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HomeMy WebLinkAboutIntertie Grant Coresspondance 1993OLIVE DI: NCV-22-83 R=93% 11-22-00 »14-10FM 4» UivUALN CLOUINIL? DU/ DOL GYNGF 2/ HON 9:28 ML&P GENER © 4ANAGER FAX NO. 9072635204 P, 02 ie P.O. SOX 196650 ANCHOR ACT. ALASKA 995714 RG 5U TTETPHOSE. WT) 243 4-04 am | ME || ltd eaten Municipality of Anchorage an bt haat OFFICE OF THE MAYOR November 15, 1993 The Honorable Ramona L. Barnes Speaker, House of Representatives Alaska State Legislature State Capitol (MS 3100) Juneau, AK 99801-1182 Dear Madam Speaker: I am pleased to lat you know that I hava juet signed the Intertie Grant Agreement and the Transfer of Funds Agreemant. Both documents are necessary for moving forward to achieve the goal of building the new electrical intertias your legislation envisioned when passed earlier this year. This action demanatrates that the Municipality of Anchorage is strongly committed to seeing these interties built so that their benefits can be experienced by all the people of Anchorage and the Railbpelt region. With reqard to the current state of the intertie negotia- tions, my assistant Mark Johnson has briefed me on your concerns that these nagotiations nave taken a divergent turn. In this respect, I have conducted a comprehensive revicw of the current atatua of thane nagotiations and conclude the divergence is not being caused by the Municipality of Anchorage or Municipal Light & Power. Our objectives hava been fairness and equality since the beginning of negotla- tion. I had instructed Tom Stahr from the onset of the intertia negotiations that any agreement reachad must contain these two provisions. My concern is that thase elements ara currently missing and will not be allowed to become part of these negotiations. The legislation you sponsored provided for a very fair and equitable platform toa assure that all ratepayers be treated Talrly. This has to be part of the agreement or some ratopayeare will be cubsidizing others. In addition, I believe all participating utilities must have equal access to the interties to prevent the development of a monopoly where only one or two of the participating utilities reap most of the benefits paid for by state and many local utility cantributors. There must he a provision to asavra that aqual access wil] be tha backbone of such an agreement. QgO072835204 L1"22-93 09:31AM POO2 #27 3 ou DI: 22 ceo uu sacra + WU Ln * wu yu QuUuOIT UF U NOV-22-93 HON 9:26 ML&P GENE © HANAGER FAX NO, 9072635204 P. 03 ss - The Honorable Ramona L. Barnes Paqea Two November 15, 1993 I am eure that when all partico undoratand that fairnosn to ratepayers and aqual access are my requirements to concluding a successful negotiation, the process will proceed rapidly to conclusion. Tomorrow Riley Snell, Tom Stahr, Joe Fouts, Joe Hayes, Dave Highers and T will be meeting on the subject. Sincere aw eats Mayor R~93% §$072635204 11-22-93 09:31AM P0003 #27 SENT BY: 2-93: 1:04PM: CHUGACH ELECTPIC- 907 561 8998:# 2/14 CRhUuCAC HELE ASSOCIATION, INC. DAVID L. HIGHERS General Manager August 12, 1993 TO: William R. (Riley) Snell, Executive Director Alaska Industrial Development and Export Authority FROM: David L. Highers, General Manager SUBJECT: Legislative Intent Re; New Interties The proposed Intertic Grant Agreement contemplates joint ownership, design, construction, and management of the Northern and Southern Interties (as a single project) - - and of the Intertie grant funds — by all Railbelt utilities collectively. Golden Valley and Chugach are to he “contractors” to the collective utilities for purposes of building the line, under the direction of the collective utilities. Although arguably lawful, and reluctantly accepted by Chugach, the scheme set forth in the Intertie Grant Agreement represents a substantial departure from the apparent intent of the Legislature in enacting the statutes that provide for the Intertie grants and authorize AIDEA to issue bonds to complete the funding of Intertie construction. The most straightforward reading of the legislative language is that the Legislature intended that: (1) ‘the Northern and Southern Interties would be separate projects. SB 126, Sections 1 and 2. (2) The grants would be made to Chugach and Golden Valley, not to others, although others were to benefit from the grants. Id... (3) gai and Golden Valley, not others, were to “design and construct" the Interties. Id. See also SB 106, Section 4 (necessarily implying that Chugach and foe Valley will both construct and own the respective Interties.) (4) SB 126, Scctions 1(c) and 2(c) requires that Chugach and Golden Valley provide the other utilitics who wished to participate access to the Interties, not ownership or control of the Interties. The legislation does not require any utility to provide assured access across its system for other utilities. 5601 Minnesota Drive « P.O. Box 196300 « Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 SENT BY: *~12-93 > 1:05PM : CHUGACH ELECTR IC= 907 561 8998:# 4/14 Riley Snell August 12, 1993 Page 2 (5) Chugach and Golden Valley would own their respective Interties, albeit for the benefit of the utilities participating in the Interties. This is an express condition of AIDEA financing under SB 106, Sections 29 and 30. It is also implied by all the provisions of SB 126 and SB 106 already cited above. For example, if the other utilities were each intended to own the Intertics, why didn’t the Legislature direct Chugach and Golden Valley to offer the other participants ownership (or even "capacity") instead of access? If you need access to my property, it is because I own it and you dort. Finally, the other prospective Participating Utilities have taken the position that the failure of any of them to agree to a Participation Agreement means that the others cannot proceed with the Intertics (this is the “one-party veto"). ‘The Legislature cannot reasonably be understood to have intended this. A better reading of the legislation is that Chugach and Golden Valley (and, for other lincs, the specific utilities designated to receive the grants, design and construct the lines, and own them as a condition of AIDEA financing) must offer each relevant utility the opportunity to participate. The alternative would be to make all Intertie construction in the Railbelt contingent upon, for example, a favorable vote of the municipal legislative body of the City of Seward. This is absurd. The Intertie Grant Agreement may represent a reasonable set of compromises on the part of Chugach and Golden Valley, and it may even be defensible as a creative application of the literal terms of the new statutes, but accepting this scheme does involve costs (¢.¢., the potential lost of AIDEA financing) and legal risks (e.g., citizen suits to block Intertie construction and alleging failure to have complied with the requirements of thc new laws). SENT BY: G*2-93 ¢ 1:08PM : CHUGACH ELECTRIC- 907 561 8998:#12/14 CHUGACH ELECTRIC ASSOCIATION, INC. e “ DAVID L. HIGHERS General Manager August 12, 1993 Norman L. Story General Manager Homer Electric Association, Inc. 3977 Lake Street Homer, Alaska 99603 VIA Facsimile - 235-3313 Dear Norm: Thank you for your letter of today's date, offering a revised draft of the Intertie Grant Agreement. Chugach appreciates the effort you and the other prospective participants have made to accommodate the concerns expressed in Chugach's letter of August 10. For the most part, that effort has been successful. The Intertie Grant Agreement still contains many provisions that Chugach considers ill-advised or unfavorable. But based on the changes you have made in the most recent draft, and subject to a satisfactory resolution of the matters discussed in this letter, T will recommend to the Board that Chugach (1) execute the Intertie Grant Agreement, and (2) proceed to negotiate a Participation Agreement. Chugach will attempt to resolve its remaining concerns -- which, as you know, are numerous -- in the latter Agreement. I note, first, that the draft Grant Agreement is now very ambiguous on the issue of the one-party veto. This has important implications. On the one hand, Section 7 still requires that the Participation Agreement must be signed by all the Participating Utilities (a defined term which includes all of us), or otherwise no funds may be spent, all funds must be returned to the State, and the Interties may not be built. On the other hand, the change you have made to Section 3 seems to imply that the other utilities can proceed to spend the funds and construct the Interties even if one or more of the utilities listed as a Participating Utility declines to execute a Participation Agreement with respect to the Northern Intertie, or the Southern Intertie, or both -- in other words, one utility's refusal to execute the Participation Agreement does not veto either the Agreement or the Interties for the other utilities. We are unclear as to which of these results you intend. Assuming that you intend to let a utility decline to participate in one or both lines without that action bringing the Participation Agrcement and the Interties to a halt, the Grant Agreement must make clear that (1) the utility which drops out is not liable for any costs, and (2) that utility's percentage share of costs and of Intertie capacity will be reallocated among the remaining Participants, who agree to be responsible for 100 percent of those costs. To accomplish the foregoing, we ask that Section 3 be amended by adding the following sentence at the conclusion thereof: 5601 Minnesota Drive « P.O. Box 196300 « Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 SENT BY: R-19-93 + 1:10PM : CHUGACH ELECTRIC- 507 561 8998:#13/14 o . “If any utility that executes this Agreement does not execute a Participation Agreement with respect to the Anchorage-Kenai Peninsula Intertie or the Healy-Fairbanks Intertie, or both, then that utility shall have no liability under Section 4 hereof, or otherwise, for any costs associated with the Intertie(s) in which that utility has not agreed to participate, and all such costs shall instead be bore by those Participating Utilities who have executed Participation Agreements with respect to such Interties." This clarification is necessary not only for the protection of Chugach and other utilities who may decline to participate in one or both Interties, but also in order to comply with the statute and to protect the State, since otherwise there would be no clear assurance of 100 percent of the relevant costs heing covered by those utilities who elect to participate in the Interties. (Note that this clarification also necessarily implies that there is no longer any one-party veto of the Participation Agreement.) If the foregoing clarification is made to the Agreement, J will recommend to the Board that Chugach execute it. In so doing, however, I want to make clear to you and the other prospective Participants that Chugach interprets the draft Agreement in the following manner, and expects the Participation Agreement to be consistent with these points. Please let me know if there is any disagreement on this. (1) Section 4.4, “Access and Wheeling," does not as written require of Chugach any commitment that Chugach indicated in its August 10 letter that Chugach is unwilling to make at this time. (2) Chugach intends to submit to the Alaska Public Utilities Commission for review and approval any proposed terms, conditions, and rates for either assured or non-firm wheeling services over Chugach's system for power transmitted across that system to/from the Intertie. (Chugach will first attempt to negotiate such terms, conditions, and rates with the other prospective Participating Utilities.) (3) Chugach will make every reasonable effort to accommodate the wheeling needs of other utilities if Chugach can do so without interfering with the use of its own system for its own wholesale and retail customers, but Chugach does not interpret SB 126 or the Intertic Grant Agreement as requiring Chugach to provide assured access to other utilities for the transmission of power to/from the Intertie across Chugach's system. (4) If funds must be returned to the State under Section 7, the return will be from the trust accounts mentioned in that Section, and not by Chugach and/or Golden Valley from any other source. Finally, we note that the computations used to produce the percentage interests shown in Attachment | must be re-checked, and, if appropriate, the percentage interests must be adjusted accordingly, before the Grant Agreement is finally executed by all parties and becomes effective. SENT BY: G-izZ-yd «Ls LIM Unuualn LLEUIRIL> OU JUL OddO+ri4/ 14 Chugach's percentage interest as shown in Attachment | may be too high because it apparently includes the loads of Seward, which should be netted out of Chugach's total (and not double- counted). I hope the foregoing is satisfactory to the other prospective Participants. If so, please contact me so that we can take the appropriate steps to memorialize our agreement. David L. Highers General Manager CC; RUG Managers Chugach Board of Directors ad SENT BY: 9-93 : 1:05PM: CHUGACH ELECTRIC- 907 561 8998:# 4/14 beet -20ee 32.288 odtadehr verPeet” «SHAT GinveRO KRMPPEL/HUP MAN 2/003 P.ev9 Homer Electric Assoctation, Inc. CORPORATE OFFICR Central Nealisula Gorviee Center