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Swan Tyee Intertie 1998
; nn nen { Wc ¢ Kl ACM : ; yy uP O\it fal \\ ja iA ; TONY KNOWLES, GOVERNOR ILS DEPARTMENT OF COMMUNITY AND / 333 WEST FOURTH AVE., SUITE 220 REGIONAL AFFAIRS / ANCHORAGE, ALASKA 99501-2341 PHONE: 907) 269-4500 / DIRECTOR'S FAX: (907) 269-4645 DIVISION OF ENERGY ENGINEERING FAX: (907) 269-4685 22° OV Shen ae February 11, 1998 Mr. Randy Simmons \ Executive Director : Lt Alaska Industrial Development and Export Authority Ajaska eu D psi 480 West Tudor Road end , Anchorage, AK 99503-6690 Subject: Swan-Tyee Intertie Dear Mr. Simmons: The Division of Energy is working with Ketchikan Public Utilities (KPU) to assist in financing the Swan-Tyee Intertie. Attached is a summary of the project's financial status and the last grant progress reports we received from KPU. Currently the $72.6 million project requires an additional $30 million of project financing. The Ketchikan City Council is meeting this month and next to give guidance to KPU on how to proceed with the project. It is my understanding that the community of Ketchikan has met with AIDEA to discuss short- term financing for the project. In order to ensure coordination of state financial support to the project, | propose that our agencies share information and otherwise work together on the project. There are a number of issues that need to be addressed regarding the flow of federal dollars to the project. My staff are now working with USDOE and KPU to work out some of these issues. | would like to discuss Swan-Tyee project financing issues with you further and will give you a call next week to find a time to get together on this. Sincerely, Percy G4 Director Attachments as stated tg/federal/simmons & pfintadion reevaledmapertb y ‘OC Oo SWAN-TYEE INTERTIE FINANCIAL STATUS Project costestimate: $72.6 million. Status of grants and loans: A. Three State grants totalling $11.2 million were issued as follows: i. $4.6 million through Dept. of Administration (FY94) ii. $4.0 million through Division of Energy (FY95) iii. $2.6 million through Dept. of Administration (FY96) _ An additional $2.4 million grant is now available from the Southeast Energy Fund. $20 million was appropriated to the Power Project Fund for a Swan-Tyee intertie loan. Ketchikan ordinances require a public vote before the City can enter into the loan. No vote has yet occurred and no loan agreement has yet been signed. Federal funds totaling $10 million are available for the project through the U.S. Department of Energy’s Idaho Support Office. KPU has just completed an application to USDOE for the funding. There is discussion regarding passing the funding through the Division of Energy in a manner similar to four other federally funded projects. hak ale tad twsqac a Overall, $23.6 million in State and federal grant funds have either been issued or are now available to issue for the project, along with $20 million in State loan funds. The balance still needed to finance the project is therefore $29 million. Project financing issues: A. As stated in the attached memo, KPU had planned to receive a $20 million federal grant in FY98 and another $20 million in FY99. What they actually have is $10 million in FY98 and approximately $30 million still needed. Prepared by: Division of Energy February 10, 1998 Swan-Tyee Intertie February 10, 1998 Page 2 of 3 The federal grant manager indicates that, if the Alaska Congressional Delegation specifically approves, USDOE may allow use of the $10 million in federal funds for construction without requiring either that project financing be confirmed for the balance of the project or that other sources of financing be drawn down concurrently. The $20 million Power Project Fund loan was authorized by the legislature and therefore does not require Loan Committee review. However, the Division of Energy must still adhere to the PPF regulations before approving the loan. The key finding that the Division must make is that the project is financially feasible. This finding has two components: 1. That funds are available to complete the project. 2. That revenue will be adequate to repay all project debt without causing burdensome increases in consumer rates. The prior administration offered a loan agreement to KPU by addressing these issues as follows: 15 The proposed agreement required that all project financing be in place before any portion of the loan could be disbursed. 2. The prior administration accepted the idea put forward by KPU in October 1994 that all project debt would be paid from annual Southeast Energy Fund grants; and that the Four Dam Pool would give KPU whatever rate relief may be necessary if the expected flow of grants from the Southeast Energy Fund was interrupted or ended. The lo ior admini i signed. In developing new loan documents, the Division of Energy must consider what will be needed to demonstrate the project’s financial feasibility. In determining financial feasibility, a judgment may have to be made on whether any future grants from the Southeast Energy Fund should be relied upon and, if so, for how many years. The Four Dam Pool project management committee may have the authority to define surplus power from Tyee Lake as “interruptible” “SF Swan-Tyee Intertie { February 10, 1998 Page 3 of 3 and might therefore offer it to KPU at a reduced rate or even a zero rate. An additional requirement in the loan agreement proposed by the prior administration is that a power sales agreement governing sale of power to KPU from Tyee Lake must be adopted before any of the intertie loan funds could be disbursed. IV. Project scheduling: KPU and their contractor Raytheon will present project scheduling alternatives at a meeting of the City Council on February 19. A second City Council meeting on March 5 will address financial aspects of the project. By that time KPU will have an updated load forecast and power planning study, as well as a forecast of electrical rates. KPU will seek guidance from the Council regarding project scheduling at the March 5 meeting. As of September 30, 1997, approximately $5.0 million was still unspent from the $11.2 million previously issued in State grants. Nearly all of the unspent balance was in the two pass-through grants administered by the Dept. of Administration. These two grants can be used without restriction for any cost associated with the project, including construction. As a result, these State grants could pay for right-of-way clearing in 1998 before the overall project financing issues are resolved. Attachment as stated. = a A ae 12-04-1997 14:59 907 225 1888 KPU #1 P.O1 KETCHIKAN PUBLIC UTILITIES SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE PROJECT 2930 Tongass Avenue, Ketchikan, Alaska 9990] (907) 225-1000 (907) 225-1888 Fax Bonry ~ RECEIVED FAXTO: TERRI GANGTHNER 12/4/97 STATE OF ALASKA, DCRA TT (907) 269-4645 noon Nar FROM: _— RICH TRIMBLE DWISION GF giigagy SUBJECT: STATUS REPORT Teri; Status report for the Swan-Tyee Intertie project follows as requested by Eva Lindgren, Finance Department. We also have copies of the Final Environmental Impact Statement if you have not received one already. It is available as a two volume set or in summary form (or both). Feel free to call for that, or any other information I may provide. Thanks, Rich cc: John Magyar, General Manager Eva Lindgren, Finance 12-04-1997 14:59 907 C 1888 KPU #1 P.02 (~ IKETCHIKAN PUBLIC UTILITIES Memorandum To: The Honorable Bob Weinstein & City(Gouncil From: John A. Magyar, KPU General Mana: Date: November 12, 1997 Subject: Swan—tTyee Intertie Update Staff had intended to provide Council information and seek direction at this meeting with regard to proceeding with certain Intertie construction activities. We had anticipated that, subject to Council direction, we would issue a solicitation for right of way clearing at the end of November with bid opening scheduled for late January. We have a draft specification prepared, but believe we would benefit 1. 4. economically by delaying until early spring for the following reasons: Potential bidders have informed us that although KPU is performing a timber appraisal (“timber cruise”), they would want to perform their own independent appraisal. With the bidding period in the middle of winter, they would not have this opportunity and might inflate their bids to account for their additional risk. Our intended bid structure was to offer all merchantable timber to the successful bidder and ask for a net bid taking into account clearing costs and timber value. We are not convinced that this provides the best value for KPU. We are considering other options such as a parmership with the contractor (a percentage split of the merchantable timber) or maintaining ownership throughout the harvest and sale. A couple of timber operators have noted that the market is particularly low and that any delay might boost the potential profit as the market recovers. The EIS appeal will be adjudicated in mid-December. Staff is continuing to prepare information for Council to facilitate a decision regarding whether or not to proceed with certain construction activities. We anticipate returning to Council in the near future to seek direction. JAM:RDTiall HAUS ER\NANCYL\WINWORD\DATAW07-T1MM.DOC 12-04-1997 15:00 907 225 1888 KPU #1 . P.03 PROJECT STATUS SWAN-TYEE TRANSMISSION LINE INTERTIE DESCRIPTION: Until recently, Ketchikan has mitigated its high cost of living through hydroelectric power. In recent years, normal growth has caused a shortage of hydroelectricity forcing our reliance on expensive diesel generation. High incremental electrical costs combined with the recent closure of our largest single employer, the Ketchikan Pulp Mill, handicaps our ability to attract replacement industry. But only 60 miles to the north, two-thirds of the hydroelectric potential at the Lake Tyee project is wasted. The Swan-Tyee Intertie would allow Ketchikan to purchase surplus energy and cease its dependence on diesel until beyond the year 2015. In addition, this project will create a Southeast Alaska grid improving the reliability of electrical power throughout the communities of Ketchikan, Wrangell and Petersburg. HISTORY: 1980 Tyee-Swan-Ketchikan transmission line proposed as alternative to Swan Lake project. 1984 Swan Lake hydroelectric project commissioned. 1987 Swan-Tyece Intertie identified as promising in SE Alaska Transmission Intertie Study. 1991 Swan-Tyee preliminary market and financial assessment performed by AEA. 1992 Swan-Tyee feasibility study performed by AEA 1993 State of Alaska legislature approves combination of grants, loans and bonding. 1994 KPU begins engineering and permitting 1996 Final EIS delayed due to Tongass Land Management Plan 1997 Final EIS and engineering scheduled for completion. Ready for construction. SUPPORT: The Swan-Tyee intertie has enjoyed popular support consistently throughout its history and throughout the region, A variety of local organizations including the City, Borough, Chamber of Commerce, Schoo! District and others have approved this project as 2 regional priority in our annual legislative requests since the late 1980's. In addition, numerous resolutions have been passed in support of the Swan-Tyee intertie through the Southeast Conference and the Four Dam Pool (Kodiak, Copper Valley, Petersburg, Wrangell and Ketchikan). ESTIMATED COST: This project has an estimated cost of $72.6 million. This assumes a two year construction period beginning in 1998 and concluding in late 1999, This also assumes “phased financing” with second year construction funding not received until Jate in the first year, We believe this estimate may be reduced somewhat by sales of merchantable timber. On the other hand, there is a likelihood that construction will extend into the year 2000 considering our current funding shortage of approximately $30 million. Extending construction into 2000 would tend to increase the overall project cost. 12-04-1997 15:00 907 225 1888 KPU #1 P.04 FINANCING PLAN: The estimated cost of $72.6 million may be roughly broken down as follows: Apnroved financing: $11.2 million State of Alaska grants (FY 1994 - 1996) $20 million State of Alaska loan (3%, 15 years) $10 million Federal grant (FY 1998) Requested financing: $2.1 million Requested State grant (40% of 1997 PMC payment) $30 million Requested Federal grant (FY 1999) KPU management intends to recommend that the City of Ketchikan construct and own the Swan- Tyee Intertie if the project can be funded as shown above (i.e. City of Ketchikan indebtedness for the $20 million State loan and grant funds for the remainder of the project). KPU is also seeking a power sales agreement with the Four Dam Poo! and short-term financing through AIDEA that mitigates the City’s risk with this project, STATUS: Both design and permitting efforts began in 1994. Final design is essentially complete and ready for construction bidding. The Final Environmental Impact Statement (FEIS) has been issued and the U.S, Forest Service has released a Record of Decision (ROD) allowing construction. That decision has been appealed, but the appeal will be adjudicated by the Forest Service in mid- December. If the decision is upheld, KPU intends to seek City Council approval to begin right-of- way clearing and certain foundation installation in 1998. RD. Trimble, P.B. Project Manager for Ketchikaa Public Utilities 11/25/97 12-29-1997 16:44 907 225 1888 KPU #1 Pea P.O1 Post-It™ brand | Memorandum 4 = G; e \ y ED To: The Honorable Bob Weinstein & City Council —_—_—— eC 25 199 From: John Magyar, KPU General Manager Po perry, rT Date: December 29, 1997 asian OF ENERGY Subject: Swan—Tyee Intertie Update On December 18, 1997, the Regional Forester denied the appeal and upheld the Record of Decision allowing construction of the Intertie. Earlier in December, KPU filed construction permit applications with the U.S. Army Corps of Engineers, U.S. Forest Service, Alaska Department of Natural Resources, Department of Environmental Conservation and Department of Governmental Coordination. The $10 million federal grant is being administered through the Department of Energy. We received a substantial grant application package from them earlier this month and are in the process of preparing that application. A challenge we have been addressing is how to take advantage of the 1998 construction season with the funding we have available, but having no assurance as to the timing of the future federal grants necessary to complete the project. Normally, our first step in construction would be to clear the right of way, However, if there is some delay in receiving the additional $30 million we need in grant funding, there could be significant regrowth along the cleared right-of- way. One solution may be to just clear the small areas needed to install structure foundations. But however we sequence construction, it must be done efficiently so we don’t raise the project cost. Raytheon has been tasked with seeking the most efficient construction strategy and presenting that to the Council in early Spring. Aside from lobbying for additional federal funding, there are other financial issues we have been addressing. KPU has proposed a power sales agreement concept to the Four Dam Pool which allows zero cost power until KPU’s costs are covered. The Four Dam Pool utilities concur with this concept and we are hoping to receive AJDEA’s approval when we meet with them in January. Our next step is to prepare a draft power sales agreement for consideration. Our financial consultant, A. Dashen & Associates will be forecasting our expected expenses and revenues which he will be presenting Council in early Spring. R. W. Beck is in the process of updating the Power Supply Planning Study. They will be modifying the Intertie alternative to consider development of the project by the City (it had previously assumed development by others with energy sales to KPU at Four Dam Pool rates). They will be incorporating our new electric load forecast being completed by the University of Alaska, Institute of Social and Economic Research which takes into account the closure of the HiAUSER\NANCYLAWPIDATA\07-16.MEM 12-29-1997 16:45 907 225 1888 KPU #1 P.@2 Memorandum-—~Mayor and Council, Swan—Tyee Update December 29, 1997 Page 2 Pulp Mill. They also will be incorporating the feasibility smdies being completed for the Whitman, Connell and Carlanna projects. These updates should make the Power Supply Planning Study a valuable and comprehensive reference for us as we approach key project decisions in the near future. We expect to have draft feasibility reports on Whitman, Connell and Carianna available shortly. This was scheduled to coincide with an agreement we made with KPC to consider acquisition of the Lake Connell dam, pipeline and filtration plant. We will be bringing consideration of thar issue to you in the near future. Staff has also prepared applications for state grant funds for hydro projects which we will also be bringing to you in the near future. JAM:RDT:nill HAUSER\NANCYL\WPIDATA\O0T-16. MEM, MEMORANDUM State of Alaska Department of Community & Regional Affairs TO: Percy Frisby DATE: February 4, 1998 Director My FILE NO FROM: Peter Crimp TELEPHONE NO: 269-4631 Development Specialist SUBJECT: Trip Report, Ketchikan 1127-29 This memo reports on my trip to Ketchikan on January 29 to 30. | departed Anchorage at 12:22 on the 27" and arrived in Ketchikan around 5 p.m. That night | reviewed material on the Reynolds Creek Hydro in preparation for the meeting the next day. Reynolds Creek The Reynolds Creek Hydro meeting began at the Cape Fox Lodge at 8 a.m. on the 28”. This was the second day of the meeting. The overall purpose of the meeting was to brief FERC, and other resource agencies on the project, identify issues, and agree on how to address the issues. Attached is a list of attendees and an agenda. Most of the day was spent addressing habitat issues—chiefly entrapment of grayling in the intake, maintenance of suitable instream flow in the bypassed reach of the creek, and adequate design standards on the access road and tail race. There was agreement to drop the storage to 600 acre-feet, putting the project on the run-of-river end of the spectrum. In general it was a good meeting with a minimum of political posturing and an emphasis on addressing impacts based on objective data. ADF&G did bring up the fuzzy question of “cumulative impacts” of, say, project construction and logging in the watershed, but no action items were identified to address this. Apparently on the day before the question of recreational/aesthetic impacts also came up; however this is not ADF&G’s area and no action items were flagged. There was some grumbling by the USFWS guy Steve Brockman and others that the “State” had failed to provide an overall energy plan for Prince of Wales. | replied that we are actively involved in planning and financing the Black Bear Lake-Thorne Bay-Kasaan intertie and would consider partially supporting a follow-up to the plan prepared by HDR which we had reviewed. For the most part | sat there and listened. The meeting ended around 3:30 p.m. Prince of Wales Intertie / AP&T | got dinner with Ben Rinehart (USDOE) and Bob Grimm. | asked Grimm how AP&T is going to put together financing for the PoW Tie. He was interested in the status of their proposed grant in our hydro/tie solicitation. He mentioned that AP&T may require “take or pay” on power delivered to the Goose Creek Road substation—i.e. Thorne Bay must build their portion of the tie or suffer consequences. Grimm was meeting with Cape Fox/City of Saxman the next day to discuss the JV on Mahoney Lake hydro. He indicated that AP&T and Whitewater Engineering are exploring the possibility of involvement of AP&T in the Power Creek Hydro Project in Cordova. Swan-Tyee Intertie This reports on'the meeting on the 29" and my follow-up discussion today with Peggy Brookshier, USDoE. Ben Rinehart and | met with KPU’s director John Magyar, intertie project coordinator Rich Trimble, and finance manager Bob Newell at KPU’s offices from 9 a.m. to noon. Trimble gave us a run down on project status. Given the favorable record of decision on the EIS by the USFS, permitting questions are less important than project costs and financing. Project construction sequence alternatives will be laid out at a meeting of the City Council on February 19. Clearing for the intertie using helicopters would be the first step. This operation would have a net cost of $1-15 million depending on the timber sale arrangement with the USFS and the market for timber. First year construction costs are estimated at $36 million. Another City Council meeting is scheduled for March 5, when KPU and contractor will present financial aspects of the project. By then KPU will have a new load forecast, an update to their power planning study, and a forecast of electrical rates, presumably linked to different scenarios. At that meeting KPU will seek guidance from the Council. There may be a decision by the Council for Raytheon to go ahead with the project assuming that additional funds will be available from the government. They could also hedge their bet by going out to bid on a clearing contract for this summer contingent on funding availability. Magyar said that the congressional delegation told them to “go forth in faith” that more federal dollars would be available. Originally KPU was planning to go to the voters for approval of the $20 million PPF loan in March. However, after KPU received only half of the expected $20 million federal funds they decided to defer this vote until the next general election in October. | asked how Mahoney Lake fits into the picture. Magyar said that they view Mahoney as a back-up project and that cost-effectiveness of the tie versus Mahoney and other alternatives depends on the time horizon chosen. (The longer term favors the intertie.) Regarding passing the federal funds through the Division, Magyar wants to make sure we are not adding additional constraints (e.g. requiring a full project finance package) on grant draw-down. Coming into the meeting, | thought that this was not a question—however Rinehart surprised me by saying that USDOE will allow the $10 million to be used up front with no strings if the Alaska congressional delegation allows this. This was a reversal of what Brookshier had told me earlier. Since free rein is a possibility, Magyar wants to hold off on the state pass-through until he gets the word from the congressional delegation. Otherwise they would like to go through us. We agreed that KPU would continue to make direct application to USDOE for the funds. If they decide to go through us, than they can notify USDOE and we can easily send in a one-page application to USDOE for the funds. KPU will copy us on their federal application. We agreed that we should resolve the question of funding constraints as soon as possible. Questions that we identified (and what | now know about them) are: 1. Are federal funds use-or-lose by October? Peggy Brookshier told me today that the federal funds only need to be obligated in a grant agreement by September 30, not spent. They recently got clarification on this. 2. Is draw-down of federal funds constrained? Brookshier said today that they will do what the congressional delegation says. She is in contact with Ron Addleman from APA, the USDOE intermediary on the funding. (This is not Indian Resources funding.) If the delegation gives no clear answer, then Brookshier says her default position is that all federal funds must be metered out over the project after full financing is assured. If this $10 million is the first of a series and the delegation says to go ahead an use the funds without a full finance package, then Brookshier says if they will require that the last federal appropriation received (say, the second of two $15 million awards, for example) be metered out over the rest of the project. \ 3. Will DCRA require an acceptable finance package before we allow PPF loans and SE intertie funds to be used for construction? KPU and USDOE want to know this. Trimble said that future grant progress reports for Dick will be succinct, instead of including the kitchen sink. | returned home at 9:00 p.m. on the 29”. Cc: Dick Emerman AGENDA Reynolds Creek Hydroelectric Project Agency Meeting - Ketchikan, Alaska - January 27-28, 1998 Introduction Introductions of participants Purpose and agenda for meeting Project regulatory status Background Next steps.. PURPA 210 Phased Development Proposed Approach Project Description Design level Diversion dam Penstock Power house Tailrace Transmission Lines Access Hydrology Existing Gage Data Lake Mellen Stage Information Operation Affects of Electrical Load Operational Modes Streamflow Characteristics Lake Level Characteristics Water Quality Purpose & Need (Day 2) Construction ESCP Water Quality Open Discussion MEETING ATTENDEES John Bruns Haida Corporation P.O. Box 89 Hydaburg, AK 99222 (907) 285-3721 (907) 285-3722 FAX Charles Skultka, Sr. Chairman of the Board Haida Corporation P.O. Box 665 Sitka, AK 99835 (907) 966-2574 (907) 747-7619 (Fax) Vincent Jameson Treasurer Haida Corporation P.O. Box 355 Hydaburg, AK 99922 (907) 285-3135 (907) 285-3740 (Fax) Paul Berkshire HDR Engineering, Inc. 500 - 108th Avenue N.E., Suite 1200 Bellevue, WA 98004 (425) 453-1523 (425) 453-7107 (Fax) pberkshi@hdrinc.com Mike Stimac HDR Engineering, Inc. 500 - 108th Avenue N.E., Suite 1200 Bellevue, WA 98004 (425) 453-1523 (425) 453-7107 (Fax) mstimac@hdrinc.com Mark Dalton HDR Alaska, Inc. 2525 “C” Street, Suite 305 Anchorage, AK 99503-2639 (907) 274-2000 (907) 274-2022 (Fax) mdalton@hdrinc.com Agency Meeting - January 27/28, 1998 Jon Houghton, Ph.D Pentec Environmental 120 Third Avenue S., Suite 110 Edmonds, WA 98020 (425) 775-4682 x. 225 (425) 778-9417 (Fax) Jon@pentec.wa.com Bennie N. Rinehart U.S. Dept. of Energy Lockheed Martin Idaho Technologies Co. 2525 N. Fremont Avenue P.O. Box 1625, MS-3830 Idaho Falls, ID 83415-3830 (208) 526-1002 (208) 526-0969 (Fax) rinehabn@inel. gov Bob Grimm President Alaska Power & Telephone P.O. Box 222 191 Otto St. Port Townsend, WA 98368 (800) 982-0136 x. 120 (360) 385-7538 (Fax) bobapt@olympus.net Jim Durst Area Habitat Biologist Alaska Department of Fish & Game Habitat and Restoration Division P.O. Box 271 Klawock, AK 99925 (907) 755-2485 (907) 755-2440 (FAX) jJamesdd@fishgame.state.ak.us Steve Hoffman Ketchikan Area Management Biologist Alaska Department of Fish & Game Division of Sportfish 2030 Sea Level Drive, Suite 205 Ketchikan, AK 99901 Reynolds Creek Hydroelectric Project FERC Project No. 11480 Glenn Freeman Fishery Biologist Alaska Department of Fish & Game Division of Sportfish 2030 Sea Level Drive, Suite 205 Ketchikan, AK 99901 Christopher Estes Alaska Department of Fish & Game 333 Raspberry Road Anchorage, AK 99518-1599 Bill Hanson Alaska Department of Fish & Game P.O. Box 240020 Douglas, AK 99824-0020 Stephen Brockmann Ecological Services USS. Fish & Wildlife Service 624 Mill Street Ketchikan, AK 99901 (907) 225-9691 (907) 225-9693 (Fax) steve_brockmann@yail fws.gov Agency Meeting - January 27/28, 1998 Carl Keller Federal Energy Regulatory Commission 888 First Street NE, Room 6H-03 Washington, DC 20426 (202) 219-2831 (202) 219-2732 (Fax) carl.keller@ferc.fed.us John Smith Federal Energy Regulatory Commission 888 First Street NE, Room 62-25 ; Washington, DC 20426 (202) 219-2460 (202) 219-2732 (Fax) john.smith@ferc. fed.us Peter Crimp State of Alaska DCRA - Div. of Energy. 333 W. 4th Ave., Suite 220 Anchorage, AK 99501-2341 (907) 269-4500 (907) 269-4685 Reynolds Creek Hydroelectric Project FERC Project No. 11480 ee ME EMIT UH SO APU AUMINISINALIUN IGu-Jur géu 1000 1. uua Poat-It™ brand fax transn...,.., .neamo 7671 From — 2830 TONGASS AVENUE February 6, 1998 JNICIPALLY OWNED ECTRIC TELEPHONE WATER Ms, Wendy L, Huggins U.S. Department of Energy Idaho Operations Office Procurement Services Division 850 Energy Drive Idaho Falls, Idaho 83401-1563 Subject: Swan Lake - Lake Tyee Transmission Line Intertie Grant Application Dear Ms. Huggins: Please find enclosed our grant application for the Swan - Tyee Intertie project in accordance with your letter of December 5, 1997, As requested by Mr. Bennic Rinehart, we have forwarded the attachments for this grant application directly to him. Please note that KPU is considering making a request to the Alaska Division of Energy to administer this grant. We are currently discussing this possibility with the State of Alaska and will keep you informed of any agreements we might reach with them. In the meantime, we are making application directly with USDOE, Unless other arrangements are made with the State of Alaska, KPU will be the agency directly Tesponsible to USDOE for this grant. In addition, please be aware that KPU is seeking a waiver from the USDOE standard procedures for spreading grant payments over the project. Our intent is to seek immediate release of these congressionally mandated funds in full to the project. Our primary contact for this grant will be Mr. Richard Trimble, Power Projects Manager for Ketchikan Public Utilities. Please contact him for any additional information or clarification regarding this grant application. Sincerely, 4 ‘Magye— ohn A. Magyar General Manager JAMERDT:klo Enclosure cc: Bennie Rinehart, INEEL ~- Attachments Percy Frisby, Director, Division of Energy - Attachments “ED. ~UY YO(MUN) 19:40 APU AUMINISINALIUN IDL: IU/ £20 1000 T.uue Gan Lake-Lake Tyee Transmission Line Intertle Grant Applicalion February 6, 1988 Application for Federal Assistance Award Swan Lake - Lake Tyee Transmission Line Intertie This information is provided as required by Department of Energy, Idaho Operations Office letter dated December 5, 1997, The following attachments are included as a part of this application: Attachment (1): Lake Tyee to Swan Lake Transmission Intertie Feasibility Study Attachment (2): Final Environmental Impact Statement and Record of Decision Attachment (3): Summary of the construction permit applications Attachment (4): Scope of work, Engineering (Raytheon) Attachment (5): Scope of work, Environmental and Permitting (Foster-Wheeler) Attachment (6): Draft design Attachment (7): Project schedule Attachment (8): Project cost estimate TE CAL: Copy of the feasibility study or economic analysis. The Lake Tyee to Swan Lake Transmission Intertie Feasibility Study conducted by R. W. Beck on behalf of the Alaska Energy Authority dated June 1992 is provided as Attachment (1). Copy of any environmental documents (EIS, permits, etc.). The Final Environmental Impact Statement and Record of Decision dated August 1997 are provided as Attachment (2). A summary of the construction permit applications filed are provided as Attachment (3). Note that all construction permits are being coordinated on behalf of KPU by: Mr. Jim Lutz Earth Tech (206) 455-9494 Name and phone number of the person in the Forest Service handling the permits. Mr. Bill Angelus (907) 225-2148 H:USER\PUBLIC\STGRANT.WPD FEB. -U9 Y8(MUN) 19:40 KPU ADMINISTRATIUN IBL:9U/ 229 1888 r. Uo San Lake-Leke Tyee Tranambssion Une Intertie Grant Applicatlan Pobruary 6, 1888 Discussion of the key individuals, their roles, responsibilities, past experience, and chain of command (organization chart), Clearly identify the project manager, the consultants, and any subcontractors. Provide names, addresses, phone and fax numbers. John Magyar, General Manager Ketchikan Public Utilities 2930 Tongass Avenue Ketchikan, AK 99901 (907) 225-1000 (907) 225-1888 fax Mr. John Magyar is the General Manager of Ketchikan Public Utilities, a municipally owned electric, telephone and water utility. He reports directly to the Ketchikan City Council. He received a BA degree in Business from Dickinson State College and is a CPM (Certified Purchasing Manager). He formerly served as Purchasing Agent for the City of Longmont, Colorado and the City of Richmond, Virginia. Mr. Magyar has extensive experience in accounting and plant maintenance and operations. Mr. Magyar’s utility experience comes from his eight year tenure at Tri-State G&T in Denver, Colorado. Richard Trimble, PE Power Projects Manager Ketchikan Public Utilities 2930 Tongass Avenue Ketchikan, AK 99901 (907) 225-1000 (907) 225-1888 fax Mr. Richard Trimble serves as the Project Manager for the Swan-Tyee Intertie and is an employee of Ketchikan Public Utilities. He reports directly to the General Manager. He graduated cum laude from the University of Washington with a BS degree in Electrical Engineering. He served as a Naval Officer from 1984 - 1990 and currently holds the rank of Lieutenant Commander in the Naval Reserves. He joined Ketchikan Public Utilities as the Engineering Manager in 1990, In 1994, he was appointed to this position to oversee the Swan-Tyee Intertie and other major power projects. Mr. Trimble will serve as the primary contact for this USDOE grant application. H:USER\PUBLICISTGRANT.WPD “BB. -U9 Y8(MUN) 19°46 KPU AUMINISTRATIUN IBL:9U/ £229 1556 rT, uu4 San Lake-Lake Tyee Transmission Line Interila Grant Applicalian Fobruaty 4, 1008 Jeff Paine, PE Project Manager Raytheon Infrastructure Services, Inc. 10900 NE 8th Street Suite 500 Bellevue, WA 98004-4405 (425) 451-4206 (425) 451-4648 fax Mr. Jeff Paine is the Project Manager for Raytheon Infrastructure Services, the design engineer for the Swan-Tyee Intertie. He reports contractually to the Project Manager for Ketchikan Public Utilities. He received his BS in Electrical Engineering from the University of North Dakota. He has over 30 years of experience in electrical engineering and project management. Nearly half of that time was as Chief Engineer for the City of Idaho Falls municipal electric utility. With Raytheon since 1988, Mr, Paine has been a project manager on many multi-discipline engineering projects and is manager of the Electrical and Instrumentation and Control group in the Raytheon Bellevue office. Ellen Hall, Ph.D. Project Manager Foster-Wheeler Environmental Corporation 54 NW 108th Terrace Plantation, FL 33324 (954) 382-2235 (954) 382-2237 fax Dr. Ellen Hall is the Project Manager for Foster-Wheeler Environmental, the consultant responsible for providing environmental services including preparation of the Environmental Impact Statement, construction permits and environmental monitoring during construction. She reports contractually to the Project Manager for Ketchikan Public Utilities. She has a Ph.D. in forest economics and has over 20 years experience in project management and NEPA compliance. This experience includes more than 20 EIS’s and EA’s, H:USER\PUBLIC\STGRANT.WPO "EB. -UY Y8(MUN) 19:47 KPU AUMINISTRATIUN IGLiYU/ 229 1388 r. uuo San Lake-Lake Tyeo Tranamission Une Interle Granl Application Pobruary 6, 1808 Mr. James J. Lutz, PE Project Manager Earth Tech 10800 NE 8th Street Seventh Floor Bellevue, WA 98004 (425) 455-9494 (425) 453-9470 fax Mr. Jim Lutz is the Project Manager for Earth Tech, the consultant responsible for obtaining construction permits from the necessary agencies including the U.S. Forest Service, U.S. Army Corps of Engineers, Alaska Department of Governmental Coordination, Alaska Department of Natural Resources and Alaska Department of Environmental Conservation. In this role, he is a subcontractor to Foster-Wheeler Environmental and reports contractually to the Project Manager for Foster-Wheeler. He has an MS in Structural Engineering and a BS in Civil Engineering. He has over 27 years of experience, most of which has been in Southeast Alaska as an engineer and project manager. Mr. Bill Angelus U.S. Forest Service Ketchikan Ranger District 303] Tongass Avenue Ketchikan, AK 99901 (907) 225-2148 (907) 225-8738 fax Mr, Bill Angelus is the U.S. Forest Service liaison for this project. He coordinates environmental and permitting issues with Ketchikan Public Utilities and the two Ranger Districts having jurisdiction in the areas crossed by the Swan-Tyee Intertie (Ketchikan and Wrangell Ranger Districts). He reports to the Ketchikan District Ranger. His background is in landscape architecture. A detailed description of the tasks. The descriptions of the engineering and permitting activities are provided as Attachments (4) and (5). These are the scopes of work from our contracts with the design engineer (Raytheon) and the environmental consultant (Foster-Wheeler). Note that minor modifications have been negotiated H:USER\PUBLIC\ISTGRANT.WPD 1 bv, UJI JO\MUIN) Lust] QU AUMINIOIRAL LUI Ibu+sju/i £éu 1000 Gan Lake-Laka Tyee Transmission Line Intarle Grant Applicalion February 8, 1998 to these scopes of work which are not included. These can be provided if required. The draft design for construction is provided as Attachment (6). A detailed schedule for the project. The most recent schedule is provided as Attachment (7). Note that Raytheon and KPU are in the process of optimizing the schedule and construction sequencing. This information will be provided as soon as complete. The costs should be broken down by tasks. The most recent project estimates are provided as Attachment (8). PRICING: Project costs are broken down in Attachment (8). Note that KPU is seeking a waiver from the USDOE standard procedures for spreading grant payments over the project. Our intent is to seek immediate release of these congressionally mandated funds in full to the project. Cost sharing will be occurring in that a combination of Federal, State and Municipal funding is proposed for this project. Specifically, the project cost noted in Attachment (8) is $72.6 million in 1997 dollars, Financing proposed is: State grants to date (FY 94-98): $11.2 million Federal grant (FY 98): $10.0 million Additional state funding requested: $ 2.0 million Additional federal funding requested: $30.0 million City of Ketchikan debt (State loan): $20.0 million Total financing: $73.2 million FORMS AND CERTIFICATIONS: Forms and certifications follow, Note that the Cost Element Guideline has not provided as KPU does not intend to charge indirect costs. Budget detail on proposed tasks is provided in Attachment (8). H:USERIPUBLIC\ISTGRANT.WPD 1. uuu roo. UJ JO\MYIN) Lust) MU AUMINISINAL UL PuuT sul wey iveuy ‘San Lake-Lake Tyee Tranemiasion Line Inienie Gran! Appiicaiion February 6, 1908 ADDITIONAL INFORMATION: KPU intends to limit charges against this grant to contracts issued for this project. At this point we do not intend on charging any indirect KPU costs. As a result, some of the requests for additional information do not apply. la-d, Does not apply. le. All tasks to be completed as part of this project are included in the budget shown in Attachment (8). The precise sequencing and breakdown of these contracts is still being optimized. 1f. Does not apply 2. Personnel (Labor): Does not apply. Indirect Costs: Does not apply. Travel: Does not apply. Equipment, Material, Other Direct Costs: Does not apply. Consultants: To be determined. Estimated costs are shown in Attachment (8). Contractyal: To be determined. Estimated costs are shown in Attachment (8). Cost Share; Project costs are broken down in Attachment (8). Note that KPU is seeking a waiver from the USDOE standard procedures for spreading grant payments over the project. Our intent is to seck immediate release of these congressionally mandated funds in full to the project. Cost sharing will be occurring in that a combination of Federal, State and Municipal funding is proposed for this project. Specifically, the project cost noted in Attachment (8) is $72.6 million in 1997 dollars, Financing proposed is: State grants to date (FY 94-98): $11.2 million * Federal grant (FY 98): $10.0 million Additional state funding requested: $ 2.0 million Additional federal funding requested: $30.0 million City of Ketchikan debt (State loan): 20.0 millio H-USER\PUBLIC\STGRANT.WPD POD, “UI JO (MUN)) Lo+4/ APU AUMINISINALIUN IGu+7U/ 飣0 1000 1, uuo e, San Lake-Lake Tyeo Transmission tine Inlartia Grant Application February 6, 1868 Total financing: $73.2 million Carry-over. There are no previous unused federal funds for which we are requesting a carry-over at this time. H;USER\PUBLIC\STGRANT.WPD TOD, “UF JO(MUN) 10-40 Kru AUMINIOTRATIUN IGu:Ju/ 飣u 1000 . SWAN-TYEE INTERTIE PROJECT ORGANIZATION CHART KETCHIKAN CITY COUNCIL KPU GENERAL MANAGER JOHN MAGYAR KPU POWER PROJECTS MANAGER US FOREST SERVICE KETCHIKAN RANGER DISTRICT BILL ANGELUS RICH TRIMBLE* DESIGN ENGINEER RAYTHEON ENVIRONMENTAL CONSULTANT FOSTER-WHEELER JEFF PAINE PROJECT ENGINEER ELLEN HALL PROJECT MANAGER CONSTRUCTION PERMITTING EARTH TECH JIM LUTZ PROJECT MANAGER *PROJECT MANGER FOR U.S. DOE GRANT POINT OF CONTACT. 1, uus KETCHIKAN PUBLIC UTILITIES Memorandum To: The Honorable Bob Weinstein & City Council From: John Magyar, KPU General Manager a Me ye Date: March 4, 1998 Subject: Ketchikan Electric Company (KEC) Information The attached information was delivered to me on Tuesday by Doug Campbell, Cape Fox Corporation, and Bob Grimm, Alaska Power & Telephone. I understand that they also have been in touch with some of you. KPU staff has not had the opportunity to aay Sa information in any sort of detail. Based on brief discussions with Mr. Campbell and Mr. Grimm, they seem to be promoting the construction of the Intertie while asking KPU to buy power from the Mahoney project rather than Swan Lake power. Based on my understanding, the Four Dam Pool Power Sales Agreement does not permit this but I have asked the City Attorney for his opinion. . Their communication raises numerous questions. Some things are certain, however. If KPU significantly reduces its purchases of Swan Lake power as KEC seems to be proposing, all Four Dam Pool operating utilities will experience a significant Four Dam Pool rate increase—KPU rate payers will share in that increase; it will be unlikely that the PMC ever will approve the KPU proposed power sales agreement for Tyee power and without it the Intertie cannot be built. Thus, even though the KEC information seems to be supportive of the Intertie, I believe that the effect is just the opposite. Both Metlakatla and Cape Fox have indicated an interest in negotiating a deal with KPU. Staff believes it is in the best interest of the rate payers to entertain proposals from both of these groups and stands ready to do so. We believe it is important to position the most cost effective small hydroelectric projects for development in the event they are needed. I will provide additional information as it comes available. JAM:nill cc \ DRS —s KL a Se a H:\USER\NANCYL\WPA\DATA\007-C4.MEM KETCHIKAN ELECTRIC COMPAN'- MAHONEY LAKE PROJECT Cape Fox Corporation and Alaska Power & Telephone Company have formed a joint venture to develop the Mahhoney Lake Hydroelectric Project, for which a Federal Energy Regulatory Commission (FERC) license was recently issued. The project is a “Qualifying Facility” under PURPA The joint venture has obtained a fixed-price construction contract at $17.5 million dollars, more than $10 million below the estimated cost used in the RW Beck Power Supply Planning Study 1998 Update. The 9.6 megaWatt project will produce between 40 million and 46 million kWh of energy annually. Ketchikan Electric believes that Mahoney lake will add major benefits to Ketchikan’s present and long-term energy picture, and will provide an important boost to efforts to build the Swan-Tyee intertie. We believe this for the following reasons: ¢ Cheap energy, no take-or-pay obligation — Ketchikan Electric Company will offer Mahoney Lake Energy to KPU, on a take-and-pay basis, for approximately the price KPU pays for Swan Lake energy — presently about 6.2¢ per kWh. * Immediate needs ~ With Mahoney Lake energy, KPU can meet its immediate and mid-term energy and capacity needs solely from existing KPU hydro, Swan Lake, and Mahoney Lake. ¢ All Hydro — KPU will be able to meet its capacity, energy and stand-by reserve requirements for many years without using diesels. This will minimize retail rates in Ketchikan for many years to come. ¢ No new public investment — KPU will have access to Mahoney Lake energy and capacity without making any further investment in new hydros. The investment will be made by Ketchikan Electric, without any local public funding. ° Enhanced funds available for Intertie — Mahoney Lake will free up all of KPU’s cash and credit for use on the intertie project by eliminating the need for investment in other generating projects. e Enhanced economic development with Intertie - Mahoney Lake will provide important electrical stability to the KPU system once the intertie is on line. When this occurs, Ketchikan’s long-term access to low-cost all hydro capacity and energy resources will put the city in a preeminent position to attract economic development. ¢ Immediate local economic development — Mahoney Lake will be a local project, within the KGB. It will provide local construction and operating jobs, and will be owned by a local corporation. \ Ketchikan Energy & Resources gW-Hr 250 200 eee once eee 100 50 0 2000 2005 Mahoney 12 0 11 Swan 81 81 81 KPU Hydro 66 66 66 ISER Load] 159 147 158 165 175 185 198 [=ISER Load EIKPU Hydro MiSwan [Mahoney Chart 1 Ketchikan Energy & Resources W-Hr 250 e 200 150 100 50 OF 1995 | 2000 2005 2010 2015 2020 2025 Mahoney 0 40 40 40 40 40 46 Swan 81 40 52 59 69 79 81 KPU Hydro 66 66 66 66 66 66 66 ISER Load| 159 147 158 165 175 185 198 wa |SER Load EIKPU Hydro liSwan C-JMahoney Chart 2 iy Dennis McCrohan From: Dennis McCrohan Sent: Monday, February 23, 1998 8:10 AM To: Randy Simmons; Keith Laufer Won Subject: SE Intertie Council Meeting on Feruary 19 Keith and Randy | will circulate the handout materials from Raytheon and KPU. John Magyar and Raytheon made their presentation. The focus was on schedule and the various options. Magyar indicated the most preferred schedule was Option 2A which is attached. Raytheon stated the current cost of the project was $77M but also presented two alternative cost scenarios which included extensions in schedule to allow for funding to be in place. The only positive comments from the Council were from Councilman Frissen who indicated the 4 Dam Pool was strongly behind the project. Councilman Coin was strongly opposed. Mayor Weinstein indicated a concern that KPU should not proceed without funds in hand for the entire project and voter approval. John Magyar indicated that KPU did not plan to spend State loan funds without a full financing package and voter approval. Weinstein then asked about the Federal grant. Magyar indicated that KPU did intend to spend the Federal funds prior to voter approval and Weinstein indicated a concern for this approach. Weinstein indicated that the cost of power report which will be presented at the next council meeting included the schedule delay scenarios and the impact of these on the cost of power options. LAKE TYEE - SWAN LAKE TRANSMISSION LINE INTERTIE PROJECT CAPITAL COST ESTIMATE (By assumed financing plan and contracting breakdown) 1999 2000 2001 Assume Annual Financing to be: $10,000,000 $10,000,000 $10,000,000 $10,000,000 Plus Completion Bonds Estimated Contract Costs By Year 10,281,088 10,968,496 11,330,230 42,275,581 Sub-total of direct contracts: 74,855,395 Total of KPU Fixed Costs: 8,368,018 Total Project: $83,223,414 Note: This represents the expected cost for completing in year 2001 with no credit for value of timber. LAKE TYEE - SWAN LAKE TRANSMISSION LINE INTERTIE PROJECT CAPITAL COST ESTIMATE (By assumed financing plan and contracting breakdown) 1999 2000 200 Assume Annual Financing to be: $10,000,000 $10,000,000 $10,000,000 $10,000,000 Plus Completion Bonds By Year 10,281,088 9,343,096 9,790,830 41,458,581 Sub-total of direct contracts: 70,873,595 Total of KPU Fixed Costs: 8,368,018 Total Project: $79,241,614 Note: This represents the expected cost for completing in year 2001 with a credit of $4.2 million for timber v __. ‘FEB. -12' 98 (THU) 13:34 KPC MINISTRATION TE 17 225 1888 P, 001 _= Gow KETCHIKAN PUBLIC ¢ UTILITIES SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE PROJECT 2930 Tongasa Avenue, Ketchikan, Alaska 99901 = 907 225-1000 (907) 225-1888 Fax FAX TO: Randy-Smmmons AIDEA (907) 269-3044 DennisMcCrohan AIDEA (907) 269-3044 Comm, Mike Irwin DCRA (907) 465-2948 Percy Frisby DCRA (907) 269-4645 Bennio Reinhart USDOE (208) 526-0969 John Heberling R. W. Beck (206) 695-4764 Alan Dashen Dashen & Assoc. (425) 452-9552 Dennis Lewis PP&L/PMC (907) 772-9287 Dave Carlson PP&L/PMC (907) 772-3064 William Privett WL&P/PMC (907) 874-3952 \ oe Scott Seabury WL&P/PMC (907) 874-3952 Walt Sapp KEA/PMC (907) 486-2441 Robert Wilkinson CVEA/PMC (907) 822-5586 Ron Saxton Ater, Wynne, et al. (503) 226-0079 Jeff Paine Raytheon (425) 451-4648 Ellen Hall Foster-Wheeler (954) 382-2237 Brad Powell USFS Ketchikan Area (907) 228-6292 Jim DeHerrera USFS Ketchikan Ranger Dist.(907) 225-8738 Senator Robin Taylor (907) 465-3922 Representative Bill Williams (907) 465-3793 FROM: RICH TRIMBLE SUBJECT: SWAN-TYEE INTERTIE MEMO TO COUNCIL A memorandum to our City Council is attached for your information. Please call if you have any questions. Lecation : oe le 2 Calg Aor se yihke @ 2 ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY /= ALASKA im =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 January 30, 1998 ECEIVE } Mr. Amodo Beloff Raytheon Engineers and Constructors FEB 0 2 1998 CN 5287 Princeton, New Jersey 08543-5287 Alaska Indusirial Development and E t j Subject: Tyee Hydroelectric Project; Airstrip Location and Classification i xport Authority Dear Mr. Beloff: Pursuant to your telephone request, transmitted herewith find the following: Drawings e Site Survey, Tyee Lake Hydroelectric Project Overall Site Plan, Sheet 1 of 4, Dated 5/20/93 ¢ Site Survey, Tyee Lake Hydroelectric Project Plan Showing Powerhouse Area, Sheet 4 of 4, Dated §/20/93. Air Photos e Blue Line Copy of 9/17/95 Air Photo of Tyee Project Area. In addition, | am enclosing a copy of a FAA Form 7480-1, which includes the latitude and longitude of the airstrip. As indicated therein, the airstrip is designated as private. The Alaska Energy Authority strongly advises that your plan for the transmission line into the Tyee Project area include provision for adequate safety, including, as appropriate, safety markers. Given the nature of both the weather and topography of the area combined with the need for frequent fixed wing and helicopter flights into and out of the Project, it is prudent that all reasonable measures be used to ensure the safety of the personne! working at the site. If you have any questions concerning the attached material or wish to further discuss this matter, please do not hesitate to call me at (907) 269-3000. Since : Le Loh rStan Sieczkowski fo Operations Manager SS/JHT/kav Enclosures: As Stated cc: D. McChrohan, AEA R. Trimble, KPU R. Williams, RGW, Inc. J. Thrall, LIL File a @1-3G-1998 11:53AM FROM TBPA TO 1 907 269 3044 ~P.@2 t | w N CE OF LANDING AREA PROPOS: — USDeqe oF franco Koon Of daterion Acmruntstrerton aa OF PROPONENT, INDIVIDUAL OR ORGANIZATION © Establishment or Activation &) Airport Cuttratignt Flightpark Alaska Energy Authority , [A Alteration oF O Hetipor O Seaplane Base ADDRESS (No.. Street, City, State. Zip Code) O Deactivati Aband P.0] Box 190869 , Anchorage, Ak. 99519-0869 inti D chen sagt 1. NEAREST CITY OR TOWN ‘ en 4, DISTANCE AND DIRECTION “ . TO HEAREST CITY OR TOWN angel] ee Miles; Direction é! AME OF LANDING AREA ee 6. LATITUDE 7. LONGITUDE ie ELEVATION @ Airport 7 56 ° 13" 13 9/28 °* +1955 Wesel. ETc U: 1 Change of Status or Alteration, Describe Change. Widen existing runway from 40’ to 80'. Raise centerline elevation to 22' MLLW. ( 13.5 M.S.L.) Construction Oates To Begin/Began , Est. Compietion | | T—Exsing aay] Provowed | et Poorer we TA C. Other Landing Areas ef . § . Magnetic Bearing of Runway(s) or s 1g 4, | Sealanots) 53 Ss ; pe Length of Runway(s) or Sealane(s) in Feet! 499 |. a-ba-ue| 2400 | aeentene- 2|——____. v= a . > +s |Width of Runway(s) or Sealane(s) in Feet i io a ee ee oj = {Type of Runway Surface (Concrete, Asphait, Turt, Ete.) » |Dimensions of Landing and Takeoff Area in Feet Dimensions of Touchdown Area in Faet Magnetic Direction of Ingress/Egress E. O Routes : 7 Type of Surface | Type (Turf, rooftop, ete.) i Description of Lighting (/f any) a of Prevailing Wind | Hill bide None $ “Operational Data 3. Are IFR Operations Anticipated | - Gd'No «Cl Yess. Withi Oo Has Been Made. C wit Be Mage * Signature, (In ink) .% Well? PLO. “Box. 1318 .,. . Date of Signature Wrangell’ Ak 99929 ~ | OF DR AA rt TABO-1 (483) SUPERSEDES PREVIOUS EDITION feo Fae ge or ig re type or print Lowell | Highbargin Manager, I ‘Telephone No. (Precada with area code) (907) 874- a i: ¢ LOOR LEVEL __ | SURVEY COMPLETED 5720793 DRAWN BY R.B. a | SCALE AS SHOWN =» PROJ. NO. T2393 = 200 0 200 400 600 EES ict te or feed GRAPHIC SCALE — FEET THOMAS BAY POWER AUTHORITY SITE SURVEY TYEE LAKE HYDROELECTRIC PROJECT OVERALL SITE PLAN SHOWING HARBOR,: MAINTENANCE, HOUSING, POWERHOUSE & RUNWAY | WITHIN UNSURVEYED SEC. 21, T.65 S., R.90 E., C.R.M.| °; SHEET | OF 4 SURVEYOR RICK G: BRAUN, L.S. P.O. BOX 211, PETERSBURG, AK 99833 PH (907) 772-3986 MIRACLE SPAN GALV. STEEL BUILDING 40 . 0 40 80 120 fe GRAPHIC SCALE — FEET THOMAS BAY POWER AUTHORITY SITE SURVEY TYEE LAKE HYDROELECTRIC PROJECT PLAN SHOWING POWERHOUSE AREA WITHIN UNSURVEYED SEC. 21, T.65 S., R.~90 E., C.R.M. SHEET 4 OF 4 SURVEYOR RICK G. BRAUN, L.S. P.O. BOX 211, PETERSBURG, AK 99833 PH (907) 772-3986 SURVEY COMPLETED 5720793 DRAWN BY R.B. SCALE AS SHOWN PROJ. NO, 782393 : DVM Four Dam Pool PMC Meeting Minutes Page 11 of 16 September 11, 12, and 14, 1990 that such sales could have been made in a firm sales mode. The advent of just such an event from fiscal 1989 demonstrates the risk involved by KPU. Such risk with a cost benefit of 1/3, 1/3, 1/3 will not be a fair and reasonable distribution in consideration of the risk involved. 2. In light of the fact that the PMC members do not want to identify the Lake Tyee/Swan Lake intertie, there is no incentive to the rate payers of KPU to give up their portion of the surplus sales agreement with KPU. Mr. Petrie indicated AEA could take a new split in the interruptible sales proceeds to their bank and ask for approval, but this approval would need to be obtained before sales could occur. Mr. Sapp suggested reexamining the split. Mr. Petrie pointed out the difference Mr. Stevenson was disputing was 75 percent versus 66.66 percent. Mr. Bursey indicated Resolution 87-20 provides the selling utility approximately 41 or 42 percent when their one-third split is combined with a pro rata share of the O&M offset through the one-third paid to the PMC. Mr. Saxton indicated a midstep during the workshop was 50 percent to the utility and 25 percent each to AEA and PMC. Mr. Petrie suggested reexamining the reservoir elevation levels in an interruptible sales agreement. This would remove the utility’s risk. ii. Wrangell Mr. Maple indicated he plans to stay with the terms of Resolution 87-20 when presenting his interruptible sales agreement to the PMC in October. He will probably seek a five-year renewal of the original contract and prices. The new agreement will need to be changed to allow the customer to generate their own power as they now have boilers. Mr. Stevenson moved that Resolution 87-20 be amended to read that the split of proceeds from any surplus sale be 45 percent to the selling utility and 55 percent split equally between the PMC and the AEA. Mr. Bursey provided the second. The motion passed with Messrs. Maple, Stevenson, Bursey, and Sapp voting in favor of the motion and Messrs. Lewis and Petrie voting against the motion (Action 90-462). — Chairman Eberhardt indicated this change will not affect agreements signed prior to this date. 5... Ketchikan [Interruptible Sales] ; - r Mr. Bursey moved to authorize sales under the PMC Interruptible Rate Schedule #1 as amended with the split as provided in Resolution 87-20 from the e‘fective date of the contract provided by KPU on February 5, 1990 through September 30 with those sales with a split as provided under the present PMC Interruptible Rate Schedule #1 and authorize the PSA Schedule K power with an effective date of October 1 with sales as provided under PMC Interruptible Rate Schedule #1 as amended today with the 45/27.5/27.5 split. Mr. Maple provided the second. A roll call vote on the motion provided affirmative votes from Messrs. Bursey, Stevenson, Petrie, Lewis, and Sapp and a negative vote from Mr. Maple. The motion failed as unanimous consent is required for interruptible sales agreements (Action 90-463). Mr. Palmer expressed concern about making the sale retroactive to February when rules say an approved agreement must be in place before sales occur. Mr. Stevenson explained an energy exchange occurred, not a sale, but that has been terminated until an agreement is secured. Mr. Saxton indicated that there has to be a power sales agreement for all sales. Mr. Maple expressed concern that Petersburg would seek a portion of Wrangell’s share of the proceeds of interruptible sales to the Wrangell Pulp Mill. Mr. Lewis indicated this matter should not hold up the Ketchikan interruptible sales approval and Mr. Maple indicated he did not see it as a separate issue. Messrs. Stevenson and Waggoner left the meeting. ii. Wrangell [Interruptible Sales] Mr. Parisena indicated he did not believe the issue of how proceeds from interruptible sales to Wrangell Pulp Mill will be split between Wrangell and Petersburg is a PMC issue. Mr. Palmer agreed. Mr. Petrie asked that the Ketchikan interruptible sales agreement be scheduled for the next meeting agenda. Messrs. Stevenson and Waggoner returned to the meeting. 3 RESOLUTION NO. 87-20 ae A RESOLUTION of the Project Management Committee ("PMC") providing for the adoption of a rate schedule for the sale of certain power from the Initial Project at PMC Interruptible Rates. WHEREAS, the Initial Projects are capable of producing energy in excess of the loads that will purchase power at the full initial Project Wholesale Power Rate; and WHEREAS, there are opportunities to sell additional power if such power can be made available at a rate less than the full Initial Project Wholesale Power Rate; and WHEREAS, such sales can be accomplished so as to provide benefits to other customers; and WHERE, such opportunities were unanticipated at the time of execution of the Long-Term Power Sales Agreement; and WHEREAS, by their unanimous concurrence the parties intend to encourage sales that are supplementary to those anticipated in the Long-Term Power Sales Agreement; and WHEREAS, the Alaska Power Authority ("Authority") and the utility members of the PMC believe such sales can encourage greater utilization of existing resources to the benefit of all consumers served by the utility members of the PMC; and WHEREAS, the parties to the Long-Term Power Sales Agreement unanimously now desire to make such sales; and WHEREAS, by agreement to this procedure, the Authority does not concede its right to make supplementary sales pursuant to other arrangements consistent with the Long-Term Power Sales Agreement. NOW, THEREFORE, BE IT RESOLVED by the Project Management Committee as follows: Section 1. The PMC hereby adopts PMC Interruptible Rate Schedule No. 1, Wholesale Displacement Rate (Non-Residential), (Attachment A). Section 2. Such rate schedule shall be effective immediately upon a unanimous vote of the PMC, and shall continue to be available until modified or rescinded by majority action of the PMC. 007/C5/1 Section 3. Each utility shall negotiate a contract for each proposed sale under the PMC Interruptible Rate Schedule and shall present such contract to the PMC for approval prior to any sale of power under such contract. Each contract shall require unanimous approval by the PMC, and once approved such contract shall continue in force for such period and on such terms as are in such approved contract. Section 4. Each utility making sales under the PMC Interruptible Rate Schedule shall report to the PMC, on at least a quarterly basis, on sales made under the PMC Interruptible Rate Schedule, sales expected to be made under the PMC Interruptible Rate Schedule, and the information collected by that utility to demonstrate compliance with the verification provisions of the PMC Interruptible Rate Schedule. Section 5. All monies received by the PMC under this schedule shall be applied to the Authority's administrative services costs and to the power production costs in the proportions specified in the schedule. The revenues to be applied to power production cost shall be applied entirely to the cost associated with Facility Operating Cost and Joint Costs of the Initial Project pursuant to Sections 5b(i)(A) and (B) of the Power Sales Agreement. DATED this {day of ugutd 1987. PROJECT MANAGEMENT COMMITTEE ATTEST: By: Secretary APPROVED AT PROJECT MANAGEMENT COMMITTEE MEETING HELD JULY 29-30, 1987. 