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HomeMy WebLinkAboutSE Intertie Contract File 1996@3-@8-1996 12:49 927 225 1888 KPU #4 DSE. LED 7Z P. @1 KETCHIKAN PUBLIC UTILITIES SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE PROJECT 25930 Tongass Avenue, Ketchikan, Alaska 99901 (907) 225-1000 (907) 228-5494 Message (907) 225-1888 Fax FAXTO: Jeff Paine, Raytheon (206) 451-4648 3/8/96 Ellen Hall, Foster-Wheeler (206) 688-3941 K1154 Doug Washburn, Damea & Moore (907) 562-1297 0100 INFO: Jimmy DeHerrera, USFS - KRD (907) 225-8738 Keene Kohrt, USFS - WRD (907) 874-2095 Dennis Lewis, PMC Chairman (PP&L) (907) 772-9287 Terry Nikodym, PMC Rep (WL&P) —(907) 874-3982 Tom Friesen, PMC Rep (KPU) (907) 225-0568 Ed Kozak, PMC Rep (KEA) (907) 486-7720 Robert Wilkinson, PMC Rep (CVEA) (907) 822-5586 Dennis McCrohan, AIDEA (907) 561-8998 Richard Emmerman, DCRA (907) 269-4645 Lowell Highbargain, TBPA (907) 874-2581 FROM: Rich Trimble, Swan-Tyee Intertie Project Manager Last night the Ketchikan City Council approved KPU staff's recommendation that we defer field work as appropriate between Shrimp Bay and Eagle Bay, KPU intends to implement the plan proposed by Raytheon whereby survey, geotechnical reconnaissance and engineering walk- through between the Swan Lake powerhouse and Shrimp Bay and between Eagle Bay and the Tyee powerhouse would still occur in 1996, but would be deferred for that portion of the route between Shrimp Bay and Eagle Bay until 1997, As of today, you are directed to modify your schedules accordingly and develop final plans and a change order to implement this change. This action is taken primarily in responses to the Forest Service desire to consider an alternate route that avoids the Eagle River area, which is managed by them for primitive recreation use. While KPU ig concerned about the significant cost increase that would result from this longer alternative route, we recognize their obligation as the lead agency in the BIS process to consider all reasonable alternatives and issues, RQ, \ey Rega div - ree gee Vpanien oS, ESTK mio, Wang Gon sre3ass CC ' SNe DN de Ow weal ‘Wrangell Sentinal (907) 874-2303 Ly a na < GPL no, Pernt Gon rasa96 Rileq to woot Wi | Realy Krurte, Ciew AweEd(u ewley [3708756 12:05) @3-@8-1996 12:59 907 225 1888 KPU #1 ee KETCHIKAN PUBLIC UTILITIES Memorandum TO: Honorable Alaire Stanton & City Council FROM: John Magyar, Acting KPU General Manager 27), _, DATE: February 29, 1996 SUBJECT: Swan—Tyee Intertie Engineering Field Work The schedule for the Swan—Tyee Intertie was developed in 1994 with the objective to complete the project as rapidly as possible. That schedule provides for design and permitting in 1995-1996 followed by construction 1997-1998. This aggressive schedule does place us at some risk since we are designing the project in advance of having a construction permit, An alternative route has been proposed along the Cleveland Peninsula in the Draft Environmental Impact Statement (DEIS) for the northern portion of the route. While this alternative route adds significant length and cost to the project, it has some environmental attraction since it avoids the Eagle River which is used for primitive recreation. Staff believes it is timely to consider deferring survey and geotechnical drilling along this portion of the route until after the Forest Services issues its decision and permit for the final route in early 1997. ADVANTAGES: 1) Minimize risk; As noted above, we are curreatly taking a risk by assuming the Forest Service will permit the same route we have proposed and are designing. Staff proposes to defer approximately $1,250,000 of field work associated with that portion of the route between Shrimp Bay and Eagle Bay which causes most concer in the Draft EIS. Staff does intend to perform field work in 1996 along the less controversial portions of the route south of Shrimp Bay and along the Bradfield Canal. 2) Public Relations: KPU postponing the engineering effort along that portion of the route of most concern in the Draft EIS will help demonstrate to the public that KPU is taking the environmental study process seriously (see the attached letter from Foster-Wheeler). DISADVANTAGES: 1) Construction delayed: Taking this action definitely delays our ability to start construction from 1997 to 1998. With our current schedule, we could start construction next year assuming we could obtain construction financing this year and the Forest Service permits our proposed route on schedule in carly 1997, MAUSERWWANCYLIWPDATAWOT-TE,.MEM (3708796 12:02 @3-@8-1996 12:51 907 225 15688 KPU #14 P.@ Memorandum—Mayor and Council, Swan—Tyee February 29, 1996 Page 2 2) Increased cost: There will be increased cost due to inflation and a certain amount of remobilization and administrative impact if we defer this work. Our consultants estimate their increased costs as follows if we provide them immediate notification to defer: Tarr et ant [Eade ir] Beem fener (sma Note that these increased costs are preliminary estimates only. Further, this does not include costs associated with Foster-Wheeler’s environmental analysis of the alternative Cleveland Peninsula route since it was in addition to our original scope of services (and is required whether or not we defer field work), We are anticipating requesting additional funding in the amount of $500,000 to $700,000 for that work alone in the near future. In summary, the decision is to incur the cost of approximately $350,000 and a one year delay in design completion to defer approximately $1,250,000 in field work that will be wasted if the Forest Service decides not to permit this route, Staff recommends this action be taken. Recommended Motion: t move that the City Council direct staff to notify Foster-Wheeler, Raytheon and Dames & Moore to defer fieid work as appropriate between Shrimp Bay and Eagle Bay and negotiate a final change order for the costs of deferring that field work. TAMGniI Attachment HAUBERINANCYLIWPDATAVOT--Y1.MEM SSS 3/08/96 12:02p_ @3-@8-1996 12:51 907 225 1688 KPU #1 W FOSTER WHEELER ENVIRONMENTAL CORPORATION = §!228 7105 28 February 1996 FBEL-KPU-96-014 Mr. Richard Trimble _— Ketchikan Public Utilltics 2930 Tongasa Avenue Ketchikan, Alnsia 99901 Subject: Swan Lake-Lakes Tyoo Intertie Project Implications of Onc-Y car Delay in Project Construction Dear Rich: With regard to our environmental services contract on the Swan Lake-Lake Tyee Intertie Project, the fol- lowing are my thoughts on the implications of a one-year construction delay: 1. Most importantly, the delay would have ao beneficial effect on public perceptions conceming KPU’s ad- herence to the letter attd spirit of tho NEPA proces. The EIS process can be completed in 1996, the Record of Decision would be issued in 1996 or arly 1997, and then KPU could proceed to geotechnical investiga- tions and final design on the route sclected in the ROD. 2. The permitting process would be more straightforward, since subntittal of permit applications could be delayed until after the ROD, This would reduce the likelihood that we would spend time preparing permit applications for activities that would later change, necessitating rework on the applications. 1. There would be a small cogt increase associated with the delay, on the ordar of a 5 parcent increase in the monitoring cost (currently estimaced af $272,965) to cover inflation and the cost of getting tha field monitor reacquainted with the assignment, There would alsa be « small increased cost associated with proj- ect management and incidental consultations over the approximatoly |5-month period between tha ROD and the start of construction (approximately Jarmary 1997 to April 1998}, The two cost increases would total roughly $25,000, assuming a few hours of misceltanecus consultation with KFU and Raytheon each month. Please lec me know if you have any questions about this leer. Until such time as a decision is made to de- lay project construction, we are proceeding on our original schedula, Sincerely, C20. Bilen J, Hall, Ph.D, Project Manager 10900 NE 81x Srasat, Surrs 1300, Bectavur, WA 98004-4405 TEL: 206-688-3700 Fax: 206-688-3952 Te'd ahna{1aQ “UOT AUy 487 sauy 49480y Fr6E+8E8 GZ 2 ie g6aT-Ge-ZO SE OE \ ry = Seu fxd Tie ake , bib 10/10/95 DRAFT #3 KETCHIKAN PUBLIC UTILITIES POWER SUPPLY PLANNING STUDY 1, SUMMARY Ketchikan Public Utilities (KPU) is seeking a consultant to conduct a Power Supply Planning Study and provide consultation to assist the utility in identifying its best power development strategy over the 20 year period 2001 - 2020. KPU plans on constructing a major transmission line intertie project within the next five years to provide its next generation hydroelectric resource. However, financing and permitting have not yet been secured and some key financial variables are yet to be determined. Therefore, KPU requires a Power Supply Planning Study that will be updated as conditions change during this transitional period (1995 - 2000). This Study and consultation will be relied upon by KPU to either confirm our present course of action or propose appropriate alternatives in light of current economic conditions. In the interest of seeking unbiased and credible guidance, KPU intends to award this work to a qualified firm without an existing interest, or appearance of interest, in a power project under consideration in this study. KPU shall be the sole judge of whether or not there appears to be a conflict of interest. 