OTT LaKo Mtrces 260 Alrpert Way Itamear, Alavla Q¢000-Ta40 Puuch Caaa Phane (UO7) 256-A16/ Kanai, Ataku OORLL Gio VAL (R07) 296-9919 Fheae (007) 263-6631 PAK (907) BAR 7144 Auguat 12, 1999 Bavid L. Highers, General Manager Chugach Electric Association, Inc. ¥.06. Box 196326 Anchorage, AK 99519-6300 Dear Davai RE: CEA’S LETTER OF AUGUST 10, 1993 The other tia-line participants havea agked ne to provide you with the following proposed changee to tha draft Intertie Grant Agreenent in response to the concarne vontained in CEA’s letter ted August 10, 1993, efuily, thease changes vill allow CEA to join with the other participants in executing & grant agreaxent and aubmitting that agreement to the State ag soon aa poacible. The Intertie Grant: Agreanent attached 1 the moat recent (8/8/93) draft. Tha highiighted changes to that draft are in specifia response to CEA‘# 8/10/93 doncarns, The change to the @econd paragraph of Saction 5 clarifies CRA‘a ahility to unilaterally decide not to act a@ the contractor for the gouthern intertie. Thea addition to Section 3 clarifies CEA‘’s right to withdraw from partiaipation in tha northern intertia. CEA‘a 1(c) concern ig algo satisfied by tha above modicication ta Section 3 since CEA may freely alact toa withdraw from either or both intertiaa and refuse te executes thea Participation Agreement if - the latter cannot be nogotiated to CHA‘s satisfaction. OEA’s,concerms with respect to access are divided into that which CRA is willing to ge that which CRA ie@ unwilling to commit. It is the feeling of the participants that thace things which oma ia willing to do, do not all naceagarsly have to be incerporated into the gxant agreement at thia atage, but rather that those things to which CRA ia unwilling to commit should be addressed. It has never haen the dateant of the participants that they have a guarantee of “equal priority use of Chugach’a eystem, ‘regardless of the consequance, if tha result would be to pravent Chugach from ueing ita own system for the needs of its own wholesale and ratail 907 276 2493 08-12-93 09:44AM POO2 #04 R-96% * *9-93 > 1:06PM : CHUGACH ELECTRIC- 907 561 8998:2 5/14 ENT BY: a beet 2eabcr io" 985 BAYT ehePEL” Aad GfneRO KEMPPEL/EURFIAN 1/003 ».3/3 David L. Highers, Ganeral Manager Page 2 Auguat 12, 1993 austomera," and we can find nothing in the praesent draft grant agxreenment which would support auch a claim by any partioipant. The language contained 4n the exigting draft Intartie Grant Agreoment ia baadad upon the requiremants of £8 126 and is arguably néecassary in order to persuade the State to release grant funde. Thia iague will, of courage, be totally raaclvead in the Participation Agreanent. In regpon@#aa t6 youre concern 24(b) (ii). we hava alininated that entire sentence containing restrictiona on the development of acceptable wheeling rates. Again, wa would hopa that these "final nodifications to the draft Intertia Grant Agreement will allow cRA to join with the other participants in executing that agreenent and aubmitting dit to the State yat thie week. Sincerely, HOMER f.. AGBOCIATION, INC. N. U. Gtory General Manoger NLADHOG1253. evi ca: .Ken Ritchey, MEA ‘Dave Culvert, City of Seward Vince Mottola, FHUS Mike Xelly, GVEA Boh Hufman, AEG&T Ron Saxton, attorney Dave Hutchens, ARECA Nus-rft H/K ry Paalesuny || 907 276 2403 08-12-93 09:44am POO3 #04 R=96% SENT BY: “ *9-93 1:06PM : CHUGACH ELECTRIC- 907 561 8998:2 6/14 AUG 12.793 29:47AM KEMPPEL = “MAN GINDER P.4/9 INTERTIE GRANT AGREEMENT ‘This Agreement is entered into this day of August, 1993, by Golden Valley Flectric Association, Inc. ("GVEA"), Fairbanks Municipal Utilities System CEMUS"), nat Municipal Light and Power (“ML&P"), Chugach Electric Tita Inc. ("CBA"), Al Electric Generation and Transmission on 9 ative, Inc. ("AEG&T"), on behalf of its members (Matanuska Blectric Association, Inc. (“ , end Homer Electric Association, Inc. ("HEA"), "Additional Parties”), and City of Seward Choon) (‘Participating Utilides" within the meaning of Section 2 of SB 126), and the State of Alaska, Department of aaeinigiaen ("DOA"), and the Alaska Industrial Development and Export Authority (‘AIDEA"). The parties agree as follows: 6 Purposes, The purpose of this A; nt is to satisfy the statutory conditions precedent to DOA’s onnsier of the grant funds and to provide for the expeditious transfer of such funds to the grant recipients for the purpose urpose of pantial funding of the design and construction of new olectric transmission intertles between Healy and Fairbanks and between Anchorage and the Kenai Peninsula. ally, this Rena is intended to satisfy the conditions of SB 126 $8 1(b) and (¢) and $§ 2(b) and (c). 23 Addidonal Agmements. The Purtici Udiities hereby agree that any alioetl agreements (whether among the i ating Utilities or with other entities) that are aS ad out the purposes 0 greement read SB 126 shall be negotiated in good faith. uch additional agroo: peu for an shall Spdsoas a participadon (“Participation Agreement"), project rasnagemnt, and Pursuant to this and any other necessary agtcements, the Participating Ulitles shall hold undivided ownership interest as tenants in common in the ae get forth in Attachment 1 to this Agreement, such proportions being based on the of the Participants’ '1900/1991/1999 ¢ oe non-codncident pest demand to the sum of the Participating Uiilites’ 1990/199 1/199: average non-coincldent system erm ar a reared ating Utilities ifferent allocation of specific ret acity in the-Participation cation Ages, A Pa peice Utility ~ elect in wri thdraw from partici in either the Anchorage-Kenai eninsula, Intertle = the, Healy-Fairbanks Tere prior to execution of a DT Participation Agreement by the r ning Participating Utilities. | 4, Statutory Conditions F For the purpose of secu nee funds. , the Participating Utilities hereby agree tO the conditions of SB 126, specifically set We : | 4.1 i j The Participating Utilities agree to Ry y the design and construction costs of the Healy-Fairbanks transmission intertie that exceed 3,200,000 ial the design}and construction costs for the Anchorage-Kenal Peninsula tranamission intertie that exceed $46,800,000 [SB 126 8§ 1(b)(1) and 2(b)(1)). 4.2 . The|Participating Utilities to pay the operation and en (O&M) costs for the Healy- lairbanks and the: auctions -Kenai Peninsula interties [SB 126 A 10)@) = 2(b)(2)]). 43 fins ‘The costs of construction of the Ancharage-Kenai Peninsula intartia in excess of $46,800,000 plus acored intorest, the cost of ation and maintenance of that intertio, and other costs setineed by the be Bredey shall first be recovered through a 1.5 mill/kWh charge for all cnergy generated by y Lake Hydroelectric Project. R=96% 907 276 2493 O8-12-93 O8:44AM POO4 HOS SENT BY: *2-99 + 1:07PM : CHLGACH ELECTR IC- 907 561 8998:= 7/14 AUG 12 7939 @9:46AM KEMPPEL = FMAN GINDER P.S/3 The coats of construction of the Healy-Fairbanks intertle ln cacess of $43,200,000 plus accrued interest, the cost,of operation and maintenance of that intertic, and other costs approved by the Participants shall first bo recovered through a 1.5 mifl/kWh charge for cnergy gcncratcd by the Bradley Lake Hydroelectric Project for the benefit of receiving utilittes in Fair! and an additional 1.5 mill/kWh charge to be paid by the receiving utility for 60 nt of the non-Bradley Lake energy transmitted on the existing GVBA transmission line and the new northern intertie between Healy and Fairbanks. Remaining costs of the two Intertles not recovered by the above 1.5 mill/kWh charges shall be allocated among the Participating Utilities in the proportion set forth in Attachment 1. 4.4 Access and Wheeling. All Participating ann A to provide the other Participating Udlites access both on thc ncw intertic and over the cipating Utilities’ systems co and from the intertie for the purpose of assured acccss to resources, economy energy transactions, and other similar uses on terms and at rates to be resolved in the pation Agreement. Charges for access to other Participants’ capacity rights will be addressed in the Participation Agreement. [The terms, conditions, and rates on access will be calculated on a ermine and required basis.] Resulting rates will be submitted to the Alaska Public tilities Commission, if required. 3. Design. and Constuction Management. The Participating Utilitles agree to contract with GVEA to design and construct the Healy-Fairbanks power transmission intertic and agree to contract with CEA to design and construct the Anchorage-Kenai Peninsula powor transmission intertio, subject fo the availability of adequate financing and in accordance with Prudent Utility Practices and construction agreements which contain provisions for adequate oversight to maintain — and cost control, and to cnsure that tatal project costs do not exceed amounts budgeted by the Participants' Group and its Participating Utility members. Consistent with the above conditions, it is agreed and understood that GVEA and CEA, as contractors, will be free to subcontract all or any portion of the work associated with the design and construction of the above projects. Tf, for any reason, GVBA and/or CEA fare unable to construct] elect not to act.as the contractors of the interties, the Participating Utilities oy contract for construction with one or more of the other Participating Utilities or Additional ‘arties. } i 6. Intertie Participants Group. As common owners of the intertles, the Participating Utilities agree to form the Intertie Participants Group (IPG) for the p' of exercising thelr rights and responsibilities as owners. Each Participating Utility shall be represented on the IPG, and the IPG shall form a technical advisory subcommittee on which cach Participating Utility shall be represented, excent that MEA and shall be represented on the IPG and any subcommittees, each of which shall be a voling member, and &T shall not be additionally represented, The Participation Agreement resolve and adopt voting rights and procedural rules for the operation of the IPG. Total project cost and financing shall be addressed in the Participation Agreement. Intertie design, construction, construction management, and operation and maintenance, among other issues, shall be sesolved by the IPG in accurdance with its rules and procedures. Relative to de and construction issucs, the IPG and its technical adviso subcommitice shall be responsible for oversight of GVEA and CEA construction efforts. Su oversight shall include approval of at least project scope (including routing and points of INTERTIC GRANT AGREEMENT ! Pago 2 R=96% 907 276 2493 08-12-93 09:44AM POOS #04 SENT BY: @42-99 > 1:08PM ; CHUGACH ELECTRIC- 907 361 8998:# 6/14 AUG 12°93 89:49AM KEMPPCL “MAN GINDER P.69 interconnection). cost estimates and budget, approval of construction agreements, significant change orders, receipt and review of at least monthly reports, and auditing of dosign and construction funds. Neither the IPG nor ~ individual Participating Utility shall attempt to make claims against GVEA and CEA for any decisions made by the IPG. Upon completion and commercial operation of the intcrties, the IPG shall be responsible for all decisions relating to the ongoing operations, maintenance, repair, and improvement of the interties. 7. Transfer of Grant Funds. DOA hereby transfers the grant funds of $43,200,000 to GVEA and $46,800,000 to CEA, fo HN with all interest carnings on such funds from the ettective date of the legislation. GVEA pe ed eee in trust accounts for the benefit of all Participating Utilities in agreed-upon financial institutions with instructions to the trust officer that no funds are to be released, encumbered, assi , or edged untl # Participation Agreement has been executed by all of the Participating Utilities. The barticipati Utilities agree to negotiate in good faith with the intent of executing a Participation eer November 1, 1993. In the event that the Healy-Falrbanks in is not, for any reason, constructed, GVEA agrees Lo 1tturu any unexpended funds and any interest earned thereon to DOA. In the cvent that the Anchorage-Kenai Peninsula intertie Is not, for any reason, constructed, CBA to rerum any funds and any interest camed thereon to DOA. No Participating Utility shall unreasonably delay progress toward compledon of the intertics. 8. Use of Funds. The parties agree to uso funds in the trust accounts described in ps ph 7 solely for the purposes of design and oonstruotion of the Healy-Pairbanks andj Anc orage-Kenai Peninsula interties, including all acts necessary for completion of these projects. The parties further agree to return to the State any unexpended grant funds and any interest camed thereon not needed far this purpose. 