007/C5/2 wey ATTACHMENT A Page 1 of 2 ATTACHMENT A PMC_INTERRUPTIBLE RATE SCHEDULE NO. 1 WHOLESALE DISPLACEMENT RATE (NON-RESIDENTIAL) 1. Statement of Intent. This schedule is intended to permit the sale of power from the Initial Project which is in excess of sales that can be accomplished at the Initial Project Wholesale Power Rate. Sales under this schedule are intended to be entirely supplemental to sales that would occur without this schedule. Sales under this schedule are intended to reduce the power cost component of the Initial Project Wholesale Power Rate and contribute to the Authority's administrative services costs and/or debt service payments and in no event shall sales-under this schedule result in an increase in the Initial Project Wholesale Power Rate. To the maximum extent possible, consistent with the terms of this schedule, each retail utility is intended to have the flexibility necessary to negotiate terms that meet the needs of its individual circumstances. 2. Conditions of Service. a. Only power produced by a facility of the Initial Project and in excess of sales that could be made by PMC Utilities at the full Initial Project Wholesale Power Rate is eligible for sale under this schedule. b. All power sold under this schedule is interruptible, subject to both Initial Project hydro and transmission availability. c. The serving utility may negotiate to provide reserves for sales made under this schedule. The rate and other terms for such reserves shall be a matter solely between the serving utility and its customers. 3. Eligible Loads. a. Loads to be served under this schedule must be non-residential. b. Such loads must not be presently served, on a regular basis, with power purchased from a retail utility at a rate in excess of the Initial Project Wholesale Power Rate. c. Eligible loads must be capable of being served by the customer's existing, on-site generation or by the use of another form of energy. 007/C5/3 4. Rate. ATTACHMENT A Page 2 of 2 The rate shall be established by contract between the utility and the customer. In negotiating a rate, the utility shall consider the best available information about the cost to the consumer of the alternative generation of energy source. The rate shall consist of three components: (1) Authority administrative service costs, (2) power production costs, and (3) retail utility service costs. The proportion of revenue to each component shall be: Authority administrative service costs - 1/3; power production costs - 1/3; retail utility service costs - 1/3; provided, that at any time after October 28, 2000, if such payments would act to reduce the Initial Project Wholesale Power Rate, the Authority shall apply its share of revenue under this schedule to reduce the purchasing utilities debt service obligations under the Long-Term Power Sales Agreement. At no time shall the retail rate paid by a customer purchasing power under this schedule, including any amount included in such rate for reserves pursuant to Section 2.c., exceed the then-applicable Initial Project Wholesale Power Rate. 5. Contract Implementation. a. All sales under this schedule shall be pursuant to individual contracts between the serving utility and the utility's customer. All such contracts shall be conditioned on prior unanimous approval of the Project Management Committee. After such approval, each contract shall continue in effect for such period, and on such terms, as approved. — eee c: ; s to. gic ‘Authority the 1/3 Praeriae of the revenues for the Authority's administrative services costs. 6. Verification. a. 007/C5/4 The utility shall require the customer to make a_ periodic demonstration of the customer's ability to utilize alternative generation or energy source. The utility shall have right to inspect customer facilities to insure actual displacement occurs (alternative generation equipment or alternative energy equipment turned off). Gey 12-29-1997 16:48 am 25 1888 Memorandum To: The Honorable Bob Weinstein & City Council From: John Magyar, KPU General Manager {DE ners arg Date: December 29, 1997 Subject: Swan—Tyee Intertie Update On December 18, 1997, the Regional Forester denied the appeal and upheld the Record of Decision allowing construction of the Intertie. Earlier in December, KPU filed construction permit applications with the U.S. Army Corps of Engineers, U.S. Forest Service, Alaska Department of Natural Resources, Department of Environmental Conservation and Department of Governmental Coordination. The $10 million federal grant is being administered through the Department of Energy, We received a substantial grant application package from them earlier this month and are in the process of preparing that application. A challenge we have been addressing is how to take advantage of the 1998 construction season with the funding we have available, but having no assurance as to the timing of the future federal grants necessary to complete the project. Normally, our first step in construction would be to clear the right of way. However, if there is some delay in receiving the additional $30 million we need in grant funding, there could be significant regrowth along the cleared right-of- way. One solution may be to just clear the small areas needed to install structure foundations. But however we sequence construction, it must be done efficiently so we don’t raise the project : cost. Raytheon has been tasked with seeking the most efficient construction strategy and ay presenting that to the Council in early Spring. Aside from lobbying for additional federal funding, there are other financial issues we have been addressing. KPU has proposed a power sales agreement concept to the Four Dam Pool which ee ee Four Dam Pool utilities concur with § concept and we are hoping to receive AIDEA’s approval when we meet with them in January. Our next step is to prepare a draft power sales agreement for consideration. Our financial consultant, A. Dashen & Associates will be forecasting our expected expenses and revenues which he will be presenting Council in early Spring. Ny R. W. Beck is in the process of updating the Power Supply Planning Study. They will be modifying the Intertie alternative to consider development of the project by the City (it had previously assumed development by others with energy sales to KPU at Four Dam Pool rates). They will be incorporating our new electric load forecast being completed by the University of Alaska, Institute of Social and Economic Research SS RB OAR i HAUSER\NANCYL\WADATA\OOT-/6.MEM CEM RR O0S RL DRY 12-29-1997 16:49 m% 25 1888 KPU #1 P.@2 oa Memorandum--Mayor and Council, Swan—Tyee Update December 29, 1997 Page 2 Pulp Mill. They also will be incorporating the feasibility studies being completed for the Whitman, Connell and Carlanna projects. These updates should make the Power Supply Planning Study a valuable and comprehensive reference for us as we approach key project decisions in the near future. We expect to have draft feasibility reports on Whitman, Connell and Carlanna available shortly. This was scheduled to coincide with an agreement we made with KPC to consider acquisition of the Lake Connell dam, pipeline and filtration plant. We will be bringing consideration of that issue to you in the near furure. Staff has also prepared applications for state grant funds for hydro projects which we will also be bringing to you in the near future. JAM:RDT:nll HA\USER\NANCYL\WP\DATAWO07-J6.MEM 12-16-1997 18:06 g 725 1888 KPU #1 P.@1 & ‘ —_—_———_ KETCHIKAN PUBLIC UTILITIES SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE PROJECT 2930 Tongass Avenue, Ketchikan, Alaska 99901 (907) 225-1000 (907) 225-1888 Fax FAXTO: DENNIS McCROHAN 12/16/97 AIDEA (907) 269-3044 INFO: ALAN DASHEN DASHEN & ASSOCIATES (425) 452-9552 FROM: RICH TRIMBLE SUBJECT: REQUEST TO RESCHEDULE JANUARY 6 MEETING Dennis: Murphy is conspiring against me in scheduling this meeting! We just found out this afternoon that our City Council is planning to reschedule their regular meeting to January 6, the same day we had arranged this morning to meet with Randy Simmons and yourself in Anchorage. Could you revisit your calendars and suggest an alternate date? The dates we know are blocked out on our end are as follows; January 6 City Council meeting January 8 KPU Advisory Board meeting January 15 City Council meeting Otherwise, our preference is a morning meeting which will allow us to catch a noon return flight to Ketchikan. y apologies for the change. —_ if21 [aa NW Rich ce: John Magyar, General Manager Petersburg Power&Light 1:907-772-9287 Nov 17°97 16:53 No.005_P.01 «SATU LAK THeE HANSSON Ue eRe wr Ketchikan Public Utilities 2930 Tongass Avenue, Ketchikan, Alaska 99901 1907) 225-1000 = (907) 228-5494 Message §=——- (907) 225-1888 Fax » Dennis Lewis, PP&L General Manager & PMC Chairman 11/13/97 +i: Dave Carlson, PMC Representative (PP&L) «1. Linds Snow, Petersburg City Manager “© Terry Nikodym, PMC Repressotative (WL&P) Soott Soabury, Wrangell City Manager Walt Sapp, PMC Representative (KEA) Tom Hendel, KEA Vice President B4 Kozak, KEA Genera] Manager Robert Wilkinson, CVEA Goneral Manager & PMC Representative Mike Basley, PMC Representative (CVEA) Dick Olson, Thomas Bay Power Authority Chairman Ray Alt, Thomas Bay Power Authority General Manager Gary Paxton, Sitka City Manager Randy Cornelius, Sitks Elactris Department Doutoh Achenbach, Motlakatls Power & Light Berne Miller, Southeast Conference Lloyd Goasman, Ketchikan Chamber of Commerce FROM: John Magyar, KPU General Manager SUBJECT: REQUEST FOR SUPPORT IN RESPONSE TO SWAN-TVER APPEAL ** DEADLINE IS TUESDAY, NOVEMBER 18 AT 4:00 P.M. ** KPU's draft response to the appeal is attached. It may undergo some minor modification over the weekend as « result of legal review, but you can see how we are Intending to respond to the technical issues raised in the appeal. If possible, please send a letter expressing general concurrende with KPU’s comments and your support of the Record of Decision. This letter should be sent and/or faxed to: Fred Norbury, Appeal Reviewing Officer Forest Service Alaska Region PO Box 21628 Juneau, AK 99802-1628 Fax: 907-586-7852 The deadline for providing a letter is TUESDAY, NOVEMBER 18 AT 4:00 P.M, For last minute letters, the Forest Service rocommends faxing by 4:00 p.m. with a November 18 postmarked hardcopy, Thanks again for your support. Please call elther myself or Rich Trimble at 225-1000 if you have atty questions (Rich can be reached at home at 225-5304 over the weekend). cc, Kel John Magyar Randy STM mews Petersburg Power&8Light ™:907-772-9287 . NOV 12'97 16:54 No.005 P.02 | } SHAN LAK, = LAK. Pic TANGWISSO UA TCT GT Ketchikan Public Utilities 2930 Tongass Averme, Ketchikan, Alaska 99901 (907) 225-1000 (907) 228-5494 Message (907) 2251888 Fax a Ce aoa, 11/13/97 FROM: SUBJECT: Dave Carlson, PMC Representative (PPL) Linds Saow, Petrsburg Cty Manager ‘ary Nikodym, PMC Representative bon baba Wrangell Clty Manager ‘Walt Sapp, PMC Representative (KEA) Ed Kozak, KEA General Manager Robert Wilkinson, CVEA Genotal Manager & PMC Ropresentative Mike Eaaley, PMC Representative (CVBA) Dick Olson, Thomas Bay Power Authority Chairman Ray Alt, Thomas Bay Power Authority Genoral Manager Gey Poon, Sle Cl Manager Randy Comolius, Sis ect hepa Deak Adetads Matabadh Pore Lage Berne Miller, Southeast Conference Lloyd Gogemun, Ketchikan Chamber of Commerce John Magyar, KPU General Manager REQUEST FOR SUPPORT IN RESPONSE TO SWAN-TYEE APPEAL ** DEADLINE 18 TUESDAY, NOVEMBER 18 AT 4:00 P.M. ** Ketchikan Public Utilities is seeking your immediate support in reaponding to an appeal submitted by the Wrangell Resource Council and the Tongass Conservation Society to the Swan - Tyes Intertie BIS, The appeal is attached for your review, KPU will be completing a draft response to see SSGSMNA pblans {rieb4 36 '946 spell sea foxing Bt pon eke We are asking you to consider writing a short letter supporting our responsa to this appeal. An example letter, which has been by our Borough, is attached, A similar letter from you on behalf of your would be extremely helpful. The deadline for providing your letter Is TUESDAY, NOVEMBER 18 AT 4:00 P.M. I will have the address and fax number to you tomorrow. Thanks in advance for your support. Please call either myself or Rich Trimble at 225-1000 if you have any questions, Thanka, John Petersburg Power8Light ™":907-?72-9287 NOV 17"97 16:54 No.005 P.03 Mr, Phil Janik Regional Forester United Gtates Foroet Bervice, Ainsks Region P.0. Box 21628 Juneau, AK 88802 BUBJECT: Swen Lako-Lake Tyee intertio Comments en Appeal by Wrangell Reseurce Counail (#97-10-00-0002 A218) The Wrangell Resource Caunoll (WAC), on ite behalf und on behalf of the Tongass Conservation Sonlety, on November 3, 1887 filed a0 appea that challenged the Record ef Cacision (ROD) and the Fins! Environmental impact Btatement (PBI) for the Swan | Lake-Lake Ty#e intertie, The appeal addresses five main reasons for the WRC's challenge, Ketaniken Pubtio Utilities (KPU), project proponent of the Swan Lake-Lake Tyne Intertie, beleves that at five paints raised by the WAC are without ment and requests thet the ROD be allowed to stand. KPU plans to reques! s Special! Vee Permit fram the Forest Gervice ihat would allow KP to build and operate an electrical transmiasion line thal would crows the Tongass j National Forest, In compilance with the National Environmental @ullay Act (NBRA), thre ! Forest Service conducted public scoping to Identify jssume, evaljated the proposed t action and aitematives, parade dratt 218, raaponded to raviaw commente on the draft, and orepered the final IB and ROD, Based on the planning process and | extensive environmental analyses, the ROD documents the Forest Service decision to allow construction and operation of the Intertia across part of the Tongeme National Forest, } In addition te the review/comment period on the draft KS, the planning process Included an extensive pubilc invelvement program (iholuding ovblic mailings, Federal Register notions, news releases, Open houses, syosistance hearings, group and individunl maetings) accompanies by coordination with atate and Federal agencies. The public invelWvernent process end sgency coordination are fully documented In tha FEIR, ROD, and planning record, KPU baileves that the planning process followed complies fully with the letter and apirit of NEPA. Following are KPU's comments on the five points raised by WRC in ite appeal. 1. The Porest Service improperly defined ita propose! to exclude connideration of other pending praposela which may have aipnavoant cumulative impels on the ence 6. surrounding the proposed intertie rou! The 215 coms consider several currant and pending proposals in the intertie ares, including tha Upper Carroll. North Reville, Canal-Hoya, and Fort Gtowart timbor ¢etes, ‘These other actions. ali of which would accur within the geographic aren coverad by the intertle studies, were comprehensively addressed in the £18 in Chapter 1, Relationsnip to Other Project and Pianning Levels (FAIS, p. 1°10) and in the Cumulative Effects Becton of eagh resource arena In Chapter 3. wn Petersburg Power&Light ~7:907-772-9287 _ NOV *7'97 16:55 No.005 P.04 | | | | i | | | } i . | { | ' | ' a rug Any roade that may be constructed ae part of the Upper Carroll timber sale were addressed as cUMUIstive impacts in the inlertie El8, Including cumulative impacte to vegatation; solle and water quatity; fish end wildlife; recreation and, particularly, subsistence Use of the Intertia project ares. Partly because of the interest in preserving subsistence uses, romd closure policies were prescribed in the Upper Gurroll £18 and in ol roaded alternatives evaluated in the Intertie EIS. The intent 1s clear that any projact 1yads would be closed, not used to foster further road development. There is no evidence that the other projects noled In WRG’s appeal are related closely enough to merit coversge as cumulative impucis. The Ward Lake bypass road, Shatter Cove road, and Sea Level timber sale are in Nemrby or Contiguous arems but not the same area as the proposed intertie. Further, tha Forest Service intertie ROD indicates that Altermative 2, Option 1 (the only nonroaded alternative considered in the EIS) Is the selected alternative, Thus, the intertle will not add to road construction in the ares, Furthermore, the Intertia ElS fully addrassas the question of the Ketchiken-Bradfield transportation corridor (PEIS, pg. 1-21, para. 3t), and finds that it is not a "reasonably foreseeable" activity as defined hy CEQ, Jet alone being a “connected action” as asserted by WRC. The fact that various studies of euch a romd corridor have bean mage ovar the past two decades does not make the road any more imminent now than It was when the idea was first proposed, It is naither the intent of NEPA nor @ requirement for {he Forest Service to evaluate the cumulative effects of every propussl thet has ever been made in a project area. Only those “reasonably foreseeable” actions need be @valuated, and the Intertia EIS hes done exactly tat, Although the WRC asserts that the Forest Service has recognized the Iiklihood of a Ketchikan-Bradfield transportation link in the Upper Carroll EIS and other documents, we believe that the Forest Service has bean merely prudent in allowing for and not precluding the future possibility of a road corridor, without acknowledging that such an action Is “reasonably foreseeable,” 2. The Intertie FE/S demonstrates the problem with the new two-step planning process adopted in the Reviaed Tongass Plan for making macuyument decisiona, Both the TLMP and the Intertie ElS have (ollowed a! stale and Federal requirements in thelr development. Again, this has included acoping, public involvenent, and Opportunities for review and comment The Inrerie ElS was appropriately tiered to TLMP, frequently citing pollcies and dacisions made in that document and noting Intertie consistency with TLMP. it cannot possibly be tha intent of WRC that each anc every project on the Tongase evaluate the whole Forest, or even a large part of it, such as the entire Revitia island, Cleveland Peninsula, and Bradfisid River Valiay areas. Such evaluation would be redundant and dost prohibitive, and would not be consistent with CEQ guidance to, for example, *.. reduce paperwork and the accumulation of extraneous background data’ (40 CFR 1500.2(b)) or to use “program, policy, or plien environmental impact statements and tiering from statements of broad acope io those of Narrower 80ope, to eliminate repetitive discussions of the eame issues’ (40 CFR 1500.4(1) , 1802.4, and 1602.20). KPU wishes to note in particular that it would be inappropriate for the Forest Service or any other Pederal agency to use every project propose) as u meuns to achieve detailed a Petersburg Power&Light ~~:907-772-9287 NOV ' “797 16:56 No.005 P.0S resource Inventories of wide geographic areas not dirently affected by the proponent's Project, We believe that the Forest Service uppropriately defined the geographic area that would potentially be affected by the Intertia, and required atudies in keeping with the extent of those potential impacts. : 3. The Foreat Service must reevaluate the guitabity of Tongass Rivers before permiting industrial development in the Bagle River and Loke conidor. This point of WRC's appeal |s clrected at the alleged deficiencies of the TLMP @valuation of eligible wild and scenic rivers on the Tongeus Natlonal Forest, As such, all of WRC’s comments on this Issue are beyond tne Scope of ine intarte EIS. The intertia EIS complies with TLMP and was appropriately tlered to those decisions. TL issues must be resolved directly through the TLMP appes! process, and (t would be inappropriate for the Forest Service to hold hostage all decisions on the Tongass unti! ail TLMP appeals are resolved, Regurdiess of WRC's astertion that the EIS does not adequately address the intertie’s Impacts on the outatandingly remarkable values of the Eagle Lake and River, these impacts are fully disclosed. For example, the EIS notes that » “nondesignation would allow for road and powerline construction along the river a which could modify the scenic ang recreational values.” (EIS, pg, 3-395, para. « “the outstandingly remarkable values for the Eagle River and Lake systems are recreation and fisheries. The proposed route would change the recreation experiences available siong Zagie Lake and Eagle River because parts of It would be wiaible form some locations.” (#18, pg. 3-410, para. 3) 2 "The line would ba mast visible from Eagle Lake, where analysis indicates that the line would be visible fram 80 percent of the points jocated along the centering of the lake.” (GIS, pg. 3-410, para. 2) ¢ ." The tranemisgion ine right-of-way would be located as ciowe as 600 feet weat of the lake... and would change the untouched character of the ares... Some recreationists making the effort to fly into a remote, pristine lake such as Fagie Lake would be disturbed (0 see @ transmission line right of way.” (EIS, pg. 3-404, para, 3) © “The proposed route would Incregse the risk of sedimentation in the river, but due to the distance of the cleared right-cf-way from Eagle Lake and River, the risk of sedimentation affecting fisheries would be minimal.” (EIS, pg. 3-410, para. 3) 4, The Forast Service failed to consider a reasonable range of alternatives as required by NEPA, WRG fails in Its appeal to give adequate support to this aasertion. Spacifically, e The purpose and naed atatement indeed inches one clement (of threa) addressing the Importance of an electrical network In Southeust Aluska (EIS, pg. 1-6, pare. 1). The value of the natwork is adequately described in the &1S (pg. 1-8, para. 1), but the EI6 also includes one altemative (the no action alternative) that does not Include an intertle. * Despite WRC’s assertion to the contrary, the E'S clearly Indicates the amount of power that would be available from the Lake Tyee project (EIS, pg. 1-7, Figure 1-3} — Petersburg Power&Light "'): 907-772-9287 NOV *7°97 16:57 No.005 P.06 i | | ' and shows that It would adequately provida power for Ketchikan for several yaars, after which the increasing demands of Wrengell and Petersburg would reduce Ketchikan's ehare and make other resources nacessary. The inability of the Interic to satisfy 100% of Ketchikan’s needs forever and all time does not decrease its value, No other alternative is avaliable that could provide even half the power to be had over the intertle, ¢ Despite WRC's posertion that the Forest Service has not monitored the Lake Tyee lake level and has therefore failed “ to ascertain and disciose important information” (WRG appeal, pq. 10, para, 1), the EIS fully addresses the environmental effects of drawing down Lake Tyee. including effects on spawning fish (E18. pg. 3-88 to 3-80), ‘There ja no violation of NEPA, and no withholding of “essential” information. » Although WRC aagerts that the Forest Service should fully evaluate an alternative which would rely solely on local sources of power (WRC appeal, pg. 10, para, 4). the EI6 already does this. Alternative 1, the no action alternative, is evaluated in both diesel only and diasel/hydro configurations. The no action alternative was very carefully defined to constitute @ realistle, achievable alternative that KPU could undertake to meet its responsibilities to the community in the event that the intertie was never bullt. (EIS, pge. 2-16 to 2-20) ¢ The €I8 Includes a detailed discussion of no fewer than 24 alternatives that were dropped from further consideration, including 4 other routes/designs (such as an underwater cable), conservation, 15 amall hydroelectric projects, and 4 other generation technologies such as tidal and wind power, This extensive discussion In the £18 (pgs. 2-4 te 2-14) adequately describes the reasons why none of these projects would constilute @ practical alternative to the intertie (see ElS py. 2-0, Table 2-1 for # summary). # WRC falls to rote (hat any alternative constituted fram several local power sources would have ii¢ own set of extensive environmontal impecte and issues to address, including impacts te fish, national wikiernes® Monument areas, and ao on. The E1S notes thasn concerne, and also notes that many of these projects would also need 10 construct a transmission line in erder to bring the power to Ketchikan, Because each project is 0 small, many of them would be needed to replace the power provided by the Intertie, e KPU partioularly takes issue with WRC's contention that the Hoya-Neats route was a “strawman” siternative (WRC appeal, pg. 10, para. 3) KPU and its engineering and environmental consultants worked long and hard with the Forest Service to define and evaluate this alternative (at @ cost to KPU of more than $200,000), While KPLI feared from the beginning that the longer alternative would prove uneconomical, we had our aeneultants undertake studies comparable to those along with our own proposed route. To dismisa this 71-mile alternative as @ strawman Indicates WRC's failure to acknowledge the serious evaluation that want into it. 5. The closure of the Ketohtken Pulp mil requires the Porast Service to perform 8 supplemental Els. The Intertie EIS already clearly takes the closure of the pulp mill into a¢eaunt. The mill generated Its own electricity, and theretore the loss of this load does not directly affect KPU's generating requirements (£18, pg. 1-6, para. 4), It ls expectad that this closure may jead to a slowdown in the local economy, which led KPU to reassess Its load growth. As stated In the EIS, KPU's current expectation is for a temporary pause in growth followed by renewed growth similar to the recent pattern of Sitke, Tha change in 4 cup Petersburg Power&Light ~":907-772-9287 NOV 122.097 16:58 No.005 P.O? ruv the expected rate of growth does not constitute “significant new clroummtances or information relevant to environmental concerns bearing on the proposed action” (40 CFR 1502. 80ii!), anc! does not justify the preparation of u supplemental EIS, in summary, KPU wishes to emphasize that the proposed transmission line provides benefits to the existing syatem beyond the power needed to meet anticipated load growth. This is clearly stated In the purpose and need for the project, namely: 1) provide a reliable and efficient source of power for the City of Ketchiken's intermediate and long- range needs at reasonable rates while 2) establishing an important link in the long- proposed elactrical network for southern Southeast Alaska so that 3) more communities would heve eceess to more power sources or More power customers. The challenges posed by the Wrangell Resource Councll do not fully consider the lengthy planning process undertaken by the Forest Service, KPU, and Its consultants, nur do they acknowledge the extensive resource studies made to support the anelysis presented In the £15 and its appandices. We believe this process and analyses are fully In concert with the letter and spirit of NEPA, Therefore, we request that the Reviowing Officar and Reglonal Forester give careful consideration ta the above additional comments by KPU in reviewing and resolving the administrative appeals of the Swan Lake-Lake Tyee Intertie EIS and ROD. Yours vary truly, John Magyar, General Manager Ketchikan Public Utilities uv Petersburg Power8Light *":907-772-9287 NOV pero, 16:58 No.005 P.08 Ss DRAFT OP 1{- 13-49% Me. Phil Janik Lonal Yorester Ue80D. Foxvest Service Alaska Region 705 West 9” street Juneau, Alaska 99801 Re: Intervention in Cartain Appesla of the Swan Lake Tyee Slectrical tntertie Pro eat Final Ravivenmental Yapant Statement and Record of Decision dated August 29, 1997 rT Dear Regional Poraster Janik and Reviewing Officers Pursuant to 36 CFR §$ 215.13(e) the following intervenor commanta axe submitted on behali of the Ketchikan Gateway Borough on the : } appeals Ziled by the Wrangell Resource Council and the Tongass i Conservation Gealety. The Xetohikan Gateway Borough is « “person | interested in or oF dee cr pry affected by’ the above-referenced appeals under 36 # 218.11 (b). By way of intervenor commants, the Ketchikan Gateway Borough herein adopts and imncmpeneatee by referance those intervencr comments submitted by the City of Ketohikan d/b/a Ketchikan Public Utilities | in their entirety. The fact that intervenor Ketchikan Gateway | Borough has not commented on each and every appeal argument or | variations of the same argument made in the appeals does mean that euch arguments havo mexit. intervenor Ketohikan Gateway Sorcugh therefore respectfully requeste that the Forrest Service reject the appeals commented on above. Further, the Ketchikan Gateway Sorough sequests thet it be dnoluded in any discussions regarding the informal reselution of Lesues raised the appeals commented on above. | | | YAXRD_AND_MAZIED | | Singeraly, | iH Thank you for your attention te thin matter. | KETCHIKAN GATEWAY BOROUGE Georgianna Simmexle Borough Manager ad -7 907-772-928? NOV *7’°9? 16:59 No.005 P.09 Petersburg Power&Light (orang AS "Caring for the Land and Serving People FAX TRANSMITTAL Date f-4-4 a. to Rich Trimble FAX Number___ CCS [SKB Total Number Pages __ 1-3 (including cover sheet) From Veke. G6ei€Gn USDA Forest Service ’ Federal Bullding Ketchikan, Alaska 99901 (907) 228-6202 Ext. FAX Number (907) 228-6215 MESSAGE: (4 Slrould robale rnle als out W ess velease - th Regt ae a PU, bee NOV “7°97 16:59 No.005 P.10 =":907-772-9287 al Ors AK REGION EPB ~~ KETCHIKAN $0 @Qoor 4990 1952 Petersburg Power&Light, WRANGELL RESOURCE COUNCIL P. O. Box 1727 Wrangell, Alaska 99929 (907) 874-3504 874-3291 msg. Appeal # November 3, 1997 Me. Phil Janik . x es Regional Forester 98: 10-20 ~ 9002 (4215) United States Forest Service, Alaska Region PO Box 21628 Junéau, AK 99802.1628 re: Appeal of the Swan Lake » Lake Tyee Intertie HAND DELIVERED Oear Mr. Janik The following is a timely appeal, filed pursuant to 36°C.F.R. part 215, challenging the Record of Decision (ROD) and the Final Environmental Impact Statement for the Swan Lake . Lake Tyea Intertie (hereafter referred to as the Intertie FEIS). The Katchikan - District Rangar, Jimmy DeHerrera, and the Wrangell District Rangor, Stephen Brady, signed this ROD on August 29, 1997, According to the public notice printed in the Ketchikan Daily News on Sept. 18. 1997, the 45-day zppeal period began an the date of the public notica's publication. interests of the Appellants The Wrangell Resource Council (WRC) submits this appeal on our behalf and behalf of the Tongass Conservation Society (TCS). TCS's mailing address is PO Box 23377, Ketchikan, AK 99901. Messages for WRC's spokesperson, Peter Branson can be left at (907) 874. 3291. TCS's Wayne Weihing can be raached for comment at (907)247.8276, WRC is a focal public interest non-profit membar organization whose purpose is to educate, inform, and represent the interests of the residents of the Wrangell community and the surrounding area on issues Pertaining to the use and management of local resourcas, WRC is a member group of the Southeast Alaska Conservation Council (SEACC). Tongass Conservation Sociaty (TCS) is a local Katchikan-based non-profit conservation organization with about 180 members. Since 1970, TCS has played an active role in . kangass National Forest policy and management issues. TCS's members come from all “. walks of life and rely on a healthy and diverse forest for thair livelihoods and quality of lite. TCS is also a member group of SEACC, Many individual TCS members are also membors of SEACC, WRC submitted comments on the DEIS far the proposed project on May 10, 1996 supoorting the No Action Alternative and giving many substantive supporting arguments. On May 27, 1996, SEACC submitted comments on the DEIS on behalf of all their member groups, including TCS & WRC. OPTIONAL POEM 99 (7.00) FAX TRANSMITTAL RECEIV HOV 03 1997 REGIONAL FOARGTER FOREST SERVICE wincali Abana 17:00 No.0O0S P.11 NOV *7'97 ight 77!907-772-9287 Petersburg pour eset 7 oe 7852 AK REGION EFB ave KETCHIKAN $0 Booz STATEMENT OF REASONS 1, THE FOREST SERVICE IMPROPERLY DEFINED ITS PROPOSAL TO EXCLUDE CONSIDERATION OF OTHER PENDING PROPCSALS WHICH MAY HAVE SIGIMIFICANT CUMULATIVE IMPACTS ON THE AREA SURROUNDING THE PROPOSED INTERTIE ROUTE, Before preparing an EIS for a particular project, the Forest Service is required to undertake a “scoping process" to identify what “issues” and “actions” will be analyzed and subject to a particular EIS. See 40 C.F.R. 84 1501.7(a)(2), 1502.4(a)., The CEQ regulations furthar require that “[c]umulative actions, which when Viewed with other Proposed actions have cumulatively significant impacts” must be considered together In a single EIS. id. $ 1508.25(a)(2). The CEQ regulations further caution that “{a} proposal may exist in tact as well as by agency deciaration that one exists.” Jd, §1508.23 While the Forest Service disclosed and discussed a few of the cumulative actions affecting the area surrounding the proposed intertic route, including the North Revilla, Upper Carroll, Canal-Hoya, and Port-Stewart Timber Sales, it laft out several other cumulative actions which have cumulatively significant impacts on the environment of the surrounding area, including: 1, r s . Currently, the Federal Highway Administration and the Forest Service are overseeing the construction of a new road near the Ward Lake Recreation Area. This road will serve a number of purposes, including becoming the first leg of a future interior Revilla island road. According to Ketchikan District Ranger Jimmy DeHerrera, “The new road eliminates the weak link of any future Interior Revilla Island road.” See Ketchikan Daily News, Old Ketchikan Road Receiving 2 New Face, October 14, 1997, attached as Exhibit A, 2. t of ing Ketchikan wi : H (oad system The Ketchikan Gateway Gorough and the Ketchikan Chamber of Commerce have been pursuing construction of a road corridor from the Ward Lake Bypass past Harriet Hunt Lake to Shelter Cove, what could serve as the next leg of an Interior Revilla Istand road. Ina recent Borough Assembly meating, the Ketchikan Gateway Borougn voted to ensure maintenance of such a road tie once constructed, See Ketchikan Daily News. Assembly Ensures Maintenance for Road Project, Sapt, 18, 1997, attached as Exhibit 8. 3. Sea Level Timber Sale, This timber sale, which has becn on the planning schedule since the summer of 1994, proposes to log approximately 60 mmbf in the Carroll and George Inlet area, directly adiacent to the orolect area for the proposed intertie. : Furthermora, the Forest Service plans to consider an alternative for this timber sale : which would facilifate a road connection between the Ward Laka bypass road and Shelter Cove. See Forest Service News Release, Oct. 23, 1997, attached as Exhibit C. Again, such 3 road connection could serve as another leg of an interior Ravilla Island road, The Forest Service plans to release a DEIS for this project in December of 1997, with logging and roadbuilding to begin as early as Summer, 1998. 4, The development of a Ketcnikan - Sradtinid transportation cerridor Although the FEIS states that “development of a transportation link is separate fram this project, Outside Ihe scope of this EIS, and will require & separate NEPA analysis" (FEIS at 1+ 22), afforts by both the State of Alaska and the Forest Service are ongoing to develop this transportation link. As such, the proposed transportation corridor qualifias as “reasonably foreseeable" and the cumulative impacts from this potential devalopment must be addressed In the same EIS. WRC & TCS's Appeal of the Swan Lake . Lake Tyee Intertie Nov *7’97 17:00 No.005 P.12 petersburg PowersLight_ *9077772-928? 4y yewion EPB sss KETCBIRAN' SO + 009 ‘Tha State of Alaska has been studying a potential Bradfield road corridor since 1981, Tetaphone conversation with Kan Vaughn, Oct. 31, 1997. In its comments on the proposed Cape Fox land exchange in 1989, the Forest Service stated “The Forest Service supports the goal of providing public access to Georga Inlet. We alsa expect that there will someday be a need to extand this road to Carroll Inlat and possibly north to tie to Wrangell,” Seg letter from J. Michael Lunn, Forest Supervisor to Ralph Gregory, Aug. 3, 1989, attached as Exhibit D. In addition, the State of Alaska DOTPF “had requested that the Bradfield and several other corridors through the Tongass Forest be included in the new TLMP...to preserve the opportunity tor construction of highways between Southeast Alaska communities and to connact Southeast Alaska to the British Columbia highway system through the archipelago's coastal range.” See lettar from Mike Mackinnon to Mitch Seaver, Sept, 25, 1997, attached as Exhibit E. Clearly, both the Forest Service and the State of Alaska have indicated the potential for a future road corridor linking Ketchikan with the Canadian highway system. The preferred route for sucn a transportation corridor would impact many of the same areas as the proposed intertie (including Carroll River and Eagle River and Lake, especially). See Ketchikan + Revillagigedo island Corridar Study, State of Alaska _ DOT&PF, 1992, attached as Exhibit F. in the ROD for the 1997 TLMP revision, a proposed state road corridor is shown for interior Revilla island. Appendix E of the TLMP FEIS notes the transportation corridor proposed for Eagle River and Lake. TUMP FEIS at E-206, While the Bradfield road corridor was left out of the TLMP ROD, this forest plan decision is under appeal, and is not yet a “final” decision. Each of these “cumulative actions” have been actually proposed and could have cumulatively significant impacts on the fish, wildiife, subsistence uses and recreational settings of the area surrounding the proposed intertie route, including Revilla island, the Ueper Cleveland Peninsula, and the Bradfield River Valley, Tha Forest Service must realize the graat likelihood that a road connection will be built between Ketchikan and the Carroll River drainage, In fact, in the Upper Carroll Timber Sale FEIS, the Forest Service assumes that such a road will be built, Upper Carroll FEIS at 3-124. Even the Intertie FEIS acknowledges that this is a possibility; "Ifa road network connected to Ketchikan were davaloped, whether due to a Single project or gradual results of several projects, tha effects upon wildlife and subsistence uses would be significant.” Intertie FEIS at 3-203, Such.a brief disclaimer fails to show that the Forest Service took the requisite hard look at tne significant environmental impacts of such 3 development on the area surrounding the proposed intertie route. The CEQ regulations require the Forest Service to evaluate the direct, indiract, and cumulative Impacts from all of these proposed projects in one comprehansive EIS, 40 C.F.R. § 1508,28(a)(2). Additionally, @ech of the above projects represent “connected actions,” which when viewed together, add up to a permanent road link between Ketchikan and the Canadian highway system. CEQ regulations require “connected actions” to be considered together ina single EIS, Seq 40 C.F.R, § 1508.25¢a)(1), The Forest Service's decision to restrict the scope of the FEIS for the Swan Lake - Lake Tyce Intertle prevents it from educating itself and others about the larger context In which decisions affecting the environment of the surrounding area, thereby raducing the quallty of the decisions made and rendering the EIS inadequate. Limiting the scope of this EIS is inconsistent with the purpose, goals, and procadures of NEPA, The failure to take 8 look at the cumulstive impacts from actual proposed projects on the resources and uses of the area surrounding the proposed intertis route at the aarliast stage ~ this NEPA Procags ~ pravents this FEIS from contributing to the quality of the agancy's decision, in WRC & TCS's Appeal of the Swan Lake - Lake Tyee Intertie ’ *7"97 17:01 No.005 P.13 i *":907-772-9287 NOV Petersburg, Powered go a 7 ote Tas2 AK REGION EPB +e» KETCHIKAN So @oo4 violation of the goals and “action-forcing” purpose of NEPA, See 40 C.F.R, $ 1500,2( ¢), 1501.2, 1902.2, and 1502.5. I, THE INTERTIE FEtS DEMONSTRATES THE PROBLEM WITH THE NEW TWO.STEP PLANNING PROCESS ADOPTED IN THE REVISED TONGASS PLAN FOR MAKING MANAGEMENT DECISIONS, The Revised Tongass Plan substantially hampers the public's right to know, understand and participate in decisions affecting their public lands by dropping the requirement for a mid-level planning stage, The “two-step” planning process adopted for the Tongass in tha 1997 revised TLMP is unworkable. It moves from the macro level (@ 17 million acre forest) to the micro level (individual timber sales, powerline proposals, roads, and mining plans) without an intermediate step. This process will cripple the Forest Service's abllity to conduct a credible cumulative impact analysis, Without conducting public planning at some intermediate geographic seale, such as the area surrounding the propesed intertia route, the public's ability to understand and meaningfully participate in planning for the sustainable use of lands and resources important to the long-term stability of their communities is impaired. Tha NEPA process conducted for the Swan Lake - Lake Tyee intertie demonstrates the principal reason why the two-step process doesn’{ work on the Tongass — the Forest rvi not it J i Instead of fully integrating the NEPA process in the early stages of development in this $eecial araa, the Forest Service's approach to encouraging and facilitating public participation in tha NEPA process [s to issue project-level dacisions in a piecemeal fashion, one project at a time. Rather than using the NEPA process for the Swan Laka - Lake Tyee Intertle to collect and analyze important rasource inventories for the surrounding area (including Revilla Island, the Upper Cleveland Peninsula and the Sradfield River Valley), the Forast Service stayed focused on just a single piace of this ecological puzzle. The Forest Service thereby violated NEPA by failing to “initiate and utilize ecological Information in the planning and development of resource-oriented projects.” See 42 U.S.C, §4332(2)(H). In order to fulfill Its responsibility as “trustee of the environment for succeeding generations,” 42 U.S.C, §4331(bX1), the Forest Service was obliged to collect and analyze comprahensive and accurate resource inventories for the area surrounding the proposed intertia route, which is almost entirely unaer Forest Service jurisdiction, This was not done. Such leagersnip would have fulfilled the Forest Servica’s responsibility under NEPA to encourage and facilitate informed agency and public review of the Swan Lake « Lake Tyee ‘ Intertie and other actual proposed projects that will have cumulatively significant impacts on the quality of the surrounding srea's environment, Ill. THE FOREST SERVICE MUST REEVALUATE THE SUITABILITY OF TONGASS RIVERS BEFORE PERMITTING INDUSTRIAL DEVELOPMENT IN THE EAGLE RIVER ANO LAKE CORRIDOR, The appellants, slong with SEACC, have long supported protecting all 2 miles of Eagie Lake and River a5 a Wild River. The Eagle River appeared in Tongass Rivers; the Lifeblood of the Rainforest, a citizens proposal to protect rivers of Alaska’s Tongass National Forest . put together by the Tongass Rivers Coalition and SEACC. See Liteblood of the Rainforest, attachad as Exhibit G. This remarkable watershed has been listed by the Alaska Dapartment of Fish and Game as one of the 65 most important watersheds In Southeast Alaska, {tls home to all five species of saimon, including king salmon, as well as WRC & TCS’s Appeal of the Swan Lake : Lake Tyee Intertie 47°97 17:02 No.o05 P.14 NOV Petersburg Power&Light P290?-722-9287 An newsun EEE ++ KETCHIRAN' $0 Boos Pac ‘cutthroat treut, rainbow trout, kakanee, steelhead, and Dolly Varden. it harbors brawn and black bear, Sitka black tail deer, Aloxander Archipelago wolves, wolverines, and mountain goats, This low-lying river corridor serves as an important travel corridor for wildlite from Benm Canal to Bradtieid Canal, WRC and TCS believe that it is in the Public's best interest that this watershed remain wild and free of industrial-scale development. : By tering the ROD for the proposed intertie to the 1997 TLMP FEIS and ROD, the Forest Service is basing its decision to develop the Eagle River and Lake corridor on s faulty analysis. The 1997 TLMP FEIS fails to support the Forest Service's finding that 88 of the 112 rivers found sligible by the Forest Service ara unsuitable for designation as Wild and Scenic Rivers (such a3 Eagle River and Lake), The TLMP FEIS is deficient because 1) it lacks a detailed analysis of the environmental consequences resulting from a decision finding an aligible river unsuitable; and 2) it did not consider a reasonable range of alternatives, Consequently. the determination in the TLMP ROD regarding the unsuitability of rivers such ag Eagle River and Lake is arbitrary and the TLMP FEIS falls to adequately explain the basis for the Forest Service’s decision, See SEACC’s TLMP Appeal, #97-13-00-0101,.9p,48.69, attached as Exhibit H, A. F Revised T. t OF t Disclose The Environmental impac ts Decision Not Te Recommand Farle River And Lake As “Syitable” For Designation Under The Wild & Scenic Rivers Act. The fundamental task tnat the Forest Service faces with respect to deciding whether any eligible river, such as Eagle River and Lake, should be recommended for designation Is to properly balance the competing values of particular rivers. NEPA requires the Forest Service to gather and analyze detailad information concerning the significant environmental consequences trom this decislen in an EJS. While Appendix E of the TLEMP FEIS does contain some discussion of the various values associated with eligible rivers , such as Eagle River and Lake, it fails to provide a detailed examination of the specific effects of development activities to particular rivers. [np particular, the TUMP FEIS lacks Meaningtul analysis of the consequences from deciding not.to protect the outstandingly o yi t etigibt The TLMP FEIS falls far short in adequately evaluating the environmental effects of a decision finding an eligible river unsuitable. The only discussion in the TLMP FEIS about etfacts of non-designatlon of Eagle River and Lake is contained in one brief sentence; “Non-designation would allow for road and powerline construction along the river valley and could greatly modify the scanic and recreational values.” TLMP FEIS at €-207, Such a brief analysis inadequately describes the likely effects on the outstandingly remarkable values of Eagia River snd Lake, With construction of a road and powerline through the river valley, there would be enormous impacts on the river's fish and wildlife values, Having 4 major road right next to a river with excellent sportfishing opportunities for stealnead and other species would obviously affect those resources, The Forest Service should have also considered the effects duc to non-designation on other resources, such as the cultural resources located at the known fishing and trapping camp used by Natives at the mouth of the river, Non-designation would also allow the construction of a major commercial recreation facility, such as a lodge or marina, which could become feasible if a major road were constructed through the river valley. The CEQ regulations require an EIS to discuss “the environmental impacts of the alternatives including the proposed actien, ... the maintenance and enhancement of long- term productivity, and any irreversible or irretrievable commitments of rasources ... WRC & TCS's Appeal! of tha Swan Lake « Lake Ty9e Intervie Nov 47°97 17:03 No.005 P.15 Petersburg Power&light :907-772-9287 AK REGION EPD 400 KETCHIKAN So Qoos should (the proposed action} be implemented.” 40 C.F.R. § 1502.16, The FEIS must further describe the direct, Indirect, and cumulative environmental effects of development activities to the values of particular rivers. Id, §§1502.16(a),(b);1508.7, Gy failing to do 50 for Eagle River and Lake, the Forest Service has violated NEPA. The CEQ regulations also direct that an EIS “shall provide full and fair discussion of significant environmantal impacts...” 49 C.F.R. ¥ 1502.1. Howover, while tha TLMP FEIS and ROD carefully identity the economic benefit associated with finding Eagle River and Lake “unsuitable,” no effort is made to weigh this benefit against the loss of the outstandingly remarkable values from development of a road, powerline, or major commercial recreation facility in the river corridor. In the TLMP ROD, Regional Forester Phil Jantk explains that designation as a Wild River would forago “substantial resource development opportunities.” TLMF ROD at A-13. While the Forest Servica evaluated the costs of foreclosing industrial development in this tiver corridor, neither the suitabilily analysis for Eagle River and Lake nor Appendix A of the ROD adequately examined the costs associated with not recommending designation of Eagle River and Lake as a Wild River. Even more, the TLMP FEIS fails to examine the ¢osis to tha public from losing the option of designating Eagle River and Lake, as a Wild. Scenic, or Recreational River, While the TLMP FEIS carefully identifies the economic banefits associated with developing ‘ resources such 48 minerals, transportation, and utilities within the Eagle River and Lake corridor, this banafit is never weighed against the loss of economic benefits associated with preserving this river's outstandingly remarkable values. For example, the economic banefits lost to recreation and tourism business from foad building, powerline construction. and potential mineral entry in this valuable watershed area not quantified or compared, Ona of the saveral outfitter and guides who used the area has stated that over 60% of his annual income is directly related to the brown bear, black bear, and fish poeulations, and their well-being in the Bradfield. See letter from Mark Galla to Ketchikan Ranger District, at.al. Feb. 12,1996, attached as Exhibit |. The TLMP FEIS fails to assess how development of the Eagia Lake and River corridor will affect the many outfitter/guides who use the area. The impact of development on Subsistence use of fish and game, which has both an econamic and cultural value, is also nat addressed, This prevents Congress, the Forest Service and the public from comparing the potential economic penefits of designating Eagie River and Lake as a Wild, Scenic, or Recreational River and the costs, both aconomic and environmental, trom managing that area as a utility and transportation corridor or for other major development activities. B. The TLMP Fels Did Not Consider a Reasonable Range of Alternatives For Recommending Designation of Eagle River and Lake As 4 Wild, Seenic. of i { River NEPA requires the Forest Service to “study, develop, and describe appropriate alternatives to recommended course of action in any proposal which involves unresolved conillets concerning alternative uses of available resources...” 40 C.F.LR. § 1502.2(c). The . purpose behind this requirement 1s to promote “informed decision-making and informed public participation,” See State of California v. Black, 690 F.2d 753, 763 (9™ Cir. 1982\X citations omitted). The Forest Service has argued that it considerad “a broad range of options,” TLMP FEIS at L-169 (responsa to cormments); we disagree, To be sura, including all 112 “eligible” rivers in Alternative 1 does provide the Farest Service with a “range of options” regarding what rivers to inciude in its suitability finding. However, providing a range of options for selecting “suitable” rivers is far different that providing a range of alternatives that permit the decision maker and public to resolve the long: 6 WRC & TCS's Appeal of the Swan Lake - Lake Tyee Intertie Nov ‘7°97 17:03 No.005 P.16 Petersburg PowerSLight ~~:90?-7.22-9287 0) jeusuw nem oss REXCHIKAN’SO ©. Qoo? standing controversy over how to manage valuable Tongass rivers, such as Eagle River and Lake. Eagle River and Lake, lke many otner “eligible” rivers on tha Tongass, was only considered for Wild River designation in TLMP under one alternative, Alternative 2. Additionally, not one of the alternatives in TUMP considered designating all 67 rivers in the Lifebiood of the Rainforest as Wild and Scenic Rivers, The public and decision-makers were forced to make a draconian choice; either recommend Wild and Scenic River designation for.ail 112 “ligible” rivers, Inctuding Eagi¢ River and Lake, or recommend designation for 32 or less rivars. The public never had the opportunity to choose an alternative which recommended designation of Cagle River and Lake as a Wild, Scenic, or Recreational River while also supporting resource development in other areas. in the case of Eagle River and Lake and many other valuable Tongass rivers, the public and decision-makers had an all.or-nothing decision. Thus the Forast Service has violated NEPA and must reevaluate the suitability of Eagle River and Lake before allowing development to take place in this valuable watershed, i C. Ine Forest Service has failed to follow the Forest Service Handbook’s guidelines pertaining to Wild and Scenic Rivers, Chapter 8 of the Land and Resource Management Planning Handbook requires the Forest Service to identify @ wild and scenic river proposal adopted in Forest Pian EIS asa “praliminary administrative recommendation for wild and scenic river designation” subject to “further review and possible modification by the Chief of tha Forast Service, Secretary of Agriculture, and the President of the United States.” See FSH 8.41(2). Given tha fact that over 30 separate administrative appeals have been filed contesting the ROD and FEI$ for the revised Tongass Plan, it is possible that the Chief of the Forest Service, the Secretary of Agriculture, and the President of the United States will make changes to the Tongass Plan, including its suitability determinations for Wild and Scenic Tongass Rivers, By authorizing construction of the intertie through the Eagle River and Lake corridor, the Forest Service may preclude any possible future changes In the river's suitability determination, By falling to disctose of analyze this set of circumstances in the project FEIS, the Forest Service has violated NEPA and has created serious conflicts with the direction contained in the Forest Service Handbook. 0. 7 zt FEIS Fails to Fi , Significant Environmental Consanuences of Deciding to Degrade the Potentia ; ra $i jon of Eagle River an i Not only did the Forest Service fail to follow its own handbook and wait fer the completion of the appeals process for tne TLMP revision, it also fails to perform the required anvironmental analysis in the Intertie FEIS. NEPA requires the Forest Smrvice to evaluate the consequences which flow from any decision which does not protect the outstandingly remarkable values of all “eligible” rivers, including Eagle Rivar and Lake. Gecause of the qualifications noted above in FSH 8.41(2), Eagle River and Lake must still ba considered an “eligible” river. The Intartia FEIS fails 10 offer such a meaningful evaluation and therstore violates NEPA, a in the Intertie FEIS's discussion of Wild and Scenic Rivers, the Forest Service simply restates the TLMP ROD's decision to nat recormmend designation for Eagle River and Lake, and thus cornpletely sidesteps any attampt at meaningtul analysis. Before the Forest Service decides to degrade the eligibility of a potential Wild and Scenic River, NEPA requires tham to 1) describe tha area to be affected, 2) evaluate environmental effects, and 3) provide a full and fair discussion of significant environmental impacts, The intertie + WRC & TCS's Appeal of the Swan Lake - Lake Tyee Intertie Nov *7°97 17:04 No.00S P.1?7 Petersburg Powertlignt,, 90775272-928 45 nection Epp wo- KETCHIKAN $0 Boos FEIS fails in all of thease duties. Not only does the intertie FEIS fail to adequately describe the outstandingly remarkable values of Eagle Lake and River, it completely fails to evaluate and discuss the direct, indirect, and cumulative affects of degrading the river's cligibillty for future Wild and Scenic River designation as required by NEPA, 40 C.F.R. 3% 1502, 16(a),(b);1508,7, In fact, the Intertie FEIS never discloses the fact that authorizing construction of a powerline In Eagle River and Lake will preclude designation of the river by Cangress as a Wild and Scenic River. The public and decision maker are forced to infer that such an effect would occur fram the roundabout discussion in the Intertie FEIS. Since the "line is sited near and within the .25 mile corridor” (Intertia FEIS, p, 3-410) ond the Wild and Scenic Rivers Act states that “shorelines and watersheds within river areas should be essentially free of structures including things such a$ buildings, pipelines, power lines,,."(Intertie FEIS, p.3-410), one must assume that the proposes Intertie will preclude any future designation of the river as a Wild River, This is contrary to the fetter and spirit of NEPA, Without a straightforward and meaningful analysis of such diract, indirect, and cumulative Impacts, the public and decision makers are unable to make taformed decisions and meaningfully participate in the planning process. i By precluding designation of Eagle River and Lake as a Wild River, the proposed . development commits Eagle River and Lake to all development activities allowed under the new Tongass Plan LUD for tha area, Semi-Remote Recreation. Such activities includa industrial mineral development, development of 3 transportation corridor, and major commarcial recreation devaicpment, The ntertie FEIS never evaluates the effects of any of these activities which flow from this project decision, and thus violates NEPA. 1V. THE FOREST SERVICE FAILED TO CONSIDER A REASONABLE RANGE OF ALTERNATIVES AS REQUIRED BY NEPA NEPA requires the Forest Service to “study, davelop, and describe appropriate alternatives to recommended course of action in any proposal which involves unresolved conflicts concerning altarnative uses of available resources...” 