2. BACKGROUND KPU’s most recent generation facility, Swan Lake, was commissioned in 1984. Until now, that facility has allowed Ketchikan to supply its load with nearly 100% hydroelectric energy, using the Bailey diesel plant primarily for back-up generation. However, as our demand has continued to grow, KPU now has the need for additional generation. A number of studies have concluded that a transmission line intertie should be constructed between Swan Lake and Lake Tyee to allow Ketchikan access to the substantial amount of surplus power and energy available at Tyee. Other factors have lead KPU to pursue this project. The intertie provides a regional “grid” that includes the combined resources of Ketchikan, Wrangell and Petersburg with its associated reliability and flexibility. Further, since both Swan and Tyee are “Four Dam Pool” projects, the administrative and political issues to be addressed in order to sell Tyee power to Ketchikan are limited to a single entity. Finally, the more efficient utilization of the Tyee project provides a direct financial benefit to the Four Dam Pool communities, which includes Ketchikan. As a result of these factors, KPU began aggressively pursuing funding of the Swan-Tyee intertie as its next generation resource. A feasibility study for the Swan-Tyee intertie was completed in June, 1992’. That study concluded that the project was feasible and was the most economic generation alternative for Ketchikan. In 1993, the State of Alaska enacted legislation that provided an annual grant of ‘Lake Tyee to Swan Lake Transmission Line Intertie. R. W. Beck, June, 1992. a)/ Fi approximately $4 million and $60 million in State loans and bonds to support construction of the Swan-Tyee intertie. The grant funds did not actually become available until 1994, at which time KPU (acting as project manager) issued contracts for the permitting (EIS) and engineering for the intertie. The EIS and design are scheduled for completion in early 1997. Construction is scheduled to begin in 1997 with completion by 1999. 3. SYSTEM INFORMATION 3.1 System hydroelectric energy capability and total energy demand roelectric Ener: ili ee KPU owned hydro projects (Ketchikan, Beaver Falls & Silvis): 62,700 Swan Lake: 82,000 Total hydro energy available: 144,700 Historic Energy Demand (MWH)?: Year Actual Actual Percent ISER Base Percent Total Diesel Actual case of ISER Generation Generation Diesel 1989 131,914 18,500 14.0% 136,172 97% 1990 142,535 791 0.6% 147,463 97% 1991 146,377 2,072 1.4% 164,767 89% 1992 153,062 587 0.4% 167,520 91% 1993 146,333 9,410 6.4% 174,134 84% 1994 158,396 3,577 2.3% 178,937 89% 1995 162,000 36,000 22% 182,172 89% 2 Average water year. Source: R. W. Beck 1992 Feasibility Study, Ix-9 Actual figures are from KPU generation reports. 1995 actual figures are KPU projections. ISER refers to the Electric Load Forecast for Ketchikan, Metlakatla, Petersburg, and Wrangell, Alaska: 1990-2010. Institute of Social and Economic Research, University of Alaska, Anchorage, June 25, 1990. 3.2 System generation capacity and peak demand eneration capacity (100% rated kW. Swan Lake (hydro) 22,500 Ketchikan (hydro) 4,200 Beaver Falls (hydro) 5,400 Silvis (hydro) 2,100 Bailey (diesel) 15,450 TOTAL 49,650 KPU’s ability to achieve this generation capacity depend on high lake levels with all facilities operational. In reality, there are operational constraints that generally preclude KPU from achieving this capacity. 3.2.1 Capacity limitations at Bailey The three diesel generators at Bailey consist of two Worthington units rated at 4,500 kW each (commissioned in 1970) and one Colt-Pielstick unit rated at 6,450 kW (commissioned in 1976). As a result of their age and KPU’s maintenance experience, these generators are operated at or below 3,500 kW and 5,500 kW respectively. This limits the reliable Bailey plant diesel capacity to 12,500 kW. 3.2.2 Capacity limitations at Ketchikan Ketchikan Lake actually is drained to an intermediate pond (Fawn Lake) by two long parallel penstocks before being channeled to a penstock/tunnel system that supplies the Ketchikan power house and represents the City’s only drinking water source. The ability of the Ketchikan power house to produce power is limited both by a need to keep the penstock pressure above 90 psi (for drinking water supply purposes) and by the limited hydraulic ability of Ketchikan Lake to drain to Fawn Lake. For these reasons, the Ketchikan power house is often limited to 2,100 kW and under worst case conditions can be limited to as little as 500 kW. 3.2.3 Greatest single contingency - failure of the Swan-Bailey transmission line Finally, our largest hydroelectric resource, Swan Lake, depends on a 42 mile remote 115 kV transmission line. The rest of our generation resources are all relatively near the City and can be accessed by road. This transmission line represents the weakest link in our system. If this line fails (or has to be de-energized for any reason), our generation resources are limited to Ketchikan, Beaver Falls, Silvis and Bailey power plants. The capacity of these remaining resources can range as follows: Absolute maximum Limited at Ketchikan, Bailey normal Ketchikan 4,200 2,100 * Beaver Falls 5,400 5,400 Silvis 2,100 2,100 Bailey 15,450 12,500 * TOTALS 27,150 22,100 The “Absolute Maximum” figures assume that we raise our operational limitations at Bailey to 100% rated capacity on all three machines (which we would only be compelled to do in an emergency), that we have maximum lake levels with good run-off in Granite Basin (part of the Ketchikan system) and that all facilities are 100% operational. “Limited at Ketchikan, Bailey normal” assumes Bailey at our operational limits and high lake levels at Beaver Falls and Silvis, but only average conditions at Ketchikan. Our available capacity would of course be further degraded by generally low lake levels and/or less than 100% operational facilities. On occasion, the Ketchikan Pulp Company has been able to provide KPU surplus power when Swan Lake generation was unavailable, but KPC generation cannot be depended upon since their ability to provide power depends on the operations they have in progress at the time. Historic Peak Demand (kW): Actual! Comparison Percent to ISER of ISER 1989 (January) 26,700 24,600 109% 1990 (February) 26,600 26,900 99% 1991 (December) 25,300 30,400 83% 1992 (December) 27,400 30,800 89% 1993 (November) 26,900 32,100 84% 1994 (December) 28,600 33,100 88% 1995 (to date) 28,700 33,700 Es “System peak. Source: KPU generation reports. 4 RRENT SITUATION AND ELEMENTS OF CONCERN 4.1 Capacity and energy limitations The system information presented above makes it clear that KPU is having to rely on base loading its diesel plant to meet energy demands for the first time since Swan Lake was commissioned. This places reliance on aging diesel generators and leaves KPU highly vulnerable to diesel fuel and maintenance cost increases. More importantly, a failure of the Swan-Bailey transmission line near peak demand may preclude KPU from recovering the entire distribution system with the generation resources remaining. In this case, there would be extended outages on lower priority (residential) feeders because of our inability to meet full demand. 4.2 Swan-Tyee Intertie financing While KPU is pursuing an aggressive schedule for the construction of the Swan-Tyee intertie, the construction financing has yet to be approved. The most recent project cost estimate was provided in the feasibility study at $55.5 million (which escalates to $64.4 million in 1997 dollars at 3% inflation). Alaska State Senate bills 106/126 passed in 1993 provide for an approximately $4 million annual grant, a $20 million loan (15 years at 3%) and up to $40 million in State backed bonding. The financing was provided to the utilities “participating” in the intertie. 4.2.1 Debt Service supported by KPU? At this point, KPU is the only utility that has a significant interest in the intertie so KPU is the only “participating utility.” Grants received to date total $11.2 million ($4.6 million in fiscal year 1994, $4.0 million in fiscal year 1995 and $2.6 million in fiscal year 1996). Because these grants require annual approval by the State legislature and because they are indexed to Four Dam Pool revenues that can be withheld under certain circumstances, receipt of future grant funding is uncertain. Further, because KPU is the only participating utility, KPU would have to obtain voter approval and absorb the debt service for the entire project. While KPU appears to have the financial ability to pursue the necessary financing, KPU is concerned about the risk associated with lower than anticipated energy sales and the impact on KPU’s ability to pursue future bonding. Finally, if KPU does not take action to obtain voter approval for the debt service promptly, there is concern that the State may perceive a lack of commitment on the part of the City and withdraw the $20 million loan during the next legislative session. 