology section was submitted to FWS for review (24 November 1998). We received comments from Brian Anderson (December 28, 1998), and from KNWR on January 15, 1999, At our meeting with the KNWR staff on January 21, we were informed that if Dames & Moore makes all of the map and changes requested that the biology section of Chapter 3 will be satisfactory. Brian Anderson is currently reviewing KNWR comments to determine if they are reasonable. Other sections — land use, recreation, and visual — need to be finalized. Chapter 4 — We are recommending a change to the impact assessment approach. Rather than summarizing direct and indirect impacts by high, moderate and low levels, they will be documented by quantifying the types of resources effected, and describing the types of impacts and differences between alternatives in text and table formats. The description of impacts will need to be edited for all resource sections. Biology — The methodology for impacts has been revised and submitted to FWS for review (December 20, 1998). Informal comments from Brian Anderson (December .28, 1998) indicate that the cumulative impact assessment should be for the entire study area. Previous direction at the September meeting was for the KNWR only. At this time we have established a program that allows us to quantify cumulative impacts for the study area and the KNWR. The model has been run for moose habitat. We have established the direct impact assumptions for all other wildlife and vegetation impacts. We have also prepared a draft impact assessment approach and conducted most of the additional research requested by FWS and RUS/Mangi regarding beluga whales, songbirds, edge impacts on general habitats, wolves in south central Alaska, and bird collision. This will be incorporated into the Chapter 4 section. The biology section for Chapter 4 is approximately 15-20 % complete. Environmental Justice — The updated analysis has been completed. Construction Worker impacts — The updated analysis has been completed. Cumulative Rate Impacts on the Railbelt — This analysis has been completed. Subsistence — This section has been revised. Land Use and Visual Impacts — Responses to comments need to be completed. TASKS TO COMPLETE THE EVAL The previous discussions have outlined and summarized the background and issues regarding the status of the EVAL. This section is directed toward looking forward to the completion of the HADATA\DOCUMENTISOUTHTIEPOWER\TIMSB-1.DOC 2-11-99; 2:27PM; 3907 7624614 fay 5 February 1999 Ga Page 9 EVAL. While progress has been made, there is considerable work to be done in order to complete the EVAL. Much of the work that was done for biology over the past three months to respond to the FWS now requires revisions and completion. In addition, the impact assessment for all resources will need to be edited, and the comparative analysis of alternatives will be redone. We have re-scoped the effort to complete the EVAL within the following tasks 5a — d: - Task 5a Comment Organization We will update the comment tracking tables for maps and text to incorporate all comments that we have received since October 1998. This will include the most recent comments (January 15,1999) and direction from the January 21 meeting with the KNWR staff. As a part of the comment organization, we will document the proposed change in direction regarding completing the EVAL with limited review from FWS, and modifying the assessment approach. This new direction has been reviewed with Brian Anderson, FWS Reality Division (January 25, 1999), and Larry Wolfe, RUS (January 26, 1999). Both were in agreement with the proposals. - Task 5b— Revise the EVAL Chapter 2 - The comparative analysis of alternatives needs to be revised and incorporated into Chapter 2. The FWS requested that we expand the comparison of alternative routes to include the 11 individual wildlife species, incorporate cumulative impacts, and to provide more detail in the description of alternative route comparisons. This will require re-formatting of the data from the impact assessments of all resource topics in three comparison tables (Tables 2 —22, 2 -23, and 2 —24). The comparison of impacts for alternatives has been organized into three areas: Kenai Peninsula, Turnagain Arm and Anchorage. Chapter 3 - The focus of the effort for Chapter 3 will be in the response to the most recent comments received from FWS, January 15, 1999 on the text and maps for biology. General editing and completing responses to comments from RUS/Mangi and FWS are required to complete this chapter. There are updates that will be necessary to the land use data to incorporate the Municipality of Anchorage and Kenai Borough new general plans and new development plans; the Cook Inlet Oil lease sales; and new land use data from the Kenai Peninsula Borough. In addition we will need to update the visual inventory to address FWS comments. Chapter 4 - Changes to the assessment of direct, indirect and cumulative impacts for biology, land use and visual impacts are the main emphasis of this chapter. Direct and indirect impacts — With the change in the impact assessment approach, we will be dropping reference to qualitative levels of low, moderate and high impacts. Instead, there will be an emphasis qualitative data, types of impacts and mitigation. The reason for this change is to establish a product that will not be subject to debate over the qualitative issues of impact levels during the EIS preparation. The biology HADATA\DOCUMENT\SOUTHTIE\WPOWER\TIM'SB~1.DOC 2-11-99; olan croup 2:27PM; 3907 7624614 5 February 1999 Page 10 section must address the 11 different analysis species (bald eagles, waterfowl, trumpeter swans, anadromous fish, beluga whales, brown bears, black bears, wolves, lynx, caribou, and moose) with respect to new FWS data. The impact summary tables (Tables 4 — 6 in the EVAL) will require re-formatting and expanding to respond to FWS requirements for the assessment of individual wildlife species. All resource impacts will need editing to conform to the revised descriptive impact assessment approach. Cumulative impacts - The assessment of cumulative impacts will be conducted by utilizing the model that we developed for the Kenai Peninsula. Through an overlay process, we will document and quantify the area of disturbance from past, present and future development activities within the study area and the KNWR. This will be done for each of the 11 wildlife analysis species, as well as for recreation management activities. A summary discussion on cumulative impacts will be prepared for earth resources, biology, land use, visual, and cultural resources. Task 5 c - Maps and Graphics Completing the analysis and display of wildlife habitat and impacts will be based on responding to comments from FWS. At the January 21, 1999 FWS meetings we were also directed to prepare a black bear map, and make additional changes the bald eagle; trumpeter swan, waterfowl, brown bear, wolf, lynx, moose, caribou, and anadromous fish maps with new FWS and ADF&G data. Revisions may also be required as a result of the direction of the IBBST. Costs to make these changes are. expected to generally fall with in the $3-6,000/map cost range, with the exception of the anadromous fish map labeling, which will require data transfer. No agreements were reached on the scope or content of the black bear map at the meeting. If the FWS can provide meaningful habitat mapping for black bears in an ArcInfo compatible electronic format, we will prepare the map. The typical cost of this type of map production ranges from $2-3,000 with data that is easily transferable. Otherwise, we have found that if there are difficulties in transferring FWS data or if there is interpretation involved, costs for this map could range from $6-12,000. A decision on this map is expected to be made at the IBBST meeting on 02/10/99. Other biology mapping efforts that are required include the incorporation of new ADF&G bald eagle, brown bear and moose habitat mapping in the Anchorage area. The quantification of the cumulative impacts for the 11 biology maps and recreation resources maps will be incorporated on to each map, and will be utilized in the description of impacts and EVAL tables 2 —22 to 24, and 4-6. Additional required mapping efforts include updating land jurisdiction mapping with the 1998 Kenai Peninsula Borough data, and revision to the recreation visibility map to respond to FWS comments for views with the KNWR. H:\DATA\DOCUMENTISOUTHTIE\POWER\TIM'SB~1 DOC # 147 16 2-11-99; 2:27PM; 3907 7624614 PYeyey S February 1999 Gi Page 11 Task 5 d — Finalize EVAL The EVAL will be reviewed along with the ANILCA application (Task 6) by Chugach Electric Association and FWS. We will review the FWS comments and respond to those that are minor and easily incorporated. Other FWS comments will be included in the EVAL for later consideration during the EIS preparation stage. We will we will finalize the document based on final comments, and print 50 copies. SCHEDULE AND COSTS Schedule - The following tasks are required to complete the EVAL. The overall assumed time frame to complete the following tasks is 20 weeks from an approval date. For example, from an assumed approval and start date of February 22, the EVAL and ANILCA Application would be teady to file the week of July 5. 5a— Comment organization — timeframe: three weeks - Analyze recent FWS comments and requested changes to maps 5b — EVAL Revisions — Timeframe: twelve weeks - Finalize Chapter 2 comparison of alternatives, and complete Chapters 3 and 4. 5c — Map Revisions - Timeframe: twelve weeks - Finalize biology habitat maps, update land use maps, and conduct cumulative assessment 5d — Finalize EVAL — Timeframe: five weeks - Respond to Chugach Electric review, incorporate comments, and print EVAL Costs - Dames & Moore has expended $154,000 since last September, and as a result we are $53,000 over budget. As indicated above, an estimated $88-90,000 was spent on activities that were not planned for. The following are total estimated costs Tasks Sa — 5d. Included are out — of — scope costs that were not included in the November and December 1998 billings ($53,018), and costs to complete the EVAL ($362,307). Detailed cost estimates are attached. - Estimated costs to complete the EVAL are provided below by task. Included are unbilled costs that were incurred in October and November. Task 5 a 46,707 Task 5 b 173,205 (26,750 unbilled in Nov. and Dec. 1998 invoices) Task 5c 139,789 (26,268 unbilled in Nov. and Dec. 1998 invoices) Task 5d 55.624 Total costs $415,325 (including total unbilled - $53,018) H.\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~!.DOC 2-11 99; 2:27PM; 3907 7624614 # 167 16 PYaryy 5 February 1999 (Ga Page 12 rrr We have included costs for three trips to Alaska in this budget. These trips are in anticipation of meeting with the IPG, FWS (Division of Reality), KPB, and Chugach for updating information. H:\DATA\DOCUMENT\SOUTHTIE\POWER\TIM'SB~1.DOC Q Quality Services (907) 274-1056 Date__DEC 04 1996 Peninsula Clarion Client No__420A Group looking at lease sale, intertie with river in mind BySTEVEKADEL 2,5, 3// Peninsula Clarion 3ysA 210E€ ¥20A A public meeting to discuss a proposed oil and gas lease sale and the Southern Intertie power line will be held Thursday at the Cook Inlet Aquaculture Association building at Mile 16.5 of Kalifornsky Beach Road. The meeting is sponsored by the Kenai Watershed Forum. The local citizens group was formed in April by people interested in river issues, said forum mem- ber Peggy Mullen. Jim Hanson of the state’s Division of Oil and Gas will speak from 5:30 to 6:15 p.m. about Oil and Gas Lease Sale 85A. That proposed state sale for Cook Inlet and the Kenai Peninsula is scheduled Dec. 18. Hanson will give an update on the sale, and answer questions from citizens. The sale has been particu- larly controversial in Homer, where the city council voted last month to ask the state Department of Natural Resources to delete all tracts south of Ninilchik due to environmental concerns. From 6:15 to 7 p.m., Phil Steyer of Chugach Electric Association and Niklas Ranta of Dames and Moore Engineering will discuss the intertie propos- al. The power line would expand Alaska’s electrical grid by linking customers between Anchorage and the Beluga Lake power station. Three possible routes for the power line have been proposed, but engineers have not designated a pref- erence. ; The intertie is of interest to forum members See GROUP, back page WY ...Grou BYSA 210E 420A Continued from page 1 302 Bt! because two of the three potential routes would affect the river’s watershed, Mullen said. The intertie’s benefit to Homer Electric Association members on the peninsula would be lower power rates over a longer period of time if it were built, according to Randy Pollock of Power Engineers, the prime contractor on the project. The forum will conduct its regu- lar meeting following presentations on the lease sale and intertie. The group’s mission, according to its organizing committee, is “to maintain the health of the Kenai River watershed; to promote sus- tainable development and quality of life for the community; and to seek local solutions to environmen- tal and economic issues.” Gu ALASKA INDUSTRIAL DEVELOPMENT > ¢ AND EXPORT AUTHORITY / => ALASKA @@E™ =ENERGY AUTHORITY ee 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 October 17, 1995 Mr. Eugene N. Bjornstad General Manager Chugach Electric Association, Inc. 5601 Minnesota Drive P.O. Box 196300 Anchorage, Alaska 99519-6300 Subject: Southern Intertie/Funding Increase Dear Mr. Bjornstad: | am writing in response to your letter of October 4, 1995, which requests, on behalf of the Intertie Participation Group, an increase in the limited funding authorization of $500,000 for Phase 1 activities on the Southern Intertie Project. As reflected in my earlier correspondence, AIDEA imposed the limitation on funding authorization out of concern that fundamental business terms remain in dispute with respect to both the Northern and Southern Intertie. The $500,000 limit on Phase | funding was established following consultation with the AIDEA Board regarding the limited progress the Authority has observed in the utilities’ efforts to resolve these business issues. To date, | have not received any written response from the IPG to my July 14, 1995 letter. AIDEA is, of course, sensitive to the complexities of the issues requiring resolution and of the need to undertake certain preliminary Project tasks to define the cost and routing of the Southern Intertie with greater clarity. Ultimately, we hope that as further information is obtained, the obstacles to resolution of the outstanding business disputes will be overcome. As | trust you appreciate, the AIDEA Board will need to approve of any decision to increase the $500,000 funding limitation. With your October 18 Board meeting in mind, Mr. Eugene N. Bjornstad October 17, 1995 Page 2 | though it would be helpful to outline AIDEA’s staff recommendations with respect to your request. AIDEA staff will recommend approval of the increased authorization request. Staffs concurrence with your request should not be construed as satisfaction with the status of consensus among the participants. While it has been at times difficult to specify the precise business terms in dispute, | believe all participating parties recognize that the “peace in the valley” required as a pre-condition to the legislative grant has been an elusive goal. Nonetheless, we believe this response creates an appropriate balance to facilitate the Project work, but which limits the unqualified use of state funds until the lingering business impediments and disputes which impede Project development are resolved. The next AIDEA Board meeting is currently scheduled for November 14, 1995. Sincerely, illiam R:- I Executive Director WRS:bif h:all\bjflaea\southi01 cc: — Harry Porter, AADEA/AEA Board Wilson Hughes, AIDEA/AEA Board Mr. Eugene N. Bjornstad October 17, 1995 Page 3 bcc: David Ramseur, Office of the Governor Dennis V. McCrohan, Deputy Director - Energy Dan Beardsley, Contracts Manager Grant File y ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY / => ALASKA i =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 April 7, 1998 Ms. Dora Gropp Manager, Transmission and Special Projects Chugach Electric Association P.O. Box 196300 Anchorage, AK 99519 SUBJECT: = Grant Funding Southern Intertie Dear Dora: As noted in your March 1998 Progress Report, the IPG anticipates making an additional funding request over the current approved AIDEA grant ceiling. It is my understanding in discussions with you that this request will not be ready for our April Board meeting. For your information, our next meeting is tentatively scheduled for June but could be delayed until July. | think it is prudent to advise you that the AIDEA Board is interested and concemed about the funding and progress on the project. CEA should be prepared to make a short presentation at our Board meeting relating the total project costs and grant funding to project progress milestones. Once you have the amount of your request determined, | recommend that we have a short meeting to discuss these matters. Please let me know if you have any questions. Sincerely, Aull Dennis V. McCrohan, P.E. Deputy Director - Project Development and Operations cc: D. Randy Simmons, Executive Director Keith A. Laufer, Financial and Legal Affairs Manager Valorie F. Walker, Deputy Director — Finance Y¥0.S-D- vail CHUGACH ELECTRIC ASSOCIATION, INC. nigack ASSOCIATION, INC. June 29, 1998 Via fax line:_ 269-3044 PM) fl ri : EGE IWE))) Alaska Industrial Development and 7 Export Authority JUN 301998 480 West Tudor Road Anchorage, Alaska 99503 Alaska Industrial Development and Export Authority Attention: Mr. Dennis V. McCrohan, P.E., Deputy Director, Energy Subject: Southern Intertie Project — Funding Increase Dear Mr. McCrohan: This will confirm the funding increase in the amount of $800,000 authorized by the AIDEA Board of Directors at their June 16, 1998 meeting for activities under Phase | of the Southern Intertie Project. The additional funds will bring the total allowable expenditures for this phase to $5,900,000 and is estimated to allow completion of the NEPA process with an Environmental Impact Statement (EIS) and subsequent Record(s) of Decision(s) (ROD) by the year 2000. The budget history and projections as well as actual and estimated cash flows have been summarized in the attached table “Southern Intertie — Funding Requirements/Cash Flow’. We trust that funds can be advanced in agreement with the Memorandum of Understanding entered into by the IPG on June 8, 1995 as amended November 19, 1996 and September 22, 1997. If there are any questions, please don't hesitate to contact me at 762-4626 by telephone or by fax to 762-4617. My e-mail address is dora_gropp@chugachelectric.com. Sincerely, bove. & (PY Dora L. Gropp, P.E. Manager, Transmission & Special Projects DLG/ah CCXOATAIANNALUSAIWORDOCSGROPPBBSAIDE DOC Attachment: Table titled: “Southern Intertie — Funding Requirements/Cash Flow’. ice Alayne Switzer _Lee Thibert Joe Griffith Mike Massin W.O. E9590081, Sec., 1 RF 5601 Minnesota Drive * PO. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 CHUGACH ELECTRIC ASSOCIATION SOUTHERN INTERTIE FUNDING REQUIREMENTS/CASH FLOW |. FUNDING REQUIREMENTS CONTRACT /ACTIVITY COST COST COST CONTINGENCY TOTAL ROUTE NEPATOEVAL NEPA-EIS TO SELECTION (TO 7/98) ROD NEPA - EIS TO ROD (TO 6/96) (TO 05/00) (TO 05/00) CONSULTANT $792,555 $3,379,691 $730,000 $100,000 $5,002,246 AGENCIES RUS/Mangi $0 $63,761 $150,000 $20,000 $233,761 USFWS $0 $24,600 $30,000 $6,500 $61,100 USFS $0 $34,954 $5,000 $500 $40,454 PROJECT MANAGEMENT $65,439 $200,000 $270,000 $27,000 $562,439 TOTAL $857,994 $3,703,006 $1,185,000 $154,000 $5,900,000 Il. CASH FLOW CONTRACT /ACTIVITY cOsT CONTING. TOTAL 1995 1996 1997 1998 1999 2000 PHASE | $5,061,500 $38,500 $5,100,000 $196,275 $1,761,159 $2,007,375 $850,000 $285,191 $0 AMENDMENT 6/98 $720,000 $80,000 $800,000 $700,000 $100,000 TOTAL PROJECTED $5,781,500 $118,500 $5,900,000 $196,275 $1,761,159 $2,007,375 $850,000 $985,191 $100,000 (CUMMULATIVE) $196,275 $1,957,434 $3,964,809 $4,814,809 $5,800,000 $5,900,000 TOTAL ACTUAL $56,420 $1,774,604 $2,153,070 (CUMMULATIVE) $56,420 $1,831,024 $3,984,094 St$sched.xis Page 1 6/29/98 Transmission Report Date/Time Local 1D Local Name Company Logo This document was confirmed. (reduced sample and details below) Document Size Ee rcnas CHUGACH ELECTRIC ASSOCIATION, INC. Attention: — Mr. Dennis V. McCronan, P.E., Deputy Director, Energy ‘Subject: ‘Southem Intertie Project — Funding Increase Dear Mr. McCrohan: This will confirm the funding increase in the amount of $800,000 authorized by the AIDEA Board of Directors at their June 16, 1998 meeting for activities under Phase | of the ‘Southem Intertie Project. The additional funds will bring the total allowable expenditures for this phase to $5,900,000 and is estimated to allow compietion of the NEPA process with an Environmental impact ‘Statement (EIS) and subsequent Record(s) of Decision(s) (ROD) by the year 2000 The budget history and projections as well as actual and estimated cash flows have been ‘summarized in the attached table “Souther Intertie — Funding Requirements/Cash Flow’. We trust that funds can be advanced in agreement with the Memorandum of Understanding ‘entered into by the IPG on June 8, 1995 as amended November 19, 1996 and September 22, 1997. If there are any questions, please don't hesitate to contact me at 762-4626 by telephone or by fax to 762-4617. My e-mail address is dora_gropp@chugachelectric.com. ‘Sincerely, Dora L. Gropp, P-E. Manager, Transmission & Special Projects DLG/ah Attachment: Table titled: “Southern Intertie — Funding Requirements/Cash Flow’. © —Aayne Swizer Lee Thibet Joe Guth W.O. £9590081, Sec. 1 RF 5601 Minnesora Drive * RO. Box 196300 » Anchorage, Alaska 99515-6300 Phone 907-663-7494 » [AX 907-562-0027 Mike Massie 6-29-98; 1:21PM 907 7624614 Total Pages Scanned : 2’ Total Pages Confirmed : =? No. |Doc|Remote Station Stert Time Duration|Pages Mode comments/Resuits 1]011/92693044 6-29-98; 1:20PM 1718” 27 2 G3 cP 14400 xx Notes ** Ec: Error Correct RE: Resend PD: Polled by Remote Recelve to Mailbox BC: Broadcast Send MP: Multi-Poll PG: Polling @ Remote Power Interruption cP: Completed RM: Receive to Memory OR: Document Removed Terminated by user LS: Local Scan LP: Local Print FO: Forced Output Waiting Transfer 6+29-98; 1:20PM; 3907 7624614 # CHUGACH ELECTRIC 9 -** Cee hs ASSOCIATION, INC. IN June 29, 1998 Via fax line: 269-3044 Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503 Attention: Mr. Dennis V. McCrohan, P.E., Deputy Director, Energy Subject: Southern Intertie Project — Funding Increase Dear Mr. McCrohan: This will confirm the funding increase in the amount of $800,000 authorized by the AIDEA Board of Directors at their June 16, 1998 meeting for activities under Phase | of the Souther Intertie Project. The additional funds will bring the total allowable expenditures for this phase to $5,900,000 and is estimated to allow completion of the NEPA process with an Environmental Impact Statement (EIS) and subsequent Record(s) of Decision(s) (ROD) by the year 2000. The budget history and projections as well as actual and estimated cash flows have been summarized in the. attached table “Southern Intertie — Funding Requirements/Cash Flow’. We trust that funds can be advanced in agreement with the Memorandum of Understanding entered into by the IPG on June 8, 1995 as amended November 19, 1996 and September 22, 1997. If there are any questions, please don't hesitate to contact me at 762-4626 by telephone or by fax to 762-4617. My e-mail address is dora_gropp@chugachelectric.com. Sincerely, ii ea bo & fy costs Dora L. Gropp, P.E. Manager, Transmission & Special Projects DLG/ah weDoc Attachment: Table titled: “Southern Intertie — Funding Requirements/Cash Flow’. c Alayne Switzer —_ Lee Thibert Joe Griffith Mike Massin W.O. E9590081, Sec., 1 RF 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 SOUTHERN INTERTIE FUNDING REQUIREMENTS/CASH FLOW |. FUNDING REQUIREMENTS CONTRACT /ACTIVITY CONSULTANT AGENCIES RUS/Mangi USFWS USFS PROJECT MANAGEMENT TOTAL Il. CASH FLOW CONTRACT /ACTIVITY PHASE | AMENDMENT 6/98 TOTAL PROJECTED (CUMMULATIVE) TOTAL ACTUAL (CUMMULATIVE) St$sched.xls CcOsT ROUTE SELECTION (TO 6/96) $792,555 $0 $0 $0 $65,439 $857,994 cOsT $5,061,500 $720,000 $5,781,500 CHUGACH ELECTRIC ASSOCIATION cost COST CONTINGENCY NEPATOEVAL NEPA- EIS TO (TO 7/98) ROD NEPA - EIS TO ROD (TO 05/00) (TO 05/00) $3,379,691 $730,000 $100,000 $63,761 $150,000 $20,000 $24,600 $30,000 $6,500 $34,954 $5,000 $500 $200,000 $270,000 $27,000 $3,703,008 $1,185,000 $154,000 CONTING. TOTAL 1996 $38,500 $5,100,000 $196,275 $80,000 $800,000 $118,500 $5,900,000 $196,275 $196,275 $56,420 $56,420 Page 1 TOTAL $5,002,246 $233,761 $61,100 $40,454 $562,439 $5,900,000 1996 $1,761,159 $1,761,159 $1,857,434 $1,774,604 $1,831,024 1987 $2,007,375 $2,007,375 $3,964,809 $2,153,070 $3,984,094 1998 $850,000 $850,000 $4,814,809 1999 $285,191 $700,000 $985,191 $5,800,000 2000 $0 $100,000 $100,000 $5,900,000 6/29/08 !e6-62-9 ' tWdoOz: viSrzsz 206! Le ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY RESOLUTION NO. G98-08 A RESOLUTION OF THE ALASKA _ INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY AUTHORIZING THE DISBURSEMENT OF A PORTION OF GRANT PROCEEDS IN CONNECTION WITH A PROPOSED INTERTIE BETWEEN ANCHORAGE AND THE KENAI PENINSULA, AND TAKING RELATED ACTIONS RELATED TO _ INTERTIE PROJECTS WHEREAS, the Alaska Industrial Development and Export Authority (the "Authority") is administering a grant made available for the development of the power transmission intertie between Anchorage and the Kenai Peninsula (the "Southern Intertie"); WHEREAS, in Resolution G95-20 and G96-09 the Authority approved the disbursement of $5,100,000 of grant funds for certain preliminary project development tasks; WHEREAS, Chugach Electric Association (“CEA”), on behalf of the participating utilities, is now requesting additional funding for completing the Environmental Impact Statement (“EIS”), Alaska National Interest Land Conservation Act (“ANILCA”) analysis and associated preliminary engineering with respect to the Southern Intertie (the “Additional Pre- Development Work’); WHEREAS, the Authority has reviewed the progress to date and found it adequate; 7 WHEREAS, the Authority recommended, and the participating utilities concurred, that the analysis for the EIS include a cost-benefit analysis of the proposed Intertie, which has been completed; WHEREAS, CEA estimates the cost for the Additional Pre-Development Work will be $800,000; WHEREAS, the Authority has previously and will continue to release grant funds to CEA on a quarterly basis, based upon projected cash flows, allowing any interest earned and expended to be used for the Project; and WHEREAS, the Authority finds it reasonable and in the public interest to release an additional $800,000 in grant funds, subject to such reasonable terms and conditions the Authority may impose, to facilitate continued development of the Project. NOW, THEREFORE, BE IT RESOLVED BY THE ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY AS FOLLOWS: Section 1. The Executive Director is authorized to release up to an additional $800,000 of grant funds to undertake the additional work. Section 2. The Executive Director may impose reasonable terms and conditions relating to the release of the funds authorized in Section 1. Section 3. The Executive Director of the Authority is directed to monitor progress of the utilities with respect to the resolution of the core development issues related to the Intertie Projects and report to this Board with respect to such progress. Section 4. The Executive Director is authorized and empowered to take any and all actions appropriate and consistent with this Resolution. DATED at Anchorage, Alaska this 16th day of June, 1998. Wo Iu Chairman Secretary - 3 Ae (SEAL) ATTEST Anchorage-Kenai Intertie P. age 2) h:all\sdean\resolution anchorage-kenai ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY —_ ALASKA @E™ ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 MEMORANDUM TO: Board of Directors Alaska Industrial Dévelopment and Export Authority FROM: D. Ra immons Executive Director DATE: June 