9. Tax Considerations. The parties agree to expeditiously determine whether the receipt of funds pursuant to this ment is inconaistent with the tax-exempt status of the Participating Utilities or will result in the grant being subject to taxation, In the event that any of the Participating Lilities determine a tax status issue 1s raised, DOA and AIDEA agree to permit the immediate rem to DOA and/or AIDEA of any grant funds received by the Participating Utilities including any interest earned thereon and to work in good faith to effect the grant transfers in a manner which preserves the tax-exempt status of all of the Participating Utilities and the grant funds and further agree that the Participating Utilities may terminate this Agreement, and any Participating Utility may withdraw trom this Agrecment, if a satisfactory resolution is not achievable for the utilities as aigroup or any Participating Utility individually. A Partclpating Utility may decline to receive t funds for purposes of avolding becoming a taxable ent by reason of such receipt but will be permitted, to the greatest extent possible, ta have the same rights and responsibilities as other Participating Utilities under this and other related agreements. However, the existence of unfavorable tax consequences for one or more Participating Utilities shall not prevent reccipt of the grant and construction of the linc by une or more of the other signatories to this Grant Agreement. INTERTIE GRANT AGREEMENT Page 3 R=96% 907 276 2493 08-12-93 09:44AM POOG #04 SENT BY: #-19-99 > 1:08PM : CHUGACH ELECTRIC- 907 561 89982 3/14 AUG 12°93 89:58AM KEMPPEL = =7MAN GTNDER P79 IN WITNESS WHEREOE, the parties have caused this Agreement to be excouted on the date first above written. STATE OF ALASKA, DEPARTMENT OF ADMINISTRATION By. ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY ADMINISTRATION By: PARTICIPATING UTILITIES: ail VALLEY ELECTRIC ASSOCIATION, By: FAIRBANKS MUNICIPAL UTILITIES SYSTEM By: ANCHORAGE MUNICIPAL LIGHT & POWER By: INTERTIE GRANT AGREEMENT Page 4 R«96% 907 276 2493 08-12-93 09:44AM POOT #04 SENT BY: 4-19-93 : 1:03PM : CHUGACH ELECTRIC- 907 561 8998:210/14 " QUG 12 793. @9:S@AM KEMPPEL —- FMAN GINDER P.0/9 CHUGACH BLECTRIC ASSOCIATION, INC. By: ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC. MATANUSKA ELECTRIC ASSOCIATION, INC. By: HOMER ELECTRIC ASSOCIATION, INC. By: Attachment 1 INTERTIE GRANT AGREEMENT Page 5 R~96% 807 276 2493 08-12-93 09:44AM POOS8 #O4 SENT BY: #-19-93 > 1:09PM : CHUGACH ELECTRIC- 907 561 8998:#11/14 AUG 12 ’SQ) @9:S1AM KEMPPEL YAN GINDER P.9/9 Attachment 1 INTERTIE OWNERSHIP INTERESTS Golden Valley Blectric Association, Inc. 15.26% Fairbanks Municipal Utilities System 4.65% Anchorage Municipal Light and Power 22.25% Chugach Electric Association, Inc. 32.04% Alaska Blectric Gencration & Transmission Cooperative, Inc, 24.56% Matanuska Electric Association, Inc. 13.35% Homer Electric Association, Inc. 11.21% aT of Seward \ 1.24% TOTAL ' 100.00% NOTE: The above percentages shall apply unless otherwise agreed to in tho Participation Agreement (see Scotion 3 of this Agreement). R-95% 907 276 2493 08-12-93 09:44AM POOS #04 CHUGACH ELECTRIC ASSOCIATION, INC. gee ASSOCIATION, INC. DAVID L. HIGHERS General Manager August 10, 1993 TO: Mike Kelly, Golden Valley Electric Assn. FAX: 451-5633 Norman Story, Homer Electric Assn. FAX: 235-3323 Tom Stahr, Anchorage Municipal Light & Power FAX: 263-5204 Ken Ritchey, Matanuska Electric Assn. FAX: 745-9368 Dave Calvert, Seward Electric Utility FAX: 224-3248 Bob Hufman, AEG&T FAX: 474-0549 Vince Mottola, Fairbanks Municipal Utilities System FAX: 451-4410 Ron Saxton, Ater Wynne FAX: 503/226-0079 ce: Hutchens, ARECA FAX: 561-5547 FROM: Dave Highers, Chairman A) RE: Most Recent (8/9/93) Draft of Intertie Grant Agreement This draft is not satisfactory to Chugach. Specifically: 1: Contingencies. Although the draft makes clear that someone else may build the Southern Intertie if Chugach is unable to do so, the draft does not make clear that: (a) | Chugach remains free to elect not to build the Southern Intertie, even if Chugach is able to build it; (b) Chugach remains free to elect not to participate in the Northern Intertie; and (c) Executing the Grant Agreement does not obligate any utility to execute the Participation Agreement, if the latter cannot be negotiated to that utility’s satisfaction. 5601 Minnesota Drive ¢ P.O. Box 196300 ¢ Anchorage, Alaska 99519-6300 Phone 907-563-7494 « FAX 907-562-0027 RUG Managers Page 2 2p Access over Chugach’s system to/from the Intertie. This draft does not adequately distinguish between those commitments that Chugach can and cannot make at this time. (a) (b) Chugach is willing to commit: (i) (ii) (iii) (iv) (v) (vi) To provide both nonfirm and (if available) assured access across Chugach’s system in a non-discriminatory manner for power that other utilities desire to wheel to/from the Intertie, as well as other services; To attempt to negotiate with the other utilities mutually acceptable terms, conditions, and rates for both nonfirm and assured wheeling services, and other services; To include such proposed terms, conditions, and rates (whether unanimously agreed upon or not) in the Participation Agreement; To submit such proposed terms, conditions, and rates to the APUC for review and approval; To recognize and accept that any utility which does not agree with the proposed terms, conditions, and rates shall remain free to challenge them before the APUC and upon judicial review of the APUC’s decisions; and To be bound by the outcome of the APUC process, including judicial review. Chugach is not willing to commit: (i) (ii) To guarantee other utilities equal priority use of Chugach’s system, regardless of the circumstances, if the result would be to prevent Chugach from using its own system for the needs of its own wholesale and retail customers; or To limit the proposed rates for assured or nonfirm wheeling based on (A) actual or hypothetical transmission distances, or (B) some other utility's opinion of which Chugach transmission facilities may or may not be used or required for wheeling. There are other provisions of the Grant Agreement that Chugach considers unfavorable or ill-advised, beth-if the Grant Agreement is not modified as set forth above, Chugach will not sign it, but ‘ ALASKA INDUSTRIAL DEVELOPMENT AIX AND EXPORT AUTHORITY 480 WEST TUDOR + ANCHORAGE, ALASKA 99503-6690 + (907) 561-8050 + FAX (907) 561-8998 MEMORANDUM TO: Patrick P. Ryan Chief of Staff Of fi PIC FROM: Wi : Executive Director DATE: November 2, 1993 SUBJECT: Grant Transfer and Delegation Agreement The final draft of the Grant Transfer and Delegation Agreement approved for execution by the managers of the participating utilities and staff of the Authority on October 25, 1993, is enclosed for your information. The agreement fully satisfies the requirements of. the legislation and ensures adequate controls to safeguard state monies. The agreement also imposes measurable performance standards upon the grant recipients. Commissioner Usera has been briefed on the above information and has indicated she is prepared to execute the document upon receipt. Arrangements have been made with staff of the Departments of Revenue and Administration to transfer funds ($90.0 million) on November 9, 1993. Should you have questions regarding the agreement or the timing of the transfer of funds, please do not hesitate to contact me. WRS: bjf DOCBIF 163 Enclosures cc: Shelby Stastny, Office of Managemen & Budget 19 °28/93 cea B503 226 0 ATER WYNNE 002/003 i WYNNE oe ATER 222.5. Columbia HEWITLI Portland, Oregon 97201-6618 (503) 226-1191 DODSON Fax (503) 226-0079 & SKERRITT ATTORNEYS AT LAW October 28, 1993 VIA FACSIMILE AND U.S. MAIL Mr. Jonathan B. Rubini Birch, Horton, Bittner & Cherot 1127 West 7th Ave. Anchorage, AK 99501 Re: _Intertie Grant Documents Dear Jon: Thank you for your letter of October 7, 1993, and the copies of the final Grant Transfer and Delegation Agreement. I have discussed both this document and the Intertie Grant Agreement with the utility managers, and we consider both documents to be final and ready for execution. All of the managers are either currently authorized to execute these agreements, or are now recommending approval of both documents to their governing bodies. Chugach Electric, Golden Valley Electric, Homer Electric and Alaska Electric Generation & Transmission are currently circulating the documents for signature and require no further approvals. Matanuska Electric, and the municipal utilities of Anchorage, Fairbanks and Seward are moving expeditiously toward completing their respective approval processes. In response to the request in your October 27 letter, I am authorized to represent that (1) each of the utility managers support execution of the Intertie Grant Agreement, and the Grant Transfer and Delegation Agreement and (2) the grant transfer may be rescinded by the Authority if al] utilities have not executed both agreements before November 15, 1993. Seattle, Washington Washington, D.C. San Francisca, California Affiliated offices in (206) 623-4711 (202) 785-0303 (41S) 421-4143 Anchorage, Fairbanks Fax (206) 467-8400 Fax (202) 785-8676 Fax (415) 989-1263 and Juneau, Alaska 0, 24/93 7 a6) G503 226 6 ATER WYNNE {4 003/003 ATER WYNNE Mr. Jonathan B. Rubini October 28, 1993 Page 2 I look forward to working with you to complete this process. I will advise you as the execution process proceeds. Please contact me as necessary. Since Ronald L. Saxton ce: — Railbelt Utility Managers and Attorneys RLS 1068der.ttr Law OFFICES OF KEMPPEL, HUFFMAN aNnb GINDER A PROFESSIONAL CORPORATION FOGERR KE ANCHORAGE OFFICE PCHARDR PE-ERC GIT 255 £ FIREWEED LANE SUITE 200 povato ANCHORAGE ALASKA 99503 2094 1907; 277 1604 TELECOPIER 1907) 276-2493 ANDREW J FIERRO GEORGE S HARRINGTON JP October 22, 1993 CORD OVASOERICE BOBBY DEAN SMITH 520 2ND STREET ya70 DURYCH 20 BOX 1829 CORDOVA. ALASKA 99574 ~ 9071 424-7410 Peete Lay ety TELECOPIER (9071) 424-7454 ore Sa Jonathan B. Rubini, Esq. Mee ate VIA FAX: 276-3680 Birch, Horton, Bittner and Cherot 1127 W. Seventh Avenue Anchorage, AK 99501-3563 Re: Intertie Grant Agreement Dear John: Enclosed you will find a revised "Intertie Grant Agreement" which incorporates all of the changes you proposed in your letter to me of October 21, 1993. I met with the other Railbelt Utility attorneys this morning, and we agreed to take this latest Intertie Grant Agreement to the various utilities for approval at the same time that we take an acceptable Grant Transfer and Delegation Agreement to them. Ron Saxton will be calling you today on several minor changes we made to that agreement. In addition to the changes to the Intertie Grant Agreement which you proposed, you should note that we changed the dates for execution of both the Participation Agreement and the Grant Administration Agreement to November 30, 1993, since we all felt that this was a more realistic date for completion of those agreements. If you have any questions, please feel free to contact me. Sincerely yours, KEMPPEL, HUFFMAN AND GINDER, P.C, Ba Roger R. Kemppel RRK: Ika Enclosure ce wiencl: Ron Saxton Eric Redman Douglas Rosenberg Mark Figura Don Edwards @ : ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY 480 WEST TUDOR * ANCHORAGE, ALASKA 99503-6690 + (907) 561-8050 + FAX (907) 561-8998 MEMORANDUM TO: Nancy Bear Usera Commissioner Department of Administration THRU: James Baldwin, Esq. Assistant Attorney General oe ment of /Law ects cand FROM: wil) iam Executive Director DATE: November 15, 1993 SUBJECT: Intertie Agreements Enclosed are the originals of the Intertie Grant Agreement and the Grant Transfer and Delegation Agreement. After your sets have been signed, please return them to the Authority for distribution. WRS:bjf DOCBJF193 Enclosures: 10 Intertie Grant Agreements 9 Grant Transfer and Delegation Agreements Huiner Electric Assvu ciation, Inc. CORPORATE OFFICE Central Peninsula Service Center 3977 Lake Street 280 Airport Way Homer, Alaska 99603-7680 Pouch 5280 Phone (907) 235-8167 Kenai, Alaska 99611-5280 FAX (907) 235-3313 Phone (907) 283-5831 FAX (907) 283-7122 November 1, 1993 Mr. Dave Calvert City of Seward Light and Power Division Corner 5th and Adams Streets P. O. Box 167 Seward, Alaska 99664 Dear Dave: REF: INTERTIE AGREEMENTS Enclosed are the originals of the Intertie Grant Agreement and the Grant Transfer and Delegation Agreement. After your sets have been signed, please continue the routing for completion of the required signatures. Sincerely, HOMER ELECTRIC ASSOCIATION, INC. Z - N. L. Story General Manager NLS: em Enclosures: 10 Intertie Grant Agreements 9 Grant Transfer and Delegation Agreements cc: RF - NLS Fairbanks Municipal Utilities System October 29, 1993 Mr. Norm Story Homer Electric Association 3977 Lake Street Homer, Alaska 99603 RE: Intertie Agreements Dear Norm: Enclosed are the originals of the Intertie Grant Agreement and the Grant Transfer and Delegation Agreement. After your sets have been signed, please continue the routing for completion of the required signatures. 