40 C.F.R. §1501.2(¢) The purpose behind this requirement is to promote “infermad decision-making and intormed public participation.” Block, 690 F.2d at 763 (citations omitted), A. P; h Bi i r d the scope 1 revised, * Mist be revised, The Intertie FEIS states the Purpose and Need for this project as: “to 1) provide a reliatie and efficient source of power for the City of Ketchikan’s intermediate and long-range needs at reasonable rates whilg 2) establishing an important link in the long-praposed electrical network for southern Southeast Alaska 80 that 3) more communities would have accass to more power source or more power customers.” lntertie FEIS at 1-6, By including the need “to establish an important link in the long- proposed electrical network tor south Southeast Alaska” in the Purpose and Need for this project, the Forast Service has narrowed the scope of the intertie E/S so as to sliminate. serious consideration of alternative methods to meet Ketchikan's future need for power. Furthermore, the (ntertie FEIS fails to provide sufficient Information to support the “tink” element of the Purpose and Need statement. It is clear that the driving force behind the purported purpose and nead is the pending special use permit to construct and operate WRC & TCS's Appaal of the Swan Lake - Lake Tyee Intertie se :05 No.005 P.18 OOT-TT2-O28F oe es a wed Gbeurman 30 Gove Petersburg Power&Light ‘ ; an interiie. While the issuance of (he special use parmit i$ obviously the action ripa for decision from the perspective of the Forest Service, it Is not clear that the issues related to other ways of meeting the intermediate and long-term power needs of Ketchikan have been addressed. While such a decision may not fail under the Forest Service's jurisdiction, the (ntertie EIS must fully evaiuate reasonable ajternatives that da not fall within the jurisdiction of the lead agency, 40 C.F.R. § 1502,14(a). - i |. The Forest Service fails to adaquately justity the need for an intertie network In southern Southeast Alaska. Under pressure fram EPA, the Forest Service attempts to disclose why an intertie network is needed in south Southeast Alaska on page 1-8 of the intertie FEIS. The three reasons RIVeN are increased r@liability. added opportunity to increase eticiency, and more access for more communities ta more power sources or more power customers, The first reason is dubious at best. The Forest Service admits on page 3-264 of the intertie FES that Ihara is no difference in the reliability of Alternatives 1, 2, and 3, As for the second paint, the Forest Service fails to disclose of analyze how the intertie netwark provides opportunity to increase efficiency, Itis possible for the affected utilities to increase efficiency without such an intertle (such as charging industrial and commercial customers for KVARS), The third stated reason begs the question of why should the Forest Service be in the business of helping find customers for power sources? Given the fact that private parties are currently attempting to buy the Four Oam Pool from the State, such an intertie could.halp a private interest hava access to more customers. A private utility company cailed Citizens Power 1s currantly soliciting potential shareholders in order to buy the Four Dam Pool from the State of Alaska. See Citizens Power flyer, attached as Exhibit J. The Forest Service fails to disclose this information in the Intertie FEIS. The Forest Service needs to give the public a better understanding of the implications of having a interconnectad intartie network in southern Southeast. Otherwise the public is unable to engage in informed decision. making and informad public participation. 2, The Forest Service tails to evaluate the direct, Indirect, and cumulative effects of an intertia network in southern Southeast Alaska, if part of the purpose and need for this project is to establish an important link In the long-proposed electrical network far southern Southeast Alaska, the Forest Service must disclose and analyze the potantial direct, indirect, and cumulative effects of such a network, Nat only does the Forest Service fail to disclose the prabable location of such an electrical network in the Intertie FEIS, it completely tails to address the potential environmental impacts associated with such a network, Since the construction of this cintertie and future developments associated with a southern Southeast wlectrical network are “interdependent parts of a larger action and depend on the larger action for their justification,” they constitute connected actions and must be considered in a single EIS. See 40 CFR, § 1508.25(aX2). It is uncloar whether the proposed Intertie will meet the long-term power demands of Ketchikan, On page 3-267 of the interti¢ FEIS, the Forest Service admits that with the construction of the Intertie, Lake Tyee's generation capacity would be completely allocated by the year 2013 under current demand projections, This is only 14 years after the planned completion of tha intertie, an awful short frame of reference for thinking about long-term power needs. After this date, It is likely that KPU will have ta faok elsewhere for its power naeds, including other possible hydro developments along the intertie network, Furthermore, it 1S also unclear how much surplus power is available at the Lake Tyee site. The intertia FEIS admits that no cne has monitorad Lake Tyee levels, especially in the wintertime, when KPU experiences peak demand for power: “lake levels 9 WRC & TCS’s Appeal of the Swan Lake - Lake Tyee intertie ' at : 005 P.19 Nov 17°97 17:06 No. : 907-272-9287 Ay pecron EPB ses KETCHIKAN SO Bor0 Petersburg Power&Light__ gO - Ces have not been monitored, but bast available estimates suggest that Lake Tyee is not currently drawn down more than 20 feet maximum annually and that the lowest lake levels occur in January and February.” Intertie FEIS at 3-89, Failure to ascertain and disciose this important information on the part of the Forest Service violates NEPA. Without knowing this “essential” piece of information, the public and decision-makers are unable make an informed decisian on the proposed intactle. See 40 C.F.R. § 1502.22(a), By hooking Ketchikan into an intertie network, KPU is essentially creating a future demand for currently inaccessible power sources. NEPA requires the Forest Service to discuss Indireet effects and their significance, 40 C.F.R, § 1502.16 (b). Thus, the Forest Service needs to fully disclose the potential indirect otfects of constructing an Intertic " matwork, including the effects of potential hydroelectric developments that may be required along the intertie route, Such possible hydropower developments include Projects in Thomas Bay and even dams along the upper Iskut River in Canada. Sec ALASKAN Southeaster, Volume 6, No, 5, Senator Robin Taylor Sui A Proponent Jor the Bractieid Road, attached as Exhibit K. B. The Forest Service considered an unreasonable range of alternatives. By, only evaluating the intertie route salected by KPU and 3 “strawman” alternative (the Neets / Hoya route), the Forest Service has failed to offer the public a reasonable range of alternatives. Tne Forest Service should have cansidered a range of alternatives which included an alternative looking at alternative energy sources, an alternative which considered a completely underwater cable system, and an alternative which avoided all river corridors ellgrote for Wild and Scanic River designation. On page 2-5 of the Intertia FEIS, the Forest Service briefly describes why it refused to consider a potential complete underwater route for the intertle, The Intertie FEIS cites a study from 1982 which looked at a complete underwater route, but found that costs were prohibitive and that the project would depend on unproven experimental design tachnology (Tashmont Consuttants, Inc., 1982). The Forest Service fails to disclose any racent developments in design technology and current casts for such a route, Basing their decision on a 15 year old study is unreasonable and fails to provide the public with the chance to engage in informed decision-making and informaa public participation. Obviously, the Farest Service considers underwater cable routes to be feasible now because many of the proposed power corridors in the TLMP ROD nave large underwater segments, such as the Kake » Snettisham and Hoonah - Juneau routes, for example, The Forest Service needs to go back and fully avajuate an alternative which relies on a completely underwater route. The Forest Service also needs to fully evaluate an alternative which would rely solely on local sources of power for Ketchikan’s power needs. Simply including the Mahoney Lake project in the No Action altarnative is inadequate, KPU needs to present an alternative Strategy which would combing potential local power developments, including ones on Mahoney, Whitman, and Carlanna Lakes: alternative sources of local power generation; ‘and a Serious effort towards alectrical conservation. Simply budgeting $7,500 tor conservation planning in 1996 (intertie FEIS at 2-15) is inadequate to address the serious neud for conservation of @lectricity in Ketchikan, For example, develapers continue to build houses in Ketchikan heated solely by electricity. KPU still fails to charge far KVARS, as well, Mast major utilities charge industrial and commercial customers for KVARS, forcing customers {9 update old electrical equipment such as fluorescent lights and oid motors and thereby increasing efficiency for the overall electrical system. KPU and the Forast Service need to collaborate to create a realistic compranensive alternative which looks at a variety of local power sources as an alternative to building this costly and 10 WRC & TCS's Appaal of the Swan Lake» Lake Tyee Intertie Petersburg Power8Li ne :06 No.005 P.20 NOV 97 Gu KAN’ $0 . * Bort ght ~~ :907-772-9287 environmentally damaging intertic, Ay utilizing a host of alternative sources near Katchikan, KPU rate-peyers would probably have more rellapie service than if they had to rely on two big power producers dependent on the same power ling. The public must have the chancw to fully participate in the planning process by having such an alternative to consider, - V, THE CLOSURE OF THE KETCHIKAN PULP MILL REQUIRES THE FOREST SERVICE TO PERFORM A SUPPLEMENTAL EIS, The Purpose and Nead tor this project is to “provide a reliable and efficient source of power for the City of Ketchikan’s intermediate and long-range needs at reasonable ratas.” Gs Intertia FEIS at 1-6. Such needs were determined by a 1990 study performed by the University of Alaska Institute of Social and Economic Research (ISER)(Alaska Energy Authority 1990), Since the time of that study and since tho release of the DEIS for this project, however, the Ketchikan Pulp Mill has closed. At those times, it was assumed the KPC mill would remain in operation at least until the end of its 50-year contract in 2004. The KPC pulp mill was 3 major consumer of KPU power, purchasing 4 mw of Katchikan's 28 mw wintar peak in 1994-1995. Not only did the KPC pulp mill consume large amounts af KPU power, its 500 employees who lived in Ketchikan relied on KPU power for their electrical needs. In light of this new information, a new study of Ketchikan’s future power needs must be performed. Simply subtracting KPC's estimated power usage from the ISER base case load growth scenario is inadequate and fails to fully analyze the entire impact of the KPC mill clasure on the future power needs of Ketchikan. Thus, the closure of the KPC pulp mill constitutes “significant new circumstances or information relevant to eavironmantal concerns and bearing on the proposed action or its impacts,” 40 C.F.R. § 1502,9( c)ii). As such this significant new information requires the Forest Service to perfarm a Supplemental ElS which fully analyzes this new set of circumstances, ul WRC & TCS’s Appeal of the Swen Lake - Lake Tyee Intertie Peter sburg Power&Light . : .005 P.21 NOV 17 37 17:07 No 907-772-928? 4 nsesuN EPD +s» KETCHIKAN SO @or Request for Retief The appaliants request that the Rogional Forester revarse and remand this decision back wat — and Wrangell Oistrict Rangors with direction to prepare a Supplemental EIS that: Evaluates tha direct. indirect, and cumulative effects of all past, presant, and reasonably foreseeable actions which may significantly effect the enviranment of the areg surrounding the proposed intertie (including Revilla tates the Upper Cleveland Peninsula, and the Bradfield River Valley), Acknowledges that the Eagle Rivar and Lake's suitability tor Wild and Seenic River status is uNknown until the revised TLMP appeals process is completed, ifthe Supplemental ElS process is to make any decision affacting the suitability of Eagle River and Laka, the Forest Service must adequately disclose and evaluate all direct, indirect. and cumulative effects of any decision which does not protect the outstandingly remarkable values of the Eagie River and Lake systam. Either revises the Purpose and Need statement. whereby any mention of esteblishing a fink in tha proposed electrical network for southern Southeast Alaska is omitted; or inciudes a full-blown analysis of the diract, indirect, and cumulative impacts resulting from an intertia network for southern Southeast Alaska. y Considers a reasonable range of alternatives for meeting Ketchikan’s intermediate and long-term power Needs, including at laast one alternative which combinas possible loca! hydropower production, a serious conservation planning effort, and other forms of local electrical generation in a comprehensive fashion; one alternative that relies on a completely underwater cable transmission route; and one alternative that protacts all rivet corndors identified by the Forest Service for eligibility for Wild and Scenic River status a$ well a5 all rivers recommended for casignauion in the citizen-based proposal. Tongess Rivers; the Lifsbloog of the Raintorest. Resvaiuatos Ketchikan’s present, intermediate, and long-term power needs given the recant closure of the KPC pulp mill. Best Regards, Mirage boges tS Pater Branson Wayne Weihing Wrangail Resource Council Tongass Conservation Society 12 WRC & TCS's Appeal of the Swan Lake - Lake Tyee Intertie Petersburg Power&Light 907-772-9287 NOV 1 3? ——__—____—____—_—_ Citizens Power Issue # 1 20% Cut in Electrical Costs Here's the bottom line: the purchase of the Four Dam Pool by Citizens Power of Alaska will produce a projected 20% effective reduction in your cost of electricity. How? Because you will own part of the company. On average, your share of the profits derived from CPA's privatization of the Four Dam Pool should equal 20% of your annual electrical costs. A portion of these profits will-be used to pay off your CPA stock, with the remainder distributed as a direct cash rebate. What is the Four Dam Pool? The four dams at Terror Lake, Solomon Gulch, Tyee Lake and Swan Lake that provide hydroelectricity to Kodiak, Valdez, Glennallen, Petersburg, Wrangell and Ketchikan are oper- ated collectively as the Four Dam Pool. The Alaska State Legislature has directed the Alaska Energy Authority to sell these dams at fair market value, which has been determined to be approximately $100,000,000. Citizens Power of Alaska, a private utility company that will include you, the energy consumer, as a 50% co-owner, has offered to purchase the Four Dam Pool for the State of Alaska's full asking price. What is Citizens Power? Citizens Power of Alaska is a private utility company headed by former U.S. Senator Mike Gravel that has offered to buy the Four Dam Pool ' from the State. CPA is proposing the creation of a CSOP ("consumer stock ownership plan") that al- lows interested consumers the opportunity to own 50% of the shares in Citizens Power of Alaska . Petersburg, Alaska ~~ Ownership Has its Privileges People choose Citizens Power of Alaska to become an owner, and one of the privileges of ownership is the right to know how efficiently the Four Dam Pool is being operated, Did you know that under current management, it costs approxi- mately 2.5 cents per kilowatt hour to run the dams? Did you know that the industry standard nationwide for similar dams is less than 1 cent per kWh? Did you know that the public entities that jointly operate the dams are fighting to keep their operational and administrative inefficiencies from being exposed? Did you know that Citizens Power of Alaska has proposed using the money that will be saved with improved efficiencies to help finance your ownership of the CPA stock? It's time to overhaul the management of hy- droelectric production from the Four Dam Pool. As an owner of CPA, you won't be kept in the dark any longer. —$——_-___—_—_} What is a CSOP? The Consumer Stock Ownership Plan is very similar to Employee Stock Ownership Plans (ESOPs) that have been used throughout Ameri- can industry to provide a financing structure that permits an employee to become an owner in his/her corporation. For Citizens Power, 50% of the company will be owned by the consumer shareholders, ratepayers just like you. Jsn’t it time that you were treated like an owner? CPA's CSOP program is based on efficiencies in financing and wholesale production and will not adversely affect your individual (retail) electrical rates! In fact, CPA will fully accept the rate structures and limitations imposed by the State's Power Sales Agreement, a binding contract for 34 more years. . — 17:07 No.005 P.22 Petersburg Power&Light 907-772-9287 State Rejects Low Offer From Four Dam Pool Utilities As expected by Citizens Power of Alaska, the State of Alaska has officially rejected the supposed $104 million offer from the Four Dam Pool Pro- ject Management Committee to buy the assets of the Pool. As predicted, the proposal from the pub- lic utilities was shown upon close inspection to be comprised mostly of "smoke and mirrors" and was actually worth only about $60 million. Unlike the phantom offer from the utilities, Citizens Power of Alaska will purchase the Four Dam Pool for $100 million in cash. NOV i7 9¥. 17:08 No.005 P.23 rE Door Now Opens Wide For Citizens Power of Alaska Plan Now that the State has spurned the effort by the utility committee to acquire the assets of the Four Dam Pool for less than its appraised value, the door is open wide for public consideration of the CPA proposal to share ownership of the Four Dam Pool with its electrical consumers. Here's the bottom line: privatization of the Poo! by CPA will produce a projected 20% effec- tive reduction in your cost of electricity. How? From your share of the profits distributed to the consum Friends - On behalf of ali of the fine people involved in our work to purchase and privatize the Four Dam Pool, I wish to thank those of you who have bean vill- ing to listen to fresh ideas, who have taken the time te consider the specifics ef our CSOP plan, and who have paused during your busy schedules to evaluate the overall mexits of onr vision, As your former U.S. Senator, I know that Alaskans are independant thinkers and I know that most residents of Patersburg will never blindly reject a new approach to the old ways of doing business. Sincerely, Mike Gravel ~ CITIZENS POWER OF ALASKA PO Box 7884 Ketchikan, AK 99901 GUINEY, JIM P.O. BOX 1244 Thank you again for your consideration. Citizens Power of Alaska/The Energy Group, Fresident BULK RATE U.S.POSTAGE PAID PERMIT NO. 61 KETCHIKAN, AK 9990) PETERSBURG, AK 99833-1244 Ownership Has Its Privileges C ® Dennis McCrohan From: Dennis McCrohan Sent: Friday, November 07, 1997 3:41 PM To: Randy Simmons; Keith Laufer Ce: Brenda Fuglestad Subject: SE Intertie Ritch Trimble called and said that KPU had decided not to request in the November 20 Council meeting approval to put the clearing contract out to bid. KPU and their engineers are still working on the bid structure and trying to resolve some technical issues. Regarding the November 3 KPU letter and request to meet, | said that Randy would be out the last two weeks in November so a meeting would need to be early next week or not be held until the first week in December. Early December seemed acceptable now that their schedule has slipped and Trimble will confirm with Magayar. Dennis vol2o[%7 td XL oh aRowly /\e Own Ov) CF er aber | 21 meceking Vy wu 5 he ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY {= ALASKA ME =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 Proposed Financing Structure for the Tyee-Swan Lake Intertie Background The City of Ketchikan has pursued development of the Tyee-Swan Lake intertie for the last decade. The intertie will provide the ability to utilize current excess capacity from the Tyee Project to serve a portion of the load of Ketchikan Public Utilities (KPU). The ,intertie also will interconnect the electric systems of Ketchikan, Petersburg and Wrangell providing additional benefits including sharing of reserves and combined resource planning. Further, it is expected that the intertie will allow for optimal water usage at Swan Lake, increasing the firm generating capacity of that project. The Tyee capacity used by KPU would be only that which is excess to the needs of Petersburg and Wrangell and would be considered surplus power. The power would be used by Ketchikan to augment its current hydroelectric power supply and reduce its use of diesels. The amount of power used depends on water conditions at the other hydroelectric projects, including Swan Lake, and on the load growth of the Ketchikan area. It is not expected that the full energy production of Tyee would be used by Wrangell, Petersburg and Ketchikan for several years, Ownership and Funding The design engineer for the project is Raytheon in Bellevuc, Washington. According to Raytheon, the estimated cost of constructing the intertie depends on the construction schedule, If the intertie can be constructed in two years, the cost is approximately $72 million. If construction requires a third season, the total cost is approximately $80.2 million, While a two year schedule is possible, availability of funting may require that it be spread over three years, After pursuing alternative ownership scenarios — primarily the State or the Four Dam Pool — Ketchikan is committing to assume financial responsibility and ownership, To this end, KPU has pursued both federal and State grants and loans. To date, KPU has received approximately $11 million in grants from the State and has a commitment from the State for a $20 million loan. KPU also will receive a Federal grant for $10 million. The Federal grant was awarded with the expectation that construction would start in 1998. This grant was originally $20 million, but last minute budget cuts reduced the amount, KPU plans on applying next year for an additional federal grant sufficient to complete the project. The City’s lobbyist believes that the likelihood of receiving the additional grant is improved significantly if construction is underway. The State loan is for 20 years at an interest rate of 3%. Unless the Four Dam Pool or the State wants to be responsible for repayment of this debt, it would become a debt of KPU and would need to be voted on by the City’s electorate. The City currently plans on placing this issue on the ballot in early 1998. newer? O3:34P | Cs / a Stes Dn OsW) — During the early years of operation, the intertie is expected to losc money, and to proceed with the project, Ketchikan needs to minimize these losses, At the same time, it is assumed that the other Four Dam Pool participants would have no liability for the intertie. To cover these early year losses, KPU currently is pursuing a loan arrangement_with ATDEA. If such a loan is agreed to, it also would need to be voted on by the City, , The following summarizes the current and required additional funding, assuming a three year construction period: Funds available to date $11.0 million State Loan 20.0 ? 1998 Federal Grant 10.0 Additional Federal/Other Grant (1999) G9. Other Funding —9.2 Total $80.2 million This table does not include the possibility of borrowing additional funds during the startup phase of the intertie, Schedule KPU has developed a schedule for construction to begin in 1998. The City is not committing to spend any funds, except for grant funds, until financing for the entire project is assured. This will occur at the earliest in the fall of 1998, limiting construction expenditures for 1998 to the approximately $10 million current federal grant. If additional funds are not made available in 1998, KPU would put the project on hold until more funding is available. To meet the 1998 start date, KPU has developed the following schedule: November 1998 4G") Mail RFP for general contractor , Surplus Power Sales Agreement signed by State and Four Dam Pool Participants February 1998 City of Ketchikan bond election Award of construction contract Fall 1998 Receipt of additional grant funds Spring 1999 Restart construction to be completed in the Fall of 1999 or in 2000 P.o3 V = ae Outline of Price Elements of Proposed Surplus Power Sales Agreement 1. The Four Dam Pool would incur no liability for construction or costs associated with the intertie, 2. The cost of power to the Four Dam Pool participants would not be negatively impacted by the intertie but could be positively impacted, 3. The Four Dam Pool will incur long term benefits from the sale of surplus power from Tyee and increased power production at Swan Lake. 4. The Four Dam Pool will be paid for power from Tyce, delivered to Ketchikan over the intertie, in accordance with the following: e Cost of Power charged to all utilities (currently approximately 6.2 cents/kWh) e less Ketchikan O&M and A&G associated with the intertic e less debt service e less intertie renewals and replacements e less other intertie expenditures e less any carry forward losses e less Ketchikan development charges The enclosed table shows the expected intertie sales and resulting cash flow to the Four Dam Pool. OQ a | SWAN-TYEE INTERTIE REVENUES & EXPENSES a eee ae Additional Debt Service O&M Tyee Stale Additional Net Payment $0.04/kWh $0.022/kWh] Expense Intertie Loan Oebt Development Nel Caryforward lo Year (MWhx1) | Fixed —_Escalated (2)| $.0025/KWh 08M (2) $20,000,000(3) $1,328,995(4) Chames(5) | ProftVLoss of Losses(6) PMC $ 900,360 * 974,560 603,282 56,273 § 137,635 $ 1,675,332 $ 101,771 S$ 144,148]S (673,682) $ (673,682) 60,910 141,764 1,675,332 101,771 187,784] (559,719) (559,719) 1,029,120 656,168 64,320 146,017. 1,675,332 101,771 168,529 | (470,681) (470,681) 1,080,200 709,398 67,513 219,609 ‘1,675,332 401,771 178,960 | (453,586) (453,586) male! 1,145,840 —-775,081 71,615 154,909 ‘1,675,332 101,774 192,092 | (274,798) (274,798) DO 1,234,240 «859,924 77,140 159,556 ‘1,675,332 101,771 —- 209,416} (129,052) (129,052) (A | 1,338,440 960,498 83,653 164,343 ‘1,675,332 101,771 229,894 43,946 43,946 Me 1,455,600 1,075,913 90,975 169,273 1,675,332 101,771 253,151 98,980 415,057 1,675,332 101,771 278,938 106,973 250,026 1,675,332 101,771 305,371 114,488 257,527 1,675,332 101,771 331,133 120,678 265,253 1,675,332 401,771 353,715 126,950 273,210 4,675,332 101,771 377,170 1,583,680 = 1,205,701 1,711,560 = 1,342,154 1,831,800 1,479,533 1,930,840 1,606,313 2,031,200 1,740,489 241,010 241,010 oe 219,303 219,303 tO 614,239 614,239 831,082 831,082 4,020,404 1,020,404 1,217,266 1,217,266 2,132,840 1,882,420 133,303 681,370 4,675,332 101,771 401,526 | 1,021,959 35,375 986,584 2,235,840 2,032,527 139,740 358,311 1,675,332 101,771 426,837 | 1,566,376 1,566,376 2,340,120 2,194,144 146,258 369,060 101,771 453,126 | 3,461,049 3,461,049 2,445,800 2,358,799 152,863 380,132 101,771 480,460 | 3,689,373 3,689,373 2,552,840 2,595,692 159,553 391,536 101,771 508,873 | 3,926,999 3,926,999 2,661,280 2,722,921 166,330 1,158,090 101,771 538,420 | 3,419,590 3,419,590 2,771,120 2,920,364 173,195 517,827 101,771 569,148 | 4,329,542 4,329,542 2,796,040 3,035,025 174,753 533,362 101,771 583,106 | 4,438,073 4,438,073 2,753,880 3,078,939 172,118 549,363 101,771 583,282 | 4,426,286 4,426,286 2,711,120 3,122,066 169,445 565,644 101,771 583,319 | 4,412,808 4,412,808 2,667,680 3,164,202 166,730 1,557,850 101,771 583,188 | 3,422,343 3,422,349 2,623,560 3,205,227 163,973 600,303 101,771 582,679 | 4,379,862 4,379,862 2,578,760 3,245,009 161,173 618,312 101,771 582,377 | 4,360,137 4,360,137 2,533,280 3,283,412 2,487,120 3,320,291 2,440,240 3,355,438 158,330 636,861 101,771 581,669 155,445 655,967 101,771 580,741] 4,313,487 4,313,487 152,515 __ 2,994,269 101,771 579,568 | 1,967,555 1,967,555 TOTAL 59,099,230 57,438,123 4,338,060 4,338,060 Footnotes: - (1) Net kWh energy which is available from Tyee afier Wrangell & Petersburg loads which can be used by Ketchikan. (2) Based on an assumed inflation rate of 3.0%. (3) $20,000,000 repaid over 15 years at an interest rate of 3%. (4) Assumed financed over 30 years al an interest rale of 6.5%. {5) Estimated at 10% of PMC power rate. (6) Losses assumed carried forward at an interest rate of 6% until funds are available for repayment. Beginning Current Interest Ending Carryforward {Loss) on Carryforward Amount Profit Balance Amount $ $ (673,682) $ - $ (673,682) (673,682) (559,719) (40,421) (1,273,822) (1,273,822) (470,681) (76,429) (1,620,933) (1,820,833) (453,586) (109,256) (2,389,775) (2,383,775) (274,798) (143,026) (2,801,599) (2,801,509) (129,052) (168,096) (3,098,748) (3,098,746) 43,946 (185,925) (3,240,725) (3,240,725) 241,010 (194,444) (3,194,158) (3,194,159) 219,303 —(191,650)* (3,166,505) (3,166,505) 614,239 (189,990) (2,742,257) (2,742,257) 831,082 (164,535) (2,075,710) (2,075,710) 1,020,404 (124,543) (1,179,848) (4,179,848) 1,217,268 (70,791) (33,373) (33,373) 35,375 (2,002) (0) Fle Acchoa km List Aceon Task. KPO] Rautthon I, Defind multiple Cconstrucchon > K ‘ -_cli\ ey% K Rawpthea —_D._Desenibe ‘the seemanachois_act USES | eden fy a areas of Goueinohes avr can impicd clearances and Potuce mantmnance os oon | KAU 'L, Evaluate, raising steacture. hess. : OT in arens of prbyectcl alder cpl VS maintenance) Sarrvnoo —Kouttheon R Oeseribe cequnemends foc crossacm | pole Conn q__Line Marker, Balls = Crk Be pd daha bye = Prowide adcli-hom) sans Sa Geren ee as Wh TS ean oT 3 Spans oot of Tyee, boars lO. Provide defin hon of moerchanpible Ain becieD USES Lk Cone" chia col “ts ° ienuts Whe ott Vist . tdehCy on PrP do eeey KeU IQ. Provide sein thao Ot ae Patent etn i resect to author ry (Bicaerad WIZ constr «con ) ¥ CPUS 13. Peveark. ancient Lr Ose of Swoan bala + bolle Tyee fore) Landoun area KPO fA Define specific (tems _ uivecd for clas thnneduces file” - Ne cach Ssheactire locchon. Kev Ilo, eee ie nology ‘port of Ua bi eterna —Fosluc lhl IT sCndicacte, ha hee a Need +o be. Beet rchect eens eee responsbilthes USES 8 Froude Fire plan a Soidable Loc heli ole Sec! Consbeacthan - USES Iq. den AF oe hat need to Ea be. dar Koped VarnZ\ sekcled - Kaythag 0. Se eee reels to Le. arednY Male yecommencathons for spore, tnsulador | hocducre, meclena a Raytheon QL cl imimade, Constrsccion Windewd oclobee,) do ae ee for Shd ee done as_pactefttluis pro \eq- Provide, oe blowle Mueeam oF ees _Whe_overal susem.. see 3 | MSU of Compeasaton Heal. cy Deere 4+ es ~ a en, Marck’ “Aisersal rv ethedlS str Deku Neeclecl on Environmental) YD raw ino I Delineaton La OSES ancl \ State. Lands pocadon ot Class -t and Class Tr streams. { a) Cape fest balers | woe) ton af +e spams senstthve. Strams [E4) NALA poal-C len sks (os) ceahens Bay Fish Te are ied La / Fie) | . Knsupn coat Kab itt eT ocathonss —I—tensat U cultural) lecachen s (ea) DA AAG liar +S a 2 mules trom le lanch og areas oc | mile Leom y 4 1 he | Pals es oe Oct atowec “0 oem ; lake + eS+varine SWAN LAKE - LAKE TYEE TRANSMISSION LINE DESIGN REVIEW October 20, Thru 24, 1997 Raytheon Engineers & Constructors Swan Lake - Lake Tyee Transmission Line Design Review Agenda for Week MEETING Project Review . Design Drawing/Construction Specification Review Ill. Construction Contract Review IV. Construction Administration V. Debriefing/Action Items DATE Monday, 10/20/97 (11 am - 5 pm) Tuesday, 10/21/97 Wednesday, 10/22/97 (9 am - 5 pm) Wednesday, 10/22/97 (9 am - 5 pm) Thursday, 10/23/97 (9 am - 11 am) Friday, 10/24/97 (9 am - 12 noon) Raytheon Engineers & Constructors 1. PROJECT REVIEW Agenda TOPIC PRESENTER(S) A. Project Overview J. Paine B. Design Basis Brown/Beloff/Kansog/Paine C. Detailed Design A. Meehan/J. Paine D. Construction J. Paine/A. Beloff E. Environmental J. Paine F. Project Schedule J. Paine G. Project Cost Estimate J. Paine Raytheon Engineers & Constructors PROJECT REVIEW PROJECT REVIEW A. Project Overview B. Design Basis 57.4 miles of line 1. Voltage Selection (M. Brown) 138 kV all overhead 2. Right-of-Way (A. Beloff/J. Kansog) Construction Methods : 3. Conductor Selection (A. Beloff) Access roads 4. Structures (A. Beloff) Design Sections: : : 5. Foundations (J. Paine) - Low Altitude Section 47.4 miles, Swan Lake to Eagle Bay - High Altitude Section 6.4 miles, Eagle Bay to Lake Tyee - Water Crossings (4) 3.6 circuit miles, Shrimp Bay Behm Narrows Bell Arm Eagle Bay Raytheon Engineers & Constructors Raytheon Engincers & Constructors PROJECT REVIEW B. Design Basis 1. Voltage Selection Alternative Configurations - Designed & operated at 115 kV - Designed & operated at 69 kV/138 kV Recommendation - Design basis - 138 kV - Initial operation - 69 kV with no reactive compensation required Power Flow - Load Basis One-Line Diagram Reference Documentation - Voltage selection & load flow analysis 09/96 - Switching surge & insulation coordination study 01/96 Raytheon Engineers & Constructors PROJECT REVIEW B. Design Basis 2. Right-of-Way Environmental Corridor Location of Pls Access Road/No Access Road Surveying - NorTech aerial survey - 1996 land survey Swan Lake-Shrimp Bay portion of route Eagle Bay-Lake Tyee portion of route Reroute - 1997 land survey Shrimp Bay-Eagle Bay portion of route Klam Creek reroute Eagle River reroute Reference Documentation - FEIS - Life cycle cost analysis of transmission line with & without access road 5/95 Baytheon Engineers & Constructors PROJECT REVIEW B. Design Basis 3. Conductor Selection Parametric Study considering: - Loading conditions Weather load predictions - Wet snow span load model - Sag and tension comparison - Economics Low Altitude Section - 397.5 KCMIL 30/7 AACSR/AW High Altitude Section - Water crossings 37 No. 8 alumoweld Revised from conductor study Reference Documentation - Conductor selection study 12/95 Raytheon Engineers & Constructors PROJECT REVIEW B. Design Basis 4. Structures Steel Versus Wood Parametric Study considering: - Economics - Aesthetics - Reliability - Constructibility - Maintenance Aluminum Reference Documentation - Transmission Line Structure Study Report 2/96 Raytheon Engineers & Constructors PROJECT REVIEW B. Design Basis 5. Foundations Preliminary concepts Present concept Reasons for change: - Final loads greater - Reliability extremely critical - Foundations most costly single element - Maintainability easier Reference Documentation - Transmission Line Foundation Study 2/96 Raytheon Engineers & Constructors ©OMWNATAWN HE PROJECT REVIEW C. Detailed Design Design Criteria Drawing List Plan and Profiles Structures Conductor/Insulator Assemblies Vibration Control Guying Grounding Line Marking and Structure Aesthetics . Foundations . Material Specifications/Bid Packages . Right-of-Way . Permanent Helicopter Landing Pads Raytheon Engineers & Constructors PROJECT REVIEW C. Detailed Design PROJECT REVIEW C. Detailed Design 1. Design Criteria 1. Design Criteria (cont.) Loading Conditions + Conductor Tensions Low altitude section NESC: 0 degrees, 1/2” radial ice, 4 psf wind Heavy Ice: 30 degrees F, 1.5” radial ice, no wind on conductors, 4 psf wind on structures High Wind: 40 degrees F, no ice, 26 psf wind Combined Snow/Wind: 30 degrees F, 1.47” radial ice and 4.9 psf wind equivalent for 3.3” radial wet snow Low Temp: -5 degrees F, no wind, no ice EDS: 40 degrees F, no ice, no wind Hot Sag: 120 degrees F, no ice, no wind % % High altitude section and Water Crossings NESC, Heavy Ice, Combined Snow/Wind, Low Temp, EDS, Hot Sag: Same as low altitude High Wind: 40 degrees F, no ice, 37 psf wind on conductors, 50 psf wind on structures Extreme Snow/Ice: 20 degrees F, 1.72” radial ice equivalent to 3.86” radial wet snow, no wind Raytheon Engineers & Constructors Low altitude section 16% RTS, final @ EDS 70% RTS, final @ heavy ice High altitude section and Water Crossings 22% RTS, final @ EDS 70% RTS, final @ heavy ice 90% RTS, final @ extreme snow/ice Safety Factors/Overload Capacity Factors- Loads Comb. Extreme Heavy High Snow/ Snow/ NESC Ice Wind Wind Ice Vertical is ak ak ik 1.0 Transverse 2.5/1.65 a | er eT 1.0 Longitudinal 1.1 11 ad Led 1.0 Raytheon Engineers & Constructors PROJECT REVIEW PROJECT REVIEW C. Detailed Design C. Detailed Design 1. Design Criteria (cont.) 1. Design Criteria (cont.) « Phase Spacings: Insulators Low Altitude Section 50% of SML - all loading conditions 16.5 ft phase-to-phase Hardware High Altitude Section . ' Reni CRO cu Match strength and ratings of insulators Adjusted for sag/long spans 20 and 25 feet Guys Water Crossings 90% of rated breaking strength per NESC Based on Sags Shrimp Bay 18.0 phase-to-phase Bell Arm 35.0 phase-to-phase Behm Narrows 20.0 phase-to-phase Eagle Bay 50.0 phase-to-phase Clearances Ground: 23 feet for vehicles (no snow) Horizontal: 10 feet Power Frequency; 60 Hz wet: 29 inches Switching Surge; positive, CFO: 40 inches Lightning, EDS: 46 inches Raytheon Engineers & Raytheon Engincers & Constructors Constructors PROJECT REVIEW PROJECT REVIEW C. Detailed Design C. Detailed Design 2. Drawing List 2. Drawing List Cont. + 56 Plan & profile sheets containing: - Plan view, - Profile with up slope and down slope data, - Contours, - Terrain information, - Tower data including: - Tower number w/type & height - Station coordinates - Centerline elevation of tower 8 Sheets of conceptual tower types with: - Configration of each type - Hardware arrangements - Loading cases - Guying details 4 Sheets of conductor and hardware details 9 Sheets of foundation plans and details 1 Sheet of helicopter landing pad details As needed additional information & detail sheets « Staking sheets for each structure location - Presents cross section at each tower site - Structure layout - Conductor and guying angles, and guy leads + As needed project location drawings with: - Staging areas, - Expected personnel arrangements, - Expected Support facilities, Raytheon Engineers & Baytheon Engineers & Constructors Constructors PROJECT REVIEW C. Detailed Design 3. Plan and Profile + Structure Spotting Using PLS-CADD Ground Clearances: Heavy Ice Loading Case Preliminary Spotting 02/96 to 04/96 Using Aerial Survey Data and Conceptual Structure Designs 1996 Field Reconnaissance for Land Survey April/May 1996 - Swan Lake to Shrimp Bay (Str, #1 to #112) - Eagle Bay to Lake Tyee (Str, #266 to #283) Aerial Survey Versus Land Survey Second Spotting 08/96 Using Land Survey Data for #1 to #112, #266 to #283 New Family of Structures/Relocated Pls Respotted Entire Route #112 to #266 1997 Field Reconnaissance for Land Survey May 1997 - #112 to #266, 23 structure relocations from 1996 - Klam Creek reroute (#124 to #128) - Eagle River reroute (#240 to #261) Raytheon Engineers & Constructors PROJECT REVIEW C. Detailed Design 4. Structures Eight Design Types 290 Structures Combination of H-Frame and Single Poles Total Quantities Low altitude section 265 High altitude section 17 Water crossings _ 8 Total number of structures 290 HSA (40 to 90 ft nominal) 123 HSB (50 to 95 ft nominal 47 HSU (40 to 90 ft nominal) 47 HHA (55 and 80 ft nominal) 3 3SPC (45 to 85 ft nominal) 24 3SPD (40 to 90 ft nominal) 24 AD (65 ft nominal) 8 3HD (45 to 85 ft nominal) _14 Total number of structures Raytheon Engineers & Constructors 20 PROJECT REVIEW C. Detailed Design 4. Structures (cont.) Coatings - Galvanizing - Weathering steel - Dulling/darkening Painting Structure Types Structure Weights/Base Diameters HSA.085 10,500 Ibs. HSB.085 14,000 Ibs. HSU.085 10,000 Ibs. 3SPC.085 13,000 Ibs. 3SPD.090 12,800 Ibs. HHA.085 15,000 Ibs. 3HD.085 24,000 Ibs. AD.065 48,000 Ibs. Variations in Leg Lengths - H-frames up to 17 ft - Single poles up to 30 ft - Shortest pole: 28 ft - Longest pole: 102 ft 29” 33” 29” a3 31” 34” 42” 42” Raytheon Engineers & Constructors PROJECT REVIEW C. Detailed Design 5. Conductor/Insulator Assemblies Selected Material - Composite polymers - Lightweight - High leakage performance - EPDM for low level contamination - Silicon rubber for high level contamination Electrical Characteristics - Leakage distance: 16 mm/kV (light contamination) - 138 kV Class 56-59 inches long - Impulse and 60 Hz compatible with standard porcelain insulators Mechanical Characteristics - Low altitude portion: 30,000 Ibs suspension 50,000 Ibs deadend - High altitude portion: 50,000 Ibs suspension 2 x 80,000 Ibs deadends - Safety Factor: 2 Raytheon Engineers & Constructors PROJECT REVIEW C. Detailed Design 6. Vibration Control te 1% ty Conductor Tension - 16% EDS Armor Rods for Mechanical Protection Stockbridge Dampers for Vibration Mitigation Two Recommendations: - Alcoa - Dulmison Application Low altitude portion: (1) per span up to 1,200ft (2) per span 1,200 to 2,000ft (4) per span over 2,000 ft High altitude portion: (2) per span up to 1,465ft (4) per span 1,466 to 1,900ft (5) per span 1,901 to 3,100ft (6) per span 3,101 to 5,300ft Water Crossings: Mix of end span and midspan dampers Raytheon Engineers & Constructors PROJECT REVIEW C. Detailed Design 7. Guying Material: « Two Sizes: Alumoweld 7 No. 5 AWG 38 No. 8 AWG « Strength: > 1.10 times maximum design load (including OLF) « Application: 397.5 kcmil AACSR: (1) 38 # 8 guy/cond. 38 No. 8 AWG Alumoweld: (2) 38 # 8 guys cond. Longitudinal guying: 7 No. 5 Other guying: 7 No. 5 + Gripping - U-bolt wedge at pole end - Preformed big grip at anchor end Anchors - Rock bolts grouted into rock Guy Angle: Range 35 to 45 degrees Raytheon Engineers & Constructors PROJECT REVIEW C. Detailed Design 8. Grounding Requirement: - Safety to personnel - 10-15 OHMs - Drain leakage current - Reduce overvoltage on insulation during ground fault Method of Grounding 1) Metal encasement of micropiles 2) Additional radial counterpoise 3) Engineer’s resolution Field Test - Megger measurement by contractor - If less than 10-15 OHM shall install 60 ft radial counterpoise 3x20 ft (for 3 micropile) or 4x15 ft (for 4 micropile or more) Raytheon Engineers & Constructors PROJECT REVIEW C. Detailed Design 9. Line Marking & Structure Aesthetics Aircraft Warning Spheres for Water Crossings - 200ft alternating phase spacing - International orange, yellow, white Aircraft Warning Spheres for Low and High Altitude Sections - Existing Tyee line (high altitude section) - Spheres on spans from Tyee to Eagle River Aesthetics - Neets Bay, Gedney Pass/Shrimp Bay, Behn Canal, Bell Arm, Eagle Lake, Bradfield Canal Non-Specular Conductor - Not recommended/required Structure Darkening - Recommended for following structures: Shrimp Bay; 111, 111B, 112, 113 Gedney Pass; 118 Behem Canal; 163, 164, 165, 166, 167, 168 Raytheon Engineers & Constructors PROJECT REVIEW C. Detailed Design PROJECT REVIEW C. Detailed Design 10. Foundations 11. Material Specifications/Bid Packages Specification Title 9907501-003 Tapered Tubular Steel Structures 9907501-004 Aluminum-Clad Steel Conductor 9907501-005 AACSR/AW Conductor Micropiles for all foundations - Rock typically within 4 feet of surface - Steel tube with reinforcement rod - Assembly drilled into rock and pressure grouted 9907501-006 Non-Ceramic Suspension Insulator - Similar to system in use on Tyee/Petersburg repairs Bid Packages Under Preparation For: Tower to foundation interface - Conductor - Pile cap is tower interface plate - Insulators - Installation tolerances - Structures - Field data during construction - Hardware - Method of pile cap attachment - Conductor accessories (multiple) Raytheon Engineers & Constructors Raytheon Engineers & Constructors 11. Material Specifications/Bid Package (Cont.) Conductor - Nonreturnable reels - Maximum lengths/weights on reels 397.5 kcmil AACSR/AW ~12,000 ft on 84” diameter reel @ 8,000 Ibs. 37 No. 8 AW ~6,600 ft on 84” diameter reel @ 10,000 Ibs. ~7,400 ft on 84” diameter reel @11,200 Ibs. (non-standard) - Conductor lead time - Southwire, ACPC, & Canadian firms Insulators 56 to 59 inch lengths 30 to 40 Ibs each Silicone rubber versus EPDM Lead time Reliable, Sediver, Ohio Brass, NGK Locke, K-line Structures - Three month fabrication - Galvanizing versus weathering steel - Thomas & Betts, Valmont, V Schuyler, North American Pole Raytheon Engineers & Constructors 11. Material Specifications/Bid Package (Cont.) Hardware - 20 weeks lead time - Packaging - Anderson Electric, Reliable « Conductor Accessories - 16 to 20 weeks lead time - Alcoa, Preformed Spare Materials - Conductor ~6 miles of 397.5 kcmil 30/7 AACSR/AW (3 reels) ~2.5 miles of 37 No. 8 AW (one 7,400 foot reel, one 6,400 ft reel) - Insulators - Hardware and conductor accessories Raytheon Engineers & Constructors PROJECT REVIEW PROJECT REVIEW C. Detailed Design C. Detailed Design 12. Right-of-Way Clearances Under Conductor Blowout - NESC, high wind with reduction factor cases Required Width Based on Clearances - 70 to 200 feet on land portions - Up to 500 feet on water crossings Right-of-Way Clearing Required width Feathering Valleys Structure site Danger trees Working sites Logging Limits - Remove merchantable timber within 2 miles of suitable landing areas except-- within 1 mile near Eagle Bay - Logging limits (width) equal clearing limits (width) 13. Helicopter Landing Facilities Permanent pads for future maintenance Approximately five-mile intervals Site selection by Contractor with Approval Sites Within ROW Limits Design Matches Existing Raytheon Engineers & Raytheon Engineers & Constructors Constructors PROJECT REVIEW D. Construction (cont.) PROJECT REVIEW D. Construction + April through October Windows «+ Work Sequencing - Clearing & construction surveying - Foundations & guy anchors - Structure erection - Stringing Preliminary Estimates Acres to be cleared within ROW Estimated timber yield (cruise) 22 stream crossings Number of danger trees + Location Map - Material storage yard/main marshaling area - Other marshaling areas ents a C\cont Working Logistics - Permits in preparation based on: - Crews located on floating camp barges - Log processing and handling on water - Helicopters staged near barges - Fuel distributed within work area - One main materials receiving and staging area. - Minor sub-staging areas as needed and approved. + Construction Issues - Financing plan drives work sequencing - Critical issues include: - Obtaining confirming site geometry - Field office - ROW clearing / foundation placement - Personnel floating camps td - Material procurement - Log barges - Final completion of project Helicopter barges Raytheon Engincers & 33 Constructors Raytheon Engineers & Constructors PROJECT REVIEW E. Environmental Detailed engineering and design in accordance with environmental licensing Construction specification in accordance with environmental licensing Advanced permitting to comply with FEIS, in expectation of work plan and timing Compliance to be monitored by on site compliance personnel from Environmental * Firm (Foster Wheeler) Construction contract crews to be provided training in environmental constraints and sensitivity Raytheon Engineers & Constructors PROJECT REVIEW F. Project Schedule _ No a Present Plan for Construction Package - Issue package as single contract as follows: - First Advertisement November 20/97 - Receive bids January 8, 1998 - Issue NTP February 22, 1998 - Construct in two seasons: 1998 & 1999 Financing may change assumptions Material procurement schedule dependent on financing Design of substation interfaces to follow T-Line Raytheon Engineers & Constructors PROJECT REVIEW G. Project Cost Estimate Ill. CONSTRUCTION CONTRACT REVIEW Estimate in progress based upon current design and work sequence in progess Previous estimate at__———« (1995) Estimates for changes to work plan are impacted by: - Inflation over period of construction - Number of mobilizations - Efficiencies for equipment utilization Seeking direction on required approach KPU Representatives Unit Price Versus Lump Sum Material Procurement - Contractor--Owner Qualification (bidders) Bidding Price Schedule Logging Sales Revenue Logging Areas & Limits: Demarcation Permits (KPU & contractor) Disposal Areas Offsite Borrow Areas SCTrTrO™moowp Raytheon Engineers & Raytheon Engineers & Constructors Constructors IV. CONSTRUCTION ADMINISTRATION Raytheon is slated to provide support to KPU during construction - On site inspection to confirm compliance with specifications based on sampling of field work. - Sampling is a function of type of work and contractor performance Successful construction depends upon: - Asolid and constructible design - Good working relationship between parties - Thorough inspection - Fairness in contract administration Raytheon Engineers & Constructors V. DEBRIEFING/ACTION ITEMS RAYTHEON FOREST SERVICE OTHERS Raytheon Engineers & Constructors Dennis McCrohan | From: Dennis McCrohan Sent: Monday, September 29, 1997 3:42 PM To: Randy Simmons; Keith Laufer Subject: SE Intertie September 29, 1997 Allen Daschen called and asked how KPU should best start discussions with AIDEA regarding a bridge construction loan for the SE Intertie. | said that a letter and phone call from Magyar to Randy would be the start. He said that KPU's revised plan, now that they will be short $10 million in 1998 federal budget, has not changed significantly. They would seek $30 million in next year's federal budget providing a net of $40 million in federal grants. TheDCRA loan would provide $20 million. The balance would be from the annual 40% from the 4 Dam Pool debt service and any current funds on hand from previous 4 Dam Pool debt service appropriations. They would look to AIDEA for a $5 to $10 million bridge construction loan. The AIDEA loan would serve to provide funds to bridge the period until an adequate amount to cover all construction costs from the 40% 4 DP debt service was received. Their plan is to secure the AIDEA loan by the general revenues of KPU. They would not use the DCRA or potential AIDEA loan in 1998. They would limit expenditures in 1998 to $10 million and halt construction if they did not get the $30 million federal grant. Regarding the PSA, they will have a proposal at the October 23, 1997 4 Dam Pool PMC meeting, but will not request action at that meeting. Dennis ? Dennis McCrohan Tt 21 L.| From: Katelyn Ohmer Sent: Monday, September 22, 1997 1:48 PM To: Randy Simmons; Dennis McCrohan; Keith Laufer Subject: Congressional $$ FYI, | talked to Larry and remembered to ask about the Intertie $$ in the Congressional budget. Short answer: Conference committee has not been named yet. The $20 million for the SE intertie is in the Senate version, nothing in the House version. Larry says it has a good chance of getting a large chuch of the $$ in the final version of the bill -- if Sen. Stevens is willing to fight for it. Larry thinks it is a long shot to get additional $$ for Snettisham in the budget -- but the $2 plus million is in for now. He is continuing to work on it. Katelyn Ohmer Markley "The past is history, the future is a mystery, the moment is a gift, that is why it's called the present." - The Seven Spiritual Laws of Success 20,38) Mut KPO 373M DSourrcrer_} | |. Stets\ean (1S Y7@ 3.0%) #20 2. FAR Fed. anot 20 a FY Gt Fed. cnout 20 ia \, 20,381 MWN@ 6.2cods/evt $1.26 ™ Ma ee Re Se. Ch NSS 1 30 FA |. Stake loan (‘Sine 3%) mat | M4) 2. keto. O2M(4 , ¢ conta (Kvoit\ ar AT te 3. DWER \oan( 10M © 8% VOR) Lec... Vt ( © XL 2) .2 ( St\@ eH soYR) YM *K A. ADP = (6.2 conta (Aut I. 2..0 u y oe § 44.88.155 State GovERNMENT 722 Sec. 44.88.155. Enterprise development account. (a) The enterprise develop- ment account is established in the revolving fund. The enterprise development account is a trust fund for the uses and purposes of this chapter. The enterprise development account consists of money or assets appropriated or transferred to the authority and other money or assets deposited in it by the authority. (b) The authority may establish in the enterprise development account the accounts it considers appropriate. (c) Money and other assets of the enterprise development account may be used to secure bonds of the authority issued to finance the purchase of loans for projects or may be used to purchase participation in the loans for projects. (d) A loan participation purchased by the authority with assets of the enterprise development account or with proceeds of bonds secured by assets of the enterprise development account (1) ‘may not exceed $10,000,000; however, in the case of a loan participation for a power — inten ieutieenl rs 1.