16, 1998 SUBJECT: — Additional Southern Intertie Funding Chugach Electric Association The Alaska Industrial Development and Export Authority (AIDEA) administers State of Alaska grant funds under the August 1994 Grant Administration Agreement for the proposed Southem Intertie between Anchorage and the Kenai Peninsula. Chugach Electric Association (CEA) was selected by the participating utilities as Project Manager. A May 28, 1998, report from CEA is attached, which provides the status of the Southern Intertie project and the need to release additional grant funds. CEA is requesting an additional $800,000 raising the total grant fund commitment to date to $5,900,000. The purpose of the additional funding is to complete the Environmental Impact Analysis (EIS) and Alaska National Interest Lands Conservation Act (ANICLA) process leading to a favorable Record of Decision (ROD) on the Southern Intertie for the Enstar route. The primary reasons for the additional funding requirements are the complexity of the route selection process, the intergovemmental agency review process required because of the complex routing issues, additional environmental studies required by the U.S. Forest Service, and the decision by Rural Utility Services (RUS) to contract rather than prepare in-house the EIS. A budget and schedule is included with the CEA report. The ROD is expected to be complete by late June 1999. AIDEA staff recommends the Board approve Resolution No. G98-08 which authorizes the Executive Director to release the additional grant funds, impose reasonable terms related to the release of the funds, monitor progress of the participating utilities regarding development issues, and take any and all actions consistent with this resolution. Attachment CHUGACH ELECTRIC ASSOCIATION GED EF fl I fi JUN 011998” Alaska Industrial Develooment May 28, 1998 Via Fax ieee 2EBBO4i4y (Hardcopy to follow) Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503 Attention: Mr. Dennis V. McCrohan, P.E., Deputy Director, Energy Subject: Southern Intertie Project NEPA Process — Additional Funding Dear Mr. McCrohan: The Grant Administration Agreement of 08/30/94 for subject project includes Schedule A-2, which governs activities and expenditures for phases of the project. Phase | of the project, entitled “Route Selection and Preliminary Design” is presently in progress and limited to costs of $5,100,000. This phase is intended to cover route selection, preliminary environmental, geotechnical, archaeological, easement and design activities as well as develop budgets for final design and construction. All preliminary investigations addressed in Phase | have been performed and are nearing completion. Reports and documents produced are the Route Selection Studies (June 4996) and the Environmental Analysis (EVAL), which will be finalized in June 1998. These reports include preliminary designs, easement investigations and cost estimates for construction. The utilities participating in the project, the Intertie Participant Group (IPG), have selected the ENSTAR Route terminating at the Soldotna and _ International Substations respectively as their proposed route. The project is subject to NEPA regulations and an Environmental Impact Statement (EIS) will be prepared by the federal lead agency RUS from the EVAL. Selection of the ENSTAR Route, which crosses the Kenai National Wildlife Refuge, also requires that a permit application be made to the US Fish and Wildlife Service (USFWS) at the same time. This application will follow ANILCA regulations. The budget presented with our letter of May 21, 1996 for this phase of the project anticipated that all NEPA related activities (including EIS) could be completed for an amount not exceeding $4,117,765. The route selection studies preceding the NEPA process add $857,994 to this amount for a total commitment of $4,975,759 to date. 5601 Minnesota Drive * P.O. Box 196300 »* Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie, NEPA Process — Additional Funding May 28, 1998 Page 2 of 3 These estimates were based on having the EIS completed by our consultant (POWER Engineers/Dames and Moore) for one federal lead agency. RUS agreed in September 1996 to take on the role as lead agency and published its intent to prepare an EIS in the Federal Register in October 1996. The project's complexity with possible routes located in areas under the jurisdiction of the USFWS and USFS made it however mandatory that these agencies be included in the process as cooperating agencies. The ensuing negotiations to develop a Memorandum of Understanding (MOU) between the agencies and the IPG as the Applicant took more time and effort than anticipated. When the MOU was finally signed in July 1997, RUS decided that its staff could not take on the preparation of the EIS and complete it in a timely manner. The agency would delegate this task to a consultant. This preparer could not be our consultant, but would have to be selected from a list of pre approved firms or solicited through requests for proposal. Costs for this consultant would have to be borne by the applicant. It was decided to allow RUS to select the preparer from the pre-approved list to save the time involved in a proposal process. RUS contracted with Mangi Environmental in November 1997 for the EIS preparation based on the EVAL submitted by the IPG. Mangi’s involvement as well as late requests for additional environmental work from USFWS added significantly to the demands on time and efforts of our consultants. What was originally meant to be a draft and final EIS has now become a draft and final EVAL, with continued work required to assure the timely and adequate preparation of the EIS. Actual project costs stand at $4,270,000 as of mid May 1998 and are expected to reach $4,561,000 by July, when the EVAL and ANILCA applications are submitted to the respective agencies. Completion of the NEPA and ANILCA process resulting in a Record of Decision (ROD) by the fall of 1999 are expected to require additional funding of $1,303,500. This leaves a shortfall in allowable funding for Phase | activities of $764,500. While the remaining tasks could be categorized as “Final Environmental Investigations” under the next project phase, we are hesitant to open Phase Il at this time, but rather request an increase of funding under Phase | by $800,000 to allow for completion of the environmental process. A budget estimate and schedule are enclosed. Chugach’s General Manager, Gene Bjornstad and | will be prepared to brief AIDEA’s Board of Directors at their June16, 1998 meeting on this project as requested in your letter of April 7, 1998. Please, let me know at what time and location this meeting will be. We would welcome a meeting with you prior to the presentation to discuss items and format of the presentation. Southern Intertie, NEPA Process — Additional Funding May 28, 1998 Page 3 of 3 We trust the information provided is sufficient to support our request. Should you have any questions, please, do not hesitate to call me at 762-4626 or fax to 762-4617. My e-mail address is dora @chugachelectric.com. Sincerely, bra. Pf Dora L. Gropp, P.E. Manager, Transmission & Special Projects DLG/ah oc Enclosures: 1. Schedule A-2 — Anchorage-Kenai Intertie 2. Funding Requirements of 5/27/98 3. Southern Intertie NEPA Schedule of 5/28/98 4. Letter to AIDEA dated May 21, 1996 — Funding for NEPA Process Cc Gene Bjornstad, CEA Robert Hufman, AEG&T Meera Kohler, AML&P Dave Calvert, Seward Michael Kelly, GVEA Norm Story, HEA Wayne Carmony, MEA Lee Thibert Mike Massin Joe Griffith Mike Cunningham W.0.#E9590081, Sec., 2 RF SCHEDULE A-2 ANCHORAGE-KENAI INTERTIE 1. PHASE DESCRIPTION - Anchorage-Kenai 138 kV Intertie ($84.1 Million) Phase I - Route Selection and Preliminary Design Phase IIT - Final Design and Construction These phases will be conducted sequentially. However, efficient performance will dictate some overlapping of phases. Ds I-R & ARY D) a. The Phase I ceiling shall be $5.1 million. b. Phase I includes the following: (1) (2) (3) (4) (5) (6) (7) (8) (9) Development and Approval of Project Team Preliminary Environmental Assessment Preliminary Geotechnical and Archaeological Investigation Preliminary Easement Investigation Identify Corridors, Determine Alternate Route Alignments Prepare Route Selection Report Investigate Design Alternatives Approval of Line Route End Points and Preliminary Design Development of the Phase II Ceiling for Submission to AIDEA for Approval PHASE II - FINAL DESIGN AND CONSTRUCTION a. The Phase II ceiling willbe $__ b. Phase II includes the completion of the following tasks: (1) (2) (3) (4) (5) (6) 7) (8) (9) Final Environmental, Geotechnical, and Archaeological Investigations Selection of Specific Location of Facilities Procurement of Easements Design Modifications to Bernice Lake Substation Design Submarine Cable Terminal Stations Design Submarine Cable Crossing Specifications Preparation of Functional Design, Drawings, Specifications, and Bid Documents and Award Preparation of Construction and Material Contracts Right-of-Way Clearing 1 To be determined pursuant to 2(b)(9), above. (10) (11) (12) (13) (14) Transmission Line Construction oi South Kenai Line i North Kenai Line i Anchorage Line Modification of Bernice Lake Substation Submarine Cable Terminal Stations Submarine Cable Crossing Commissioning and Project Closeout SOUTHERN INTERTIE FUNDING REQUIREMENTS/CASH FLOW I. FUNDING REQUIREMENTS CONTRACT /ACTIVITY CONSULTANT AGENCIES RUS/Mangi USFWS USFS PROJECT MANAGEMENT TOTAL St$sched.xls COST ROUTE SELECTION (TO 6/96) $792,555 $0 $0 $0 $65,439 $857,994 CHUGACH ELECTRIC ASSOCIATION COST NEPA TO EVAL (TO 7/98) $3,379,691 $63,761 $24,600 $34,954 $200,000 $3,703,006 COST CONTINGENCY NEPA - EIS TO ROD NEPA - EIS TO ROD (TO 11/99) (TO 11/99) $730,000 $73,000 $150,000 $15,000 $30,000 $3,000 $5,000 $500 $270,000 $27,000 $1,185,000 $118,500 Page 1 TOTAL $4,975,246 $228,761 $57,600 - $40,454 $562,439 $5,864,500 5/27/98 SOUTHERN INTERTIE NEPA SCHEDULE ACTIVITY FINAL EVAL ANILCA APPLICATION START DEIS PREL. DEIS FOR REVIEW REVIEW COMMENTS DEIS TO APPLICANT FOR PRINTING DEIS PUBLISHED & DISTRIBUTED PUBLIC MEETINGS: WASHINGTON, D.C. ALASKA PUBLIC REVIEW PERIOD 4s pays) FEIS DRAFT FOR REVIEW REVIEW COMMENTS FEIS PUBLISHED & DISTRIBUTED ROD APPEAL PERIOD CHUGACH ELECTRIC ASSOCIATION RESPONSIBILITY AND COMPLETION DATE APPLICANT RUS/MANGI USFWS 7/20/98 7/20/98 7/20/98 7/20/98 7/15/98 10/30/98 12/15/98 12/15/98 1/20/99 2/10/99 2/10/99 *4/20/99 3/29/99 4/23/99 5/10/99 5/10/99 5/24/99 *5/10/99 - 7/20/99 *6/24/99 *41/20/99 30 DAYS NONE DATES WITH * IDENTIFY REGULATORY REQUIREMENTS AND/OR ALLOWANCES St$sched.xls USFS 12/15/98 *3/11/99 5/10/99 *6/24/99 45 DAYS 5/28/98 in | NT | CHUGACHELECTRIC - | ASSOCIATION, INC. — (Se) eas: lectric ASSOCIATION, INC. May 21, 1996 VIA Fax Line: (907) 269-3044 (Hardcopy to follow) Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503-6690 Attention: Mr. William R. Snell, Executive Director Subject: Southern Intertie - Funding for the NEPA Process Dear Mr. Snell: The route selection effort, which we began in November 1995 with our consultants POWER Engineers and Dames & Moore is coming to its conclusion with the preparation of final reports due in early June. The studies performed so far will serve as a base for the upcoming EIS preparation. Continuation of the project will now lead to the preparation of an Environmental Impact Statement (EIS). Some major tasks to accomplish this include: . Determination of a Lead Agency - Formation of the Inter Agency Team - Scoping Meetings ° Field Work to supplement the Environmental Inventory - Hydrograhic Field Work and Studies to verify the feasibility of Submarine Crossings . Prepare Draft and Final EIS POWER Engineers/Dames & Moore have submitted a proposal for this work in response to a request by the IPG. Costs are estimated at $3,347,765. This proposal was presented to you and your staff on April 16, 1996. Overall costs of this phase of the work are estimated at $4,200,000 and include an update of the economic analysis of the project originally prepared in 1991 as well as project management costs and a 10% contingency for all activities through the completion of the EIS process. A Record of Decision (ROD) is anticipated between September 1998 and February 1999 if full use can be made of the 1996 summer field season. Any delays in these critical activities are expected to postpone the ROD by a full year. 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie - Funding for the NEPA Process = May 21, 1996 Page 2 of 2 A more detailed cost estimate and cash flow projection is attached and we request that funding be made available for the activities described. The work will not proceed until the IPG has concurred. We have scheduled an IPG meeting for May 23, 1996, where POWER’s proposal and contractual matters pertaining to it will be discussed. At this meeting we would like to be able to advocate approval to the participant’s governing bodies for work contemplated with the assurance that AIDEA will make the necessary funds available. Sincerely, CHUGACH ELECTRIC ASSOCIATION, INC. ae . Bj a General Manager ENB/DLG:ahw Attachment: Cost estimate. c: Dennis McCrohan, AIDEA General Managers - IPG Michael Massin Lee Thibert Joe Griffith John Cooley Dora Gropp W.0.#E9590081, Sec., 2.2.1.1 RF SOUTHERN INTERTIE - EIS a SOUTHERN INTERTIE - EIS FUNDING 5/16/96 FUNDING REQUIREMENTS ANO CASH FLOW, |, FUNDING REQUIREMENTS 1 CONTRACTIACTIVITY START FINISH CcosT CONTINGENCY TOTAL NEPA PROCESS 5/1/96, 9/14/98 $3,043,423 $304,342 $3,347,765 LEAD AGENCY 6/1/96 9/14/98 $100,000 $10,000 $110,000 ECONOMIC FEASIBIL. 6/1/96 10/1/96 $200,000 $20,000 $220,000 PROJ. MANAGEMENT 5/1/96, 12/31/98 $400,000 $40,000 $440,000 TOTAL $3,743,423 $374,342 $4,117,765 il, CASH FLOW T | — CONTRACTIACTIVITY TOTAL CONTINGENCY 1996/3 1996/4 1997/1 1997/2 1997/3 1997/4 1998/1 1998/2 1998/3 1998/4 NEPA PROCESS $3,347,765 $304,342 $821,724 $669,553 $456,513 | $304,342 $243,474 $182,605 $152,171 $121,737 $30,434 LEAD AGENCY $110,000 $10,000 $50,000 $50,000 $0 $0 $0 $0 $0 $0 ECONOMIC FEASIBIL. $220,000 $20,000 $100,000 $100,000 $0 $0 $0 $0 $0 PROJ. MANAGEMENT $440,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 |_ $40,000 TOTAL $4,117,765 $374,342 $1,011,724 $859,553 $496,513 Page 1 $283,474 $161,737 | $100,868 x7 | File <evkwuin Swot ~~ CHUGACH ELECTRIC — Ce eee kectric EGEIVE| |) ASSOCIATION, INC. August 11, 1997 AUG 15 1997 Alaska Electric Generation & Alaska Industrial Developmen! Transmission Cooperative, Inc. and Export Authority 1018 Galena Street Fairbanks, Alaska 99709 Attention: Mr. Robert Hufman, Executive Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear we hs The rate impact of the proposed construction of the Southern Intertie has been an issue throughout the scoping process and needs to be addressed in the EIS. It is understood that impacts will vary among the participating utilities, but can probably be addressed by establishing a differential to given rates. POWER Engineers proposes to have DFI evaluate the impact in conjunction with the update of the Feasibility Study. We agree with that recommendation and enclose PEI’s letter and DFI’s offer to perform the services for about $11,000 for your approval. The project budget includes funds for this work. Please, indicate your approval by signing in the space provided and return the signed letter by facsimile. If you need any additional information, please, give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. CONCURRENCE: General Mapager Mr. Robert Hufman, Executive Manager 4 ENB/DGGiahw Enclosures: Cc: IPG Tech ~AIDEA Lee Thibert | Mike Massin Mark Fouts — Brian Hickey JimBorden W.O. E9590081, Sec.2.1.2.1 RF 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 CHUGACH ELECTRIC . ASSOCIATION, INC. a niger ASSOCIATION, INC. August 11, 1997 Anchorage Municipal Light and Power 1200 East First Avenue Anchorage, Alaska 99501 Attention: Mr. Hank Nikkels, Acting General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear The rate impact of the proposed construction of the Southern Intertie has been an issue throughout the scoping process and needs to be addressed in the EIS. It is understood that impacts will vary among the participating utilities, but can probably be addressed by establishing a differential to given rates. POWER Engineers proposes to have DF] evaluate the impact in conjunction with the update of the Feasibility Study. We agree with that recommendation and enclose PEI’s letter and DFI’s offer to perform the services for about $11,000 for your approval. The project budget includes funds for this work. Please, indicate your approval by signing in the space provided and return the signed letter by facsimile. If you need any additional information, please, give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. CONCURRENCE: Mr. Hank Nikkels, Acting General Manager Enclosures: Cc: IPG Tech AIDEA Lee Thibert Mike Massin Mark Fouts Brian Hickey JimBorden W.O. E9590081, Sec.2.1.2.1 RF 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 kectric ASSOCIATION, INC. CHUGACH ELECTRIC ¢ . August 11, 1997 City of Seward Light & Power Division P.O. Box 167 Seward, Alaska 99664 Attention: Mr. Dave Calvert, Utility Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear ble The rate impact of the proposed construction of the Southern Intertie has been an issue throughout the scoping process and needs to be addressed in the EIS. It is understood that impacts will vary among the participating utilities, but can probably be addressed by establishing a differential to given rates. POWER Engineers proposes to have DFI evaluate the impact in conjunction with the update of the Feasibility Study. We agree with that recommendation and enclose PEI’s letter and DFI’s offer to perform the services for about $11,000 for your approval. The project budget includes funds for this work. Please, indicate your approval by signing in the space provided and return the signed letter by facsimile. If you need any additional information, please, give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. CONCURRENCE: 7 General Manager Mr. Dave Calvert, Utility Manager ENB/G.G:ahw Enclosures: Cc: IPG Tech AIDEA Lee Thibert Mike Massin Mark Fouts Brian Hickey Jim Borden W.O. E9590081, Sec.2.1.2.1 RF 5601 Minnesota Drive * RO. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 CHUGACH ELECTRIC ASSOCIATION, INC. August 11, 1997 Fairbanks Municipal Utilities System P.O. Box 72215 Fairbanks, Alaska 99707 Attention: Mr. Frank Biondi, General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment The rate impact of the proposed construction of the Southern Intertie has been an issue throughout the scoping process and needs to be addressed in the EIS. It is understood that impacts will vary among the participating utilities, but can probably be addressed by establishing a differential to given rates. POWER Engineers proposes to have DFI evaluate the impact in conjunction with the update of the Feasibility Study. We agree with that recommendation and enclose PEI’s letter and DFI’s offer to perform the services for about $11,000 for your approval. The project budget includes funds for this work. Please, indicate your approval by signing in the space provided and return the signed letter by facsimile. If you need any additional information, please, give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. CONCURRENCE: Mr. Frank Biondi, General Manager Enclosures: c: IPG Tech AIDEA Lee Thibert Mike Massin Mark Fouts Brian Hickey Jim Borden W.O. E9590081, Sec.2.1.2.1 RF 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 CHUGACH ELECTRIC ASSOCIATION, INC. August 11, 1997 Golden Valley Electric Association, Inc. P.O. Box 71249 Fairbanks, Alaska 99707 Attention: Mr. Michael P. Kelly, General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear Mae The rate impact of the proposed construction of the Southern Intertie has been an issue throughout the scoping process and needs to be addressed in the EIS. It is understood that impacts will vary among the participating utilities, but can probably be addressed by establishing a differential to given rates. POWER Engineers proposes to have DFI evaluate the impact in conjunction with the update of the Feasibility Study. We agree with that recommendation and enclose PEI’s letter and DFI’s offer to perform the services for about $11,000 for your approval. The project budget includes funds for this work. Please, indicate your approval by signing in the space provided and return the signed letter by facsimile. If you need any additional information, please, give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. CONCURRENCE: Mr. Michael P. Kelly, General Manager Enclosures: Cc: IPG Tech AIDEA Lee Thibert Mike Massin Mark Fouts — Brian Hickey Jim Borden W.O. E9590081, Sec.2.1.2.1 RF 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 CHUGACH ELECTRIC ASSOCIATION, INC. August 11, 1997 Homer Electric Association, Inc. 3977 Lake Street Homer, Alaska 99603 Attention: Mr. Norm Story, General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear The rate impact of the proposed construction of the Southern Intertie has been an issue throughout the scoping process and needs to be addressed in the EIS. It is understood that impacts will vary among the participating utilities, but can probably be addressed by establishing a differential to given rates. POWER Engineers proposes to have DFI evaluate the impact in conjunction with the update of the Feasibility Study. We agree with that recommendation and enclose PEI’s letter and DFI’s offer to perform the services for about $11,000 for your approval. The project budget includes funds for this work. Please, indicate your approval by signing in the space provided and return the signed letter by facsimile. If you need any additional information, please, give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. CONCURRENCE: Mr. Norm Story, General Manager Enclosures: c: IPG Tech AIDEA Lee Thibert Mike Massin Mark Fouts Brian Hickey Jim Borden W.O. E9590081, Sec.2.1.2.1 RF 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 CHUGACH ELECTRIC ASSOCIATION, INC. August 11, 1997 Matanuska Electric Association, Inc. P.O. Box 2929 Palmer, Alaska 99645 Attention: Mr. Wayne D. Carmony, General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear Mr. Carmony: The rate impact of the proposed construction of the Southern Intertie has been an issue throughout the scoping process and needs to be addressed in the EIS. It is understood that impacts will vary among the participating utilities, but can probably be addressed by establishing a differential to given rates. POWER Engineers proposes to have DFI evaluate the impact in conjunction with the update of the Feasibility Study. We agree with that recommendation and enclose PEI’s letter and DFI’s offer to perform the services for about $11,000 for your approval. The project budget includes funds for this work. Please, indicate your approval by signing in the space provided and return the signed letter by facsimile. If you need any additional information, please, give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. CONCURRENCE: Mr. Wayne D. Carmony, General Manager Enclosures: c: IPG Tech AIDEA Lee Thibert Mike Massin Mark Fouts Brian Hickey Jim Borden W.O.E9590081, Sec.2.1.2.1 RF 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Review and Update of Economic Feasibility of Southern Intertie Project DRAFT Prepared by: Stephen Haas Annette Hulse Decision Focus Incorporated 650 Castro Street, Suite 300 Mountain View, California 94041-2055 (415) 960-3450 Prepared for: Power Engineers Incorporated 3940 Glenbrook Drive Hailey, ID 83333 August 1997 Q-0- CFS 005/, Sec a7 zeceunol 8/4/37 1.0 Introduction and Summary In 1989 Decision Focus Incorporated (DFI) carried out an economic analysis of the benefits of several proposed transmission line upgrades or additions in the Railbelt area of Alaska. The tesults of the analysis were documented in a December 1989 report entitled “Economic Feasibility of the Proposed 138 KV Transmission Lines in the Railbelt”. One of the lines studied in the 1989 analysis, the Southern Intertie Project (SIP) between Anchorage and Kenai, is currently under serious consideration, and an environmental impact statement (EIS) is being prepared for the proposed project. Because DFI’s 1989 analysis helped to justify the project, it is desirable to review that analysis to determine whether any changes have occurred in the years since 1989 that would alter the conclusions of the analysis. The December 1989 report estimated benefits of new transmission lines in six different categories: capacity sharing economy energy transfer reliability transmission losses operating reserve sharing state revenue from gas royalty and severance taxes SNA BS oro The first three of these categories accounted for about 90 per cent of the total benefits in the 1989 study; the current effort, described in this report, concentrates on these three categories. The effort focused on the key data values underlying the estimates, determined how these data values have changed, and calculated the impacts on the benefits estimates. In addition, all benefit estimates were converted to 1997 dollars for easy comparison to current cost estimates _ of the proposed line. Table 1 summarizes the conclusions of the update. The dollar values shown are the net present value of benefits in each category over the period 2004-2043; the new line is assumed to come into operation January 1, 2004, and to last for 40 years; the present values are in 2004. Each of the last three columns reflects an additional charge: converting to 1997 dollars, discounting at 6 per cent, and updating values such as fuel price projections. Decision Focus Incorporated - Confidential Table 1 Net Present Value of Benefits of Proposed SIP December 1989 Value | December 1989 Value Category (millions of 1990 $, (millions of 1997 $, 4.5% discount rate) 4.5% discount rat December 1989 Value (millions of 1997 $, 6% Capacity Sharing 24.4 30.5 20.9 Economy Energy 43.4 54.3 35.7 Transfer Reliability 41.0 51.2 44.5 Remaining Categories 13.8 17.2 15.0 Total | 122.6 153.2 116.1 The new total benefits estimate is substantial, but is about 25 per cent lower than for the 1989 study, when expressed in the same year dollars, due primarily to lower forecasts of fuel prices, a lower cost of new generating capacity, and the use of a higher discount rate. The changes in benefits and the reasons for them are explained in the following sections. 2.0 Benefits Estimation Methodology This section outlines the methodology used for calculating the numerical estimates in each of the three major categories, summarizing the key assumptions and listing the major data items affecting the estimates. 