645 Fifth Avenue +» P.O. Box 72215 + Fairbanks, Alaska 99707-2215 + (907) 459-6000 int 6V GOLDEN VALLEY ELECTRIC ASSOCIATION INC. Box 71249, Fairbanks, Alaska 99707-1249, Phone 907-452-1151 October 29, 1993 HAND DELIVERED Mr. Vince Mottola Fairbanks Municipal Utilities System P. 0. Box 2215 Fairbanks, Alaska 99707 RE: Intertie Agreements Dear Vince: Enclosed are the originals of the Intertie Grant Agreement and the Grant Transer and Delegation Agreement. After your sets have been signed, please continue the routing for completion of the required signatures. Bob Hufman is out of town for the next two weeks so he will have to execute the agreements at a later date. Best regards, tei p/kelly General Manager eo CHUGACH cLECTRIC <4 Cus BY ASSOCIATION, INC kectric ASSOCIATION, INC. Michael P. Kelly, General Manager VIA DHL COURIER Golden Valley Electric Association, Inc. 758 Illinois Street Fairbanks, AK 99707 Dear Mike: Enclosed are the originals of the Intertie Grant Agreement and the Grant Transfer and Delegation Agreement. After you have signed your sets, please continue the routing for eaion of the required signatures. David L. Highers General Manager Enclosures: 10 Intertie Grant Agreements 9 Grant Transfer and Delegation Agreements 5601 Minnesota Drive ¢ P.O. Box 196300 ¢ Anchorage, Alaska 99519-6300 Phone 907-563-7494 * FAX 907-562-0027 @ ALASKA INDUSTRIAL DEVELOPMENT Oy AND EXPORT AUTHORITY 480 WEST TUDOR * ANCHORAGE, ALASKA 99503-6690 « (907) 561-8050 + FAX (907) 561-8998 September 13, 1993 Ron L. Saxton, Esq. Ater, Wynne, Hewitt, Dodson & Skerritt 222 S.W. Columbia, Suite 1800 Portland, Oregon 97201-6618 Dear Mr. Saxton: I have carefully reviewed the intertie grant agreements proposed by the utilities. I believe that the agreement provides an excellent definition of the steps necessary to satisfy the conditions set out in the grant appropriations made in ch 19, SLA 1993. The participating utilities have shown substantial good faith and concerted effort to reach this point. However, before the grant can be awarded, you must complete the participation agreement which is a key element to a _ conclusive determination that the preconditions to the grants have been satisfied. It is also necessary to resolve any uncertainty about constraints imposed by federal law on the ability of a cooperative electric utility to receive these grants. I have been advised by the Department of Law that the obligations set out in the proposed grant agreement and the yet to be prepared participation agreement may not be final and binding absent review and approval by the Alaska Public Utilities Commission. I would like the utilities position on the necessity for APUC review of the intertie grant and participation agreements. The final grant agreement must anticipate this circumstance so that we all- understand the ramifications. Pending full satisfaction of the legislature's conditions, the Authority is prepared to request that the Department of Administration transfer custody of and responsibility for the grant to the Alaska Industrial Development and Export Authority. This means the intertie grant appropriations will be deposited in the revolving fund of AIDEA, where the money will be held and accumulate interest for the purposes of the grants. When the conditions to payment are satisfied, the amount appropriated plus any interest accrued while in the possession of AIDEA will be available for expenditure as provided in the final grant agreement. I further add that given the substantial preliminary agreement reached among the participating utilities, I have requested legal confirmation that grant funds held by the Authority can be expended on preliminary design, engineering and permitting work if the participating utilities think prudent. Ron L. Saxton - Letter September 13, 1993 Page Two During AIDEA custody of the grant appropriation, the grant agreement must provide that the utilities will not have a vested right to receive payment beyond amounts necessary to satisfy valid obligations incurred by the responsible utilities. The legislature would be able to appropriate the unencumbered and unobligated money from AIDEA for any valid public purpose. I believe the possibility of further appropriation of intertie grant funds by the legislature is remote. However, as custodian of such a substantial amount of public money, AIDEA must be careful to preserve the legislature's plenary power of appropriation over all publicly held money. I am pleased to host a meeting with your negotiating committee on September 17 to discuss points raised in this letter and the next steps to take to accomplish the intent of the legislature. Sincerely yours, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY am”’R.” Snel Executive Director cc: Pat Ryan, Chief of Staff, Office of the Governor James Baldwin, Esq., Department of Law INTERTIE GRANT AGREEMENT This Agreement is entered into this 17th day of August, 1993, by Golden Valley Electric Association, Inc. ("GVEA"), Fairbanks Municipal Utilities System ("FMUS"), Anchorage Municipal Light and Power ("ML&P"), Chugach Electric Association, Inc. ("CEA"), Alaska Electric Generation and Transmission Cooperative, Inc. ("AEG&T"), on behalf of its members (Matanuska Electric Association, Inc. ("MEA"), and Homer Electric Association, Inc. ("HEA"), "Additional Parties"), and City of Seward ("Seward") ("Participating Utilities" within the meaning of Section 2 of SB 126), and the State of Alaska, Department of Administration ("DOA"), and the Alaska Industrial Development and Export Authority (“AIDEA”). The parties agree as follows: 1 Purpose. The purpose of this Agreement is to satisfy the statutory conditions precedent to DOA’s transfer of the grant funds and to provide for the expeditious transfer of such funds to the grant recipients for the purpose of partial funding of the design and construction of new electric transmission interties between Healy and Fairbanks and between Anchorage and the Kenai Peninsula. Specifically, this Agreement is intended to satisfy the conditions of SB 126 §§ 1(b) and (c) and §§ 2(b) and (c). 2s Additional Agreements. The Participating Utilities hereby agree that any additional agreements (whether among the Participating Utilities or with other entities) that are necessary to carry out the purposes of this Agreement and SB 126 shall be negotiated in good faith. Such additional agreement(s) shall address ownership participation ("Participation Agreement"), project management, and project operation. 3% Ownership. Pursuant to this and any other necessary agreements, the Participating Utilities shall hold undivided ownership interest as tenants in common in the proportion set forth in Attachment 1 to this Agreement, such proportions being based on the relationship of the Participants’ 1990/1991/1992 three-year average non-coincident peak demand to the sum of the Participating Utilities' 1990/1991/1992 three-year average non-coincident system peak demands unless the Participating Utilities agree to a different allocation of specific project capacity in the Participation Agreement. A Participating Utility may elect in writing to withdraw from participation in either the Anchorage-Kenai Peninsula Intertie or the Healy-Fairbanks Intertie prior to execution of a Participation Agreement by the remaining Participating Utilities. If any utility that executes this Agreement elects to withdraw from participation in either the Anchorage- Kenai Peninsula Intertie or the Healy-Fairbanks Intertie, or both, then that utility shall have no liability under Section 4 hereof, or otherwise, for any costs associated with the Intertie(s) in which that utility has not agreed to participate, and all such costs shall instead be borne by those Participating Utilities which execute Participation Agreements with respect to such Interties. 4, Statutory Conditions. For the purpose of securing transfer of the grant funds, the Participating Utilities hereby agree to the conditions of SB 126, specifically set forth below. 4.1 Design and Construction Costs. The Participating Utilities agree to pay the design and construction costs of the Healy-Fairbanks transmission intertie that exceed $43,200,000 and the design and construction costs for the Anchorage-Kenai Peninsula transmission intertie that exceed $46,800,000 [SB 126 §§ 1(b)(1) and 2(b)(1)]. ; 4.2 O&M Costs. The Participating Utilities agree to pay the operation and maintenance (O&M) costs for the Healy-Fairbanks and the Anchorage-Kenai Peninsula interties [SB 126 §§ 1(b)(2) and 2(b)(2)]. 4.3 Rates. The costs of construction of the Anchorage-Kenai Peninsula intertie in excess of $46,800,000 plus accrued interest, the cost of operation and maintenance of that intertie, and other costs approved by the Participants shall first be recovered through a 1.5 mill/kWh charge for all energy generated by the Bradley Lake Hydroelectric Project. The costs of construction of the Healy-Fairbanks intertie in excess of $43,200,000 plus accrued interest, the cost of operation and maintenance of that intertie, and other costs approved by the Participants shall first be recovered through a 1.5 mill/kWh charge for energy generated by the Bradley Lake Hydroelectric Project for the benefit of receiving utilities in Fairbanks and an additional 1.5 mill/kWh charge to be paid by the receiving utility for 60 percent of the non-Bradley Lake energy transmitted on the existing GVEA transmission line and the new northern intertie between Healy and Fairbanks. Remaining costs of the two interties not recovered by the above 1.5 mill/kWh charges shall be allocated among the Participating Utilities in the proportion set forth in Attachment 1. 4.4 Access and Wheeling. All Participating Utilities agree to provide the other Participating Utilities access both on the new intertie and over the Participating Utilities’ systems to and from the intertie for the purpose of assured access to resources, economy energy transactions, and other similar uses on terms and at rates to be resolved in the Participation Agreement. Charges for access to other Participants’ capacity rights will be addressed in the Participation Agreement. Resulting rates will be submitted to the Alaska Public Utilities Commission, if required. Se Design and Construction Management. The Participating Utilities agree to contract with GVEA to design and construct the Healy-Fairbanks power transmission intertie and agree to contract with CEA to design and construct the Anchorage-Kenai Peninsula power transmission intertie, subject to the availability of adequate financing and in accordance with Prudent Utility Practices and construction agreements which contain provisions for adequate oversight to maintain quality and cost control, and to ensure that total project costs do not exceed amounts budgeted by the Participants' Group and its Participating Utility members. Consistent with the above conditions, it is agreed and understood that GVEA and CEA, as contractors, will be free to subcontract all or any portion of the work associated with the design and construction of the above projects. If, for any reason, GVEA and/or CEA elect not to act as the contractors of the interties, the Participating Utilities may contract for construction with one or more of the other Participating Utilities or Additional Parties. 6. Intertie Participants Group. As common owners of the interties, the Participating Utilities agree to form the Intertie Participants Group (IPG) for the purpose of exercising their rights and responsibilities as owners. Each Participating Utility shall be represented on the IPG, and the IPG shall form a technical advisory subcommittee on which each Participating Utility shall be represented, except that MEA and HEA shall be represented on the IPG and any subcommittees, each of which shall be a voting member, and AEG&T shall not be additionally represented. The Participation Agreement shall resolve and adopt voting rights and procedural rules for the operation of the IPG. i ; _ Total project cost and financing shall be addressed in the Participation Agreement. Intertie design, construction, construction management, and operation and maintenance, among other issues, shall be resolved by the IPG in accordance with its rules and procedures. INTERTIE GRANT AGREEMENT Page 2 Relative to design and construction issues, the IPG and its technical advisory subcommittee shall be responsible for oversight of GVEA and CEA construction efforts. Such oversight shall include approval of at least project scope (including routing and points of interconnection), cost estimates and budget, approval of construction agreements, significant change orders, receipt and review of at least monthly reports, and auditing of design and construction funds. Neither the IPG nor any individual Participating Utility shall attempt to make claims against GVEA and CEA for any decisions made by the IPG. Upon completion and commercial operation of the interties, the IPG shall be responsible for all decisions relating to the ongoing operations, maintenance, repair, and improvement of the interties. es Transfer of Grant Funds. DOA hereby transfers the grant funds of $43,200,000 to GVEA and $46,800,000 to CEA, together with all interest earnings on such funds from the effective date of the legislation. GVEA and CEA agree to immediately deposit such funds in trust accounts for the benefit of all Participating Utilities in agreed-upon financial institutions with instructions to the trust officer that no funds are to be released, encumbered, assigned, or pledged until a Participation Agreement has been executed by all of the Participating Utilities. The Participating Utilities agree to negotiate in good faith with the intent of executing a Participation Agreement by November 1, 1993. In the event that the Healy-Fairbanks intertie is not, for any reason, constructed, GVEA agrees to return any unexpended funds and any interest earned thereon to DOA. In the event that the Anchorage-Kenai Peninsula intertie is not, for any reason, constructed, CEA agrees to return any unexpended funds and any interest earned thereon to DOA. No Participating Utility shall unreasonably delay progress toward completion of the interties. 