$10,000,000 ith legisl approval; (2) may not be purchased unless (A) the project applicant is not, or, if the applicant is not a single proprietorship, all members of the business enterprise or enterprises constituting the project applicant are not, in default on another loan made by the state or by a public corporation of the state; and (B) at least 20 percent of the principal amount of the loan is retained by the loan originator; (3) may not be purchased if the loan to be purchased exceeds the cost of the project or 75 percent of the appraised value of the project, whichever is less, unless the amount of the loan in excess of this limit is federally insured or guaranteed or is insured by a qualified mortgage insurance company; (4) may not be purchased if the participation in the loan to be purchased is for a term longer than three-quarters of the authority's estimate of the life of the project or 25 years from the date the loan is made, whichever is earlier; however, in the case of a loan — participation for a power transmission intertie, the term may not be longer than 50 years _ (5) may be made only if the participation in the loan to be purchased contains amortization provisions; the amortization provisions (A) must be complete and satisfactory to the authority and require periodic payments by the borrower; (B) may allow the loan originator to amortize the portion of the loan retained by the loan originator using a shorter amortization schedule than the amortization schedule for the portion of the loan held by the authority if (i) in the authority’s opinion, the project financed can support the increased debt service; and (ii) the accelerated amortization schedule is required to induce the originator to make the loan; (6) may be made only if the participation in the loan to be purchased is in the form and contains the terms and provisions with respect to insurance, repairs, alterations, payment of taxes and assessments, default reserves, delinquency charges, default remedies, acceleration of maturity, secondary liens, and other matters the authority prescribes; and (7) may be made only if the participation in the loan to be purchased is secured as to repayment by a mortgage or other security instrument in the manner the authority determines is feasible to assure timely repayment under a loan agreement entered into with the borrower. (e) The authority may adopt regulations for the administration of the enterprise development account including, without limitation, provisions for fees and agreements Axaska InDustRIAL DEVELOPMENT AND Export AUTHORITY § 44.88.159 723 relating to application, loan commitment, servicing, and origination of loans by other lenders. (f) The authority may enter into agreements as to the use of the money in the enterprise development account, including without limitation, trust or custody arrange- ments with banks or trust companies. It may also pledge, assign, or grant the agreement, interests under an agreement, or interests in the enterprise development account as may be necessary or appropriate to provide for payment and security for bonds of the authority . issued to finance the purchase by the authority of loans for projects. (h) The provisions of this section apply only with respect to a loan participation purchased by the authority for projects under AS 44.88.155 — 44.88.159. (§ 65 ch 106 SLA 1980; am § 38 ch 115 SLA 1981; am § 7 ch 162 SLA 1984; am §§ 21— 27 ch 42 SLA 1987; am § 32ch 141 SLA1988; am §§ 12— 14ch 123 SLA1990; am § 1 ch 25SLA1991; am §§ 5 — 7 ch 51 SLA 1992; am §§ 24, 25 ch 18 SLA 1993) Revisor’s notes. — Enacted as AS 44.61.155. Re- numbered in 1980. Effect of amendments. — The 1990 amendment, effective June 15, 1990, substituted “the accounts” for “a small enterprise loan account, a loan insurance account, and other accounts” in subsection (b); deleted “and shall be held and invested by the authority in accordance with AS 37.10.071” after “projects” in sub- section (c); deleted former subparagraph (dX1XB), which provided “$500,000 if the loan is purchased under AS 44.88.158”; substituted “20 percent” for “10 percent” and inserted “as long as the loan is outstand- ing” in subparagraph (dX7XA); deleted former sub- paragraph (dX8)A), requiring a partial guarantee of a loan by the United States or an agency or instrumen- tality thereof; and made related stylistic changes. The 1991 amendment, effective June 11, 1991, re- wrote paragraphs (d4) and (dX7). The 1992 amendment, effective June 11, 1992, sub- stituted “may be used to purchase participation in the loans” for “shall be used to purchase loans” in subsec- tion (c), rewrote subsection (d), and substituted “to a loan participation purchased by” for “to loans pur- chased or made by” in subsection (h). The 1993 amendment, effective August 11, 1993, in subsection (d), added “however, in the case of a loan participation for a power transmission intertie, the loan participation may exceed $10,000,000 with legis- lative approval” to the end of paragraph (1) and “however, in the case of a loan participation for a power transmission intertie, the term may not be longer than 50 years from the date the loan is made” to the end of paragraph (4); and, in subsection (g), added “or in order to finance a power transmission intertie project” to the end. Sec. 44.88.156. Multi-family housing loan account. [Repealed, § 44 ch 42 SLA 1987.] Secs. 44.88.157, 44.88.158. Loan insurance and loan insurance account; small business enterprise loan account. [Repealed, § 23 ch 123 SLA 1990.] Sec. 44.88.159. Interest rates. (a) The interest rate on a loan participation pur- chased from the proceeds of tax-exempt bonds or expected by the authority to be purchased from the proceeds of tax-exempt bonds is equal to the cost of funds to the authority. In this subsection “cost of funds” means the true interest cost expressed as a rate on tax-exempt bonds of the authority plus an additional percentage as determined by the authority to represent the allocable expenses of operation, costs of issuance, and loan servicing. (b) The interest rate on a loan participation purchased from the proceeds of taxable bonds or expected by the authority to be purchased from the proceeds of taxable bonds is equal to the cost of funds to the authority. In this subsection “cost of funds” means the true interest cost expressed as a rate on taxable bonds, plus an additional percentage as determined by the authority to represent the allocable expenses of operation, costs of issuance, and loan servicing costs. (c) (Repealed, § 23 ch 123 SLA 1990.] (d) The provisions of this section apply only to a loan participation purchased under AS 44,88.155 — 44.88.159. (10) a detailed estimate of the cost of construction; (11) an estimate of the number of jobs to be created or retained by this project; (12) if the loan is to be secured by real property, a narrative appraisal report acceptable to the authority estimating the fair market value of the project in a format consistent with standards established by the American Institute of Real Estate Appraisers or Society of Real Estate Appraisers, including a cost approach, a market approach, and an income approach; (13) if the !oan is for the purchase of tangible personal property, an appraisal! in a format acceptable to the authority prepared by an appraiser who is acceptable to the authority; (14) copies of leases or agreements to lease or renew a lease between the applicant and project tenants, including a list of tenants, lease rates, terms and options; (15) if required by the authority, a financial feasibility analysis satisfactory to the authority; (16) an environmental risk assessment satisfactory to the authority, followed by an environmental audit if required by the authority; and (17) any other information considered necessary by the authority to evaluate the application. (In effect before 1988; am 1/11/88, Register 106; am 11/30/90, Register 118; am 7/19/91, Register 119; am 9/25/92, Register 124) Authority: AS 44.88.080 AS 44.88.085 AS 44.88.155 3 AAC 99.330. TERMS OF REAL PROPERTY LOANS. (a) The authority will participate in a loan made by an originator to acquire land or to acquire or construct buildings, improvements, and structures on land, only if the loan satisfies the conditions prescribed in this section. (b) The amount of the authority's participation in a real property loan will not exceed inerte and te Asia State Leite tas approved te aus partcoaton i i tate Legi i . The principal amount of a real property loan may not exceed, (1) for the purchase of an existing project, 75 percent of either the appraised value or purchase price of the project, whichever is less; (2) for the construction of a new project, 75 percent of the appraised value of the project or 90 percent of the cost of construction of the project, including land acquisition cost, as certified by the applicant and originator and approved by the authority, whichever is less; or (3) for a loan to refinance an existing loan, the lesser of 75 percent of the appraised value of the project or the outstanding principal balance of the loan to be refinanced, plus associated costs of the refinancing. (c) A real property loan must be secured by a mortgage which is a first lien on real property in fee simple or on a leasehold estate except as provided in (i) of this section. The authority will, in its discretion, review and approve other encumbrances against the real property that do not affect the authority's security for the loan. (d) or a real property loan other than a real property loan described in the preceding sentence, the term may not exceed 25 years or 75 percent of the estimated economic life of the project, whichever is less, as determined by the authority. The loan terms for any real property loan must require complete amortization provisions and require periodic payments by the borrower. (e) The authority may allow the loan originator to amortize its portion of the loan using a shorter amortization schedule than the authority 12/1/96 Page 12 * ME =SENERGY AUTHORITY 1H | oll ae , IES AUASIAND EXPORT AUTHORITY => ALASKA * —_ * 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 MEMORANDUM TO: Jim Ayers Chief of Staff Office of the Governor FROM: D. Randy Simmons Executive Director Mike Irwin Commissioner Department of Community and Regional Affairs DATE: September 25, 1997 SUBJECT: Southeast Intertie Introduction Construction of the Southeast Intertie has capital construction cost and operational implications to the state. Capital. As a result of the pulp mill closure impact on energy demand, Ketchikan Public Utilities (KPU) now plans to fund the $73 million capital construction costs through a combination of federal grants ($20 million grants this FFY and next FFY), Southeast Energy Fund (SEF) grant funds of $13 million ($11 million has already been received by KPU), and a $20 million DCRA Power Project Fund loan. KPU has notified AIDEA that its preliminary cash flow projections indicate a $5 to $10 million bridging loan will be required to fund construction until the second federal grant is received. AIDEA’s authority to issue a bridging loan and the financial ability of KPU to make the repayment must be addressed. Operational. KPU is preparing a draft power sales agreement for the purchase of “surplus” power from the Four Dam Pool. With the unanimous consent of AEA and the purchasing utilities “surplus” power may be sold at rate less than the wholesale power rate charged to each dedicated hydroelectric project's utilities. KPU will request a short term power sales rate less than the project's operation and maintenance cost rate (expected to be somewhere between 0 to 2¢ per kwh) without any debt sefvice DRAFT Kf al} Pepodele Pretgg Me: CONFIDENTIAL Deliberative Process Stuffers J Dibra he Per Jim Ayers, Chief of Staff September 25, 1997 Page 2 payment. The sale of power at less than the Four Dam Pool wholesale rate which is currently 6¢ (2¢ for operation and maintenance and 4¢ for debt service) raises several policy issues related to the tradeoffs between development of the Southeast Intertie, AEA’s increased project liabilities, and precedent for other projects. History and Current Status Several studies on an intertie to connect the Swan Lake and Tyee Lake hydroelectric projects were undertaken between 1982 and 1992. R.W. Beck prepared a feasibility study in 1992 that found construction of the Intertie to be feasible and the most economic source of power for Ketchikan Public Utility (KPU). In 1993, the legislature appropriated 40% of the Four Dam Pool Transfer Fund to the Southeast Energy Fund, which funds were provided to KPU for the Intertie. Other provisions of the 1993 legislation authorized AIDEA to issue $40 million in bonds and also appropriated $20 million from the Railbelt energy fund to the Power Project Fund administered by DCRA. The $20 million was set aside for a loan at three percent for a term of 15 years. Since the 1992 feasibility study by R.W. Beck, closure of the pulp mill has significantly impacted the demand projections. KPC purchased surplus power from the Swan Lake Project, but also provided an alternative power supply source during outages of the -Swan Lake Project. A sawmill project at the site of the KPC mill may purchase up to 4 megawatts' of power from KPU’s system or decide to use the KPC steam generation facilities instead. No decision or agreement has been reached. In 1996 R.W. Beck prepared an Initial Draft Power Supply Planning Study for KPU. That study analyzed the various alternative sources of power and well as the needs for power under low, medium and high load growth projections. Based on the KPC closure, Beck anticipates that demand will likely be at the low growth projection. With respect to the Intertie as a source of power, the Beck study assumed that all costs of construction and operation (and apparently energy transfers) for the project would be borne by the Four Dam Pool or the state. Beck’s study further assumed KPU would pay a Four Dam Pool wholesale power rate of 6.6¢. Under those assumptions, the Intertie did not provide the lowest cumulative cost for any of the three scenarios, but was one of the lower cost alternatives. Funding is the key to the $73 million project's feasibility. To date, KPU has received approximately $11 million in grant funds from the Southeast Energy Fund and anticipates receiving a total of $13 million within the next two years. Under the 1993 legislation $20 million was appropriated to the Power Project Fund administered by DCRA for a 15 year, 3% interest project loan. The legislation also authorized AIDEA to ' For comparison purposes, Swan Lake generates 22 megawatts of power. DRAFT CONFIDENTIAL Deliberative Process Jim Ayers, Chief of Staff September 25, 1997 Page 3 issue up to $40 million in bonds to finance the project, but repayment of those funding sources through power sales is questionable. Recently the U.S. House of Representatives passed the Energy and Water Development Appropriations Bill for FFY 98, H.R. 2203, which included a $20 million appropriation for the project. The bill has passed out of committee and is before the U.S. Senate. An additional $20 million is scheduled for next FFY. The final EIS and record of decision were issued in August. The route approved for construction is a 57-mile route from Swan Lake to Shrimp Bay, across Bell Island, by Eagle Lake to Eagle Bay and into the Tyee powerhouse. Except for some foundation geotechnical work, project design will be completed this year. KPU anticipates beginning the first phase of construction early in 1998. The first phase, estimated at $36 million, entails right of way clearing, foundations and ordering long lead-time items. Before the project proceeds, feasibility issues involving the financing and operation of the project, AIDEA loan authority, and issues associated with the sale of “surplus” power must be addressed. Issues and Recommendations qe Project Feasibility Due to the change in economic conditions caused by the KPC mill closure and the assumptions made in the Initial Draft Power Supply Planning Study, adequate information is not available to determine the impact of power demand on the project's feasibility or financing. Absent grant funding for the entire project cost or participation in the project by third parties, there will be a repayment obligation that requires a funding source, presumably impacting energy sales rates. Until a power sales agreement is negotiated with the Four Dam Pool, the cost of power, any maintenance and operation costs, and wheeling costs are speculative. The cost of power must also be established before the project's viability can be determined. Three areas of project feasibility must be addressed: power demand, funding, and sale of power from the Four Dam Pool Tyee Lake Project. A. Feasibility Issue - Power Demand The KPC closure renders the 1992 feasibility study demand projections obsolete. Until the economy settles from the impact of the closure and a decision on the sawmill’s usage of 4 megawatts occurs, demand projections are uncertain. In its 1996 Initial Draft Power Supply Planning Study, R.W. Beck stated that its forecast would require adjustment for the loss of local employment. Beck expected no growth in power demand in the near term and concluded the low load scenario of the 1992 study was most currently applicable. DRAFT CONFIDENTIAL Deliberative Process Jim Ayers, Chief of Staff September 25, 1997 Page 4 The Beck study assumption that the Intertie’s costs of construction and operation would be borne by others does not reflect the current situation, nor does it provide any analysis on the cost of power and project benefits if KPU must pay a portion of those costs. An analysis of the demand and power rates based on varying levels of KPU participation are necessary to adequately assess the project costs and benefits. B. Feasibility Issue - Funding The preferred alternative’s cost estimate is $73.2 million. Assuming $13.2 million in SEF grants, ($11 million already received and $2.2 million over the next two years) and assuming that KPU will receive $20 million in federal grants in the FFY 98 and FFY 99 budgets, the $20 million Power Project Fund Loan will be required. KPU also foresees the need for a construction bridging loan of $5 to $10 million to cover cash flow needs until the second $20 million federal grant is received. The recent studies do not address KPU’s ability to repay any amount of debt service. Based on the low load growth scenario discussed in the Beck report, it appears that KPU must either raise rates to include debt service (and operational costs), obtain additional grants to reduce the debt service levels, add financial participants to the project, or obtain significant rate reductions from the Four Dam Pool. At one time the City of Ketchikan requested the Governor to convert the $20 million Power Project Fund Loan appropriation to a grant to reduce the debt service level; however, the latest preliminary proposals by KPU reflect a loan rather than a grant. C. Feasibility Issue - Power Sales Agreement As the dedicated facility for Wrangell Municipal Light and Power (WMLP) and Petersburg Municipal Power and Light (PMPL), the Tyee Lake project must first meet the power demands of those utilities. Any additional power generated by the dedicated project is considered surplus power and may be sold. Unless the Four Dam Pool Purchasing Utilities agree otherwise, any surplus power sold to KPU must be at, or greater than, the wholesale rate charged to the other Purchasing Utilities. Since the Tyee Lake Project is not the dedicated facility of KPU, nor is the Swan Tyee Intertie part of the initial Four Dam Pool facilities, KPU must enter into a separate power sales agreement with AEA and the Purchasing Utilities to establish the power sales rate. That agreement will need to resolve incremental generation and transmission operational costs and reserves issues, as well as wheeling rates for transmission of power between the interconnected utilities. The two Four Dam Pool utilities outside of Southeast Alaska, Kodiak Electric Association and Copper Valley Electric Association, have higher retail rates than the three Southeast utilities. Those utilities have unsuccessfully sought reduced wholesale rates for large commercial customers. Sale of surplus power to Ketchikan for less than the wholesale power rate will likely bring that issue to the forefront. DRAFT CONFIDENTIAL Deliberative Process Jim Ayers, Chief of Staff September 25, 1997 Page 5 2. AIDEA Authority to Finance Bridging Loan: AIDEA’s loan program may consider a loan of this magnitude without legislative authorization; however, bank participation would be required. Due diligence would be necessary to review the viability of KPU’s financial plan and load growth projections. An outside utility consultant would be required. Should KPU request AIDEA’s participation as a partial owner of the project under the development finance program, a legal opinion determining if the 1993 legislation authorizes such participation will be required. 3. Surplus Power v. Wholesale Rate Issues: AEA, as a member of the Four Dam Pool, must vote on any modification to the Power Sales Agreement. The Southeast Intertie would use a state asset to provide energy which would increase the Tyee project's variable operating costs and AEA’s renewal and replacement liability. Interconnection may lead to wheeling of power between the Ketchikan, Petersburg, and Wrangell utilities across the existing Tyee Transmission line. A determination must be made on the extent state assets and increased state liabilities should be assumed to support development of the Southeast Intertie and transmission interconnection between the three Southeast utilities. It would be reasonable to assume that the Southeast Intertie rate should include an increment for Tyee Lake debt service, reserve and replacement costs, and a rate structure for wheeling of power over the Tyee Transmission line. Depending upon policy considerations, a range of alternative payment options exist. That range extends from a waiver payment for either, or both, generation or transmission costs to foster the development of the Southeast Intertie; through reduced payments in early years with increase payments in later years; to full payment of all state liabilities, including Four Dam Pool debt service and operational costs. Recommendation KPU should: 1. Negotiate a power sales agreement to establish the cost of wholesale power. 2. Develop a sensitivity analysis that addresses the cost of the project, project financing and funding alternatives, wholesale power rates, operation and maintenance costs and any wheeling costs for analyzing project feasibility, financing, and rate requirements. The sensitivity analysis should establish a range of scenarios from full funding through grants, to various levels of grant and debt financing, as well as additional funding of various amounts by other participating parties. Rate impacts should be addressed in each case and project benefits determined. AIDEA upon receipt of Ketchikan’s official request for financing and a power sales DRAFT CONFIDENTIAL Deliberative Process Jim Ayers, Chief of Staff September 25, 1997 Page 6 agreement should proceed with investigation of a bridging loan, the surplus power sale rate and wheeling rates. Staff with minor assistance from financial consultants should be able to address the feasibility and due diligence issues. Staff would also require minor assistance from its Four Dam Pool risk consultant on the wholesale power and wheeling rate issues. Expected Proponents: City of Ketchikan (Ketchikan Public Utilities) City of Petersburg City of Wrangell Senator Robin Taylor Expected Opponents: Kodiak Electric Association Copper Valley Electric Association cc David Ramseur Pat Pourchot Annalee McConnell DRAFT CONFIDENTIAL Deliberative Process Jim Ayers, Chief of Staff September 25, 1997 Page 7 bec: Lamar Cotton, DCRA Percy Frisbee, DCRA Keith Laufer, AIDEA Dennis McCrohan, AIDEA DRAFT CONFIDENTIAL Deliberative Process Fle @ i ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY /= ALASKA im = ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 MEMORANDUM TO: D. Randy Simmons Executive Director a FROM: Dennis V. McCrohan, P.E. TOW Deputy Director — Project and Operations DATE: September 18, 1997 SUBJECT: AIDEA Participation Southeast Intertie | have received calls from Rich Trimble and Alan Daschen regarding the Southeast Intertie. Attached are Ketchikan Public Utilities’ (KPU) memos describing the status of the project. KPU will be approaching AIDEA for assistance of some manner in their financing plan. The background information is: 1 The current project cost is estimated to be $73M. The fund sources will be: a current $11M from PDRLF from the 40% share of the 4 Dam Pool debt service, one or two additional years of 4 dam Pool 40% debt service, $20M approved State loan, $20M Federal grant assured by KPU lobbyist to be in this year’s Federal budget, and $20M less certain Federal grant in next year’s budget. 2. KPU wants to start construction next year but will not have the final $20M commitment from the Federal source and will not have adequate cash reserves on hand to fund the project. 3. In the first 5 years of operation, the Intertie will not generate sufficient revenue to pay for the O&M costs and debt service. 4. KPU will propose in the next 4 Dam Pool meeting a very significant reduction in the wholesale power rate specific to the Southeast Intertie. This could vary from nil to O&M cost only. 5. KPU will be requesting from AIDEA, directly or through legislation, a loan to bridge fund the first year of construction until the second Federal grant is received. We will be receiving in the very near future a project description and related financial pro forma. | stated that we would review the information. | would make sure that Randy Simmons received the information so that AIDEA may consider if such a loan were feasible under AIDEA guidelines. In addition, we need to discuss internally AEA’s response to any proposals on a special wholesale power rate for the Southeast Intertie. Please let me know if you have any questions. Attachments ce: Keith A. Laufer, Finance and Legal Affairs Manager Robert Poe, Business Development Manager James A. McMillan, Deputy Director — Credit @9-17-1897 13:25 9¢ 25 1888 KPU #1 P.Q1 Post-it? Fax Note KETCHIKAN PU Memorandum To: Honorable Alaire Stanton & City Co From: John A. Magyar, KPU General Manager Date: September 14, 1997 Subject; _ | Swan-Tyee Intertie Schedule The Forest Service has announced the release of the Record of Decision for the Swan-Tyee Intertie. This brings us near conclusion of the 3 year and $2 million permitting effort. The decision reached by the Forest Service permits construction of the most direct route (alternative 2), Staff is continuing to plan for 1998 - 1999 construction by KPU of the Swan-Tyee Intertie as noted at the last Council meeting. Our intent is to provide Council the information necessary at the November 6 meeting to proceed with the project, specifically; 1) Status of agreements with AIDEA and the Four Dam Pool for financing and power sales, 2) Intertie revenue/cost assessment by our financial consultant, Alan Dashen. 3) R. W. Beck opinion comparing this project to the alternatives. 4) Institute of Social and Economic Research (University of Alaska, Anchorage) opinion regarding future electric load growth. If the City Council approves the resolution for a special election, staff intends to solicit bids for construction beginning in November. Bid opening would occur in January. Council would have the opportunity to consider award of this contract in February, shortly after the special election. In support of a February decision to fund and authorize the construction contract, Staff is providing notice to R. W. Beck to perform an update to the Power Supply Planning Study. This update will be based on a revised electric load forecast by the Institute of Social and Economic Research. We anticipate distribution of this update in early January. In summary, there are two key decision points for the City Council in authorizing KPU construction of the Swan-Tyee Intertie. The first is in November when staff will seek a Council resolution authorizing a special election for KPU funding. The second will be in February, shortly following the special election, awarding the construction contract. HS USER\RICHT\WINWORD'TEMPS.DOC @9-17-1997 13:26 a 25 1888 KPU #1 KETCHIKAN PUBLIC UTILITIES Memorandum To: Honorable Alaire Stanton & City Covacih From: John A. Magyar, KPU General Manager ; a7 Date: August 28, 1997 Subject: Swan-Tyee Intertie Update The purpose of this memorandum is to update you regarding various aspects of the Swan-Tyee Intertie project. Ownership The State legislation passed in 1993 set up certain financing for KPU to design and construct the Swan-Tyee Intertie. Considering that both the Swan Lake and Lake Tyee projects are owned by the State of Alaska, we have suggested in the past thar the State (or a divested Four Dam Pool) own and operate this project rather than KPU. Now that we are anticipating additional grant assistance, and given the uncertain future ownership of the Four Dam Pool assets, staff suggests there may be economic advantage to the City to own and operate this project. Financing Raytheon and KPU are planning for a construction contract bid period in December with award in February, 1998. Construction would occur over a two year period, with completion in late 1999. Total project cost with financing phased over the two year construction period is $73 million broken down as follows. The 1998 construction cost is about $36 million. The 1999 construction cost is the remaining $25 million. Other costs (permitting, engineering, construction management, etc.) are about $12 million. We are planning to cover construction costs with nwo $20 million federal grants (over FY 1998 and FY 1999) and a $20 million State of Alaska loan at 3% over 15 years. Other costs are planned to be covered by our existing State of Alaska grants totaling $11.2 million with perhaps another year or two of State grants from 40% of the Four Dam Pool debt service payments. There are certain issues which have to be resolved for this plan to work. This does entail a $20 million debt by the City of Ketchikan, with associated voter approval, at some point in this project. Our objective is to arrange our cash flow and financing such that we do not incur this debt until we are certain of the FY 1999 federal grant in mid-1998. Since the early years of the project have the lowest energy sales, we need to arrange our power sales agreement and our debt service to mitigate our costs in the early years. H:\USER\NANCYL\WPIDATAW07-23.MEM AW ou @9-17-1997 13:27 a 25 1888 KPU #1 P.@3 Memorandimm—Mayor and Clty Council, Swan—Tyes Update August 28, 1997 _ Page Construction Management As noted during Raytheon’s presentation to Council last mouth, KPU is working with them to develop an acceptable plan for inspection. An outline of that plan is attached for your review. This inspection schedule is more comprehensive than originally envisioned when our contract with Raytheon was executed, but we are anxious to avoid the kind of problems that have occurred during construction of other major transmission lines in this region, The additional cost of this program is still being negotiated but is expected to be well within the contract contingency. Near-term activities We continue to anticipate the release of the Final EIS and Record of Decision by the USFS shordy. KPU will be working with the Finance Director and various consultants over the next couple of months to refine the construction financing plan, including the schedule of voter approval and acceptance of the $20 million State loan for Council’s consideration and approval. KPU also will be working to develop a draft power sales agreement with the Four Dam Pool. In October, KPU will conduct a review of the draft Raytheon design, which is expected to be released for bidding in late November. JAM:RDT:all Amachments H:\USERINANCYL\WPIDATAWO7-Z3,. MEM @9-16-1 Stiw 997 14:21 9 25 1888 aid fe 1 OX ages P.0 f vrs SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE PROJECT Ketchikan Public Utilities, 2930 Tongass Avenue, Ketchikan, Alaska 99901 (907) 225-1000 - Fax: (907) 225-1888 September 16, 1997 TO: Tom Friesen, PMC Representative (KPU) 225-0568 Dennis Lewis, PMC Chairman (PP&L) (907) 772-9287 Dave Carlson, PMC Representative (PP&L) (907) 772-3064 Terry Nikodym, PMC Representative (WL&P) (907) 874-3952 Scott Seabury, Alternate PMC Representative (WL&P)(907) 874-3952 Tim Gillen, WL&P Foreman (907) 874-3952 Walt Sapp, PMC Representative (KEA) (907) 486-2441 Bill Beaty, Alternate PMC Representative (KEA) (907) 486-7760 Ed Kozak, KEA General Manager . (907) 486-7720 :.' Robert Wilkinson, PMC Representative (CVEA) (907) 822-5586 Mike Easely, Alternate PMC Representative (CVEA) (907) 835-4328 Dennis McCrohan, AIDEA (907) 269-3044 ‘:! Stan Sieczkowski, AIDEA (907) 269-3044 Ray Alt, TBPA General Manager (907) 874-2581 John Magyar, KPU General Manager Tom Waggoner, KPU Electric Division Manager _—— FROM: _ Richard Trimble GE SUBJECT: Swan-Tyee Intertie - Final Design Review We will be conducting a final design review of the Swan-Tyee Intertie project in Ketchikan the week of October 20 - 24, As before, we are asking for your participation in this review. This will be a comprehensive review, including the design, constructability, ease of maintenance and operation, as well as bidding and contract terms. We invite you to assist us with this review. The investment of your time will help to insure the success of this project. I will be sending out more information as it becomes available. Please RSVP as soon as possible with Kathy Hustead at 225-1000 x 321 will be coordinating your lodging and travel reimbursement. ma Tuk Bon nd wowed : Merrill Peacock, KPU Electric Plant Engineer * Dave Noae, KPU Electric Engieeriog Techniolan No Yorandus 3 Ron Setije, KPU Administrative Manager Jaff Paine, Raytheon Project Manager = — Creuse (a ttococl ent & ge F |e. SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE PROJECT — 2930 Tongass Avenue, Ketchikan, Alaska 99901 | D ) (907) 225-1000 (907) 228-5494 Message (907) 225-1888 Fak FAX TO: PETE ECKLUND 1/21/97 t-Developm REP. WILLIAMS OFFICE K1951_ ct Authority (907) 465-3793 1020 FROM: RICHTRIMBLE 47 SUBJECT: INTERTIE FINANCING Pete, The following is provided in response to your request to detail the costs and responsible parties for the Swan-Tyee Intertie project. Sheet A shows our financing strategy before the Pulp Mill announce its closure. There were two key elements that made the cash flow work. One was the sale of 4 MW to KPC. They had requested 5 MW and negotiations for that sale were in progress during the first half of 1996. The other was an additional $10 million from the State in grants. Since legislation existed for $4 million in grants each year, we felt the State would consider a final payment of $10 million reasonable. Sheet B shows how the closure of KPC impacts the cash flow. The loss of the Pulp Mill destroyed the economics of this project, even with the $10 million grant. Sheet C shows our new strategy. We are asking the State to forgive the $20 million loan. We are also seeking a federal grant. The combination of these two grants brings the project back to the same cash flow as we were projecting at the beginning of 1996. I would envision an agreement with the Four Dam Pool for the purchase of Tyee surplus power slightly below the current wholesale rate. The agreement would allow the gross revenue to fund debt service and O&M for the Intertie. The agreement would also have to allocate risk, profit a and loss between the Four Dam Pool, the State and KPU. I expect O&M to be performed by some combination of the operators of the Tyee and Swan projects (Thomas Bay Power Authority and Ketchikan Public Utilities) but regardless of who performs the work, it would be funded from gross revenues of Intertie energy sales. Thanks, Rich Ram Ng SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE SWAN-TYEE INTERTIE REVENUE PROJECTION (BEFORE PULP MILL CLOSURE) ADDITIONAL STATE FUNDING: $10 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.064 19968 INTERTIE CAPITAL COST (1997$) $69,800,000 INFLATION: 3.0% FY 94 GRANT (1997$): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (1997$): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (1997$): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997$) $58,575,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWh): 144700 ADDITIONAL STATE FUNDING: $10,000,000 REMAINING CAPITAL COST (1997) $28,575,738 SALES INCOME Costs NET YEAR INTERTIE PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME GENERATION O&M LOAN BOND REVENUE INCOME COST COST NET $0.040 $0.024 $0.0025 $20,000,000 $28,575,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) | ($s) ($s) ($s) ($s) (Ss) ($s) ($s) 1999 55421; $2,216,838 $1,453,439 $138,552 $133,626 $1,675,332 $2,188,257 ($465,490) 2000 57549) $2,301,958 $1,554,524 $143,872 $137,635 $1,675,332 $2,188,257 ($288,614 2001 59404) $2,376,158 $1,652,771 $148,510 $141,764 $1,675,332 $2,188,257 Rell 2002 60768) $2,430,718 $1,741,442 $151,920 $146,017 $1,675,332 $2,188,257 $10,635 2003 62045! $2,481,798 $1,831,379} $155,112 $219,609 $1,675,332 $2,188,257 $74,867 2004 63686; $2,547,438 $1,936,211} $159,215 $154,909 $1,675,332 $2,188,257 $305,936 2005 65896) $2,635,838 $2,063,502 $164,740 $159,556 $1,675,332 $2,188,257 $511,455) 2006 68501} $2,740,038 $2,209,429 $171,252 $164,343 $1,675,332 $2,188,257 $750,283 2007 71430) $2,857,198 $2,373,018 $178,575 $169,273 $1,675,332 $2,188,257 $1,018,779 2008 74632) $2,985,278 $2,553,775 $186,580 $415,057 $1,675,332 $2,188,257 $1,073,827 2009 77829) $3,113,158 $2,743,066 $194,572 $250,026 $1,675,332 $2,188,257 $1,548,037 2010 79596) $3,183,821 $2,889,489 $198,989 $257,527 $1,675,332 $2,188,257 $1,753,205 2011 78691 $3,147,651 $2,942,362 $196,728 $265,253 $1,675,332 $2,188,257 $1,764,444 2012 77773| $3,110,925 $2,995,273 $194,433 $273,210 $1,675,332 $2,188,257 $1,774,965 2013 76841} $3,073,634 $3,048,149 $192,102 $681,370 $1,675,332 $2,188,257 $1,384,722 2014 75894| $3,035,769 $3,100,916) $189,736 $358,311 $2,188,257 $3,400,382 2015 74933] $2,997,322 $3,153,494 $187,333 $369,061 $2,188,257 $3,406,166 2016 73957) $2,958,284 $3,205,794 | $184,893 $380,132 $2,188,257 $3,410,796 2017 72966| $2,918,646 $3,257,724} $182,415 $391,536 $2,188,257 $3,414,161 2018 71960) $2,878,397 $3,309,184 $179,900 $1,158,090 $2,188,257 $2,661,335 2019 70938; $2,837,530 $3,360,066 $177,346 $517,827 $2,188,257 $3,314,167 2020 69901} $2,796,034 $3,410,256 $174,752 $533,362 $2,188,257 $3,309,919 2021 68847} $2,753,899 $3,459,632! $172,119 $549,363 $2,188,257 $3,303,792 | 2022 67778) $2,711,116 $3,508,061 | $169,445 $565,843 $2,188,257 $3,295,632 | 2023 66692 | $2,667,675 $3,555,406 $166,730 $1,557,850 $2,188,257 $2,310,244 | 2024 65589! $2,623,565 $3,601,516 $163,973 $600,303 $2,188,257 $3,272,548 2025 64469; $2,578,776 $3,646,233 $161,174 $618,312 $2,188,257 $3,257,267 | 2026 63332; $2,533,299 $3,689,389) $158,331 $636,862 $2,188,257 $3,239,237 | | 2027 62178| $2,487,121 $3,730,802! $155,445 $655,968 $2,188,257 $3,218,253 | | 2028 61006} $2,440,233 $3,770,281 | $152,515 $2,994,269 $2,188,257 $875,473 NET PRESENT VALUE: 5.5% $19,700,212 ‘Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEE INTERTIE REVENUE PRUsECTION SHEET B (AFTER PULP MILL CLOSURE) ADDITIONAL STATE FUNDING: $10 MILLION KPC FIRM SALES: 0.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.064 1996$ INTERTIE CAPITAL COST (19978) $69,800,000 INFLATION: 3.0% FY 94 GRANT (1997): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19973): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19978): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997$) $58,575,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $10,000,000 REMAINING CAPITAL COST (1997) $28,575,738 SALES INCOME | 5 costs NET YEAR INTERTIE| PMC DEBT PMC O&M | TYEE INTERTIE STATE MORAL OBL. INTERTIE | SALES | SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME | COST cost NET | $0.040 $0.024 | $0.0025 $20,000,000 $28,575.738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 20381 $815,238 $534,499 $50,952 $133,626 $1,675,332 $2,188,257 ($2,698,430 2000 22509) $900,358 $608,016 $56,272 $137,635 $1,675,332 $2,188,257 ($2,549,121 | 2001 24364) $974,558 reall $60,910 $141,764 $1,675,332 $2,188,257 ($2,413,83 2002 25728 | $1,029,118 $737,292 $64,320 $146.017 $1,675,332 $2,188,257 ($2,307,515 2003 27005; $1,080,198 $797,104} $67,512 $219,609 $1,675,332 $2,188,257 race 2004 28646! $1,145,838 $870,908 $71,615 $154,909 $1,675,332 $2,188,257 ($2,073,367 2005 30856; $1,234,238 $966,240 | $77,140 $159,556 $1,675,332 $2,188,257 ($1,899,807 2006 33461| $1,338,438 $1,079,249) $83,652 $164,343 $1,675,332 $2,188,257 ($1,693,897 2007 36390) $1,455,598 $1,208,933} $90,975 $169,273 $1,675,332 $2,188,257 ($1,459,306 2008 39592! $1,583,678 $1,354,767! $98,980 $415,057 $1,675,332 $2,188,257 ($1,439,181 2009 42789) $1,711,558 $1,508,088} $106,972 $250,026 $1,675,332 $2,188,257 ($1,000,941 2010 45795] $1,831,798 $1,662,455, $114,487 $257,527 $1,675,332 $2,188,257 ($741,350 2011 48271| $1,930,855 $1,804,926; $120,678 $265,253 $1,675,332 $2,188,257 ($513,739 2012 50780} $2,031,200 $1,955,688 $126,950 $273,210 $1,675,332 $2,188,257 ($276,861 2013 53321} $2,132,850 $2,115,165) $133,303 $681,370 $1,675,332 $2,188,257 ($430,24 2014 55896) $2,235,821 $2,283,801; $139,739 $358,311 $2,188,257 $1,833,315 2015 58503] $2,340,130 $2,462,060 $146,258 $369,061 $2,188,257 $2,098,614 2016 61145) $2,445,796 $2,650,428, $152,862 $380,132 $2,188,257 $2,374,972| | 2017 63821! $2,552,836 $2,849,416; $159,552 $391,536 $2,188,257 $2,662,906 2018 66532) $2,661,266 $3,059,557) $166,329 $1,158,090 $2,188,257 $2,208,148 | 2019 69278] $2,771,107 $3,281,411) $173,194 $517,827 $2,188,257 $3,173,240 2020 69901} $2,796,034 $3,410,256; $174,752 $533,362 $2,188,257 $3,309,919 2021 68847) $2,753,899 $3,459,632) $172,119 $549,363 $2,188,257 $3,303,792 2022 67778| $2,711,116 $3,508,061 | $169,445 $565,843 $2,188,257 $3,295,632 2023 66692} $2,667,675 $3,555,406 $166,730 $1,557,850 $2,188,257 $2,310,244 2024 65589) $2,623,565 $3,601,516 $163,973 $600,303 $2,188,257 $3,272,548 2025 64469) $2,578,776 $3,646,233) $161,174 $618,312 $2,188,257 $3,257,267 2026 63332! $2,533,299 $3,689,389) $158,331 $636 862 $2,188,257 $3,239,237 2027 62178] $2,487,121 $3,730,802! $155,445 $655,968 $2,188,257 $3,218,253 2028 61006| $2,440,233 _ $3,770,281 | $152,515 $2,994,269 $2,188,257 $875,473} NET PRESENT VALUE: 5.5% ($5,746,468) SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PPAL AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE ‘Spreadsheet by R. O. Trimble - 2/6/96 SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PPAL AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM SWAN-T: ce INTERTIE REVENUE PROJECTION - -SHEETC * (STATE LOAN CONVERTED TO GRANT) Th) \c 2 | 1) \ Rega | ADDITIONAL STATE FUNDING: $20 MILLION ¢ '} FEDERAL GRANT: $25 MILLION \ | = PMC WHOLESALE RATE: $0.064 1996$ i ka Industria! ¥ or INTERTIE CAPITAL COST (1997$) $69,800,000 ao 4 Export / \uthority 3.0% FY 94 GRANT (19975): $4,664,262 STATE LOAN TERM: oe 15 FY 95 GRANT (1997$): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (1997$): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997$) $58,575,738 MORAL OBL. BOND RATE: 6.5% ADDITIONAL STATE FUNDING: $20,000,000 KPU HYDRO (MWH#): 144700 FEDERAL GRANT: $25,000,000 REMAINING CAPITAL COST (1997) $13,575,738 SALES INCOME COSTS NET YEAR INTERTIE PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME GENERATION O&M BOND REVENUE INCOME COST COST NET $0.040 $0.024 $0.0025 $13,575,738 PER KWH PER KWH PER KWH FIXED ESCALATED MWh ($s) ($s) ($s) ($s) ($s) 1999 20381) $815,238 $534,499 $50,952 $133,626 $0 $1,039,595 $125,564 2000 22509 $900,358 $608,016 $56,272 $137,635 $0 $1,039,595 $274,872 2001 24364 $974,558 $677,868 $60,910 $141,764 $0 $1,039,595 $410,157 2002 25728] $1,029,118 $737,292 $64,320 $146,017 $0 $1,039,595 $516,478 2003 27005; $1,080,198 $797,104 $67,512 $219,609 $0 $1,039,595 $550,585 2004 28646/ $1,145,838 $870,908 $71,615 $154,909 $0 $1,039,595 $750,626 2005 30856/ $1,234,238 $966,240 $77,140 $159,556 $0 $1,039,595 $924,186 2006 33461/ $1,338,438 $1,079,249 $83,652 $164,343 $0 $1,039,595 $1,130,096 2007 36390) $1,455,598 $1,208,933 $90,975 $169,273 $0 $1,039,595 $1,364,687 2008 39592) $1,583,678 $1,354,767 $98,980 $415,057 $0 $1,039,595 $1,384,813 2009 42789) $1,711,558 $1,508,088 $106,972 $250,026 $0 $1,039,595 $1,823,052 2010 45795; $1,831,798 $1,662,455 $114,487 $257,527 $0 $1,039,595 $2,082,643 2011 48271} $1,930,855 $1,804,926 $120,678 $265,253 $0 $1,039,595 $2,310,254 2012 50780| $2,031,200 $1,955,688 $126,950 $273,210 $0 $1,039,595 $2,547,132 2013) =53321| $2,132,850 $2,115,165 $133,303 $681,370 $0 $1,039,595 $2,393,747 2014 55896} $2,235,821 $2,283,801 $139,739 $358,311 $1,039,595 $2,981,977 2015 58503] $2,340,130 $2,462,060 $146,258 $369,061 $1,039,595 $3,247,276 2016 61145; $2,445,796 $2,650,428 $152,862 $380,132 $1,039,595 $3,523,634 2017 63821) $2,552,836 $2,849,416 $159,552 $391,536 $1,039,595 $3,811,567 2018 66532) $2,661,266 $3,059,557 $166,329 $1,158,090 $1,039,595 $3,356,809 2019 69278) $2,771,107 $3,281,411 $173,194 $517,827 $1,039,595 $4,321,902 2020 69901| $2,796,034 $3,410,256 $174,752 $533,362 $1,039,595 $4,458,581 2021 68847) $2,753,899 $3,459,632 $172,119 $549,363 $1,039,595 $4,452,454 2022 67778) $2,711,116 $3,508,061 $169,445 $565,843 $1,039,595 $4,444,294 2023 66692! $2,667,675 $3,555,406) $166,730 $1,557,850 $1,039,595 $3,458,905 2024 65589| $2,623,565 $3,601,516) $163,973 $600,303 $1,039,595 $4,421,210 2025 64469) $2,578,776 $3,646,233 $161,174 $618,312 $1,039,595 $4,405,929 2026 63332] $2,533,299 $3,689,389 $158,331 $636,862 $1,039,595 $4,387,899 2027 62178) $2,487,121 $3,730,802 $155,445 $655,968 $1,039,595 $4,366,915 | 2028 61006| $2,440,233 $3,770,281, $152,515 $2,994,269 $1,039,595 $2,024,134 NET PRESENT VALUE: 5.5% $27,764,164 Spreadsheet by R. D. Trimble - 1/21/97 Dennis McCrohan From: Dennis McCrohan Sent: Friday, August 15, 1997 8:58 AM To: Keith Laufer; Randy Simmons Subject: 4 Dam Pool Divestiture August 15, 1997 Randy and Keith Randy's letter was provided to the divestiture committee. This created some discussions and resulted in a subsequent phone call between Randy and Saxton. Saxton then reported that the issue of the entity's capitalization could be resolved through a self help limiting agreement. He recommended that the utilities not be concerned about this issue. There were no objections to the local approval requirement other than the approval would be based upon the term sheet agreement current at the time and subsequent changes by the State could be considered as justification to seek a new approval. | commented that this condition seemed reasonable. | presented our detailed comments to their proposal. The utilities claimed to have met the conditions outlined by AEA and were not enthusiastic about our comments. | commented that they had met some but not all of our conditions, particularly regarding no risk and the deferrals. The utilities then caucused. After the caucus, the utilities asked Saxton to review the specifics of AEA's comments with AEA. We discussed doing this by phone early next week. Saxton advised me on the side that the utilities were not prone to go significantly beyond their current proposal. Regarding Senator Gravel, the utilities discussed sending Saxton and Carlson to meet with him and decided not to proceed with that option. They will take no action at this time. The utilities also stated clearly that they would not be drawn into any bidding war with Senator Gravel. The utilities asked what AEA's response would be to any new offer from Gravel. | stated that no response had been considered and but that we would be making recommendations to our Board in early September regarding the divestiture. Of other interest was the SE Intertie. KPU is preparing a draft PSA between KPU and the 4 Dam Pool for sale of 4 Dam Pool a the SE Intertie. KPU will be requesting the sale of power at a reduced rate below the Wholesale Power Rate. According to Mr Saxton, Carolyn Jones and Ron Saxton had worked out an interpertation of the current PSA that power aot be sold at differing rates if it did not displace a current load and it was as good a deal as possible. | asked KPU to keep Mr. Laufer and me informed and feel free to contact us is he has any questions as KPU prepares the draft. We need to discuss our detail comments on their proposal. | anticipate and would guess that if we stick to the 7% discount rate and the additional payment and deferral trigger levels that the discussions will be over. Dennis Page 1 OP OT ae td RELIST a P.5801/02 Ted Stevens United States Senator For Alaska FOR IMMEDIATE RELEASE duly 10, 1997 BILL WOULD ALLOW SOUTHEAST COMMUNITIES TO TAP INTO UNUSED HYDRO ENERGY, REDUCING DEPENDENCE ON COSTLY DIESEL The Senate Appropriations Committee today approved a bill that would allow Ketchikan and surrounding communities to tap inte a nearby renewable energy source and meet the growing demand for power in the area. The provision was included at the behest of Senator Stevens, chairman of the committee, and Senator Frank Murkowski, chairman of the Energy Committee which authorizes energy projects. mile transmission line, or‘intertie, from a hydroelectric The bill would provide $20 million to help construct a 57- facility at Lake Tyee to the Swan Lake hydroelectric facility in \ Ketchikan. While the Swan Lake facility ia currently operating at maximum capacity and additional demand must be met by smaller ; hydroelectric sites and diesel generators in Ketchikan, the Lake - the communities it serves (Petersburg and Wrangell). The intertie will allow the Swan Lake facility to draw on this extra , capacity, inereasing ene: afficiancy in Southeast Alaska and / reducing the financial environmental costs associated with / diesel-generated powar. Tyee facility can produce two-thirds mora power than is needed by / j Upon passage of the bill in his committee, Stevens said: "The Swan Lake - Lake Tyee intertie forges a much-needed link in the Southeast Alaska power grid. More importantly, it will allow a community that has been devastated by the losa of timber receipts to benefit from new infrastructure that ie naeded to Febutia an economy. It just didn't make sense for a sisable community like Ketchikan to have to continue to depend on more Alaske Offices: Anchorage: 271-0816 Falrbanke: 466-0261 Juneau: 680-7400 ‘ Kenal: 283-5806 Ketohikan: 225-9880 8/06/97 4: 12p_ SZ 84: 1g Fe f STEVENS ANCHORAGE 167 7 ll Ta l P.6/602/02 2 7/10/97 7 Swan Lake/ Lake Tyee expensive diesel fuel for its power needs when so much renewable energy wap available nearby. Alaskans pay some cf tha highest rates in the country for power. This project should be welcome news for any family oz business in Ketchikan dependent on power from the Swan Lake facility.” : "At a time when the economy of Southeast is lesa than stable given the uncertainty involving the timber industry. it is a perfect tima to help foster new development by stabilizing power supplies. The beat way te do that is to bring about the Tyes intertie. It's a project that will provide immadiate help to Ketchikan, by giving it access to the surplus power of the Tyee Lake project. It will clearly help consumera and also help economic development throughout the southern Panhandle," sald Murkowski. A To date the State of Alaska has committed $11 million in grants for this project which is currently estimated to cost approximately $81 million, allowing the City of Ketchikan to pursue an Envizonmental Impact Statement and final design, scheduled to ba completed this year. Funding approved today would go toward construction of the intertie, slated to creas Forest Service land between Lake Tyee and Swan Lake. ! The project will also benefit the communities of Petersburg, Wrangell, Valdez, Glenallen and Kodiak, whose electrical rates are all influenced by efficient use of this project. The Bill now goes te the full Senate. # # # |_ 8/06/97 __4:12p Dennis McCrohan From: Dennis McCrohan Sent: Saturday, July 12, 1997 12:34 PM To: Randy Simmons Subject: Southeast Intertie July 11, 1997 Randy Received a call from an aide in Senator Murkowski's office concerning the SE Intertie. He wanted to know first the estimated cost. | stated our information was that it is $69.8 M at this time but that he should confirm with John Magyar of KPU. He also wanted to know if their were any specific plan for other interties in the Southeast. | said no other than that it was planned to tie Mahoney Lake into the KPU system. | did mention that there were concepts being discussed such as connecting Snettisham into the Tyee KPU system and also interconnections to Canadian mines. However theses were purely speculative to my knowledge. Dennis Page 1 K2253 Wrloo 5 80 30 KETCHIKAN PUBLIC UTILITIES 8410 o10° Memorandum ECEIVE [) To: Honorable Alaire Stanton & City cil a MAY 1 2 1997 — From: John Magyar, KPU General Manage; Alaska Industrial Development Date: April 29, 1997 and Export Authority Subject: Intertie Final EIS Delayed After review of the preliminary Swan-Tyee Final EIS by the Forest Service, they have decided to delay issuing the Final EIS until after the Tongass Land Management Plan (TLMP) is issued. The reason is that TLMP would resolve the designation of all rivers eligible for Wild and Scenic status. The most direct route for the Intertie would follow the Eagle River, which is currently eligible for Wild and Scenic status. If the Swan-Tyee FEIS were issued prior to TLMP, it would have to deal with the Eagle River as a separate issue. The USFS believes it may be more appropriate to deal with the Wild and Scenic issue for all of the Tongass first in TLMP. While this would delay the Swan-Tyee FEIS, it would eliminate a controversial issue from our process. Since we do not currently have construction funding in place, KPU supports this decision to delay issuing the Swan-Tyee FEIS. We expect to revisit this decision if TLMP continues to be delayed. JAM:RDT:all H:\USER\NANCYL\WP\DATA\007-L4.MEM aes KETCHIKAN PUBLIC UTILITIES ELECTRIC TELEPHONE WATER 2930 TONGASS AVENUE KETCHIKAN, ALASKA 99901 TELEPHONE 907-225-1000 FAX 907-225-1888 November 19, 1996 F ( ic |W i MUNICIPALLY OWNED LU le MELE NCY 25 1$25 Governor Tony Knowles ; P.O. Box ea Alaska Indusiric! Dsvelopment Juneau, AK 99811-0001 and Export Authority Dear Governor Knowles: As you are well aware, the announcement by Louisiana Pacific regarding the closure of the Pulp Mill in Ketchikan has serious consequences for our local economy. Ironically, one of the consequences is the possible loss of a project that promises long-term, low cost hydroelectric power to our community, precisely the infrastructure we need to attract new industry. That project is the Swan Lake to Lake Tyee Intertie, a high voltage transmission line that would link the electrical systems of Ketchikan, Wrangell and Petersburg and allow sale of the vast surplus of energy available at Lake Tyee. Until recently, we felt we could demonstrate the economic viability of this project to AIDEA as the projected revenues compared quite favorably with the cost. Now with the future of our economy in question, this becomes more difficult. But rather than give up on a project that promises to bolster the southeast economy, our City Council, in the attached resolution, is asking for your assistance, and that of the federal government, in allowing it to proceed. Although this Intertie has been studied since the Swan and Tyee hydroelectric projects were constructed in the mid-1980’s, it was not until 1993 that the State of Alaska set up a financing mechanism that allowed Ketchikan Public Utilities to begin the permitting and design. That effort is on the verge of completion. A draft EIS was issued earlier this year and the Forest Service expects to issue a record of decision within a few months. Final design will be completed this spring which would allow us to advertise for construction bids in late summer. In summary, after an investment of $8.7 million, we will be ready to solicit construction bids in late 1997. The problem is construction financing. The funding set up by the State of Alaska in 1993 consisted of a $20 million low interest loan, $40 million in state backed bonds and an annual grant of approximately $4 million. We do have $11.2 million in grants to date, but the total estimated cost of the project is $70 million. We have contacted Representative Young and Senator’s Murkowski and Stevens asking for their help in the next congressional session to solicit federal financial assistance for the project. We are asking the State of Alaska to forgive the $20 million loan allocated to the financing of the Intertie. We are also asking your administration to develop this project through AIDEA. The City of Ketchikan has used the grant funding to pursue permitting and design but, as you know, we are in no position to issue construction bonding for a project of this magnitude. C0. den Daath soaly adroodn H:\USER\NANCYL\WP\DATA \007-C6.COR — Governor Tony Knowles November 19, 1996 Page 2 Sir, this project is key to our economic recovery. It offers a market for the hydroelectric surplus at Lake Tyee, the sale of which would benefit all the Four Dam Pool communities. It offers environmentally friendly, low cost, long-term power to our depressed economy. It offers Ketchikan, Wrangell and Petersburg the flexibility and reliability of a shared transmission network. This project has been studied for years, we already know it is beneficial. Now we have invested millions and we are ready to build it. But we cannot do so without your help. Please accept our sincere thanks for your efforts on behalf of the threatened economy in Southeast Alaska and this project in particular. incerely, Gh Mage John A. Magyar General Manager JAM:RDTinll Attachment: Ketchikan City Council resolution no. 96-1859 dated November 7, 1996 cc: Dennis Lewis, Chairman—PMC Randy Simmons, Acting Executive Director—AIDEA H:\USER\NANCY L\WP\DATA\007-C6.COR CITY OF KETCHIKAN, ALASKA RESOLUTION No. 96-1859 A RESOLUTION SUPPORTING DEVELOPMENT OF THE SWAN LAKE TO LAKE TYEE INTERTIE AND TRANSFER OF THE FOUR DAM POOL HYDROELECTRIC PROJECTS TO THEIR COMMUNITIES WHEREAS, the economy of Ketchikan is in serious jeopardy as a result of the closure of the Ketchikan pulp mill and the decline of the timber industry; and WHEREAS, the other Four Dam Pool communities of Petersburg, Wrangell, Kodiak and Copper Valley have similarly suffered recent economic crises which dictates the need for prompt action to avert economic disaster in our regions; and WHEREAS, the key to the recovery of the Southeast economy is the availability and sale of low-cost hydroelectric power; and WHEREAS, the Four Dam Pool hydroelectric project at Lake Tyee has a significant surplus which could generate revenue and attract industry if it were made available; and WHEREAS, the State of Alaska as owner of the Four Dam Pool hydroelectric projects has devoted $11 million in grants, and allocated $20 million as a loan to the development of a southeast transmission line intertie that would connect the Four Dam Pool hydroelectric projects at Swan Lake and Lake Tyee; and WHEREAS, the permitting and engineering for the Swan-Tyee Intertie will be complete in 1997 and ready for construction; and WHEREAS, the State of Alaska and the Four Dam Pool communities have negotiated for, and are mutually interested in, the divestiture of the Four Dam Pool hydroelectric projects; and WHEREAS, on October 23, 1996 the Kodiak Electric Association passed resolution 448- 96 requesting that the Governor of the State of Alaska submit legislation transferring the hydroelectric projects of the Four Dam Pool to each community. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Ketchikan, Alaska as follows: Section 1. The Council of the City of Ketchikan, Alaska hereby urgently calls upon the State of Alaska to facilitate the development of the Swan-Tyee Intertie through the Alaska Industrial Development and Export Authority and to forgive the $20 million loan set aside in Senate Bills 106/126 of 1993. Section 2. The Council of the City of Ketchikan, Alaska hereby urgently calls upon the federal government to provide assistance to offset the economic loss we are suffering as a result of the decline of the timber industry by assisting the community to access the hydroelectric surplus available at Lake Tyee. Resolution No. 96-1859 Page | Section 3. The Council of the City of Ketchikan, Alaska hereby supports Kodiak Electric Association resolution 448-96 requesting that the Governor of the State of Alaska submit legislation transferring the hydroelectric projects of the Four Dam Pool to each community. Section 4. The Council of the City of Ketchikan, Alaska hereby directs that a copy of this resolution be forwarded to the Governor of the State of Alaska, our State and Federal legislators and the representatives of the Four Dam Pool. Section 5. This resolution is effective immediately upon passage and approval. PASSED AND APPROVED by the Council of the City of Ketchikan, Alaska this 7 day of November, 1996. Alaire E. Stanton, Mayor ATTEST: [Cats Olt bew) Karen Miles, CMC/AAE City Clerk Resolution No. 96-1859 Page 2 ALASKA INDUSTRIAL DEVELOPMENT » 4 AND EXPORT AUTHORITY ==> ALASKA ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 January 24, 1997 Mr. John Magyar General Manager Ketchikan Public Utilities 2930 Tongass Avenue Ketchikan, Alaska 99901 SUBJECT: Operations and Maintenance Agreement Four Dam Pool Dear John: Attached are the three signed O&M documents. As noted in your December 27, 1997 letter, your City Clerk will seal the documents and return two of the originals. Please let me know if you have any questions. Sincerely, i Gael carte 2 yi | Dennis V. McCrohan, P.E. Deputy Director - Energy Attachments cc: file mri EGIENW Ic ] ee MorRISON & FOERST del Hue ATTORNEYS AT LAW JAN 17 29! 5 co. Elle lt 2000 PENNSYLVANIA AVENU Sle Fr SUITE 3500 Alaska Industria ap pn nge lus WASHINGTON, DC. 20006-1812 and Export Ay ority TELEPHONE (202) 887-1500 lérry Wike odym FACSIMILE (202) 887-0763 Ron Saxton a —— \_ MULTI-ADDRESS FACSIMILE FORM AND COVER SHEET ) Reith Paenes Please deliver the following pages to: Dennis Lewis ¢ > - 1) Name: a Krell [ fim 6] a h ye so i 7 ™ Wis i J . Location: Ic eica (Kia Fubirc Ieerds Ly 4, Fy - Fax Number: 7 © Fol eS IESE 2) Name: it ee Location: __ “4¢#7~-«_ eee : = he a-9jP£ Fax Number: (F022 97 - ZOS6 Main Number: 72 APF -FOEE 3) Name: 7 Location: pee ss aod Main Seniber- ih) * Stow, rank Neweee: 4) Name: Location: _ Fax Number: «Malin Number: Preparer of this slip has confirmed that fax numbers are correct:____ Ss / (Comp. * /{nitials) From: _ We are transmitting a total of A pages including this cover letter. ea = 0 ee Time: Comments: ——- This facsimile contains confidential information which may also be privileged. Unless you are the addressee named above (or authorized to receive for the addressec), you may not copy, usc, or distribute it If you have received it in error, please advise Morrison & Foerster immediately by telephone or fax and retum it promptly by the US. Postal Service. Our telephone number, fax number, and address are indicated above. IF YOU DO NOT RECEIVE ALL THE PAGES, PLEASE CALL AS SOON AS POSSIBLE AT (202) 887-877 K1904 710% UNEEED Siarss FEDERAL ENERGY REGU. U.S. Forest Service } Decket Neo. DE ORDER FINDING LICENSING OF = (Issued Decemp July 29,1996, the with the Ccommissicn Intertie tran Ketchikan Public Utilities mile-long transmission iine ‘betwe Project (FERC Project No. 3015) ao Project (FERC Project Ne. 2911}. BACKGROUND The Swan Lake and the T Alaska Energy Authority (AEA). ¥>U and the Thomas Bay Power Authority. coduced at the Swan Lake protect i produc ed at the Tyee Lake nroie Bay Power Authority for sale to peterer: Light. and Wrangell Light and Power. KPU is proposing te buiic an aonre 133-kY transmission Line that wou! svstems of KP. Petersburg Municice rangell Light and Power. The presos transmission Link between the two lic \ and the communities of Ketchikan. Fetersbura, The Draft Environmental Imvact Statemer ty the USFS for the oroposed intertie states of Ketchikan currently relies wa Project for a majcr portion of i em generated at Swan Lake, which capacity, is supplemented by s jeneratina plants in Ketchikenr. Ketchikan call for an increase in area, according to the DEIS. The Communities of Wrangeil PEIS. receive their electric power 3 Lake Hydroelectric Project. RBeth communities a generating plants and Petersburg orerates a nydroe ac Crystal Lake. The DEIS states th aadditicn to providing Ketchikan access to sur Tyee Lake project, would increase the reliability Docket No. DI96-11-000 = ef electricai service pr: and Light, rssure—tinnies+ PUBLIC NCTICE Notice of the reque the subject intertie was 3 protests, and motions to intervene September 27, 1996. Moticns the licensee otf the Tvee Pox Corporation (CEC) cf Saxman. Alaska, whict Commission for the propesed (PERC Protect No. 11393). le n 5 proposes to sell the provect - Ne other comin protests, or motions to intervene were Fiied. DISCUSSION AND CONCLUSION The Commissica License ransni Section 4.70 of the Comm i s, de section 3(11) cf the Act, ad¢ s tor lines and defines a primary tra ne as: A transmission iine that transmits power from a licensed water power project or other nydroelectric authorized by Congress distribution system or transmission system. The licenses for noth the already include orimary transmi = kV line connects the Tyee Lake Substation, according tc the Tyee EG 4981. 1L/ According to the Swan Lake license, iss 1980, the project’s primary transmi on line is long, 115-kV Jine extending fram the powerhouse t Bailey Substation in Ketchikan. 