2.1 Capacity Sharing Capacity sharing benefits occur when: © one region has a capacity shortfall (i.e., demand plus the required reserve margin exceeds the capacity available) e another region has a capacity surplus e transmission links allow the first region to rely on excess capacity in the second region, even if only for a limited time Increased transmission capacity allows one region to rely more heavily on generation capacity in another region, for capacity as well as for energy. For the Railbelt, the SIP would allow Anchorage to rely on a greater portion of the Kenai Peninsula generation capacity surplus for meeting the Anchorage capacity requirement, thus deferring the need to build new generation capacity in Anchorage. Decision Focus Incorporated - Confidential There are two types of capacity sharing benefits: 1. As load grows in a region, enough capacity must be available to meet the peak load in that region plus a required reserve margin. Increased transmission capacity increases access to generation capacity in regions with surplus capacity, thus making it possible to defer adding generation capacity in the first region 2. The larger and more interconnected a system, the lower the reserve margin required to provide the same level of reliability. Increasing transmission capacity increases the level of interconnectedness for the Railbelt, allowing utilities to permanently avoid building some of the capacity that would have been constructed to maintain the desired reserve margin. Construction of the SIP would produce both types of capacity sharing benefits. Demand growth, taken together with available capacity, determines the timing of any capacity sharing benefits. Demand tends to grow over time, while unless new generating units are installed, capacity holds steady or shrinks somewhat due to retirements. Therefore, capacity sharing benefits tend to first grow over time as surplus is eliminated in relatively capacity-poor tegions, then fall as surplus also disappears in the relatively capacity-rich regions. The capacity sharing benefit in a year is the amount of capacity avoided or deferred in the year, measured in kilowatt-years, times the cost of a kilowatt-year of capacity. For the latter we use the annualized fixed cost of a new combustion turbine, including both the installed capital cost and the fixed operations and maintenance cost; this is a standard yardstick for measuring the value of capacity. key data items: e total generating capacity available e peak demand growth e required reserve margin e fixed cost of new combustion turbine 2.2 Economy Energy Transfers This benefit occurs when high cost energy in one area is displaced by lower cost energy from another area. In the Railbelt all available hydro energy, which uses no fuel and for which the variable cost is essentially zero, will be used with or without the proposed new transmission line. Thus the benefits in this category result from displacing electricity generated from thermal units (gas-fired or oil-fired) with electricity from other thermal units with lower variable costs. These lower costs may result from access to less expensive fuel or from some units being more efficient (converting a greater fraction of the energy content of the fuel to electricity) than others. Decision Focus Incorporated - Confidential The economy energy benefit is equal to the increased amount transferred between Kenai and Anchorage (as a result of the new line) times the difference in marginal variable operating costs between the two regions. Secondary impacts result from being able to better operate units at or near their optimal loading levels, and improved hydro-thermal coordination. The variable costs of producing electricity, i.e., costs of economy energy, are roughly proportional to fuel prices. This means that higher fuel prices translate directly to a higher level of economy energy transfer benefits; a percentage increase in fuel prices translates to toughly the same percentage increase in economy energy benefits if all fuel prices in both regions are increased by the same percentage. Similarly, a reduction in price forecasts for all fuels translates directly to reductions in economy energy transfer benefits. Changes in load growth forecasts since 1989 may impact economy energy amounts transferred, also impacting the benefits in this category, but this is a smaller effect and has not been estimated. key data items: a fuel price projections a load growth projections 2.3 Reliability Reliability is determined by the number, magnitude, and duration of customer outages. Reliability benefits occur if customer outages are reduced as a direct consequence of constructing a new transmission line. The proposed SIP is expected to reduce both the frequency and duration of generation- and transmission-related outages, i.e., outages related to unexpected loss of generating units or the existing Anchorage-Kenai transmission line. In the event of an outage, unserved energy is defined as the electricity that would have been consumed if the outage had not occurred. The reliability benefit is equal to the expected teduction in unserved energy as a result of the proposed line times the value of each unit of unserved energy. Several studies have shown that the value per unit of unserved energy depends on the customer class affected and the duration of the outage. key data items: a reduction in unserved energy as result of new line a value of unserved energy Decision Focus Incorporated - Confidential 3.0 Updates Of Key Data Items The major factors that go into determining benefits of capacity sharing, economy energy, and teliability include: discount rate demand forecasts generating capacity: planned additions and retirements cost of new capacity fuel price projections level of customer outages (number, size, duration) and outage causes value of customer outages Each of these is discussed below, followed by a qualitative discussion of the impact on benefits estimates given the new information. 3.1 Converting to 1997 Dollars The first challenge in comparing 1989 estimates with current estimates is to make sure that the numbers are all based on the same year’s dollars; this eliminates the effects of inflation that make a dollar today not as valuable as a dollar was 7 or 8 years ago. DFI’s 1989 benefits study expressed all values in 1990 dollars. For this update all values are expressed in 1997 dollars. Therefore, before we can compare the data from the previous study to the new information, we have to inflate it so that we can compare old values expressed in 1997 dollars to new values expressed in 1997 dollars. We have assumed an annual average inflation rate over the last 7 years of 3.23 per cent, which is the annual average increase in the Consumer Price Index from 1990 to 1997. With this inflation rate, a value of $1.00 in 1990 dollars corresponds to $1.25 in 1997 dollars. 3.2 Discount Rate In order to make simple comparisons between two or more multi-year streams of costs or benefits, the multi-year streams are usually converted to a net present value by discounting costs and benefits that occur in future years back to an initial year, and summing over all years. This means that costs or benefits that occur in the future carry less weight than those occurring now. For example, at a discount rate of 6 per cent, $1 of benefits in 1998 is worth $0.94 now, while $1 of benefits in 2010 is worth only $0.47 now. The choice of discount rate can make a significant difference to the net present value of a benefits stream if many of the benefits occur in the future. A lower discount rate gives relatively more weight to future benefits than a higher discount rate. Decision Focus Incorporated - Confidential Which discount rate to use for evaluating projects such as the SIP is not obvious. The discount tate is supposed to reflect the time preference of the party or parties making the decisions; Is this the state, the ratepayers, or some other entity? Should a higher discount rate be used to teflect the riskiness of the project? We believe that for the SIP the appropriate discount rate should reflect the cost (or value) to the ratepayer of investing money today to capture future benefits. The cost of capital for the investing organization is a good measure of the cost to the Tatepayer. For instance, Chugach Electric Association has an average historic cost of debt of about 8.6 per cent. This means that, on average, when Chugach has borrowed money in the past, it has paid a nominal interest rate of 8.6 per cent on the debt. The nominal interest rate includes inflation; to get the equivalent real interest rate we take out the effects of inflation. Fuel prices provided by Golden Valley Electric Association indicate a projected forward-looking inflation rate of 2 per cent, and historical inflation has been 2.5 to 3 per cent over the last 5 years. For this update of the 1989 study, we have chosen a discount rate of 6 per cent to represent the teal cost of capital for the Railbelt area (8.6 per cent nominal = 6 per cent real + 2.6 per cent inflation). Using a 6 per cent discount rate instead of 4.5 per cent, as was used in the 1989 study, with no other changes in assumptions would lower the present value of benefits by 15 to 20 per cent, depending on the pattern of benefits over time. Note that both the 4.5 per cent rate used in 1989 and the 6 per cent rate used here are real discount rates, i.e., rates excluding inflation. The switch from 4.5 to 6 per cent does not teflect any changes in underlying conditions, but rather a change in assumptions away from a rate mandated by a government agency to a rate more appropriate for a utility and its ratepayers. 3.3 Demand Forecasts Table 2 compares the demand forecast used in the 1989 study with current demand forecasts, by looking at the forecast for the year 2010. Table 2 COMPARISON OF PEAK DEMAND FORECASTS FOR 2010 (MW) Decision Focus Incorporated - Confidential (Fairbanks forecast is preliminary.) For Anchorage and the Kenai Peninsula, the new forecasts for 2010 are not too different from the 1989 forecasts. However, the newer projection for Golden Valley/Fairbanks is substantially higher. 3.4 Generating Capacity: Planned Additions and Retirements There have been some changes since the 1989 study. Life extensions and postponing the retirement of several units, particularly Beluga, result in a substantially higher projection of available capacity, pushing capacity sharing benefits further into the future. 3.5 Cost of New Combustion Turbine A new combustion turbine is assumed to cost $600 per kilowatt installed (per discussion with Power Engineers Incorporated), with fixed operations and maintenance cost of $11.50 per kilowatt per year. Levelizing the capital cost over 20 years at 6 per cent and adding the fixed operations and maintenance cost yields a value of $55 per kilowatt per year, in 1997 dollars. The 1989 study used a value of $51 per kilowatt per year, in 1990 dollars. When both are expressed in the same year dollars, the new value is about 15 per cent lower. 3.6 Fuel Prices Table 3 shows the fuel prices projected for 2010 in the 1989 analysis, converts them to 1997 dollars, and compares the forecasts to today’s actual prices. The actual prices today are about 40 to 70 per cent lower than the forecast, when both are expressed in 1997 dollars. Decision Focus Incorporated - Confidential R2947— Table 3 Comparison of 1997 Fuel Price Forecast with Actual Prices [$/million Btu] 1989 Forecast of 1997 Actual 1997 Price Price (1997 $) (97 $) $2.28 | $1.50 $2.80 NA NA - no data provided Table 4 compares the 1989 fuel price forecasts for 2010 with current fuel price forecasts for 2010. As in Table 3, all numbers are converted to 1997 dollars. We see a similar pattern, in that the prices forecast today for 2010 are 25 to 50 per cent lower than the prices that were forecast for 2010 in 1989. Table 4 Comparison of Fuel Price Forecasts for 2010 Made in 1989 With Those Made in 1997 [$/million Btu] 1989 Forecast of 1989 Forecast of 1997 Forecast of 2010 Price 2010 Price (1990 $) (1997 $) $2.27 $3.25 $1.85 $2.65 $2.08 $3.00 $4.78 $6.83 $4.34 $6.20 $2.52 $3.60 $1.30 $1.86 Decision Focus Incorporated - Confidential R2947a Lower fuel prices reduce the value of the benefits from economy energy. Without detailed system modeling (i.e., how each generating unit would be operated over the 40-year time horizon, with and without the proposed new transmission line), it is impossible to say precisely how much the benefits are reduced (see recommendation Section 4.2). However, in aggregate, we would expect that if all fuel prices are lower by some percentage, then the benefits will similarly go down by about the same percentage. 3.7 Level of Customer Outages Two key assumptions about the impact of the new Kenai-Anchorage line were made in the 1989 study: a the new line would reduce outages (unserved energy) in the Kenai by about 55 per cent from historical levels (1986-1987); this assumption took into account the fraction of time that energy was flowing in each direction, and the likely impact of an outage for each direction of flow. a the new line would reduce outages in the Anchorage area by 30 to 60 megawatthours; this is based on avoiding 1 to 2 outages of 30 MW and one hour duration per year. The current update uses these same assumptions. New outage data has been provided, but it is incomplete, and completely redoing the reliability benefits component was beyond the scope of this update (see recommendations in Section 4.2). 3.8 Value of a Customer Outage Except for converting to 1997 dollars, we used the same assumptions as the 1989 study. About 88 per cent of outages are industrial or commercial, with the remainder residential. The outages that would be impacted by the proposed line range from a few minutes to a few hours in duration. Based on the distribution by customer class and duration, the average value of each kilowatthour of unserved energy avoided is about $22 (1997 dollars). 4.0 Conclusions and Recommendations 4.1 Updated Benefits Estimates Table 5 (which is identical to Table 1) shows the updated benefits estimates. While they are lower than in the 1989 study, they are still substantial. To put the benefits of the proposed SIP in context, it is useful to compare them to the current level of expenditures (total paid by retail customers) on electricity in the Railbelt. These are roughly $450 million per year. If we assume these will grow at 2 per cent per year, then the net present value of these expenditures over the period 2004-2043, for which we have estimated the benefits of the proposed Kenai-Anchorage line, is about $9 billion. Decision Focus Incorporated - Confidential R2947— 10 Table 5 Net Present Value of Benefits of Proposed SIP December 1989 Value (millions of 1990 $, 4.5% discount December 1989 Value December 1989 Value New Value (millions of 1997 $, (millions of 1997 $, 6% (millions of 4.5% discount rate) discount rate) 1997 $) Category Capacity Sharing 30.5 Economy Energy 54.3 Transfer Reliability Remaining Categories Total 51.2 17.2 153.2 The updated benefits estimates in all categories are lower than in the 1989 study as a result of using a higher discount rate, 6.0 per cent versus 4.5 per cent; where we did not re-calculate the entire benefits stream, we reduced the value by 15 per cent to account for this effect. In addition, the capacity sharing and economy energy transfer benefits are substantially lower, primarily as a result of lower cost of new generating capacity and lower fuel price projections. Benefits of improved reliability are the same as the 1989 study, except for the conversion to 1997 dollars and the use of a higher discount rate, because incomplete data was provided, and complete updating of the reliability numbers was beyond the scope of this update. Benefits in the other categories are the same as the 1989 study, except for the conversion to 1997 dollars and the use of a higher discount rate; they were significantly smaller than the first three categories, so we did not attempt to update them. 4.2 Recommendations If additional analysis of the benefits of the SIP is considered warranted, it should focus on the following areas: Uncertainty in projections of fuel prices and load growth. Economy energy benefits: projections of how the entire Railbelt system would be operated with and without the new line, should be developed, instead of simply adjusting the 1989 estimates in proportion to the change in projected fuel prices. a Reliability benefits: the assumptions about the extent to which unserved energy would be reduced by constructing the proposed line, and about the value of each unit of unserved energy, should be reviewed. a Other potential benefits not included in either study, such as transmission system stability and economies of scale in installing new generating capacity. Decision Focus Incorporated - Confidential R2947a 11 L Impacts of adding battery energy storage (BESS) or superconducting magnetic energy storage (SMES) in addition to the SIP to the Railbelt system; Anchorage Municipal Light and Power (AMLP) has estimated that the savings in spinning reserve costs from adding storage would be $1 million per year for AMLP alone, but only if there is adequate transmission capacity. Additional analysis of these areas would require considerable interaction with staff of the IPG members. : Decision Focus Incorporated - Confidential R2947a SENT BY: 8- 6-87 5 10:32 ; POWER ENGIN©&RS> 907 562 0027;# 2/ 6 pwr names ECEIVE D Beas cease ll] AUG 1 1 4997 Project Manager : Chugach Electric Association i . TRANSMISSION 5601 Minnesota Drive - SRR aoueer ‘Anchorage, AK 99519-6300 Subject: 120376-04 Southern Intertie Project ‘Calculation of kWh Rate Impacts from the SIP Dear Dora, ‘The impact of the SIP on rates has been an issue ever since the very first public meetings last year. The Project Team’s response at the meetings has been that the rate impacts would be addressed as part of the RIS process. The Scoping Report, which is in the proccss of being completed by Dames and Moore, currently states that the rate issue would be addressed as follows: . Financial Considcrations The impacts to kWh rates wilf be assessed using the cost and benefit dala resulting from the studies. The Project is being proposed by seven of the Railbelt Utilities (the IPG), all having differing rate structures. The cost of end use kWh tates for cach of the utilities is based on many factors which vary from utility to utility, and so to provide an overall Project assessment of rate impacts, the cost and benefit impacts of the Project on kWh rates will be calculated based on the overall system sales of kWh. ~~ This is the wording that we worked out earlier this ycar to address this issue, and to include in See MARAT TT TTT IR in uestpanuectt ct teh thes eeeces fcact tho HIP 4a cil convebdly opaat Of Ge scope OF wok. As we discussed last week, Decision Focus, Inc. (Fl) would be a good choice to complictc this task, as they have most of the data required, and are well qualified to complete the ' analysis and be listed as a “Preparer” in the EIS. We requested DFT to send us a letter proposal outlining their approach to the analysis, and additional data requirements needed to complcte the analysis, We forwarded the above wording to them to describe the required scope of work, Attached is DFI’s proposed scope of work and budget. In addition to DFI’s scope, Power Engineers will require some time to incorporate DFI’s results into the EVAI., HLY 23-273 POWER Engineers, Incorporated — HU ji alee) 1 | (SAA 00 amar Sn sl 3940 Gienhmok Pr, » P.O. Bux 166 Phone (208) 788-3456 Hasilcy, Idaho 83333 p Rax (208) 788-2082 _SENT.BY: 8- 6-87 + 10:33 5 POWER ENGINFERS> 907 562 0027:;# 3/ 6 } ‘ August 4, 1997 Page 2 " DF has requested the following information to complete the analysis: Item Party to supply data to DF Cost Estimates - construction and maintenance Power Enginccrs Timing of Construction Expenditures Power Enginccrs Financing - State assistance and the details on any debt | Chugach tobe incurred “Wax rates (ce in Hou oF tax rates) which opply to the IPG Chugach member firms Accounting Rules applicable tn Alaska utilities Chugach pertaining to: allowed rates of return, depreciation - schedules, rules on AFUDC Any other pertinent information that DFI should know | Chugach regarding limitations or special cxceptions to any of the _kWh data or above information . DFT has estimated a cost to produce the required analysis of between $5000 and $10,000, and that they would executo the scope of work according to their letter proposal, on a time and expense basis. If it meets with your approval, a not to exceed budget of $10,000 for DF1 to complete. the work is suggested. ‘To coordinate this work and to incorporate the results into the EIS documentation, would require labor and expense on the part of Power Engineers of “$1200. The cost of the work would be invoiced on a time and expense basis, with an overall ———————————— "ALY 23-273 set nro errnaie SENT BY: Nc 6-87 + 10:34 ; POWER ENGIN"=RS> 907 562 0027;# 4/ 6 August 4, 1997 © Page 3 Since this work is in connection with preparation of thc EVAI. documentation, adding the approved amount to our Task 5 - Draft EIS is suggested. Please advise with any questions or comments that you have concerning this proposal. Thank you for your consideration of this matter. Sincerely, POWER Engineers, Inc. Randy Pollock, PE. Project Manager ‘co: Tit Tetherow - D&M Niklas Ranta - D&M Mike Walbert - Power HLY 23273 Seer Rares a rpms SENT BY: 8- 6-87 + 10:34; POWER ENGI" ERS+ 807 562 0027;# 5/ 6 | Vie SAPS Pb- 25 - 35-22. . i Il Tye FOCUS iipane AUG INCORPORATED : 0 4 397 Corporate Office 650 Castro Street, Suite 300 Mountain View, Califomia 94041-2055 415 960 3450 August 1, 1997 Mr. Michael Walbert 3940 Glenbrook Drive Hailey, ID 83333 j Dear Mike: This letter is in response to your inquiry regarding an assessment of how IPG utility rates will be impacted due to the Southern Intertie Project. : Steve Haas and my understanding is that you need us to prepare a spreadsheet and accompanying documentation showing these rate impacts, The spreadsheet would show rate impacts year-by-year for each of the next N years, where N is some number we would agree upon, a5 well as an average impact over this time. The project is being proposed by seven utilities, all having different rate structures. The cost of the end use kWh rates for each of the utilities is based on many factors which vary from utility to utility, 30 you would like us to calculate the overall impacts of the project on kWh rates based on the overall system sales in kWh. Our understanding is that you want us to examine only the change in the kWh rates due to the project (the deltas), not the absolute levels of these rates. The impact of the project on kWh rates would be equal to the capital costs (depreciation and rate of return) and maintenance costs of the line, less the benefits to ratepayers in the form of reduced generation capacity additions (capital and maintenance), reduced transmission losses, reduced energy costs, and reduced spinning reserve costs, all divided by the kWh sales each year. Ue ee ae a study. : Wis will acl feet ateicisema ies pervldices tnbcceaniicns tar soon avelennaen Sor vie Hine (construction and maintenance), the timing of the construction expenditures, the financing (state assistance and the details on any debt to be incurred), and the tax rates (or in-liew-of-tax rates) which apply to the IPG member firms. Also, any information you can provide on - accounting rules applicable to Alaska utilities, especially allowed rates of return, depreciation 8- 6-987 ; 10:35 ; POWER ENGIS™ERS- 907 562 0027;# 6/-6 Mr, Michael Walbert Page 2 August 1, 1997 schedules, and rules on allowance for funds used during construction, will help make out results more accurate. . We would propose to perform the work on a time’and materials basis, We estimate the cost as being between $5,000 and $10,000 dollars, although, with your cooperation, we should be able . to keep it toward the low end of that range. Please give mi a cal (415) 960-50 Ifyou have any quentions oF want uso get are We look forward to working with you. Pl, bh Ralph Samuelson Senior Associate /\am cc: Steve Haas 0880/P283-004 - Fi le CHUGACH ELECTRIC ses i ASSOCIATION, INC. K rien dNECEIVE j AUG 1 9 1997 August 14, 1997 Alaska Industrial Development and Export Authority 4 Iv Alaska Electric Generation & Transmission Cooperative, Inc. 1018 Galena Street Fairbanks, Alaska 99709 Attention: Mr. Robert Hufman, Executive Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear Mr. Hufman: The delays encountered in executing the MOU between the federal agencies and RUS’ need for a third party preparer of the EIS have delayed the overall schedule for this project by about 3 to 4 months. Our consultants, Power Engineers and Dames and Moore, estimate now that the Draft Environmental Analysis (EVAL) will be completed in early October of this year. This draft will include the “environmental preference”, but not the Applicant’s proposed action. Prior to submitting the EVAL to RUS the IPG will have to select it’s “Proposed Alternative”. This alternative may or may not be the same as the “environmental preference” . We would like to suggest that the technical representatives of the IPG for the project get together to discuss all options after the draft EVAL is available and prepare a recommendation for the proposed action. The consultants could then make a presentation to the IPG prior to finalizing the EVAL which will incorporate the proposed alternative. If the proposed alternative involves lands in the Kenai Wildlife Refuge a permit application under ANILCA will have to be prepared at that time and submitted to USFWS. This application triggers that agency’s permit/EIS process which dictates the time frame to a Record of Decision (ROD) in 1999. 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie - EIS Preparation - Selection of Applicant’s Proposed Alternative August 14, 1997 Page 2 of 2 The following tentative dates are anticipated for the various events: Draft EVAL available October 13, 1997 Technical Committee Review October 22 or 23, 1997 Consultant’s presentation to IPG and IPG approval of “Applicant’s Proposed Alternative” November 4, 1997 Complete and Submit ANILCA Application November 10, 1997 Submit Final EVAL to RUS November 17, 1997 Please, let me or our project manager Dora Gropp know, if any of the above dates present a conflict for you, so that we can attempt to find a mutually acceptable time frame for the necessary actions. If you need any additional information, please give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. =-. cone Bjornstad Ne General Manager Ennion tjh (3 IPG Tech AIDEA MEM Lee Thibert Don Edwards Brian Hickey Jim Borden John Cooley W.O. E9590081, Sec.2 RF ~ - August 14, 1997 Anchorage Municipal Light and Power 1200 East First Avenue Anchorage, Alaska 99501 Attention: Mr. Hank Nikkels, Acting General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear Mr. Nikkels: The delays encountered in executing the MOU between the federal agencies and RUS’ need for a third party preparer of the EIS have delayed the overall schedule for this project by about 3 to 4 months. Our consultants, Power Engineers and Dames and Moore, estimate now that the Draft Environmental Analysis (EVAL) will be completed in early October of this year. This draft will include the “environmental preference”, but not the Applicant’s proposed action. Prior to submitting the EVAL to RUS the IPG will have to select it’s “Proposed Alternative”. This alternative may or may not be the same as the “environmental preference” . We would like to suggest that the technical representatives of the IPG for the project get together to discuss all options after the draft EVAL is available and prepare a recommendation for the proposed action. The consultants could then make a presentation to the IPG prior to finalizing the EVAL which will incorporate the proposed alternative. If the proposed alternative involves lands in the Kenai Wildlife Refuge a permit application under ANILCA will have to be prepared at that time and submitted to USFWS. This application triggers that agency’s permit/EIS process which dictates the time frame to a Record of Decision (ROD) in 1999. 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie - EIS Preparation - Selection of Applicant’s Proposed Alternative August 14, 1997 Page 2 of 2 The following tentative dates are anticipated for the various events: Draft EVAL available October 13, 1997 Technical Committee Review f October 22 or 23, 1997 Consultant’s presentation to IPG and IPG approval of “Applicant’s Proposed Alternative” November 4, 1997 Complete and Submit ANILCA Application November 10, 1997 Submit Final EVAL to RUS November 17, 1997 Please, let me or our project manager Dora Gropp know, if any of the above dates present a conflict for you, so that we can attempt to find a mutually acceptable time frame for the necessary actions. If you need any additional information, please give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. Sincerely, Eugene N. Bjornstad General Manager ENB/D@G:tjh C: IPG Tech AIDEA MEM Lee Thibert Don Edwards Brian Hickey Jim Borden John Cooley W.O. E9590081, Sec.2 RF 4 CHUGACH ELECTRIC an ASSOCIATION, INC. a a a rigach ASSOCIATION, INC. August 14, 1997 City of Seward Light & Power Division P.O. Box 167 Seward, Alaska 99664 Attention: Mr. Dave Calvert, Utility Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear Mr. Calvert: The delays encountered in executing the MOU between the federal agencies and RUS’ need for a third party preparer of the EIS have delayed the overall schedule for this project by about 3 to 4 months. Our consultants, Power Engineers and Dames and Moore, estimate now that the Draft Environmental Analysis (EVAL) will be completed in early October of this year. This draft will include the “environmental preference”, but not the Applicant’s proposed action. Prior to submitting the EVAL to RUS the IPG will have to select it’s “Proposed Alternative”. This alternative may or may not be the same as the “environmental preference”. We would like to suggest that the technical representatives of the IPG for the project get together to discuss all options after the draft EVAL is available and prepare a recommendation for the proposed action. The consultants could then make a presentation to the IPG prior to finalizing the EVAL which will incorporate the proposed alternative. If the proposed alternative involves lands in the Kenai Wildlife Refuge a permit application under ANILCA will have to be prepared at that time and submitted to USFWS. This application triggers that agency’s permit/EIS process which dictates the time frame to a Record of Decision (ROD) in 1999. 