8. Use of Funds. The parties agree to use funds in the trust accounts described in paragraph 7 solely for the purposes of design and construction of the Healy-Fairbanks and Anchorage-Kenai Peninsula interties, including all acts necessary for completion of these projects. The parties further agree to return to the State any unexpended grant funds and any interest earned thereon not needed for this purpose. 9. Tax Considerations. The parties agree to expeditiously determine whether the receipt of funds pursuant to this Agreement is inconsistent with the tax-exempt status of the Participating Utilities or will result in the grant being subject to taxation. In the event that any of the Participating Utilities determine a tax status issue is raised, DOA and AIDEA agree to permit the immediate return to DOA and/or AIDEA of any grant funds received by the Participating Utilities including any interest earned thereon and to work in good faith to effect the grant transfers in a manner which preserves the tax-exempt status of all of the Participating Utilities and the grant funds and further agree that the Participating Utilities may terminate this Agreement, and any Participating Utility may withdraw from this Agreement, if a satisfactory resolution is not achievable for the utilities as a group or any Participating Utility individually. A Participating Utility may decline to receive grant funds for purposes of avoiding becoming a taxable entity by reason of such receipt but will be permitted, to the greatest extent possible, to have the same rights and responsibilities as other Participating Utilities under this and other related agreements. However, the existence of unfavorable tax consequences for one or more Participating Utilities shall not prevent receipt of the grant and construction of the line by one or more of the other signatories to this Grant Agreement. INTERTIE GRANT AGREEMENT Page 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first above written. INTERTIE GRANT AGREEMENT Page 4 TA’ RTIES: STATE OF ALASKA, DEPARTMENT OF ADMINISTRATION By: ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY ADMINISTRATION By: ADDITIONAL UTILITIES: MATANU: ELECTRIQ A: TION, INC. By: HOMER ELE C ASSOCIATION, INC. woe VALLEY ELECTRIC ASSOCIATION, By: FAIRBANKS MUNICIPAL UTILITIES SYSTEM np CHUGACHELECTRIC ASSOCIATION, INC. ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC. py (Jeeher Sefer CITY OF SEWARD INTERTIE GRANT AGREEMENT Page 5 ANCHORAGE CIPAL LIGHT & POWER By: a a Attachment 1 INTERTIE GRANT AGREEMENT Page 6 Attachment | TF P RE Golden Valley Electric Association, Inc. 15.45% Fairbanks Municipal Utilities System 4.71% Anchorage Municipal Light and Power 22.53% Chugach Electric Association, Inc. 31.19% Alaska Electric Generation & Transmission Cooperative, Inc. 24.87% Matanuska Electric Association. Inc. 13.52% Homer Electric Association, Inc. 11.35% City of Seward 1.25% TOTAL 100.00% NOTE: The above percentage ownership interests are subject to recomputation in the Participation Agreement utilizing consistent system peak data and methodology unless the Participating Utilities agree to a different allocation of specific project capacity (Section 3 of this Agreement). I. RECITALS 1.1. The legislature appropriated the sum of $43,200,000 to Golden Valley Electric Association for the purpose of constructing a power transmission intertie between Healy and Fairbanks to_benefit all utilities participating in the intertie. The appropriation is to be administered as a designated grant under AS 37.05.316. The appropriation named the Department of Administration as the grantor agency. 1.2. The legislature appropriated the sum of $46,800,000 to Chugach Electric Association for the purpose of constructing a pgwer transmission intertie between Anchorage and the Kenai Peninsula Lael appropriation is to be administered as a designated grant under AS 37.05.316. The appropriation named the Department of Administration as the grantor agency. 1.3. The grant appropriations contain conditions which must be satisfied by the grant recipients before the grants can be made. The grant appropriation requires that these conditions be established in an agreement executed by and between the Department, AIDEA and the participating utilities (hereafter the "Final Grant Agreement"). The Alaska Industrial Development and Export Authority (AIDEA) possesses the expertise necessary to protect the public interest and to determine whether the statutory preconditions have been satisfied. 1.4. The designated grant recipients and the participating utilities executed a preliminary agreement which addressed, but did not definitively resolve, the statutory preconditions. 1.5. The designated grant recipients and the utilities participating in the interties need additional time to conclude the arrangements necessary to satisfy the conditions imposed by the grant appropriations. In order to preserve the value of the amount appropriated, it is desirable to administer the amount appropriated so that it may accrue interest for the benefit of the intertie projects. 1.6. The de, -:ment determines that the p _ose of the grant appropriations and the intent of the legislature can best be accomplished if the department were to delegate its authority as the grantor agency to AIDEA. The department further determines that it is in the best interests of the state and consistent with the intent of the legislature to designate AIDEA as an intermediary to receive the transfer of the full amount appropriated. As intermediary, AIDEA will provide for custody and administration of the grant appropriation. 1.7. The department has the authority to make this agreement under AS 37.05.316 and AS 36.30.730. AIDEA has the authority to make this agreement under AS 44.88.080 (9), (11), and (17). II. THE DELEGATION AGREEMENT In consideration of the promises set out below, the parties agree as follows: 2.1. AIDEA is delegated all powers and duties of the Department of Administration associated with the administration of the’ grant appropriations made in secs. 1 and 2 of CH 19 SLA 1993. The AIDEA shall serve as an intermediary for provisions of grant financing to the named recipients of the grants for the benefit of themselves and other electric utilities participating in the intertie projects. 2.2. This delegation includes the department's power to determine whether the Final Agreement submitted by the participating electric utilities satisfies the requirements in secs. 1 (b) and (c) and 2 (b) and (c) of Ch 19 SLA 1993. If AIDEA determines that these requirements are satisfied it may execute a grant agreement with the named recipients. Copies of all grant documents shall be provided to the department's grant administrators. 2.3. The AIDEA shall exercise the delegation granted by this agreement according to the following standards: a (a) al statutes and regulations plicable to the administration of grants by the Department of Administration must be followed and enforced by AIDEA; (b) AIDEA will administer the grant in substantial accordance with the terms and conditions set out in the Department standard form grant agreement for grants administered under AS 37.05.316; (c) a binding participation agreement which fully satisfies the statutory preconditions, including the terms of access, must be executed among all participating utilities before execution of the Final Agreement; (d) AIDEA may establish other reasonable preconditions to assure that the designated grant recipients are authorized and empowered to accept and expend grant proceeds for the intended purposes; (e) AIDEA shall provide that a vested right in money appropriated in secs. 1 and 2, Ch 19 SLA 1993 cannot exist until a valid obligation is created for the payment of money consistent with the purposes of the grant; and (f) no act may be undertaken by AIDEA to limit or otherwise impair the ability of the legislature to reappropriate the unobligated balance of the grant appropriations prior to the execution of the Final Agreement. III. CUSTODIAN 3.1. AIDEA will serve as custodian on behalf of the state and the recipients of the grant appropriations made in secs. 1 and 2, CH 19 SLA 1993. As custodian, AIDEA will, on behalf of the state and the grant recipients, hold in trust the sums appropriated. AIDEA may designate an institutional trustee to accomplish this purpose. 3.2. Amounts ld in custody under this agre ot will be invested consistent with the principles set out in AS 37.10.071. AIDEA will consult with the grant recipients before adopting an investment strategy and asset allocation plan for the amount in custody. 3.3. Interest earned from investment of the amount in custody will be retained by AIDEA, kept separate from all other funds and accounts of AIDEA and, af Quthorized by a resolution of the board of directors, expended for the purposes of the grants, expended for the costs of any custodial arrangements with a private financial institution or, if the purpose of a grant cannot be accomplished, returned to the state treasury. IV. CONSENT OF GRANTEES 4.1. The grantees, on behalf of their respective associations and other participating utilities consent to the establishment of AIDEA as the intermediary for the purpose of providing custody and administration of the grant appropriations made in secs. 1 and 2 of Ch 19 SLA 1993. The parties set out below execute this agreement on this day of » 1993 in Anchorage, Alaska. Department of Administration Alaska Industrial Development and Export Authority Nancy Bear Usera, Commissioner William R. Snell, Executive Director ag Chugach Electric Association Golden Valley Electric Association David Hires Mike Kelly Decsms 50 plS-22 ~OOT="1-93 FRI 13°18 ALASKA ALTUKNEY UENEKAL THA NU. gUre0u001 ou byue DELEGATION OF AUTHORITY TO GRANT INTERMEDIARY I. RECITALS 1.1. The legislature appropriated the sum of $43,200,000 to Golden Valley Electric Association for the purpose of constructing a power transmission intertie between Healy and Fairbanks to benefit all utilities participating in the intertie. The appropriation is to be administered as a designated grant under AS 37.05.316. The appropriation named the Department of Administration as the grantor agency. 1.2. The legislature appropriated the sum of $46,800,000 to Chugach Electric Association for the purpose of constructing a power transmission intertie between Anchorage and the Kenai Peninsula. The appropriation is to be administered as a designated grant under AS 37.05.3116. The appropriation named the Department of Administration as the grantor agency. 1.3. The grant appropriations contain conditions which Must be satisfied by the grant recipients before the grants can be made. The grant appropriation requires that these conditions be established in an agreement executed by and between the Department, AIDEA and the participating utilities (hereafter the "Final Grant Agreement"). The Alaska Industrial Development and _ Export Authority (AIDEA) possesses the expertise necessary to protect the “ UGIRM1-¥S FRE 1St1y ALASKA ALIURNEY GENERAL FHA NU. 9U/4090199 r.uo public interest and to determine whether the statutory preconditions have been satisfied. 4 The designated grant recipients and _ the participating utilities executed a preliminary agreement which addressed, but did not definitively resolve, the statutory preconditions. 1.5. The designated grant recipients and the utilities participating in the interties need additional time to conclude the arrangements necessary to satisfy the conditions imposed by the grant appropriations. In order the preserve the value of the amount appropriated, it is desirable to administer the amount appropriated so that it may accrue interest for the benefit of the intertie projects. 1.6. The department determines that the purpose of the grant appropriations and the intent of the legislature can best be accomplished if the department were to delegate its authority as the grantor agency to AIDEA. The department further determines that it is in the best interests of the state and consistent with the intent of the legislature to designate AIDEA as an intermediary to receive the transfer of the full amount appropriated. As intermediary, AIDEA will provide for custody and administration of the grant appropriation. “OCT- 1-93 FRI 13:19 ALASKA ALIURNEY GENEKAL FAA NU. YU/4090/39 r. U4 Verde The department has the authority to make this agreement under AS 37.05.316 and AS 36.30.730. AIDEA has the authority to make this agreement under AS 44.88.080(9),(11), and (17). II. THE DELEGATION AGREEMENT In consideration of the promises set out below, the parties agree as follows: 2.1. AIDEA is delegated all powers and duties of the Department of Administration associated with the administration of the grant appropriations made in secs. 1 and 2 of ch 19 SLA 1993, The AIDEA shall serve as an intermediary for provision of grant financing to the named recipients of the grants for the benefit of themselves and other electric utilities participating in the intertie projects. 