4.2.2 Debt Service supported by the Four Dam Pool? An alternative to KPU financing the intertie would be financing by a “divested” Four Dam Pool. The Four Dam Pool is currently governed by representatives of the utilities served by the Four Dam Pool projects (Kodiak, Copper Valley, Petersburg, Wrangell and Ketchikan) and a representative of the State of Alaska. The actual facilities are owned and maintained by the State of Alaska. The Utilities and the State have recently begun negotiations to consider divesting the State of ownership of the facilities with the Four Dam Pool forming an independent entity and assuming ownership. While the Four Dam Pool, as it exists today, does not have the ability to incur indebtedness, an independent “divested” Four Dam Pool would have that ability. Since the intertie allows the Four Dam Pool to sell additional power and derive additional revenue, it would follow that the project should be backed by the Four Dam Pool. Whether or not divestiture will actually occur, and the timing with which it would occur, is uncertain. 4.2.3 Intertie purchased power rate Another factor of uncertainty is the rate at which power would be obtained from Tyee._The feasibility study assumed that the power would be available at no cost, considerin there was no cost associated with the generation of the additional “intertie” power. At the other extreme, the Four Dam Pool power sales agreement requires that firm power sales occur at the wholesale rate (currently $0.064/K WH) of which a payment of $0. 04 or $0.03 per KWH is made to the State.It appears that by definition, KPU will be sin er (as opposed to firm power) since the power available to KPU will be limited to what is surplus to the needs of Petersburg and Wrangell. Therefore, KPU will have to negotiate an agreement and surplus power rate with the Four Dam Pool that allows revenue generated from intertie energy sales to offset the debt service 5. ALTERNATIVE POWER PROJECTS A 1986 Power Supply Planning Study® and the 1992 Swan-Tyee Intertie Feasibility Study considered diesel, the Swan-Tyee intertie, Mahoney Lake and Lake Grace as potential power supply projects.© However, the economics of the alternative projects are more refined today than they were in previous studies. KPU wants to either reaffirm its present course of action or stop short of a construction decision on the intertie if the economics now favor a different course of action. Further, if a permit is not issued by the U.S. Forest Service for the Swan-Tyee intertie, KPU needs to pursue the most prudent alternative action. 5.1 Diesel The Power Supply Planning Study conducted in 1986 concluded that KPU should install 12 to 15 MW of new diesel generation over the 20 year study period. It further concluded that this diesel generation was more cost effective than any of the hydroelectric options unless financial assistance was available. The power supply evaluation in the 1992 Intertie Feasibility Study concluded that KPU should install 8 MW of diesel generation in 1992 and 4 MW of diesel generation in 1997, 2008 and 2013 (for a total of 20 MW) regardless of whether or not the intertie is constructed to support back-up generation. If for no other reason than existing plant replacement, KPU needs to install additional diesel capacity. ’Power Supply Planning Study, CH2M Hill, May 1986. °The Feasibility Study further considered wood waste-fired generation at the Ketchikan Pulp Company. Recent joint investigation of this alternative by KPU and KPC have lead us to the conclusion that there is not adequate wood waste available to make a joint use co-generation facility viable. KPU is proposing in the 1996 budget that a new 9.6 MW diesel be purchased to essentially replace the two 4.5 MW Worthington diesels commissioned in 1970. Although the Worthington’s would not be immediately decommissioned (and would initially be available to help provide peaking capability), spare parts are no longer available so one unit would soon be decommissioned to serve as a source of spare parts for the other unit. Assuming the City Council approves the budget request and the voters approve the bond issue, KPU is still concerned about the length of time it will take to have the new diesel in place and our ability to meet demand in the interim. Beyond the installation of that unit, KPU acknowledges previous study conclusions that additional diesel should be installed. In light of current and evolving economic conditions, KPU wants its need for future diesel generation revisited. 5.2 Mahoney Lake Both the Power Supply Planning Study and the power supply analysis in the Intertie Feasibility Study considered Mahoney Lake as a potential hydroelectric resource. Both concluded that it was not the most cost effective option available to KPU. However, in March 1993 the City of Saxman in partnership with Cape Fox, an ANCSA Native Corporation, filed with FERC for a preliminary permit application to develop Mahoney Lake as a hydroelectric resource with the intent of marketing that power to KPU. KPU has objected to the development of Mahoney on the basis that the Swan-Tyee intertie represents the more favorable, longer-term project. Cape Fox produced an economic analysis in December, 19947 that compared Mahoney Lake against the Swan-Tyee Intertie and diesel. That analysis concluded that under all but the most extreme conditions (i.e. complete state financing and no cost power from Tyee), Mahoney Lake was the more economically favorable project. KPU was not involved in the development of this report and disagrees with many of the key financing assumptions that were made. Further, the conclusions of this report contradict the findings of similar analyses conducted in the past. However, KPU acknowledges that the lower cost development proposed by Cape Fox merits further consideration. The Mahoney Lake Feasibility Study conducted on behalf of Cape Fox* indicates the project total investment cost is $23,442,000 (in 1993 dollars). A cursory review of the estimate done on behalf of KPU indicates this figure could be closer to $36,000,000. Regardless, the cost is considerably less than the amounts assumed in previous studies. KPU requires a more complete, independent review of the Mahoney cost estimate. Given the outcome of this review, KPU wants to consider the economic and operational advantages, and timing of developing the Mahoney project as proposed by Cape Fox. In addition, KPU staff has discussed the merit of constructing a tunnel directly from Upper Mahoney Lake into either the Silvis or Ketchikan Lake systems allowing existing generation to take advantage of the additional water flow. KPU would like to investigate this option as well. THDR Engineering, Inc., Economic and Financial Feasibility Assessment of the Swan/Tyee Lakes Intertie Project, Economic and Engineering Services, Inc. December, 1994. ®Mahoney Lake Hydroelectric Project Feasibility Report, HDR Engineering, Inc. Initially released November, 1993, updated March 21, 1995. 5.3 Miscellaneous system upgrades and small projects In the spirit of investigating all reasonable means of making our system more efficient, KPU wishes to further consider the economic merit of the following upgrades and small projects: 1) Upgrade of the Beaver Falls hydroelectric generators. 2) Construction of a dedicated penstock for the Ketchikan power house. 3) Raise dam at Ketchikan Lakes 4) Upgrade existing tunnel from Fawn Lake. 5) Construction of a dedicated diversion from Granite Basin. 6) New small hydroelectric generator at Whitman Lake. 7) New small hydroelectric generator at Carlanna Lake 8) Conservation 6. WORK PRODUCTS Power Supply Planning Studies conducted in the past for KPU have consisted of a single report representing conditions that existed on the date the report was issued. Because KPU is ina period of transition, and some key financial variables are in flux, KPU intends for this study to be structured as a “work in progress” until such time as the next major transmission/hydroelectric project is actually commissioned. Further, KPU intends that the consultant will take a proactive role in providing power planning strategy advice to KPU during this period of transition rather than simply producing the study documentation. This proactive role is particularly crucial during the period between Notice to Proceed and issuance of the “final draft” study. 6.1 Schedule and study format The study will consist of the following: 1) Initial draft (within 4 months of Notice to Proceed) 2) Updates (six when required by KPU during the period 1996-1997) 3) Final draft (when required by KPU during 1998) 4) Final (when required by KPU during 2000) 6.1.1 Initial draft The Study will be structured similar to a manual held in a notebook with updates issued as change 1, change 2, etc. The “initial draft” is to be provided to KPU within 4 months of Notice to Proceed in pre-final form. The consultant will provide the “initial draft” in final form within 3 weeks of KPU’s response. KPU will be responsible for reproduction and distribution of the initial draft. 