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie - EIS Preparation - Selection of Applicant’s Proposed Alternative August 14, 1997 Page 2 of 2 The following tentative dates are anticipated for the various events: Draft EVAL available October 13, 1997 Technical Committee Review October 22 or 23, 1997 Consultant’s presentation to IPG and IPG approval of “Applicant’s Proposed Alternative” November 4, 1997 Complete and Submit ANILCA Application November 10, 1997 Submit Final EVAL to RUS November 17, 1997 Please, let me or our project manager Dora Gropp know, if any of the above dates present a conflict for you, so that we can attempt to find a mutually acceptable time frame for the necessary actions. If you need any additional information, please give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. Sincerely, Eugene N. Bjornstad General Manager ee cs IPG Tech AIDEA MEM Lee Thibert Don Edwards Brian Hickey Jim Borden John Cooley W.O. E9590081, Sec.2 RF 4 % CHUGACH ELECTRIC (Chg ern ‘hs kectric ASSOCIATION, INC. August 14, 1997 Fairbanks Municipal Utilities System P.O. Box 72215 Fairbanks, Alaska 99707 Attention: Mr. Frank Biondi, General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear Mr. Biondi: The delays encountered in executing the MOU between the federal agencies and RUS’ need for a third party preparer of the EIS have delayed the overall schedule for this project by about 3 to 4 months. Our consultants, Power Engineers and Dames and Moore, estimate now that the Draft Environmental Analysis (EVAL) will be completed in early October of this year. This draft will include the “environmental preference”, but not the Applicant’s proposed action. Prior to submitting the EVAL to RUS the IPG will have to select it’s “Proposed Alternative”. This alternative may or may not be the same as the “environmental preference” . We would like to suggest that the technical representatives of the IPG for the project get together to discuss all options after the draft EVAL is available and prepare a recommendation for the proposed action. The consultants could then make a presentation to the IPG prior to finalizing the EVAL which will incorporate the proposed alternative. If the proposed alternative involves lands in the Kenai Wildlife Refuge a permit application under ANILCA will have to be prepared at that time and submitted to USFWS. This application triggers that agency’s permit/EIS process which dictates the time frame to a Record of Decision (ROD) in 1999. 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 »* FAX 907-562-0027 Southern Intertie - EIS Preparation - Selection of Applicant’s Proposed Alternative August 14, 1997 Page 2 of 2 The following tentative dates are anticipated for the various events: Draft EVAL available October 13, 1997 Technical Committee Review October 22 or 23, 1997 Consultant’s presentation to IPG and IPG approval of “Applicant’s Proposed Alternative” November 4, 1997 Complete and Submit ANILCA Application November 10, 1997 Submit Final EVAL to RUS November 17, 1997 Please, let me or our project manager Dora Gropp know, if any of the above dates present a conflict for you, so that we can attempt to find a mutually acceptable time frame for the necessary actions. If you need any additional information, please give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. Sincerely, Zing Motel Eugene N. Bjornstad General Manager ENBIIA.G:th ce IPG Tech AIDEA MEM Lee Thibert Don Edwards Brian Hickey Jim Borden John Cooley W.O. E9590081, Sec.2 RF - s August 14, 1997 Homer Electric Association, Inc. 3977 Lake Street Homer, Alaska 99603 Attention: Mr. Norm Story, General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear Mr. Story: The delays encountered in executing the MOU between the federal agencies and RUS’ need for a third party preparer of the EIS have delayed the overall schedule for this project by about 3 to 4 months. Our consultants, Power Engineers and Dames and Moore, estimate now that the Draft Environmental Analysis (EVAL) will be completed in early October of this year. This draft will include the “environmental preference”, but not the Applicant’s proposed action. Prior to submitting the EVAL to RUS the IPG will have to select it’s “Proposed Alternative”. This alternative may or may not be the same as the “environmental preference”. We would like to suggest that the technical representatives of the IPG for the project get together to discuss all options after the draft EVAL is available and prepare a recommendation for the proposed action. The consultants could then make a presentation to the IPG prior to finalizing the EVAL which will incorporate the proposed alternative. If the proposed alternative involves lands in the Kenai Wildlife Refuge a permit application under ANILCA will have to be prepared at that time and submitted to USFWS. This application triggers that agency’s permit/EIS process which dictates the time frame to a Record of Decision (ROD) in 1999. 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie - EIS Preparation - Selection of Applicant’s Proposed Alternative August 14, 1997 Page 2 of 2 The following tentative dates are anticipated for the various events: Draft EVAL available October 13, 1997 Technical Committee Review October 22 or 23, 1997 Consultant’s presentation to IPG and IPG approval of “Applicant’s Proposed Alternative” November 4, 1997 Complete and Submit ANILCA Application November 10, 1997 Submit Final EVAL to RUS November 17, 1997 Please, let me or our project manager Dora Gropp know, if any of the above dates present a conflict for you, so that we can attempt to find a mutually acceptable time frame for the necessary actions. If you need any additional information, please give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. Eugene N. Bjornstad General Manager ENB/DYG th c: IPG Tech AIDEA MEM Lee Thibert Don Edwards Brian Hickey Jim Borden John Cooley W.O. E9590081, Sec.2 RF Sincerely, CHUGACH ELECTRIC ASSOCIATION, INC. August 14, 1997 Matanuska Electric Association, Inc. P.O. Box 2929 : Palmer, Alaska 99645 Attention: Mr. Wayne D. Carmony, General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear Mr. Carmony: The delays encountered in executing the MOU between the federal agencies and RUS’ need for a third party preparer of the EIS have delayed the overall schedule for this project by about 3 to 4 months. Our consultants, Power Engineers and Dames and Moore, estimate now that the Draft Environmental Analysis (EVAL) will be completed in early October of this year. This draft will include the “environmental preference”, but not the Applicant’s proposed action. Prior to submitting the EVAL to RUS the IPG will have to select it’s “Proposed Alternative”. This alternative may or may not be the same as the “environmental preference”. We would like to suggest that the technical representatives of the IPG for the project get together to discuss all options after the draft EVAL is available and prepare a recommendation for the proposed action. The consultants could then make a presentation to the IPG prior to finalizing the EVAL which will incorporate the proposed alternative. If the proposed alternative involves lands in the Kenai Wildlife Refuge a permit application under ANILCA will have to be prepared at that time and submitted to USFWS. This application triggers that agency’s permit/EIS process which dictates the time frame to a Record of Decision (ROD) in 1999. 5601 Minnesota Drive * P.O. Box 196300 » Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie - EIS Preparation - Selection of Applicant’s Proposed Alternative August 14, 1997 Page 2 of 2 The following tentative dates are anticipated for the various events: Draft EVAL available October 13, 1997 Technical Committee Review October 22 or 23, 1997 Consultant’s presentation to IPG and IPG approval of “Applicant’s Proposed Alternative” November 4, 1997 Complete and Submit ANILCA Application November 10, 1997 Submit Final EVAL to RUS November 17, 1997 Please, let me or our project manager Dora Gropp know, if any of the above dates present a conflict for you, so that we can attempt to find a mutually acceptable time frame for the necessary actions. If you need any additional information, please give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. Sincerely, Eugene UU \ General Manager ENB/D§G:tjh ce IPG Tech AIDEA MEM Lee Thibert Don Edwards Brian Hickey Jim Borden John Cooley W.O. E9590081, Sec.2 RF August 14, 1997 Golden Valley Electric Association, Inc. P.O. Box 71249 Fairbanks, Alaska 99707 Attention: Mr. Michael P. Kelly, General Manager Subject: Southern Intertie - EIS Preparation Rate Impact Assessment Dear Mr. Kelly: The delays encountered in executing the MOU between the federal agencies and RUS’ need for a third party preparer of the EIS have delayed the overall schedule for this project by about 3 to 4 months. Our consultants, Power Engineers and Dames and Moore, estimate now that the Draft Environmental Analysis (EVAL) will be completed in early October of this year. This draft will include the “environmental preference”, but not the Applicant’s proposed action. Prior to submitting the EVAL to RUS the IPG will have to select it’s “Proposed Alternative”. This alternative may or may not be the same as the “environmental preference” . We would like to suggest that the technical representatives of the IPG for the project get together to discuss all options after the draft EVAL is available and prepare a recommendation for the proposed action. The consultants could then make a presentation to the IPG prior to finalizing the EVAL which will incorporate the proposed alternative. If the proposed alternative involves lands in the Kenai Wildlife Refuge a permit application under ANILCA will have to be prepared at that time and submitted to USFWS. This application triggers that agency’s permit/EIS process which dictates the time frame to a Record of Decision (ROD) in 1999. 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie - EIS Preparation - Selection of Applicant’s Proposed Alternative August 14, 1997 Page 2 of 2 The following tentative dates are anticipated for the various events: Draft EVAL available October 13, 1997 Technical Committee Review October 22 or 23, 1997 Consultant’s presentation to IPG and IPG approval of “Applicant’s Proposed Alternative” November 4, 1997 Complete and Submit ANILCA Application November 10, 1997 Submit Final EVAL to RUS November 17, 1997 Please, let me or our project manager Dora Gropp know, if any of the above dates present a conflict for you, so that we can attempt to find a mutually acceptable time frame for the necessary actions. If you need any additional information, please give our project manager Dora Gropp a call at 762-4626 or contact her by e-mail at dora_gropp@chugachelectric.com. Sincerely, Eugene N. vin q General Manager Exava. c: IPG Tech AIDEA MEM Lee Thibert Don Edwards Brian Hickey Jim Borden John Cooley W.O. E9590081, Sec.2 RF -QCT- 2-987 THU 14:00 ML&P GENERAL MANAGER FAX NO. 9072635204 P. 01 Alaska Power Administration Room 8G-027, Forrestal Building _ Wee 1000 Independence Avenue, SW Washington, DC 20585 202-586-2008 Fax: 202-586-9147 FAX TRANSMISSION COVER SHEET Date: October 2, 1997 To: Alaska Congressional delegation Alaska Governor’s office Power Marketing Administrations Public Power trade organizations and media Alaska media and interests Interested Congressional contacts Other interested parties Re: Sale of APA's Eklutna Project “transacted” Sender: Rodney 1. Adelman, Administrator YOU SHOULD RECEIVE — 3___ PAGES, INCLUDING THIS COVER SHEET. IF YOU DO NOT RECEIVE ALL THE PAGES, PT.EASE CALL 202-586-2008. Attached is a PRESS RELEASE announcing the signing of the necessary documents “transacting” the sale of APA‘s Eklutna Project. As stated in the Press Release, a formal “signing ceremony’ is being planned by the Purchasers for Dec. 4. _OCT- 2-87 THU 14:00 ML&P GENERAL MANAGER FAX NO, 9072635204 P, 02 U.S. Department of Energy Alaska Power Administration 2770 Sherwood Lane Juneau, Alaska 99801-8545 FOR IMMEDIATE RELEASE Contact: Rodney Adelman October 2, 1997 (202) 586-2008 EKLUTNA PROJECT SOLD The Alaska Power Administration and the Eklutna Purchasers - (Anchorage) Municipal Light and Power; Chugach Electric Association, Inc.; and Matanuska Electric Association, Inc. - signed today all necessary documents to complete the historic process of transferring ownership of the Eklutna Project, located near Palmer, Alaska, to the three Alaskan utilities. Because of significant construction work-in-progress at the Eklutna Project, a formal “signing ceremony” is being planned by the Eklutna Purchasers for December 4. The Alaska Power Administration Asset Sale and Termination Act (Public Law 104-58) authorizes and directs the sale of all Alaska Power Administration {APA) assets to non-Federal owners, in accordance with previously-negotiated purchase agreements, and the subsequent termination of APA. Today’s transaction transfers all Eklutna Project real and personal property assets to the new local utility owners, in exchange for the negotiated purchase price of $5,953,000, which represents the net present value of projected future principal and interest payments (outstanding Federal taxpayers’ investment), plus a “bonus” of $1 million. -MORE- OCT- 2-87 THU 14:01 ML&P GENERAL MANAGER FAX NO. 9072635204 P. 03 EKLUTNA PROJECT SOLD 2 The sale transaction was competed before the legislated deadline of November 28, 1997, and at significant savings for both Federal taxpayers (primarily due to resolution of a variety of real estate issues at less than originally projected costs) and local Anchorage - Matanuska Valley ratepayers (early settlement savings of over $200,000 in wholesale power rates}. Sale of the two APA projects and termination of the Federal agency was one of the eight Department of Energy recommendations contained in Vice-President Gore’s National Performance Review (September, 1993). The proposed “asset divestiture" has been supported by Alaska’s Congressional delegation and Alaska’s last four Governors. The Alaska Power Administration also owns and operates the Snettisham Project, which provides most of the electric power for the Juneau area. Progress continues on the transfer of the Snettisham Project to the (State of Alaska’s) Alaska Industrial Development and Export Authority/Alaska Energy Authority, currently targeted for mid-1998, -END- CHUGACH ELECTRIC ASSOCIATION, INC. eT In \ IG Mic fl = a = | \ November 3, 1997 LA : {| NOV10 1997 Alaska Electric Generation & ! Transmission Cooperative, Inc. Alaska Industrial Devela-m 1018 Galena Street and Export Auth Fairbanks, Alaska 99709-4826 Attention: Mr. Robert Hufman, Executive Manager Subject: Southern Intertie, EIS Process Route Selection, Decision Process Dear Mr. Hufman: Enclosed is a document to assist in the route selection decision for your review and use. This document has been prepared by POWER Engineers and Dames and Moore and is intended to assist the IPG members in the decision for an Applicant proposed route for the Southern Intertie to be included in the Environmental Analysis (EVAL) for submittal to RUS. Background information on federal regulations pertaining to the issues addressed will be assembled and forwarded to you shortly. Copies of the Draft EVAL will be sent to you in the week of November 10, 1997. POWER Engineers and Dames and Moore staff are prepared to brief the IPG on the process and investigations which led to the conclusions presented. If such a briefing is desired, it would be most beneficial if a meeting could be called within the next 3 weeks. This would allow ample time to subsequently review the draft EVAL and decide on a proposed route for inclusion in the final EVAL by December 18, 1997. a ay Eugen? Bjorns alas Sm Wid Looe C ons General Manager Sail CORAL an. i Hy YL: 0 Fe | ' ENB/DLG/ahw_ Enclosures: \D Om W5 ey IPG Tech., w/ Lee Thibert Mike Massin W.O. #9590081, Sec., 2.1.2.1, w/RF re). ¢ \F KL 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 995 19-6300 oe 907-563-7494 * FAX 907-562-0027 oe a ( Shaun vw \ SOUTHERN INTERTIE PROJECT DECISION PROCESS FOR ROUTE SELECTION INTRODUCTION The purpose of this document is to provide assistance to the Intertie Participant Group (IPG) toward selecting a proposed alternative for the Southern Intertie Project (Project). Dames & Moore and Power Engineers, Inc. are currently in the process of preparing the Environmental Analysis (EVAL) for the Project. As the applicant for the Project, the EVAL is the IPG’s document and submittal to the lead Federal agency, Rural Utilities Service (RUS). The EVAL and the identified proposed alternative by the IPG will become the basis for the RUS to prepare the Environmental Impact Statement (EIS) with the assistance of their third-party contractor, Mangi Environmental consultants; and the cooperating agencies, U.S. Fish and Wildlife Service and the U.S. Forest Service. Two alternative routes, Tesoro and Enstar, are investigated in detail in the EVAL and the IPG has to decide which alternative to propose for construction. A draft of the EVAL will be made available to the IPG in mid-November. The EVAL is scheduled to be completed in January 1998, based on comments by the IPG, RUS, USFWS, USFS and other Federal, State, Borough and Municipal agencies. In order to include the IPG’s preference in the final EVAL document, we have prepared this document to assist in the decision. The principle factors to consider in the decision include: e Cost Submarine cable operations Regulatory criteria Environmental criteria Community, public and special interest group preferences and issues The following section provides a summary of the regulatory process and how each of the above criteria relate to the Project alternatives. This is followed by more detailed descriptions of the regulatory background of the Project and the cost of the alternative routes. The EVAL will provide in depth comparisons and discussions of these criteria. SUMMARY The purpose of this summary is to briefly describe both the regulatory processes and criteria that will influence the decision on the IPG’s proposed alternative for the project. Regulatory Process The regulatory process for the Project is driven by two primary and related regulations, including the National Environmental Policy Act (NEPA); and the Alaska National Interest DEN 26-1413(10/29/97)ukk 1 Lands Conservation Act (ANILCA). The extent that the ANILCA regulations would apply will depend on the proposed alternative: if the Enstar alternative is selected, then the ANILCA process will be required in conjunction with the Project Environmental Impact Statement (EIS) prepared under NEPA; whereas, if the Tesoro alternative is selected, then the NEPA process would be the primary regulatory process, and ANILCA would not apply. The relationships between the regulatory processes, NEPA and ANILCA, are illustrated in Figure 1. For the Enstar route, the time frames for the Draft EIS (9 months), Final EIS (3 months), and Record of Decision (4 months) are established in the ANILCA regulations (43 CFR 36.6). It is possible that for the Tesoro route, the overall process could be completed in a shorter time frame since an ANILCA application would not be necessary. Figure 1 is also intended to explain the implications of the regulatory process. If the IPG selects the Tesoro alternative, then the standard NEPA steps would include the preparation of a draft and final EIS, and a Record of Decision (ROD) by RUS. A hearing is not required by RUS, but could be held if requested by the public. From a regulatory perspective the NEPA process for Tesoro would be straight forward and a favorable ROD is considered achievable. In contrast, if the IPG selects the Enstar alternative, the process is far more complex, and the anticipated result is not certain. An ANILCA application would be prepared and submitted with the EVAL. This would trigger both an ANILCA application review and a compatibility determination by USFWS for the portion of the Enstar route that crosses the Kenai National Wildlife Refuge. The details of these steps are described in the following section, Regulatory Background. The ANILCA review and compatibility determination would be conducted to answer the following general questions: e Is there an economically feasible and prudent alternative to routing the Enstar route through the Kenai National Wildlife Refuge? What are the short and long term impacts to the Refuge? e Would the impacts affect the purpose for which the Refuge was established? The results of the ANILCA review, compatibility determination, and the findings from the draft and final EIS would be considered together in the RUS and USFWS decisions. At this point in time, the IPG should anticipate that the ROD would be to deny an application for the Enstar route. We have been told by the USFWS Refuge Manager that it would be very difficult to approve Enstar. This is because of the availability of the Tesoro alternative, in an area that was set aside from the Refuge through a boundary shift back from the coast of the Cook Inlet, for purposes of providing a transportation corridor. If the ROD denies the application for the Enstar route, the IPG may appeal the decision to the President. The appeal would be reviewed by the President using the same criteria used to prepare the ROD. If the appeal is denied, the IPG would have exhausted its administrative options, and the only resort remaining would be a suit in Federal court. DEN 26-1413(10/29/97)ukk 2 Public Review If Tesoro - RUS Prepares EIS IPG Decision ENVIRONMENTAL hoe ANALYSIS (EV. AL) sas Alternative: Tesoro EVAL DEI Record of Decision Tesoro = : = (ROD) Approved Public Hearing not required but could be held based on RUS decision Public Review t If Enstar - RUS Prepares EIS na =“ DEIS=s! Ve l Public Hearings *Washington D. C. *Alaska If Enstar - IPG Prepares ANILCA Application Application Review l USFWS Compatibility Determination | fee | p|Record of Decision > FEIS (ROD): Enstar or Tesoro — USFWS ANILCA | Decision to approve or deny application by USFWS If ANILCA Application is denied, IPG may either accept Tesoro Alternative or appeal the Decision IPG Appeal: Decision within 4 months President reviews ‘aed | If Appeal is denied: IPG may file suit in Federal Court to challenge Decision RELATIONSHIP BETWEEN REGULATORY PROCESSES - NEPA AND ANILCA SOUTHERN INTERTIE PROJECT EIS Proposed Anchorage to Kenai Peninsula Transmission Line Figure 1 Route Comparison A brief preliminary comparison of the two routes is provided in Figure 2. The criteria, regulatory and environmental issues, submarine cable operations and costs are applied to the Enstar and Tesoro alternative routes. The comparisons are provided on both a local basis with regard to the Kenai Peninsula, Turnagain Arm and coastal zones, and Anchorage areas; as well as a summary of the entire route. The EVAL will provide extensive detail regarding each specific alternative location being considered for Enstar and Tesoro. Figure 2 provides a general characterization of the Enstar and Tesoro alternatives in terms of general preference. Regulatory compliance clearly favors the Tesoro alternatives due to the ability to avoid the Kenai National Wildlife Refuge as well as the Anchorage Coastal Wildlife Refuge and the South Anchorage area. The Tesoro alternatives are also considered environmentally preferable based on consideration for soils, geology, surface water, vegetation, wildlife, existing and planned land uses, and views from residences, recreation areas and travel routes. Cultural resources (history and archaeology) and subsistence uses are not issues in the comparison of alternative routes. The environmental issues are related to potentially significant cumulative impacts to brown bears, and visual impacts to residences, recreation areas and travel. Based on scoping, agency contacts, and the community working group comments, the Tesoro alternatives would be preferred due to the opportunity to minimize environmental impacts. In contrast, submarine cable operations favor the Enstar alternatives over Tesoro. The potential for cable failure during the life of the Project is greater at Point Possession due to slopes, boulders, and hard bottom and tidal conditions, and because it does not appear to be feasible to successfully embed the cables. Cable replacement in future years has been included in an economic analysis, to financially account for the shorter cable life expected for Tesoro, and the results of the analysis are shown in the cost section. Project costs favor the Enstar alternative. Current cost estimates indicate a first cost differential of about 10% in favor of the Enstar alternative. The life cycle analysis also favors the Enstar route. However, both routes have the potential for increased costs. On the Tesoro route, the outcome of the negotiations with the Pt. Possession group regarding right- of-way across the conveyed lands could increase the cost, in the worst case, by up to $4.1 million. For the Enstar route, the potential for the USFWS to require undergrounding, as mitigation in the area south Burnt Island, could increase the cost of that alternative, in the worst case, by up to $4.7 million. As we move further through the process, the actual impact of these factors on cost will become clearer. A summary of the Project costs, as well as a discussion of these factors are included under Significant Factors Influencing Project Cost. In the south Anchorage area, the cost estimates for the Enstar route currently include undergrounding of certain segments as mitigation, and these costs could increase depending on which route links in south Anchorage might be selected. For example, route links along DEN 26-1413(10/29/97)ukk 3 ENSTAR TESO NRA PU BAAS) NUS E AAS Turnagain Arm and Coastal Zones Turnagain Arm and Coastal Zones & & s s g = g = 2) 3] 2| 8] 2 2] @ ‘g 2) él] a 2/6 5 2/515 2,5 Costs O © Submarine Cable Operations | —|O}]—-]O]}]—- | @ @ Regulatory Compliance @'0/o/@/O OJOJO Environmental Preference | e/e/®@ © O O};OJO *Soils/Geology/Surface Water @e@;-|e};/e;o};]—-|o];o “Biology - Vegetation/ Wildlife @);o/@;/@e;o;o;o;o *Land Use @o;/—-|@;e@;o;-|o];o Visual - Residential/Recreation/Travel o;—|@);e;o; —- ee oO Agency Issues @ @ e @ O = O O Special Interest Group Issues @|\e'@/@/O/O O O Public/Community Issues | © e @ @ © O| OO © Most Preferable ww Low to Moderate Preference @ Least Preferable — Not Applicable PRELIMINARY ALTERNATIVE ROUTE COMPARISON OVERVIEW SOUTHERN INTERTIE PROJECT EIS Proposed Anchorage to Kenai Peninsula Transmission Line Figure 2 Klatt Road or Old Seward Highway near Rabbit Creek, if selected, might require additional undergrounding. Conclusion When the regulatory processes and comparative criteria are viewed in their broadest context, the Tesoro alternative would best ensure a favorable ROD in a timely manner. Support could be expected at all levels of government. A decision that selects Enstar would lead to an uncertain outcome both in terms of success and timing. The Point Possession corporation land that is crossed at the north end of the Kenai Peninsula along Tesoro is an issue to be addressed. The Point Possession group is currently trying to sell 4500 acres for $4.1 million. We are exploring their willingness to negotiate a right-of- way rather than having to purchase the entire property, which is their current position, or