2.2. This delegation includes the department’s power to determine whether the Final Agreement submitted by the participating electric utilities satisfies the requirements in secs. 1 (b) and (c) and 2 (b) and (c) of Ch. 19 SLA 1993. If AIDEA determines that these requirements are satisfied it may execute a grant agreement with the named recipients. Copies of all grant documents shall be provided to the department’s grant administrators. * OCT-" 1-93 FRI 13%2U0 ALASKA ALTURKNEY GENERAL FAX NU, YU/4656/ 55 r. uo 2.3. The AIDEA shall exercise the delegation granted by this agreement according to the following standards: (a) all statutes and regulations applicable to the administration of grants by the Department of Administration must be followed and enforced by AIDEA; (b) AIDEA will administer the grant in substantial accordance with the terms and conditions set out in the Department standard form grant agreement for grants administered under AS 37.05.316; (c) a binding participation agreement which fully satisfies the statutory preconditions, including the terms of access, must be executed among all participating utilities before execution of the Final Agreement; (a) AIDEA may establish other reasonable preconditions to assure that the designated grant recipients are authorized and empowered to accept and expend grant proceeds for the intended purposes; (e) AIDEA shall provide that a vested right in money appropriated in secs. 1 and 2, ch 19 SLA 1993 cannot exist until a valid obligation is created for the payment of money consistent with the purposes of the grant; and (f) no act may be undertaken by AIDEA to limit or otherwise impair the ability of the legislature to reappropriate the unobligated balance of the grant appropriations prior to the execution of the Final Agreement. * OCT-71-93 FRI 13:20 ALASKA ATTORNEY GENERAL FAX NU. YU/466/55 Pr. Ub III. CUSTODIAN a AIDEA will serve as custodian on behalf of the state and the recipients of the grant appropriations made in secs, 1 and 2, ch. 19 SLA 1993. As custodian, AIDEA will, on behalf of the state and the grant recipients, hold in trust the sums appropriated. AIDEA may designate an institutional trustee to accomplish this purpose. 3.2 Amounts held in custody under this agreement will be invested consistent with the principles set out in AS 37.10.0711. AIDEA will consult with the grant recipients before adopting an investment strategy and asset allocation plan for the amount in custody. 3.3. Interest earned from investment of the amount in custody will be retained by AIDEA, kept separate from all other funds and accounts of AIDEA and, if authorized by a resolution of the board of directors, expended for the purposes of the grants, expended for the costs of any custodial arrangements with a private financial institution or, if the purpose of a grant cannot be accomplished, returned to the state treasury. ~ OCT- "1-93 FRI 13:21 ALASKA ATTORNEY GENERAL FAX NO, 9074656736 P, 07 IV. CONSENT OF GRANTEES 4.1. The grantees, on behalf of their respective associations and other participating utilities consent to the establishment of AIDEA as the intermediary for the purpose of providing custody and administration of the grant appropriations made in secs. 1 and 2 of ch. 19 SLA 1993. The parties set out below execute this agreement on this day of ,» 1993 in Anchorage, Alaska. Department of Administration AIDEA Nancy Bear Usera, Commissioner Riley Snell Executive Director Chugach Electric Ass’n Golden Valley Electric Ass’n David Hires Mike Kelly WK? ] ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY 480 WEST TUDOR » ANCHORAGE, ALASKA 99503-6690 + (907) 561-8050 + FAX (907) 561-8998 MEMORANDUM TO: Patrick Ryan Chief ,of Staff FROM: Executive Director DATE: August 23, 1993 SUBJECT: Proposed Intertie Grant Agreements In connection with the comprehensive reformulation of state energy policy, the Legislature appropriated roughly $90 million from the Railbelt intertie reserve to the Department of Administration for payment as a designated grant to Golden Valley Electric Association ($43.2 million) and to Chugach Electric Association ($46.8 million). While GVEA and Chugach were the designated recipients of the grants, the grants were explicitly for the benefit of all the utilities participating in the respective intertie projects. The appropriations were further "contingent upon the execution of a written agreement" between the participating electric utilities and the state which provides that the utilities (i) agree to pay any costs in excess of the grant amount; (ii) pay the O&M costs of the interties, and (iii) allocate such costs essentially in proportion to the system peak demands of the participating utilities. We understand from discussions with Speaker Barnes that the intent of the "contingent" appropriation was to require that the participating utilities reach sufficient agreement on terms such that no utilities could unfairly leverage other participating utilities. Historically, I understand that the utilities have at times had substantial difficulty in reaching a consensus on issues of access availability and terms, control, or cost allocation. The utilities have presented AIDEA a proposed Intertie Grant Agreement which establishes a framework to resolve the "pre-condition" issues set out in the appropriation. While the Grant Agreement provides general assurances to satisfy the statutory pre-conditions, the Agreement anticipates execution of a definitive Participation Agreement on or before November 1, 1993, which Patrick Ryan August 23, 1993 Page Two will definitively establish the terms and conditions under which the various utilities will participate. Similarly, the Grant Agreement establishes in general terms an agreement among the utilities to provide "access" to each other's systems (a point of historic contention), however the actual establishment of definitive “terms and rates" for such access is also reserved for the Participation Agreement. Any utility is able to withdraw from the Grant Agreement until the more definitive Participation Agreement is executed. The proposed Grant Agreement is conditional in two other respects. First, the draft Agreement is explicitly contingent on the utilities' receipt of a favorable opinion from the Internal Revenue Service in response to a Private Letter Request (involving whether receipt of the grant funds impairs the tax-exempt status of the utilities). Finally, it is virtually certain that any final agreement reached among the utilities will be subject to Alaska Public Utilities Commission review (and is thus not "final" unless and until approved). The utilities have two primary objectives in seeking the state's immediate execution of a grant agreement which transfer funds to GVEA and Chugach. First, unless otherwise specified, interest earnings on a designated recipient grant (AS 37.05.316) are generally available for project purposes. It is noteworthy, here, that the grants are roughly half of anticipated Project costs, so interest earnings would substantially mitigate the cost to the participating utilities. Second, the utilities seek execution of a grant agreement which transfers the fund, so that the funds are not amenable to legislative reappropriation. (Once a third party has "vested" contract rights in a grant, it is certainly arguable under Alaska Supreme court rulings that the legislature has no power to modify or rescind the grant appropriation.) The issues of legislative powers of appropriation are particularly significant given the pending litigation involving the Budget Reserve Fund. If, for example, the courts invalidate the approximate $800 million of appropriations in dispute, the Governor or the Legislature may well prefer that the $90 million in intertie grant appropriations be available to redress any budget shortfall. (The grant appropriations are themselves not directly affected by the pending litigation.) And while not as critical, the question of interest earnings involves approximately $10-15 million in interest income, since it is unlikely that actual construction on the interties will begin until 1995 or later. The policy options range as follows: (1) Approve Agreement substantially in the form as presented. Interest income on grant available for project purposes. Grant funds likely subject to third-party contract rights, and thus not subject to Legislative reappropriation. Patrick Ryan August 23, 1993 Page Three (2) Approve Agreement structure, but expressly provide in Grant Agreement that, until final definitive agreement is reached among participating utilities, grant funds remain subject to legislative powers. (3) Utilize AIDEA as interim custodian of funds (by agreement with utilities or by RSA agreement between Department of Administration and AIDEA) until utilities reach binding definitive agreement. Interest earnings would be available for project purposes, but assets held by AIDEA are subject to legislative action. (4) Reject agreement structure; grant available only after utilities reach binding definitive agreement. Until pre-condition satisfied, interest income would be a general fund asset. Also, appropriation fully subject to legislative action. I recommend Option 3 -- the use of AIDEA as the interim custodian of funds through a structure which allows interest income (from the date of transfer to AIDEA) to be available for project purposes. This option maintains an incentive for the participating utilities to resolve all outstanding business terms through execution of a binding Participation Agreement. Until a definitive agreement is reached, the funds would remain subject to legislative action. WRS:bjf cc: James Baldwin, Esq. Jon Rubini, Esq. Dennis V. McCrohan, Design/Construction Manager INTERTIE GRANT AGREEMENT This Agreement is entered into this 17th day of August, 1993, by Golden Valley Electric Association, Inc. ("GVEA"), Fairbanks Municipal Utilities System ("FMUS"), Anchorage Municipal Light and Power ("ML&P"), Chugach Electric Association, Inc. ("CEA"), Alaska Electric Generation and Transmission Cooperative, Inc. ("AEG&T"), on behalf of its members (Matanuska Electric Association, Inc. ("MEA"), and Homer Electric Association, Inc. ("HEA"), "Additional Parties"), and City of Seward ("Seward") ("Participating Utilities" within the meaning of Section 2 of SB 126), and the State of Alaska, Department of Administration ("DOA"), and the Alaska Industrial Development and Export Authority (“AIDEA”). The parties agree as follows: I Purpose. The purpose of this Agreement is to satisfy the statutory conditions precedent to DOA’s transfer of the grant funds and to provide for the expeditious transfer of such funds to the grant recipients for the purpose of partial funding of the design and construction of new electric transmission interties between Healy and Fairbanks and between Anchorage and the Kenai Peninsula. Specifically, this Agreement is intended to satisfy the conditions of SB 126 §§ 1(b) and (c) and §§ 2(b) and (c). as Additional Agreements. The Participating Utilities hereby agree that any additional agreements (whether among the Participating Utilities or with other entities) that are necessary to carry out the purposes of this Agreement and SB 126 shall be negotiated in good faith. Such additional agreement(s) shall address ownership participation ("Participation Agreement"), project management, and project operation. 3 Ownership. Pursuant to this and any other necessary agreements, the Participating Utilities shall hold undivided ownership interest as tenants in common in the proportion set forth in Attachment 1 to this Agreement, such proportions being based on the relationship of the Participants’ 1990/1991/1992 three-year average non-coincident peak demand to the sum of the Participating Utilities’ 1990/1991/1992 three-year average non-coincident system peak demands unless the Participating Utilities agree to a different allocation of specific project capacity in the Participation Agreement. A Participating Utility may elect in writing to withdraw from participation in either the Anchorage-Kenai Peninsula Intertie or the Healy-Fairbanks Intertie prior to execution of a Participation Agreement by the remaining Participating Utilities. If any utility that executes this Agreement elects to withdraw from participation in either the Anchorage- Kenai Peninsula Intertie or the Healy-Fairbanks Intertie, or both, then that utility shall have no liability under Section 4 hereof, or otherwise, for any costs associated with the Intertie(s) in which that utility has not agreed to participate, and all such costs shall instead be borne by those Participating Utilities which execute Participation Agreements with respect to such Interties. 4, Statutory Conditions. For the purpose of securing transfer of the grant funds, the Participating Utilities hereby agree to the conditions of SB 126, specifically set forth below. 4.1 Design and Construction Costs. The Participating Utilities agree to pay the design and construction costs of the Healy-Fairbanks transmission intertie that exceed $43,200,000 and the design and construction costs for the Anchorage-Kenai Peninsula transmission intertie that exceed $46,800,000 [SB 126 §§ 1(b)(1) and 2(b)(1)]. 4.2 O&M Costs. The Participating Utilities agree to pay the operation and maintenance (O&M) costs for the Healy-Fairbanks and the Anchorage-Kenai Peninsula interties [SB 126 §§ 1(b)(2) and 2(b)(2)]. 