2/ cFC, citing the Conmissic: Een! Transmission Facilities at F ectric Pre No. he intertie shoulc ine Subject te Commission cnat m biv = Jn othe £ chere does net appear te be eny OPR-6, January 1 , comuented considered a primary tx Missic jurisdiction. arque = the Jicer Tyee Lak intertie to mar} the or: decommissioning of Lf 16 FERC ¥ 61,142. | 2/ 12 FERC § 61,331. Docket No. DI96-11-000 basis for continued functionine sf the intertie;: anda is necessary to carry Tyee Lake J power. Lake Tyee project outout primary transmission line j ; intertie and Tvee Lake ang Swan L projects would continue to exi ener Ss It is not necessary that, at any sz int in time. market be capable of using ei eee Due oOnty sufficient transmission capacity \ he full prot to the distribution syst t Sransmissicn § be included in the license. T nlc Casry comm yower from numerous generating For the reasons stated abcve Swan Lake-Tyee Lake Intertie trans line as set forth in Section 2/1 interconnected transmission sy authority of the Commission. The Director orders: (A) Pursuant te Swan Lake-Tyee Lake In transmission line requi (8) This ora for rehearing by the date of issu § 385-713. Sion mav order, AE SE SR PT a ; le _ Done see UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Qe City of Saxman, Alaska Project No. 11393-001, AK MOTION TO INTERVENE AND COMMENTS Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.214 (1996), the Ketchikan Public Utilities ““KPU”) hereby moves to intervene in the above-referenced proceeding. In support of its motion, KPU states the following: 1. The following individual should be included on the official service list in this proceeding, and all communications concerning this motion should be addressed as follows: Robert H. Loeffler Morrison & Foerster LLP 2000 Pennsylvania Avenue, N.W. Suite 5500 Washington, D.C. 20006 (202) 887-1506 2. KPU is a municipality organized under the laws of the State of Alaska. Under its Charter and Certificate of Convenience and Necessity, KPU provides utility services, including electricity, to customers in its service area. 3. On August 14, 1996, the Federal Energy Regulatory Commission (“FERC” or “Commission”) gave notice of the application and applicant-prepared EA accepted for filing in the above-captioned proceeding. As explained in the City of Saxman’s Application for License for Major Unconstructed Project (“Application”), the proposed Mahoney Lake Hydroelectric Project, a 9.6 megawatt hydroelectric project on Upper Mahoney Lake and Upper Mahoney Creek near Ketchikan in southeast Alaska, is planned to be integrated into the KPU electrical generating system. The Project is designed “to generate to meet the projected energy demand that is in excess of KPU’s current hydroelectric generation capabilities.” 4. KPU requests intervention in this proceeding. As explained in the Application, the project is designed to serve the electrical needs of KPU. As the intended customer or consumer of power generated at the Lake Mahoney Project, KPU’s interests may be directly affected by the outcome of this proceeding.’ Accordingly, KPU seeks intervention to protect its rights to address any concerns that might arise in relation to the Applicauon. 5. Although KPU is presently not opposed to the proposed project, KPU does note its concern regarding the City of Saxman’s claim for benefits under Section 210 of the Public Utilities Regulatory Policies Act of 1978 (“PURPA”).* KPU believes that, based upon statements made in a separate proceeding before FERC, a conflict may arise between KPU and the City of Saxman regarding the applicability of PURPA to KPU’s power purchase plans. 6. On August 22, 1996, the Federal Energy Regulatory Commission gave notice of a Declaration of Intention with respect to an application by the U.S. Forest Service to issue a " See City of Saxman, Mahoney Lake Hydroelectric Project, Application for License for Major Unconstructed Project at B-6 (May 1996) (“Application”). > Application at B-7. > See 18 C.F.R. § 385.214 (b)(ii) (1996). KPU also intervened in the proceeding involving the City of Saxman’s Application for Preliminary Permit for the Mahoney Lake Hydroelectric project. See Ketchikan Public Utilities, Motion to Intervene, FERC Project No. 11393-000 (April 28, 1993). * See Application at I-5. special use permit for a proposed 138 kV transmission line between the Swan Lake hydroelectric project switchyard and the Lake Tyee hydroelectric project switchyard, Ketchikan and Stikine areas, Alaska. This proposed transmission line would intertie the electrical systems of KPU and others and is intended to allow the City of Ketchikan to meet its energy needs by accessing surplus energy at the Lake Tyee project. KPU presently plans to construct, own, and operate the proposed intertie.° 7. On September 25, 1996, Cape Fox Corporation (“Cape Fox’), the Alaskan Native Village acting as development agent for the City of Saxman for the proposed Mahoney Lake Hydroelectric Project, filed a Motion to Intervene and Comments in the Swan Lake proceeding. In its comments, Cape Fox argued that under PURPA, in the event that KPU is unable to meet its electric power load through existing hydroelectric resources, KPU would be obligated to purchase power from the Mahoney Lake project before purchasing from other sources.° 8. KPU sought intervention in the Swan Lake proceeding and responded to Cape Fox’s PURPA assertion by arguing that the Swan Lake proceeding is not the appropriate proceeding to resolve that issue. For the record, KPU noted that it disagrees with the proposition that, under the circumstances of this case, PURPA would obligate KPU to purchase power from Mahoney Lake in preference over Swan Lake, KPU’s dedicated facility, or Lake Tyee, via the proposed Intertie. * As plans for the proposed intertie develop, the State of Alaska, or other third party, may become successor owner of the intertie. § See Motion to Intervene and Comments of Cape Fox Corporation at 2 n.1. 3 9. In the event that Cape Fox or the City of Saxman raise the same PURPA arguments in the above-captioned proceeding, KPU would oppose those claims on the same grounds asserted in the Swan Lake proceeding. WHEREFORE, KPU requests that the Commission grant it intervention as a party with full rights to participate in this proceeding. Respectfully submitted, % lH. beflentsse. Robert H. Loeffler Stephen J. Kim Morrison & Foerster LLP 2000 Pennsylvania Avenue, N.W. Washington, D.C. 20006 (202) 887-1506 Attorneys for Intervenor Dated: November 12, 1996 dc-51730 CERTIFICATE OF SERVICE I, Stephen J. Kim, hereby certify that on this 12th day of November, 1996, copies of the Motion to Intervene in the above-captioned case were served by facsimile and/or by mail, first class postage prepaid, upon those listed in the attached Service List. Stepher J. Kim MORRISON & FOERSTER LLP 2000 Pennsylvania Avenue, N.W. Suite 5500 Washington, D.C. 20006 (202) 887-1500 de-54967 Mr. Tom Fitzgerald City Administrator City of Saxman Route 2, Box 1 Ketchikan, AK 99901 Mr. Doug Campbell Cape Fox Corporation 2851 S. Tongass P.O. Box 8558 Ketchikan, AK 99901 Mr. Michael V. Stimac Manager, Licensing & Environmental Services HDR Engineering, Inc. 500 - 108th Ave. NE, Suite 1200 Bellevue, WA 98004 Mr. Donald H. Clarke Wilkinson, Barker, Knauer & Quinn 1735 New York Avenue, NW Washington, DC 20006 Mr. John Braislin Betts, Patterson & Mines 800 Financial Center 1215 Fourth Avenue Seattle, WA 98161-1000 dc-54965 William R. Snell Executive Director Alaska Energy Authority 480 West Todor Road Anchorage, AK 99503 Ernesta Ballard, Chief Cape Fox Corporation P.O. Box 8558 Ketchikan, AK 99901 Keith A. Laufer, Esq. 1031 West Fourth Avenue, Suite 200 Anchorage, AK 99501 Mayor City of Saxman City Hall Saxman, AK 99901 KETCHIKAN PUBLIC UTILITIES SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE PROJECT 2930 Tongass Avenue, Ketchikan, Alaska 99901 (907) 225-1000 (907) 228-5494 Message —_ (907) 225-1888 Fax FAX TO: BOB LEFFLER 10/4/96 Morrison and Foerster LLP, Attorneys at Law K1657 (202) 887-0763/4 7108 ECEIVE!) FROM: = RICH TRIMBLE —§/ #2 oct 10 1996 SUBJECT: Late Motion to Intervene: Swan-Tyee Intertie Alaska Industrial Development ~and_Export Authority Bob: I am in receipt of your draft and have reviewed it with our General Manager, John Magyar. We concur with your statements and analysis but have one additional point with you may feel should be addressed in this motion. The footnote of the Cape Fox motion asserts that our Power Sales Agreement (PSA) with the Four Dam Pool is nullified by a PURPA requirement to purchase Mahoney Lake power. If this assertion has merit, there is dramatic potential impact on the revenue of the Four Dam Pool organization (of which KPU is a member). Specifically, if KPU is forced to purchase Mahoney Lake power over Swan Lake, Four Dam Pool energy sales from Swan Lake would significantly decrease and energy costs to the Four Dam Pool communities (Ketchikan, Wrangell, Petersburg, Kodiak and Copper Valley) would increase. The State of Alaska as the owner of the Four Dam Pool projects would suffer revenue loss as well. I have conveyed the Cape Fox motion to the Four Dam Pool attorney and the State (AIDEA) to deal with that issue. Since it is not specifically a Swan-Tyee Intertie issue, it may not merit rebuttal in this motion you are filing. On the other hand, since the assertion was made in the motion to which we are responding, you may feel a rebuttal of the footnote is warranted. Unless you feel a modification to the draft is warranted to refute the footnote in the Cape Fox motion, we concur with you draft and authorize you to file our motion as soon as possible. Thanks, Rich ce: John Magyar, KPU General Manager Ron Saxton, Four Dam Pool Attorney, Ater, Wynne, Hewitt, Dodson & Skerritt OlT 84 535 12:42PM Pal MUvRRISON & FOERSTER Luc Attomeys at Law 2000 Pennsylvania Avenue, N.W. Washington, D.C. 20006-1888 Telephone: (202) 887-1500 Facsimile: (202) 887-0763 Sb GLT -u F212: 29 To: Richard Trimble Facsimile: 907-225-1888 Ketchikan Public Utilities Phone: 907-225-1000 From: Bob Loeffler Date: October 4, 1996 Time: 12:25 PM We are transmitting a total of 4 pages (including this page). Original or hard copy to follow if this box is checked O. If you do not receive all pages, please call as soon as possible 202-887-1506. Preparer of this slip has confirmed that facsimile number given is correct: 3380/SJK2 This facsimile contains confidential information which may also be privileged. Unless you are the addressee (or authorized to receive for the addressee), you may not copy, use, or distribute it. If you have received it in error, please advise Morrison & Foerster immediately by telephone or facsimile and return it promptly by mail. Comments: Attached please find a draft motion to intervene. We have based our factual analysis on what we have learned from the Draft EIS and other materials you have sent us. Please review our analysis to confirm our understanding of the facts. [f this is satisfactory to you, we are prepared to file at FERC today. We believe that Cape Fox may engage in a set of maneuvers to protect its project as against competing sources of power. Please call to discuss. —_ mT Oe SE LS 44rr Ps UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION U.S. Forest Service Swan Lake - Lake Tyee Intertie Docket No. DI96-11-00 MOTION TO INTERVENE OUT OF TIME (AND COMMENTS/PROTEST] Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.214 (1996), the Ketchikan Public Utilities (“KPU”) hereby moves to intervene in the above-referenced proceedings out of time. In support of its motion, KPU states the following: 1. The following individual should be included on the official service list in this proceeding, and all communications concerning this motion should be addressed to the following: Robert H. Loeffler Morrison & Foerster LLP 2000 Pennsylvania Avenue, N.W. Suite 5500 Washington, D.C. 20006 (202) 887-1506 1. KPU is a municipality organized under the laws of the State of Alaska. Under its Charter and Certificate of Convenience and Necessity, KPU provides utility services, including electricity, to customers in its service area. On August 22, 1996, the Federal Energy Regulatory Commission gave notice of a Dectaration of Intention with respect to an application by the U.S. Forest Service to issue a special use permit for a proposed 138 kV late intervention motion for ketchikan/dc-50225 v1 10/4/96 12:26 pm OT Ga SE LEt44em F. transmission line between the Swan Lake hydroelectric project switchyard and the Lake Tyee hydroelectric project switchyard, Ketchikan and Stikine areas, Alaska. This proposed transmission line would intertie the electrical systems of KPU and others and is intended to allow the City of Ketchikan to meet its energy needs by accessing surplus energy at the Lake Tyee project. 2. On September 25, 1996, Cape Fox Corporation (“Cape Fox”), an Alaskan Native Village acting as development agent for the City of Saxman, Alaska, license applicant for the proposed Mahoney Lake Hydroelectric Project, filed a Motion to Intervene and Comments in this proceeding. In its comments, Cape Fox argued that “a legitimate question arises with respect to whether this line carrying Lake Tyee Project power is a primary line as defined in Section 3(1!) of the Federal Power Act.” 3. KPU requests intervention in this proceeding. KPU would construct, own, and operate the proposed intertie. KPU accordingly has interests that may be directly affected by the outcome in this proceeding and are not represented by the present parties. In particular, KPU believes that the proposed intertie does not qualify as a primary line under Section 3(11) of the Federal Power Act. 4. The Draft Environmental Impact Statement (“DEIS”) clearly establishes what is the central purpose of the proposed intertie. “[T]he intertie would establish an important link in a long-term electrical network in Southeast Alaska, connecting the Ketchikan, Wrangell, and Petersburg systems; providing an opportunity to use excess power available from the Lake Tyee project while still satisfying the demand for power in Petersburg and Wrangell; . . . enhancing each system’s reliability by providing potential backup power sources; and establishing a link that could also expand to include communities such as Ww Jate intervention motion for ketchikan/dc-50225 vi 10/4/96 12:26 pm OCT 84 735 LS: 45h Fs Metlakatla, Kake, and others.” DEIS at S-40. The DEIS also contains several other references that clearly establish that the intertie would be part of an interconnected transmission system. 5. The Commission distinguishes berween primary lines whose function is to transport power from the powerhouse or appurtenant works of a project to a junction with either transmission lines or distribution facilities and such transmission lines or facilities. The intertie plainly is a facility that falls outside the definition of a primary line. As noted above, the Intertie will connect two faciliues that already market power through other connections to nearby communities. The intertie will be used by KPU and others to enhance reliable electric service, as noted above, and will provide a link in the establishment of an electrical network in southeast Alaska. The intertic is “not necessary to get all the project power to market dependably” because the power from cach project already “gets” to market. In addition, the Intertie would continue to exist were it not guaranteed by a Commission license because it is part of a larger grid that is planned for southeast Alaska. See DEIS at S-40. It is and will be needed to provide power from sources beyond the two hydro projects that it will intertie. 6. KPU’s late intervention is warranted under the standard set forth in Rule 214(d)(1). KPU has good cause for failing to file its motion within the time prescribed in the Commission's Notice of Filing. KPU did not become aware of Cape Fox’s filing and potentially adverse position until late last week. KPU is not specifically familiar with FERC procedures and acted expeditiously to locate and retain FERC counsel once it realized its interests might be adversely affected in this proceeding. Because this motion is being filed only 5 working days after the comment deadline. KPU believes that no late intervention motion for ketchikan/de-50225 v1 10/4/96 12:26 pm 12: 45° PLS i 7m miT pa ° disruption of the proceeding will result from permitting intervention. There will be no prejudice to, or burden upon, the existing parties if this motion is granted. Moreover, no party in this proceeding can adequately represent KPU’s interests. Finally, granting this motion is in the public interest. WHEREFORE, KPU requests that the Commission grant it intervention as a party out of time, with full rights to participate in this proceeding. Respectfully submitted, Robert H. Loeffler Stephen J. Kim Morrison & Foerster LLP 2000 Pennsylvania Avenue, N.W. Washington, D.C. 20006 (202) 887-1506 Afttomeys for Intervenor Dated: October __, 1996 late intervention motion for ketchikan/de-50225 v1 10/4/96 12:26 pm Tn if iT mT ga SR OS: LEM MORRISON & FOERSTER LLP Attomeys at Law 2000 Pennsylvatua Avenue, N.W. Washington, D.C. 20006-1888 Telephone. (202) 887-1500 Facsimile: (202) 887-0763 To: Mr. Richard Trimble Facsimile: (907) 225-1888 Ketchikan Public Utilities Phone: (907) 225-1000 | a From: Robert H. Loeffler Date: October 4+, 1996 We are transmitting a total of 6 pages (including this page). Original or hard copy to follow if this box 1s checked If you do not receive all pages, please call as soon as possible (202) 887-1506. Preparer of this slip has confirmed that facsimile number given is correct: 2900/RTN This facsimile contains confidential information which may also be privileged. Unless you are the addressce (or authorized to receive for the addressee), you may not copy, use. or distribute ic [f you have received it in error, please advise Morrison & Foerster immediately by telephone or facsimile and return it promptly by mail. Comments: Attached is a copy of today’s filing. RAL 50S Gg h~ 199 abi de-50327 OlT 4 SR BS: OPM F. tu UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION U.S. Forest Service Swan Lake - Lake Tyee Intertie Docket No. DI96-1 1-00 MOTION TO INTERVENE OUT OF TIME AND COMMENTS Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.214 (1996), the Ketchikan Public Utilities (“KPU”) hereby moves to intervene in the above-referenced proceedings out of time. In support of its motion, KPU states the following: 1. The following individual should be included on the official service list in this proceeding, and all communications concerning this motion should be addressed to the following: Robert H. Loeffler Morrison & Foerster LLP 2000 Pennsylvania Avenue, N.W. Suite 5500 Washington, D.C. 20006 (202) 887-1506 1. KPU is a municipality organized under the laws of the State of Alaska. Under its Charter and Certificate of Convenience and Necessity, KPU provides utility services, including electricity, to customers in its service area. On August 22, 1996, the Federal Energy Regulatory Commission gave nouce of a Declaration of Intention with respect to an application by the U.S. Forest Service to issue a special use permit for a proposed 138 kV 1% MT G4 (Ss OS: LOM - tat wT transmission line between the Swan Lake hydroelectric project switchyard and the Lake Tyee hydroelectric project switchyard, Ketchikan and Sukine areas, Alaska. This proposed transmission line would intertie the electrical systems of KPU and others and ts intended to allow the City of Ketchikan to meet its energy needs by accessing surplus energy at the Lake Tvee project. 2. On September 25, 1996. Cape Fox Corporation (“Cape Fox”). an Alaskan Native Village acting as development agent for the City of Saxman. Alaska, license applicant for the proposed Mahoney Lake Hydroelectric Project. filed a Motion to Intervene and Comments in this proceeding. In its comments. Cape Fox argued that “a legitimate question arises with respect to whether this line carrying Lake Tyee Project power is a primary line as defined in Section 3(11) of the Federal Power Act.”" 3. KPU requests intervention in this proceeding. KPU would construct, own. and operate the proposed intertie. KPU accordingly has interests that may be directly affected by the outcome in this proceeding and are not represented by the present parties. [In particular, KPU believes that the proposed intertie does not quality as a primary line under Section 3(11) of the Federal Power Act. 4. The Draft Environmental Impact Statement (“DEIS”) clearly establishes what is the central purpose of the proposed interue. “(T]he intertie would establish an important link in a long-term electrical network in Southeast Alaska, connecting the Ketchikan, ‘ Cape Fox also contends that, under che Public Utilities Regulatory Policies Act of 1978 (“PURPA”), in the event that KPU is unable to meet its electric power load through existing hydroelectric resources, KPU would be obligated to purchase power from the Mahoney Lake project before purchasing trom other sources. See Motion to Intervene and Comments of Cape Fox Corporation at 2 n.1. This is not an appropriate proceeding to resolve this issue. For the record, KPU notes that « disagrees with the proposition that, under the circumstances of this casc, PURPA would obligate KPU to purchase power from Mahoney Lake in preference over Swan Lake, KPU’s dedicated facility, or Lake Tyee, via the proposed Intertie. 2 WT Bog RR SS LLP FL Tw Wrangell, and Petersburg systems; providing an opportunity to use excess power available from the Lake Tyee project while still satisfying the demand for power in Petersburg and Wrangell; . . . enhancing each system's reliability by providing potential backup power sources: and establishing a link that could also expand to include communities such as Metlakatla, Kake, and others.” DEIS at S-40. The DEIS also contains several other references that clearly establish that the intertie would be part of an interconnected transaussion system. 5. The Commission distinguishes between pnmary lines whose function is to transport power trom the powerhouse or appurtenant works of a project to a junction with either transmission lines or distibution facilities and such transmission lines or facilities. The intertie plainly is a facility that falls outside the definition of a primary line. As noted above, the Intertie will connect two facilities that already market power through other connections to nearby communities. The intertie will be used by KPU and others to enhance reliable electric service, as noted above, and will provide a link in the establishment of an electrical network in southeast Alaska. The intertie is “not necessary to get all the project power to market dependably” because the power from each project already “gets” to market. In addition, the Intertie would continue to exist were it not guaranteed by a Commission license because it is part of a larger grid that is planned for southeast Alaska. See DEIS at S-40. It is and will be needed to provide power from sources beyond the two hydro projects that it will intertie. 6. KPU?’s late intervention is warranted under the standard set forth in Rule 214(d)(1). KPU has good cause for failing to file its motion within the time prescribed in the Commission’s Notice of Filing. KPU did not become aware of Cape Fox’s filing and OCT Ga oS OS: LPM potentially adverse position unul late last week. KPU is not specifically familiar with FERC procedures and acted expeditiously to locate and retain FERC counsel once it realized its interests might be adversely affected in this proceeding. Because this motion is being filed only 5 working days after the comment deadline, KPU believes that no disruption of the proceeding will result f.om permitting intervention. There will be no prejudice to, or burden upon, the existing parties if this motion is granted. Moreover, no party in this proceeding can adequately represent KPU’s interests. Finally, granting this motion is in the public interest. WHEREFORE, KPU requests that the Commission grant it intervention as a party out of time, with full rights to participate in this proceeding. Dated: October 4, 1996 de-50225 Respertuly submi LION Robert H. Loeffler) “\) Stephen J. Kim Mormison & Foerster LLP 2000 Pennsylvania Avenue, N.W. Washington, D.C. 20006 (202) 887-1506 Attorneys for Intervenor 1 CERTIFICATE OF SERVICE (. Amy S. Bertelsen, hereby certify that on this 4th day of October, 1996, cupies of the Motion to Intervene Out of Time And Comments in the above-captioned case were served by facsimile and/or by mail, first class postage prepaid. upon: William R. Snell By US. Mail Alaska Energy Authority 480 West Todor Road Anchorage. AK 99503 Doug Campbell By U.S. Mail Cape Fox Corporation P.O. Box 8558 Ketchikan, AK 99901 Bill Angelus By U.S. Mail U.S. Forest Service (AK) Ketchikan District Ranger 3031 Tongass Avenue Ketchikan, AK 99901 Jimmy J. Deherrera By U.S. Mail U.S. Forest Service (AK) Ketchikan District Ranger 3031 Tongass Avenue Ketchikan, AK 99901 Keith A. Laufer By U.S. Mail Attomey General 1031 West Fourth Avenue, Suite 200 Anchorage, AK 99501 Donald H. Clarke, Esq. By U.S. Mail Wilkinson, Barker, Knauer & Quinn 1735 New York Avenue, N.W. Suite 600 Washington, D.C. 20006 i : 4 j - ; ' At Vi UA, J Butdl Léds J Amy S. Bertelsen de-$0522 n 7 im KETCHIKAN PUBLIC UTILITIES 2930 TONGASS AVENUE KETCHIKAN, ALASKA 99901 TELEPHONE 907-225-1000 FAX 907-225-1888 EGEIVE/) October 3, 1996 MUNICIPALLY OWNED \AT ane ELECTRIC TELEPHONE WATER oc i i 0 1986 Alaska Industrial Developmer Mr. Ronald L. Saxton and Export Authority Ater, Wynne, Hewitt, Dodson & Skerritt 222 S.W. Columbia, Suite 1800 Portland, OR 97201-6618 Dear Ron: Subject: Motion to Intervene and Comments of Cape Fox Corporation on Swan-Tyee Intertie Notice of Declaration of Intention, FERC Docket No. DI96-11-000 The attached motion was filed by Cape Fox Corporation with FERC last week. Until receipt of this motion, the U.S. Forest Service (lead agency in the Intertie EIS), KPU and our consultants had felt this FERC notice was essentially a formality since the Intertie appeared to be clearly outside of FERC jurisdiction. As a result of this motion however, KPU is filing our own Motion to Intervene Out of Time (the comment period ended on September 27) and presenting comment that this project is outside of FERC jurisdiction. We should have a ruling by the end of this month from FERC. However, I want to bring to your attention that this motion asserts that KPU is not subject to the Power Sales Agreement for the purchase of Swan Lake power as PURPA would obligate us to purchase Mahoney Lake power (see footnote on pages 2 and 3). This could have serious implications for Four Dam Pool power sales, if true. Please advise us of the merit in this assertion by Cape Fox and what action, if any, you would recommend. Sincerely, Ee GLC Richard D. Trimble Enclosure ce: John Magyar, KPU General Manager Tom Friesen, Ketchikan PMC representative Dennis Lewis, PMC Chairman Dennis McCrohan, AIDEA Deputy Director — UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION U.S. Forest Service ) Swan Lake - Lake Tyee Intertie ) Docket No. DI96-11-00 MOTION TO INTERVENE AND COMMENTS OF CAPE FOX CORPORATION Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.214 (1995), Cape Fox Corporation (Cape Fox”) hereby respectfully files this motion to intervene in the above-captioned proceeding with respect to the jurisdictional status of the proposed Swan Lake - Lake Tyee Intertie. In support thereof, Cape Fox states the following: L SERVICE All correspondence or communication concerning this pleading should be addressed to: Doug Campbell Chief Operating Officer Cape Fox Corporation P.O. Box 8558 Ketchikan, Alaska 99901 tel. (907) 225-5163 fax (907) 225-3137 Donald H. Clarke, Esq. Wilkinson, Barker, Knauer & Quinn 1735 New York Avenue, N.W. Washington, D.C. 20009 tel. (202) 783-4141 fax (202) 833-2360 2 IL STATEMENT OF INTEREST Cape Fox is an Alaska Native Village corporation formed under the Alaska Native Claims Settlement Act (“ANCSA”), 43 U.S.C. § 1601 et seq. Cape Fox is acting as development agent for the City of Saxman, Alaska (“City”), license applicant for the proposed Mahoney Lake Hydroelectric Project, FERC Project No. 11393 (“Project”), a 9.6 megawatt hydroelectric project on Upper Mahoney Lake and Upper Mahoney Creek near Ketchikan in southeast Alaska. The Project will be located in part on lands owned and selected by Cape Fox under the terms of ANCSA and will be a major source of income for Cape Fox, as well as for the City. The City’s license application was filed with the Federal Energy Regulatory Commission (“FERC” or “Commission”) on May 31, 1996, and the Commission issued public notice accepting the license application and applicant-prepared environmental assessment for filing on August 14, 1996. The City proposes to develop the Project as a qualifying facility under Section 210 of the Public Utilities Regulatory Policies Act of 1978 (“PURPA”), 16 U.S.C. § 824a-3, and sell the Project power to Ketchikan Public Utilities (“KPU”) to meet power needs in the Ketchikan area. Inasmuch as the Swan Lake - Lake Tyee Intertie (“Intertie”), if determined to be feasible and appropriate, would provide surplus energy from the Lake Tyee Project No. 3015 to the Ketchikan market, any action with respect to the Intertie could affect the market for power from the City’s Project.’ As stated in the U.S. Forest Services’s Swan Lake - Lake Tyee Intertie ' Cape Fox does not thereby imply that KPU access to Lake Tyee Project power at the Swan Lake Project would necessarily preclude purchase of power from the City’s Project. The Long Term Power Sales Agreement — Four Dam Pool (Oct. 28, 1985) (“PSA”) establishes the Alaska Power Authority’s obligations to sell and the utilities’ (continued...) 5 Draft Environmental Impact Statement Summary (March 1996) (“DES”), “{t]he No Action Alternative [to the Intertie] includes greater reliance on diesel generation alone or in combina- tion with power purchased from the proposed Mahoney Lake Hydroelectric project.” DEIS at S-11. As such, Cape Fox has a direct interest in this proceeding which is not represented by any other party. I. COMMENTS Inasmuch as the Intertie, as currently proposed, would carry energy from the Lake Tyee Project to the Swan Lake Project switchyard, to which KPU is interconnected, a legitimate questions arises with respect to whether this line carrying Lake Tyee Project power is a primary line as defined in Section 3(11) of the Federal Power Act, 16 U.S.C. § 796(11), i.e., a transmis- sion line transmitting power from a licensed water power project “to the point of junction with the distribution system or with the interconnected primary transmission system.” In recent years, the Commission has attempted to simplify its approach to determining what is a primary transmission line that must be licensed under Part I of the FPA. As explained in /dentifying Transmission Facilities at FERC Hydroelectric Projects, FERC : (...continued) obligations to purchase power generated in the Four Dam Pool, including the utilities’ obligations to purchase from their specific dedicated facilities. The Four Dam Pool includes the Solomon Gulch, Swan Lake, Lake Tyee and Terror Lake hydroelectric projects. KPU is required to purchase power from Swan Lake, its dedicated facility, to the extent that KPU’s existing hydroelectric resources are insufficient to satisfy its electric power load. Under Section 3(c)(ii) of the PSA, however, this obligation does not apply if KPU is obligated by law to purchase power generated at another source. Section 210(a) of PURPA, 16 U.S.C. § 824a-3(a), as implemented in 18 C.F.R. § 292.303 (1995), would impose such an obligation by law. 4 Office of Hydropower Licensing, Paper No. DPR-6, January 1993 (“Guidelines”), “[e]xperience has shown that set formulas and procedures do not produce reasonable and consistent results in all cases.” As set forth in the Guidelines, there is basically now a two step inquiry: (1) Is the segment necessary, alone or in combination with one or more other segments, to get all the project power to market de- pendably? (2) Would the segment continue to exist even if its continued existence were not guaranteed by a Commission license? With respect to Inquiry (1), the Intertie would carry Lake Tyee. Project power that is surplus to Wrangell’s and Petersburg’s needs to the Ketchikan market. As such, it appears to qualify as necessary to carry “all the project power to market.” Under the Inquiry (2) — whether the segment would exist if its continued existence were not guaranteed by a Commission license — the answer is less apparent and an investigation of the policies and interests underlying this inquiry is required. This second inquiry appears to address the notion of an independent justification for the line, i.e. independent of the existence of the licensed project. Because a licensed project may be subject to Govern- ment takeover, transferred to a new licensee, or decommissioned, the required disposition of the transmission line in these instances is informative as to whether the line has an independent justification or whether it must be considered part of the licensed project. It appears that any new entity that might take over ownership of the Lake Tyee Project would require the Intertie to market all of the project’s output. In the case of decommis- sioning of the project, there does not now appear to be any alternative basis that would feasibly support the continued functioning of the Intertie. The DEIS does reference reliability benefits to 5 all three utilities’ electrical systems. DEIS at S-3. The Commission should carefully consider whether these benefits are merely incidental or rise to the level of an adequate independent justification for the construction and operation of the Intertie. Additionally, the DEIS reports that from KPU’s perspective the Intertie would “establish an important link in the long-proposed electrical network for southern Southeast Alaska.” DEIS at S-2. Whatever future options may exist with respect to expansion of the transmission network in Southeast Alaska, the instant jurisdictional inquiry must focus on the status of the Intertie as currently proposed to enter service, i.e. carrying Lake Tyee Project power. Any subsequent modification or additions to the transmission system that could change the character and potentially the jurisdictional status of the Intertie must necessarily be adjudicated at the time such changes occur. IV. CONCLUSION WHEREFORE, for the foregoing reasons, Cape Fox urges careful consideration of the jurisdictional issues raised by the U.S. Forest Service’s request and respectfully requests that the Commission grant its intervention in the above-captioned proceeding with all rights as a party thereto. espectfully submitted, WA CAL “Donald H. Clarke, Esq. Wilkinson, Barker, Knauer & Quinn 1735 New York Avenue, N.W. Washington, D.C. 20006 Counsel for Cape Fox Corporation Dated: September 25, 1996 18-@7-1996 09:43 9s 225 1888 KPU #1 “ "5 P.@2 Find DVM | of [46 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION U.S, Forest Service Swan Lake - Lake Tyee Intertic Docket No, DI96-1 1-00 MOTION TO INTERVENE OUT OF TIME AND COMMENTS Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.214 (1996), the Ketchikan Public Utilities (“KPU") hereby moves to intervene in the above-referenced proceedings out of time, In support of its motion, KPU states the following: 1. The following individual should be included on the official service list in this proceeding, and all communications concerning this motion should be addressed to the following: Robert H. Loeffler Morrison & Foerster LLP 2000 Pennsylvania Avenue, N.W, Suite 5500 Washington, D.C. 20006 (202) 887-1506 1. KPU is a municipality organized under the laws of the State of Alaska. Under its Charter and Certificate af Convenience and Necessity, KPU provides utility services, including electricity, to customers in its service atea. On August 22, 1996, the Federal Energy Regulatory Commission gave notice of a Declaration of Intention with respect to an application by the U.S, Forest Service to issue a special use permit for a proposed 138 kV [10/07/96 9:47a. 10-@7-1996 99:49 927 225 1888 KPU #1 ~ "8 es transmission line between the Swan Lake hydroelectric project switchyard and the Lake Tyee hydroelectric project switchyard, Ketchikan and Stikine areas, Alaska, This proposed transmission line would intertie the electrical systems of KPU and others and is intended to allow the City of Ketchikan to meet its energy needs by accessing surplus energy at the Lake Tyee project. 2, On September 25, 1996, Cape Fox Corporation (“Cape Fox"), an Alaskan Native Village acting as development agent for the City of Saxman, Alaska, license applicant for the proposed Mahoney Lake Hydroelectric Project, filed a Motion to Intervene and Comments in this proceeding. In its comments, Cape Fox argued that “‘a legitimate question arises with respect to whether this line carrying Lake Tyee Project power is a primary line as defined in Section 3(11) of the Federal Power Act.”! 3. KPU requests intervention in this proceeding. KPU would construct, own. and operate the proposed intertie, KPU accordingly has interests that may be directly affected by the outcome in this proceeding and are not represented by the present parties, In particular, KPU believes that the proposed intertie does not qualify as a primary line under Section 3{11) of the Federal Power Act. 4. The Draft Environmental Impact Statement (“DEIS”) clearly establishes what is the central purpose of the proposed intertie. “(T]he intertie would establish an important link in a long-term electrical network in Southeast Alaska, connecting the Ketchikan, ' Cape Fox also contends that, under the Public Utilities Regulatory Policies Act of 1978 (“PURPA”), in the event that KPU is unable to meet its electric power load through existing hydroelectric rasaurces, KPU would be obligated to purchase power from the Mahoney Lake project before purchasing ftom other sources. See Motion to Intervene and Comments of Cape Fox Corporation at 2n.!. This is not an appropriate proceeding te resolve this issue. For the record, KPU notes thet it disagrees with the proposition that, under the circumstances of this case, PURPA would obligete KPY to purchase power from Mahoney Lake in preference over Swan Lake, KPU's dedicaad facility, or Lake Tyee, via the proposed Intertic. 2 (10/07/96 9:47a | 10-97-1996 29:44 ©97 225 1888 KPU #4 wines Wrangell, and Petersburg systems; providing an opportunity to use excess power available from the Lake Tyee project while still satisfying the demand for power in Petersburg and Wraugell; ... enhancing each system's reliability by providing potential backup power sources; and establishing 4 link that could also expand to include communities such as Metlakatla, Kake, and others.” DEIS at S-40, The DEIS also contains several other references that clearly establish that the intertie would be part of an interconnected transmission system, 5. The Commission distinguishes between primary lines whose function is to transport power from the powerhouse or appurtenant works of a project to a junction with either transmission lines or distribution facilities and such transmission lines or facilities. The intertic plainly is a facilicy that fails outside the definition of a primary line. As noted above, the Intertie will connect two facilities that already market power through other connections to nearby communities. The intertie will be used by KPU and others to enhance reliable electric service, a5 noted above, and will provide a link in the establishment of an electrical network in southeast Alaska. The intertie is “not necessary to get all the project power to market dependably” because the power from each project already “gets” to market. [n addition, the Intertie would continue to exist were it not guaranteed by & Commission license because it is part of a larger grid that is planned for southeast Alaska. See DEIS at 8-40. It is and will be needed to provide power from sources beyond the two hydro projects that it will intertie. 6. KPU’s late intervention is warranted under the standard set forth in Rule 214(d)(1), KPU has good cause for failing to file its motion within the time prescribed in the Commission's Notice of Filing. KPU did not become aware of Cape Fox’s filing and 3 10/07/96 9:47a | 10-97-1996. 99:42 297 225 1688 KPU #1 5.05 potentially adverse position until late last week. KPU is not specifically familiar with FERC procedures and acted expeditiously to locate and retain FERC counsel once it realized its interests might be adversely affected in this proceeding, Because this motion is being filed only 5 working days after the comment deadline, KPU believes that no disruption of the proceeding will result from permitting intervention. There will be no prejudice to, or burden upon, the existing parties if Unis mation is granted. Moreover, no party in this proceeding can adequately represent KPU's interests. Finally, granting this motion is in the public interest, WHEREFORE, KPU requests that the Commission grant it intervention as a party out of time, with full rights to participate in this proceeding. Morrison & Foerster LLP 2000 Pennsylvania Avenue, N.W. Washington, D.C. 20006 (202) 887-1506 Attomeys for [ntervenor Dated: October 4, 1996 de-$0225 10/07/96 9:47a | aw eee are 1 Sat 10-87-1996 99:42 9°> 225 1588 at KPU #1 P.@6 CERTIFICATE OF SERVICE (, Amy §. Bertelsen, hereby certify that on this 4th day of October, 1996, copies of the Motion to Intervene Out of Time And Comments in the above-captioned case were served by facsimile and/or by mail, first class postage prepaid, upon: William R. Snell By U.S. Mail Alaska Energy Authority 480 West Todor Road Anchorage. AK 99503 Doug Campbell! By U.S. Mail Cape Fox ration PO. Box a558. Ketchikan, AK 9990] Bill Angelus By U.S, Mail U.S. Forest Service (AK) Ketchikan District Ranger 3031 Tongass Avenue Ketchikan, AK 99901 J. Deherrera By U.S. Mail U.S, Forest Service (AK) Ketchikan District Ranger 3031 Tongass Avenue Ketchikan, AK 9990] Keith A. eae By U.S. Mail fon wean 1031 West Fourth Avenue, Suite 200 Anchorage, AK 99501 Donald H. Clarke, Es By U.S. Mail Wilkinson, Barker, eiaver & Quinn 1735 New York Avenue, N.W. Suite 600 Washington, D.C. 20006 A Lin z [| BurAdien / Amy S. Begfelsen dc-50522 10/07/96 9:47a 10-07-1996 12:35 sc” "25 1888 KPU #4 P.@4 Fle KETCHIKAN PUBLIC UTILITIES 2930 Tongass Avenue, Ketchikan, Alaska 99901 (907) 225-1000 (907) 228-5494 Message (907) 225-1888 Fax FAX TO: Ron Saxton 10/7/96 Ater, Wynne, Hewitt, Dodson & Skerritt K1660 (503) 226-0079 8823 ‘ 7108 Dennis McCrohan State of Alaska, AIDEA (907) 269-3044 Keith Laufer State of Alaska, AIDEA (907) 258-4978 FROM: Rich Trimble As discussed, the attached pages of the Mahoney Lake license application state their assumptions regarding Swan Lake power as follows: Pages B-6 through B-8, and tables B-] through B-4 are from the Application for License for Major Unconstructed Project dated May 1996. Note that FERC accepted the application for filing by way of notice issued on August 14. The comment period is 90 days from that date. The assumption regarding Swan Lake is stated in the second paragraph of page B-6, Further, tables B-1 through B-4 assume KPU hydro capacity at 147,650 MWH. This figure clearly includes Swan Lake capacity. Their Mahoney generation estimates are based on the remaining un-met demand after KPU hydro (including Swan Lake) are exhausted. Pages C-1 through C-6 are from the Scoping Document 2 dated September 1995, These pages respond to issues raised by KPU comment in our April 1995 letter. I flagged a number of statementa that make their assumptions regarding Swan Lake clear. Let me know if you would like any additional information, I look forward to seeing you in Wrangell this week! Thanks, Rich 10/07/96 12:49p | 10-@7-1996 12:35 So” 225 1588 KPU #1 P.@2 Exhibit B - Project Operanon/Resource Urilization 3.0 DESCRIPTION OF PLANT OPERATION 3.1 General Plant Operation It is planned that the Mahoney Lake Project will be integrated into the Ketchikan Public Utilities’ (KPU) electrical generating system. KPU's system is an isolated network that includes Beaver Falls Hydroelectric Project (FERC No, 1922), ABA's Swan Lake Project (FERC No. 2911), several other small hydroelectric plants, and several diesel generating units. The system is not connected to any fegional power grid, and operates as an isolated system. When insufficient hydropower is available to meet local needs, expeusive diesel generators must be started and Nt Operated to make up any shortfall. The nameplate capacity of KPU"s current generating resource mix is about 70% hydroelectric and 30% diesel. The Mahoney Lake Project will change the percentages to about 75% hydroelectric and 25% diesel, and will provide KPU additional seasonal flexibility in scheduling its resources because of ths 4,000 ac.-ft. of useable storage developed in Upper Mahoney Lake. QL Under the Four-Dam Fool Agreement with the Alaska Energy Anshori PU must puro power from t Swan Lake Project (FERC No. 2911) befo using po irom any othe ae KPU-owned diesel generation EPU can, however, use pov seu B OW The that KPO Swan Laks P No. 2911 ee forecast ek ad Ge ol Saale a mck year 1998, the year mbsuntia] covatrection of the penject is anticipated to begin, KPU loads would exceed, by about 25,000,000 kWh, the average energy generation capability of all hydroelectric resources in its system. Because all of KPU's hydroelectric resources will be fully Utilized under these scenarios, KPU will have some flexibility to adjust operations of their various hydroelectric resources in order to maximize the benefits of the Mahoney Lake Project to the community, The proposed power plant will be fully automated with remote operation control for dispatching changes and routine start-up and shut-down sequences. Pressure transducers located in the valve bouse will continnally sense and tranamit to the powerhouse the water surface elevation af Upper Mahoney Lake. A programmable logic controller (PLC) in the powerbouss will process the lake level signal, together with other input signals, and adjust the turbine nozzles according to a pre- Programmed set of instructions. Depeading on KPU's fume dispatching preferences, the Mahoney Lake Project may be operated as 2 base load resource to maximize annual energy generation, or a5 a peaking facility to serve anticipated seasonal, weekly and daily capacity demands. The turbine for this project has beem proposed as a two-jet pelton type turbines, with Mahoney Lake Hydroelectric Project FERC No. 11393 May 1996 [10/07/96 12:49p (OT ro? 18-07-1996 12:36 97" 225 1588 KPU #1 P.e@ Exhibit B - Project Operation/Resource Utilization capability to pass flows from about 8 cfs minimum to a maximum of 78 cfa, depending on power demands and water availability, The unit will be incapable of passing more than 78 cfs. The analysis of plant operations assumes that ths project will be operated as a base load resource. The project is assumed to generate to meet the projected energy demand that is in excess of KPU"s current hydroelectric generation capabilities. Energy demand forecasts and current generation capabilities are described in Section 5 of this Exhibit. The seasonal variation of the annual demand is assumed to follow the recent historic variation in KPU generation, As an integrated resource in KPU’s system, variations of this operational scenario are possible. 32 Normal Water Year Operation Noxmal operation of the project woukd have the reservoir full, or at about elevation 1959, at the beginning of winter. Storage would be combined with local inflow to meet the winter energy demands. The pool would reach minimum elevations in late spring and refill with summer and fall runoff. In the early years of plant operation, the project would be capable of fully displacing the diesel generation requirements of the KPU system. During the first year of operation, only about 57% of the available water would be needed for generation based on the ISHR forecasted load for year 2000. The remaining water would spill from Upper Mahoney Lake. As the system load grows, available water would be utilized for energy generation until the output from the project is maximized. Under the assumed seasonal variation of load, available water would be maximized when the annual energy demand on the system reached about 215,000 MWh. From the ISER base case forecast, this energy demand would occur in year 2017. Projected monthly operation of the project during the first year of operation is shown in Figure B-1. Operation of the maximized project is shown in Figure 8-2, With an average water year and full system operations, the upper lake would be full in October and drafted to minimum pool level by the end of April. During these months flows downstream of the powerhouse would be above pre-project conditions as storage would be used to supplement natural inflow. From May through August, the upper lake will be refilling with spring and summer snowmelt and ronoff. Plant releases; and the flow downstream of the powerhouse will be below pre-project flows during this period, Once the wpper lake is full, the project will operate on runoffs and post-project flows will be similar to pre-project flows. The monthly average flows shown in Tables B-1 and B-2 represent the expected flow rates through the project on an average basis under the assumed energy demand profile. It should be noted, however, that other operation scenarios are possible, Circumstances may arise when KPU’s other energy resources ate shutdown for a variety of reasons and the Mahoney Lake Project must be operated to help carry the electrical demand of Ketchikan. Under Mahoney Lake Hydroelectric Projact May 1996 FERC No, 11393 B-7 [10/07/96 12:49p 10-@7-1996 12:37 s"~ 225 1888 KPU #1 Exhibit B - Project Operation/Resource Utilization in these conditions, the project would likely be operated at full load, or 78 cfs. until the other resources can be brought back on-line. Another scenario to maximize the energy production from the project sooner would be to seasonally vary the distribution of the load placed on the project. Under this scenario, during the carly years of the project, the project would produce more energy during the fall months than is depicted in Table B-1. The additional water that is used that would normally have gone as uncontrolled spill could be theoretically “banked” at other hydroelectric projects within KPU’s system and used to offset diesel generation later in the year. This flexibility to vary the plant output is critical to being able to provide power for the citizens of Ketchikan at the most economical rate. When fully utilized, the Mahoney Lake Project will operate at a 0.55 plant factor. For comparison, the Swan Lake Project (FERC No. 2911) operates at a 0.42 plant factor and the combined KPU-owned hydroelectric facilities operate at » 0.63 plant factor. 33 Low Water Year Operation Operation of the project will be coordinated with KPU's other operating resources to best use will stipulate minimum and maximum pool levels with the objective of minimizing "spill" through the natural lake outlet. During a low water year, the minimum pool level will be sustained for a longer period of time, and the plant will opesate az a "nin-of-river” project during that period, simulating pre-project conditions downstream of the powerhouse, An example of i Operation during a low water year is shown on Table B-3. The table is based on an annual load requirement of 215,000 MWh and recorded monthly inflows doring Water Year 1978, the lowest year from a 35-year database. The table shows that the project cam produce 29,600 MWh of energy, or 64% of the annual energy produced under similar conditions as shown in Table B-2, 3.4 High Water Year Operation During a high water year, insufficient storage volume and high inflow to Upper Mahoney Lake f will exceed the turbine's maximum hydemilic capacity resulting in loss of runoff through the existing natural lake outlet. Table B-4 shows an example of project operation during the wettest year in the 35-year database, Water Year 1987. The table shows that the project can produce 52,400 MWh, of 113% of the annual energy produced under similar conditions as shown in Table B-2. Upper Mahoney Lake is restored to its normal maxittum operating level by the end of Juns, and remains at this level until November, spilling some water down the bypass reach throughout this period, Mahoney Lake Hydroelectric Project z FERC No. 11393 May 1996 B-8 i [10/07/96 12:49p_ aA av A tani aeaia pide | 10-@7-1996 12:38 3 225 16888 KPU #1 P.e@S Table B-1 Sema fAdee 4 . MAHONEY LAKE HYDROELECTRIC PROJECT Average Annual Energy Generation - Year 2000 — a7 a {We veeys I" 174,383 MWhre Minimum Poo! Elev,: ; 147,650 MWhrs Pool Starting Elev,; Turbine Elev.; I = Assumed Head Lows: Assumed Eff, Ost Nov Dec Jan Feb Mar Ape May ne July Aug SUMMARY OF GENERATION | KPU Un-Met Demand 26,733 MWhrs Mahoney Generation 26,733 100.0% Required Diesel Generation 0 0.0% [10/07/96 12:49p 18-@7-1996 12:38 977 225 1688 KPU #1 Table B-2 MAHONEY LAKE HYDROELECTRIC PROJECT Maximum Annual Energy Generation - Average Water Year 215,000 Minicmum Pool Elev.: 147,650 MWhrs Pool Starting Elev.: Turbine Elev.; Aasumed Head Loss: Asnumed Eff. SUMMARY OF GENERATION KPU Un-Met Demand 67,350 MWhra Mahoney Genaration 46,066 68.4% Required Diesel Generation 21,284 31.6% [10/07/96 12:49p_ HH “= 10-@7-1996 12:39 S"~ 225 1588 KPU #4 Table B-3 MAHONEY LAKE HYDROELECTRIC PROJECT Maximum Annual Energy Generation - Low Water Year 215,000 Minimum Pool Elev.: 147,650, MWhra Pool Starting Hlev.: Turbine Elav.: Aswumed Head Loss: 3989 3778 2328 861 0 16 a 44 SUMMARY OF GENERATION KFPU Un-Met Demand 67,350 MWhrs Mahonsy Generation 29,640 4.90% Required Diesel Generation 37,710 56.0% 108-@7-1996 12:39 g"~ 225 1888 KPU #1 Table B-4 MAHONEY LAKE HYDROELECTRIC PROJECT Maximum Annual Energy Generation - High Water Year SUMMARY OF GENERATION EPU Un-Met Demand Mahoney Generation Required Diasel Gensration 67,350 $2,414 14,9% Minimum Pool Elev: Poo! Starting Elsv.: Turbine Elev.: Assumed Head Loss: Assumed Eff. MWhss Tr.8% 22.2% P.@8 18-@7-1996 12:49 e-~ 225 1688 KPU #1 P.e@9 Response to Agency Comments APPENDIX C RESPONSE TO AGENCY COMMENTS Agency comment letters regarding SD! were annotated and responses to specific issues raised in these letters are below. Alaska Division of Governmental Coordination (ADGC) April 5, 1995 Issue 1: Revisions need to be made to distribution list, Response: Comment noted. Distribution list has been revised accordingly. Issue 2: Review of state coastal management program consistency process. Response: Comment noted. Applications will be submitted prior to submitting the DEA and license application to the FERC, Ketchikan Public Utilities (KPU) April 12, 1995 Issue 1: Our previous studies and the study recently done by HDR leads us to the conclusion that the Mahoney Lake Project simply will not meet Ketchikan's needs at this time. Response: Although the City has met and corresponded with KPU many times since 1993 to describe the project, the benefits of the project to the KPU system and the KPU ratepayers still seem to be unclear to KPU at the time this comment was writtes, The City believes that in a meeting with KPU on April 24, 1995, KPU SE XCPUT ws reolace encepy seummai by KEU' 1 doen unt. As KPU’s load continues to grow, as projected by KPU and all other available load growth projections, more and more diesel generation will be required. KPU's residential rates as of June 1995 are $0.0875 per kilowatt-hour (kWh). Diesel fuel alone costs approximately $0.07 per kWh. The power produced by the proposed project will be less expensive than equivalent diesel generation. This can be of great benefit to KPU and its mtepayers. The operating scenarios described in the scoping document do not include any coordination of the project operation with existing KPU facilities. The City believes that since all existing KPU hydro resources are currently being fully utilized on an annual basis, and diesel generation is still necessary, that by coordinating operation of Mahoney Lake with other KPU resources, no spill and no diesel operation will be necessary for up to ten years Mahoney Lake Hydroslevtric Project September 1995 | FERC No. 11393-000 (10/07/96 12:49p 10-@7-1996 12:41 eo 1588 KPU #1 Response to Agency Comments Issue 2: Response: Issue 3: into the future. This is because there is significant storage available at other KPU hydro facilities, Water could be "banked" at these reservoirs and saved until needed, while fully utilizing Mahoney Lake when there is excess water there. KPU’s existing hydro resources would, thus, still be 100% utilized on an annual basis, but the timing of generation of each would be shifted slightly. This type of ion i nt with KPU’s for use of Swan Project C No. 29 other er into their system. Ata with KPU on April 24, 1995, (two weeks after the date of the KPU texter), Tom Stevenson of KPU agreed that this type of integration of Mahoney Lake into their system would indeed be possible. Furthermore, the proposed project has 3,760 acre-feet of storage in the upper lake that can be used by KPU as they see fit for emergency capacity or energy. This much water represents the ability to run the plant at full load output for 24 days with no reservoir inflow at all. With the average annual reservoir inflow of 44 cfs, a full reservoir could be operated at full load for 55.7 days before it was depleted, 55.7 days of full load operation represent 12,8 million kWh of energy that KPU could use at any time in their system to offset diesel generation. This provides a clear benefit to KPU. Finally, the City and Cape Fox have offered KPU control of the operations of the plant as well as full dispatchability of the project as KPU sees fit, as long as KPU agrees tO use best efforts to minimize avoidable spill of water from the upper lake. This would give KPU complete flexibility to integrate the project into their system as they see fit. The scoping of this project seems to be premature...(KPU) expect(s) there to be at least tentative terms negotiated for the sale of power to be produced by the project before proceeding with scoping. Comment noted. Scoping is a part of the NEPA process, and in general, the terms of a power sale agreement are not typically addressed. The purpose of scoping is to identify possible issues, and as such, the City believes that scoping can never be "premature", but in fact, is most beneficial to all concerned the sooner it occurs in a regulatory process. Although the City has made it clear to KPU that a power purchase agreement would be desirable for the Mahoney Lake Project, the City wishes to preserve its rights under the Public Utility Regulatory Policies Act of 1978 (PURPA) to guarantee that KPU will purchase the project output at its avoided cost, The City believes that all parties concemmed would benefit if a power purchase agreement were finalized with KPU as soon as possible, and will diligently continue to pursue this with KPU. The City has met and corresponded with KPU to discuss this issue many times since 1993, The economic feasibility of the Mahoney Lake Project appears to be based on the preferential use of Mahoney Lake power by KPU, which is simply not an Mahoney Lake Hydroelectric Project : FERC No. 11393-000 c-2 September 1995 -10 10-87-1996 12:41 g77. 