6.1.2 Updates For proposal purposes, assume one “update” consists of (1) a single new development scenario or modification to an existing scenario which results in a new series of spreadsheets associated with the economic and financial analyses and the associated text, (2) a series of load flow analyses for that single new or modified scenario, (3) a series of operational analyses for that single new or modified scenario, (4) miscellaneous, minor changes to the report in response to comments received from the previous draft/update and (5) a reasonable review of the entire report by the consultant to update any portion as necessary to reflect changed conditions. The “update” is to be provided to KPU within 5 weeks of written notice from KPU in pre-final form. The consultant will provide the “update” in final form within 2 weeks of KPU’s response. Assume 6 updates will be required by KPU during 1996 and 1997. KPU will be responsible for reproduction and distribution of the updates. 6.1.3 Final draft The “final draft” version of the study is intended to be issued once construction has been approved for a major transmission/hydro project (i.e. Intertie, Mahoney or Lake Grace). It is to be provided in pre-final form within 3 months of written notice from KPU. The consultant will provide this version in final form within 3 weeks of KPU’s response. This version of the report will be reproduced by the consultant as a complete, bound document and provided to KPU for distribution. For proposal purposes assume 35 copies are required in 1998. 6.1.4 Final The “final” version of the study is intended to be issued when the major transmission/hydro project is actually on-line. The intent of delaying issuance of the final until this point is to allow the study to consider the actual costs of the project and its impact in the final economic and financial analyses for the 20 year planning horizon. It is to be provided in pre-final form within 3 months of written notice from KPU. The consultant will provide this version in final form within 3 weeks of KPU’s response. This version of the report will be reproduced by the consultant as a complete, bound document and provided to KPU for distribution. For proposal purposes assume 35 copies are required in the year 2000. 6.2 Tasking The scope of this work is to be limited to consideration of the following projects: 1. Major transmission/hydro projects: a) Swan-Tyee Intertie b) Mahoney Lake - Cape Fox development c) Mahoney Lake - Tunnel option selected by KPU d) Lake Grace 2. Diesel a) Immediate installation of 9.6 MW generator at Bailey b) Additional diesel as required over 20 year study period. 3. Miscellaneous system upgrades and small projects: a) Upgrade of the Beaver Falls hydroelectric generators. b) Construction of a dedicated penstock for the Ketchikan power house. c) Raise dam at Ketchikan Lakes d) Upgrade existing tunnel from Fawn Lake. e) Construction of a dedicated diversion from Granite Basin. f) New small hydroelectric generator at Whitman Lake. g) New small hydroelectric generator at Carlanna Lake h) Conservation An assumption of this study is that one or more of the major projects noted in items 1 and 2 will have to be developed to meet demand in the very near future. The scenarios developed by the consultant (see task 2X) will be based on combinations of these major projects. However, the small projects noted in item 3 do not appear to offer the amounts of energy necessary to meet load growth by themselves. The intent is to consider the economic merits of ea”-h of these small projects individually. Each project that appears to be cost effective should be proposed to KPU for inclusion in all of the scenarios developed by the consultant and ultimate development (see task 5X. Task 12K Review existing documentation The consultant will review existing planning documentation, feasibility studies, power sales agreements, electric load forecasts, market and financial assessments, operations studies, etc. related to the KPU system as necessary to perform this scope of work. KPU will assist in providing this documentation but the final responsibility for obtaining the necessary material rests with the consultant. Task Derive initial project development scenari Using combinations of the major transmission/hydro and diesel projects defined above (items 1 and 2), the consultant will derive six scenarios for development of the projects that appear to provide least economic impact and greatest operational flexibility and reliability. For example, scenario #1 would be KPU’s current development plan, a combination of Intertie and diesel. Miscellaneous system upgrades and small projects (item 3) are not to be included in these scenarios. An outline of these scenarios and the justification for their selection will be provided to KPU 1 month after Notice to Proceed. KPU has two weeks to provide comment. Task 32K Review of major project schedules and estimate: The consultant will conduct an independent review and assessment of the available estimates and schedules for the Swan-Tyee Intertie and the Mahoney Lake - Cape Fox development. The review will consider and reference similar projects in the region and differences between public and private development costs. Based on the consultants independent review of the available information for these three projects, the consultant will provide to KPU (1) an estimate and schedule for each for use in the economic and financial analyses, (2) justification for any adjustments made by the consultant to existing estimates and schedules and (3) an assessment of the consultants confidence in the estimate within 2 months after Notice to Proceed. KPU has two weeks to provide comments. Note that this task does not include Lake Grace. For this study, the consultant will have available an Alternatives Study for Lake Grace currently underway and planned for completion by the end of this year. Task 47k Review KPU’s need for a 9.6 MW diesel generator at Bail Subject to approval by City Council, KPU intends to issue Requests for Proposals for design and permitting of a 9.6 MW diesel generator at Bailey shortly. KPU may issue a Request for Proposals for diesel procurement as soon as February, 1996 or as late as September, 1996 (depending on whether or not the bond issue is considered in a special election KPU is (996 contemplating for Spring of 1996 or is considered in the regular election of October). KPU intends to issue the Bailey construction RFP in Fall, 1996. The consultant will independently review KPU’s stated requirement for a 9.6 MW diesel to replace and augment existing generation at Bailey. The consultant will consider and if appropriate, recommend alternate courses of action for KPU to best address retirement of existing plant and provide back-up generation. This review will be provided in the “initial draft.” Task 5K Provide feasibility level estimates and schedule for remaining projec The consultant will develop feasibility level estimates and schedules for the following remaining projects: 1. Mahoney Lake - tunnel option (to Silvis or Ketchikan Lakes as selected by KPU) 2. Additional diesel as required over 20 year study period. 3. Upgrade of the Beaver Falls hydroelectric generators. 4. Construction of a dedicated penstock for the Ketchikan power house. 5. Raise dam at Ketchikan Lakes 6. Upgrade existing tunnel from Fawn Lake. 7. Construction of a dedicated diversion from Granite Basin. 8. New small hydroelectric generator at Whitman Lake. 9. New small hydroelectric generator at Carlanna Lake 10. Conservation The consultant will recommend options and methods for development of each project. KPU will select a single development option for each project. The consultant will provide to KPU (1) an estimate and schedule for each for use in the economic analyses if selected by KPU, (2) justification for the estimates and schedules produced and (3) an assessment of the estimate range within 2 months after Notice to Proceed. KPU has two weeks to provide comments. Task 6 Provide economic analyses of development scenari Ges ner present Sala Using Lotus 123 compatible spreadsheet software, provide a 30 year basic economic analysis using the same methodology found in the economic analysis section of the Intertie Feasibility study. Expand the cases to the six scenarios defined above. Expand the sensitivity analysis to 7 include surplus sales, project capital costs and costs of diesel. The analysis should consider the impact of providing service to Metlakatla within the next 5-10 years. KPU will provide inflation rate and discount rate. Load growth for the Ketchikan, Metlakatla, Petersburg and Wrangell systems will be based on the 1990 ISER study. The consultant will compare actual demand to the ISER base cases and recommend a modification of the ISER base cases for the base case economic analysis. The consultant will recommend high and low growth cases for Ketchikan and the combined Petersburg/Wrangell system and conduct sensitivity analyses for those cases. Metla habla Task 6.0 is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Task 7XProvide financial analyses of development scenarios Using Lotus 123 compatible spreadsheet software, provide a 30 year financial analysis for all scenarios and sensitivity analyses defined above. This analysis will take into account anticipated bond interest rates and purchased power costs (KPU will provide these figures to be assumed in the analyses). A sensitivity analysis will be performed for purchase power rate. The intent of this analysis is to infer rate impact from each development scenario. Part of this task will involve participation in direct purchase power negotiations with third parties. For proposal purposes, assume four trips to Southeast Alaska or Anchorage during 1996-1997 specifically for this purpose. This task is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Task 87K Provide load flow studies of development scenarios Using Power Technology, Inc. (PTI) PSS/E software, provide load flow analyses of the critical/extreme operating points of the system provided in three development scenarios selected by KPU. KPU will provide a PSS/E database for the current system and the system with the Swan-Tyee Intertie. The consultant will have to modify the database as necessary to conform with each load and development scenario. This task is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Task 9 Provid rations study of development scenario The consultant shall apply a computer model to evaluate the combined operation of all generation resources in the KPU system for three of the development scenarios selected by KPU. Consultant shall use the model to simulate operation of the KPU system as it currently exists to demonstrate that the model is calibrated. It is expected that the model will operate on a monthly timestep and will be driven by the loads required to serve the KPU service area accounting for power available from all sources in the scenario. The model will reflect the variation in turbine efficiencies with changes in net head and flow and will take into account suggested operating ranges of net head for each project. The consultant shall use the model to produce estimates of the anticipated monthly and annual generation and firm capacity from each project and compare with the current annual hydro system generation and firm capacity. Existing operations models are available using ACRES Reservoir Simulation Program for the interconnected Swan-Tyee system and in Excel spreadsheet format for the Lake Grace-Swan Lake system. This task is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Task 10>£ Provide Engineer’s R for KP. nd i The consultant will provide the Consulting Engineer’s Report for a Municipal Utility Revenue Bond Issue in support of financing one of the major power projects considered in this study. While the bond issue may be limited to a power project, the Engineer’s Report must be a comprehensive review of the status of the entire utility including electric, telephone and water. For proposal purposes, assume the bond issue election occurs in 1996 and the report is due in 1997. Task 11>K Provide miscellane wer ly plannin nsultation during transition period KPU expects the consultant to maintain a close working relationship with KPU during the period prior to approval of construction of a major power project, independent of the work described in tasks 1>¢- 10>Kabove. Assume for proposal purposes that this task will require 100 hours and 4 trips to Alaska in 1996 and 100 hours and 4 trips to Alaska in 1997. SUMMARY OF DELIVERABLES Start Pre-final KPU review work duetoKPU due Initial draft NTP 4 months AR Updates Notice 5 weeks AR Final draft Notice 3 months AR Final Notice 3 months AR Initial project scenarios outline (249 NTP 1 month 2 weeks Major project estimates & schedule (34%) NTP 2 months 2 weeks Feasibility estimates & schedules (5) NTP 2 months 2 weeks NTP = Notice to Proceed AR = KPU review period as required by KPU Notice = Upon written notice by KPU LD. = Final form of this deliverable will be incorporated into “initial draft.” Other items: Attach example proposal budget. Attach Economic Analysis section from the power supply evaluation. Define professional services criteria weights. Final 3 weeks 2 weeks 3 weeks 3 weeks LD. LD. LD, Note that Selection Committee will weigh heavily reputation of firm and perceived ability to keep the same team relatively intact over the contract period. a Sb >a 10/10/95 DRAFT #3 KETCHIKAN PUBLIC UTILITIES POWER SUPPLY PLANNING STUDY 1, SUMMARY Ketchikan Public Utilities (KPU) is seeking a consultant to conduct a Power Supply Planning Study and provide consultation to assist the utility in identifying its best power development strategy over the 20 year period 2001 - 2020. KPU plans on constructing a major transmission line intertie project within the next five years to provide its next generation hydroelectric resource. However, financing and permitting have not yet been secured and some key financial variables are yet to be determined. Therefore, KPU requires a Power Supply Planning Study that will be updated as conditions change during this transitional period (1995 - 2000). This Study and consultation will be relied upon by KPU to either confirm our present course of action or propose appropriate alternatives in light of current economic conditions. In the interest of seeking unbiased and credible guidance, KPU intends to award this work to a qualified firm without an existing interest, or appearance of interest, in a power project under consideration in this study. KPU shall be the sole judge of whether or not there appears to be a conflict of interest. 2, BACKGROUND KPU’s most recent generation facility, Swan Lake, was commissioned in 1984. Until now, that facility has allowed Ketchikan to supply its load with nearly 100% hydroelectric energy, using the Bailey diesel plant primarily for back-up generation. However, as our demand has continued to grow, KPU now has the need for additional generation. A number of studies have concluded that a transmission line intertie should be constructed between Swan Lake and Lake Tyee to allow Ketchikan access to the substantial amount of surplus power and energy available at Tyee. Other factors have lead KPU to pursue this project. The intertie provides a regional “grid” that includes the combined resources of Ketchikan, Wrangell and Petersburg with its associated reliability and flexibility. Further, since both Swan and Tyee are “Four Dam Pool” projects, the administrative and political issues to be addressed in order to sell Tyee power to Ketchikan are limited to a single entity. Finally, the more efficient utilization of the Tyee project provides a direct financial benefit to the Four Dam Pool communities, which includes Ketchikan. As a result of these factors, KPU began aggressively pursuing funding of the Swan-Tyee intertie as its next generation resource. A feasibility study for the Swan-Tyee intertie was completed in June, 1992’. That study concluded that the project was feasible and was the most economic generation alternative for Ketchikan. In 1993, the State of Alaska enacted legislation that provided an annual grant of ‘Lake ane : Swan Lake Transmission Line Intertie. R. W. Beck, June, 1992. approximately $4 million and $60 million in State loans and bonds to support construction of the Swan-Tyee intertie. The grant funds did not actually become available until 1994, at which time KPU (acting as project manager) issued contracts for the permitting (EIS) and engineering for the intertie. The EIS and design are scheduled for completion in early 1997. Construction is scheduled to begin in 1997 with completion by 1999. 3. SYSTEM INFORMATION 3.1 System hydroelectric energy capability and total energy demand roelectric Ener: ili i KPU owned hydro projects (Ketchikan, Beaver Falls & Silvis): 62,700 Swan Lake: 82,000 Total hydro energy available: 144,700 Historic Energy Demand (MWH)’: Year Actual Actual Percent ISER Base Total Diesel Actual case Generation Generation Diesel 1989 131,914 18,500 14.0% 136,172 1990 142,535 791 0.6% 147,463 1991 146,377 2,072 1.4% 164,767 1992 153,062 587 0.4% 167,520 1993 146,333 9,410 6.4% 174,134 1994 158,396 a,577 2.3% 178,937 1995 162,000 36,000 22% 182,172 ?Average water year. Source: R. W. Beck 1992 Feasibility Study, IX-9 Actual figures are from KPU generation reports. 1995 actual figures are KPU Percent of ISER 97% 97% 89% 91% 84% 89% 89% projections. ISER refers to the Electric Load Forecast for Ketchikan, Metlakatla, Petersburg, and Wrangell, Alaska: 1990-2010. Institute of Social and Economic Research, University of Alaska, Anchorage, June 25, 1990. 3.2 System generation capacity and peak demand neration capacity (100% rated kW Swan Lake = (hydro) 22,500 Ketchikan (hydro) 4,200 Beaver Falls (hydro) 5,400 Silvis (hydro) 2,100 Bailey (diesel) 15,450 TOTAL 49,650 KPU’s ability to achieve this generation capacity depend on high lake levels with all facilities operational. In reality, there are operational constraints that generally preclude KPU from achieving this capacity. 