if possible, condemnation. Worst case, however, would be property acquisition. REGULATORY BACKGROUND The purpose of this section is to provide background information regarding the key Federal regulatory factors that will apply to the decision process for the Project, as outlined in the Southern Intertie EIS Memorandum of Understanding (MOU) between the following entities: e Rural Utilities Service (RUS) - Lead Federal Agency US. Fish and Wildlife Service (USFWS) - Cooperating Agency U.S. Forest Service (USFS) - Cooperating Agency Intertie Participants Group (IPG) - Applicant Included are discussions on the following topics: e Federal Lands Jurisdiction USFWS Jurisdiction Alaska National Interest Lands Conservation Act (ANILCA) ANILCA Appeals Process Alaska Native Claims Settlement Act (ANCSA) Consideration of the following regulatory guidelines and their interrelationships as they apply to the Tesoro and Enstar alternatives will be a central aspect in assisting the IPG in selecting a proposed alternative for the project. Federal Lands Jurisdiction The EIS must be in compliance with the National Environmental Policy Act (NEPA), as implemented by the Council on Environmental Quality (CEQ) Regulations 40 CFR Parts 1500-1508; RUS environmental policies and procedures (7 CFR Part 1794); and the pertinent regulations of the USFWS. Of the current alternative routes under study between the Kenai Peninsula and Anchorage, the Enstar route crosses the Kenai National Wildlife Refuge, which is under the jurisdiction of the USFWS. DEN 26-1413(10/29/97)ukk 4 Crossing the Chugach National Forest is not currently under consideration for the Project because the alternative of paralleling the existing Quartz Creek transmission line does not meet the purpose and need for the project and has been eliminated from consideration. Improvements to the Daves Creek Substation will occur in a parcel of state land that is located within the Forest. As a result, the role of the USFS is primarily in a review capacity to track the Project and comment on any indirect impacts to the Forest. USFWS Jurisdiction The Kenai National Wildlife Refuge is a designated conservation system unit that is managed by the USFWS under the Alaska National Interest Lands Conservation Act (ANILCA) (P.L. 96-487). Therefore regulations implementing Title XI of ANILCA apply to the entire Project (43 CFR Part 36). A Title XI Transportation/Utility Systems (TUS) Application would be required if the Enstar alternative route is selected by the IPG as the proposed alternative for the Project. ANILCA Application The regulations and decision process that would be applied to the Enstar alternative route by USFWS are defined in 43 CFR Part 36 - Transportation and Utility Systems In and Across, and Access Into, Conservation System Units in Alaska. In general, criteria applicable to the approval of the Enstar route under ANILCA Title XI require that this alternative must 1) be found “compatible with the purposes for which the Unit (Kenai National Wildlife Refuge) was established” and 2) there must be no “economically feasible and prudent alternative route for the system.” These two criteria imply separate factors that are described below. Compatibility 43 CFR 26.2 defines compatibility as “compatible with the purposes for which the unit was established.” It means that the system (Southern Intertie Project Transmission System - Enstar alternative) “will not significantly interfere with or detract from the purpose for which the area (Kenai National Wildlife Refuge) was established. The determination of “compatibility” is established through a separate formal process that is tied to ANILCA. In addition to NEPA and the ANILCA Title XI Process, the National Wildlife Refuge System Administration Act (16 U.S.C. 668dd-668ee) requires a compatibility determination by the Refuge Manager. The USFWS Policy requires the Regional Director’s approval of the manager’s compatibility determination when the proposed action, i.e., Southern Intertie Project, is being evaluated through the NEPA process. The term “compatible use” as defined in Section 5 (16 U.S.C. 668ee) of the Act means a “wildlife-dependent recreational use or any other use of a refuge that, in the sound professional judgment of the Director, will not materially interfere with or detract from the fulfillment of the Mission of the System or the purposes of the refuge.” DEN 26-1413(10/29/97)ukk 5 “Wildlife-dependent recreational use’ means “a use of a refuge involving hunting, fishing, wildlife observation and photography, or environmental education and interpretation.” ‘Sound professional judgment’ means “a finding, determination, or decision that is consistent with principles of sound fish and wildlife management and administration, available science and resources, and adherence to the requirements of this Act and other applicable laws.” The Kenai National Wildlife Refuge Manager, Robin West, has advised us (September 11, 1997) that the analysis and comparison of impacts of alternatives that occur off the Refuge, i.e., Tesoro alternative, cannot be taken into account in the compatibility determination. The finding is based only on effects to Refuge lands and resources. While the compatibility determination has not been conducted, based on conversations with Robin West it is our understanding that it would be very difficult for the Refuge Manager to find the Enstar route compatible with the Kenai National Wildlife Refuge. One of the reasons is that the Tesoro Pipeline is located in a transportation corridor that was created by pulling the original boundary of the refuge back from the edge of the Cook Inlet to allow for utility and transportation projects, such as the Southern Intertie, to traverse the northern portion of the Kenai Peninsula without conflicting with the refuge. Economically Feasible and Prudent The definition of the term “economically feasible and prudent alternative route” (43 CFR part 36.2) has recently been revised to mean “a route either within or outside an area that is based on sound engineering practices and is economically practicable, but does not necessarily mean the least costly alternative route.” This is a Final rule that was signed September 22, 1997. This rule will now apply to the USFWS decision-making process when reviewing applications under ANILCA Title XI. This recent ruling changing the definition drastically reduces the probability of a favorable decision for the Enstar route. Previously, an “economically feasible and prudent alternative route” was defined as one that would be considered feasible if it is “able to attract capital to finance its construction,” and prudent “only if the difference of its benefit minus its costs (Tesoro alternative) is equal to or greater than that of the benefits of the proposed TUS (Enstar alternative) minus its costs. In summary, if the IPG decides to propose the Enstar alternative, an ANILCA Application to USFWS will be evaluated in conjunction with the NEPA Process. The criteria regarding compatibility and economic feasibility and prudence will be applied to the proposed Enstar route. An independent compatibility review will be conducted by Robin West, Refuge Manager. The Enstar route is not likely to be found compatible, and economic criteria no longer emphasize differences in cost/benefits between alternatives in the decision process. DEN 26-1413(10/29/97)ukk 6 Administrative Appeal Process Under ANILCA According to Section 1106 (a) of ANILCA, if the IPG should propose the Enstar route and file an ANILCA application, and if the application were to be disapproved, the IPG may appeal the denial. Under Section 1106 (a), if each Federal agency (RUS, USFWS) decides to approve the application within its jurisdiction, then the application is approved. RUS would need to decide to provide financing assistance, and USFWS would need to approve the ANILCA application. However, if either agency disapproves the application within its jurisdiction, then the entire application would be disapproved. If the application is disapproved the IPG may appeal the disapproval to the President of the United States. Under Section 1106 (a) (2), if the IPG appeals, the President must decide within four months after receiving the appeal whether to approve or deny the application. To approve the application, the President would need to find that the proposed action would be in the public interest, that it would be compatible, and that there is no economically feasible and prudent alternative. The President also considers the EIS, public and agency comments on the EIS, and findings and recommendations in RUS and USFWS ROD’s. The President’s decision to approve or deny is then published in the Federal Register. Under Section 1106 (a) (4), if the President were to deny the application, the IPG would have exhausted its administrative avenues, and could file suit in any appropriate Federal court to challenge the decision. Alaska Native Claims Settlement Act (ANCSA) The Tesoro route crosses a 4500 acre property at Point Possession that is owned by the Point Possession Native Group. This property was transferred from the Kenai National Wildlife Refuge through the authorization of ANCSA. The process for such an exchange of lands is discussed in 22 (f) of ANCSA. The property, located within the boundaries of the Kenai National Wildlife Refuge, is currently for sale by the Point Possession Native Group. Section 22 (g) of ANCSA explains that when lands such as the Point Possession property are sold, there is a provision that they “remain subject to the laws and regulations governing the use and development of such Refuge.” The land that was conveyed to the Point Possession Group had been in a wilderness designation as a part of the Kenai National Wildlife Refuge. With the restrictions carried through 22 (g), facility siting through this parcel must conform with minimum surface disturbance from facilities or construction impacts. The USFWS has informed us that their solicitor has determined that ANILCA does not apply to lands subject to 22 (g). With regard to right-of-way acquisition, the Point Possession Group has notified Dames & Moore that they are only interested in selling their entire property at a price of $4.1 million. We are trying to explore their willingness to consider right-of-way acquisition rather than acquiring the entire parcel. DEN 26-1413(10/29/97)ukk a. COST OF THE ALTERNATIVE ROUTES Each of the routing alternatives, Enstar and Tesoro, is composed of various route links which can be combined to form complete routes between the proposed endpoints. To compare the cost of the two alternatives, specific combinations of links have been selected, representing realistic routes which could be constructed. Following Table 1 are additional comments addressing: e Significant Factors Influencing Project Cost e A description of the routes represented by the cost estimates e Notes explaining the various items in the Table Table 1 Summary of Benefits and Costs (millions of 1997 dollars) Tesoro Route Enstar Route Submarine Cable 2-3 core | 4-lcore |} 2-3 core} 4-1 core Type > cables cables cables cables ‘Constructed Cost $99.5 $112.5 $90.2 $100.5 IPW of O&M Costs| $4.3 $4.3 $6.1 $6.1 IPW of Cable | $10.7 $14.5 $3.3 $2.3 [Replacement Costs Total Life Cycle $114.5 $131.3 $99.6 $108.9 Cost W of Project $145.0 $145.0 | $145.0 | $145.0 Benefits Benefit/Cost Ratio} 1.27 | 1.10 1.46 1.33 Range | Adjusted 2.14 Pee eee 'Benefit/Cost Ratio Range Significant Factors Influencing Project Cost The following factors may significantly influence the cost of the alternatives, by increasing the cost estimates by up to the amounts indicated. Tesoro Route - The right-of-way cost of $12,000 included in the estimate for crossing the native conveyed lands at Pt. Possession (Link T5.2, about one mile) is based on a survey of current land values by Land Field Services, Inc. As discussed elsewhere in this document, the conveyed lands, comprising approximately 4500 acres, are currently for sale by the natives. Without more in depth negotiations with the natives it is not known if a partial purchase could be made for a line right-of-way, or in the worst case, if the entire parcel would have to be purchased. The current asking price for the entire parcel is $4.1 million. DEN 26-1413(10/29/97)ukk 8 Enstar Route - The route along the Enstar pipeline north of Big Indian Creek to Burnt Island is proposed to be constructed overhead. It may be necessary to underground all or part of this stretch of the route, contingent on mitigation that the KNWR may deem appropriate to mitigate waterfowl or other issues. The total distance from Big Indian Creek north to the transition station near Burnt Island is 4.7 miles (Links E2.1 and M5.1). In the worst case, if it were necessary to underground the line for this entire distance it would add an additional $4.7 million to the cost of the Enstar route shown in the Table. Route Descriptions represented by the Cost Estimates For the Tesoro Route, the link combination selected would begin at Bernice Lake Substation, and proceed north along the east side of the north Kenai Spur Road utilizing single shaft steel poles. There are two airports which would require short distances of underground where the route crosses the end of the runways. Through Captain Cook State Recreation Area (CCSRA), the line would be placed underground parallel to the road through the CCSRA to comply with Section 6(f)(3) of the Land and Water Conservation Fund Act. North of the CCSRA, the line would parallel the Tesoro pipeline and would be composed of steel X Structures north to the Point Possession area, where the line would transition from overhead to submarine cable. The transition station at Point Possession would be located approximately one mile south of where the cable would enter the water, so that where the line crosses the native conveyed lands, the line would be underground in compliance with Section 22g of the ANCSA regulations. The marine route would extend from Point Possession to Point Campbell where a transition from submarine cable to solid dielectric land type cable would be constructed. The line would then be placed underground from Pt. Campbell to Pt. Woronzof Substation, because of the proximity to Kincaid Park and the Anchorage International Airport respectively, and would terminate at the Pt. Woronzof Substation. For the Enstar Route, the link combination selected would begin at the Soldotna Substation and proceed south and east following the existing 69kV line route, which currently extends to the Quartz Creek Substation near Cooper Landing. The existing 69kV line would be rebuilt to operate at 138kV, up to a point about 4 miles east of Naptowne, and a new substation would be constructed at that location with voltage transformation from 138kV to 69kV so that the 69kV connection to the Quartz Creek Substation can be maintained. From that location the line would proceed north through the KNWR paralleling the Enstar pipeline to the north coast of the Kenai Peninsula near Burnt Island. At that point the line would transition from overhead to submarine cable, and would then extend across Turnagain Arm, coming ashore at the Oceanview Park area. Horizontal directional drilling techniques would be used to cross under the coastal wildlife refuge and the submarine cable would then parallel the Alaska Railroad ROW to a point north of Cross Road. At that point an SF6 Gas Insulated (GIS) transition from submarine cable to solid dielectric cable would be installed within a small building (30x30x25H), and due to the proximity of the Flying Crown airstrip, the underground cable would continue north within the railroad right-of-way north to 120" Avenue. At that point the line would transition to overhead single shaft steel pole construction and would continue along the railroad right-of-way, terminating at the International Substation. DEN 26-1413(10/29/97)ukk 9 Notes explaining the various items in the Table Constructed Cost Constructed cost includes those costs associated with the EIS process, preliminary design, detailed design, right-of-way, procurement, and construction of the Project. Internal utility, legal, or financing costs which might be associated with the Project are not included. A 10% contingency has been included in the construction cost estimates. Present Worth Calculations Present Worth calculations are a based on a project life of 40 years and a real discount rate of 4.5%. The values shown are in 1997 dollars in the year 2004, the first year that the line is scheduled to be in service. Operation and Maintenance (O&M) Costs The present worth costs indicated for each of the alternatives are based on the cost of a representative annual maintenance program for each facility type. In addition, O&M costs for the Enstar route include a $136,000 annual right-of-way payment to the Alaska Railroad. Submarine Cable Replacement Costs Based on the hydrographic surveys conducted for the Project in 1996, marine bottom conditions on the Tesoro submarine crossing between Pt. Possession and Pt. Campbell are such that it was concluded that embedment of the cable would not be feasible, although the cable would be embedded on the shore ends and in the mud flats. The marine bottom conditions on the Enstar submarine crossing from Burnt Island to Oceanview Park are such that it is feasible to embed the cables. Based on experience with the existing cables crossing the Knik Arm, and through discussions with cable installation contractors, it was concluded that the submarine cable life that could be expected on the non-embedded Tesoro crossing would be less than for the embedded Enstar crossing. To reflect this difference in marine conditions for the two crossings, the present worth of the cable replacement costs were calculated. The present worth cable replacement costs shown in the table represent replacement of one three core cable at 17 year intervals for the Tesoro route, and at 30 years for the Enstar route. For the four one core cable alternate, the present worth of the cable replacement costs shown in the table represent replacement of two one core cables at 17 year intervals for the Tesoro route, and replacement of one single core cable at 30 years for the Enstar route. Project Benefits The benefits of the Project are currently being updated by Decision Focus, Inc. Adjusted Benefit/Cost Ratio The adjusted benefit/cost ratio accounts for the $46.8 million State grant for the Project. DEN 26-1413(10/29/97)ukk 10 CHUGACH ELECTRIC“ a x = kectric LAL ASSOCIATION, INC. ke: 7/02/97 es July 9, 1997 D ECEIVE | Alaska Electric Generation & JUL 14 1997 Transmission Cooperative, Inc. Alaska Industrial Development 1018 Galena Street and Export Authority Fairbanks, Alaska 99709 Attention: Mr. Robert Hufman, Executive Manager Subject: Southern Intertie, EA/EIS Process Quartz Creek Route Alternative Dear Mr. Hufman: The Quartz Creek Route for the Southern Intertie represents an alternative that follows an existing transmission line from Soldotna to Quartz Creek into Anchorage. The new tie would be constructed on its own support structures next to the existing facilities. POWER Engineers and Dames and Moore have evaluated this route extensively and recommend that it be eliminated from the EIS preparation as a viable alternative. This recommendation is based on an assessment of the reliability of a line built along this route and added costs resulting from underground construction over approximately 23.8 miles of lands in the Chugach State Park. The existing line’s reliability is compromised, primarily due to avalanche, wind and snow exposure. Chugach State Park Service, created after the existing transmission line was built, cannot allow non recreational use (e.g., construction of a transmission line) without requesting concurrence from the National Park Service. The park’s administration has informed us that they will not support such a conversion request. Underground construction could be allowed, but would add more than $20 Million to the construction costs. A copy of POWER Engineers’ analysis and recommendation is enclosed. We agree with the consultants recommendation and are requesting your concurrence. This leaves-two alternative corridors for the Southern Intertie: 1. Enstar Route 2. Tesoro Route 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 »* FAX 907-562-0027 Southern Intertie, EA/EIS Process - Quartz Creek Route Alternative July 9, 1997 Page 2 of 2 Both of these routes would terminate in South Anchorage at Chugach’s International Substation (Enstar Route) or at the Point Woronzof Substation (Tesoro Route). Please indicate that you concur with the proposed action by signing in the space provided and returning a copy of this letter. If there are any questions, please contact Dora Gropp, Project Manager at (907) 762-4626 by telephone or by e-mail to dora_gropp@chugachelectric.com. Sincerely, CONCURRENCE: Date: i ELECTRIC ASSOCIATION, INC. i eas Bjorstad Mr. Robert Hufman, Executive Manager General Manager ENB/DLG/ahw Enclosures: Quartz Creek Route Alternative dated July 3, 1997. CB Randy Simmons, AIDEA Lee Thibert Mike Massin John Cooley Brian Hickey Jim Borden W.O. E9590081, Sec., 2.1.2.1 RF July 3, 1997 SOUTHERN INTERTIE QUARTZ CREEK ROUTE ALTERNATIVE Recommendation for Elimination The Quartz Creek Route alternative was identified and studied as a potential routing opportunity for the Southern Intertie Transmission Project (Intertie) because it would follow an existing transmission line cortidor. The Quartz Creek Route alternative would involve siting the proposed Intertie in a right-of-way adjacent to the existing 115 kilovolt (kV) transmission line right-of-way. The parallel right-of-way would extend from one of three endpoints in the Anchorage area—University Substation, APA Substation, or AML&P Plant No.2 Substation—to the Soldotna Substation on the Kenai Peninsula. There have been numerous comments on the Quartz Creek Route alternative from federal, state, and local agencies and the public through the scoping process, extensive inventory studies, and legal review. At this time, the Quartz Creek Route alternative does not meet the purpose and need for the project and is recommended for elimination from further study in the Environmental Impact Statement. The following discussions highlight the key issues leading to the recommendation to eliminate the Quartz Creek Route altemative from further study, including reliability/purpose and need and land rights constraints. Reliabili The primary reasons for constructing the Intertie is to increase the reliability and electric transfer capability of the Railbelt electrical system by establishing a second tie between Anchorage and the Kenai Peninsula which would be independent of the existing Quartz Creek transmission line. Reliability of the electric power supply to Anchorage and the Kenai Peninsula is compromised because the Quartz Creek line is vulnerable to weather and avalanche-caused outages. Constructing a second, parallel line along the Quartz Creek line right-of-way would make both lines vulnerable to the same weather and avalanche-caused outages. The existing Quartz Creek 115kV transmission line is exposed to potential avalanche hazard in several locations between the University and Quartz Creek substations. Studies by the Alaska Mountain Safety Center (1991) show that 88 structures and 117 spans along the line are exposed to some degree of potential hazard from destructive avalanches. Extended outages to the existing line have occurred because of avalanches in the Bird Flats area, between Girdwood, and Portage as well as in the Summit Lake area. Historic records indicate that during an 18-year period from 1971 to 1988 the line was hit and severely damaged by avalanches on 11 occasions at six different areas, for an average of once every 1.6 years or more frequently. The largest period of time without interruption was eight years while the least was less than one year. From 1988 to 1989 Chugach Electric Association implemented mitigation to reduce the overall risk of exposure to avalanche damage, including tower relocations and diversion structures; however, the remaining hazard is still rated as moderate. A moderate risk means that one to four large, potentially destructive avalanches may reach an individual structure or span during a 50-year period. Since the Quartz Creek line is the only transmission line between the Kenai Peninsula and the Anchorage Bowl, the loss of the line has a severe impact on the electrical systems on both the Kenai Peninsula and the Anchorage Bowl, causing outages for consumers in both areas. A second parallel line would be subject (C:\WPWIN60\WPDOCS\SOUTHTIE\POWER\QUCRELIM. 1 July 3, 1997 to the same potential for outages as the existing line, and would only marginally increase the reliability of the system. Thus, the Intertie would not meet the purpose and need for the project in terms of significantly increasing the reliability of the system. In terms of increased energy transfer, a second parallel line would increase the transfer capacity of the system between Anchorage and the Kenai Peninsula. However, with the second line parallel to the existing line and subject to the same outage events as the existing line, an avalanche or similar event could remove both lines from service. Consequently, the new parallel line would be subject to the same single contingency outage events as the existing line, and would not reliably provide increased energy transfers during a significant outage event on the existing line. Conversion of Chugach State Park Lands The existing 115kV transmission line crosses 23.8 miles of Chugach State Park, traversing Powerline Pass to Indian, and then generally paralleling the Seward Highway National Scenic Byway to Girdwood. The Quartz Creek Route alternative would parallel this existing line. In 1973, Chugach State Park applied for funding assistance from the National Park Service under the Land and Water Conservation Fund Act (L&WCFA). The funds were to be used for certain acquisitions within the park to support outdoor recreation activities. Accompanying the federal funds assistance is legal protection which states that grant-assisted areas are to remain forever available for public outdoor recreation use or be replaced by lands of equal market value and recreation usefulness. Section 6(f)(3) protection states: No property acquired or developed with assistance under this section shall, without the approval of the Secretary [of the Interior], be converted to other than public outdoor recreation uses. The Secretary shall approve such conversion only if he finds it to be in accord with the then existing comprehensive statewide outdoor recreation plan and only upon such conditions as he deems necessary to assure the substitution of other recreation properties of at least equal fair market value and of reasonably equivalent usefulness and location. The entire park was placed under this legal protection, and Alaska Department of Natural Resources- Division of Parks and Outdoor Recreation staff have indicated that they perceive an additional overhead transmission line as a conversion of use. The existing 115kV line predates the park and funds assistance. Division of Parks staff have indicated that they would not support a request for conversion to the National Park Service for conveyance of additional right-of-way for a second overhead line. Undergrounding the transmission line through Chugach State Park would require 18.8 miles of underground cable. The length of the route through the Park is 23.8 miles, and approximately 5 miles of the line would be constructed as a double circuit on the existing steel lattice tower section west of Girdwood, which is the only practical alternative for that section. The additional cost of undergrounding (excess cost of underground minus overhead cost) would be on the order of $22 million. By using the alternative route along Sixmile Creek the distance through Chugach State Park is approximately 15.3 miles resulting in an additional $19 million for undergrounding and associated reactor/transition stations. C:\WPWIN60\WPDOCS\SOUTHTIE\POWER\QUCRELIM. 