2 225 1688 KPU #4 Pit Response to Agency Comments acceptable option for the ratepayers of KPU who would be forced to pay extraordinary amounts for the use of Mahoney Lake power over the cost of operating KPU"s own hydros. geoention by KPU, iad avoiding fare diesel ay expansions or other large capital intensive projects such aa the Lake Tyee Hydroelectric Project (FERC No. 3015)/Swan Lake Project (FERC No. 2911) Intertie, Project economic projections show a net benefit to KPU and its ratepayers if cheap, renewable energy from Mahoney Lake is used in Ketchikan for the next 50 years instead of using energy generated by burning diesel fuel. The City has retained an independent economic analysis consultant, Economic and Engineering Services, Inc. (HES) to perform a complete economic analysis of the project and to compars the project to diesel generation and other potential future energy resources in the Ketchikan area. The results of their analysis show that the Mahoney Lake Project is the most cost effective option for Ketchikan at this time, and in fact, is the only option that will not result in rate shock for the ratepayers of KPU. This study also shows that other projects such as the intertie would result in significant rate shock for the KPU ratepayers unless it was constructed completely with grant monies and could obtain subsidized rates for energy from the Lake Tyee Project (FERC No. 3015). This economic analysis has been provided to KPU. The intertie is clearly not a complete answer for Ketchikan. As Ketchikan, Petersburg, and Wrangell loads grow, less and less energy will be available to Ketchikan over the intertic, and by 2013, even with the intertie, diesel generation would have to resumé in Ketchikan. Projections including the intertie show that by 2023, diesel generation capacity equivalent to the Mahoney Lake Project would be necessary. Building the Mahoney Lake Project now would provide capacity and energy for KPU as it pursues authorization for the intertie, Mahoney Lake could help avoid diese] generation completely until at least 2023. The Mahoney Lake Project will be a cost-effective, long-term source of energy that will be available for at least 50 years for the region, and likely for in excess of 100 years, This long-term pace es ees oes eae consideration n by resources and the Swan Lake Project, (FERC No. 2911) have been exhausted on an annual basis. The City is convinced that the Mahoney Lake Project is not only feasible, but is the best and lowest cost option for the citizens of Ketchikan as their system loads continue to grow. Issue 4: For the project to be a meaningful addition to the Ketchikan area power system, it should include a dam for additional storage. : Mahoney Lake Hydroelectric Project September 1995 C-3 FERC No. 11393-000 (10707796 12:49p | 18-@7-1996 12:42 £"~ 225 1888 KPU #1 Response to Agency Comments Response; Addition of a dam at the upper lake was investigated by the City in order to increase storage at the project. There are several factors involved in the City’s decision to not to include a dam in the project design at this time: a) In the first few years of project operation, projections show that only about 90- 95% of the proposed project's output would be used by KPU until diesel loads grow a little further. Addition of a dam into the initial project configuration would not be cost effective because the additional flexibility it would provide KPU would not be necessary until some time off in the future. If a dam would prove to be of benefit, and is cost effective and environmentally acceptable, the City would agree to study its feasibility in the future and to add a dam at the upper lake in the future through a license amendment process when it appears warranted. If FERC were to add a license condition to the license requiring the City to review the feasibility of adding a dam in the future and to apply to FERC for an amnendment when such an addition was feasible, the City would accept such a condition, b) The area in the vicinity of the upper lake outlet is subject to avalanche in the winter and hag slope instability and evidence of historic landslide activity along the left side of the outlet creek. The presence of these problems presents some challenges for construction of a dam at this location, although we agree that these concerns could probably be addressed by good engineering design and by keeping the dam relatively small. c) No road access will be possible to the dam location. It will have to be constructed of local materials and by use of helicopters, so it will probably be very expensive, : 4) Raising the lake level by constructing a dam will inundate some habitat for plants and animals, so some environmental concerns by the public and the resource agencies are likely. The proposed project results in 3,760 acre-feet of storage without the need for any dam whatsoever, é) The project as proposed has 3,760 acre-feet of storage. A 25-foot high dam would add an additional 2,000 acre-feet, or a 50-foot high dam would add 3,300 acre-feet, It is difficult to see how this increase in storage could make the project more attractive to KPU. As stated earlier, the City is willing to look at adding a dam in the future when it appears to be necessary and feasible. Issue 5: Interconnection of the Mahoney Lake transmission line to the Ketchikan system should be moved to the Beaver Fails Project (FERC No. 1922). Response: The City recognizes that this change in project configuration would be of benefit to KPU. For this reason, the City agrees to add the review of this new "southern" intertie route to the scope of study for the project feasibility studies and the Mahoney Lake Hydroelectric Project PERC No. 1393-000 C-4 12 10-@7-1996 12:43 Issue 6: Response: Issue 7: ¢-— 225 1588 KPU #4 P.13 Response to Agency Comments Environmental Assessment. A potential route has already been identified and flagged in the field, Bald eagle, marbled murreiet, and northern goshawk surveys have been conducted of this new route along with vegetation, sensitive plant and cultural resource surveys. This potential route will be evaluated throughout the environmental review process. The economic analysis of this project would be incomplete without pursuing the market potential of Mahoney Lake power in Metlakatla. Two meetings have been held since the date of this comment letter to pursue the idea of interconnection to Metlakatla. This interconnection would require construction of roads, above ground transmission lines, and a submarine transmission line to Annette Island before it could become a reality. Metlakatla is reviewing this project and deciding whether or not to proceed, If Metlakatla were to build these facilities, the City would be interested in further pursuing the notion of power sales to Metlakatla, If the "southern" intertie route to the Beaver Falls Project (FERC No. 1922) is adopted, the transfer of power to Metlakatla could occur with almost no additional facilities being necessary. The City believes that KPU, who is the locally franchised utility, would be the most appropriate agency to contract with Metlakatla for sale of energy. KPU could provide Metlakatla with more capacity and flexibility, and would also be able to best integrate Metlakatla’s needs with the KPU system. Until the significant new facilities are constructed, or even proposed by Metlakatla formally, the City is unable to evaluate or commit to sale of energy to Metlakatla. We believe that more than sufficient basis for economic evaluation of the project exists by analyzing the present and future needs of the KPU system alone. The possibility of future sales to Metlakatla only further enhances the already attractive economic viability of the project, The project is even less economically feasible when you add an anticipated mark- up for the power for the benefit of the City, who would obviously expect a return on their investment. See previous responses. City is ing to sell power from the ne’ Lake Project to KPU lace energy generated by : units. As KPU loads continue to grow, a8 projected by and all other available load growth projections, more and more diesel generation will be required. KPU's residential rates as of June 1995 are $0.0875 per kWh. Diesel fuel alone costs approximately $0.07 per kWh and this does not include the cost of operation and maintenance, replacement funds or debt service retirement. The power produced by the proposed project will be less expensive than equivalent diesel generation. This can be of great benefit to KPU and its ratepayers, The City has the ability not only to sell bonds at rates equivalent to bond money available to KPU, but as a Native Alaskan entity, also may be able to obtain low interest loans or grant monies from the federal government that may not be available to KPU. Due to all these September 1995 Mahoney Lake Hydroelectric Project C5 FERC No. 11393-000 10/07/96 12:49p 10-@7-1996 12:44 £-~ 225 1688 KPU #4 Response to Agency Comments factors, the City is confident that a power purchase agreement can be worked out ! that will provide the KPU ratepayers relief from expensive diesel generation costs = while assisting the City in developing an economic base to help insure the future _ viability of this community. An independent economic evaluation of the project i was conducted by BES as discussed above in response to Issue No, 3. This - analysis shows the Mahoney Lake Project is not only economically feasible, but is the only option available to KPU for new energy resources that will not result in rate shock to the ratepayers. This report has been shared with KPU and its aT consultants. Alaska Department of Fish and Game (ADFG) May 11, 1995 Issue 1: Impact of post-project flows on fish in Lower Mahoney Lake and fish passage in Lower Mahoney Creek. Response: § The City prepared a flow regime report in June that directly responds to the concern for fish passage through Lower Mahoney Creek. The indications are that the project will not appreciably change conditions in the Mahoney basin, as the project flows are derived from 39% of the total Mahoney basin and planned post- project average flows in August and September track very closely with existing pre-project conditions. A water quality teport that ‘will soon be available for agency review discusses the impacts to spawning fish at the outict of Upper - Mahoney Creek. As discussed at the June 22, 1995, meeting, with the USFS, - ADFG, and USFWS, the project will be able to auginent flows in the Mahoney Lake system for a brief period to facilitate fish passage through Lower Mahoney Creek and into Mahoney Lake. The City has been conducting additional fish studies this summer to better identify the dynamics of fish passage through Lower Mahoney Creek. The fisheries study plan is described in Appendix A. The observations will be linked with flow information from a new stream gage that was installed on Lower Mahoney Creek in the approximate location of the former U.S. Geological Survey gage site. As discussed at the June 22, 1995, meeting, the project will be capable of increasing flows to facilitate fish passage should conditions warrant. Issue 2: The need for gage data and the verification of fish passage blockages. Response: Refer to Appendix A for the proposed summer field program. This information will be collected and appended to the fish report for agency review and ultimate incorporation in to the BA, At the June 22, 1995, meeting in Ketchikan, the City agreed to construct a bypass pipe to allow for the release of water into Upper Mahoney Creek. The water would be diverted to the creek in the vicinity of the upper construction site and would provide water through the upper creek and into Mahoney Lake Hydroelectric Project FERC No, 11393-000 C-6 ; September 1995 [10/07/96 12:49p cc’ 10-@4-1996 99:49 “Ee 1688 KPU_ #4, eI” UA TF DB KETCHIKAN PU SWAN LAKE ' LAKE TYEE TRANSMiworn LG WiCNiiC rniwvEvs 2930 Tongass Avenue, Ketchikan, Alaska 99901 (907) 225-1000 (907) 228-5494 Message (907) 225-1888 Fax FAX TO: BOB LEFFLER 10/4/96 Morrison and Foerster LLP, Attorneys at Law K1657 (202) 887-0763/4 7108 8823 FROM: RICHTRIMBLE #2" SUBJECT: Lats Motion to Intervene: Swan-Tyee Intertie Bob: Tam in receipt of your draft and have reviewed it with our General Manager, John Magyar, We concur with your statements and analysis but have one additional point with you may feel should be addressed in this motion, The footnote of the Cape Fox motion asserts that our Power Sales Agreement (PSA) with the Four Dam Pool is nullified by a PURPA requirement to purchase Mahoney Lake power. If this assertion has merit, there is dramatic potential impact on the revenue of the Four Dam Pool organization (of which KPU is a member), Specifically, if KPU is forced to purchase Mahoney Lake power over Swan Lake, Four Dam Poo! energy sales from Swan Lake would significantly decrease and energy costs to the Four Dam Pool communities (Ketchikan, Wrangell, Petersburg, Kodiak and Copper Valley) would increase, The State of Alaska as the owner of the Four Dam Pool projects would suffer revenue loss as well. I have conveyed the Cape Fox motion to the Four Dam Pool attorney and the State (AIDEA) to deal with that issue, Since it is not specifically a Swan-Tyee Intertie issue, it may not merit rebuttal in this motion you are filing. On the other hand, since the assertion was made in the motion to which we are responding, you may feel a rebuttal of the footnote is warranted. Unless you feel a modification to the draft is warranted to refute the footnote in the Cape Fox motion, we concur with you draft and authorize you to file our motion as soon as possible. Thanks, Rich ce: John Magyar, KPU General Manager Ron Saxton, Four Dam Pool Attorney, Ater, Wynne, Hewitt, Dodson & Skerritt Dennis McCrohan, AIDEA Deputy Director eee 10/04/96 9:57a 10-@3-1996 16:01 : 225 1888 KPU #1 . P.@1 PUBLIC UTILITIES 2930 TONGASS AVENUE KETCHIKAN, ALAEKA #5801 TELEPHONE 907-225-1000 FAX 807-225-1668 October 3, 1996 MUNICIFALLY OWNED €LECTRIC TELEPHONE WATER Ce. en Mr. Ronald L, Saxton Ater, Wynne, Hewitt, Dodson & Skerritt 222 S.W. Columbia, Suite 1800 Portland, OR 97201-6618 peor ttt Fa "269 -30¥% 22r- ~ aeP Dear Ron: Subject: Mation to Intervene and Comments of Cape Fox Corporation on Swan-Tyee Intertie Notice of Declaration of Intention, FERC Docket No. DI96-11-000 The attached motion was filed by Cape Fox Corporation with FERC last week. Until receipt of this motion, the U.S. Forest Service (lead agency in the Intertie EIS), KPU and our consultants had felt this FERC notice was essentially a formality since the Intertie appeared to be clearly outside of FERC jurisdiction. As a result of this motion however, KPU is filing our own Motion to Intervene Out of Time (the comment period ended on September 27) and presenting comment that this project is outside of FERC jurisdiction. We should have a tuling by the end of this month from FERC. However, I want to bring to your attention that this motion asserts that KPU is not subject to the Power Sales Agreement for the purchase of Swan Lake power as PURPA would obligate us to purchase Mahoney Lake power (see footnote on pages 2 and 3), This could have serious implications for Four Dam Pool power sales, if true. Please advise us of the merit in this assertion by Cape Fox and what action, if any, you would recommend, Sincerely, Le Richard D. Trimble Enclosure ce! John Magyar, KPU General Manager X ek , Q 4 Tom Friesen, Ketchikan PMC representative P\ oenl, call Non ancy Wk Dennis Lewis, PMC Chairman Dennis MeCrohan, AIDEA Deputy Director to Ad aeus nA. Ae {ow 5 (10703796 4:09p 10-@3-1996 16:02 225 1888 KPU #1 P.@2 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION US. Forest Service } Swan Lake - Lake Tyee Imertie ) Docket No. DI96-11-00 MOTION TO INTERVENE AND COMMENTS OF CAPE FOX CORPORATION Pursuant to Rule 214 of the Commission’s Rules of Practice and Procedure, 18 C.P.R, § 385.214 (1995), Cape Fox Corporation ("Cape Fox”) hereby respectfully files this motion to intervene in the above-captioned proceeding with respect to the jurisdictional status of the proposed Swan Lake - Lake Tyee Intertie. In support thereof, Cape Fox states the following: L SERVICE All correspondence or communication concerning thia pleading should be addressed to: Doug Campbell Chief Operating Officer Cape Fox Corporation P.O. Box 8558 Ketchikan, Alaska 9990] tel. (907) 225-5163 fax (907) 225-3137 Donald H. Clarke, Esq. Wilkinson, Barker, Knauer & Quinn 1735 New York Avenue, N.W. Washington, D.C, 20009 tel (202) 783-4141 fax (202) 833-2360 [10703796 4:09p 18-@3-1996 16:02 § 225 1688 KPU #1 P.@ 2 IL STATEMENT OF INTEREST Cape Fox is an Alaska Native Village corporatian formed under the Alaska Native Claims Settlement Act (“ANCSA”), 43 U.S.C. § 1601 et seq. Cape Fox is acting as development agent for the City of Saxman, Alaska (“City”), license applicant for the proposed Mahoney Lake Hydroelectric Project, FERC Project No, 11393 (“Project”), a 9.6 megawatt hydroelectric project on Upper Mahoney Lake and Upper Mahoney Creek near Ketchikan in southeast Alaska, The Project will be located in part on lands owned and selected by Cape Fox under the terms of ANCSA and will be a major source of income for Cape Fox, as well ag for the City, The City’s license application was filed with the Federal Energy Regulatory Commission (“FERC” or “Commission”) on May 31, 1996, and the Commission issued public notice accepting the license application and applicant-prepared environmental assessment for filing on August 14, 1996, The City proposes to develop the Project as = qualifying facility under Section 210 of the Public Utilities Regulatory Policies Act of 1978 (“PURPA”), 16 U.S.C. § 8244-3, and sell the Project power to Ketchikan Public Utilities (KPU”) to meet power needs in the Ketchikan area. Inasmuch as the Swan Lake - Lake Tyee Intertic (“Intertie”), if determined to be feasible and appropriate, would provide surplus energy from the Lake Tyes Project No. 3015 to the Ketchikan market, any action with respect to the Intertie could affect the market for power from the City's Project.’ As stated in the U.S, Forest Services’s Swan Lake - Lake Tyee Intertie z Cape Fox does not thereby imply that KPU acceas to Lake Tyee Project power at the Swan Lake Project would necessarily preclude purchase of power from the City’s Project, The Long Term Power Sales Agreement — Four Dam Pool (Oct, 28, 1985) (“PSA”) establishes the Alaska Power Authority's obligations to sell and the ree ; [10/03/96 4:09p 18-23-1996 16:03 g 225 1688 KPU #1 P.04 3 Draft Environmental Impact Statement Summary (March 1996) (“DEIS”), “[t]he No Action Alternative [to the Intertie] includes greater reliance on diesel generation alone or in combina- tion with power purchased from the proposed Mahoney Lake Hydroelectric project.” DEIS at S-11. As such, Cape Fox has a direct interest in this proceeding which is not represented by any other party. TL COMMENTS Tnasmuch as the Intertie, as currently proposed, would carry energy from the Lake Tyee Project to the Swan Lake Project switchyard, to which KPU is interconnected, a legitimate questions arises with respect to whether this line carrying Lake Tyee Project power is a primary line ag defined in Section 3(11) of the Federal Power Act, 16 U.S.C. § 796(11), /e., a tranamis- sion line transmitting power from a licensed water power project “to the point of junction with the distribution system or with the interconnected primary transmission system.” In recent years, the Commission has attempted to simplify its approach to determining what is 4 primary transmission line that must be licensed under Part I of the FPA. As explained in Jdentifying Transmission Facilities at FERC Hydroelectric Projects, FERC ! (...continued} obligations to purchase power generated in the Four Dam Pool, including the utilities’ obligations to purchase from their specific dedicated facilities, The Four Dam Pool includes the Solomon Gulch, Swan Lake, Lake Tyee and Terror Lake hydroelectric projects, KPU is required to purchase power from Swan Lake, its dedicated facility, to the extent that KPU's existing hydroelectric resources are insufficient to satisfy its electric power load. Under Section 3{c){ii) of the PSA, however, this obligation does not apply if KPU is obligated by law to purchase power generated at another source. Section 210(a) of PURPA, 16 U.S.C. § 824a-3(a), as implemented in 18 CFR. § 292,303 (1995), would impose such an obligation by law. (10/03/96 _4:09p 18-@3-1996 16:03 : 225 1688 KPU #41 P.@S 4 Office of Hydropower Licensing, Paper No. DPR-6, January 1993 (“Guidelines”),“[e}xperience has shown that set formulas and procedures do not produce reasonable and consistent results in all cases.” As set forth in the Guidelines, there is basically now a two step inquiry: (1) Is the segment necessary, alone or in combination with one or more other segments, to get all the project power to market de- pendably? (2) Would the segment continue to exist even if its continued existence were not guaranteed by a Commission license? With respect to Inquiry (1), the Intertie would carry Lake Tyee Project power that ae is surplus to Wrangell’s and Petersburg's needs to the Ketchikan market. As such, it appears to qualify as necessary to carry “gil the project power to market.” Under the Inquiry (2) — whether the segment would exist if its continued existence were not guaranteed by a Commission license — the answer is less apparent and an investigation of the policies and interests underlying this inquiry is required. This second inquiry appears to address the notion of ao independent justification for the line, i.e, independent of the existence of the licensed project, Because a licensed project may be subject to Govern- ment takeover, transferred to 4 new licensee, or decommissioned, the required disposition of the transmission line in these instances is informative ag to whether the line has an independent justification or whether it must be considered part of the licensed project, It appears that any new entity that might take over ownership of the Lake Tyee Project would require the Intertie to market all of the project’s output. In the case of decommis- sioning of the project, there does not now appear to be any alternative basis that would feasibly support the continued functioning of the Intertie, The DEIS does reference reliability benefits to 10/03/96 4:09p | 18-@3-1996 16:04 : 225 1688 KPU #1 P.e6 5 all three utilities’ electrical systems, DEIS at S-3. The Commission should carefully consider whether these benefits are merely incidental or rise to the level of an adequate independent justification for the construction and operation of the Intertie. Additionally, the DEIS reports that from KPU’s perspective the Intertie would “establish an important link in the long-proposed electrical network for southern Southeast Alaska.” DEIS at S-2. Whatever future options may exist with respect to expansion of the transmission network in Southeast Alaska, the instant jurisdictional inquiry must focus on the status of the Intertie as currently proposed to enter service, i.e. carrying Lake Tyee Project power. Any subsequent modification or additions to the transmission system that could change the character and potentially the jurisdictional status of the Intertie must necessarily be adjudicated at the time such changes occur. TV. CONCLUSION WHEREFORE, for the foregoing reasons, Cape Fox urges careful consideration of the jurisdictional issues raised by the U.S. Forest Service's request and respectfislly requesta that the Commission grant its intervention in the above-captioned proceeding with all rights aa a party thereto. spectiilly submitted, UH CAL id H. Clarke, Esq. Wilkinson, Barker, Knauer & Quinn 1735 New York Avenue, N.W. Washington, D.C. 20006 Counsel for Cape Fox Corporation Dated: September 25, 1996 10/03/96 4:09p | : ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY f= = ALASKA @im™ =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 269-3000 FAX 907 / 269-3044 September 25, 1996 Mr. Linwood A. Watson, Jr., Acting Secretary Federal Energy Regulatory Commission 888 First Street, N. E. Washington, D.C. 20426 Subject: MOTION TO INTERVENE Swan Lake - Lake Tyee Intertie Declaration of Intention Docket Number DI96-11-000 FERC Project Numbers 2911 and 3015 Dear Mr. Watson: Enclosed is our MOTION TO INTERVENE in the subject proceedin: iska Energy ity has interests not represented by other parties involved in thes eedings. Sincerely, wd hig BD : William R. Snell Executive Director Et aural Wohnen jake WRS/JHT/cjp / Enclosure: As stated ee cc: Mr. Keith A Laufer, Assistant Attorney General, Dept. of Law, Anchorage Mr. Jimmy D. Herrera, USDA Forest Service, Ketchikan Mr. Bill Angelus, USDA Forest Service, Ketchikan Mr. J. Magyar, KPU Mr. T. Wagonner, KPU oO Kan R,\ Mr. L. Highbargin, TBPA 4, Curse WW Mr. S. Sieczkowski, AEA Mr. D. Beardsley, AEA Mr. J. Thrall, LIL File UNITED STATES OF AMERICA FEDERAL ENERGY REGULATORY COMMISSION USDA FOREST SERVICE SWAN LAKE - LAKE TYEE INTERTIE, PROJECT NUMBERS 2911 AND 3015 Motion to Intervene of Alaska Energy Authority Pursuant to the Federal Energy Regulatory Commission's ("Commission") NOTICE OF DECLARATION OF INTENTION, Docket Number DI96-11-000, dated August 22, 1996, and the Commission's Rules of Practice and Procedure, the Alaska Energy Authority, ("Energy Authority") hereby moves to intervene in this proceeding. In support of its motion the Energy Authority states as follows: 1. The Alaska Energy Authority is a public corporation of the State of Alaska, having its principal office at 480 west Tudor Road, Anchorage, Alaska. Correspondence and communications with respect to this Motion should be addressed to: Mr. William R. Snell Executive Director Alaska Energy Authority Attention: Stanley E. Sieczkowski 480 West Tudor Road Anchorage, Alaska 99503 Mr. Keith A. Laufer Assistant Attorney General Department of Law General Civil Section 1031 West Fourth Avenue, Suite 200 Anchorage, Alaska 99501 The Energy Authority is a Public Corporation of the State of Alaska. The purpose of the Energy Authority is to promote, develop and advance the general prosperity and economic welfare of the people of the State by providing a means of financing and operating power projects and facilities that recover and use waste energy (§ Ch. 278 SLA 1976; am § 5 Ch 156 SLA 1978; am § 1 Ch 133 SLA 1982; am § 9 Ch 18 SLA 1993). The Energy Authority is supportive of projects resulting in sound energy development by entities other than itself and will make efforts to provide assistance as appropriate. Motion to Intervene, Alaska Energy Authority City of Saxman, Alaska Project No. 11393-001 Page 2 4. The Energy Authority is the Owner and FERC Licensee of the Swan Lake Hydroelectric Project and the Tyee Lake Hydroelectric Project. 5: The Swan Lake and Tyee Lake projects are operated for the Energy Authority by Ketchikan Public Utilities and the Thomas Bay Power Authority, respectively. Power produced at the Swan Lake Project is purchased by Ketchikan Public Utilities and power produced at Tyee Lake is transmitted by the Thomas Bay Power Authority for sale to Petersburg Municipal Power and Light and to Wrangell Light and Power. 6. Implementation of the proposed intertie between these two projects will effect the operation of both projects, as well as the sale of power from the projects. WHEREFORE, the Energy Authority moves that the Commission make and issue its Order permitting the Energy Authority to intervene in, and be made a party of, the above-entitled proceedings with a right to have notice of and appear at all hearings, to produce evidence and witnesses, to cross-examine witnesses, and be heard by counsel, and to submit briefs and participate in oral argument, if oral argument is granted. Dated this 25 day of September, 1995. Respectfully submitted, oh William R. Snell Executive Director Alaska Energy Authority KETCHIKAN PUBLIC UTILITIES 2930 TONGASS AVENUE KETCHIKAN, ALASKA 99901 TELEPHONE 907-225-1000 FAX 907-225-1888 K1290 MUNICIPALLY OWNED 7109 r \ ELECTRIC TELEPHONE WATER May 9, 1996 e C E | V E ) Me 0 iso Mr. Dennis McCrohan Deputy Director - Energy Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, AK 99503 Alaska Industrie! Development and Export Authority Subject: Swan Lake - Lake Tyee Intertie Project Dear Mr. McCrohan: As you are aware, the City of Ketchikan d/b/a Ketchikan Public Utilities is pursuing a project to construct a power transmission line connecting the state’s hydroelectric facilities at Swan Lake and Lake Tyee. The purpose of this letter is to initiate the formal permit process with AEA, and to request the state’s permission for the interconnection, and for associated design and construction activities within the state’s power withdrawal boundaries. Design and the preparation of an Environmental Impact Statement are well underway. Documents from these activities describing the proposed facilities will be forwarded to you as they become available and as you require them for state review. In 1996 and 1997 we expect that there will be field activity by engineers and surveyors who will require access to state property, and who may wish to use the existing power withdrawal sites for temporary staging of helicopters or fuel, and for short term bunking of crews, depending on availability of facilities. A Draft EIS has been published and forwarded to you, and we hope to obtain a Record of Decision from the Forest Service later this year regarding final routing selection. We expect to complete design of a portion of the route in 1996, and the remainder in 1997. We hope to commence construction in early 1998 and conclude by the end of 1999. Additional field survey work and geotechnical exploration will be conducted in 1997. We understand that a formal agreement will be required between ourselves and AEA to govern the proposed activity. We request a meeting with you at your earliest convenience to discuss AEA procedures and identify issues that will need to be resolved. Sincerely, __———— CC Be fEE Richard D. Trimble Intertie Project Manager RDT:sb QE ye pK AE File SWAN LAKE + LAKE TYEE TRAISMSSION LINE NTERTIE PROJECT Ketchikan Public Utilities 2930 Tongass Avenue, Ketchikan, Alaska 99901 (907) 225-1000 (907) 228-5494 Message (907) 225-1888 Fax TO: Tom Friesen, PMC Representative (KPU) 8/20/96 Dennis Lewis, PMC Representative (PP&L) K1578 Terry Nikodym, PMC Representative (WL&P) 0103 Walt Sapp, PMC Representative (KEA) Robert Wilkinson, PMC Representative (CVEA) Stan Sieczkowski, AIDEA pyERELY am Dick Emmerman, DCRA ie mn me | John Magyar, KPU General Manager LiL ! Tom Waggoner, KPU Electric Superintendent Lowell Highbargain, TBPA General Manager Alaska Incustr Tim Gillen, Wrangell Power & Light Foreman @ Development and Export Autherity FROM: Rich Trimble, Intertie Project Manager The following is provided for your information: 1) Updated Intertie cost estimate by Raytheon. Note that although the EIS is considering a number of different options and routes, Raytheon’s effort is focused on the most direct route (Alternative 2). This cost estimate assumes the most direct route, aerial water crossings and no road construction. Their estimate of $69.8 million compares to the 1992 feasibility study estimate of $64.4 million (converted to 1997 dollars). 2) Final Geologic Reconnaissance report by Dames & Moore. Please let me know if you would like a complete copy of the report which includes evaluations of each tower location. 3) Foster-Wheeler progress reports for May, June and July and a memorandum on the current FEIS schedule (no recent progress reports have been received from Raytheon). The USFS seems to be waiting until TLMP is signed until making a decision on the preferred alternative and moving forward on the Swan-Tyee Intertie Final EIS. Thanks, Rich ce: Darrell Pierce, KPU Engineering Manager Merrill Peacock, KPU Electric Plant Engineer Dave Nesje, KPU Electric Engineering Technician Ron Settje, KPU Administrative Manager Frank Garrison, KPU Inspector LAKE TYEE - SWAN LAKE TRANSMISSION LINE INTERTIE BUDGETARY COST ESTIMATE JULY 1996 Executive Summary: This budgetary estimate reflects the current level of engineering completion of the project. It is based upon findings made in the field, a number of key decisions made by KPU and recommendations made by Raytheon and accepted by KPU. For these reasons, the confidence level of the estimate is greater than earlier estimates therefore, contingency coverage has been removed on some items and reduced on others. The overall contingency level has been reduced from 20% of the baseline construction cost to 15%. As directed by KPU, this estimate is for construction of the transmission line only. It does not include costs for building a construction and long term maintenance road. The estimate in 1997 dollars is now: Clearing for and construction of the line is estimated to cost: Switchyard and substation work is estimated to cost: $ 2.2 million Other costs to KPU for design, permitting, construction management: __| $_8.8million Contingency allowance is calculated at: | $ 7.6 million Allowance for KPU’s costs for project administration: | $ 3.0 million Total Estimated Project Cost | $ 69.8 million Detailed supporting information including an itemized list of the cost of each of the project’s elements which are included in the estimate is provided in the following section and attachments. Detailed Discussion: The attached estimate reflects key decisions made by KPU in consultation with the four dam pool, Wrangell and Petersburg and the State of Alaska. It also reflects the information which has been compiled on the project by Raytheon as the detailed engineering has progressed since January, 1995. The salient items which provide the basis for this estimate are: ¢ KPU’s decision to remove from present consideration, design and construction of a road from the North side of Shrimp Bay to the Behm Canal and from Anchor Pass to the Bradfield Canal. Lake Tyee - Swan Lake Intertie Page 1 Raytheon Infrastructure Services Incorporated Budgetary Estimate July 1996 KPU’s decision to place a hold on further design and construction of a construction access and maintenance road between Carroll Inlet and Shrimp Bay until further information is available regarding the DEIS decision and the Forest Service’s Upper Carroll Timber Sale. No costs have been included in the estimate for construction of a road. The knowledge gained through the completion of aerial and ground surveys for the presently designed route which allowed the development of detailed plan & profile drawings. The selection of the specific conductors to be used for the line which will sustain the agreed upon meteorological criteria. The selection of tubular steel H-frame structures as the basic tower system to be used for the line. This selection was based upon technical & economic evaluations completed in February of 1996. Selection of the types of foundation to be used for the recommended structures and loads to be supported. Completion of preliminary design which established the structure locations on project plans for the entire 57.3 mile length of the intertie. Completion of a field check of the designed location of each of the structures between Swan Lake and Shrimp Bay (approximately 20.5 miles of the line which is segment 4) during April and May, 1996. Some of the values used in an estimate prepared in May of 1995 which was used to evaluate the cost benefits of proceeding with a construction and maintenance road for the line were used in this estimate with little or no modification because they are thought to have changed only slightly. The following identifies those areas of the cost estimate which were changed and those which used earlier developed values. Helicopter and logging costs were based on the same information used for the April 1995 estimate. Local union labor rates were assumed to be the same as were used in the previous estimate preliminary. Staging areas were considered the same as planned for the April/95 estimate. The costs of the steel pole structures were obtained and/or developed to reflect the present concept instead of the wood pole concepts that were a part of the original evaluations. Lake Tyee - Swan Lake Intertie Page 2 Raytheon Infrastructure Services Incorporated Budgetary Estimate July 1996 ¢ Costs were obtained from reliable manufacturers of the special high strength conductor and high strength polymer insulators. ¢ All new costs were developed for the various foundation types based on preliminary loads and designs. ¢ Other material cost components such as: hardware, grounding and miscellaneous were kept the same with no added escalation. For this estimate, it has been assumed that the entire line will be constructed using helicopters as the primary means of transporting materials and equipment from the material and assembly laydown areas to the structure sites. While logging access roads may be available for portions of the route between Swan Lake and Shrimp Bay, it is expected that they will be of limited cost benefit to the project because of the additional handling and equipment logistics that will be required to actually deliver the structures to the extremely rugged terrain in which the towers are to be located. As the Forest Service’s needs become better defined with respect to the location and timing of roads that they or their purchaser will be constructing for harvesting the Upper Carroll Timber sale, it may prove to be advantageous to encourage the construction bidders to provide pricing for road assisted construction in this area based upon the arrangements that can be finalized with the Forest Service and the Ketchikan Pulp Company, the purchaser of the timber within the timber sale lots. Table 1 presents a detailed tabular listing of the major project cost elements and provides a comparison with the costs that were presented in the Draft Environmental Impact Statement which is presently under consideration. The values presented in this table are in 1997 dollars. No costs have been included for interest during construction because this cost has not been included in other comparative estimates. If the terms of the financing will include a period of interest which is not paid from other means, interest during construction will need to be considered. The detailed estimate breakdown is presented in Attachment A. That estimate was developed in 1996 dollars. These values were adjusted to 1997 values in Table 1 using an adjustment factor of 3% per year. Lake Tyee - Swan Lake Intertie Page 3 Raytheon Infrastructure Services Incorporated Budgetary Estimate July 1996 Table 1 LAKE TYEE - SWAN LAKE TRANSMISSION LINE INTERTIE PROJECT CAPITAL COST ESTIMATES (1997S) LAKE TYEE - SWAN LAKE Transmission Line Estimates Presented in Current COST ITEM DEIS Estimate Construction Costs A. Transmission Line Elements: Segment 1: Tyee Lake - Beil Arm $16,242,592 Segment 2: Bell Arm - Behm Narrows $7,471,546 Segment 3: Behm Narrows - Shrimp Bay $7,371,881 Segment 4: Shrimp Bay - Swan Lake : $17,064,428 Subtotal of A $43,011,642 $48,150,447 B. Switchyards / Substations Tyee Lake Switchyard $1,684,657 Swan Lake Switchyard $512,979 Subtotal of B $2,600,000 $2,197,636 C. Access Road — None $o $0 Subtotal I costs (A+B + C) $45,611,642 $50,348,083 Other Costs Licensing/Peritting $2,000,000 Engineering/Investigations $7,115,416 $4,350,000 Const. Mgmt. as a % of Const. Cost: 5.00% (all combined) 5.00% $2,517,404 Right of Way Costs per Acre $0 $0 $o $0 Contingency as a % of Const. Cost: 20.00% $9,122,328 15.00% $7,552,212 Subtotal 2 (Const, + other costs) $61,849,386 $66,767,700 Owner's Cost 4.50% of Subtotal2 $2,783,222 $3.004.546 Subtotal 3 (Const. + other + owner costs) $64,632,609 $69,772,246 TOTAL ESTIMATED PROJECT COST $64,632,609 $69,772,246 Estimated line miles S75 573 Cost per transmission line mile $1,124,045 $1,217,665 Lake Tyee - Swan Lake Intertie Page 4 Raytheon Infrastructure Services Incorporated er- aoe 1852 9e7T 225 1000 KPU #1 SHAUL LT: UMN LE WT Ketchikan Public Utilities 2930 Tongass Avenue, Ketchikan, Alaska 99901 (907) 225-1000 (907) 228-5494 Message (907) 225-1888 Fax TO: Tom Friesen, PMC Representative (KPU) 117/96 Dennis Lewis, PMC Representative (PP&L) K1506 Terry Nikodym, PMC Representative (WL&P) 0103 Walt Sapp, PMC Representative (KEA) Robert Wilkinson, PMC Representative (CVEA) Stan Sieczkowski, AIDEA Dick Emmerman, DCRA John Magyar, KPU General Manager Tom Waggoner, KPU Electric Superintendent Lowell Highbargain, TBPA General Manager Tim Gillen, Wrangell Power & Light Foreman FROM: Rich Trimble, Intertie Project Manager SUBJECT: EVALUATION OF ALUMINUM LATTICE TOWER STRUCTURES rte The following is provided by Raytheon in response to our suggestion to them at our April 16 meeting. Thanks, Rich wu Darrell Picres, KPU Engineering Manager Morrill Peaoook, KPU Electric Plast Eagineer Dave Nesje, KPU Electric Engineering Technician Ron Settja, KPU Administrative Manager Frank Garrison, KPU Inapector Of—17-199G 16:31 Se7T 225 1000 ‘ KPU #1 P.ee * Raytheon Infrastructure Services Incorporated Ki Sol Plaza Cenier Building Lilo 10900 N.E. &th Street Suite $00 Bellevue, WA 98004-4408 Raytheon Engineers & Tel 206.451.4500 Constructors Fax 206.451.4980 July 2, 1996 N9607,001 Oo Mr. Rich Trimble 2110 Intertie Project Manager Ketchikan Public Utilities 2930 Tongass Avenue Ketchikan, AK 99901 Dear Rich: SUBJECT: SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE PROJECT v. IN I WER, Attached is an analysis done by Amado on lattice aluminum towers and their applicability to the Swan Lake - Lake Tyee Project. The report goes into the history of the concept and follows through to the state of the industry today. The lattice aluminum market is no longer a strong and viable industry. While special purpose applications can still be obtained, it is our design group's consensus that the applicatiun in South East Alaska is not best served by use of aluminum structures, It is further hampered by the fact that there is such a limited source of supply and thus competition. Additionally, although they are much lighter, the most economical configuration would require an extreme reliance upon guying for support which is not readily compatible with the rugged terrain through which this line is routed. In the report’s conclusion, it is suggested that an option could be provided in the bidding phase to allow the use of aluminum, however, it appears that it would be necessary to develop detailed designs for each structure type because of the present limited ability of the manufacturer’s in this area. This is different from the steel pole supply standpoint where they will be required to provide designs that meet a set of performance criteria. [hope that this meets your needs, It'you have any questions or comments, please feel free to call me at 206 - 451-4206. Very truly yo sh pi Project Manager JP: AX60702L. do Attachment ce: W. Pietz G. Brewer A, Beloff O7-17-199C iG:32 907 225 1000 KPU #14 les SWAN LAKE-LAKE TYEE 138 kV TRANSMISSION INTERTIE Ketchikan Public Utilities Ketchikan, Alaska ALUMINUM T! MISS RE CONSIDERATI A. Background Raytheon completed a structure study for the subject transmission line project essentially comparing the technical and aconomic aspects of wood vs. steel pole construction, The study recommended the adoption of H-frame galvanized steel poles, Self-supporting and guyed steel as well as aluminum structures were ruled out for the following reasons; e foundation casts for a multi-legged lattice tower of either steel or aluminum are excessive if more than two foundations are required e steep terrain makes it very difficult to guy V or Y structures in all directions * remoteness makes guy maintenance costly e the more guying there is, the greater the exposure to landslides and snow avalanches in critical unstable soils e the inherent design and material problems which are unique to aluminum structures in the past The conclusions of the study were reported and presented to KPU personnel, members of the four dam pool and the Alaska Power Authority during a meeting held in Ketchikan.on April 19, 1996. At the time questions arose about the advantages of light weight aluminum structures for helicopter construction based on: 1) good experience with an existing 138 kV transmission line using guyed Y aluminum structures in SE Alaska and 2), the recommendations of the engineering team for the upgrade of the existing Wrangell-Tyee 138 kV transmission line using Intermediate guyed V aluminum structures. Raytheon was requested to substantiate their reasons for not using lattice aluminum structures. O7-17-1996 16:32 907 225 1600 KPU #14 P.04 B. History of Aluminum Structure Designs The mid 50’s and the decade of the 60's portrayed perhaps the most productive and challenging times in the development of iarge transmission systems. A considerable number of projects were undertaken to consolidate EHV projects (00 kV and above). Refinements in design, optimization techniques and construction methods were needed to make them technically and economically feasible. The use of new and previously unexplored materials flourished in this environment. In the quest for lighter weight, more economical towers, aluminum found its place and competed with traditional steel designs. During this time almost all transmission projects included a comparison of the merits of aluminum versus, steel towers. The development of aluminum materials, shapes and associated design concepts were propelled by market conditions and by the existence of a large and important aluminum manufacturing base supported by companies like Kaiser Aluminum and Chemical, Reynoids Aluminum, ALCOA and Michael Flynn Manufacturing Co., in USA, and ALCAN, in Canada. This industry was able to take advantage of low energy rates for producing aluminum during that period. An array of technical papers were presented in the engineering forums In which the advantages and limitations of aluminum with respect to design, manufacturing, erection and maintenance were discussed, The published material is rich from the early 60's up to about the mid 70’s where the interest for aluminum structures started to wane. As aresult of this active period the ASCE Structural Division in 1972 issued a “Guide for the Design of Aluminum Towers’ and the IEEE Task Group on Loadings and Strengths for Transmission Line Structures published a Report on Aluminum Latticed Structure Design in 1975. C. Limitations and Advantages of Aluminum Structure Designs The successful and economical application of aluminum materials to transmission towers depended largely on the successful resolution of the following: 1. The availability of extruded aluminum shapes of various forms for optimum use of the material weight and stresses. At some point even tubular aluminum members competed with aluminum extruded shapes. 2. Lrratios and maximum allowable stresses were a matter of discussions in the absence of aluminum design guides for transmission towers. The general O7-17-1986 16:53 907 2PS 1000 KPU #14 P.es conclusions were that for safety and optimum use of material the use of short connecting members was preferred, thus the design of narrow square or triangular iegged shafts like jn the case of the two columns of V-guyed or Y- guyed towers was the preferred design as opposed to large rectangular base self-supporting towers. Narrow base towers and H-frame designs fitted this description. Member connections had to be specially designed and manufactured to assure the correct load transfer. Bolt tightening and bolt material was of special concem to assure safe bolt stresses and avoid loose connections. Nut locking washers were tried and new concepts developed indicating that no washers were sometimes better than locking devices. Material fatigue caused by aeolian vibration was a matter of concern and observation and general guidelines were published with the aim to prevent its occurrence. Material cold flow under normal and extreme stresses which occurred at the connection of the structural elements was investigated and specially designed connections had to be developed, The advantages of aluminum structures were: 1; 2. D. Light-weight compared to steel, making them particularly attractive for helicopter construction, specially in remote, inaccessible locations. Important construction savings: while the material costs of aluminum vs, steel were a toss-up, the real economies were obtained through the lower costs associated with transporting and erecting the lighter aluminum structures. Low maintenance costs compared to galvanized and/or painted steel, which meant they were particularly suited for corrosive industrial environments where steel rusts and requires regular paint painting to maintain. Scarcity of stee! during the Korean war in the late 50's and early '60s made aluminum an attractive alternative based strictly on economics. Aluminum Structure Projects In the USA and Canada In the meantime large and important projects emerged and aluminum towers were used for all voltages, 138-500 KV, on a variety of tower types and shapes, predominantly guyed V and guyed Y, and to a limited extent narrow square base shafts, where some were self-supporting and a few lattice H-frame tower types were developed, Projects that were prominently publicized in technical news, manufacturer's literature and trade magazines are listed below: @?7-17-1996 16:33 907 25 100 . : =i c B 6 KPU #1 P.0G UTILITY PROJECT VOLTS LENGTH YEAR TOWER MANUF. NAME . TYPE Florida Winter Pk. 240 KV 12 mi 4954 Self-supp N/A Power & sami- Light Co. flexible twr BC Hydro Hanging 300 kV Omi 1955 Thin wall ALCAN Vallay-Kitimano tubular H- frame and Box girder Hydro- Chute-de 345 kV 4-towers 1960 Guyed V ALCAN Quebec Passes & Isle Maligny Central Interconnection 345kV N/A 1963 X-braced ALCOA Illinois Chicago-Minn. H-frame Public Thru lowa Service Appalachian Smith Mtn. & 138 400 mi 1961 Guyed V FLYNN Power Co Big Sandy kV Appalachian Kanawha- 534kV 372twrs 1961 Guyed V KAISER Power Co. Lurich- Cloverdale BC Hydro Terrace-Alice 138kV 91 mi 1968 GuyedY ALCAN Arm Washington Wanapum 230 kV N/A 1963 Guyed Y ALCCA Water Power Dam- Walla Co Walia Commonwith South Chicago- 138 kV 4 mi 1962 4’ Narrow ALCOA Edison Co Beverly Subst Base twr Philadelphia Electric Co VEPCO Southern California Edison The United Illuminating Ca,, Conn. Louisiana Power & Light Co. VEPCO Central Hudson Gas & Electric Arkansas Power & Light Co. Ontario Hydro Bureau of Reclamation 907 275 1000 Marcus Hook, Pa-Delaware River, NJ Various line sections Test tower design & erect Crossing over turnpike cloverileaf Transmission link in marshy areas Dismal Swamp Hurley Ave Subst., Kingston El Dorado- Magnolia Emergency replacement twrs Emergency replacement twrs 230 kV 138 kV 230 kV TiS KV 500 kV 500 kV 115 kV 345 kV 500 kV 345 kV KPU #4 2.8 mi 400 mi 2 towers N/A 160 twrs 13 mi 1 twr 43.7 mi 1961 1962 1960 1961 1968 1970 1964 1969 1972 1972, Self-supp lattice twr Guyed V Self-supp lattice twr witubular members Self-supp 3-lagged twr Guyed Y Guyed Y Guyed V 3-legged tubular Guyed Y Guyed V Guyed V ALCOA FLYNN Hunter Engng Co Reynolds KAISER KAISER N/A Powerlite Devices Ltd Reynolds By examination it can be seen that the great majority of aluminum designs were based on using guyed V and guyed Y structures, This is because those designs were most economical when compared to other structure types or to steel. @?-17-399C 10:34 907 225 1000 KPU #4 P.00 E; Present Design Considerations The present rugged nature of the terrain for the line under consideration makes the use of guyed structures (guyed V with four guys or guyed Y with up to eight guys) quite difficult. The idea was even considered for the steal guyed structures because of the attractiveness of a single foundation but subsequently abandoned because of the design, construction and maintenance complications this would introduce due to avalanches, unstable soils, etc. F. Present Market Conditions for Transmission Structures From the late 70's to the present, Important changes have occurred in transmission line design where aesthetics and environmental issues shifted the conception of transmission lines toward the use of more pleasant, less unobtrusive installations. As a result, tubular steal poles have gained considerable acceptance among designers and users alike. As a result, steel pole manufacturers now dominate the transmission structure market. Several lattice steel tower manufacturers have closed shop and aimost all aluminum tower manufacturers have discontinued operations and their engineering capabilities for tower design and detailing have vanished from the market with the result being that aluminum transmission tower suppliers are practically non-existent in the United States. Fewer aluminum structures have been used in general and some were more recently built for transmission lines in Canada where marine corrosion coupled with high cost of transportation was a factor however, the purchaser was required to provide there own detailed structural designs. A few steel manufacturers with fabrication capabilities also have the ability to supply aluminum structures for substation and transmission towers provided designs are readily available, They are located in the USA and Canada but have no engineering and design capabilities in house. The materials used are aluminum shapes that substitute conventional ASTM structural steel shapes (channels, angles and T sections) which greatly differ from the highly efficient extruded shapes developed and promoted in the past for aluminum transmission structures but which are no longer readily available. With the limited aluminum transmission structure manufacturing capabilities remaining in the USA it is difficult to establish with certainty the feasibility and economic advantages of aluminum structures for a given project. Under this market condition the technical merits and the economics of aluminum structures could only be evaluated if at time of bidding for steel structures the . Or-1 71-1986 16:35 S07 225 1000 KPU #4 options were opened for alternative bidding of competitive aluminum structures. However to be able to do this, designs would need to be developed and be available beforehand to obtain manufacturer's quotations. G. Conclusions Aluminum structures were extensively used in the USA during the decade of the 60's and up to about the mid 70's, notably V-guyed and Y-guyed structure designs which were found most economical among other possible designs. Since the late 70's to present the interest in lattice aluminum structures in the USA faded away and steel poles emerged as an answer to environmental pressures, As a result these steel structure types became compatitive with other wood and steel structures and the manufacturing base for stee! poles grew while lattice aluminum and steel tower manufacturing have been severely reduced. As a consequence aluminum tower manufacturers as weil es commercially available extruded shapes and technical know-how for the design of highly efficient aluminum structures are no longer readily available in the USA. Both, the lack of manufacturing competitiveness and design capabilities makes it difficult to compare aluminum either technically and economically with other designs made of structural steel and/or steel poles for projects of this size. Given the present market conditions the evaluation of lattice aluminum towers for the KPU 136 kV Intertie could be made at the same time compatitive bids are requested for steel poles by opening the options for alternative bidding of aluminum structures. This would however, require that the bidders be provided complete aluminum structure designs for the project to allow quotations by tower fabricators because the tower manufacturers no longer have this capability in house. It should be noted that the project to repair the Tyee to Wrangell line is an example of a specialty case where a limited number of structures are required. Because of the need to erect them over the existing line, the guyed V aluminum lattice option which allows the structures to be installed over the center phase with the base open is particularly attractive. The project is not solely determined on the economic competitiveness of the tower type for many structures of the same configuration. KETCHIKAN PUBLIC UTILITIES 2930 TONGASS AVENUE KETCHIKAN, ALASKA 99901 J ELEPHONE 907-225-1000 FAX 907-225-1888 MUNICIPALLY OWNED ELECTRIC TELEPHONE WATER May 6, 1996 TO: Project Management Committee FROM: John Magyar, KPU General Manager SUBJECT: REQUEST FOR RESOLUTION IN SUPPORT OF SWAN-TYEE INTERTIE Comments are now being taken on the Swan-Tyee Intertie Draft EIS. As you know, Ketchikan is experiencing a critical shortage of energy. This project not only offers a solution to that problem, it also offers additional revenue to the Four Dam Pool members through the sale of surplus energy at Lake Tyee. We sincerely request your support for Alternative 2 in the Draft EIS. Alternative 1 is Ketchikan’s “No Action” alternative which places greater reliance on diesel generation. Alternative 3 adds 14 miles and $25 million to the most direct (Alternative 2) route. A sample resolution is attached for your reference if desired. The official comment deadline is May 28 although I expect the Forest Service will accept your resolution after this date if your meeting schedule prohibits earlier comment. Thank you very much for your consideration in this matter. Sincerely, is i ' Wie iy A John A. Magyar General Manager DRAFT DRAFT DRAFT DRAFT RESOLUTION #.407'T'4 COMMENT ON THE DRAFT ENVIRONMENTAL IMPACT STATEMENT FOR THE SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE WHEREAS, the Four Dam Pool has-sqspies energy available at Lake Tyee which could be sold through the Swan-Tyee Intertie with revenues providing a direct benefit to the Four Dam Pool members; and WHEREAS, the Project Management Committee supports development of a Southeast Alaska regional intertie because the development of utility infrastructure fosters the economic development of the entire region; and WHEREAS, the establishment of a regional electrical grid will provide efficient use of energy resources and provide the region with more reliable and stable electrical power; and DR agduce var A now rgnewakra dues ) WHEREAS, the intertie between Swan Lake and Lake Tyee represents a key component of the regional electrical grid; and WHEREAS, the United States Forest Service is seeking comment on the Draft Environmental Impact Statement for this intertie; and WHEREAS, the route identified as Alternative 2 seeks to minimize environmental impact while making more efficient use of public funds; NOW, THEREFORE, BE IT RESOLVED that the Project Management Committee hereby provides comment to the United States Forest Service for the Environmental Impact Statement supporting development of the Swan Lake - Lake Tyee transmission line intertie identified as Alternative 2 in the Draft Environmental Impact Statement. senator Fred F. Zharoff Gb Alaska State Legislature In Kodiak: P.O. Box 405, Kodiak, Alaska 99615 (907) 486-5259 (Fax also) In Juneau: State Capitol, Room 121, Juneau, Alaska 99801-1182 Phone: (907) 465-3473 © Fax: (907) 463-3043 State Senate District C Kodiak Island & Rural Southeast Alaska April 3, 1996 Alaska industrial D evelo and Export Ay pment ay: . . thority William R. Snell, Executive Director Industrial Development & Export Authority 480 W. Tudor Road Anchorage, AK 99503-6690 Dear ws The Alaska Native Brotherhood (A.N.B.) and Sisterhood (A.N.S.) held their annual convention last November in Hydaburg. At that convention, Resolution No. 95-56 was adopted. This is an issue that may have connections to programs under your department. A copy of this resolution is enclosed. If you have not previously provided A.N.B. and A.N.S. input on this resolution, I ask that you do so at this time. I would also appreciate receiving a copy of your response. The addresses for the offices are: Grand Secretary, Alaska Native Brotherhood, P.O. Box 22129, Juneau, AK 99802. Grand Secretary, Alaska Native Sisterhood, P.O. Box 313, Hoonah, AK 99829. Thank you for your time in addressing this resolution. Any suggestions, assistance, or solutions regarding the issue covered in this resolution will be appreciated. Sincerely, cc : Qs Fred F. Zharoff DB Alaska State Senator ce: Grand Secretaries Alaska Native Brotherhood Alaska Native Sisterhood 1912 RESOLUTION NO. 95-56 TITLE: Resolution To Provide For The Protection Of Subsistence In The Carroll Inlet Region With Regards To the Swan Lake, Lake Tyee Inter-tie WHEREAS, The health, education, and welfare of its membership is of paramount importance to the well being of the Ketchikan Indian Corporation; and, WHEREAS, The Ketchikan Indian Corporation is responsible for the protection and preservation of Tribal property and wildlife and natural resources for the benefit of its tribal citizens; and, WHEREAS, Upon enacting ANILCA, Congress invoked its constitutional authority over Native affairs to protect subsistence uses of Alaska Natives and declared that the continuation of subsistence uses by Alaska Natives is essential to the Native physical, economic, traditional, and cultural existence; and, WHEREAS, In exercising its constitutional authority over Native affairs, the U.S. Government is required by the trust responsibility and Federal Indian Law to conduct business with the Tribes on a government-to-government basis. NOW THEREFORE BE IT RESOLVED, by the Alaska Native Brotherhood and Sisterhood in Convention assembled at Hydaburg, Alaska during the week of Nov. 13-17, 1995, that by way of this resolution supports the Ketkchikan Indian Corporation in its efforts in regards to the Swan Lake-Lake Tyee inter-tie in that they: 1. Oppose the Yes Bay alternate route. 