3.2.1 Capacity limitations at Bailey The three diesel generators at Bailey consist of two Worthington units rated at 4,500 kW each (commissioned in 1970) and one Colt-Pielstick unit rated at 6,450 kW (commissioned in 1976). As a result of their age and KPU’s maintenance experience, these generators are operated at or below 3,500 kW and 5,500 kW respectively. This limits the reliable Bailey plant diesel capacity to 12,500 kW. 3.2.2 Capacity limitations at Ketchikan Ketchikan Lake actually is drained to an intermediate pond (Fawn Lake) by two long parallel penstocks before being channeled to a penstock/tunnel system that supplies the Ketchikan power house and represents the City’s only drinking water source. The ability of the Ketchikan power house to produce power is limited both by a need to keep the penstock pressure above 90 psi (for drinking water supply purposes) and by the limited hydraulic ability of Ketchikan Lake to drain to Fawn Lake. For these reasons, the Ketchikan power house is often limited to 2,100 kW and under worst case conditions can be limited to as little as 500 kW. 3.2.3 Greatest single contingency - failure of the Swan-Bailey transmission line Finally, our largest hydroelectric resource, Swan Lake, depends on a 42 mile remote 115 kV transmission line. The rest of our generation resources are all relatively near the City and can be accessed by road. This transmission line represents the weakest link in our system. If this line fails (or has to be de-energized for any reason), our generation resources are limited to Ketchikan, Beaver Falls, Silvis and Bailey power plants. The capacity of these remaining resources can range as follows: : Absolute maximum Limited at Ketchikan, Bailey normal Ketchikan 4,200 2,100 * Beaver Falls 5,400 5,400 Silvis 2,100 2,100 Bailey 15,450 12,500 * TOTALS 27,150 22,100 The “Absolute Maximum” figures assume that we raise our operational limitations at Bailey to 100% rated capacity on all three machines (which we would only be compelled to do in an emergency), that we have maximum lake levels with good run-off in Granite Basin (part of the Ketchikan system) and that all facilities are 100% operational. “Limited at Ketchikan, Bailey normal” assumes Bailey at our operational limits and high lake levels at Beaver Falls and Silvis, but only average conditions at Ketchikan. Our available capacity would of course be further degraded by generally low lake levels and/or less than 100% operational facilities. On occasion, the Ketchikan Pulp Company has been able to provide KPU surplus power when Swan Lake generation was unavailable, but KPC generation cannot be depended upon since their ability to provide power depends on the operations they have in progress at the time. Historic Peak Demand (kW): Actual* Comparison Percent to ISER of ISER 1989 (January) 26,700 24,600 109% 1990 (February) 26,600 26,900 99% 1991 (December) . 25,300 30,400 83% 1992 (December) 27,400 30,800 89% 1993 (November) 26,900 32,100 84% 1994 (December) 28,600 33,100 88% 1995 (to date) 28,700 33,700 -- “System peak. Source: KPU generation reports. 4 RRENT SITUATION AND ELEMENTS OF CONCERN 4.1 Capacity and energy limitations The system information presented above makes it clear that KPU is having to rely on base loading its diesel plant to meet energy demands for the first time since Swan Lake was commissioned. This places reliance on aging diesel generators and leaves KPU highly vulnerable to diesel fuel and maintenance cost increases. More importantly, a failure of the Swan-Bailey transmission line near peak demand may preclude KPU from recovering the entire distribution system with the generation resources remaining. In this case, there would be extended outages on lower priority (residential) feeders because of our inability to meet full demand. 4.2 Swan-Tyee Intertie financing While KPU is pursuing an aggressive schedule for the construction of the Swan-Tyee intertie, the construction financing has yet to be approved. The most recent project cost estimate was provided in the feasibility study at $55.5 million (which escalates to $64.4 million in 1997 dollars at 3% inflation). Alaska State Senate bills 106/126 passed in 1993 provide for an approximately $4 million annual grant, a $20 million loan (15 years at 3%) and up to $40 million in State backed bonding. The financing was provided to the utilities “participating” in the intertie. 4.2.1 Debt Service supported by KPU? At this point, KPU is the only utility that has a significant interest in the intertie so KPU is the only “participating utility.” Grants received to date total $11.2 million ($4.6 million in fiscal year 1994, $4.0 million in fiscal year 1995 and $2.6 million in fiscal year 1996). Because these grants require annual approval by the State legislature and because they are indexed to Four Dam Pool revenues that can be withheld under certain circumstances, receipt of future grant funding is uncertain. Further, because KPU is the only participating utility, KPU would have to obtain voter approval and absorb the debt service for the entire project. While KPU appears to have the financial ability to pursue the necessary financing, KPU is concerned about the risk associated with lower than anticipated energy sales and the impact on KPU’s ability to pursue future bonding. Finally, if KPU does not take action to obtain voter approval for the debt service promptly, there is concern that the State may perceive a lack of commitment on the part of the City and withdraw the $20 million loan during the next legislative session. 4.2.2 Debt Service supported by the Four Dam Pool? An alternative to KPU financing the intertie would be financing by a “divested” Four Dam Pool. The Four Dam Pool is currently governed by representatives of the utilities served by the Four Dam Pool projects (Kodiak, Copper Valley, Petersburg, Wrangell and Ketchikan) and a representative of the State of Alaska. The actual facilities are owned and maintained by the State of Alaska. The Utilities and the State have recently begun negotiations to consider divesting the State of ownership of the facilities with the Four Dam Pool forming an independent entity and assuming ownership. While the Four Dam Pool, as it exists today, does not have the ability to incur indebtedness, an independent “divested” Four Dam Pool would have that ability. Since the intertie allows the Four Dam Pool to sell additional power and derive additional revenue, it would follow that the project should be backed by the Four Dam Pool. Whether or not divestiture will actually occur, and the timing with which it would occur, is uncertain. 4.2.3 Intertie purchased power rate Another factor of uncertainty is the rate at which power would be obtained from Tyee. The feasibility study assumed that the power would be available at no cost, considering that there was no cost associated with the generation of the additional “intertie” power. At the other extreme, the Four Dam Pool power sales agreement requires that firm power sales occur at the wholesale rate (currently $0.064/K WH) of which a payment of $0.04 or $0.03 per KWH is made to the State. It appears that by definition, KPU will be purchasing surplus power (as opposed to firm power) since the power available to KPU will be limited to what is surplus to the needs of Petersburg and Wrangell. Therefore, KPU will have to negotiate an agreement and surplus power rate with the Four Dam Pool that allows revenue generated from intertie energy sales to offset the debt service. 5, ALTERNATIVE POWER PROJECTS A 1986 Power Supply Planning Study® and the 1992 Swan-Tyee Intertie Feasibility Study considered diesel, the Swan-Tyee intertie, Mahoney Lake and Lake Grace as potential power supply projects.° However, the economics of the alternative projects are more refined today than they were in previous studies. KPU wants to either reaffirm its present course of action or stop short of a construction decision on the intertie if the economics now favor a different course of action. Further, if a permit is not issued by the U.S. Forest Service for the Swan-Tyee intertie, KPU needs to pursue the most prudent alternative action. 5.1 Diesel The Power Supply Planning Study conducted in 1986 concluded that KPU should install 12 to 15 MW of new diesel generation over the 20 year study period. It further concluded that this diesel generation was more cost effective than any of the hydroelectric options unless financial assistance was available. The power supply evaluation in the 1992 Intertie Feasibility Study concluded that KPU should install 8 MW of diesel generation in 1992 and 4 MW of diesel generation in 1997, 2008 and 2013 (for a total of 20 MW) regardless of whether or not the intertie is constructed to support back-up generation. If for no other reason than existing plant replacement, KPU needs to install additional diesel capacity. ‘Power Supply Planning Study, CH2M Hill, May 1986. °The Feasibility Study further considered wood waste-fired generation at the Ketchikan Pulp Company. Recent joint investigation of this alternative by KPU and KPC have lead us to the conclusion that there is not adequate wood waste available to make a joint use co-generation facility viable. KPU is proposing in the 1996 budget that a new 9.6 MW diesel be purchased to essentially replace the two 4.5 MW Worthington diesels commissioned in 1970, Although the Worthington’s would not be immediately decommissioned (and would initially be available to help provide peaking capability), spare parts are no longer available so one unit would soon be decommissioned to serve as a source of spare parts for the other unit. Assuming the City Council approves the budget request and the voters approve the bond issue, KPU is still concerned about the length of time it will take to have the new diesel in place and our ability to meet demand in the interim. Beyond the installation of that unit, KPU acknowledges previous study conclusions that additional diesel should be installed. In light of current and evolving economic conditions, KPU wants its need for future diesel generation revisited. 