2 July 3, 1997 A double circuit configuration of the existing facilities would be another alternative, which would not require additional ROW, but is viewed by the Division of Parks as a significant change in the visual aesthetics of the property. Division of Parks therefore would not support a request for conversion to the National Park Service for a double circuit line. Conversion of the existing line would require an amendment to the FERC license, under which this line was originally constructed. With the known opposition of the underlying land owner (Division of Lands), it is very unlikely that such an amendment would be approved. It should be noted that any plans for double circuit construction of existing lines have generally been avoided for the Intertie, because of the need for increased reliability of the Railbelt system. If both circuits occupy the same transmission structure, the resulting line would not enhance the single contingency performance of the electrical system for a structure failure. (C:\WPWING60\WPDOCS\SOUTHTIE\POWER\QUCRELIM. 3 Southern Intertie Route Selection Study - Phase 1B W.0.#E9590081 Subject: Quartz Creek Route Alternative Preceding letter from Chugach sent to IPG Utility General Managers and to AIDEA as follows: Alaska Electric Generation & Transmission Cooperative, Inc. Attention: Mr. Robert Hufman 1018 Galena Street Fairbanks, Alaska 99709 e Mike Yerkes Alaska Industrial Development & Export Authority Attention: Mr. Randy Simmons, Executive Director 480 West Tudor Road Anchorage, Alaska 99503 ic: Dennis McCrohan Anchorage Municipal Light and Power Attention: Mr. Hank Nikkels, Acting General Manager 1200 East First Avenue Anchorage, Alaska 99501 ( Tim McConnell City of Seward, Light and Power Division Attention: Mr. Dave Calvert, Utility Manager P.O. Box 167 Seward, Alaska 99664 Fairbanks Municipal Utilities System Attention: Mr. Frank Biondi, General Manager P.O. Box 72215 Fairbanks, Alaska 99707 Golden Valley Electric Association, Inc. Attention: Mr. Michael Keily, General Manager P.O. Box 71249 Fairbanks, Alaska 99707 Cc: Mr. Steve Haagenson Homer Electric Association, Inc. Attention: Mr. Norm Story, General Manager 3977 Lake Street Homer, Alaska 99603 Cs Mr. Don Stead Matanuska Electric Association, Inc. Attention: Mr. Wayne Carmony, General Manager P.O. Box 2929 Palmer, Alaska 99645 cs Jim Hall Sane ar onneEReTEN July 8, 1997 lectric oe a CHUGACH ELECTRIC as Cee nN ASSOCIATION, INC. ix Acak + respon oe, Des. May 19, 1997 se: os/x | 4 Alaska Industrial Development E C E | VE and Export Authority 480 West Tudor Road MAY 2 2 1997 Anchorage, Alaska 99503 Alaska Industrial Development Attention: | Mr. Randy Simmons, Executive Director and Export Authority Subject: Southern Intertie, EIS Process Benefits Analysis Update Dear Mr. Simmons: Comments received during the scoping process for the Environmental Impact Statement (EIS) make it necessary that the 1990 benefits analysis for the Southern Intertie be updated. We have received approval from the IPG to have Decision Focus Inc. (DFI), who prepared the original study, review it and prepare an update as needed. DFI has submitted a proposal to Power Engineers (copy attached), which includes a review for $40,000 and subsequent update work for $140,000, Power’s and Dames & Moore’s involvement will add $15,562 for a total of $195,562. The project budget dated 05/21/96 includes $220,000 for this effort. We request your concurrence with our intent to add this work to Power Engineer’s contract. We will authorize the review of the study only and determine the scope and more accurate cost of the update from that process. Your cooperation in approving this additional work is appreciated. If you have any questions, please, call me or our Project Manager, Dora Gropp at 762-4626. Sincerely, Eugene N. Bjornstad General Manager extn Enclosures cs Lee Thibert Mike Massin Joe Griffith Dora Gropp Mike Cunningham W.0.#E9590081, Sec., 2.1.1 RF 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 ROWER May 16, 1997 Dora Gropp Project Manager Chugach Electric Association 5601 Minnesota Drive Anchorage, AK 99519-6300 Subject: 120376-05 Decision Focus, Inc. - Proposal for Southern Intertie Benefits Analysis. Review and Update. Dear Dora, As you requested, attached is a revised spreadsheet summarizing the proposed budget for the Decision Focus proposal. Since DFI will be contracted via a subcontract with Power Engineers, instead of Dames and Moore as previously proposed, this spreadsheet has been revised from the previous one by eliminating the 2% markup that Dames and Moore had included in their costs. As we discussed yesterday, I called Steve Haas at DFI and let him know that we had received approval to proceed with the Phase I review as proposed, and that we would be sending him copies of the requested information shortly. Steve said they are ready to get started. In terms of schedule, Steve is proposing to be able to discuss their initial review with us within three weeks of notice to proceed, as noted in their proposal. This means that they would be prepared to discuss their initial findings by June 9. HLY 23-175 SS SRE POWER Engineers, Incorporated 3940 Glenbrook Drive * P.O. Box 1066 Phone: (208) 788-3456 Hailey, Idaho 83333 Fax: (208) 788-2082 Chugach Electric Association May 16, 1997 Page 2 I suggest that the additional task funding be added to Task 5 - DEIS in our contract. Please let me know if you need any further information to conduct your review and approval process for this proposed work. Sincerely, POWER Engineers, Inc. KL Atk Randy Pollock, P.E. Project Manager Enclosure rp/RP cc: Tim Tetherow - D&M Mike Walbert - Power Larry Henriksen - Power File HLY 23-175 Summary of Proposed Budget - Revision 1 Decision Focus 1989 Study Review and Update Totals Estimated NTE Phase 1 - Review of 1989 Study Categories A . . j $35,820 $43,820) Phase 2 - Detailed Update & Analysis he B ‘ A $105,457 $145,457) Subtotal Phase 1 & 2 $141,277 $189,277) 2% Subcontractor Markup H i $6,285 $6,285 rotate ar] 8200 | sr nat] sare |$8a,640] $105,600] —staT SD] $195,562 Notes: 1. The proposed budget for Power and Dames & Moore accounts for the time required for interaction and administration of the DFI studies. For Power, the proposed budget also accounts for the time required to integrate the technical aspects of the DF! studies into the Purpose & Need portion of the EIS. 2. Decision Focus has referenced the potential for two trips to Alaska in their proposal. The potential for such meetings is mentioned only as part of Phase 2, the detailed update and analysis. Should meetings in Anchorage be required for Phase 2, and attendance from Power and/or Dames & Moore is required, the meeting will need to be scheduled so as to coincide with already scheduled project meetings. Based on this assumption, no funding for additional trip expenses are proposed for Power or Dames and Moore. 3. NTE means Not to Exceed for Labor and Expenses DFI Proposal Summary - Revision 1 May 16, 1997 Hly 23-175a Proposal to Review and Revise the 1989 Study on the Benefits and Costs of Proposed Transmission Lines in the Alaska Railbelt Background In 1989 Decision Focus Incorporated carried out an economic analysis of several proposed transmission line upgrades or additions in the Railbelt area of Alaska. The results of the analysis were documented in a December, 1989 report entitled “Economic Feasibility of the Proposed 138 KV Transmission Lines in the Railbelt.” One of the lines studied in the 1989 analysis, the Southern Intertie Project (SIP) between Anchorage and Kenai, is currently under serious consideration; an environmental impact statement (EIS) for the project is being prepared. Because the 1989 analysis helped to justify the project, it is desirable to review that analysis to determine whether any changes have occurred in the years since 1989 that would alter the conclusions of that analysis. DFI proposes to carry out a review of the 1989 study to make such a determination. The review will be carried out in two stages. The first phase will update the study accounting for changes in such factors as electricity demand growth projections and projections of fuel prices, as well as updating the benefits estimates to 1997 dollars so they can be directly compared to current estimates of the cost of the proposed line. If any changes identified during the first phase are large enough to impact the conclusions of the earlier study, then more detailed analysis will be carried out in a second phase that may require re-doing major portions of the earlier study. Approach Phase J The 1989 analysis estimated benefits of a new Anchorage-Kenai transmission line in six categories: increased reliability increased transfers of economy energy reduced transmission losses increased state gas royalty and severance tax revenues resulting from increased gas utilization ; deferral/avoidance of new generation capacity reduced cost of maintaining operating reserves Fwnre oS For each of these categories, DFI will review the assumptions and data values underlying the benefits calculations, update them as appropriate, and make the corresponding adjustments to the level of benefits by category. As part of this updating process, DFI will review the comments that have been submitted on the Southern Intertie Project. Depending on the nature of the comments, it may be desirable to talk directly with the parties making the comments or with others knowledgeable in the areas commented on. DFI can begin work as soon as we receive formal approval. If approval is received by May 1, and the data items listed below are provided quickly, then by May 20 DFI will have completed its review of the six benefits categories and determined whether significant additional analysis, i.e., Phase II, will be required. The remainder of Phase I, including the Draft Review Statement, will be completed by the middle of June. In late May or early June we will hold a teleconference review of project status and future direction. If Phase II effort is required, then the scope and schedule for that effort will be determined at this time. Such determination will probably involve a trip to Alaska to meet with the various parties. If a Phase I effort is required, it will begin as soon as approval is received. We will make every effort to complete the analysis and draft documentation of Phase II by early July. Initial Data Requirements In order to meet the relatively tight deadlines of the project, it will be important to have much of the data on hand by May 1. This includes: 1. comments on the Southern Intertie Project 2. description of the SIP 3. prices, current and projected, of fuels used for generation (low, nominal, and high scenarios) 4. current and projected Railbelt electric demand (low, nominal, and high scenarios) 5. changes to existing or planned generating units since 1989: size, heat rates, etc. 6. any new studies on the value of reliability in the Railbelt area Cost and Billing DFI will bill Dames and Moore on a time and materials basis. The hourly billing rates for the individuals expected to work on the proposed effort are: Fancher $315 Haas $250 Stremel $215 Cohen $185 Support $80 We estimate that the cost of Phase I (labor, production of copies, no travel) will be about $32,000, and we guarantee that it will not exceed $40,000. Phase II is much harder to estimate, because we do not yet know what might be required. However, a reasonable estimate (labor, production of copies, two trips to Alaska) might be $100,000, with a not to exceed cost of $140,000. If travel is required, it will be billed at cost, which should not exceed $1,500 per trip. If additional efforts not described in this proposal are requested, their costs will be estimated when requested. Production costs for 40 copies each of the bound draft Review Statement and final Review Statement will be $300. Additional copies will be $4 per copy. Production costs for 40 copies each of the bound draft Revised Report and final Revised Report will be $600. Additional copies will be $8 per copy. DFI will invoice Dames and Moore monthly for work performed in the previous month. rs ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY {= ALASKA @iE_ ~=ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 June 20, 1997 Mr. Eugene N. Bjornstad General Manager Chugach Electric Association, Inc. P.O. Box 196300 Anchorage, Alaska 99519-6300 SUBJECT: Benefit Analysis Update Southern Intertie Dear Mr. Bjornstad: We concur with your decision to have any update performed of the 1990 benefit analysis for the Southern Intertie. We understand that adequate funds for the analysis have been allocated in the current budget. On a related matter, our Board has asked that staff provide an update on the status of the Northern and Southern Intertie. | have discussed this matter with Ms. Dora Gropp. The status report should be at an executive summary level by Chugach Electric. Material from Power Engineers monthly reports could be attached. | suggest a brief discussion including an introduction, budget and schedule, accomplishments to date, and potential critical future milestones or problems which may require interagency, administrative, or legislative guidance or actions. It would be presented in our August Board meeting so a draft is needed by mid July. Please call me if you have any questions. Sincerely, hau Dennis V. McCrohan, P.E. Deputy Director - Energy ” ce: D. Randy Simmons, Executive Director Ms. Dora Gropp, Chugach Electric Association [Def ee eee eer i ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY / = ALASKA im =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 October 6, 1997 Ms. Dora Gropp Project Manager Chugach Electric Association, Inc. P.O. Box 196300 Anchorage, Alaska 99519-6300 SUBJECT: Cost Benefit Analysis Southern Intertie Dear Ms. Gropp: In your September 1997 Progress report for the Southern Intertie, it states that the updated cost/benefit study by DFI has been updated and distributed. As your may be aware, AIDEA’s Board established a condition as part of the approval of CVEA’s latest grant funding request that such a study be undertaken. We would appreciate a copy of the updated DFI report at your earliest convenience. Please let me know if you have any questions. Sincerely, CMe Cot— Dennis V. McCrohan, P.E. Deputy Director - Project Development and Operations CC: D. Randy Simmons, Executive Director Bask) ies March 11, Nines Acie nee aA Homer Electric Association, Inc. 3977 Lake Street E 6 E l V E Homer, Alaska 99603 MAR 1 4 1997 Alaska Industrial Development and Export Authority Attention: Mr. Norm Story, General Manager Subject: Southern Intertie, EIS Process Purpose and Need for the Project Dear Mr. Story: Enclosed is a letter from our consultants, Power Engineers, and EPA addressing the scoping issues for the project. The scoping report cannot be finalized until we propose a method to respond to these issues. Power Engineers proposes to address concerns voiced in regard to the “Purpose and Need” (P&N) by having Decision Focus review and update the 1990 feasibility study and NERC to do the same for the reliability assessment. This approach appears the most cost effective way to satisfy the requirement. The budget for the EIS process for the Southern Intertie includes $220,000 to address these issues. We ask that you review the letters and be prepared to address approval to update the respective studies at the next IPG meeting on March 25,1997. Sincerely, Eugene. Bjornstad General Manager ENG/ DUG:ahw Enclosures: cs Lee Thibert Mike Massin W.O. E9590081, Sec., 2.1.2.1 RF 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie Route Selection Study - Phase 1B W.0.#E9590081 Subject: Purpose and Need for Project Preceding letter and the following attachments were addressed and sent to IPG Utility General Managers and AIDEA as follows: Alaska Electric Generation & Transmission Cooperative, Inc. Attention: Mr. Robert Hufman, Executive Manager 1018 Galena Street Fairbanks, Alaska 99709 cc: Mike Yerkes Alaska Industrial Development and Export Authority Attention: Mr. Randy Simmons, Executive Director 480 West Tudor Road Anchorage, Alaska 99503 cc: Dennis McCrohan Anchorage Municipal Light and Power Attention: Mr. Thomas R. Stahr, General Manager 1200 East First Avenue Anchorage, Alaska 99501 cc: Tim McConnell City of Seward Light & Power Division Attention: Mr. Dave Calvert, Utility Manager P.O. Box 167 Seward, Alaska 99664 Fairbanks Municipal Utilities System Attention: Mr. Frank Biondi, General Manager P.O. Box 72215 Fairbanks, Alaska 99707 Golden Valley Electric Association, Inc. Attention: Mr. Michael P. Kelly, General Manager P.O. Box 71249 ; Fairbanks, Alaska 99707 ce: Steve Haagenson Homer Electric Association, Inc. Attention: Mr. Norm Story, General Manager 3977 Lake Street Homer, Alaska 99603 ce: Don Stead Matanuska Electric Association, Inc. Attention: Mr. Wayne D. Carmony, General Manager P.O. Box 2929 Palmer, Alaska 99645 ce: Jim Hall HAANNALISA\WPDOCS\E9S90081 \MAILTECH. GM March 11, 1997 SENT BY: 3-10-87 ; 14:55 5 POWER ENGINFERS~ 907 562 0027;# 2/ 7 GINEEFS March 10, 1997 eH AR 1 207 Dora Gropp Saye ; : Project Manager Se ee Chugach [Electric Association 5601 Minnesota Drive Anchorage, AK 99519-6300 Subject: 120376-01 EIS Preparation - Review of Economic Benefit and Reliability Studies Dear Dora, As you will recall, in April 1996 we discussed updating the Decision Focus, Inc. cost/benefit study for the Southern Intertic Project, so that we would have up to date information with which to prepare the EIS. You directed me to contact qualificd firms to conduct such an update, and at that time I did contact Decision Focus and Economic and Engineering Services regarding this subject. Subsequently, you decided not to update the study at that time, but rather to wait and see if such an update would be required. Since that timc the Projcct has progressed through the scoping proccss with the agencies and public, and we are currently completing the Scoping Report, which outlincs the studies required to provide a basis for completion of the EIS documentation. The Scoping Report is subject to the approval of the co-lead agencies, so it must address public and agency concerns regarding the Project. As aresult of comments from the public and agencies regarding the Purpose and Need (P&N) tor the Project, it has become abundantly clear that a solid foundation for setting forth the P&N for the Project in the EIS is critical. As an example of the type of comments we have received, | have attached a letter received from the EPA, in which they emphasize the importance of the P&N to the Project. RUS has also emphasized the importance of the P&N on numerous occasions. The P&N for the Project is based on two factors: e Improve the electrical transfer capability of the transmission system between the Kenai Peninsula and Anchorage area to more economically use existing generation resources, reduce clcctrical system instability, and reduce system load shedding requirements in case of system disturbance; and e Increase reliability of the power supply to customers on the Kenai Peninsula and in the Anchorage area by providing a second path for the power during an interruption on the existing Quartz Creek Line. IILY 23-079 POWER Engineers, Incorporated 1 ee eee RR Phone (208) 788-\456 Paux (208) 788-2082 8940 Glenbrook Dr. + P.O) Box L066 Hailey, Iduno 83333 SENT BY: 3-10-37 + 14:56 ; POWER ENUILVTRNKS7> Bul ODZ UULI +e OF Chugach Electric Association March 10, 1997 Page 2 So the drivers for the Southern Intcrtic Project (SIP) are economics (cost savings) and improvements in reliability. Two of the past studies that form the current basis for justifying the P&N for the Project include: e “Economic Feasibility of the Proposed 138kV Transmission Lines in the Rail!belt”; Decision Focus, Inc., April 1.990. e “Reliability Assessment of the Railbelt Interconnected Electric Utility Systems of the Alaska Systems Coordinating Council, 1990-1999”; NERC, March 16, 1990. Because these two factors are so central to the justification for the Project, we must make certain that our basis for citing economics and reliability as the P&N for the Project is very solid. Additionally, in the EJS we will need to name a specific individual as a “Preparer” for each area covered by the EIS. This means that for the economic benefit analysis, we will need to have an individual from Decision Focus, Inc. represent their 1990 study; and have an individual from NERC represent their 1990 reliability analysis. In the process of adopting these studies, the Preparers will need to be given the opportunity to review the respective studies, and recommend any updates to make the studics acceptable for inclusion by reference in the 1998 EIS for the SIP. In cach casc, Decision Focus, Inc. and NERC will need to examine the underlying assumptions of the studies to determine if they are still valid, or what limitations might apply to their conclusions. As part of their review, the Preparers should identify any data gaps or the need to update assumptions or information in order for them to “adopt” the analyses as EIS “Preparers”. Subsequent to the Preparer revicw, we can cvaluate their recommendations to determine if we agrec that any update studies are justified, and to what extent. Our expericnce on other similar projects has taught us that the P&N for a project is onc of the most critical areas to focus on in preparation of the ETS documentation. Critics of the Project will focus first on the P&N, and sccondly on other issues. Over the past few months, we have:seen that this is indeed what has occurred as well for the SIP. We believe this approach will provide a solid basis for presenting the P&N in the EIS. Input from Decision Focus, Inc. and NERC is needed by May 30, 1997 in order to maintain the current schedule. IILY 23.079 a Soe ean 03/10/97 MON 11:57 [TX/RX NO 7290] SENT BY: 3-10-97 ; 14:57; POWER ENGINFERS~ 907 562 0027:# 4/ 7 Chugach Electric Association March 10, 1997 Page 3 Please advise if you require additional information or discussion regarding this important issue. Sincerely, “R Engineersg, Inc. Randy Pollock, P.E. Project Manager Enclosures tp/RP cc: Project Team ALLY 23.079 GS paser saree asaenew 5 SZ ¥ UNITED STATES ENVIRONMENTAL PROTECTION AGENCY ae REGION 10 “prot 1200 Sixth Avenue Seattle, Washington 98101 February 14, 1997 Reply To Attn Of: ECO-088 Ref: 96-076-RUS Mr. Nurul Islam Rural Utilities Service 1400 Independence Avenue SW, Stop 1571 Washington, DC 20250-1571 Dear Mr. Islam: The Environmental Protection Agency (EPA) has reviewed the Notice of Intent (NOI) to prepare an Environmental Impact Statement (EIS) for the Southern Intertie Project in accordance with our responsibilities under the National Environmental Policy Act and Section 309 of the Clean Air Act. We appreciate the opportunity for early involvement in this project. Based on the information presented in the NOI and at the meeting we attended in November, we would like to take this opportunity to highlight the topic areas that EPA believes warrant explicit treatment and discussion in the EIS. 1, Purpose and Need - It is essential that a clear statement of the purpose and need be defined for the proposed project, as it provides the foundation for the analyses to be conducted. We believe that to make early input into the project truly meaningful, the purpose and need is best included in the NOI. Information provided to us indicates that the Intertie Participants Group (IPG) is proposing to construct and operate a 230 kV transmission line between Anchorage and a location on the Kenai Peninsula in Alaska, yet we have been unable to determine the underlying need for the transmission line. Is the intertie needed to alleviate existing power shortages? Is the intertie needed to meet projected power shortfalls in the near or distant future? A clearly defined need for the project is essential in developing a reasonable range of alternatives to evaluate, as well as determining the nature of the analyses to be conducted. The EIS should include a clearly stated purpose and need for the project, along with sufficient information to support it. We would appreciate information related to the purpose and underlying need for the project prior to issuance of the draft EIS to allow us the opportunity to provide meaningful input as the analyses for the proposed project are developed. 2. Existing Transmission Line/Pipeline Corridors - For those proyect alternatives that consider potential intertie routes, we strongly recommend the use of existing transmission line and pipeline corridors. The use of existing corridors would minimize the impacts to presently undisturbed areas with high resource and aesthetic values. © printed on Recycied Paper Range of Alternatives - We are pleased to see that RUS is intending to evaluate energy conservation, local generation, system, and transmission alternatives, in addition to intertie corridor routes, in the EIS. Assuming that the intertie proposal is based on present and/or projected power shortfalls within the areas serviced by the members of the IPG, we believe that the EIS should rigorously evaluate alternative means of providing the power needed by end-users. Stormwater - Please be advised that under Section 402 of the Clean Water Act, the EPA is required to establish National Pollutant Discharge Elimination System (NPDES) requirements for storm water discharges associated with all construction activities involving five (5) or more acres of exposed soil. Construction activities include, but are not limited to, land clearing, grading, and excavation. The proposed intertie corridor would exceed this five acre threshold. Therefore, a Notice of Intent (NOI) must be submitted to the EPA in order to gain coverage under the NPDES Storm Water General Permit (GP). A NOI should be submitted at least two (2) days prior to the beginning of the construction activity. In addition, each construction activity covered by the GP must develop and implement a Storm Water Pollution Prevention Plan, tailored to the site specific conditions, and designed with the goal of preventing or minimizing the amount of pollutants in storm water discharges from the project. Enclosure 1 contains a Storm Water Program Package, which includes a NOI for Storm Water Discharges associated with Industrial Activity under the NPDES GP. Wetlands - In order for decision-maker and the public to understand potentially significant impacts to waters of the United States, including wetlands, from construction of the project, the draft EIS should include an identification of wetland types, acreage, and location, and an assessment of wetland functions and values. This information should be provided for impacts associated with intertie right of way alternatives. All construction activities should avoid high resource wetlands (particularly A and B wetlands in Anchorage, and wetlands in the Kenai National Wildlife Refuge) to the maximum extent practicable. All unavoidable wetland impacts should be minimized by strict implementation of Best Management Practices (BMPs). The EIS should provide a discussion of the proposed BMPs to be implemented and monitoring proposed to demonstrate their effectiveness. Aesthetics - Because preliminary investigations have identified potential intertie routes through near-wilderness settings, we strongly recommend that project alternatives include design elements that would eliminate or minimize the adverse effects to the aesthetic qualities of those areas. We believe that one way of minimizing such impacts would be underground placement of transmission lines for.intertie alignment alternatives through aesthetically sensitive areas. Evaluation of potential aesthetic impacts should be included in the EIS. ie Relationship to the Northern Intertie Project - Because the completion of both the Southern and Northern Intertie Projects would result in an electrical network extending from Fairbanks to the Kenai Peninsula, we believe that the EIS should provide a discussion of the interrelationship between the two projects, the anticipated operation of the completed network, and any impacts associated with operation of the electrical network. Thank you for providing this opportunity for early involvement in this project. Should you have any questions about our comments, please feel free to contact me at (206) 553-8561 or Phil North in our Anchorage office at (907) 271-3401. Sincerely, WilcM by William M. Ryan Environmental Review Team Enclosure cc: Dora Gropp, Chugach Electric Association, Inc. gach ASSOCIATION, INC. Baaae EGEIVE|}) . CHUGACH ELECTRIC UL Pa ASSOCIATION, INC. \ oct 10 (997 Alaska Industrial Development elopment and Export Authority Alaska Industrial a 2 480 West Tudor and Export Authority Anchorage, Alaska 99503 Attention: Mr. Dennis V. McCrohan, P.E., Deputy Director, Project Development and Operations Subject: Southern Intertie - EIS Process DFI Economic Feasibility Study Update Dear Mr. McCrohan: We have received your letter of October 6, 1997 and wish to apologize for inadvertently bypassing the distribution of the above subject report to your office. We will make a conscious effort in the future to ensure that AIDEA is included on the cc: list for items distributed to the IPG for this project. At the last distribution of this report however, there has since been an additional update (August 1997, Revision 1). The attached page is an explanation of the revisions made followed by the report itself. As of this transmittal, all IPG participants and AIDEA will receive this report. Again, we extend our apologies for the error. If there are any questions, please contact me at 762-4626 by telephone, or fax to 762-4617 or by e-mail to dora_gropp@chugachelectric.com. Sincerely, Dora L. Gropp, P.E. Transmission & Special Projects DLG/ahw Enclosure: “Review and Update of Economic Feasibility of Southern Intertie Fs tebe it Prepared by Decision Focus Incorporated, August 1997, Revision 1. Tl eas c: W.0.