2. Support area logging only, opposing any road building in the Carroll Inlet-Swan Lake-Lake Tyee area. 3. Urges those agencies of the federal government to continue studies of wild life, land subsistence, and fresh and salt water subsistence, requesting traditional Native people to assist in the impact study. 4. Requests further study on the proposed Carroll Inlet route regarding the close proximity of the power line to the river system. 5a The Ketchikan Indian Corporation will work with the Saxman IRA Council and Wrangell IRA Council on issues regarding Carroll Inlet. ATTEST: I certify that this resolution was adopted by the ANB/ANS Grand Camp in convention rand President in Hydaburg, Alaska during the week of November 13-17, 1995. x Cudney 2: Meer Andrew W. Ebona Grand Secretary Ve Dennis McCrohan To: Riley Snell; Randy Simmons Subject: SE Transmission Line Riley and Randy Rich Trimble of KPU called . Rich who is Project Manger on the SE line and John Magyar Utilities Manager of KPU would like to meet with AIDEA to discuss any possible means by which AIDEA might particpate in the SE line. Until the divestiture discussions were suspended, KPU was looking to the new 4 Dam Pool G&T to provide financial backing. It appears that KPU based on the SE Intertie economics seems not financially capable to proceed without some form of assistance or risk sharing. They would like to explore ideas with AIDEA. Let me know if you would like me to set up a meeting or how to respond. We have the financial proformas for the SE Intertie already and some background technical information. As | understand the current status is: 1. KPU has received $11.3M to date form the State. About $9.0 M is committed. 2. Engineering is scheduled to be complete by mid Fall 1996. 3. EIS is scheduled to be complete by January 1997. 4. There is a proposal regarding alternative routing by the US Park Service which KPU has not resolved. Dennis Page 1 ‘ _ @3-@8-1996 12:49 807 2r= «588 KPU #1 KETCHIKAN PUBLIC UTILITIES SWAN LAKE - LAKE TYEE TRANSMISSION LINE INTERTIE PROJECT 2930 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, Dames & 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) 874-3952 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 response 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 is 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. &. sey Rega dw ce: KRED mndio, Ketshikan (907) 247-0808 rn 7 at, KTKN radio, Katohikan (907) 225-0444 Bn Kotahikan Dally News (907) 225-1086 ae KSTK redio, Wrangell G07) 874-3293 CC, Show OW” oe EFFK nd, Peorsbng (907) 719296 R.\ ae” uk Petersburg Pilot QUA 772-4871 att | is we w Re ies Krurts, Leeuw AEA qUseet "QRuus [3708/96 12:02p * @3-@8-1996 12: 2 . (eee KPU #4 4 Fa, KETCHIKAN PUBLIC UTILITIES Memorandum TO: Honorable Alaire Stanton & City Council FROM: John Magyar, Acting KPU General Manager 277 -w¢ 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: yy Minimize risk; As noted above, we are currently 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 concem 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 Relatlous: XPU postponing the engineering effort along that portion of the route of most concern in the Draft RIS 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, MAUSERWWANCYLIWPDATAWO07-T1,MEM (3708/96 12:02 @3-@§-1996 12:51 907 2-" +5888 KPU #1 ‘ 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: er 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: I move that the City Council direct staff to notify Foster-Wheeler, Raytheon and Dames & Moore to defer field work as appropriate between Shrimp Bay and Eagle Bay and negotiate a final change order for the costs of deferring that field work. JAM:niI Attachment HAUSER\NANCYLIWADATAVOT?-Y 1. MEM r= 3/08/96 12:02p ” @3-@8-1996 12:51 907 2” 8a8 KPU #1 W FOSTER WHEELER ENVIRONMENTAL CORPORATION re P.@4 28 February 1996 FBEL-KPU-96-014 Mr. Richard Trimble _- Ketchikan Pyblic Utilities 2930 Tongasa Avenue Ketchikan, Alasia 99901 Subject: Swan Lake-Lake Tyco Intertie Project Implications of Onc-¥ 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 a henedicial effect on public perceptions conceming KPU's ad- herencé to the letter atid spirit of the NEPA process. The EIS process can be completed! in 1996, the Record of Decision would be issued in {996 or sarly 1997, and then KPU could proceed to geotechnical investiga- tions and final design on the route sciccted in the ROD. 2. The permitting process would be more straightforward, since submtittal of permit applications could be delayed until after the ROD, This would reduce the likelihood that we would spend Gime prepanng permit applications for activities that would later change, necessitating rework on the applications. 1. There would be a small cost increase associated with the delay, on the ordar of a 3 parcent increase in the monitoring cost (currently estimaced at $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 approxumataly |5-month period between tha ROD and the start of coturruction (approximately January 1997 to April 1998}, The two cost incroases would total roughly $25,000, assuming a few hours of miscellaneous consultation with KFU and Raytheon each month. Please lec me know if you have any questions abous this leter. Until such time as a decision is made to de- lay project construction, we are proceeding on our original schedule, Sincerely, C80. Ellen J, Hall, Ph.D, Project Manager 10900 NE 811 Sraser, Surrs 1300, BuLtavur, WA 98004-4405 TEL: 206-688-3700 Fax: 206-668-3952 Te'd ahaa{ lag “UOut Aug 48, eeu wayso" Tr6E+aEs gor @5:8T g6at-ge-co (3708796 42:02 | ti a KETCHIKAN PUBLIC UTILITIES 2930 TONGASS AVENUE KETCHIKAN, ALASKA 99901 TELEPHONE 907-225-1000 FAX 907-225-1888 February 6, 1996 INICIPALLY OWNED K1072 ar 0270 i a EGEIVE/}) FEB 12 1996 Alaska Industriel Development and Export Authority Mr. Alan Dashen Seattle Northwest Securities Corporation 1420 Fifth Avenue Suite 4300 Seattle, Washington 98101 Dear Alan: Based on discussions with yourself and Dennis McCrohan, I am providing revised revenue and cost projections for the Swan-Tyee Intertie. A summary of the net present values and years of negative cash flow in each case follow: Additional State funding Power Rate $0 $10 million $20 million $30 million State funding State funding State funding State funding 6.4 cents $2.8 million $13.9 million $25 million $36.2 million 10 years 6 years 1 year All positive 5.9 cents ($4.9 million) $6.2 million $17.4 million $28.5 million 15 years 8 years 3 years All positive 5.4 cents ($12.6 million) ($1.4 million) $9.7 million $20.8 million 15 years 10 years 6 years All positive I have made the following modifications to the projections I provided to you in my letter of December 19: 1) The gross revenue projection was 6.4 cents per KWH escalated at the rate of inflation. I have divided that into a fixed 4 cent debt service component and a 2.4 cents per KWH O&M component that escalates with inflation. As you suggested, I also considered two other projections which decreased the O&M component (1.9 and 1.4 cents). 2) I added a cost for additional generation from Tyee of 0.25 cents per KWH. It has been argued that there will be an increase in O&M costs attributable to additional power generation at Tyee which are not included in the R. W. Beck O&M estimates (my “Intertie O&M cost” column). I disagree with this argument but I have arbitrarily included this level of additional cost until it can be investigated further. CC: D\3 3) My previous analysis varied additional state funding ($0 to $30 million), Ketchikan Pulp Company firm sales (0.96 to 4 MW) and Intertie capital cost ($65 to $75 million). In this analysis, I have fixed Ketchikan Pulp Company sales at 4.00 MW and Intertie capital cost at $75 million. My variables in this analysis are additional state funding and PMC wholesale rate (which varies the O&M component from 2.4 cents to 1.4 cents but leaves the 4 cent component fixed). 4) I added a Net Present Value analysis at the 5.5% rate you suggested. Otherwise, the assumptions for my analysis are the same as in my letter of December 19 but are repeated on the following pages for completeness. Thank you for your review and comment on my previous analysis. Please let me know if I can provide any additional information. Sincerely, | fGLEEZ Richard D. Trimble Intertie Project Manager Cai Dennis MeCrohan SWAN-TYEE INTERTIE REVENUE/COST PROJECTIONS Revised 2/6/96 These projections vary additional state funding ($0 to $30 million) and PMC wholesale rate (6.4 to 5.4 cents per KWH) and derive annual net revenues and a net present value of the thirty year revenue stream. The following assumptions apply: Intertie capital cost: R. W. Beck’s estimate of $55.5 million in 1992$ (page I-5) escalated at 3% inflation results in a capital cost of $65 million in 1997$. Considering the possibility of an increased cost estimate after Raytheon completes preliminary design and/or addition of the third turbine at Tyee ($6.16 million in 1992$, page X-14) leads me to increase this estimate to $75 million for planning purposes. Debt Service: In all cases I assumed the $20 million loan was utilized at the terms specified in the legislation (3% for 15 years). The remaining cost was considered to be issued as a State backed (“Moral Obligation”) bond at 6.5% for 30 years. The remaining cost to be bonded was obtained by taking the total project cost and subtracting the grants to date, $20 million loan and additional state funding. Ketchikan Pulp Company (KPC) firm sales: During 1995, KPC sales averaged 0.96 MW firm. KPC has requested a power sales agreement that would provide 5 MW with the first 3 MW as the minimum firm purchase and the remaining 2 MW either as surplus or firm depending on our spill situation. This analysis assumes an average of 4 MW firm sales to KPC. Load growth: All load growth is based on the 1990 ISER study. The Ketchikan load growth is the ISER base case with surplus sales to KPC deducted. Further, the 0.96 MW continuous firm sales (estimated for 1995) have been deducted and replaced with 4 MW in this analysis. The Wrangell and Petersburg loads are the ISER base case with a 10,000 MWH deduct from the Petersburg load for Crystal Lake. No downward adjustment has been made to the Wrangell demand for the closure of the Wrangell mill. Growth for all three communities beyond 2010 is projected at the rates noted in ISER for the period of 2000-2010 (1.3% for Ketchikan, 1.6% for Petersburg and 1.4% for Wrangell). KPU hydro: The KPU hydroelectric figure of 144,700 MWH consists of Beaver Falls, Silvis and Ketchikan Lakes powerhouses (62,700 MWH) and Swan Lake (82,000 MWH) during average water years. R. W. Beck page IX-9. Intertie sales: Intertie sales are the lessor of (1) the Ketchikan load in excess of KPU hydro or (2) the surplus available at Tyee after serving the Petersburg and Wrangell demands less 4% intertie line loss. Intertie revenue: Income from intertie power sales are divided into a “PMC Debt Service” component of 4 cents per KWH and a variable “PMC O&M” component. The analysis is run with the PMC O&M component at 2.4 cents (the current rate), 1.9 cents and 1.4 cents. This component is also escalated at the rate of inflation while the “PMC Debt Service” component remains fixed at 4 cents. Tyee generation cost: This component was included in response to arguments that the R. W. Beck O&M estimates are not complete. Note that R. W. Beck states that all O&M costs associated with the Intertie project have been included in their estimates. Further, the R. W. Beck estimated O&M costs are conservative and include significant contingencies. However, in response to the concerns expressed, this figure has been arbitrarily included for discussion purposes until the issue is investigated further. Intertie O&M: Intertie O&M is taken directly from R. W. Beck (table VI-8, page VI-19) escalated from 1992$ at 3% inflation. Net present value: The net present value of the 30 year net revenue stream has been calculated at 5.5%. by Richard D. Trimble, 2/6/96 SWAN-TYEc iNTERTIE REVENUE PROJL~ SION ADDITIONAL STATE FUNDING: $0 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.064 1996$ INTERTIE CAPITAL COST (1997$) $75,000,000 INFLATION: 3.0% FY 94 GRANT (19978): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19978): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19978): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (19978) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $0 REMAINING CAPITAL COST (1997) $43,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION 0am LOAN BOND REVENUE INCOME COST cost NET $0.040 $0.024 $0.0025 $20,000,000 $43,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421] $2,216,838 $1,453,439 $138,552 $133,626 $1,675,332 $3,352,234 ($1,629,46 2000 57549} $2,301,958 $1,554,524 $143,872 $137,635 $1,675,332 $3,352,234 ($1,452,591 2001 59404/ $2,376,158 $1,652,771 $148,510 $141,764 $1,675,332 $3,352,234 ($1,288,911 2002 60768| $2,430,718 $1,741,442 $151,920 $146,017 $1,675,332 $3,352,234 ($1,153,342, 2003 62045| $2,481,798 $1,831,379 $155,112 $219,609 $1,675,332 $3,352,234 ($1,089,110 2004 63686/ $2,547,438 $1,936,211 $159,215 $154,909 $1,675,332 $3,352,234 ($858,041 2005 65896/ $2,635,838 $2,063,502 $164,740 $159,556 $1,675,332 $3,352,234 ($652,522) 2006 68501/ $2,740,038 $2,209,429 $171,252 $164,343 $1,675,332 $3,352,234 ($413,694, 2007 71430} $2,857,198 $2,373,018 $178,575 $169,273 $1,675,332 $3,352,234 ($145,198) 2008 74632] $2,985,278 $2,553,775 $186,580 $415,057 $1,675,332 $3,352,234 ($90,150 2009 77829) $3,113,158 $2,743,066 $194,572 $250,026 $1,675,332 $3,352,234 $384,060 2010 79596| $3,183,821 $2,889,489 $198,989 $257,527 $1,675,332 $3,352,234 $589,228 2011 78691| $3,147,651 $2,942,362 $196,728 $265,253 $1,675,332 $3,352,234 $600,467 2012 77773] $3,110,925 $2,995,273 $194,433 $273,210 $1,675,332 $3,352,234 $610,988 2013 76841| $3,073,634 $3,048,149 $192,102 $681,370 $1,675,332 $3,352,234 $220,745 2014 75894| $3,035,769 $3,100,916 $189,736 $358,311 $3,352,234 $2,236,405 2015 74933| $2,997,322 $3,153,494 $187,333 $369,061 $3,352,234 $2,242,189 2016 73957] $2,958,284 $3,205,794 $184,893 $380,132 $3,352,234 $2,246,819 2017 72966| $2,918,646 $3,257,724 $182,415 $391,536 $3,352,234 $2,250,184 2018 71960) $2,878,397 $3,309,184 $179,900 $1,158,090 $3,352,234 $1,497,358 2019 70938| $2,837,530 $3,360,066 $177,346 $517,827 $3,352,234 $2,150,190 2020 69901) $2,796,034 $3,410,256 $174,752 $533,362 $3,352,234 $2,145,942 2021 68847] $2,753,899 $3,459,632 $172,119 $549,363 $3,352,234 $2,139,815 2022 67778) $2,711,116 $3,508,061 $169,445 $565,843 $3,352,234 $2,131,655 2023 66692) $2,667,675 $3,555,406 $166,730 $1,557,850 $3,352,234 $1,146,267 2024 65589/ $2,623,565 $3,601,516 $163,973 $600,303 $3,352,234 - $2,108,571 2025 64469| $2,578,776 $3,646,233 $161,174 $618,312 $3,352,234 $2,093,290 2026 63332] $2,533,299 $3,689,389 $158,331 $636,862 $3,352,234 $2,075,260 2027 62178] $2,487,121 $3,730,802 $155,445 $655,968 $3,352,234 $2,054,276 2028 61006| $2,440,233 $3,770,281 $152,515 $2,994,269 $3,352,234 ($288,504) NET PRESENT VALUE: 5.5% $2,783,265 ‘SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE ‘Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYL.. INTERTIE REVENUE PROJE _ FON SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PPA&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE ADDITIONAL STATE FUNDING: $10 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.064 1996$ INTERTIE CAPITAL COST (1997$) $75,000,000 INFLATION: 3.0% FY 94 GRANT (1997$): $4,664,262 STATE LOAN TERM: 15 _ FY 95 GRANT (19978): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19978): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (19978) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $10,000,000 REMAINING CAPITAL COST (1997) $33,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME cost cOsT NET $0.040 $0.024 $0,0025 $20,000,000 $33,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421! $2,216,838 $1,453,439 $138,552 $133,626 $1,675,332 $2,586,460 ($863,693) 2000 57549] $2,301,958 $1,554,524 $143,872 $137,635 $1,675,332 $2,586,460 ($686,816) 2001 59404| $2,376,158 $1,652,771 $148,510 $141,764 $1,675,332 $2,586,460 ($523,136 2002 60768] $2,430,718 $1,741,442 $151,920 $146,017 $1,675,332 $2,586,460 ($387,568 2003 62045) $2,481,798 $1,831,379 $155,112 $219,609 $1,675,332 $2,586,460 ($323,336) 2004 63686) $2,547,438 $1,936,211 $159,215 $154,909 $1,675,332 $2,586,460 ($92,26 2005 65896) $2,635,838 $2,063,502 $164,740 $159,556 $1,675,332 $2,586,460 $113,253 2006 68501} $2,740,038 $2,209,429 $171,252 $164,343 $1,675,332 $2,586,460 $352,080 2007 71430} $2,857,198 $2,373,018 $178,575 $169,273 $1,675,332 $2,586,460 $620,576 2008 74632} $2,985,278 $2,553,775 $186,580 $415,057 $1,675,332 $2,586,460 $675,625 2009 77829} $3,113,158 $2,743,066 $194,572 $250,026 $1,675,332 $2,586,460 $1,149,834 2010 79596} $3,183,821 $2,889,489 $198,989 $257,527 $1,675,332 $2,586,460 $1,355,002 2011 78691] $3,147,651 $2,942,362 $196,728 $265,253 $1,675,332 $2,586,460 $1,366,241 2012 77773] $3,110,925 $2,995,273 $194,433 $273,210 $1,675,332 $2,586,460 $1,376,763 2013 76841] $3,073,634 $3,048,149 $192,102 $681,370 $1,675,332 $2,586,460 $986,519 2014 75894} $3,035,769 $3,100,916 $189,736 $358,311 $2,586,460 $3,002,179 2015 74933} $2,997,322 $3,153,494 $187,333 $369,061 $2,586,460 $3,007,963 2016 73957} $2,958,284 $3,205,794 $184,893 $380,132 $2,586,460 $3,012,594 2017 72966} $2,918,646 $3,257,724 $182,415 $391,536 $2,586,460 $3,015,959 2018 71960} $2,878,397 $3,309,184 $179,900 $1,158,090 $2,586,460 $2,263,132 2019 70938] $2,837,530 $3,360,066 $177,346 $517,827 $2,586,460 $2,915,964 2020 69901] $2,796,034 $3,410,256 $174,752 $533,362 $2,586,460 $2,911,716 2021 68847| $2,753,899 $3,459,632 $172,119 $549,363 $2,586,460 $2,905,590 2022 67778| $2,711,116 $3,508,061 $169,445 $565,843 $2,586,460 $2,897,429 2023 66692] $2,667,675 $3,555,406 $166,730 $1,557,850 $2,586,460 $1,912,041 2024 65589| $2,623,565 ~$3,601,516 $163,973 $600,303 $2,586,460 $2,874,345 2025 64469] $2,578,776 $3,646,233 $161,174 $618,312 $2,586,460 $2,859,064 2026 63332] $2,533,299 $3,689,389 $158,331 $636,862 $2,586,460 $2,841,035 2027 62178] $2,487,121 $3,730,802 $155,445 $655,968 $2,586,460 $2,820,050 2028 61006} $2,440,233 $3,770,281 $152,515 $2,994,269 $2,586,460 $477,270 NET PRESENT VALUE: 5.5% $13,912,836 Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEc iNTERTIE REVENUE PROJE. ION ADDITIONAL STATE FUNDING: $20 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.064 1996$ INTERTIE CAPITAL COST (1997$) $75,000,000 INFLATION: 3.0% FY 94 GRANT (1997S): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19975): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (1997$): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (19978) $63,775,738 MORAL OBL. BOND RATE: 65% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $20,000,000 REMAINING CAPITAL COST (1997) $23,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME cost cost NET $0.040 $0.024 $0.0025 $20,000,000 $23,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421| $2,216,838 $1,453,439 $138,552 $133,626 $1,675,332 $1,820,685 ($97,918) 2000 57549] $2,301,958 $1,554,524 $143,872 $137,635 $1,675,332 $1,820,685 $78,958 2001 59404) $2,376,158 $1,652,771 $148,510 $141,764 $1,675,332 $1,820,685 $242,638 2002 60768| $2,430,718 $1,741,442 $151,920 $146,017 $1,675,332 $1,820,685 $378,207 2003 62045| $2,481,798 $1,831,379 $155,112 $219,609 $1,675,332 $1,820,685 $442,439 2004 63686/ $2,547,438 $1,936,211 $159,215 $154,909 $1,675,332 $1,820,685 $673,508 2005 65896) $2,635,838 $2,063,502 $164,740 $159,556 $1,675,332 $1,820,685 $879,027 2006 68501; $2,740,038 $2,209,429 $171,252 $164,343 $1,675,332 $1,820,685 $1,117,855 2007 71430) $2,857,198 $2,373,018 $178,575 $169,273 $1,675,332 $1,820,685 $1,386,351 2008 74632) $2,985,278 $2,553,775 $186,580 $415,057 $1,675,332 $1,820,685 $1,441,399 2009 77829) $3,113,158 $2,743,066 $194,572 $250,026 $1,675,332 $1,820,685 $1,915,608 2010 79596) $3,183,821 $2,889,489 $198,989 $257,527 $1,675,332 $1,820,685 $2,120,777 2011 78691) $3,147,651 $2,942,362 $196,728 $265,253 $1,675,332 $1,820,685 $2,132,015 2012 77773) $3,110,925 $2,995,273 $194,433 $273,210 $1,675,332 $1,820,685 $2,142,537 2013 76841] $3,073,634 $3,048,149 $192,102 $681,370 $1,675,332 $1,820,685 $1,752,294 2014 75894) $3,035,769 $3,100,916 $189,736 $358,311 $1,820,685 $3,767,954 2015 74933) $2,997,322 $3,153,494 $187,333 $369,061 $1,820,685 $3,773,738 2016 73957) $2,958,284 $3,205,794 $184,893 $380,132 $1,820,685 $3,778,368 2017 72966) $2,918,646 $3,257,724 $182,415 $391,536 $1,820,685 $3,781,733 2018 71960) $2,878,397 $3,309,184 $179,900 $1,158,090 $1,820,685 $3,028,907 2019 70938| $2,837,530 $3,360,066 $177,346 $517,827 $1,820,685 $3,681,738 2020 69901| $2,796,034 $3,410,256 $174,752 $533,362 $1,820,685 $3,677,491 2021 68847) $2,753,899 $3,459,632 $172,119 $549,363 $1,820,685 $3,671,364 2022 67778| $2,711,116 $3,508,061 $169,445 $565,843 $1,820,685 $3,663,204 2023 66692! $2,667,675 $3,555,406 $166,730 $1,557,850 $1,820,685 $2,677,816 2024 65589| $2,623,565 $3,601,516 $163,973 $600,303 $1,820,685 $3,640,120 2025 64469) $2,578,776 $3,646,233 $161,174 $618,312 $1,820,685 $3,624,839 2026 63332] $2,533,299 $3,689,389 $158,331 $636,862 $1,820,685 $3,606,809 2027 62178) $2,487,121 $3,730,802 $155,445 $655,968 $1,820,685 $3,585,825 2028 61006) $2,440,233 $3,770,281 $152,515 $2,994,269 $1,820,685 $1,243,044 NET PRESENT VALUE: 5.5% $25,042,406 SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEc INTERTIE REVENUE PROJL- TION ADDITIONAL STATE FUNDING: $30 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.064 1996$ INTERTIE CAPITAL COST (1997$) $75,000,000 INFLATION: 3.0% FY $4 GRANT (19978): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19978): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19978): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997$) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $30,000,000 REMAINING CAPITAL COST (1997) $13,775,738 SALES INCOME COSTS NET YEAR INTERTIE| PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME cOsT cost NET $0.040 $0.024 $0.0025 $20,000,000 —- $13,775,738 | PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421| $2,216,838 $1,453,439 $138,552 $133,626 $1,675,332 $1,054,911 $667,856 2000 57549) $2,301,958 $1,554,524 $143,872 $137,635 $1,675,332 $1,054,911 $844,733 2001 59404) $2,376,158 $1,652,771 $148,510 $141,764 $1,675,332 $1,054,911 $1,008,413 2002 60768) $2,430,718 $1,741,442 $151,920 $146,017 $1,675,332 $1,054,911 $1,143,981 2003 62045) $2,481,798 $1,831,379 $155,112 $219,609 $1,675,332 $1,054,911 $1,208,213 2004 63686) $2,547,438 $1,936,211 $159,215 $154,909 $1,675,332 $1,054,911 $1,439,282 2005 65896) $2,635,838 $2,063,502 $164,740 $159,556 $1,675,332 $1,054,911 $1,644,801 2006 68501) $2,740,038 $2,209,429 $171,252 $164,343 $1,675,332 $1,054,911 $1,883,629 2007 + 71430) $2,857,198 $2,373,018 $178,575 $169,273 $1,675,332 $1,054,911 $2,152,125 2008 74632! $2,985,278 $2,553,775 $186,580 $415,057 $1,675,332 $1,054,911 $2,207,173 2009 77829) $3,113,158 $2,743,066 $194,572 $250,026 $1,675,332 $1,054,911 $2,681,383 2010 79596) $3,183,821 $2,889,489 $198,989 $257,527 $1,675,332 $1,054,911 $2,886,551 2011 78691) $3,147,651 $2,942,362 $196,728 $265,253 $1,675,332 $1,054,911 $2,897,790 2012 77773) $3,110,925 $2,995,273 $194,433 $273,210 $1,675,332 $1,054,911 $2,908,312 2013 76841) $3,073,634 $3,048,149 $192,102 $681,370 $1,675,332 $1,054,911 $2,518,068 2014 75894] $3,035,769 $3,100,916 $189,736 $358,311 $1,054,911 $4,533,728 2015 74933) $2,997,322 $3,153,494 $187,333 $369,061 $1,054,911 $4,539,512 2016 73957] $2,958,284 $3,205,794 $184,893 $380,132 $1,054,911 $4,544,143 2017 72966| $2,918,646 $3,257,724 $182,415 $391,536 $1,054,911 $4,547,507 2018 71960/ $2,878,397 $3,309,184 $179,900 $1,158,090 $1,054,911 $3,794,681 2019 70938] $2,837,530 $3,360,066 $177,346 $517,827 $1,054,911 $4,447,513 2020 69901] $2,796,034 $3,410,256 $174,752 $533,362 $1,054,911 $4,443,265 2021 68847) $2,753,899 $3,459,632 $172,119 $549,363 $1,054,911 $4,437,138 2022 67778| $2,711,116 $3,508,061 $169,445 $565,843 $1,054,911 $4,428,978 2023 66692! $2,667,675 $3,555,406 $166,730 $1,557,850 $1,054,911 $3,443,590 2024 65589| $2,623,565 $3,601,516 $163,973 $600,303 ~ $1,054,911 $4,405,894 2025 64469| $2,578,776 $3,646,233 $161,174 $618,312 $1,054,911 $4,390,613 2026 63332] $2,533,299 $3,689,389 $158,331 $636,862 $1,054,911 $4,372,584 2027 62178) $2,487,121 $3,730,802 $155,445 $655,968 $1,054,911 $4,351,599 2028 61006| $2,440,233 $3,770,281 $152,515 $2,994,269 $1,054,911 $2,008,819 NET PRESENT VALUE: 5.5% $36,171,976 SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEc INTERTIE REVENUE PROJLYIION ADDITIONAL STATE FUNDING: $0 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.059 1996$ INTERTIE CAPITAL COST (19978) $75,000,000 INFLATION: 3.0% FY 94 GRANT (1997): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19978): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19978): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997S) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $0 REMAINING CAPITAL COST (1997) $43,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME COST COST NET $0.040 $0.019 $0.0025 $20,000,000 $43,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421| $2,216,838 $1,150,639 $138,552 $133,626 $1,675,332 $3,352,234 ($1,932,26 2000 57549} $2,301,958 $1,230,665 $143,872 $137,635 $1,675,332 $3,352,234 ($1,776,450) 2001 59404| $2,376,158 $1,308,444 $148,510 $141,764 $1,675,332 $3,352,234 ($1,633,238) 2002 60768) $2,430,718 $1,378,642 $151,920 $146,017 $1,675,332 $3,352,234 ($1,516,142) 2003 62045) $2,481,798 $1,449,842 $155,112 $219,609 $1,675,332 $3,352,234 ($1,470,64 2004 63686| $2,547,438 $1,532,833 $159,215 $154,909 $1,675,332 $3,352,234 ($1,261,418 2005 65896) $2,635,838 $1,633,606 $164,740 $159,556 $1,675,332 $3,352,234 ($1,082,418) 2006 68501) $2,740,038 $1,749,131 $171,252 $164,343 $1,675,332 $3,352,234 ($873,992 2007 71430) $2,857,198 $1,878,639 $178,575 $169,273 $1,675,332 $3,352,234 ($639,5 2008 74632] $2,985,278 $2,021,739 $186,580 $415,057 $1,675,332 $3,352,234 ($622,186 2009 77829) $3,113,158 $2,171,594 $194,572 $250,026 $1,675,332 $3,352,234 ($187,413 2010 79596] $3,183,821 $2,287,512 $198,989 $257,527 $1,675,332 $3,352,234 ($12,749 2011 78691] $3,147,651 $2,329,370 $196,728 $265,253 $1,675,332 $3,352,234 ($12,526 2012 77773| $3,110,925 $2,371,257 $194,433 $273,210 $1,675,332 $3,352,234 ($13,02 2013 +=76841 $3,073,634 $2,413,118 $192,102 $681,370 $1,675,332 $3,352,234 ($414,286 2014 75894] $3,035,769 $2,454,892 $189,736 $358,311 $3,352,234 $1,590,380 2015 74933] $2,997,322 $2,496,516 $187,333 $369,061 $3,352,234 $1,585,211 2016 73957) $2,958,284 $2,537,920 $184,893 $380,132 $3,352,234 $1,578,945 2017 72966| $2,918,646 $2,579,032 $182,415 $391,536 $3,352,234 $1,571,492 2018 71960) $2,878,397 $2,619,771 $179,900 $1,158,090 $3,352,234 $807,945 2019 70938) $2,837,530 $2,660,052 $177,346 $517,827 $3,352,234 $1,450,176 2020 69901) $2,796,034 $2,699,786 $174,752 $533,362 $3,352,234 $1,435,472 2021 68847) $2,753,899 $2,738,875 $172,119 $549,363 $3,352,234 $1,419,059 2022 67778) $2,711,116 $2,777,215 $169,445 $565,843 $3,352,234 $1,400,809 2023 66692! $2,667,675 $2,814,696 $166,730 $1,557,850 $3,352,234 $405,557 2024 65589) $2,623,565 $2,851,200 $163,973 $600,303 $3,352,234 $1,358,255 2025 64469/ $2,578,776 $2,886,601 $161,174 $618,312 $3,352,234 $1,333,658 2026 63332! $2,533,299 $2,920,766 $158,331 $636,862 $3,352,234 $1,306,638 2027 62178) $2,487,121 $2,953,551 $155,445 $655,968 $3,352,234 $1,277,026 2028 61006] $2,440,233 $2,984,806 $152,515 $2,994,269 $3,352,234 ($1,073,980) NET PRESENT VALUE: 5.5% ($4,883,633) SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PPAL AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE ‘Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEr INTERTIE REVENUE PROJEv1 ION ADDITIONAL STATE FUNDING: $10 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.059 1996$ INTERTIE CAPITAL COST (19978) $75,000,000 INFLATION: 3.0% FY 94 GRANT (1997): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19975): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (1997): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997$) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $10,000,000 REMAINING CAPITAL COST (1997) $33,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME cOsT cost NET $0.040 $0.019 $0.0025 $20,000,000 $33,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421| $2,216,838 $1,150,639 $138,552 $133,626 $1,675,332 $2,586,460 ($1,166,492 2000 57549] $2,301,958 $1,230,665 $143,872 $137,635 $1,675,332 $2,586,460 ($1,010,676 2001 59404] $2,376,158 $1,308,444 $148,510 $141,764 $1,675,332 $2,586,460 ($867,463 2002 60768| $2,430,718 $1,378,642 $151,920 $146,017 $1,675,332 $2,586,460 ($750,368 2003 62045| $2,481,798 $1,449,842 $155,112 $219,609 $1,675,332 $2,586,460 ($704,873 2004 63686} $2,547,438 $1,532,833 $159,215 $154,909 $1,675,332 $2,586,460 ($495,644 2005 65896} $2,635,838 $1,633,606 $164,740 $159,556 $1,675,332 $2,586,460 ($316,644 2006 68501} $2,740,038 $1,749,131 $171,252 $164,343 $1,675,332 $2,586,460 ($108,218 2007 71430} $2,857,198 $1,878,639 $178,575 $169,273 $1,675,332 $2,586,460 $126,198 2008 74632| $2,985,278 $2,021,739 $186,580 $415,057 $1,675,332 $2,586,460 $143,588 2009 77829} $3,113,158 $2,171,594 $194,572 $250,026 $1,675,332 $2,586,460 $578,362 2010 79596| $3,183,821 $2,287,512 $198,989 $257,527 $1,675,332 $2,586,460 $753,026 2011 78691] $3,147,651 $2,329,370 $196,728 $265,253 $1,675,332 $2,586,460 $753,249 2012 77773} $3,110,925 $2,371,257 $194,433 $273,210 $1,675,332 $2,586,460 $752,748 2013 76841) $3,073,634 $2,413,118 $192,102 $681,370 $1,675,332 $2,586,460 $351,488 2014 75894) $3,035,769 $2,454,892 $189,736 $358,311 $2,586,460 $2,356,155 2015 74933] $2,997,322 $2,496,516 $187,333 $369,061 $2,586,460 $2,350,985 2016 73957/ $2,958,284 $2,537,920 $184,893 $380,132 $2,586,460 $2,344,720 2017 72966) $2,918,646 $2,579,032 $182,415 $391,536 $2,586,460 $2,337,266 2018 71960) $2,878,397 $2,619,771 $179,900 $1,158,090 $2,586,460 $1,573,719 2019 70938] $2,837,530 $2,660,052 $177,346 $517,827 $2,586,460 $2,215,950 2020 69901] $2,796,034 $2,699,786 $174,752 $533,362 $2,586,460 $2,201,246 | 2021 68847| $2,753,899 $2,738,875 $172,119 $549,363 $2,586,460 $2,184,833 2022 67778} $2,711,116 $2,777,215 $169,445 $565,843 $2,586,460 $2,166,583 2023 66692| $2,667,675 $2,814,696 $166,730 $1,557,850 $2,586,460 $1,171,332 2024 65589} $2,623,565 $2,851,200 $163,973 $600,303 $2,586,460 $2,124,030 2025 64469) $2,578,776 $2,886,601 $161,174 $618,312 $2,586,460 $2,099,432 2026 63332] $2,533,299 $2,920,766 $158,331 $636,862 $2,586,460 $2,072,412 2027 62178] $2,487,121 $2,953,551 $155,445 $655,968 $2,586,460 $2,042,800 2028 61006} $2,440,233 $2,984,806 $152,515 $2,994,269 $2,586,460 ($308,205) NET PRESENT VALUE: 5.5% $6,245,937 SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEr: INTERTIE REVENUE PROJEvw ION ADDITIONAL STATE FUNDING: $20 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.059 1996$ INTERTIE CAPITAL COST (1997$) $75,000,000 INFLATION: 3.0% FY 94 GRANT (1997): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19973): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19975): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (19978) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $20,000,000 REMAINING CAPITAL COST (1997) $23,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME COST cost NET $0.040 $0.019 $0.0025 $20,000,000 $23,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421] $2,216,838 $1,150,639 $138,552 $133,626 $1,675,332 $1,820,685 ($400,718 2000 57549] $2,301,958 $1,230,665 $143,872 $137,635 $1,675,332 $1,820,685 ($244,901 2001 59404] $2,376,158 $1,308,444 $148,510 $141,764 $1,675,332 $1,820,685 ($101,689) 2002 60768; $2,430,718 $1,378,642 $151,920 $146,017 $1,675,332 $1,820,685 $15,406 2003 62045; $2,481,798 $1,449,842 $155,112 $219,609 $1,675,332 $1,820,685 $60,901 2004 63686} $2,547,438 $1,532,833 $159,215 $154,909 $1,675,332 $1,820,685 $270,131 2005 65896; $2,635,838 $1,633,606 $164,740 $159,556 $1,675,332 $1,820,685 $449,131 2006 68501} $2,740,038 $1,749,131 $171,252 $164,343 $1,675,332 $1,820,685 $657,557 2007 71430} $2,857,198 $1,878,639 $178,575 $169,273 $1,675,332 $1,820,685 $891,972 2008 74632} $2,985,278 $2,021,739 $186,580 $415,057 $1,675,332 $1,820,685 $909,362 2009 77829} $3,113,158 $2,171,594 $194,572 $250,026 $1,675,332 $1,820,685 $1,344,136 2010 79596] $3,183,821 $2,287,512 $198,989 $257,527 $1,675,332 $1,820,685 $1,518,800 2011 78691} $3,147,651 $2,329,370 $196,728 $265,253 $1,675,332 $1,820,685 $1,519,023 2012 77773} $3,110,925 $2,371,257 $194,433 $273,210 $1,675,332 $1,820,685 $1,518,522 2013 76841| $3,073,634 $2,413,118 $192,102 $681,370 $1,675,332 $1,820,685 $1,117,263 2014 75894} $3,035,769 $2,454,892 $189,736 $358,311 $1,820,685 $3,121,929 2015 74933) $2,997,322 $2,496,516 $187,333 $369,061 $1,820,685 $3,116,760 2016 73957} $2,958,284 $2,537,920 $184,893 $380,132 $1,820,685 $3,110,494 2017 + 72966| $2,918,646 $2,579,032 $182,415 $391,536 $1,820,685 $3,103,040 2018 71960| $2,878,397 $2,619,771 $179,900 $1,158,090 $1,820,685 $2,339,494 2019 70938; $2,837,530 $2,660,052 $177,346 $517,827 $1,820,685 $2,981,725 2020 69901} $2,796,034 $2,699,786 $174,752 $533,362 $1,820,685 $2,967,021 2021 68847] $2,753,899 $2,738,875 $172,119 $549,363 $1,820,685 $2,950,607 2022 67778| $2,711,116 $2,777,215 $169,445 $565,843 $1,820,685 $2,932,358 2023 66692] $2,667,675 $2,814,696 $166,730 $1,557,850 $1,820,685 $1,937,106 2024 65589} $2,623,565 $2,851,200 $163,973 $600,303 $1,820,685 $2,889,804 2025 64469| $2,578,776 $2,886,601 $161,174 $618,312 $1,820,685 $2,865,207 2026 63332] $2,533,299 $2,920,766 $158,331 $636,862 $1,820,685 $2,838,187 2027 62178) $2,487,121 $2,953,551 $155,445 $655,968 $1,820,685 $2,808,574 2028 61006} $2,440,233 $2,984,806 $152,515 $2,994,269 $1,820,685 $457,569 NET PRESENT VALUE: 5.5% $17,375,507 SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PPA&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE ‘Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEe iINTERTIE REVENUE PROJEv SION ADDITIONAL STATE FUNDING: $30 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.059 1996$ INTERTIE CAPITAL COST (1997S) $75,000,000 INFLATION: 3.0% FY 94 GRANT (19978): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19973): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19978): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997S) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $30,000,000 REMAINING CAPITAL COST (1997) $13,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME COST cOsT NET $0.040 $0.019 $0.0025 $20,000,000 $13,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421) $2,216,838 $1,150,639 $138,552 $133,626 $1,675,332 $1,054,911 $365,056 2000 57549| $2,301,958 $1,230,665 $143,872 $137,635 $1,675,332 $1,054,911 $520,873 2001 59404} $2,376,158 $1,308,444 $148,510 $141,764 $1,675,332 $1,054,911 $664,085 2002 60768] $2,430,718 $1,378,642 $151,920 $146,017 $1,675,332 $1,054,911 $781,181 2003 62045| $2,481,798 $1,449,842 $155,112 $219,609 $1,675,332 $1,054,911 $826,676 2004 63686} $2,547,438 $1,532,833 $159,215 $154,909 $1,675,332 $1,054,911 $1,035,905 2005 65896| $2,635,838 $1,633,606 $164,740 $159,556 $1,675,332 $1,054,911 $1,214,905 2006 68501/ $2,740,038 $1,749,131 $171,252 $164,343 $1,675,332 $1,054,911 $1,423,331 2007 71430} $2,857,198 $1,878,639 $178,575 $169,273 $1,675,332 $1,054,911 $1,657,746 2008 74632} $2,985,278 $2,021,739 $186,580 $415,057 $1,675,332 $1,054,911 $1,675,137 2009 77829} $3,113,158 $2,171,594 $194,572 $250,026 $1,675,332 $1,054,911 $2,109,911 2010 79596| $3,183,821 $2,287,512 $198,989 $257,527 $1,675,332 $1,054,911 $2,284,575 2011 78691| $3,147,651 $2,329,370 $196,728 $265,253 $1,675,332 $1,054,911 $2,284,798 2012 77773} $3,110,925 $2,371,257 $194,433 $273,210 $1,675,332 $1,054,911 $2,284,296 2013 76841| $3,073,634 $2,413,118 $192,102 $681,370 $1,675,332 $1,054,911 $1,883,037 2014 75894] $3,035,769 $2,454,892 $189,736 $358,311 $1,054,911 $3,887,704 2015 74933) $2,997,322 $2,496,516 $187,333 $369,061 $1,054,911 $3,882,534 2016 73957) $2,958,284 $2,537,920 $184,893 $380,132 $1,054,911 $3,876,269 2017 72966| $2,918,646 $2,579,032 $182,415 $391,536 $1,054,911 $3,868,815 2018 71960} $2,878,397 $2,619,771 $179,900 $1,158,090 $1,054,911 $3,105,268 2019 70938; $2,837,530 $2,660,052 $177,346 $517,827 $1,054,911 $3,747,499 2020 69901} $2,796,034 $2,699,786 $174,752 $533,362 $1,054,911 $3,732,795 2021 68847] $2,753,899 $2,738,875 $172,119 $549,363 $1,054,911 $3,716,382 2022 67778} $2,711,116 $2,777,215 $169,445 $565,843 $1,054,911 $3,698,132 2023 66692] $2,667,675 $2,814,696 $166,730 $1,557,850 $1,054,911 $2,702,880 2024 65589| $2,623,565 $2,851,200 $163,973 $600,303 $1,054,911 $3,655,578 2025 64469| $2,578,776 $2,886,601 $161,174 $618,312 $1,054,911 $3,630,981 2026 63332} $2,533,299 $2,920,766 $158,331 $636,862 $1,054,911 $3,603,961 2027 62178} $2,487,121 $2,953,551 $155,445 $655,968 $1,054,911 $3,574,349 2028 61006} $2,440,233 $2,984,806 $152,515 $2,994,269 $1,054,911 $1,223,344 NET PRESENT VALUE: 5.5% $28,505,078 ‘SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEr INTERTIE REVENUE PROJEv : ION ADDITIONAL STATE FUNDING: $0 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.054 1996$ INTERTIE CAPITAL COST (1997$) $75,000,000 INFLATION: 3.0% FY 94 GRANT (1997S): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19978): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19978): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997$) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $0 REMAINING CAPITAL COST (1997) $43,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME COST cOsT NET $0.040 $0.014 $0.0025 $20,000,000 $43,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421| $2,216,838 $847,839 $138,552 $133,626 $1,675,332 $3,352,234 ($2,235,06 2000 57549) $2,301,958 $906,806 $143,872 $137,635 $1,675,332 $3,352,234 ($2,100,309) 2001 59404) $2,376,158 $964,116 $148,510 $141,764 $1,675,332 $3,352,234 ($1,977,565 2002 60768) $2,430,718 $1,015,841 $151,920 $146,017 $1,675,332 $3,352,234 ($1,878,943 2003 62045| $2,481,798 $1,068,304 $155,112 $219,609 $1,675,332 $3,352,234 ($1,852,185 2004 63686) $2,547,438 $1,129,456 $159,215 $154,909 $1,675,332 $3,352,234 ($1,664,796 2005 65896) $2,635,838 $1,203,710 $164,740 $159,556 $1,675,332 $3,352,234 ($1,512,314 2006 68501) $2,740,038 $1,288,834 $171,252 $164,343 $1,675,332 $3,352,234 ($1,334,290 2007 71430} $2,857,198 $1,384,260 $178,575 $169,273 $1,675,332 $3,352,234 ($1,133,956 2008 74632] $2,985,278 $1,489,702 $186,580 $415,057 $1,675,332 $3,352,234 ($1,154,223 2009 77829} $3,113,158 $1,600,122 $194,572 $250,026 $1,675,332 $3,352,234 ($758,885, 2010 79596| $3,183,821 $1,685,535 $198,989 $257,527 $1,675,332 $3,352,234 ($614,726 2011 78691} $3,147,651 $1,716,378 $196,728 $265,253 $1,675,332 $3,352,234 ($625,518) 2012 77773} $3,110,925 $1,747,242 $194,433 $273,210 $1,675,332 $3,352,234 ($637,042) 2013 76841| $3,073,634 $1,778,087 $192,102 $681,370 $1,675,332 $3,352,234 ($1,049,31 2014 75894| $3,035,769 $1,808,868 $189,736 $358,311 $3,352,234 $944,356 2015 74933) $2,997,322 $1,839,538 $187,333 $369,061 $3,352,234 $928,233 2016 73957) $2,958,284 $1,870,047 $184,893 $380,132 $3,352,234 $911,072 2017 72966) $2,918,646 $1,900,339 $182,415 $391,536 $3,352,234 $892,799 2018 71960; $2,878,397 $1,930,357 $179,900 $1,158,090 $3,352,234 $118,531 2019 70938} $2,837,530 $1,960,039 $177,346 $517,827 $3,352,234 $750,162 2020 69901] $2,796,034 $1,989,316 $174,752 $533,362 $3,352,234 $725,002 2021 68847] $2,753,899 $2,018,118 $172,119 $549,363 $3,352,234 $698,302 2022 67778} $2,711,116 $2,046,369 $169,445 $565,843 $3,352,234 $669,963 2023 66692|} $2,667,675 $2,073,987 $166,730 $1,557,850 $3,352,234 ($335,152) 2024 65589| $2,623,565 $2,100,884 $163,973 $600,303 - $3,352,234 $607,939 2025 64469| $2,578,776 $2,126,970 $161,174 $618,312 $3,352,234 $574,026 2026 63332| $2,533,299 $2,152,143 $158,331 $636,862 $3,352,234 $538,015 2027 62178| $2,487,121 $2,176,301 $155,445 $655,968 $3,352,234 $499,775 | 2028 61006} $2,440,233 $2,199,330 $152,515 $2,994,269 $3,352,234 ($1,859,455) NET PRESENT VALUE: 5.5% ($12,550,532) SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE ‘Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEc iINTERTIE REVENUE PROJEvw ‘ION ADDITIONAL STATE FUNDING: $10 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.054 1996$ INTERTIE CAPITAL COST (1997$) $75,000,000 INFLATION: 3.0% FY 94 GRANT (19978): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19978): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19978): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997$) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $10,000,000 REMAINING CAPITAL COST (1997) $33,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME COST COST NET $0.040 $0.014 $0.0025 $20,000,000 $33,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421| $2,216,838 $847,839 $138,552 $133,626 $1,675,332 $2,586,460 ($1,469,292 2000 57549| $2,301,958 $906,806 $143,872 $137,635 $1,675,332 $2,586,460 ($1,334,535 2001 59404] $2,376,158 $964,116 $148,510 $141,764 $1,675,332 $2,586,460 ($1,211,791 2002 60768| $2,430,718 $1,015,841 $151,920 $146,017 $1,675,332 $2,586,460 ($1,113,169 2003 62045| $2,481,798 $1,068,304 $155,112 $219,609 $1,675,332 $2,586,460 ($1,086,410 2004 63686/ $2,547,438 $1,129,456 $159,215 $154,909 $1,675,332 $2,586,460 ($899,021 2005 65896| $2,635,838 $1,203,710 $164,740 $159,556 $1,675,332 $2,586,460 ($746,540 2006 68501/ $2,740,038 $1,288,834 $171,252 $164,343 $1,675,332 $2,586,460 ($568,515) 2007 71430] $2,857,198 $1,384,260 $178,575 $169,273 $1,675,332 $2,586,460 ($368,181 2008 74632| $2,985,278 $1,489,702 $186,580 $415,057 $1,675,332 $2,586,460 ($388,448 2009 77829| $3,113,158 $1,600,122 $194,572 $250,026 $1,675,332 $2,586,460 $6,890 2010 79596] $3,183,821 $1,685,535 $198,989 $257,527 $1,675,332 $2,586,460 $151,049 2011 78691| $3,147,651 $1,716,378 $196,728 $265,253 $1,675,332 $2,586,460 $140,257 2012 77773] $3,110,925 $1,747,242 $194,433 $273,210 $1,675,332 $2,586,460 $128,733 2013 76841| $3,073,634 $1,778,087 $192,102 $681,370 $1,675,332 $2,586,460 ($283,543) 2014 75894| $3,035,769 $1,808,868 $189,736 $358,311 $2,586,460 $1,710,131 2015 74933| $2,997,322 $1,839,538 $187,333 $369,061 $2,586,460 $1,694,008 2016 73957| $2,958,284 $1,870,047 $184,893 $380,132 $2,586,460 $1,676,846 2017 72966| $2,918,646 $1,900,339 $182,415 $391,536 $2,586,460 $1,658,573 2018 71960] $2,878,397 $1,930,357 $179,900 $1,158,090 $2,586,460 $884,306 2019 70938] $2,837,530 $1,960,039 $177,346 $517,827 $2,586,460 $1,515,936 2020 69901} $2,796,034 $1,989,316 $174,752 $533,362 $2,586,460 $1,490,776 2021 68847| $2,753,899 $2,018,118 $172,119 $549,363 $2,586,460 $1,464,076 2022 67778| $2,711,116 $2,046,369 $169,445 $565,843 $2,586,460 $1,435,737 2023 66692| $2,667,675 $2,073,987 $166,730 $1,557,850 $2,586,460 $430,622 2024 65589| $2,623,565 $2,100,884 $163,973 $600,303 $2,586,460 $1,373,714 2025 64469| $2,578,776 $2,126,970 $161,174 $618,312 $2,586,460 $1,339,800 2026 63332] $2,533,299 $2,152,143 $158,331 $636,862 $2,586,460 $1,303,790 2027 62178! $2,487,121 $2,176,301 $155,445 $655,968 $2,586,460 $1,265,550 2028 61006| $2,440,233 $2,199,330 $152,515 $2,994,269 $2,586,460 ($1 ,093,680) NET PRESENT VALUE: 5.5% ($1,420,961) SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEE INTERTIE REVENUE PROJEv ‘ION ADDITIONAL STATE FUNDING: KPC FIRM SALES: $20 MILLION 4.00 MW (CONTINUOUS) SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE PMC WHOLESALE RATE: $0.054 1996$ INTERTIE CAPITAL COST (1997S) $75,000,000 INFLATION: 3.0% FY 94 GRANT (19978): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (19978): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (19978): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (19978) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $20,000,000 REMAINING CAPITAL COST (1997) $23,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION 0am LOAN BOND REVENUE INCOME COST cost NET $0.040 $0.014 $0.0025 $20,000,000 $23,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421 $2,216,838 $847,839 $138,552 $133,626 $1,675,332 $1,820,685 ($703,518) 2000 57549} $2,301,958 $906,806 $143,872 $137,635 $1,675,332 $1,820,685 ($568,760) 2001 59404| $2,376,158 $964,116 $148,510 $141,764 $1,675,332 $1,820,685 ($446,016 2002 60768} $2,430,718 $1,015,841 $151,920 $146,017 $1,675,332 $1,820,685 ($347,394, 2003 62045| $2,481,798 $1,068,304 $155,112 $219,609 $1,675,332 $1,820,685 ($320,636) 2004 63686} $2,547,438 $1,129,456 $159,215 $154,909 $1,675,332 $1,820,685 ($133,24 2005 65896| $2,635,838 $1,203,710 $164,740 $159,556 $1,675,332 $1,820,685 $19,234 2006 68501| $2,740,038 $1,288,834 $171,252 $164,343 $1,675,332 $1,820,685 $197,259 2007 71430} $2,857,198 $1,384,260 $178,575 $169,273 $1,675,332 $1,820,685 $397,593 2008 74632! $2,985,278 $1,489,702 $186,580 $415,057 $1,675,332 $1,820,685 $377,326 2009 77829} $3,113,158 $1,600,122 $194,572 $250,026 $1,675,332 $1,820,685 $772,664 2010 79596] $3,183,821 $1,685,535 $198,989 $257,527 $1,675,332 $1,820,685 $916,823 2011 78691} $3,147,651 $1,716,378 $196,728 $265,253 $1,675,332 $1,820,685 $906,031 2012 77773} $3,110,925 $1,747,242 $194,433 $273,210 $1,675,332 $1,820,685 $894,507 2013 76841} $3,073,634 $1,778,087 $192,102 $681,370 $1,675,332 $1,820,685 $482,232 2014 75894| $3,035,769 $1,808,868 $189,736 $358,311 $1,820,685 $2,475,905 2015 74933] $2,997,322 $1,839,538 $187,333 $369,061 $1,820,685 $2,459,782 2016 73957} $2,958,284 $1,870,047 $184,893 $380,132 $1,820,685 $2,442,621 2017 72966; $2,918,646 $1,900,339 $182,415 $391,536 $1,820,685 $2,424,348 2018 71960} $2,878,397 $1,930,357 $179,900 $1,158,090 $1,820,685 $1,650,080 2019 70938} $2,837,530 $1,960,039 $177,346 $517,827 $1,820,685 $2,281,711 2020 69901} $2,796,034 $1,989,316 $174,752 $533,362 $1,820,685 $2,256,551 2021 68847! $2,753,899 $2,018,118 $172,119 $549,363 $1,820,685 $2,229,851 2022 67778} $2,711,116 $2,046,369 $169,445 $565,843 $1,820,685 $2,201,512 2023 66692! $2,667,675 $2,073,987 $166,730 $1,557,850 $1,820,685 $1,196,396 2024 65589} $2,623,565 $2,100,884 $163,973 $600,303 $1,820,685 $2,139,488 2025 64469| $2,578,776 $2,126,970 $161,174 $618,312 $1,820,685 $2,105,575 2026 63332} $2,533,299 $2,152,143 $158,331 $636,862 $1,820,685 $2,069,564 2027 62178} $2,487,121 $2,176,301 $155,445 $655,968 $1,820,685 $2,031,324 2028 61006] $2,440,233 $2,199,330 $152,515 $2,994,269 $1,820,685 ($327,906) NET PRESENT VALUE: 5.5% $9,708,609 ‘Spreadsheet by R. D. Trimble - 2/6/96 SWAN-TYEE INTERTIE REVENUE PROJEwu ION ADDITIONAL STATE FUNDING: $30 MILLION KPC FIRM SALES: 4.00 MW (CONTINUOUS) PMC WHOLESALE RATE: $0.054 1996$ INTERTIE CAPITAL COST (1997$) $75,000,000 INFLATION: 3.0% FY 94 GRANT (1997): $4,664,262 STATE LOAN TERM: 15 FY 95 GRANT (1997S): $4,000,000 STATE LOAN RATE: 3.0% FY 96 GRANT (1997S): $2,560,000 MORAL OBL. BOND TERM: 30 REMAINING CAPITAL COST (1997$) $63,775,738 MORAL OBL. BOND RATE: 6.5% STATE LOAN: $20,000,000 KPU HYDRO (MWH): 144700 ADDITIONAL STATE FUNDING: $30,000,000 REMAINING CAPITAL COST (1997) $13,775,738 SALES INCOME COSTS NET YEAR INTERTIE] PMC DEBT PMC O&M TYEE INTERTIE STATE MORAL OBL. INTERTIE SALES SERVICE INCOME | GENERATION O&M LOAN BOND REVENUE INCOME COST cost NET $0.040 $0.014 $0.0025 $20,000,000 $13,775,738 PER KWH PER KWH PER KWH FIXED ESCALATED (MWh) ($s) ($s) ($s) ($s) ($s) ($s) ($s) 1999 55421| $2,216,838 $847,839 $138,552 $133,626 $1,675,332 $1,054,911 $62,257 2000 57549) $2,301,958 $906,806 $143,872 $137,635 $1,675,332 $1,054,911 $197,014 2001 59404| $2,376,158 $964,116 $148,510 $141,764 $1,675,332 $1,054,911 $319,758 2002 60768] $2,430,718 $1,015,841 $151,920 $146,017 $1,675,332 $1,054,911 $418,380 2003 62045| $2,481,798 $1,068,304 $155,112 $219,609 $1,675,332 $1,054,911 $445,139 2004 63686| $2,547,438 $1,129,456 $159,215 $154,909 $1,675,332 $1,054,911 $632,528 2005 65896| $2,635,838 $1,203,710 $164,740 $159,556 $1,675,332 $1,054,911 $785,009 2006 68501| $2,740,038 $1,288,834 $171,252 $164,343 $1,675,332 $1,054,911 $963,034 2007 71430} $2,857,198 $1,384,260 $178,575 $169,273 $1,675,332 $1,054,911 $1,163,368 2008 74632| $2,985,278 $1,489,702 $186,580 $415,057 $1,675,332 $1,054,911 $1,143,100 2009 77829) $3,113,158 $1,600,122 $194,572 $250,026 $1,675,332 $1,054,911 $1,538,439 2010 79596] $3,183,821 $1,685,535 $198,989 $257,527 $1,675,332 $1,054,911 $1,682,598 2011 78691] $3,147,651 $1,716,378 $196,728 $265,253 $1,675,332 $1,054,911 $1,671,806 2012 77773} $3,110,925 $1,747,242 $194,433 $273,210 $1,675,332 $1,054,911 $1,660,281 2013 76841/ $3,073,634 $1,778,087 $192,102 $681,370 $1,675,332 $1,054,911 $1,248,006 2014 75894] $3,035,769 $1,808,868 $189,736 $358,311 $1,054,911 $3,241,679 2015 74933] $2,997,322 $1,839,538 $187,333 $369,061 $1,054,911 $3,225,556 2016 73957) $2,958,284 $1,870,047 $184,893 $380,132 $1,054,911 $3,208,395 2017 72966] $2,918,646 $1,900,339 $182,415 $391,536 $1,054,911 $3,190,122 2018 71960] $2,878,397 $1,930,357 $179,900 $1,158,090 $1,054,911 $2,415,855 2019 70938] $2,837,530 $1,960,039 $177,346 $517,827 $1,054,911 $3,047,485 2020 69901/ $2,796,034 $1,989,316 $174,752 $533,362 $1,054,911 $3,022,325 2021 68847] $2,753,899 $2,018,118 $172,119 $549,363 $1,054,911 $2,995,625 2022 67778| $2,711,116 $2,046,369 $169,445 $565,843 $1,054,911 $2,967,286 2023 66692! $2,667,675 $2,073,987 $166,730 $1,557,850 $1,054,911 $1,962,171 2024 65589| $2,623,565 $2,100,884 $163,973- $600,303 $1,054,911 $2,905,263 2025 64469| $2,578,776 $2,126,970 $161,174 $618,312 $1,054,911 $2,871,349 2026 63332! $2,533,299 $2,152,143 $158,331 $636,862 $1,054,911 $2,835,338 2027 62178] $2,487,121 $2,176,301 $155,445 $655,968 $1,054,911 $2,797,099 2028 61006| $2,440,233 $2,199,330 $152,515 $2,994,269 $1,054,911 $437,869 NET PRESENT VALUE: 5.5% $20,838,179 SALES PROJECTION ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT KPC FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 2/6/96 “ file KETCHIKAN PUBLIC UTILITIES 2930 TONGASS AVENUE KETCHIKAN, ALASKA 99901 TELEPHONE 907-225-1000 FAX 907-225-1888 December 19, 1995 - K965 MUNICIPALLY OWNED 0270 ELECTRIC TELEPHONE WATER Mr. Alan Dashen Seattle Northwest Securities Corporation 1420 Fifth Avenue Suite 4300 Seattle, Washington 98101 Dear Alan: As discussed, I am providing revenue and cost projections for the.Swan-Tyee Intertie as weil as some background reference material that may be of interest as follows: ATTACHMENTS: — 2 (1) Intertie revenue/cost projections (2) Discussions regarding additional KPC power purchase (3) KPU Power Supply Planning Study RFP discussion (4) Alaska State Senate Bills 106/126 of 1993 (5) Electric load forecast for Ketchikan, Metlakatla, Petersburg and Wrangell (ISER) (6) R. W. Beck 1992 Intertie feasibility study I would direct your attention to series C of attachment (1). We expect to have a wmitten letter of understanding between Ketchikan Pulp Company (KPC) and KPU for the additional SMW power sales in mid-January. This would be etfective once the Intertie is on-line. Assuming 4MW of KPC firm sales, if the State is willing to offer some concession that is worth $16.8 million to be free of their annual grant requirement, we would have near zero cash flow in the first year and positive thereafter. $13.3 million results in $267,000 negative cash flow in 1999, near zero in 2000 and positive thereafter. I look forward to hearing your comments or questions regarding this analysis. Happy Holidays! Richard D. Trimble Intertie Project Manager CG; John Magyar, Acting KPU General Manager (w/o attachments 3-6) Tom Friesen, KPU PMC Representative (w/o attachments 3-6) Ron Saxton, PMC Attomey (w/o attachments 5-6) Ed Kozak, KEA PMC Representative (w/o attachments 5-6) INTERTIE REVENUE T PROJECTION ATTACHMENT (1) These projections consist of three series (A, B and C) that fix intertie cost and KPC firm sales but vary the amount of additional state funding ($0, $10, $20 and $30 million). Series A: This series models the “status quo” (i.e. no change in firm energy sales to KPC). It assumes the same level of firm energy sales to KPC as we have had in 1995 (the equivalent of 0.96 MW continuous) and assumes the cost of the intertie as estimated in the R. W. Beck 1992 feasibility study adjusted for inflation ($65 million in 1997S). Series B: This series is a conservative model of additional KPC sales at 3MW continuous since that is the minimum requested by KPC. It assumes the intertie cost is increased by $10 million to account for the third turbine at Tyee (although R. W. Beck estimates $6.16 million in 1992$, page X-14). Series C: This series is a more representative model of additional KPC sales at 4MW continuous based on their request (see attachment 2). It also assumes the intertie cost is increased by $10 million. ASSUMPTIONS: Intertie capital cost: Based on R. W. Beck’s estimate of $55.5 million (page I-5) in 1992S escalated at 3% inflation. Raytheon is just wrapping up preliminary design and so is not ina position to offer any better estimates. We should have better estimates in February (when the structures are selected), March (when the structures are spotted) and August (when final design is completed). Debt Service: In all cases I assumed the $20 million loan was utilized at the terms specified in the legislation (3% for 15 years). The remaining cost was considered to be issued as a State backed (“Moral Obligation”) bond at 6.5% for 30 years. The remaining cost to be bonded was obtained by taking the total project cost and subtracting the grants to date, $20 million loan and additional state funding. KPC firm sales: KPC has requested SMW with the first 3MW as the minimum firm purchase and the remaining 2MW either as surplus or firm depending on our spill situation (see attachment 2). Through November 1995, we furnished KPC with 7,720,220 KWH energy. This extrapolates to 0.96 MW continuous for the entire year of 1995. Load growth: All load growth is based on the 1990 ISER study (see attachment 5). The Ketchikan load growth is the ISER base case with surplus sales to KPC deducted. Further, the 0.96MW continuous firm sales (estimated for 1995) have been deducted and replaced with the amount noted in each series. The Petersburg and Wrangell loads are the ISER base case with a 10,000 MWH deduct from the Petersburg load for Crystal Lake. No downward adjustment has been made to the Wrangell demand for the closure of the Wrangell mill. Growth for all three communities beyond 2010 is projected at the rates noted in ISER for the period of 2000-2010 (1.3% for Ketchikan, 1.6% for Petersburg and 1.4% for Wrangell). KPU Hydro: The KPU hydroelectric figures consist of Beaver Falls, Silvis and Ketchikan Lakes powerhouses (62,700 MWH) and Swan Lake (82,000 MWH) during average water years. R. W. Beck page IX-9. Intertie sales: Intertie sales are the lessor of (1) the Ketchikan load in excess of KPU hydro or (2) the surplus available at Tyee after serving the Petersburg and Wrangell demands less 4% line loss. In all cases, the surplus at Tyee is sufficient to meet Ketchikan’s excess load up until sometime between 2010 and 2017 (depending on the KPC firm sales assumed) and then decreases slowly as Petersburg and Wrangell grow. Intertie revenue: Gross intertie revenue is intertie sales extended at $0.064/KWH in 1996 dollars escalated at 3% inflation. Net intertie revenue is gross revenue less O&M and loan and bond payments. Intertie O&M: Intertie O&M is taken directly from R. W. Beck (Table VI-8, page VI-19) escalated from 1992$ at 3% inflation. by Richard D. Trimble, 12/19/95 SWAN-TYEE ux ‘ERTIE REVENUE PROJEC..ON SERIES: A ADDITIONAL STATE FUNDING: $0 MILLION KPC FIRM SALES: 0.96 MW (CONTINUOUS) INTERTIE COST (1997$): A $65 MILLION INTERTIE CAPITAL COST (1997S) $65,000,000 - os Sa REVENUE 1996S ($/KWH): $0.064 FY 94 GRANT (1997S): $4,664,262 aw INFLATION: 3.0% FY 95 GRANT (19975): $4,000,000 \ STATE LOAN TERM: 15 FY 96 GRANT (1997S): $2,560,000 “~)> STATE LOAN RATE: 3.0% REMAINING CAPITAL COST (1997S) $53,775,738 \) XQ MORAL OBL. BOND TERM: 30 STATE LOAN: $20,000,000 , MORAL OBL. BOND RATE: 6.5% ADDITIONAL STATE FUNDING: $0 v REMAINING CAPITAL COST (1997) $33,775,738 a | oe Ve YEAR KTNADJ KPU_ INTERTIE / INTERTIE \INTERTIE STATE MORALOBL. |JNTERTIE REVENUE NET LOAD HYDRO SALES _ | REVENUE O&M LOAN BOND 144700 GROSS f $20,000,000 $33,775,738 (MWh) = (MWh) (MWh) (Ss) [: ($s) (Ss) ($s) ($s) 1999 173491 144700 28791| $2,013,453 J $133,626 $1,675,332 $2,586,460 ($2,381,964) 2000 175619 144700 30919} $2,227,142 $137,635 $1,675,332 $2,586,460 ($2,172,284) 2001 177474 144700 32774 . $2,431,585 | $141,764 $1,675,332 $2,586,460 ($1,971,970) 2002 178838 144700 34138 | $2,608,769 $146,017 $1,675,332 $2,586,460 ($1,799,039) 2003. 180115 144700 35415 | $2,787,547 $219,609 $1,675,332 $2,586,460 ($1,693,853) 2004 181756 144700 37056 $3,004,215 $154,909 $1,675,332 $2,586,460 ($1,412,486) 2005 183966 144700 39266 $3,278,888 $159,556 $1,675,332 $2,586,460 ($1,142,459) 2006 186571 144700 41871 | $3,601,312 $164,343 $1,675,332 $2,586,460 ($824,822) 2007. 189500 144700 44800 $3,968,835 $169,273 $1,675,332 $2,586,460 ($462,230) 2008 192702 144700 48002 ; $4,380,078 $415,057 $1,675,332 $2,586,460 ($296,770) 2009 195899 144700 51199 | $4,811,954 $250,026 $1,675,332 $2,586,460 $300,137 2010 198905 144700 $4205 | $5,247,311 $257,527 $1,675,332 $2,586,460 $727,993 2011 201490 144700 56790 | $5,662,556 $265,253 $1,675,332 $2,586,460 $1,135,512 2012 204110 144700 59410 | $6,101,446 $273,210 $1,675,332 $2,586,460 $1,566,444 2013. 206763 144700 62063 | $6,565,174 $681,370 $1,675,332 $2,586,460 $1,622,013 2014 209451 144700 64751 | $7,054,994 $358,311 $2,586,460 $4,110,223 2015 212174 144700 67474 | $7,572,215 $369,061 $2,586,460 $4,616,695 2016 214932 144700 70232 | $8,118,212 $380,132 $2,586,460 $5,151,620 2017. «217726 = 144700 72966 | $8,687,265 $391,536 $2,586,460 $5,709,269 2018 220557 144700 71960 | $8,824,491 | $1,158,090 $2,586,460 $5,079,942 2019 223424 144700 70938 | $8,960,177 $517,827 $2,586,460 $5,855,890 2020 226328 144700 69901 | $9,094,017 \ $533,362 $2,586,460 $5,974,195 ~— 2021 229271 144700 68847 | $9,225,684 $549,363 $2,586,460 $6,089,862 2022 232251 144700 67778 | $9,354,830 $565,843 $2,586,460 $6,202,527 2023 235271 144700 66692 | $9,481,082 $1,557,850 $2,586,460 $5,336,773 2024 238329 144700 65589 | $9,604,043 ' $600,303 $2,586,460 $6,417,280 2025 241427 144700 64469 | $9,723,289 | $618,312 $2,586,460 $6,518,517 2026 244566 144700 63332 \ $9,838,370 | $636,862 $2,586,460 $6,615,048 2027 247745 144700 62178 \ $9,948,804 / $655,968 $2,586,460 $6,706,377 2028 250966 144700 61006 $1 0,054,082 / $2,994,269 $2,586,460 $4,473,353 AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% ———__ KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE ASSUMPTIONS: \ Peaje a wom QD Spreadsheet by R. D. Trimble - 12/19/95 —= 2K: TVA wu 4 -D Ee | SWAN-TYEE |... ERTIE REVENUE PROJEC1._N ADDITIONAL STATE FUNDING: KPC FIRM SALES: INTERTIE COST (19978): INTERTIE CAPITAL COST (1997$) $65,000,000 ~ FY 94 GRANT (19975): $4,664,262 FY 95 GRANT (1997S): $4,000,000 FY 96 GRANT (19978): $2,560,000 REMAINING CAPITAL COST (1997$) $53,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $10,000,000 REMAINING CAPITAL COST (1997) $23,775,738 YEAR KTN ADJ KPU —INTERTIE LOAD HYDRO SALES 144700 (MWh) (MWh) (MWh) 1999 173491 144700 28791 2000 175619 144700 30919 2001 177474 144700 32774 2002 178838 144700 34138 2003. 