5.2 Mahoney Lake Both the Power Supply Planning Study and the power supply analysis in the Intertie Feasibility Study considered Mahoney Lake as a potential hydroelectric resource. Both concluded that it was not the most cost effective option available to KPU. However, in March 1993 the City of Saxman in partnership with Cape Fox, an ANCSA Native Corporation, filed with FERC for a preliminary permit application to develop Mahoney Lake as a hydroelectric resource with the intent of marketing that power to KPU. KPU has objected to the development of Mahoney on the basis that the Swan-Tyee intertie represents the more favorable, longer-term project. Cape Fox produced an economic analysis in December, 1994” that compared Mahoney Lake against the Swan-Tyee Intertie and diesel. That analysis concluded that under all but the most extreme conditions (i.e. complete state financing and no cost power from Tyee), Mahoney Lake was the more economically favorable project. KPU was not involved in the development of this report and disagrees with many of the key financing assumptions that were made. Further, the conclusions of this report contradict the findings of similar analyses conducted in the past. However, KPU acknowledges that the lower cost development proposed by Cape Fox merits further consideration. The Mahoney Lake Feasibility Study conducted on behalf of Cape Fox*® indicates the project total investment cost is $23,442,000 (in 1993 dollars). A cursory review of the estimate done on behalf of KPU indicates this figure could be closer to $36,000,000. Regardless, the cost is considerably less than the amounts assumed in previous studies. KPU requires a more complete, independent review of the Mahoney cost estimate. Given the outcome of this review, KPU wants to consider the economic and operational advantages, and timing of developing the Mahoney project as proposed by Cape Fox. In addition, KPU staff has discussed the merit of constructing a tunnel directly from Upper Mahoney Lake into either the Silvis or Ketchikan Lake systems allowing existing generation to take advantage of the additional water flow. KPU would like to investigate this option as well. "HDR Engineering, Inc., Economic and Financial Feasibility Assessment of the Swan/Tyee Lakes Intertie Project, Economic and Engineering Services, Inc. December, 1994. ®Mahoney Lake Hydroelectric Project Feasibility Report, HDR Engineering, Inc. Initially released November, 1993, updated March 21, 1995. 5.3. Miscellaneous system upgrades and small projects In the spirit of investigating all reasonable means of making our system more efficient, KPU wishes to further consider the economic merit of the following upgrades and small projects: 1) Upgrade of the Beaver Falls hydroelectric generators. 2) Construction of a dedicated penstock for the Ketchikan power house. 3) Raise dam at Ketchikan Lakes 4) Upgrade existing tunnel from Fawn Lake. 5) Construction of a dedicated diversion from Granite Basin. 6) New small hydroelectric generator at Whitman Lake. 7) New small hydroelectric generator at Carlanna Lake 8) Conservation 6. WORK PRODUCTS Power Supply Planning Studies conducted in the past for KPU have consisted of a single report representing conditions that existed on the date the report was issued. Because KPU is ina period of transition, and some key financial variables are in flux, KPU intends for this study to be structured as a “work in progress” until such time as the next major transmission/hydroelectric project is actually commissioned. Further, KPU intends that the consultant will take a proactive role in providing power planning strategy advice to KPU during this period of transition rather than simply producing the study documentation. This proactive role is particularly crucial during the period between Notice to Proceed and issuance of the “final draft” study. 6.1 Schedule and study format The study will consist of the following: 1) Initial draft (within 4 months of Notice to Proceed) 2) Updates (six when required by KPU during the period 1996-1997) 3) Final draft (when required by KPU during 1998) 4) Final (when required by KPU during 2000) 6.1.1 Initial draft The Study will be structured similar to a manual held in a notebook with updates issued as change 1, change 2, etc. The “initial draft” is to be provided to KPU within 4 months of Notice to Proceed in pre-final form. The consultant will provide the “initial draft” in final form within 3 weeks of KPU’s response. KPU will be responsible for reproduction and distribution of the initial draft. 6.1.2 Updates For proposal purposes, assume one “update” consists of (1) a single new development scenario or modification to an existing scenario which results in a new series of spreadsheets associated with the economic and financial analyses and the associated text, (2) a series of load flow analyses for that single new or modified scenario, (3) a series of operational analyses for that single new or modified scenario, (4) miscellaneous, minor changes to the report in response to comments received from the previous draft/update and (5) a reasonable review of the entire report by the consultant to update any portion as necessary to reflect changed conditions. The “update” is to be provided to KPU within 5 weeks of written notice from KPU in pre-final form. The consultant will provide the “update” in final form within 2 weeks of KPU’s response. Assume 6 updates will be required by KPU during 1996 and 1997. KPU will be responsible for reproduction and distribution of the updates. 6.1.3 Final draft The “final draft” version of the study is intended to be issued once construction has been approved for a major transmission/hydro project (i.e. Intertie, Mahoney or Lake Grace). It is to be provided in pre-final form within 3 months of written notice from KPU. The consultant will provide this version in final form within 3 weeks of KPU’s response. This version of the report will be reproduced by the consultant as a complete, bound document and provided to KPU for distribution. For proposal purposes assume 35 copies are required in 1998. 6.1.4 Final The “final” version of the study is intended to be issued when the major transmission/hydro project is actually on-line. The intent of delaying issuance of the final until this point is to allow the study to consider the actual costs of the project and its impact in the final economic and financial analyses for the 20 year planning horizon. It is to be provided in pre-final form within 3 months of written notice from KPU. The consultant will provide this version in final form within 3 weeks of KPU’s response. This version of the report will be reproduced by the consultant as a complete, bound document and provided to KPU for distribution. For proposal purposes assume 35 copies are required in the year 2000. 6.2 Tasking The scope of this work is to be limited to consideration of the following projects: 1. Major transmission/hydro projects: a) Swan-Tyee Intertie b) Mahoney Lake - Cape Fox development c) Mahoney Lake - Tunnel option selected by KPU d) Lake Grace 2. Diesel a) Immediate installation of 9.6 MW generator at Bailey b) Additional diesel as required over 20 year study period. 3. Miscellaneous system upgrades and small projects: a) Upgrade of the Beaver Falls hydroelectric generators. b) Construction of a dedicated penstock for the Ketchikan power house. c) Raise dam at Ketchikan Lakes d) Upgrade existing tunnel from Fawn Lake. e) Construction of a dedicated diversion from Granite Basin. f) New small hydroelectric generator at Whitman Lake. g) New small hydroelectric generator at Carlanna Lake h) Conservation An assumption of this study is that one or more of the major projects noted in items 1 and 2 will have to be developed to meet demand in the very near future. The scenarios developed by the consultant (see task 2X) will be based on combinations of these major projects. However, the small projects noted in item 3 do not appear to offer the amounts of energy necessary to meet load growth by themselves. The intent is to consider the economic merits of eah of these small projects individually. Each project that appears to be cost effective should be proposed to KPU for inclusion in all of the scenarios developed by the consultant and ultimate development (see task 52%. Task IDK Review existing documentation The consultant will review existing planning documentation, feasibility studies, power sales agreements, electric load forecasts, market and financial assessments, operations studies, etc. related to the KPU system as necessary to perform this scope of work. KPU will assist in providing this documentation but the final responsibility for obtaining the necessary material rests with the consultant. Task Derive initial project development scenari Using combinations of the major