#E9590081, Sec.,2.2.2.1 CC \ DRS (KL [S08 RF aa 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 ae R ECEIVE D oct 3 1997 SPEOAL PROUT Review and Update of Economic Feasibility of Southern Intertie Project Stephen Haas Annette Hulse Decision Focus Incorporated 650 Castro Street, Suite 300 Mountain View, California 94041-2055 (415) 960-3450 Prepared for: Power Engineers Incorporated 3940 Glenbrook Drive Hailey, ID 83333 August 1997 Revision 1 1.0 2.0 3.0 TABLE OF CONTENTS Introduction and Summary ....cccssssecsssesssseesssneessensecssnsecsneecssnsessaneecsssneccenseseaseceannecsees 1 L1 Backgroutnd....scssecocossersnnncssossonesecssonsscssoonnusegeonussessensessopsuneesesa;esaiitececnnsssconnnaseece 1 1.2 —_ Updated Benefits Estimates ......cssssssssesssesessssneseessssssesssssnnneessscssssnnaneeeseesees 1 1.3 —_ Range of Berefits .........ssssssssssecsssseovsscssnssscssnesessnssonnsssonsssssconesesonnsoconasconsecsonnsoes 2 1.4 Additional Analysis ........sssssssssssssseesssseeessseessssesssseessnsecsesssseesssneessnsesssvessenseses 3 Benefits Estimation Methodology .......ssssssssssessesssesssseesssecenseesssnseessnnsessnssenneccsnsesssse 4 2.1 ——- Capacity Shharing........ssvscsscsssessssssssssssosesorssessnsnnesransensesscssonesesconssesonessonesesonesesone 4 2.2 —_ Economy Energy Transfer.....sscssssssssssesssseccsssessnsssnnecesssnsescssneccssneecensecesnecssess 5 EID) uO Reta Daly jssseccsscseconsceovnsssnresvsersvevecessecrverteerernnstcsessteaconsaeesscoseecunsecserveneseervzsseeses 6 Updates of Key Data Items 3.1 Converting to 1997 Dollars . earl 3.2. Discount Rate............ qi, 3.3. Demand Forecasts... 3.4 Generating Capacity: Planned Additions and Retirements............se+00 9 3.5 Cost of New Combustion Turbinee..........ssssesssessseesssesssnessssnessneessneenneenseesenses 9 1S .6 etched ess eeeeseveeeeeesssnereesseerensne srenesneenersceesreneenetrarateceareeeestreerrmeeetssemeeetrrrteteteaes 9 3.7 —_—_ Level of Customer Outages....scsssesssssssensecssnssesseeccnseessssnsscessnnsessnaeesseesesnees 11 3.8 Value of a Customer Outage.....scssssssssssesssesecsnesssneecsssnessssssseessnscessaneessneeess 11 LIST OF TABLES Table Page 1 — Net Present Value of Benefits of Proposed SIP ....s.sssssssssssssssssssssssssnssssssnnsecessnnessesssnnees 2 2 Comparison of Peak Demand Forecasts for 2010 (MW)....ssesscssssssssesssssessessseseessssseesees 8 3 Comparison of 1997 Fuel Price Forecast with Actual Prices......sssssssssesssssesssesessnseees 10 4 Comparison of Fuel Price Forecasts for 2010 Made in 1989 with those Made it. 1997......sssssssssssesssssssesesssssseeesssssseeesssssseecesnsessessenseess 10 Decision Focus Incorporated - Confidential ii R2947a Revi 1.0 Introduction and Summary 1.1 Background In 1989 Decision Focus Incorporated (DFI) carried out an economic analysis of the benefits of several proposed transmission line upgrades or additions in the Railbelt area of Alaska. The results of the analysis were documented in a December 1989 report entitled “Economic Feasibility of the Proposed 138 KV Transmission Lines in the Railbelt”. One of the lines studied in the 1989 analysis, the Southern Intertie Project (SIP) between Anchorage and Kenai, is currently under serious consideration, and an environmental impact statement (EIS) is being prepared for the proposed project. Because DFI’s 1989 analysis helped to justify the project, it is desirable to review that analysis to determine whether any changes have occurred in the years since 1989 that would alter the conclusions of the analysis. The December 1989 report estimated benefits of new transmission lines in six different categories: capacity sharing economy energy transfer reliability transmission losses operating reserve sharing state revenue from gas royalty and severance taxes ATP YN The current review and update, described in this report, concentrates on the first three categories, which accounted for about 90 per cent of the total benefits in the 1989 study. The update focused on the key data values underlying the estimates, determined how these data values have changed, and calculated the impacts on the benefits estimates. In addition, all benefit estimates were converted to 1997 dollars for easy comparison to current cost estimates of the proposed line. 1.2 Updated Benefits Estimates Table 1 summarizes the conclusions of the update. The dollar values shown are the net present value of benefits in each category over the expected 40-year life of the new transmission line. In 1989 the line was expected to come into operation in 1994, so the 1989 benefits values are for the period 1994-2033; the line is now planned to come into operation January 1, 2004, so the benefits values are for the period 2004-2043. The 1989 study calculated all present values in 1994, the year the line was expected to come into operation; here we display the present values of the individual categories for 2004, the year the line is now expected to come into operation, and the total for both 2004 and 1997; the 1997 value is simply the 2004 value discounted seven years at the indicated discount rate. Decision Focus Incorporated - Confidential R2947a Revi Table 1 Net Present Value of Benefits of Proposed SIP December 1989 | December 1989 December 1989 New Value New Value Value (millions | Value (millions | Value (millions (millions of (millions of of 1990 $, 4.5% of 1997 $, 4.5% of 1997 $, 6% 1997 $, 4.5% 1997 $, 6% discount rate) discount rate) | discount rate) Capacity Sharing * in 1994 for 1989 study, and in 2004 for current update. The new total benefits estimate is substantial, but is lower than for the 1989 study, when expressed in the same year dollars, due primarily to lower forecasts of fuel prices and a lower cost of new generating capacity. The changes in benefits and the reasons for them are explained in Sections 2 and 3. The biggest change is for the capacity sharing and economy energy transfer benefits, which are significantly lower, primarily as a result of lower cost of new generating capacity and lower fuel price projections. Benefits of improved reliability are the same as the 1989 study, except for the conversion to 1997 dollars, because complete updating of the reliability numbers was beyond the scope of this update; it would require significant data analysis and review of a number of subjective assumptions. Benefits in the other categories are the same as the 1989 study, except for the conversion to 1997 dollars; they were significantly smaller than the first three categories, so we did not attempt to update them. To put the benefits of the proposed SIP in context, it is helpful to compare them to the current level of expenditures (total paid by retail customers) on electricity in the Railbelt. These are roughly $450 million per year. If we assume these will grow at 2 per cent per year, then the net present value of these expenditures over the period 2004- 2043, for which we have estimated the benefits of the proposed Kenai-Anchorage line, is about $9 billion. 1.3 Range of Benefits Estimating the future benefits of a project like the SIP is difficult because it depends on numerous factors that can not be predicted or measured with precision, ranging from future fuel prices to how much consumers would pay to avoid an outage to how the Decision Focus Incorporated - Confidential R2947a Rev1 Railbelt utilities will choose to operate their interconnected systems in the future. Asa - result, there is necessarily a great deal of uncertainty and imprecision in the benefits estimates presented here. The December 1989 study showed a range of values within which the benefits were expected to lie. This review takes the midpoint of that range as a starting point, but does not try to update the range. This should not be interpreted as a failure to recognize the uncertainty and lack of precision; if anything, the range of possible benefits may be even wider than presented in the December 1989 study. (See page 6-1 of the Railbelt Intertie Feasibility Study — Final Report, prepared by the Alaska Energy Authority, March 1991 for further discussion of this point.) 1.4 Additional Analysis Time and budget constraints limited the extent of this review. In particular, we have not revisited operating scenarios for the Railbelt system, i.e., how the overall system is likely to be operated with and without the proposed line. Conditions and expectations have changed since the 1989 study. For example, at that time Bradley Lake was not yet on line, but was expected to provide spinning reserve; now it is on line, but is not providing spinning reserve. As another example, consideration is now being given to adding battery energy storage (BESS) or superconducting magnetic energy storage (SMES) to the Railbelt system; the value of the proposed transmission line could vary significantly if storage is added. If additional analysis of the benefits of the SIP is considered warranted, it should focus on the following areas: a Economy energy benefits: projections of how the entire Railbelt system would be operated, with and without the new line, should be developed, instead of simply adjusting the 1989 estimates in proportion to the change in projected fuel prices. a Spinning reserve benefits: projections of how the entire Railbelt system would be operated, with and without the new line, will impact spinning reserve costs as well. a Impacts of adding BESS or SMES in addition to the SIP to the Railbelt system; Anchorage Municipal Light and Power (AMLP) has estimated that the savings in spinning reserve costs from adding storage would be $1 million per year for AMLP alone, but only if there is adequate transmission capacity. a Reliability benefits: the assumptions about the extent to which unserved energy would be reduced by constructing the proposed line, and about the value of each unit of unserved energy, should be reviewed. Decision Focus Incorporated - Confidential R2947a Rev1 a Other potential benefits not included in either study, such as transmission system stability and economies of scale in installing new generating capacity. a Uncertainty in projections of fuel prices and load growth. Specifically, we recommend a re-examination of how the overall generating system is likely to be operated without the proposed line, with the proposed line, and with both the proposed line and BESS or SMES. Such a re-examination would require considerable interaction with staff of the IPG members, and would include factors such as unit commitment and dispatch policies, hydro-thermal coordination, spinning reserve, and transmission line loading policies. The re-examination would provide more credible values for the economy energy and spinning reserve benefits of the proposed transmission line. 2.0 Benefits Estimation Methodology This section outlines the methodology used for calculating the numerical estimates in each of the three major categories, summarizing the key assumptions and listing the major data items affecting the estimates. 2.1 Capacity Sharing Capacity sharing benefits occur when: e one region has a capacity shortfall (i.e., demand plus the required reserve margin exceeds the capacity available) e another region has a capacity surplus e transmission links allow the first region to rely on excess capacity in the second region, even if only for a limited time Increased transmission capacity allows one region to rely more heavily on generation capacity in another region, for capacity as well as for energy. For the Railbelt, the SIP would allow Anchorage to rely on a greater portion of the Kenai Peninsula generation capacity surplus for meeting the Anchorage capacity requirement, thus deferring the need to build new generation capacity in Anchorage. There are two types of capacity sharing benefits: 1. As load grows in a region, enough capacity must be available to meet the peak load in that region plus a required reserve margin. Increased transmission capacity increases access to generation capacity in regions with surplus capacity, thus making it possible to defer adding generation capacity in the first region Decision Focus Incorporated - Confidential R2947a Rev 25 The larger and more interconnected a system, the lower the reserve margin required to provide the same level of reliability. Increasing transmission capacity increases the level of interconnectedness for the Railbelt, allowing utilities to permanently avoid building some of the capacity that would have been constructed to maintain the desired reserve margin. Construction of the SIP would produce both types of capacity sharing benefits. Demand growth, taken together with available capacity, determines the timing of any capacity sharing benefits. Demand tends to grow over time, while unless new retirements. Therefore, capacity sharing benefits tend to first grow over time as surplus is eliminated in relatively capacity-poor regions, then fall as surplus also disappears in the relatively capacity-rich regions. The capacity sharing benefit in a year is the amount of capacity avoided or deferred in the year, measured in kilowatt-years, times the cost of a kilowatt-year of capacity. For the latter we use the annualized fixed cost of a new combustion turbine, including both the installed capital cost and the fixed operations and maintenance cost; this is a standard yardstick for measuring the value of capacity. key data items: e total generating capacity available peak demand growth e e required reserve margin e fixed cost of new combustion turbine 2.2 Economy Energy Transfers This benefit occurs when high cost energy in one area is displaced by lower cost energy from another area. In the Railbelt all available hydro energy, which uses no fuel and for which the variable cost is essentially zero, will be used with or without the proposed new transmission line. Thus the benefits in this category result from displacing electricity generated from thermal units (gas-fired or oil-fired) with electricity from other thermal units with lower variable costs. These lower costs may result from access to less expensive fuel or from some units being more efficient (converting a greater fraction of the energy content of the fuel to electricity) than others. The economy energy benefit is equal to the increased amount transferred between Kenai and Anchorage (as a result of the new line) times the difference in marginal variable operating costs between the two regions. Secondary impacts result from being able to better operate units at or near their optimal loading levels, and improved hydro-thermal coordination. Decision Focus Incorporated - Confidential R2947a Revi ' The variable costs of producing electricity, i.e., costs of economy energy, are roughly proportional to fuel prices. This means that higher fuel prices translate directly to a higher level of economy energy transfer benefits; a percentage increase in fuel prices translates to roughly the same percentage increase in economy energy benefits if all fuel prices in both regions are increased by the same percentage. Similarly, a reduction in price forecasts for all fuels translates directly to reductions in economy energy transfer benefits. Changes in load growth forecasts since 1989 may impact economy energy amounts transferred, also impacting the benefits in this category, but this is a smaller effect and has not been estimated. key data items: a fuel price projections a load growth projections 2.3 Reliability Reliability is determined by the number, magnitude, and duration of customer outages. Reliability benefits occur if customer outages are reduced as a direct consequence of constructing a new transmission line. The proposed SIP is expected to reduce both the frequency and duration of generation- and transmission-related outages, i.e., outages related to unexpected loss of generating units or the existing Anchorage-Kenai transmission line. In the event of an outage, unserved energy is defined as the electricity that would have been consumed if the outage had not occurred. The reliability benefit is equal to the expected reduction in unserved energy as a result of the proposed line times the value of each unit of unserved energy. Several studies have shown that the value per unit of unserved energy depends on the customer class affected and the duration of the outage. key data items: a reduction in unserved energy as result of new line a value of unserved energy 3.0 Updates Of Key Data Items The major factors that go into determining benefits of capacity sharing, economy energy, and reliability include: a discount rate Decision Focus Incorporated - Confidential R2947a Rev1 demand forecasts generating capacity: planned additions and retirements cost of new capacity fuel price projections level of customer outages (number, size, duration) and outage causes value of customer outages Each of these is discussed below, followed by a qualitative discussion of the impact on benefits estimates given the new information. 3.1 Converting to 1997 Dollars The first challenge in comparing 1989 estimates with current estimates is to make sure that the numbers are all based on the same year’s dollars; this eliminates the effects of inflation that make a dollar today not as valuable as a dollar was 7 or 8 years ago. DFI’s 1989 benefits study expressed all values in 1990 dollars. For this update all values are expressed in 1997 dollars. Therefore, before we can compare the data from the previous study to the new information, we have to inflate it so that we can compare old values expressed in 1997 dollars to new values expressed in 1997 dollars. We have assumed an annual average inflation rate over the last 7 years of 3.23 per cent, which is the annual average increase in the Consumer Price Index from 1990 to 1997. With this inflation rate, a value of $1.00 in 1990 dollars corresponds to $1.25 in 1997 dollars. 3.2 Discount Rate In order to make simple comparisons between two or more multi-year streams of costs or benefits, the multi-year streams are usually converted to a net present value by discounting costs and benefits that occur in future years back to an initial year, and summing over all years. This means that costs or benefits that occur in the future carry less weight than those occurring now. For example, at a discount rate of 6 per cent, $1 of benefits in 1998 is worth $0.94 now, while $1 of benefits in 2010 is worth only $0.47 now. The choice of discount rate can make a significant difference to the net present value of a benefits stream if many of the benefits occur in the future. A lower discount rate gives relatively more weight to future benefits than a higher discount rate. Which discount rate to use for evaluating projects such as the SIP is not obvious. The discount rate is supposed to reflect the time preference of the party or parties making the decisions. Is this the state, the ratepayers, or some other entity? Should a higher discount rate be used to reflect the riskiness of the project? Decision Focus Incorporated - Confidential R2947a Revi ' We believe that for the SIP the appropriate discount rate should reflect the cost (or value) to the ratepayer of investing money today to capture future benefits. The cost of capital for the investing organization is a good measure of the cost to the ratepayer. For instance, Chugach Electric Association has an average historic cost of debt of about 8.6 per cent. This means that, on average, when Chugach has borrowed money in the past, it has paid a nominal interest rate of 8.6 per cent on the debt. The nominal interest rate includes inflation; to get the equivalent real interest rate we take out the effects of inflation. Fuel prices provided by Golden Valley Electric Association indicate a projected forward-looking inflation rate of 2 per cent, and historical inflation has been 2.5 to 3 per cent over the last 5 years. For this update of the 1989 study, we have used a discount rate of 6 per cent as representative of the real cost of capital for the Railbelt area (8.6 per cent nominal = 6 per cent real + 2.6 per cent inflation). Present values of benefits are shown in Table 1 using both 6 per cent and 4.5 per cent discount rates. Using a 6 per cent discount rate instead of 4.5 per cent, as was used in the 1989 study, with no other changes in assumptions lowers the present value of benefits by 15 to 20 per cent, depending on the pattern of benefits over time. For rates between 4.5 and 6 per cent, the present value of benefits would lie between those calculated using these two rates. Note that both the 4.5 per cent rate used in 1989 and the 6 per cent rate suggested here are real discount rates, i.e., rates excluding inflation. The switch from 4.5 to 6 per cent does not reflect any changes in underlying conditions, but rather a change in assumptions away from a rate mandated by a government agency to a rate more appropriate for a utility and its ratepayers. 3.3 Demand Forecasts Table 2 compares the demand forecast used in the 1989 study with current demand forecasts, by looking at the forecast for the year 2010. Table 2 COMPARISON OF PEAK DEMAND FORECASTS FOR 2010 (MW) Decision Focus Incorporated - Confidential R2947a Rev1 10 Table 3 Comparison of 1997 Fuel Price Forecast with Actual Prices [$/million Btu] 1989 Forecast of 1997 1989 Forecast of 1997 Actual Price 1997 Price Price Fuel [Plants (1990 $) (1997 $) (97 $) Gas1 $1.50 Gas2 NA Gas3 027 Chena 6 $6.16 $6.83 NA Seward oid 72.8 Coal NA Coal? $1.10 NA - no data provided Table 4 compares the 1989 fuel price forecasts for 2010 with current fuel price forecasts for 2010. As in Table 3, all numbers are converted to 1997 dollars. We see a similar pattern, in that the prices forecast today for 2010 are 10 to 50 per cent lower than the prices that were forecast for 2010 in 1989. Table 4 Comparison of Fuel Price Forecasts for 2010 Made in 1989 With Those Made in 1997 [$/million Btu] 1989 Forecast of 2010 Price (1997 $) 1997 Forecast of 2010 Price (1997 $) $1.50 1989 Forecast of 2010 Price (1990 $) $2.31 $2.88 Fairbanks Chena 6 $7.63 $9.53 Seward $279 Coal 2 Decision Focus Incorporated - Confidential R2947a Rev1 11 Lower fuel prices reduce the value of the benefits from economy energy. Without detailed system modeling (i.e., how each generating unit would be operated over the 40-year time horizon, with and without the proposed new transmission line), it is impossible to say precisely how much the benefits are reduced (see recommendation in Section 1.4). However, in aggregate, we would expect that if all fuel prices are lower by some percentage, then the benefits will similarly go down by about the same percentage. 3.7 Level of Customer Outages Two key assumptions about the impact of the new Kenai-Anchorage line were made in the 1989 study: a the new line would reduce outages (unserved energy) in the Kenai by about 55 per cent from historical levels (1986-1987); this assumption took into account the fraction of time that energy was flowing in each direction, and the likely impact of an outage for each direction of flow. a the new line would reduce outages in the Anchorage area by 30 to 60 megawatthours; this is based on avoiding 1 to 2 outages of 30 MW and one hour duration per year. The current update uses these same assumptions. New outage data has been provided, but it is incomplete, and completely redoing the reliability benefits component was beyond the scope of this update (see recommendation in Section 1.4). 3.8 Value of a Customer Outage Except for converting to 1997 dollars, we used the same assumptions as the 1989 study. About 88 per cent of outages are industrial or commercial, with the remainder residential. The outages that would be impacted by the proposed line range from a few minutes to a few hours in duration. Based on the distribution by customer class and duration, the average value of each kilowatthour of unserved energy avoided is about $22 (1997 dollars). Decision Focus Incorporated - Confidential R2947a Rev1 September 4, 1997 Homer Electric Association, Inc. 3977 Lake Street Homer, Alaska 99603 Attention: Mr. Norm Story, General Manager Subject: Southern Intertie, EIS Process Scoping Report Dear Mr. Story: Enclosed is a copy of the Scoping Report and the Work Plan prepared by Dames and Moore in response to issues raised during the scoping process for the EIS phase of the above subject project. It includes documentation of all comments received as well as how they will be addressed in the EIS. This report has been accepted by the federal agencies involved in the EIS preparation and forms the basis for the EIS itself. If you have any questions please contact Dora Gropp, Project Manager at (907) 762-4626 by phone, or by e-mail to dora_gropp@chugachelectric.com or by fax to (907) 762-4617. Sincerely, a Uh ter Eugene-N. Bjorns General Manager ENB/G:ahw Enclosures: Scoping Report and Work Plan c: Lee Thibert Mike Massin IPG Technical Committee, w/ W.O. E9590081, Sec.2.1.2.1 n \ ) CC. than Suto EL: o ( Ca “vy VA \ i + DOW 0 NY \ 5601 Minnesota Drive * P.O. Box 196300 * Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 Southern Intertie Route Selection Study - Phase 1B W.0.