4.3 Rates. The costs of construction of the Anchorage-Kenai Peninsula intertie in excess of $46,800,000 plus accrued interest, the cost of operation and maintenance of that intertie, and other costs approved by the Participants shall first be recovered through a 1.5 mill/kWh charge for all energy generated by the Bradley Lake Hydroelectric Project. The costs of construction of the Healy-Fairbanks intertie in excess of $43,200,000 plus accrued interest, the cost of operation and maintenance of that intertie, and other costs approved by the Participants shall first be recovered through a 1.5 mill/kWh charge for energy generated by the Bradley Lake Hydroelectric Project for the benefit of receiving utilities in Fairbanks and an additional 1.5 mill/kWh charge to be paid by the receiving utility for 60 percent of the non-Bradley Lake energy transmitted on the existing GVEA transmission line and the new northern intertie between Healy and Fairbanks. Remaining costs of the two interties not recovered by the above 1.5 mill/kWh charges shall be allocated among the Participating Utilities in the proportion set forth in Attachment 1. 4.4 Access and Wheeling. All Participating Utilities agree to provide the other Participating Utilities access both on the new intertie and over the Participating Utilities’ systems to and from the intertie for the purpose of assured access to resources, economy energy transactions, and other similar uses on terms and at rates to be resolved in the Participation Agreement. Charges for access to other Participants’ capacity rights will be addressed in the Participation Agreement. Resulting rates will be submitted to the Alaska Public Utilities Commission, if required. 5. Design and Construction Management. The Participating Utilities agree to contract with GVEA to design and construct the Healy-Fairbanks power transmission intertie and agree to contract with CEA to design and construct the Anchorage-Kenai Peninsula power transmission intertie, subject to the availability of adequate financing and in accordance with Prudent Utility Practices and construction agreements which contain provisions for adequate oversight to maintain quality and cost control, and to ensure that total project costs do not exceed amounts budgeted by the Participants' Group and its Participating Utility members. Consistent with the above conditions, it is agreed and understood that GVEA and CEA, as contractors, will be free to subcontract all or any portion of the work associated with the design and construction of the above projects. If, for any reason, GVEA and/or CEA elect not to act as the contractors of the interties, the Participating Utilities may contract for construction with one or more of the other Participating Utilities or Additional Parties. 6. Intertie Participants Group. As common owners of the interties, the Participating Utilities agree to form the Intertie Participants Group (IPG) for the purpose of exercising their rights and responsibilities as owners. Each Participating Utility shall be represented on the IPG, and the IPG shall form a technical advisory subcommittee on which each Participating Utility shall be represented, except that MEA and HEA shall be represented on the IPG and any subcommittees, each of which shall be a voting member, and AEG&T shall not be additionally represented. The Participation Agreement shall resolve and adopt voting rights and procedural rules for the operation of the IPG. ~~ . Total project cost and financing shall be addressed in the Participation Agreement. Intertie design, construction, construction management, and operation and maintenance, among other issues, shall be resolved by the IPG in accordance with its rules and procedures. INTERTIE GRANT AGREEMENT Page 2 Relative to design and construction issues, the IPG and its technical advisory subcommittee shall be responsible for oversight of GVEA and CEA construction efforts. Such oversight shall include approval of at least project scope (including routing and points of interconnection), cost estimates and budget, approval of construction agreements, significant change orders, receipt and review of at least monthly reports, and auditing of design and construction funds. Neither the IPG nor any individual Participating Utility shall attempt to make claims against GVEA and CEA for any decisions made by the IPG. Upon completion and commercial operation of the interties, the IPG shall be responsible for all decisions relating to the ongoing operations, maintenance, repair, and improvement of the interties. ie Transfer_of Grant Funds. DOA hereby transfers the grant funds of $43,200,000 to GVEA and $46,800,000 to CEA, together with all interest earnings on such funds from the effective date of the legislation. GVEA and CEA agree to immediately deposit such funds in trust accounts for the benefit of all Participating Utilities in agreed-upon financial institutions with instructions to the trust officer that no funds are to be released, encumbered, assigned, or pledged until a Participation Agreement has been executed by all of the Participating Utilities. The Participating Utilities agree to negotiate in good faith with the intent of executing a Participation Agreement by November 1, 1993. In the event that the Healy-Fairbanks intertie is not, for any reason, constructed, GVEA agrees to return any unexpended funds and any interest earned thereon to DOA. In the event that the Anchorage-Kenai Peninsula intertie is not, for any reason, constructed, CEA agrees to return any unexpended funds and any interest earned thereon to DOA. No Participating Utility shall unreasonably delay progress toward completion of the interties. 8. Use of Funds. The parties agree to use funds in the trust accounts described in paragraph 7 solely for the purposes of design and construction of the Healy-Fairbanks and Anchorage-Kenai Peninsula interties, including all acts necessary for completion of these projects. The parties further agree to return to the State any unexpended grant funds and any interest earned thereon not needed for this purpose. 9. Tax Considerations. The parties agree to expeditiously determine whether the receipt of funds pursuant to this Agreement is inconsistent with the tax-exempt status of the Participating Utilities or will result in the grant being subject to taxation. In the event that any of the Participating Utilities determine a tax status issue is raised, DOA and AIDEA agree to permit the immediate return to DOA and/or AIDEA of any grant funds received by the Participating Utilities including any interest earned thereon and to work in good faith to effect the grant transfers in a manner which preserves the tax-exempt status of all of the Participating Utilities and the grant funds and further agree that the Participating Utilities may terminate this Agreement, and any Participating Utility may withdraw from this Agreement, if a satisfactory resolution is not achievable for the utilities as a group or any Participating Utility individually. A Participating Utility may decline to receive grant funds for purposes of avoiding becoming a taxable entity by reason of such receipt but will be permitted, to the greatest extent possible, to have the same rights and responsibilities as other Participating Utilities under this and other related agreements. However, the existence of unfavorable tax consequences for one or more Participating Utilities shall not prevent receipt of the grant and construction of the line by one or more of the other signatories to this Grant Agreement. INTERTIE GRANT AGREEMENT Page 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first above written. INTERTIE GRANT AGREEMENT Page 4 STATE PARTIES: STATE OF ALASKA, DEPARTMENT OF ADMINISTRATION By: ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY ADMINISTRATION By: ADDITIONAL UTILITIES MATANUSKA ELECTRIQG A TION, INC. By: HOMER ELE! C ASSOCIATION, INC. GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. INTERTIE GRANT AGREEMENT Page 5 FAIRBANKS MUNICIPAL UTILITIES SYSTEM By:: Pa CHUGACHyELECTRIC ASSOCIATION, INC. ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC. Mpa. Sefer CITY OF SEWARD ANCHORAGE MUNICIPAL LIGHT & POWER By. me 2 Attachment 1 INTERTIE GRANT AGREEMENT Page 6 Attachment | I RTIE OWNE IPT EST. Golden Valley Electric Association, Inc. 15.45% Fairbanks Municipal Utilities System 4.71% Anchorage Municipal Light and Power 22.53% Chugach Electric Association, Inc. 31.19% Alaska Electric Generation & Transmission Cooperative, Inc. 24.87% Matanuska Electric Association. Inc. 13.52% Homer Electric Association, Inc. 11.35% City of Seward 1.25% TOTAL 100.00% NOTE: The above percentage ownership interests are subject to recomputation in the Participation Agreement utilizing consistent system peak data and methodology unless the Participating Utilities agree to a different allocation of specific project capacity (Section 3 of this Agreement). AUG @9 793 @6:G8PM KEMPPEL "FMAN GINDER P.178 Law OFFICES OF KEMPPEL, HUFFMAN AND GINDER A PROFESSIONAL CORPORATION ROGER FR. KEMPPEL ANGNORAGE OFrice RICHARD R. HUFFMAN 255 &. FIREWEEO LANE. SUITE 200 PETER C. GINDER ANCHORAGE, ALASKA 09503-2004 DONALOC. ELLIS (9071 277-1604 TELECOPIER (907) 276-2493 ANDREW J. FIERRO GEORGE 8. HARRINGTON JR. Sonsova oprics BUMHY DEAN SMIIN B“O ENO GIHEE! JAY 0, DURYCH f.0, BOX 1020 CORDOVA. ALASKA 99574 (907! 424-7410 TELECOPIER (9071 424-7454 TO: David Highers, Chugach FAX: 562-0027 Norm Story, HEA FAX: 235-3323 Ken Ritchey, MEA FAX: 745-9368 Dave Calvert, City of Seward FAX: 224-3248 Vince Mottola, FMUS FAX: 451 4410 Mike Kelly, GVEA FAX: 451-5633 Bob Hufman, AEG&T FAX: 474-0549 Ron Saxton, Attorney FAX: (503) 226-0079 FROM ——s Roger R. Kemppel DATE: August 9, 1993 SRT + Antertie Grant Agreement - Final Agreement Reached at 8/09/93 RUG Meeting > § (argo, tnclicfetig Mea (pod flee! R=96% 907 276 2493 08-09-93 06:06PM POO1 #19 R=96% $43,200,000 and the design and construction AUG @9 '93 @6:@8PM KEMPPEL FMAN GINDER P.2/8 INTERTIE GRANT AGREEMENT This Agreement is entered into this day of August, 1993, by Golden Valley Llectric Association, Inc. ("GVEA"), Fairbanks Municipal Utilitics System ("FMUS"), Anchorage Municipal Light.and Power ("ML&P"), Chugach Electric Association, Inc. ("CEA"), Alaska Electric Generation and Transmission Cooperative, Inc. ("AEG&T"), on behalf of its members (Matanuska Electric Association, Inc., and Homer Electric Association, Inc., ‘Additional Parties"), and City of Scward ("Seward") ("Participating Utilities" within the meaning of Section 2 of SB 126), [Matanuska Electric Association, Inc. ("MEA") and Homer Electric Association, Inc. ("HEA") ("Additional Utilities),] and the State of Alaska, Department of Administration ("DOA"), and the Alaska Industrial Development and Export Authority (“AIDEA”). The parties agree as follows: 1. Purpose. The purpose of this Agreement is to satisfy the statutory conditions precedent to DOA's transfer of the grant funds and to provide for the expeditious transfer of such funds to the grant recipients for the purpose of partial funding of the design and construction of new electric transmission interties between Healy and Fairbanks and between Anchorage and the Kenai Peninsula. Specifically, this Agreement is intended to satisfy the conditions of SB 126 $$ 1(b) and (c) and §§ 2(b) and (c). 2, Additional Agreements. The Participating Utilities hereby agree that any additional agreements (whether among the Participating Utilities or with other entities) that are necessary to carry out the purposes of this Agreement and SB 126 shall be negotiated in good faith. Such additional agreement(s) shall address ownership participation ("Participation Agreement"), project management, and project operation. 3. Ownership. Pursuant to this and any other necessary agreements, the Participating Utilities shall hold undivided ownership interest as tenants in common in the proportion set forth in Attachment 1 to this iy avoquminny such proportions being based on the relationship of the Participants’ 1990/1991/1992 ra average non-coincident peak demand to the sum of the Particip Utilities' 1990/1991/1992 three-year average non-coincident system peak ee aids a Utilities agree to [the] a different allocation of specific project capacity In the Participation Agreement. 4. Statutory Conditions. For the purpose of securing transfer of the grant ae the Participating Utilities hereby agree to the conditions of SB 126, specifically set forth elow. 4.1 i i The Participating Utilities agree the and construction costs of th E mission intertie that transmission intertie that exceed $46,800,000 [SB 126 $$ 1(b)(1) and 2(b)(1)}. 4.2 O&M Costs. The Participating Utilities agree to pay the operation and maintenance (O&M) costs for the Healy-Fairbanks and the Anchorage-Kenai Peninsula interties [SB 126 §§ 1(b)(2) and 2(b)(2)]. Ue 4.3 Rates. The costs of construction of the Anchorage-Kenai Peninsula intertie in excess of $46,800,000 plus accrued interest, the cost of operation and maintenance of that intertie, and other costs approved by the Participants shall first be recovered through a 1.5 mill/kWh charge for all energy generated by the Bradley The costs of construction of the Healy-Fairbanks intertie in excess of $43,200,000 plus accrued interest, the cust of operation and muintenunve of that intertic, and other 907 276 2493 08-09-93 06:06PM P0O2 #19 WG @9 ’93 @6:@9PM KEMPPEL HUFFMAN G R '.3/8 costs approved by the Participants shall first be recovered through a 1.5 mill/kWh charge for : by the Bradley Lake Hydroelectric Project for the benefit of receiving utilities in rire additional 1.5 mill/kWh charge to be paid by the receiving utility for 60 percent of the non-Bradley Lake energy transmitted on the ciate GVEA transmission line and the new northern intertie between Healy and Fairbanks. 