transmission/hydro and diesel projects defined above (items 1 and 2), the consultant will derive six scenarios for development of the projects that appear to provide least economic impact and greatest operational flexibility and reliability. For example, scenario #1 would be KPU’s current development plan, a combination of Intertie and diesel. Miscellaneous system upgrades and small projects (item 3) are not to be included in these scenarios. An outline of these scenarios and the justification for their selection will be provided to KPU 1 month after Notice to Proceed. KPU has two weeks to provide comment. Task 3>KReview of major project schedules ani imate: The consultant will conduct an independent review and assessment of the available estimates and schedules for the Swan-Tyee Intertie and the Mahoney Lake - Cape Fox development. The review will consider and reference similar projects in the region and differences between public and private development costs. Based on the consultants independent review of the available information for these three projects, the consultant will provide to KPU (1) an estimate and schedule for each for use in the economic and financial analyses, (2) justification for any adjustments made by the consultant to existing estimates and schedules and (3) an assessment of the consultants confidence in the estimate within 2 months after Notice to Proceed. KPU has two weeks to provide comments. Note that this task does not include Lake Grace. For this study, the consultant will have available an Alternatives Study for Lake Grace currently underway and planned for completion by the end of this year. Task 47K Review KPU’s need for a 9.6 MW diesel generator at Bail Subject to approval by City Council, KPU intends to issue Requests for Proposals for design and permitting of a 9.6 MW diesel generator at Bailey shortly. KPU may issue a Request for Proposals for diesel procurement as soon as February, 1996 or as late as September, 1996 (depending on whether or not the bond issue is considered in a special election KPU is (996 contemplating for Spring of 1996 or is considered in the regular election of October). KPU intends to issue the Bailey construction RFP in Fall, 1996. The consultant will independently review KPU’s stated requirement for a 9.6 MW diesel to replace and augment existing generation at Bailey. The consultant will consider and if appropriate, recommend alternate courses of action for KPU to best address retirement of existing plant and provide back-up generation. This review will be provided in the “initial draft.” Task 5 XK Provide feasibility level estimates and schedule for remaining projec The consultant will develop feasibility level estimates and schedules for the following remaining projects: 1. Mahoney Lake - tunnel option (to Silvis or Ketchikan Lakes as selected by KPU) 2. Additional diesel as required over 20 year study period. 3. Upgrade of the Beaver Falls hydroelectric generators. 4. Construction of a dedicated penstock for the Ketchikan power house. 5. Raise dam at Ketchikan Lakes 6. Upgrade existing tunnel from Fawn Lake. 7. Construction of a dedicated diversion from Granite Basin. 8. New small hydroelectric generator at Whitman Lake. 9. New small hydroelectric generator at Carlanna Lake 10. Conservation The consultant will recommend options and methods for development of each project. KPU will select a single development option for each project. The consultant will provide to KPU (1) an estimate and schedule for each for use in the economic analyses if selected by KPU, (2) justification for the estimates and schedules produced and (3) an assessment of the estimate range within 2 months after Notice to Proceed. KPU has two weeks to provide comments. Task 6K Provide economic analyses of development scenarios Using Lotus 123 compatible spreadsheet software, provide a 30 year basic economic analysis using the same methodology found in the economic analysis section of the Intertie Feasibility study. Expand the cases to the six scenarios defined above. Expand the sensitivity analysis to 7 include surplus sales, project capital costs and costs of diesel. The analysis should consider the deriv top net present Va log impact of providing service to Metlakatla within the next 5-10 years. KPU will provide inflation rate and discount rate. Load growth for the Ketchikan, Metlakatla, Petersburg and Wrangell systems will be based on the 1990 ISER study. The consultant will compare actual demand to the ISER base cases and recommend a modification of the ISER base cases for the base case economic analysis. The consultant will recommend high and low growth cases for Ketchikan and the combined Petersburg/Wrangell system and conduct sensitivity analyses for those cases. Metla habla Task 6.0 is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Task 7X Provide financial anal f developmen nari Using Lotus 123 compatible spreadsheet software, provide a 30 year financial analysis for all scenarios and sensitivity analyses defined above. This analysis will take into account anticipated bond interest rates and purchased power costs (KPU will provide these figures to be assumed in the analyses). A sensitivity analysis will be performed for purchase power rate. The intent of this analysis is to infer rate impact from each development scenario. Part of this task will involve participation in direct purchase power negotiations with third parties. For proposal purposes, assume four trips to Southeast Alaska or Anchorage during 1996-1997 specifically for this purpose. This task is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Task 82K Provide load flow studies of development scenarios Using Power Technology, Inc. (PTI) PSS/E software, provide load flow analyses of the critical/extreme operating points of the system provided in three development scenarios selected by KPU. KPU will provide a PSS/E database for the current system and the system with the Swan-Tyee Intertie. The consultant will have to modify the database as necessary to conform with each load and development scenario. . This task is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Task 9X Provide operations study of development scenario The consultant shall apply a computer model to evaluate the combined operation of all generation resources in the KPU system for three of the development scenarios selected by KPU. Consultant shall use the model to simulate operation of the KPU system as it currently exists to demonstrate that the model is calibrated. It is expected that the model will operate on a monthly timestep and will be driven by the loads required to serve the KPU service area accounting for power available from all sources in the scenario. The model will reflect the variation in turbine efficiencies with changes in net head and flow and will take into account suggested operating ranges of net head for each project. The consultant shall use the model to produce estimates of the anticipated monthly and annual generation and firm capacity from each project and compare with the current annual hydro system generation and firm capacity. Existing operations models are available using ACRES Reservoir Simulation Program for the interconnected Swan-Tyee system and in Excel spreadsheet format for the Lake Grace-Swan Lake system. This task is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Task 104 Provide Engineer’s R: for KP ndi The consultant will provide the Consulting Engineer’s Report for a Municipal Utility Revenue Bond Issue in support of financing one of the major power projects considered in this study. While the bond issue may be limited to a power project, the Engineer’s Report must be a comprehensive review of the status of the entire utility including electric, telephone and water. For proposal purposes, assume the bond issue election occurs in 1996 and the report is due in 1997. Task 11>K Provide miscellaneous power supply planning consultation during transition period KPU expects the consultant to maintain a close working relationship with KPU during the period prior to approval of construction of a major power project, independent of the work described in tasks 1p¥- 10Kabove. Assume for proposal purposes that this task will require 100 hours and 4 trips to Alaska in 1996 and 100 hours and 4 trips to Alaska in 1997. SUMMARY OF DELIVERABLES Start Pre-final KPU review Final work duetoKPU due to KPU Initial draft NTP 4months . AR 3 weeks Updates Notice 5 weeks AR 2 weeks Final draft Notice 3 months AR 3 weeks Final Notice 3 months AR 3 weeks Initial project scenarios outline (24) NTP 1 month 2 weeks LD. Major project estimates & schedule (3-4) NTP 2 months 2 weeks ED: Feasibility estimates & schedules (5) NTP 2 months 2 weeks LD. NTP = Notice to Proceed AR = KPU review period as required by KPU Notice = Upon written notice by KPU LD. = Final form of this deliverable will be incorporated into “initial draft.” Other items: Attach example proposal budget. Attach Economic Analysis section from the power supply evaluation. Define professional services criteria weights. Note that Selection Committee will weigh heavily reputation of firm and perceived ability to keep the same team relatively intact over the contract period.