#E9590081 Subject: EIS Process - Scoping Report Preceding letter from Chugach sent to IPG Utility General Managers and to AIDEA as follows: Ir ro & CM WI |e uGnee 0) Alaska Electric Generation & Transmission Cooperative, toe SEP -9 1997. L Attention: Mr. Robert Hufman : 1018 Galena Street Alaska Industrial Development Fairbanks, Alaska 99709 c: Mike Yerkes and Export Authority Alaska Industrial Development & Export Authority Attention: Mr. Randy Simmons, Executive Director 480 West Tudor Road Anchorage, Alaska 99503 c: (Dennis McCrohan — Anchorage Municipal Light and Power Attention: Mr. Hank Nikkels, Acting General Manager 1200 East First Avenue Anchorage, Alaska 99501 c: Tim McConnell City of Seward, Light and Power Division Attention: Mr. Dave Calvert, Utility Manager P.O. Box 167 Seward, Alaska 99664 Fairbanks Municipal Utilities System Attention: Mr. Frank Biondi, General Manager P.O. Box 72215 Fairbanks, Alaska 99707 Golden Valley Electric Association, Inc. Attention: Mr. Michael Kelly, General Manager P.O. Box 71249 Fairbanks, Alaska 99707 c: Mr. Steve Haagenson Homer Electric Association, Inc. Attention: Mr. Norm Story, General Manager 3977 Lake Street Homer, Alaska 99603 c Mr. Don Stead Matanuska Electric Association, Inc. Attention: Mr. Wayne Carmony, General Manager P.O. Box 2929 Palmer, Alaska 99645 c: Jim Hall HADATANNALISA\WPDOCSESS9008KMAILTECH GM Setpember 4, 1997 i ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY = ALASKA i =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 MEMORANDUM TO: D. Randy Simmons Executive Director wad FROM: Dennis V. McCrohan, P.E. Deputy Director - Project Development & Operations DATE: February 25, 1998 SUBJECT: Additional Funding for the Southern Intertie This memo is a draft of briefing material on the key issues associated with additional funding for the Southern Intertie as contemplated in the February 12, 1998 Chugach Electric Association (CEA) letter (attached). As noted in previous AIDEA Board meetings, Commissioner Perkins is particularly concemed about the prudence of releasing further funding for this project. Funding and Agreements The first two resolutions, approved by the AIDEA Board, authorized funding of $500,000 and $400,000 respectively. These funds were for Phase 1 work. While the conditions of the Grant Administration and Delegation Agreement and the Grant Administration Agreement had not been completely satisfied, it was recommended by staff, after John Rubini’s review, that these funds were necessary to accomplish the Agreement requirements and to start and progress the project. At the time, a Reimbursement Agreement, which required repayment of the grant funds if the project were not to proceed, was considered but rejected. The Board was advised of this consideration. The most recent AIDEA funding Resolution G96-09 (attached) authorized funding up to $5,100,000 which included the EIS preparation and some preliminary engineering necessary to complete the EIS and financing requirements. These were considered to be preliminary tasks of Phase 2 work. G96-09 was approved on May 21, 1996. Conditions of the Resolution were that a cost benefit analysis was to be included in the final EIS, that the Executive Director may impose reasonable terms and conditions relating to the release of Phase I] funds authorized by the Resolution, and that the Executive Director was directed to monitor progress of the utilities with respect to the core development issues related to the Intertie. The cost benefit analysis has been completed in draft form for incorporation into the EIS. It appears satisfactory progress is being made. AIDEA has received monthly reports from CEA and the progress of the work appears satisfactory. The core development issues in the Grant Administration and Delegation Agreement and the Grant Administration Agreement, which were ¥a.3-D- vi Memorandum February 25, 1998 Page 2 not satisfied at the time G96-09 was approved, are best addressed in Mr. Snell’s letter of July 14, 1995 to the Intertie Participants Group (attached). The current status of these issues is as follows: 1. A cost benefit analysis has been undertaken and will be incorporated in the EIS. A Memorandum of Understanding (MOU) (attached), completed in June 1995, addressed the matter of a Construction Agreement. | have no record that a Construction Agreement has ever been completed. AIDEA’s intent by this requirement was to assure the “peace in the valley’ concept and to establish a viable construction management plan and construction phasing. 2. The ownership structure was addressed by 1997 legislative action. 3. The enforceability of the various Agreements on the individual utilities has to my knowledge not been addressed. | am not aware of any binding letters from the utilities noted in the July 14, 1995 letter. | am also uncertain whether the 1997 legislation changed the need for such binding letters. However, it should be noted that the utilities have withdrawal provisions allowing abandonment of the project. 4. A determination by each utility of their APUC approval requirements was a precondition to expenditure of grant monies. This condition has not been enforced in the release of funds to date. It is our understanding that CEA nor any of the Participating Utilities have made an APUC filing for the Southern Intertie. Route Selection Preliminary studies by CEA had discarded the existing transmission alignment coupled with a Bird Point crossing and focused on the Enstar and Tesoro routes. On November 3, 1997, Power Engineers issued a report recommending the Tesoro route. However, the attached February 14, 1998, letter indicates that CEA is now recommending the Enstar route. | do not know what was the basis for this deviation from the Power Engineers recommendation. The Enstar route is thought to be less expensive than the Tesoro route but more environmentally sensitive. It should be noted that it is probable that more funds, in addition to the February 12, 1998 request, will be required to complete the EIS, preliminary engineering, and funding requirements. It seems prudent to request CEA to provide forecasts for all costs to complete the EIS, gain APUC approval, and assure financing. Please let me know what additional information is needed. Attachments cc: Keith A. Laufer, Finance and Legal Affairs Manager CHUGACH ELECTRIC ASSOCIATION, INC. February 12, 1998 UU Fesagie. LD AK Electric Gen. & Trans. Cooperative, Inc. 1018 Galena Street Fairbanks, Alaska 99709-4826 Attention: Mr. Robert Hufman, Executive Manager Subject: Southern Intertie, EIS Process Route Selection Dear Mr. Hufman: The Environmental Analysis (EVAL) for this project is to be completed in March 1998. As we indicated earlier and discussed at our meeting on December 9, 1997, this EVAL has to include the “Applicant’s Proposed Action”. Based on construction cost estimates and technical merits, we recommend the transmission line be constructed following the ENSTAR route. We have prepared a resolution (attached), which reflects acceptance of this recommendation and authorize Chugach, the Project Manager, to file an application for a permit to place facilities in the Kenai Wildlife Refuge with the USFWS under the provisions of ANILCA. Termination points for this route are the Soldotna Substation on the Kenai Peninsula and Chugach’s International Substation in Anchorage. A change in termination point in Anchorage is possible, if Chugach constructs a transmission level substation in south Anchorage priar to construction of the Southern Intertie Project. In that case it should be anticipated that the Intertie will terminate at the new substation, which would reduce the overall lengths by an estimated 2 to 3 miles. It is estimated that filing the ANILCA application will add between $500,000 and $600,000 to the EIS preparation costs due to added information and coordination requirements with the USFWS as well as reimbursement of that agency’s efforts on behalf of the project. With a present commitment of $4,700,000 against the $5,100,000 ceiling set for Phase I of the project in Schedule A-2 of the Grant Administration Agreement, additional funds will need to be allocated, when the application is filed. The established ceiling cannot be exceeded without AIDEA approval. The IPG has to request an amendment to the ceiling and AIDEA has to consider this request within 15 days of receipt. This is expected to be in June of 1998. A proposed resolution is attached. We expect the IPG to vote on the proposed resolutions on February 25, 1998. Please contact me or our project manager Dora Gropp at (907) 762-4626 if you have any questions. Sincerely, Eugene N. Jt General Manager Enclosures: Resolutions c: @gAIDEA IPG Tech Lee Thibert Mike Massin Don Edwards W.O. E9590081, Sec.2 RF 5601 Minnesota Drive « P.O. Box 196300 « Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 INTERTIE PARTICIPANT GROUP | SOUTHERN INTERTIE PROJECT RESOLUTION 98- Whereas an Environmental Impact Statement (EIS) has to be prepared for the Southern Intertie Project, and Whereas the applicant’s (IPG) proposed action is to be included in this document, and Whereas the “ENSTAR’” route has been estimated to result in the lowest costs and has technical advantages over the alternative(s), Now therefore be it resolved to propose to construct the transmission line along the ENSTAR route and authorize Chugach Elelctric Association as the Project Manager to apply for the necessary permits. INTERTIE PARTICIPANT GROUP SOUTHERN INTERTIE PROJECT RESOLUTION 98- Whereas the IPG proposes to construct the Southern Intertie Project following the ENSTAR route and Whereas the ENSTAR route includes sections within the Kenai National Wildlife Refuge, which will require a special use permit under the provisions of the Alaska National Interest Land Act (ANILCA), and Whereas the application for such permits requires additional environmental work and coordination efforts not contemplated in the original Environmental Impact Statement, and Whereas funding for the present phase of the project (Phase I) will not be sufficient to cover this additional work, Now therefore be it resolved that Chugach Electric, the project manager, be authorized to request a funding increase for Phase I in the amount of $500,000 from the Alaska Industrial Development and Export Authority (AIDEA), the Custodian and Administrator of the State Grant for this project. ovm ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY RESOLUTION NO. G96-09 A RESOLUTION OF THE ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY AUTHORIZING THE DISBURSEMENT OF A PORTION OF GRANT PROCEEDS IN CONNECTION WITH A PROPOSED INTERTIE BETWEEN ANCHORAGE AND THE KENAI PENINSULA, AND TAKING RELATED ACTIONS RELATED TO INTERTIE PROJECTS WHEREAS, the Alaska Industrial Development and Export Authority ("Authority") is administering grants made available for the development of the power transmission intertie between Anchorage and the Kenai Peninsula (the "Southern Intertie") ; WHEREAS, in Resolution G95-20 the Authority approved the disbursement of up to $900,000 of grant funds for certain preliminary project development tasks ("Phase I Work"); WHEREAS, Chugach Electric Association, on behalf of the participating utilities, has completed the Phase I Work contemplated under Resolution G95-20 and is now requesting funding to proceed into the Environmental Impact Statement analysis and preliminary engineering with respect to the Southern rneere©(mnase 11 Work] ii WHEREAS, the Authority has reviewed the Phase I Work and found it to be complete; WHEREAS, the Authority recommends. and the participating utilities concur, that the analysis for the Environmental Impact Statement should include a _ cost-benefit analysis of the proposed Intertie; WHEREAS, the Authority estimates the cost of the work proposed by Chugach Electric Association for the next phase of project development will be $4,200,000; WHEREAS, the Authority finds it reasonable and in the public interest to release an additional $4,200,000 in grant funds, subject to such reasonable terms and conditions the Authority may impose, to facilitate continued development of the Project; NOW, THEREFORE, BE IT RESOLVED: Ly The Executive Director is authorized to release up to $4,200,000 of grant funds to undertake Phase II Work, providing that the participating utilities agree in writing that the Environmental Impact Statement analysis will include a cost- benefit evaluation of the Southern Intertie. ze The Executive Director may impose reasonable terms and conditions relating to the release of the Phase II funds authorized in Section 1. a) The Executive Director of the Authority is directed to monitor progress of the utilities with respect to the RESOLUTION NO. G96-09 PAGE 2 resolution of the core development issues related to the Intertie Projects and report to this Board with respect to such progress. 4. The Executive Director is authorized and empowered to take any and all actions appropriate and consistent with this Resolution. DATED at Anchorage, Alaska this 21st day of May, 1996. eee ease Chairman (S E A L) ACTER SHET Wh Pall Secretary RESOLUTION NO. G96-09 PAGE 3 Ke x t Le ALASKA INDUSTRIAL DEVELOPMENT a_~ AND EXPORT AUTHORITY = ALASKA @@—™ ENERGY AUTHORITY woO*® 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 July 14, 1995 Mr. Thomas R. Stahr General Manager and Chairman IPG Municipal Light & Power 1200 East First Avenue Anchorage, Alaska 99501-1685 ; _ ec: DB Subject: —_Intertie Financing Dear Mr. Stahr: | am writing in response to your letter to me dated June 13, 1995, relating to the recent Intertie Participants Group (IPG) action to begin work on the southern intertie. | am pleased with IPG’s desire to initiate work on the southern intertie. Your letter also provides a timely opportunity to assess the progress made to date on the intertie projects. Initially, | would like to note that through informal discussion with the various participants, it is AIDEA perception that although fair progress has been made on preliminary engineering and related tasks on the Northern Intertie, many fundamental issues remain unresolved on both intertie projects. | believe we have reached a juncture where such issues need be specifically addressed and resolved in order to maintain progress on the intertie projects. With the foregoing objectives in mind, | invite you to respond to the following. First, my letter to you dated November 2, 1994, addressed the intended scope of the intertie project and confirms the view that the intertie must have the benefits and functionality envisioned under the AEA feasibility study. Your response of January 12 on behalf of the IPG accepted this view in principle, though it left for resolution in "construction agreements" such critical issues as whether such a line would be developed in phases, or to what extent each participating utility would be responsible for project costs. | understand that the referenced agreements have not as yet, been adopted by the participating utilities. | believe a date should be set by which such issues will be resolved, and | invite your suggestion as to an appropriate deadline. Second. In my letter of November 2, 1994, | noted that AIDEA asked its bond counsel, (Foster, Pepper & Shefelman law firm), to address whether the ownership structure provided for under the Intertie Grant Agreement would enable AIDEA to issue bonds to finance all or part of the participant's share of project costs. | recently received a draft legal opinion which concludes that, for purposes of a public financing, AIDEA would require a legislative revision to the underlying debt-issuance authorization (Sec. 29 and 30, Ch. 18, SLA 1993), since that authorization references intertie ownership by, respectively, Golden Valley Electric Association (GVEA) and Chugach Electric Association (CEA). | add that counsel also notes that the Mr. Thomas R. Stahr July 14, 1995 Page 2 ownership structure set out in the Intertie Grant Agreement would, assuming specific legislative authorization, enhance the use of tax-exempt financing. There are, of course, several different ways to proceed in response to the legal opinion. For example, the utilities may maintain the current ownership structure and simply finance the participant's share absent AIDEA involvement. Alternatively, the utilities may want to revert back to the ownership structure specifically envisioned by the underlying legislation, which would enable AIDEA to be the issuer without further legislative action. Finally, the utilities may prefer that AIDEA seek legislative approval of the requisite revision to Sections 29 and 30. While | believe such approval would be viewed as ministerial if supported by all utilities, | recognize that, particularly absent full consensus among the utilities on the various unresolved issues, the prospect of legislative involvement may be troubling. | would appreciate an immediate response whether the IPG requests that AIDEA seek legislative action to facilitate an AIDEA financing under the current ownership structure. If no legislative action is desired, please advise how the IPG intends to proceed and how each participant intends to finance its proportionate share of costs. Third. Item No. 4 in our respective letters of November 2, 1994 and January 12, 1995, addressed the enforceability of the various agreements. While | appreciate that final project costs are not as yet known with certainty and, perhaps more importantly, significant issues with substantial economic ramifications remain for resolution in the "construction agreements," nevertheless, | believe it essential to confirm that each of the participating utilities have the requisite intent and legal capacity to enter into a binding obligation to bear their proportionate share of the project costs in accordance with the ownership interests established in the Intertie Grant Agreement and related documents. As questions continue to arise in informal discussions regarding these matters, | request an unqualified opinion letter from legal counsel for each of the participating utilities confirming the legal capacity of each entity to enter into such agreements and further confirming that the obligations arising under said agreement, including the obligation to bear a proportionate share of project costs, are fully enforceable. | also request that counsel for FMUS and the City of Seward address the applicability of any requirement of voter approval with respect to these financial obligations. Fourth. Both the Grant Administration Agreement and the Grant Transfer and Delegation Agreement envisioned prompt notification of which matters and obligations arising in connection with the development and financing of the interties need be submitted to the Alaska Public Utilities Commission (APUC). As you know, to the extent such approval is required, APUC approval is a precondition to the expenditure of grant monies. | believe it timely to reach a common understanding of prospective APUC matters. Accordingly, counsel for each of the participating utilities should also address in the requested opinion letters of counsel which, if any, of the obligations arising in connection with the various intertie agreement, require APUC consideration. The Authority believes the time has come for the participating utilities to resolve basic questions of ownership, management and participation in the intertie projects. While | appreciate that the “unreasonably delayed” standard under Section 3.03 of the Grant Administration Agreement Mr. Thomas R. Stahr July 14, 1995 Page 3 does not offer a “bright line” test, | am concerned that, absent substantial progress on these core development issues in the near future, the availability of grant monies is subject to review. In light of the foregoing, the Authority believes it would be inappropriate to authorize the release of full Phase 1 funding on the southern intertie before core development issues are resolved. Accordingly, subject to the provisions of Section 4 of the Agreement, the Authority will make available $500,000 in grant funds for initial work on the southern intertie. No additional funds will be advanced absent settlement of the outstanding differences among the participating utilities or, in the alternative, execution of a reimbursement agreement in the event that the final development of the intertie is not undertaken. Similarly, the Authority intends to restrict use of grant funds on the northern intertie to the pending engineering and permitting work, until a comparable resolution of core development issues are resolved. | look forward to working with you and the other participating utilities toward development of the intertie projects. Executive Director = Jim Ayers, Chief of Staff, Office of the Governor Wilson Hughes, AIDEA Board Member WRS:bjf:ks hiall\bjfiboard\stahripg MEMORANDUM OF UNDERSTANDING IN AID OF BEGINNING ACTIVITIES TO BUILD THE SOUTHERN INTERTIE The undersigned Parties are currently negotiating a full Construction Management agreement to govern construction of the Southern Intertie, However, in order to expedite construction, the Parties wish to memorialize this temporary agreement that, consistent with the Participants Agreement, Chugach, as agent of the Parties, shall begin to perform the following tasks which the Parties recognize as reasonably necessary to begin building the Southern Intertie: Preliminary Environmental Assessment Preliminary Geotechnical and Archaeological Investigation Preliminary Easement Investigation Identify Corridors, Determine Alternate Route Alignments Prepare Route Selection Report The parties understand that Chugach is willing to perform the Construction Management duties for the benefit of all of the Parties as well as its own members but that Chugach does not earn a profit from these activities. Accordingly, the Parties have agreed that (except for gross negligence and willful misconduct) Chugach should be protected from any harm resulting from its activities as Construction Manager except for Chugach's own percentage share of Project Costs on the same basis as other Parties. The Parties also agree that under no circumstance will Chugach, in its role as Construction Manager, have to advance i own funds toward the Project. The Parties contemplate that most of the work will be done under contracts approved by the Parties and overseen by the Construction Manager. Chugach is not authorized to let any contracts until 1) prior approval has been given by the Parties under the procedures set out in the Participants Agreement and 2) AIDEA has issued assurance that it will advance grant funds in the full amount reasonably estimated by Chugach as needed to pay a) all contract costs, b) Chugach costs permitted under the Participants Agreement, and c) 10% of the estimated amount for contingency. Amounts received from AIDEA will be held by Chugach in a segregated interest bearing account for use solely on the Southern Intertie Project. So long as the contractor proceeds in accordance with the contract terms and schedule Chugach shall be permitted to pay the contractor without further approvals although Chugach will promptly Page 1 of 4 provide the Parties with documentation of the invoice and supporting information reasonably required by the Intertie Participants Group (IPG). Any invoices not consistent with the contract, such as requests for additional payment shall be brought to the Parties for approval before payment, The Parties agree that- since each contract and schedule of Chugach internal work will be separately approved by the Parties, Schedule A-~2 of the Grant Administration Agreement will adequately satisfy the budgeting requirements set out in the Participants Agreement for the limited phase of the Project. By this Memorandum of Understanding, the Parties intend to outline in a very abbreviated form a temporary arrangement by which efforts to construct a Southern Intertie can be started. This memorandum should be read in conjunction with all the other agreements relating to the Southern Intertie. This agreement should not he construed to prejudice the Parties' positions in negotiations toward a full Construction Management Agreement. Chugach agrees to perform the construction management duties described herein as agent for the Parties, subject to the terms and conditions of this Memorandum of Understanding. The Parties hereby authorize Chugach to perform the tasks set out above as their agent according to the terms and conditions of this Memorandum of Understanding. All contracts, obligations, liabilities, and duties entered, incurred, undertaken, or suffered by Chugach in carrying out the terms of this Memorandum of Understanding, shall be entered, incurred, undertaken, or suffered solely as agent for the Parties and not for its own account. All contracts shall be entered in the name of the Parties acting by and through their agent Chugach. Chugach shall carry out its duties hereunder in the best interests of the Parties and in accordance with Prudent Utility Practices. The Parties shall timely and definitively decide all requests for approvals and authorizations so as to avoid (1) delaying the Project, (2) unnecessarily increasing its costs, and (3) exposing Chugach to unreasonable and unanticipated demands on its management personnel with respect to carrying out the terms of this Memorandun. As between Chugach, as the Construction Manager, and the Parties, the ultimate financial responsibility for all amounts incurred, obligated, or suffered, arising out of the Project shall be that of the Parties. This Memorandum of Understanding is intended to cover only work which is entirely funded by grant monies and is conditioned on the Parties obtaining sufficient advances of grant funds to fund each portion of the tasks set out above. The Parties are not obligated by this Memorandum of Understanding as to work for which sufficient grant funds are not available. The Parties do not contemplate any work on tasks not fully funded by Grant Funds. The Parties shall also have the ultimate responsibility to secure Page 2 of 4 the approval of AIDEA for any necessary authorizations to proceed with the Project and for the advances from amounts available under the above referenced legislative grants; provided that Chugach, on behalf of the Parties, may communicate with and provide information to AIDEA in order to facilitate ..such approvals and grant disbursements. In accordance with section 6 of the Intertie Grant Agreement dated October 26, 1993 and section 6 of the Participants' Agreement dated January 24, 1994, the Parties have designated and authorized the Intertie Participants Group (IPG) to carry out certain powers and exercise certain rights, responsibilities, and duties with respect to this Memorandum of Understanding. The term of this agreement shall begin when last executed and shall end on the sooner of: (a) the execution of a Construction Management Agreement; (b) the completion of the contract work authorized by the IPG; (c) Eighteen (18) months from commencement of the Memorandum of: Understanding; or (d) Removal or withdrawal of the Construction Manager under the Participants Agreement. CHUGACH ELECTRIC ASSOCIATION, INC. By, Its Date “CONSTRUCTION MANAGER" ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, HOMER ELECTRIC ASSOCIATION, INC. INC. BLT EEUU By Its pe Date Date Page 3 of 4 MATANUSKA ELECTRIC ASSOCIATION, Inc. By, Its Date MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITY SYSTEM By its Date THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM By, Its. Date “PARTIES" 1:\1995\sintd.22 CHUGACH ELECTRIC ASSOCIATION, Inc. By. Its Date GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. By Its Date THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT & POWER By Its Date Page 4 of 4 2-11-99; 2:27PM; 3907 7624614 * 57) 16 CHUGACH ELECTRIC Ce is ASSOCIATION, INC. kctric February 11, 1999 Via Fax Line: 269-3044 Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503 Attention: Mr. Dennis V. McCrohan, P.E., Deputy Director, Energy Subject: Southem Intertie Project - Fundmg Dear Mr. McCrohan: The budget for Phase I of subject project was amended to a total of $5,900,000 at the June 16, 1998 meeting of AIDEA’s Board of Directors. The increase had been estimated to allow completion of the NEPA process. Continued changes in direction from one of the federal agencies goveming the process for the preparation of the Environmental Analysis (EVAL) have resulted in the need for additional funds for that task. An estimated $500,000 are needed to complete the EVAL. The work to be performed is explained in detail in Power Engineers’ letter of February 8,1999 (copy attached). The IPG has authorized us in their meeting on February 10, 1999 to amend Power Engineers’ contract by $465,215 and utilize funding available at this time. Completion of the EVAL and submittal to RUS and the USFWS with a permit application is now estimated for July 1999. We have cancelled a previous amendment to Power Engineers’ contract in the amount of $678,069, which had been executed to pay for their assistance during the EIS/ROD preparation by RUS’ contractor. This leaves total commitments well within the authorized budget. Funding needs for the EIS/ROD process will be reassessed after the USFWS has accepted the application for a project permit in the Kenai National Wildlife Refuge. At that time we may request further adjustments to funding under Phase I of the project. We are presently preparing new cash flow estimates and will submit them for your use shortly and trust that funds can be K advanced in agreement with the Memorandum of Understanding entered into by the IPG on 6/8/95 as last amended O2/T0/99, — If there are any questions, please don't hesitate to contact me at (907) 762-4626 by telephone or by fax to (907) 762-4617. My e-mail address is dora_gropp@chugachelectric.com. Sincerely, CPs! x. PA, CG; pes /KL /VW Dora L. Gropp, PE. Manager, Transmission & Special Projects Dv Attachment: | Power Engineers’ letter of February 8,1999 cs Lee Thibert Joe Griffith Mike Massin W.O.#E9590081, Sec., 1 RF 5601 Minnesota Drive * RO. Box 196300 * Anchorage, Alaska 99549-6300 Phone 907-563-7494 * FAX 907-562-0027