4 Mm. or 0 ; costs of the two interties not recovered by the above 1.5 - ene dae: mill/kWh charges shall be allocated among the Participating Utilities in the proportion set forth in ~ it pre Attachment 1. Sl ET All Participating Utilities agree to ne the — Utilities both on the new intertie and over ng Utilities’ sya systems to and from the Intertie for the purpose of ET cere ae and other similar uses hanna om the interties] on terms and at rates [that must] to be resolved in the Agreement. [Participating Utilities shall have capacity and access on the interties in orporen to their 5 ore Hh interest seer all purposes including aaa access Participant's ity, resources, economy energy transactions, and other similar uses. J] s for ACCESS to Participants' capacity rights will be addressed in the Participation Agreement.) The oer Faricpan capac for access will be calculated on a ities: ued and a c eaulred. bose Resulting rates will be submitted to the Ss Design and Constmction Management. The Participating Utilities agree to zontract with GVEA to design and construct the Healy-Fairbanks power transmission intertie and agree‘to contract with CEA to design and construct the Anchorage-Kenai Peninsula power intertie, subject to the availability of adequate financing and in accordance with en eaten Practices and construction agreements which contain provisions for adequate dversight to maintain quality and cost control, and to ensure that total project costs do not exceed mounts budgeted by the Participants' Group and its Participating Utility members. Consistent with the above conditions, it is agreed and understood that GVEA and CEA, as contractors, will be free to subcontract all or any portion of the work associated with the jesign and construction of the above projects. If, for GVEA and/or CEA are vanes to construct the interties, the may contract for sonstruction with one or more of the other Participating Ulities or Additonal i ies. a 6. Intertie Participants Group. As common owners of the interties, the articipating Utilities agree to form thc Intertic Participants Group (IPG) for the se of s their rights and responsibilities as owners. Each Participating Utility 1 be epresented on the IPG, and the PG shall form a technical advisory subcommittee on which each rarticipating Utility shall be represented, except that [AEGAT shall be represented on the IPG and my subcommittees by MEA and HEA, one of which shall be a voting aes of the IPG, and \EG&T shall not be additionally represented] MEA and HEA shall be represented on the PG and any subcommittees, each of which shall be a voting member, and \EG&T shall not be additionally represented. The Participation Agreement shall resolve nd adopt voting rights and Seocedael? rer for the operation of the IPG. [Total project cost and financing shall be addressed in the Participation Agreement. idditional agreements addressing at least ha terms of intertie design, construction, construction nanagement, Cae operation and maintenance shall be negotiated vite the IPG.] Total project NTERTIE GRANT AGREEMENT ‘age 2 907 276 2493 08-09-93 06:06PM POO03 #19 R=96% AUG 18 '93 @2:@2PM KEMPPE! IFFMAN GINDER fre 2 Gy i 0 Veli Vy [Total project cost and financing shall be addressed in the Participation Agreement. Additional agreements addressing at least the terms of intertie design, construction, construction management, and operation and maintenance shall be negotiated within the IPG.] Total project cost and financing shall be addressed in the Participation Agreement. Intertie design, construction, construction management, and operation and maintenance, among other issues, shall be resolved by the IPG in accordance with its rules and procedures. Race Relative to design and construction issues, the IPG and its technical advisory subcommittee shall be responsible for oversight of GVEA and CEA construction efforts. Such oversight shall include approval of at least project scope (including routing and points of interconnection), cost estimates and budget, approval of construction agreements, significant change orders, receipt and review of at least monthly reports, and auditing of design and gn construction funds. IPG shall not attempt to make claims against GVEA and CEA for any decisions made by the IPG. U ponies andionmnmencial paren of the interties, neither the IPG nor an niabietetaeeten tility shall be responsi a a er operations, maintenance, repair, and improvement of the interties. 7. Transfer of Grant Funds. DOA hereby transfers the grant funds of $43,200,000 to GVEA and $46,800,000 to CBA, together with all interest earnings on such funds from the effective date of the legislation. GVEA and CBA agree to immediately deposit such funds in trust accounts for the benefit of all Participating Utilities in agreed-upon financial institutions with instructions to the trust officer that no funds are to be released, encumbered, assigned, or pledged until a Participation Agreement has been executed by all of the Participating Utilities, The Participating Utilities agree to negotiate in good faith with the intent of executing a Participation Agreement [no later than October 15, 1993] by November 1, 1993. In the event that the Healy-Fairbanks intertie is not, for any reason, constructed, GVEA agrees to return any unexpended funds and any interest earned thereon to DOA. In the event that the Anchorage- Kenai Peninsula intertie is not, for any reason, constructed, CEA agrees to return any unexpended funds and any interest earned thereon to DOA. No Participating Utility shall unreasonably delay progress toward completion of the interties. 8. Use of Funds, The parties agree to use funds in the trust accounts described in paragraph 7 solely for the purposes of design and construction of the Healy-Fairbanks and Anchorage-Kenai Peninsula interties, including all acts necessary for completion of these eer The parties further agree to return to the State any unexpended grant and any interest earned thereon not needed for this purpose. 9. Tax Considerations. The parties agree to Gal sarap determine whether the receipt of funds pursuant to this Agreement is inconsistent with the tax-exempt status of the Participating Utilities or will result in the grunt being subject to taxation. In the event that any of the Participating Utilities determine a tax status issue is raised, DOA and AIDEA agree to permit the immediate return to DOA and/or AIDEA of any grant funds received by the Participating Utilitics including any interest earned thereon and to work in good faith to effect the grant transfers in a manner which preserves the tax-exempt status of all of the Participating Utilities and the grant funds and further agree that the Participating Utilities may terminate this Agreement, and any Participating Utility may withdraw from this Agreement, if a satisfactory resolution is not achievable for the utilities as a group or any Participating Utility individually. A Participating Utility may decline to receive grant funds for purposes of avoiding becoming a taxable entity by reason of such receipt but will be INTERTIE GRANT AGREEMENT Page 3 907 276 2493 08-10-93 02:00PM POO2 #47 AUG @9 793 @6:1@PM KEMPPEL ‘MAN GINDER P.478 cost and financing shall be addressed in the Participation Agreement. Intertie design, construction, construction management, and aperation and maintenance, among other issues, shall be resolved by the IPG in accordance with its rules and procedures. Relative to design and construction issues, the IPG and its technical advisory subcommittee shall be responsible for oversight of GVEA and CEA construction efforts. Such oversight shall include approval of at least project scope (including routing and points of Jorg vot interconnection), cost estimates and budget, approval of construction agreements, significant “ . , change orders, receipt and review of at least monthly reports, and auditing of ed and yews construction funds. The IPG shall not attempt to make claims against GVEA and CEA for any decisions made by the IPG. | any wtilelyse + Upon completion and commercial operation of the interties, the IPG shall be responsible for all decisions relating to the onguing operations, maintenance, repair, and improvement of the interties. D, Transfer of Grant Funds, DOA hercby transfers the grant funds of $43,200,000 to GVEA and $46,800,000 to CEA, with all interest earnings on such funds from the effective date of the legislation. GVEA and CEA agree to immediately deposit such funds in trust accounts for the benefit of all Participating Utilities in agreed-upon financial institutions with instructions to the trust officer that no funds are to be released, encumbered, assigned, or pledged until a Participation Agreement has been executed by all of the Participating Utilities. The Participating Utilities agree to negotiate in good faith with the intent of executing a Participation Agreement [no later than October 15, 1993] by|November 1, 1993, In the event that the Healy-Fairbanks intertie is not, for any reason,; constructed, GVEA agrees to return any unexpended funds and any interest earned thereon to DOA. In the event that the Anchorage- Kenai Peninsula intertie is not, for any reason, constructed, CEA iyses return — unexpended funds and any interest earned thereon to DOA. No cipating Utility shall — unreasonably delay progress toward completion of the interties. i 8. Use of Funds. The parties agree to use funds in the trust accounts described in paragraph 7 solely for the purposes of design and construction of the Healy-Fairbanks and Anchorage-Kenai Peninsula interties, including all acts necessary for completion of these projects. The parties further agree to return to the State any unexpended grant funds and any interest earned thereon not needed for this purpose. \ c, 9. . Tax Considerations. The parties agree to expeditiously determine whether the receipt of funds pursuant to this Agreement is inconsistent with the tax-exempt status of the Participating Utilities or will result in the grant being subject to (axatiun. In the event that any of the Participating Utilities determine a tax'status issue is raised, DOA and AIDEA agree to permit the immediate return to DOA and/or AIDEA of any grant funds received by the Participating Utilities including any interest carncd thereon and to work in good faith to effect the grant transfers in a manner which preserves the tax-exempt status of all of the Participating Utilities and the grant funds and further agree that the Participating Utilities may terminate this Agreement, and any Participating Utility may withdraw from this Agreement, if a satisfactory resolution is not achievable for the utilities as a group or any Participating Utility individually. A Participating Utility may decline to receive grant funds for purposes of avoiding becoming a taxable entity by reason of such receipt but will be permitted, to the greatest extent possible, to have the same rights and responsibilities as other Participating Utilities under this and other related agreements. However, the existence of unfavorable: tax consequences for ane or INTERTIE GRANT AGREEMENT Page 3 R=96% 907 276 2493 08-09-93 06:06PM PO004 #19 R=96% AUG @9 '93 @6:11PM KEMPPEL “MAN GINDER P.S/8 more Participating Utilities shall not prevent receipt of the grant and construction of the line by one or more of the other signatories to this Grant Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on the date first above written. STATE PARTIES: STATE OF ALASKA, DEPARTMENT OF ADMINISTRATION By: ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY ADMINISTRATION By: PARTICIPATING UTILITIES: naeTil VALLEY ELECTRIC ASSOCIATION, | - 7 FAIRBANKS MUNICIPAL UTILITIES SYSTEM By: ANCHORAGE MUNICIPAL LIGHT & POWER By: INTERTIE GRANT AGREEMENT Page 4 907 276 2493 08-09-93 06:06PM POOS #19 AUG @9 793 86:12PM KEMPPEL FMAN GINDER P.6/8 CHUGACH ELECTRIC ASSOCIATION, INC. By: ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC. By: CITY OF SEWARD By: ADDITIONAL PARTIES: MATANUSKA ELECTRIC ASSOCIATION, INC. By: HOMER ELECTRIC ASSOCIATION, INC. By: INTERTIE GRANT AGREEMENT Page 5 R=96% 907 276 2493 08-09-93 06:06PM PO006 #19 R=96% AUG @9 ’°S3) 86:12PM KEMPPE IFFMAN GINDER P.778 Attachment 1 INTERTIE GRANT AGREEMENT Page 6 By: CONTRACTORS: ad VALLEY ELECTRIC ASSOCIATION, By: CHUGACH ELECTRIC ASSOCIATION, LINC, 907 276 2493 08-09-93 06:06PM POOT #19 AUG. @9 793 86:12PM KEMPPEL HUFFMAN “*™“'DER P.8/8 Attachment 1 INTERTIE OWNERSHIP INTERESTS Golden Valley Electric Association, Inc. 15.26% Fairbanks Municipal Utilities System 4.65% Anchorage Municipal Light and Power 22.25% Chugach Electric Association, Inc. 32.04% Alaska Electric Generation & Transmission Cooperative, Inc. 24.56% Matanuska Electric Association, Inc. 13.35% Homer Electric Association, Inc. 11.21% City of Seward | 1.24% TOTAL 100.00% NOTE: The above percentages shall apply y unless otherwise agreed to in the Participation Agrccment (sce Scction 3 of this Agreement), 907 276 2493 08-09-93 06:06PM POO08 #19