180115 144700 35415 2004 181756 144700 37056 2005 183966 144700 39266 2006 186571 144700 41871 2007 189500 144700 44800 2008 192702 144700 48002 2009 195899 144700 $1199 2010 198905 144700 54205 2011 201490 144700 56790 2012 204110 144700 59410 2013. 206763 144700 62063 2014 209451 144700 64751 2015 212174 144700 67474 2016 214932 144700 70232 2017 217726 144700 72966 2018 220557 144700 71960 2019 223424 144700 70938 2020 226328 144700 69901 2021 229271 144700 68847 2022 232251 144700 67778 2023 235271 144700 66692 2024 238329 144700 65589 2025 241427 144700 64469 2026 244566 144700 63332 2027 247745 144700 62178 INTERTIE REVENUE GROSS ($s) $2,013,453 $2,227,142 $2,431,585 $2,608,769 $2,787,547 $3,004,215 $3,278,888 $3,601,312 $3,968,835 $4,380,078 $4,811,954 $5,247,311 $5,662,556 $6,101,446 $6,565,174 $7,054,994 $7,572,215 $8,118,212 $8,687,265 $8,824,491 $8,960,177 $9,094,017 $9,225,684 $9,354,830 $9,481,082 $9,604,043 $9,723,289 $9,838,370 $9,948,804 2028 250966 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $10 0.96 $65 INTERTIE O&M (Ss) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION MW (CONTINUOUS) MILLION REVENUE 1996$ (S/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE MORAL OBL. LOAN BOND $20,000,000 $23,775,738 ($s) (Ss) $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: A $0.064 3.0% 15 3.0% 30 6.5% INTERTIE REVENUE NET ($s) ($1,616,190) ($1,406,510) ($1,206,195) ($1,033,265) ($928,079) ($646,711) ($376,685) ($59,047) $303,545 $469,004 $1,065,911 $1,493,767 $1,901,286 $2,332,218 $2,387,787 $4,875,997 $5,382,469 $5,917,394 $6,475,043 $5,845,716 $6,621,665 $6,739,970 $6,855,636 $6,968,302 $6,102,547 $7,183,055 $7,284,292 $7,380,823 $7,472,151 $5,239,128 SWAN-TYEE ‘ERTIE REVENUE PROJEC N ADDITIONAL STATE FUNDIN KPC FIRM SALES: INTERTIE COST (1997$): INTERTIE CAPITAL COST (1997$) $65,000,000- FY 94 GRANT (1997$): $4,664,262 FY 95 GRANT (1997$): $4,000,000 FY 96 GRANT (19975): $2,560,000 REMAINING CAPITAL COST (1997$) $53,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $20,000,000 REMAINING CAPITAL COST (1997) $13,775,738 YEAR KTN ADJ KPU —INTERTIE LOAD HYDRO SALES 144700 (MWh) = (MWh) (MWh) 1999 173491 144700 28791 2000 175619 144700 30919 2001 177474 144700 32774 2002 178838 144700 34138 2003. 180115 144700 35415 2004 181756 144700 37056 2005 183966 144700 39266 2006 186571 144700 41871 2007 189500 144700 44800 2008 192702 144700 48002 2009 195899 144700 51199 2010 198905 144700 54205 2011 201490 144700 56790 2012 204110 144700 59410 2013 206763 144700 62063 2014 209451 144700 64751 2015 212174 144700 67474 2016 214932 144700 70232 2017 217726 ~=©144700 72966 2018 220557 144700 71960 2019 223424 144700 70938 2020 226328 144700 69901 2021 229271 144700 68847 2022 232251 144700 67778 2023 235271 144700 66692 2024 238329 144700 65589 2025 241427 144700 64469 2026 244566 144700 63332 2027 247745 144700 62178 G: INTERTIE REVENUE GROSS ($s) $2,013,453 $2,227,142 $2,431,585 $2,608,769 $2,787,547 $3,004,215 $3,278,888 $3,601,312 $3,968,835 $4,380,078 $4,811,954 $5,247,311 $5,662,556 $6,101,446 $6,565,174 $7,054,994 $7,572,215 $8,118,212 $8,687,265 $8,824,491 $8,960,177 $9,094,017 $9,225,684 $9,354,830 $9,481,082 $9,604,043 $9,723,289 $9,838,370 $9,948,804 2028 250966 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $20 0.96 $65 INTERTIE O&M ($s) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION MW (CONTINUOUS) MILLION REVENUE 1996S (S/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE MORAL OBL. LOAN BOND $20,000,000 $13,775,738 ($s) (Ss) $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: A $0.064 3.0% 15 3.0% 6.5% INTERTIE REVENUE NET ($s) ($850,415) ($640,735) ($440,421) ($267,490) ($162,304) $119,063 $389,089 $706,727 $1,069,319 $1,234,778 $1,831,686 $2,259,541 $2,667,061 $3,097,993 $3,153,562 $5,641,772 $6,148,244 $6,683,169 $7,240,818 $6,611,491 $7,387,439 $7,505,744 $7,621,411 $7,734,076 $6,868,321 $7,948,829 $8,050,066 $8,146,597 $8,237,926 $6,004,902 SWAN-TYEE ivr ERTIE REVENUE PROJEC..ON ADDITIONAL STATE FUNDIN KPC FIRM SALES: INTERTIE COST (1997$): INTERTIE CAPITAL COST (1997$) $65,000,000 ~ FY 94 GRANT (19975): $4,664,262 FY 95 GRANT (1997S): $4,000,000 FY 96 GRANT (19978): $2,560,000 REMAINING CAPITAL COST (1997$) $53,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $30,000,000 REMAINING CAPITAL COST (1997) $3,775,738 YEAR KTN ADJ KPU —INTERTIE LOAD HYDRO SALES 144700 (MWh) (MWh) (MWh) 1999 173491 144700 28791 2000 175619 144700 30919 2001 177474 144700 32774 2002 178838 144700 34138 2003. 180115 144700 35415 2004 181756 144700 37056 2005 183966 144700 39266 2006 186571 144700 41871 2007 189500 144700 44800 2008 192702 144700 48002 2009 195899 144700 51199 2010 198905 144700 54205 2011 201490 144700 56790 2012 204110 144700 59410 2013. 206763 144700 62063 2014 209451 144700 64751 2015 212174 144700 67474 2016 214932 144700 70232 2017 9217726 144700 72966 2018 220557 144700 71960 2019 223424 144700 70938 2020 226328 144700 69901 2021 229271 144700 68847 2022 232251 144700 67778 2023. 235271 144700 66692 2024 238329 144700 65589 2025 241427 144700 64469 2026 244566 144700 63332 2027 247745 144700 62178 G: INTERTIE REVENUE GROSS ($s) $2,013,453 $2,227,142 $2,431,585 $2,608,769 $2,787,547 $3,004,215 $3,278,888 $3,601,312 $3,968,835 $4,380,078 $4,811,954 $5,247,311 $5,662,556 $6,101,446 $6,565,174 $7,054,994 $7,572,215 $8,118,212 $8,687,265 $8,824,491 $8,960,177 $9,094,017 $9,225,684 $9,354,830 $9,481,082 $9,604,043 $9,723,289 $9,838,370 $9,948,804 2028 250966 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $30 MILLION 0.96 MW (CONTINUOUS) $65 INTERTIE O&M ($s) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION REVENUE 1996$ ($/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE LOAN $20,000,000 ($s) $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% MORAL OBL. BOND $3,775,738 ($s) $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 $289,136 KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: A $0.064 3.0% 15 3.0% 6.5% INTERTIE REVENUE NET (Ss) ($84,641) $125,039 $325,354 $498,284 $603,470 $884,838 $1,154,864 $1,472,502 $1,835,094 $2,000,553 $2,597,460 $3,025,316 $3,432,835 $3,863,767 $3,919,336 $6,407,546 $6,914,018 $7,448,943 $8,006,592 $7,377,265 $8,153,214 $8,271,519 $8,387,185 $8,499,850 $7,634,096 $8,714,603 $8,815,840 $8,912,371 $9,003,700 $6,770,676 SWAN-TYEE iv TERTIE REVENUE PROJEC..JN ADDITIONAL STATE FUNDIN KPC FIRM SALES: INTERTIE COST (19978): INTERTIE CAPITAL COST (1997$) — $75,000,0007 FY 94 GRANT (19978): $4,664,262 FY 95 GRANT (19978): $4,000,000 FY 96 GRANT (1997S): $2,560,000 REMAINING CAPITAL COST (1997$) $63,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $o REMAINING CAPITAL COST (1997) $43,775,738 YEAR KTN ADJ KPU —INTERTIE LOAD HYDRO SALES 144700 (MWh) = (MWh) (MWh) 1999 191361 144700 46661 2000 193489 144700 48789 2001 195344 144700 50644 2002 196708 144700 $2008 2003 197985 144700 53285 2004 199626 144700 54926 2005 201836 144700 57136 2006 204441 144700 59741 2007. 207370 144700 62670 2008 210572 144700 65872 2009 213769 144700 69069 2010 216775 144700 72075 2011 219593 144700 74893 2012 222448 144700 77748 2013. 225340 144700 76841 2014 228269 144700 75894 2015 231236 144700 74933 2016 234243 144700 73957 2017 237288 144700 72966 2018 240372 144700 71960 2019 243497 144700 70938 2020 246663 144700 69901 2021 249869 144700 68847 2022 253118 144700 67778 2023 256408 144700 66692 2024 259741 144700 65589 2025 263118 144700 64469 2026 266539 144700 63332 2027 270004 #144700 62178 G: INTERTIE REVENUE GROSS ($s) $3,263,211 $3,514,393 $3,757,453 $3,974,413 $4,194,160 $4,453,027 $4,771,164 $5,138,357 $5,551,991 $6,010,729 $6,491,524 $6,977,268 $7,467,576 $7,984,786 $8,128,397 $8,269,110 $8,409,317 $8,548,785 $8,687,265 $8,824,491 $8,960,177 $9,094,017 $9,225,684 $9,354,830 $9,481,082 $9,604,043 $9,723,289 $9,838,370 $9,948,804 2028 273514 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $0 MILLION 3.00 MW (CONTINUOUS) $75 INTERTIE O&M (Ss) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION REVENUE 1996$ ($/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE LOAN $20,000,000 (Ss) $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 $1,675,332 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% MORAL OBL. BOND $43,775,738 (Ss) $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: 8 $0.064 3.0% 15 3.0% 30 6.5% INTERTIE REVENUE NET ($s) ($1,897,981) ($1,650,808) ($1,411,876) ($1,199,169) ($1,053,014) ($729,448) ($415,957) ($53,551) $355,152 $568,106 $1,213,933 $1,692,176 $2,174,758 $2,684,010 $2,419,461 $4,558,565 $4,688,022 $4,816,418 $4,943,495 $4,314,167 $5,090,116 $5,208,421 $5,324,088 $5,436,753 $4,570,998 $5,651,506 $5,752,743 $5,849,274 $5,940,603 $3,707,579 SWAN-TYEE Invi ERTIE REVENUE PROJECT.UN ADDITIONAL STATE FUNDING: KPC FIRM SALES: INTERTIE COST (19973): INTERTIE CAPITAL COST (1997$) $75,000,000 i FY 94 GRANT (19978): $4,664,262 FY 95 GRANT (19975): $4,000,000 FY 96 GRANT (19975): $2,560,000 REMAINING CAPITAL COST (1997S) $63,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $10,000,000 REMAINING CAPITAL COST (1997) $33,775,738 YEAR KTN ADJ KPU —INTERTIE LOAD HYDRO SALES 144700 (MWh) (MWh) (MWh) 1999 191361 144700 46661 2000 193489 144700 48789 2001 195344 144700 50644 2002 196708 144700 52008 2003 197985 144700 53285 2004 199626 144700 54926 2005 201836 144700 57136 2006 204441 144700 59741 2007. 207370 144700 62670 2008 210572 144700 65872 2009 213769 144700 69069 2010 216775 144700 72075 2011 219593 144700 74893 2012 222448 144700 77748 2013 225340 144700 76841 2014 228269 144700 75894 2015 231236 144700 74933 2016 234243 144700 73957 2017 237288 144700 72966 2018 240372 144700 71960 2019 243497 144700 70938 2020 246663 144700 69901 2021 249869 144700 68847 2022 253118 144700 67778 2023 256408 144700 66692 2024 259741 144700 65589 2025 263118 144700 64469 2026 266539 144700 63332 2027 270004 144700 62178 INTERTIE REVENUE GROSS ($s) $3,263,211 $3,514,393 $3,757,453 $3,974,413 $4,194,160 $4,453,027 $4,771,164 $5,138,357 $5,551,991 $6,010,729 $6,491,524 $6,977,268 $7,467,576 $7,984,786 $8,128,397 $8,269,110 $8,409,317 $8,548,785 $8,687,265 $8,824,491 $8,960,177 $9,094,017 $9,225,684 $9,354,830 $9,481,082 $9,604,043 $9,723,289 $9,838,370 $9,948,804 2028 273514 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $10 3.00 $75 INTERTIE O&M (Ss) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION MW (CONTINUOUS) MILLION REVENUE 1996S ($/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE MORAL OBL. LOAN BOND $20,000,000 $33,775,738 ($s) (Ss) $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: 8 $0.064 3.0% 1S 3.0% 30 6.5% INTERTIE REVENUE NET ($s) ($1,132,206) ($885,033) ($646,101) ($433,395) ($287,239) $36,326 $349,817 $712,223 $1,120,926 $1,333,880 $1,979,707 $2,457,950 $2,940,532 $3,449,784 $3,185,236 $5,324,339 $5,453,797 $5,582,193 $5,709,269 $5,079,942 $5,855,890 $5,974,195 $6,089,862 $6,202,527 $5,336,773 $6,417,280 $6,518,517 $6,615,048 $6,706,377 $4,473,353 SWAN-TYEE in ERTIE REVENUE PROJEC11UN SERIES: ADDITIONAL STATE FUNDING: $20 MILLION KPC FIRM SALES: 3.00 MW (CONTINUOUS) INTERTIE COST (1997$): $75 MILLION INTERTIE CAPITAL COST (1997S) $75,000,000 ~ REVENUE 1996S ($/KWH): $0.064 FY 94 GRANT (19978): $4,664,262 INFLATION: 3.0% FY 95 GRANT (19978): $4,000,000 STATE LOAN TERM: 15 FY 96 GRANT (19978): $2,560,000 STATE LOAN RATE: 3.0% REMAINING CAPITAL COST (1997S) $63,775,738 MORAL OBL. BOND TERM: 30 STATE LOAN: $20,000,000 MORAL OBL. BOND RATE: 6.5% ADDITIONAL STATE FUNDING: $20,000,000 REMAINING CAPITAL COST (1997) $23,775,738 YEAR KTNADJ KPUINTERTIE INTERTIE INTERTIE STATE MORAL OBL. INTERTIE LOAD HYDRO SALES REVENUE O&M LOAN BOND REVENUE 144700 GROSS $20,000,000 $23,775,738 NET (MWh) = (MWh) (MWh) (Ss) ($s) ($s) ($s) ($s) 1999 191361 144700 46661 $3,263,211 $133,626 $1,675,332 $1,820,685 ($366,432) 2000 193489 144700 48789 $3,514,393 $137,635 $1,675,332 $1,820,685 ($119,259) 2001 195344 144700 50644 $3,757,453 $141,764 $1,675,332 $1,820,685 $119,673 2002 196708 144700 52008 $3,974,413 $146,017 $1,675,332 $1,820,685 $332,380 2003 197985 144700 53285 $4,194,160 $219,609 $1,675,332 $1,820,685 $478,535 2004 199626 144700 54926 $4,453,027 $154,909 $1,675,332 $1,820,685 $802,101 2005 201836 144700 57136 $4,771,164 $159,556 $1,675,332 $1,820,685 $1,115,591 2006 204441 144700 59741 $5,138,357 $164,343 $1,675,332 $1,820,685 $1,477,997 2007 207370 144700 62670 $5,551,991 $169,273 $1,675,332 $1,820,685 $1,886,701 2008 210572 144700 65872 $6,010,729 $415,057 $1,675,332 $1,820,685 $2,099,655 2009 213769 144700 69069 $6,491,524 $250,026 $1,675,332 $1,820,685 $2,745,481 2010 216775 144700 72075 $6,977,268 $257,527 $1,675,332 $1,820,685 $3,223,724 2011 219593 144700 74893 $7,467,576 $265,253 $1,675,332 $1,820,685 $3,706,307 2012 222448 144700 77748 $7,984,786 $273,210 $1,675,332 $1,820,685 $4,215,558 2013. 225340 144700 76841 $8,128,397 $681,370 $1,675,332 $1,820,685 $3,951,010 2014 228269 144700 75894 $8,269,110 $358,311 $1,820,685 $6,090,114 2015 231236 144700 74933 $8,409,317 $369,061 $1,820,685 $6,219,571 2016 234243 144700 73957 $8,548,785 $380,132 $1,820,685 $6,347,967 2017 237288 144700 72966 $8,687,265 $391,536 $1,820,685 $6,475,043 2018 240372 144700 71960 $8,824,491 $1,158,090 $1,820,685 $5,845,716 2019 243497 144700 70938 $8,960,177 $517,827 $1,820,685 $6,621,665 2020 246663 144700 69901 $9,094,017 $533,362 $1,820,685 $6,739,970 2021 249869 144700 68847 $9,225,684 $549,363 $1,820,685 $6,855,636 2022 253118 144700 67778 $9,354,830 $565,843 $1,820,685 $6,968,302 2023 256408 144700 66692 $9,481,082 $1,557,850 $1,820,685 $6,102,547 2024 259741 144700 65589 $9,604,043 $600,303 $1,820,685 $7,183,055 2025 263118 144700 64469 $9,723,289 $618,312 $1,820,685 $7,284,292 2026 266539 144700 63332 $9,838,370 $636,862 $1,820,685 $7,380,823 2027 270004 144700 62178 $9,948,804 $655,968 $1,820,685 $7,472,151 2028 273514 144700 61006 $10,054,082 $2,994,269 $1,820,685 $5,239,128 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SWAN-TYEE INTERTIE REVENUE PROJECTION ADDITIONAL STATE FUNDIN KPC FIRM SALES: INTERTIE COST (19978): INTERTIE CAPITAL COST (1997S) $75,000,000 FY 94 GRANT (19978): $4,664,262 FY 95 GRANT (19975): $4,000,000 FY 96 GRANT (19978): $2,560,000 REMAINING CAPITAL COST (1997S) $63,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $30,000,000 REMAINING CAPITAL COST (1997) $13,775,738 YEAR KTN ADJ KPU — INTERTIE LOAD HYDRO SALES 144700 (MWh) (MWh) (MWh) 1999 191361 144700 46661 2000 193489 144700 48789 2001 195344 144700 50644 2002 196708 144700 52008 2003 197985 144700 53285 2004 199626 144700 54926 2005 201836 144700 $7136 2006 204441 144700 59741 2007. 207370 144700 62670 2008 210572 144700 65872 2009 213769 144700 69069 2010 216775 144700 72075 2011 219593 144700 74893 2012 222448 144700 77748 2013 225340 8 144700 76841 2014 228269 144700 75894 2015 = =231236 144700 74933 2016 234243 144700 73957 2017 = 237288 144700 72966 2018 240372 144700 71960 2019 243497 144700 70938 2020 246663 144700 69901 2021 249869 144700 68847 2022 253118 144700 67778 2023 256408 144700 66692 2024 259741 144700 65589 2025 263118 144700 64469 2026 266539 144700 63332 2027 270004 144700 62178 G: INTERTIE REVENUE GROSS ($s) $3,263,211 $3,514,393 $3,757,453 $3,974,413 $4,194,160 $4,453,027 $4,771,164 $5,138,357 $5,551,991 $6,010,729 $6,491,524 $6,977,268 $7,467,576 $7,984,786 $8,128,397 $8,269,110 $8,409,317 $8,548,785 $8,687,265 $8,824,491 $8,960,177 $9,094,017 $9,225,684 $9,354,830 $9,481,082 $9,604,043 $9,723,289 $9,838,370 $9,948,804 2028 273514 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $30 3.00 $75 INTERTIE O&M ($s) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION MW (CONTINUOUS) MILLION REVENUE 1996$ ($/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE MORAL OBL. LOAN BOND $20,000,000 $13,775,738 (Ss) ($s) $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: 8 $0,064 3.0% 15 3.0% 6.5% INTERTIE REVENUE NET ($s) $399,343 $646,516 $885,447 $1,098,154 $1,244,309 $1,567,875 $1,881,366 $2,243,772 $2,652,475 $2,865,429 $3,511,256 $3,989,499 $4,472,081 $4,981,333 $4,716,785 $6,855,888 $6,985,345 $7,113,742 $7,240,818 $6,611,491 $7,387,439 $7,505,744 $7,621,411 $7,734,076 $6,868,321 $7,948,829 $8,050,066 $8,146,597 $8,237,926 $6,004,902 SWAN-TYEE INTERTIE REVENUE PROJEC11UN ADDITIONAL STATE FUNDIN KPC FIRM SALES: INTERTIE COST (19978): INTERTIE CAPITAL COST (1997$) $75,000,000" FY 94 GRANT (1997S): $4,664,262 FY 95 GRANT (1997S): $4,000,000 FY 96 GRANT (1997S): $2,560,000 REMAINING CAPITAL COST (1997S) $63,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $o REMAINING CAPITAL COST (1997) $43,775,738 YEAR KTNADJ KPU —INTERTIE LOAD HYDRO SALES 144700 (MWh) = (MWh) (MWh) 1999 200121 144700 55421 2000 202249 144700 57549 2001 204104 144700 59404 2002 205468 144700 60768 2003 206745 144700 62045 2004 208386 144700 63686 2005 210596 144700 65896 2006 213201 144700 68501 2007 216130 144700 71430 2008 219332 144700 74632 2009 222529 144700 77829 2010 225535 144700 79596 2011 228467 144700 78691 2012 231437 144700 77773 2013. 234446 144700 76841 2014 237493 144700 75894 2015 240581 144700 74933 2016 243708 144700 73957 2017 246877 144700 72966 2018 250086 144700 71960 2019 253337 144700 70938 2020 256631 144700 69901 2021 259967 144700 68847 2022 263346 144700 67778 2023. 266770 144700 66692 2024 270238 144700 65589 2025 273751 144700 64469 2026 277310 144700 63332 2027 280915 144700 62178 G: INTERTIE REVENUE GROSS ($s) $3,875,837 $4,145,398 $4,407,389 $4,643,846 $4,883,677 $5,163,229 $5,502,672 $5,891,810 $6,328,048 $6,810,067 $7,314,843 $7,705,303 $7,846,300 $7,987,393 $8,128,397 $8,269,110 $8,409,317 $8,548,785 $8,687,265 $8,824,491 $8,960,177 $9,094,017 $9,225,684 $9,354,830 $9,481,082 $9,604,043 $9,723,289 $9,838,370 $9,948,804 2028 284567 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $0 4.00 $75 INTERTIE O&M (Ss) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION MW (CONTINUOUS) MILLION REVENUE 1996$ ($/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE MORAL OBL. LOAN BOND $20,000,000 $43,775,738 (Ss) (Ss) $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $1,675,332 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 $3,352,234 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: Cc $0.064 3.0% 15 3.0% 6.5% INTERTIE REVENUE NET ($s) ($1,285,354) ($1,019,802) ($761,940) ($529,736) ($363,497) ($19,246) $315,551 $699,902 $1,131,209 $1,367,444 $2,037,251 $2,420,211 $2,553,481 $2,686,617 $2,419,461 $4,558,565 $4,688,022 $4,816,418 $4,943,495 $4,314,167 $5,090,116 $5,208,421 $5,324,088 $5,436,753 $4,570,998 $5,651,506 $5,752,743 $5,849,274 $5,940,603 $3,707,579 SWAN-TYEE IN fERTIE REVENUE PROJEC 11JUN ADDITIONAL STATE FUNDIN KPC FIRM SALES: INTERTIE COST (19973): INTERTIE CAPITAL COST (19978) — $75,000,000 ~ FY 94 GRANT (19978): $4,664,262 FY 95 GRANT (1997S): $4,000,000 FY 96 GRANT (1997S): $2,560,000 REMAINING CAPITAL COST (1997S) $63,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $10,000,000 REMAINING CAPITAL COST (1997) $33,775,738 YEAR KTN ADJ KPU —INTERTIE LOAD HYDRO SALES 144700 (MWh) (MWh) (MWh) 1999 200121 144700 55421 2000 202249 144700 57549 2001 204104 144700 59404 2002 205468 144700 60768 2003 206745 144700 62045 2004 208386 144700 63686 2005 210596 144700 65896 2006 213201 144700 68501 2007 =. 216130 144700 71430 2008 219332 144700 74632 2009 222529 144700 77829 2010 225535 144700 79596 2011 228467 144700 78691 2012 231437 144700 77773 2013 234446 144700 76841 2014 237493 144700 75894 2015 240581 144700 74933 2016 243708 144700 73957 2017 246877 144700 72966 2018 250086 144700 71960 2019 253337 144700 70938 2020 256631 144700 69901 2021 259967 144700 68847 2022 263346 144700 67778 2023 266770 144700 66692 2024 270238 144700 65589 2025 273751 144700 64469 2026 277310 144700 63332 2027 =280915 144700 62178 G: INTERTIE REVENUE GROSS ($s) $3,875,837 $4,145,398 $4,407,389 $4,643,846 $4,883,677 $5,163,229 $5,502,672 $5,891,810 $6,328,048 $6,810,067 $7,314,843 $7,705,303 $7,846,300 $7,987,393 $8,128,397 $8,269,110 $8,409,317 $8,548,785 $8,687,265 $8,824,491 $8,960,177 $9,094,017 $9,225,684 $9,354,830 $9,481,082 $9,604,043 $9,723,289 $9,838,370 $9,948,804 2028 284567 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $10 4.00 $75 INTERTIE O&M ($s) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION MW (CONTINUOUS) MILLION REVENUE 1996S ($/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE MORAL OBL. LOAN BOND $20,000,000 $33,775,738 (Ss) (Ss) $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $1,675,332 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 $2,586,460 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: c $0.064 3.0% 15 3.0% 30 6.5% INTERTIE REVENUE NET (Ss) ($519,580) ($254,028) $3,834 $236,039 $402,277 $746,528 $1,081,325 $1,465,676 $1,896,983 $2,133,219 $2,803,026 $3,185,985 $3,319,256 $3,452,392 $3,185,236 $5,324,339 $5,453,797 $5,582,193 $5,709,269 $5,079,942 $5,855,890 $5,974,195 $6,089,862 $6,202,527 $5,336,773 $6,417,280 $6,518,517 $6,615,048 $6,706,377 $4,473,353 SWAN-TYEE in rERTIE REVENUE PROJEC11UN ADDITIONAL STATE FUNDIN KPC FIRM SALES: INTERTIE COST (19978): G: INTERTIE CAPITAL COST (1997S) — $75,000,000~ FY 94 GRANT (1997S): $4,664,262 FY 95 GRANT (1997$): $4,000,000 FY 96 GRANT (1997S): $2,560,000 REMAINING CAPITAL COST (1997S) $63,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $20,000,000 REMAINING CAPITAL COST (1997) $23,775,738 YEAR KTNADJ KPU INTERTIE INTERTIE LOAD HYDRO SALES REVENUE 144700 GROSS (MWh) = (MWh) (MWh) (Ss) 1999 200121 144700 §5421 $3,875,837 2000 202249 144700 57549 $4,145,398 2001 204104 144700 59404 $4,407,389 2002 205468 144700 60768 $4,643,846 2003 206745 144700 62045 $4,883,677 2004 208386 144700 63686 $5,163,229 2005 210596 144700 65896 $5,502,672 2006 = 213201 144700 68501 $5,891,810 2007 216130 144700 71430 $6,328,048 2008 219332 144700 74632 $6,810,067 2009 222529 144700 77829 = $7,314,843 2010 225535 144700 79596 $7,705,303 2011 228467 144700 78691 $7,846,300 2012 231437 144700 77773 = $7,987,393 2013 234446 144700 76841 $8,128,397 2014 237493 144700 75894 $8,269,110 2015 240581 144700 74933 $8,409,317 2016 243708 144700 73957 $8,548,785 2017 246877 = 144700 72966 $8,687,265 2018 250086 144700 71960 $8,824,491 2019 253337 144700 70938 $8,960,177 2020 256631 144700 69901 $9,094,017 2021 259967 144700 68847 $9,225,684 2022 263346 144700 67778 $9,354,830 2023. 266770 144700 66692 $9,481,082 2024 270238 144700 65589 $9,604,043 2025 273751 144700 64469 $9,723,289 2026 277310 144700 63332 $9,838,370 2027 280915 144700 62178 $9,948,804 2028 284567 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $20 4.00 $75 INTERTIE O&M (Ss) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION MW (CONTINUOUS) MILLION REVENUE 1996$ ($/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE MORAL OBL. LOAN BOND $20,000,000 $23,775,738 ($s) (Ss) $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,675,332 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 $1,820,685 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: c $0.064 3.0% 15 3.0% 6.5% INTERTIE REVENUE NET (Ss) $246,195 $511,746 $769,608 $1,001,813 $1,168,051 $1,512,303 $1,847,099 $2,231,451 $2,662,758 $2,898,993 $3,568,800 $3,951,760 $4,085,030 $4,218,166 $3,951,010 $6,090,114 $6,219,571 $6,347,967 $6,475,043 $5,845,716 $6,621,665 $6,739,970 $6,855,636 $6,968,302 $6,102,547 $7,183,055 $7,284,292 $7,380,823 $7,472,151 $5,239,128 SWAN-TYEE ...TERTIE REVENUE PROJEC .. )N ADDITIONAL STATE FUNDIN KPC FIRM SALES: INTERTIE COST (19978): INTERTIE CAPITAL COST (1997$) $75,000,000 ~ FY 94 GRANT (1997S): $4,664,262 FY 95 GRANT (19975): $4,000,000 FY 96 GRANT (1997S): $2,560,000 REMAINING CAPITAL COST (1997S) $63,775,738 STATE LOAN: $20,000,000 ADDITIONAL STATE FUNDING: $30,000,000 REMAINING CAPITAL COST (1997) $13,775,738 YEAR KTN ADJ KPU —INTERTIE LOAD HYDRO SALES 144700 (MWh) (MWh) (MWh) 1999 200121 144700 55421 2000 202249 144700 57549 2001 204104 144700 59404 2002 205468 144700 60768 2003. 206745 144700 62045 2004 208386 144700 63686 2005 210596 144700 65896 2006 213201 144700 68501 2007 216130 144700 71430 2008 219332 144700 74632 2009 222529 144700 77829 2010 225535 144700 79596 2011 228467 144700 78691 2012 231437 144700 77773 2013 234446 144700 76841 2014 237493 144700 75894 2015 240581 144700 74933 2016 243708 144700 73957 2017 246877 = 144700 72966 2018 250086 144700 71960 2019 253337 144700 70938 2020 256631 144700 69901 2021 259967 144700 68847 2022 263346 144700 67778 2023 266770 144700 66692 2024 270238 144700 65589 2025 273751 144700 64469 2026 277310 144700 63332 2027 280915 144700 62178 G: INTERTIE REVENUE GROSS (Ss) $3,875,837 $4,145,398 $4,407,389 $4,643,846 $4,883,677 $5,163,229 $5,502,672 $5,891,810 $6,328,048 $6,810,067 $7,314,843 $7,705,303 $7,846,300 $7,987,393 $8,128,397 $8,269,110 $8,409,317 $8,548,785 $8,687,265 $8,824,491 $8,960,177 $9,094,017 $9,225,684 $9,354,830 $9,481,082 $9,604,043 $9,723,289 $9,838,370 $9,948,804 2028 284567 144700 61006 $10,054,082 ASSUMPTIONS: AVERAGE WATER YEAR PER R. W. BECK $30 4.00 $75 INTERTIE O&M (Ss) $133,626 $137,635 $141,764 $146,017 $219,609 $154,909 $159,556 $164,343 $169,273 $415,057 $250,026 $257,527 $265,253 $273,210 $681,370 $358,311 $369,061 $380,132 $391,536 $1,158,090 $517,827 $533,362 $549,363 $565,843 $1,557,850 $600,303 $618,312 $636,862 $655,968 $2,994,269 MILLION MW (CONTINUOUS) MILLION REVENUE 1996$ ($/KWH): INFLATION: STATE LOAN TERM: STATE LOAN RATE: MORAL OBL. BOND TERM: MORAL OBL. BOND RATE: STATE MORAL OBL. LOAN BOND $20,000,000 $13,775,738 ($s) ($s) $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,675,332 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 $1,054,911 WL&P AND PP&L AT ISER BASE CASE LOAD GROWTH (WRG MILL OPERATIONAL) INTERTIE LOSSES AT 4% KPU AT ISER BASE CASE LESS KPC SURPLUS AND CURRENT FIRM PLUS KPC FIRM NOTED ABOVE Spreadsheet by R. D. Trimble - 12/19/95 SERIES: c $0.064 3.0% 15 3.0% 30 6.5% INTERTIE REVENUE NET ($s) $1,011,969 $1,277,521 $1,535,383 $1,767,588 $1,933,826 $2,278,077 $2,612,874 $2,997,225 $3,428,532 $3,664,768 $4,334,575 $4,717,534 $4,850,805 $4,983,941 $4,716,785 $6,855,888 $6,985,345 $7,113,742 $7,240,818 $6,611,491 $7,387,439 $7,505,744 $7,621,411 $7,734,076 $6,868,321 $7,948,829 $8,050,066 $8,146,597 $8,237,926 $6,004,902 10/3/95 (10:00 am - 12:30 pm) K818 KPC - KPU 8834 KPU upstairs conf room 0280 Allyn Hayes Dan Loitz John Magyar Tom Waggoner Rich Timble KPC requires 3 MW (maximum) standby power during periods where they lose critical environmental loads due to partial or total generation failure. Further, KPC desires to purchase 3- 6 MW firm power at schedule D rates when KPU commissions intertie. For the short term, we discussed the possibility of having additional reserve in Swan Lake. KPU did not believe such an arrangement would be allowed by the PMC although KPC indicated they would like to further consider those possibilities. For the long term, KPU plans on having the 9.6 MW diesel commissioned by the end of 1997 and the intertie by the end of 1998 (although these are aggressive schedules). Once the diesel is commissioned, KPU can provide 3 - 6 MW continuous except during KPU’s peak and during a failure of the Swan-Bailey transmission line. System capacity constraints prevent KPU supplying firm power during KPU peaks. KPC indicated that they could live with limitations on firm power in the event of a rare failure of the Swan-Bailey transmission line but would like KPU to upgrade their capacity such that firm power could be provided otherwise. KPU can plan in that manner (i.e. third unit at Tyee or more diesel capacity) if KPC can commit to firm power purchase. Either as an alternative to KPU firm power, or as a standby measure with KPU firm power, KPC will investigate economics of installing their own diesel capacity. If KPU is to plan on firm power purchase by KPC, KPC needs to let us know within about three months (for Power Supply Planning Study analyses) and we need to have a wntten agreement by about May 1996 (for bond issue purposes). 12/15/95 (2:30 - 3:45 p.m.) K958 KPU - KPC 8834 KPU upstairs conf room 0280 John Magyar Rich Trimble Allyn Hayes Follow-up on 10/3 meeting (K8 18). KPC has tentative plans to install two high speed diesels but is inclined to avoid installing them if they can demonstrate to EPA that risk is small that KPU won't be able to provide 3MW vital load. After new diesel is installed (assume 1998), KPU can provide minimum 3MW and base load or SMW under all but extreme circumstances (i.e. failure of Swan-Bailey line combined with peak loads). KPC considers this risk small and likely acceptable to EPA. KPC could assist with ad in support of diesel bond issue if desirable. KPU will provide draft letter of understanding to KPC with a follow-up meeting to be held no later than January [5. Letter will include the following elements: - 5.0 MW base load. - 3.0 MW minimum load. - Statement regarding risk. - Firm rates up to 3MW with possible surplus beyond that depending on water status. In the interim, KPU will not be able to make a firm power commitment but wiil work with KPC to mitigate the problem. Specifically, KPU wiil investigate an operational policy acceptable to the PMC that will allow a higher operating reserve in Swan Lake (i.e. 10 days assuming 3MW additional firm to KPC). KPU concern is spiil either at Swan Lake or at KPU owned hydro projects. Perhaps this can be balanced by KPC compensation in the event of spill, additional power purchase when we are getting “close” to spill and/or demonstration of better efficiency at Swan with higher average lake level. KPC vital load will be on-line late 1996. January 9, 1996 MEMORANDUM IO 2 John Magyar, Acting General Manager Tom Waggoner, Electric Superintendent FROM : Richard D. Trimble, Intertie Project Manager LE SUBJECT: DRAFT POWER SALES AGREEMENT TO KPC As agreed at our meeting with KPC, I have drafted the attached power sales agreement for your review. Please review and comment on this draft by January 15 so I can forward it to KPC for their review. This agreement is similar to that approved by Council in 1993 except: 1. It does not guarantee firm power to KPC during a failure of the Tyee-Swan-Bailey transmission line. NV It does not provide for sales until “commissioning of the Swan Lake - Lake Tyee transmission line, additional thermal power generation and/or other major power generation resource by KPU.” I believe this addresses our concerns and meets the agreements we reached verbally with KPC ce: Steve Schweppe, City Attorney John Heberling, R. W. Beck DRAFT DRAFT DRAFT DRAFT MEMORANDUM OF UNDERSTANDING PURCHASE OF ELECTRIC POWER This Agreement dated this day of , 1996, by and between the CITY OF KETCHIKAN d/b/a KETCHIKAN PUBLIC UTILITIES, (hereinafter referred to as “KPU”, or “the City” and KETCHIKAN PULP COMPANY (hereinafter referred to as “KPC”, or “the Customer”). WITNESSETH: WHEREAS, the City is a home rule municipality operating in the State of Alaska; and WHEREAS, the City owns and operates an electric utility serving the Ketchikan area, which utility is exempt from regulation by the Alaska Public Utilities Commission pursuant to AS 42.05.711(b); and WHEREAS, the Customer owns and operates a forest products manufacturing complex located within KPU’s service area; and WHEREAS, the Customer can and does generate power needed by its plant through operation of its own electric generators, but desires to meet a greater portion of its power requirements by purchasing power from KPU; and WHEREAS, KPU anticipates the construction of the Swan Lake to Lake Tyee transmission line, additional thermal power generation and/or other major power generation resource which will allow KPU to supply additional firm and potentially surplus power, and WHEREAS, the City is authorized to take and has taken all steps required by the constitution and laws of the State of Alaska and the charter and ordinances of the City of Ketchikan to enter into this agreement and to comply fully with the terms thereof, and WHEREAS, the Customer, Ketchikan Pulp Company, is the largest employer in Southeast Alaska, and one of the largest employers providing year around employment in the State of Alaska, the City is interested in attaining an economic base for the Customers operations in Ketchikan; and WHEREAS, the source of economical, reliable power is essential to the operations of the Customer, the City, Southeast, and the State of Alaska; NOW, THEREFORE, the parties agree as follows: KPC will, upon commissioning of the Swan Lake - Lake Tyee transmission line, additional thermal power generation and/or other major power generation resource by KPU, purchase an average of S Megawatts power from KPU. The minimum purchase shall be 3 Megawatts firm power at schedule D industrial rates with additional power purchased either at schedule D industrial rates or surplus schedule K rates if permitted by Four Dam Pool Project Management Committee. KPU will sale this power to KPC subject to the provisions of the Ketchikan Municipal Code and, the integrity of the Swan Lake to Bailey transmission line and if commissioned, the integrity of the Swan Lake to Lake Tyee transmission line. IN WITNESS THEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date below written. October 26, 1995 AMPAWIC MEMORANDUM ECEIVE | |} [ TO: PMC and Divestiture Committee OCT 30 1895 CVEA: Clayton Hurless, Robert Wilkiigon & Mike’ Easteylooment KEA: Ed Kozak, Walter Sapp & Bill Beaty*PO° 4uthority KPU: Tom Friesen & Tom Waggoner PP&L: Dennis Lewis & Dave Carlson WL&P: Terry Nikodym, Zo Herriges-Sherman & Eric Redman Attorney: Ron Saxton TBPA: Lowell Highbargain AIDEA: Dennis McCrohan, Dan Beardsley & Stan Sieczkowski — FROM: Richard D. Trimble, Swan-Tyee Intertie Project Manager 7a SUBJECT: W Ne P NT Y KPU has just released a Request for Proposals (RFP) for a Power Supply Planning Study. This study will further evaluate the operation and economics of the Swan-Tyee Intertie and compare the results to alternative projects in the Ketchikan area. The scope of work for the study is attached for your information. We anticipate award of the contract in December with the first draft of the study due in May. I will keep you all appraised of this study as it progresses and would appreciate any comments you may have as KPU plans for its future power supply needs. cc, RS/ PR REQUEST FOR PROPOSALS CONTRACT NO. 95-50 POWER SUPPLY PLANNING STUDY Scope of Work 1. SUMMARY Ketchikan Public Utilities (KPU) is seeking a consultant to conduct a Power Supply Planning Study and provide on-going 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 confirm our present course of action, propose appropriate alternatives in light of current economic conditions and/or propose strategies for improving project economics. 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 coniflict 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 Pooi” 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 ‘Lake Tyee to Swan Lake Transmission Line Intertie. R. W. Beck, June, 1992. Contract No. 95-50 Page 25 for Ketchikan. In 1993, the State of Alaska enacted legislation that provided an annual grant of 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 Hydroelectric Energy Capability (MWH)?: 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 Total Actual Diesel Percent Actual ISER Base Percent of Generation Generation Diesel case ISER 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 22.0% 182,172 89% "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. Contract No. 95-50 Page 26 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 ail 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 Coit-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: Contract No. 95-50 Page 27 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 ail 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 - 4. CURRENT 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 diese! plant to meet energy demands for the first time since Swan Lake was commissioned. This places reliance on aging diesel generators and leaves KPU *System peak. Source: KPU generation reports. Contract No. 95-50 Page 28 highly vuinerable 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. 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 (in 1992 dollars). 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. However, if the timing does facilitate financial backing by the Four Dam Pool, that option appears preferable. Contract No. 95-50 Page 29 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/KWH) 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) in any event 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, seek strategies to improve project economics or stop short of a construction decision on the intertie if the economics 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. 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 >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. Contract No. 95-50 Page 30 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 7HDR Engineering, Inc., Economic and Financial Feasibility Assessment of the Swan/Tyee Lakes Intertie Project, Economic and Engineering Services, Inc. December, 1994. 3Mahoney Lake Hydroelectric Project Feasibility Report, HDR Engineering, Inc. Initially released November, 1993, updated March 21, 1995. Contract No. 95-50 Page 31 generation to take advantage of the additional water flow. KPU would like to investigate this option as well. 5.3 Lake Grace Lake Grace was considered as a potential hydroelectric resource in the power supply analysis of the Intertie Feasibility Study. It concluded that it was not the most cost effective option available to KPU. Further, the fact that Lake Grace lies within the Misty Fjords National Monument complicates the permitting process considerably. However, previous studies considered Lake Grace as a stand alone project. KPU has recently retained an engineering firm to study the economics associated with constructing a tunnel between Swan Lake and Lake Grace so the Swan power plant could take advantage of additional water from Grace. The study will consider two development options and is scheduled to be completed by November, 1995. Given the outcome of this study, KPU wants to consider the economic and operational advantages of developing the Lake Grace project under one option to be selected by KPU. 5.4 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 tunne! 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 in a 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. Contract No. 95-50 Page 32 6.1 Schedule and study format The study will consist of the following: Initial draft (within 4 months of Notice to Proceed) Updates (six when required by KPU during the period 1996-1997) Final draft (when required by KPU during 1998) Final (when required by KPU during 2000) WON ee Lea 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 four (4) months of Notice to Proceed in pre-final form. The consultant will provide the “initial draft” in final form within three (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 five (5) weeks of written notice from KPU in pre-final form. The consultant will provide the “update” in final form within two (2) weeks of KPU’s response. Assume six (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 three (3) months of written notice from KPU. The consultant will provide this version in final form within three (8) 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 Contract No. 95-50 Page 33 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 three (3) months of written notice from KPU. The consultant will provide this version in final form within three (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 2) 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 each of these smail projects individually. Each project in item 3 above 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 4). Task 1: 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 Contract No. 95-50 Page 34 assist in providing this documentation but the final responsibility for obtaining the necessary material rests with the consultant. Task 2: Derive initial project development scenarios 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 back-up 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 one (1) month after Notice to Proceed. KPU has two (2) weeks to provide comment. Task 3:_ Review of major project schedules and estimates 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 eacn for use in the economic and financial analyses, (2) justification for any adjustments made by the consultant to existing estimates and schedules and (8) an assessment of the consultants confidence in the estimate within two (2) months after Notice to Proceed. KPU has two (2) 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 4: Provide feasibility level estimates and schedule for remaining projects The consultant will develop feasibility level capital and O&M 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 smail hydroelectric generator at Whitman Lake. 9. New smail hydroelectric generator at Carlanna Lake 10. Conservation Contract No. 95-50 Page 35 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 two (2) months after Notice to Proceed. KPU has two weeks to provide comments. Task 5: 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 deriving comparable net present value. Expand the cases to the six scenarios defined above. Expand the sensitivity analysis to 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, Metlakatla and the combined Petersburg/Wrangell system and conduct sensitivity analyses for those cases. This task is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Task 6: Provide 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 Contract No. 95-50 Page 36 Task 7: 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 (3) 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 8: Provide operations study of development scenarios The consultant shall apply a computer mode! to evaluate the combined operation of all generation resources in the KPU system for three (3) 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 9: Provide Conclusions and Recommendations The consultant will provide conclusions and recommendations based on interpretations and summaries of the previous analyses to allow KPU to judge the overall merit of various development options. These recommendations and conclusions should be made with due consideration given to the fluidity of some of the financing variables. These conclusions should also address such issues as risk associated with increased reliance on fossil fuels, increased reliance on the Swan-Bailey transmission line and financing and permitting difficulties of the second generation power resource. (The next major project to follow a project developed prior to the year 2000.) This task is to reflect effort required for the initial draft, all updates, final draft and final as discussed in section 6.1 Contract No. 95-50 Page 37 Task 10: Provide Engineer’s Report for KPU bond issue 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: 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 1 - 10 above. Assume for proposal purposes that this task will require 100 hours and four (4) trips to Alaska in 1996 and 100 hours and four (4) trips to Alaska in 1997. SUMMARY OF DELIVERABLES Start Pre-final KPU review Final due work due to KPU due to KPU Initial draft NTP 4 months 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 (task 2) NTP 1 month 2 weeks ED: Major project estimates & schedule (task 3) NTP 2 months 2 weeks I.D. Feasibility estimates & schedules (task 4) NTP 2 months 2 weeks I.D. NTP = Notice to Proceed AR = KPU review period as required by KPU Notice = Upon written notice by KPU |.D. = Final form of this deliverable will be incorporated into “initial draft.” Contract No. 95-50 Page 38 7. DESCRIPTION OF METHODS a. Written Descriptions. Proposals submitted in response to this document shall contain a written description of how the scope of work identified in tasks 1 through 11 will be accomplished. This description shall: 1. Be concise and without excess verbiage as Be specific to this project 3 Clearly define the technical and management procedures to be employed 4. Show an understanding of the technical and economic aspects associated with power supply planning 5: Demonstrate the Bidder’s experience and ability to handle complex interagency projects 6. As much as possible, show experience with the physical, political and administrative environment in Southern Southeast Alaska. b. Page Limit. The description of the proposed methods to accomplish tasks 1 through 11 shail not exceed a total of 40 pages. The intent of this limitation is to allow KPU to publish and distribute the “core” of all received proposals to Selection Committee members. Additional information may be provided in the form of appendices but this information may or may not be distributed at KPU’s option. It is important the consultant identify the portion of the proposal (limited to 40 pages) that comprises the basic proposal. 8. PROJECT STAFFING AND QUALIFICATIONS a. Organization Chart. An organization chart shall be included in the proposal to show the name, project responsibility, and reporting relationship of all key personnel proposed for the project. Key personnel who are subconsultants shall be so indicated on the chart. As a minimum, key personnel shall include: 1. The Bidder’s project manager 2: Task managers chy Discipline managers 4. Field team leaders and professional assistants for all field work b. Resumes. Individual resumes shall be included in the proposal to show the experience and qualifications of all key personnel and all other professional staff assigned to work on the project. The proposal shall contain a statement that the persons identified as key members will be assigned for actual work on the project and will not have other commitments which will unduly interrupt project work. Emphasis shall be placed on related experience in areas similar to Southeast Alaska. c. Corporate Experience. Additional information shall be included in the proposal to demonstrate corporate experience with similar transmission line projects Contract No. 95-50 Page 39 within the last five years. Emphasis shall be placed on related experience in areas similar to Southeast Alaska and. ability of the consultant to maintain a relatively stable team for the duration of this planning study. 9. PROJECT SCHEDULE The proposal shall respond to the consultants ability to meet the schedule detailed in section 6 of this Request for Proposals. 10. PRESENTATION OF SUBCONSULTANTS All persons (key members and others) who are subconsultants shail be clearly identified in the proposal by providing the person’s name, corporate affiliation, corporate address, and project responsibility. Subconsultants who are key members and as such shown on the organization chart shall be noted as subconsultants on the organization chart. Resumes which show the experience and qualifications of all subconsultant key personnel and other subconsultant professional staff assigned to work on the project shall be provided in the proposal. The proposal shall contain a statement that the subconsultants identified as key members will be assigned for actual work on the project and will not have other commitments which will unduly interrupt project work. Emphasis shall be placed on related experience in areas similar to Southeast Alaska. 11. PRESENTATION OF COST AND LABOR SUMMARY TABLE The cost and labor summary table shail be prepared following the format shown in Figure 1. The table shall list for each of tasks 1 through 11 the hours of labor, marked-up (complete) labor costs, and total (complete) expense costs. 12. ALTERNATIVE METHODOLOGIES Alternatives to the methodologies (or any portion thereof) defined in this document may be suggested as an option for consideration by the OWNER. Such suggested options will be considered only if they are accompanied by a complete proposal which responds to the scope of work and methods specified in this document. All such alternatives must be clearly and prominently marked as an alternative scope of work or methodology. Contract No. 95-50 Page 40 Figure 1 Format for Cost and Labor Summary Table (Name of Offeror) Total Task Consultant or Task Labor Labor Expense Task No. Sub-consultant Description Hours Cost(1) Cost(2) Cost t Consultant x Review documentation XXX X,XXX Subconsultant y XXX X,XXX Task Total X,XXX $XX,XXX_ $XX,XXX SXX,XXX 2 Consultant x Derive development scenarios XXX X,XXX Subconsuitant y XXX XR Task Total X,XXX SXX,XXX $XX,XXX SXX,XXX 3 Consultant x Review major projects XXX X,XXX Subconsultant z XXX X,XXX Task Total X,XXX $XX,XXX_ $XX,XXX $XX,XXX etc for all tasks. Column All Project Total Column Column Column (Project) Total Total Total Total (3) (1) Compiete marked-up labor cost. Inciude ail costs. (2) Total task expense cost. Include all costs. (3) Should be the total price of bid. Contract No. 95-50 Page 41 EXHIBIT D PERSONNEL, HOURLY RATES, PROJECT FEES AND EXPENSE MAXIMUMS I. RATES: CONSULTANT shail provide the following personnel whose services shail be billed for the time actually expended in performance of the work called for in the Scope of Work at the rates hereinafter specified, subject to the maximum amounts set forth in Il. below. A. Hourly Rates Principals Associates Senior Designers Drafters Secretarial AAAAA Il. PROJECT FEE AND EXPENSE MAXIMUMS A. CONSULTANT shail provide ail work, services and materials as set forth in ithe Scope of Work, including ail related project expenses, for the following not to exceed lump-sum compensation: Dollars ( ). BS Any EXTRA SERVICES requested by the OWNER shail be computed and provided at the hourly rates set forth in |. above, unless otherwise expressly agreed upon by the OWNER at the time such work is requested. C. Expenses ile Cosis of travel, lodging and meais shall be reimbursed at actual invoiced cost. 2s Reproduction of ( ) copies of drawings and specifications shall be paid at invoiced cost. ill. PAYMENT A. OWNER shail make payment based upon approval of the monthiy pay request. Contract No. 95-50 Page 42 - —F SE wht ke 0/10/9: #3 KETCHIKAN PUBLIC UTILITIES WER SUPPLY PLANNING STUDY 1 ARY 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. CC. Riley / File 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 25 roelectric Ener: ili KPU owned hydro projects (Ketchikan, Beaver Falls & Silvis): 62,700 Swan Lake: 82,000 Total hydro energy available: 144,700 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 3Actual 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 neration ity (100% rated kW Swan Lake (hydro) 22,500 Ketchikan (hydro) 4,200 Beaver Falls (hydro) 5,400 Silvis (hydro) 2,100 Bailey (diesel) 5,450 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 SITUATI ND ELEMENT. NCERN 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. 7HDR 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 each 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 LX 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 proj velopmen nari 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 | month after Notice to Proceed. KPU has two weeks to provide comment. Task 32KReview of major project schedules and estimates 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. k 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, Provide feasibility level estimates and schedule for remaining projects 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 6X Provi nomic analyses of developmen nari 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 Jerry a net present Valog 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 ka Ha 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 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 8X 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 k OOK Provi rations study of development scenari 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 miscellan wer supply 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>¥- 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. AR ELI Start Pre-final KPU revi Final due work duetoKPU due to KPU Initial draft NTP 4 months 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 (2%) NTP 1 month 2 weeks LD: Major project estimates & schedule (3-4) NTP 2 months 2 weeks LD: 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 ID. = 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. 7.5 MVAR A vw REACTOR wt g 138/69kV/13.8kV MU (2 - EXISTING) 3 42.6 MILE - 69kV LINE (EXISTING) ) WRANGELL 69kV/115kV XFMR Advantages 1 No changes required to Swan Bailey line (PROPOSED) 2 No need to upgrade line voltage at later date 3 Losses would be lower than for 69 kV option Disadvantages 1 69 kV - 115 kV transformer required at Tyee 2 Oil containment and fill required for expansion 3 Compensating reactor required at Tyee end 4 Future connections for upgrade at Tyee may result in two high voltage bus levels. 57.5 MILE - 115kV LINE (PROPOSED) LAKE 30.6 MILE - 115kV LINE (EXISTING) 115kV/13.8kV (EXISTING) ) a) 20MVA XFMR BAILEY 113kV/34.5kV (EXISTING) RAYTHEON ENGINEERS & CONSTRUCTORS (KPU) geass RENE PROPOSED LAKE TYEE TO SWAN LAKE 115kV TRANSMISSION INTERTIE _—— | o16/95 OPTION A 7.5 MVAR REACTOR 38/69 V/13.8kV YN) ISTING) 42.6 MILE - 69kV LINE (EXISTING) WRANGELL Advantages 1 No new transformation at Tyee 2 Transformation change can be made at Swan 3 One system voltage 4 Easily upgradable to 138 kV 5 No new reactor needed at 69 kV Disadvantages 1 Losses are higher but negligable 2 Voltage regulation slightly worse 3 Line insulation on Swan Bailey needs evaluation for operation at 138 kV 57.5 MILE - 69kV LINE (PROPOSED) 30.6 MILE - 115kV LINE (EXISTING) TO BE OPERATED AT 69kV. BAILEY ise/eoxvisa.sky ( XFMR (PROPOSED) oo PROPOSED LAKE TYEE TO SWAN LAKE 115kV TRANSMISSION INTERTIE spaciiaebaniiaa aaacanieamnemeree aad eS 9/6/95 OPTION B FIGQUne 9 SUMMARY OF LOADFLOW ANALYSIS LAKE TYEE - SWAN LAKE INTERTIE TRANSMISSION LINE LOAD SCHEDULE (MW) GENERATION SCHEDULE VOLTAGES (p..) Wrangell 115kV Option A 69 kV Option B Case No. Description | Petersburg] KPC] KPU | Total |Lake Tye | Petersburg|Ketchikan*] Swan Lake] KPC} Total | Point | Bailey | Bailey] Swan | Wrangell} Petersburg] Point | Bailey| Bailey} Swan | Wrangell] Petersburg] Tyee Higgins} 115kV }34.5kV] Lake Higgins] 69kV |34.5kV] Lake Winter Peak - Current Base _ [No Interchange 134 ]20] 2 [594] 108 | 34 9.6 168 | 20 | 606 | 0.966 | 1.01 | 0.99 | 1.014] 0997 | 1.014 1 [Max Tyee 134 | 20] 26 [594] 250 | 34 9.6 25 | 20 [605 0.964 | 0.995 |0.988 | 1.009 | 1.009 | 1.013 2 [Max Swan B4 [20] 26 [soa] 75 34 9.6 20 | 20 | 60.5 | 0.967 | 1.007 [0.994 | 1.015 | 0996 | 1.014 3 [Max Bailey 134 [20] 26 |s94| 172 | 34 27 18 | 20 1.006 | 0.99 | 1.012 4 [Min Ketchikan 134 [20] 26 [594] 250 | 34 0 121 | 20 0.989 | 0.989 | 1.007 5 |MinKPC 134 [20] 26 |594| 250 | 34 11.6 8 1B 1.007 | 0.995 | 1.012 Base LTC |NoInter/BaileyLT| 134 |20 | 26 [594] 108 | 34 9.6 168 | 20 1001 | 0992 | 1.01 [0.975 | 1.001 |0.948] 1.002 | 0999 | 101 | TLTC [Max Tyee/LTC 134 [20] 26 [594] 250 | 34 96 25 | 20 0.995 | 0.991 | 1.004 2LTC |MaxSwawtTc | 134 | 20 | 26 [594] 75 34 9.6 20 ‘| 20 1.001 | 0.99 | 1.008 3LTC [Max BaileyiTc | 134 [20 | 26 [sa [172 | 34 27 18 | 20 0.997 | 0.992 | 1.009 4LTC |MinKetchikawtT| 134 | 20] 26 [594 250 | 34 0 12.1 | 20 0.966 | 0.957 | 1.009 SLTC [Min KPC/LTC 134 |20 | 2 [594] 250 | 34 116 8 3B 0.994 | 0.991 | 1.008 Minimum Load - Current Base [No Interchange 45 [7] 8 |i95] 21 25 65 16 | 7 | 197 | 1.006 | 1.018 ] 1.019 ] 1.019 | 1.032 | 1.013 | 1.001 | 1.008 | 1.008 | 1.009 | 1.031 | 1.003 1 [Min Swan 45 [7 | 8 jis] 38 25 65 0 7 | 19.8 | 1.006 | 1.018 [1.013 [1.019 | 1.037 | 1011 | 1.002 | 1.01 | 1.009 | 1.012 | 1.037 | 1.001 Base LTC |No interchange 45. [7] 8 |iss] 21 25 65 16 | 7 | 197 | 1.029 | 0996 | 1.041 {1.005 | 1.027 | 1.007 | 1.02 [0978 | 1.03 }0997 | 1.026 | 1.003 ILTC [Min Swan 45 [7 | 8 |i9s] 38 25 65 0 7 | 19.8 | 1.029 | 0.996 | 1.043 | 1.005 | 1.029 | 1.005 | 1.021 [0.979 | 1.031 [0.999 | 1.039 | 1.003 Winter Peak - 2010 Sr.Qd Ud @ cto “TQee Base No Interchange 12.2 20 | 40.3 3.4 18.6 22 20 76.1 0.954 1.015 | 0.998 | 1.037 1.007 1.023 0.99 0.99 | 1.042 1.008 1.024 ~ 1 [Max Tyee 122 | 20 | 403 3.4 96 1s | 20 | 73 2 [Max Swan 122 | 20 | 403 3.4 96 2 | 20) 73 3 |Max Bailey 122 | 20 | 403 3.4 10.6 =] 1.001 | 0.986 | 1.005 | 1.005 | 1.012 0.974 | 0.979 | 1.037 | 1.007 | 1.023 4 [Min Ketchikan 122 | 20 | 403 34 46 _|- 5 |MinKPC 122 | 20 | 403 34 116 Base LTC [No Inter/BaileyLT] 12.2 | 20 | 403 5 34 18.6 o98s fioi2{ 1 | 1001 | 1018 [0956 [o9s3| 1 [1027] 1.005 | i021 | TLTC [Max Tyee/LTC | 122 |20 | 403 [25] 250 | 34 96 2LTC |MaxSwanLTc | 122 | 20 | 403 [as 20.0 | 34 96 | 3LTC [MaxBaiteyttc | 122 [20 [403 [ns iso [34 10.6 0.964 [1.009 }i013 1 1018 | 095 [ose Joss 1.023 | 1.005 | 1.015 | 4LTC |MinKetchikanLT| 122 | 20 | 403 [725] 250 | 34 46 [ SLTC [Min KPC/LTC 122 |20 | 403 [25] 250 | 34 116 *Breakdov i n ve: Numbers outlined in bold indicate values that are below exceptable levels. Total MW 4.6 65 10.6 12 186 Ketchikan 27 i] Ts 272727 K AC ‘ ae nau 2o/UAmh 20 Beaver Falls 0.0 0.0 4.0 5 00 10 50 , i - at oe UAT mA Sous, Tee 3 ZX \ooartale (FU 11148) Date Description || Balance/Total 2/23/94 Fund transfer from FDP Transfer fund 2/25/94 07472-98 Swan Lake/Tyee Lake DOULMEASL ENergZy Fund ACUVIties & a Cashhtesgalere || Fond | Other A iati Amount Ba | Transfer | _Reccipts | Budget gt | Expended | Byline | 7,225,171,82 | 8,958,024.29 | sa $664,262.29 | 1,732,852.47 | 931,409.82 4,560,549.27 (4,560,549.27) 4,560,549.27 || _4,560,549.27 0.00 | 2 L___ AArpropratons 7] 4,664,262.29 a 932,852.47 | 3,731,409.82 6/30/94 Fund transfer ‘from FDP Transfer fund 103,713. alr 103,713.02 | 103,713.02 | 8/8/94 |07472-98 Additional AR _ (103,713, 02)) 0.00, | ~ 6/29/94|56070-99 SE Energy fund grant (4,000,000.00)} (4,000,000.00) 4,000,000.00 3,200,0040.00 12/22/94 |Fund transfer frem FOP Transfer fund | _4,293,762.00 293,762.00 j} 4,293,762.00 ; - ____|Unbudgeted Cash balance 293,762.00 - _ !Unexpended Appropriatin balance | 6,931,409.82 | - 7,225,171.82 - | Outstanding Warrants State of Alaska, DCRA 7,225,171.82 | Page 1 ae oS pu WAS Line hoped av of 5 /u/9S SAR RIA. re an tan rt ms ‘ an.at MW aia winna _ Imran 7 #7 #40770 TON IAN ¥ # ‘Metlakatla Power & Light Metlakatla Indian Community P.O. Box 359 Metlakatla, Alaska 99926-0359 0 HEC iC al V [= 0 17 February 1995 FEB 211995 APY Manager's Cffice Mr. Tom Stevens AETENIZAN PUBLIC UTHITIES Ketchikan public Utility 2930 Tongass Avenue Ketchikan, Alaska 99901 Subject: Swan Lake - Lake Tyee Intertie; EIS Scoping Comments. Mr. Tom Stevens, Attached is Metlakatla Power and Light’s comments concerning the Construction of Swan Lake Tyee Intertie. Metlakatla Power and Light and the Metlakatla Indian Community are very much in favor of the construction of the Swan Lake - Lake Tyee Intertie. Sincerely, el J. Pierce, ‘General a Metlakatla Power & Light cc: Mayor Jim Scudero District Ranger Becky Cross Ellen Hall John Pearson Manager (907) 886-6661 Business Office (907) 886-4451 Fax (907) 886-3313 yy tl t ‘metlakatla Power & Light Fie Metlakatla Indian Community P.O. Box 359 SE TAQua Metlakatla, Alaska 99926-0359 SWAN LAKE - LAKE TYEE EIS Scoping Comments Metlakatla Support Metlakatla Power & Light Company and the service base of our Native Community Utility supports the Construction of the Swan Lake - Lake Tyee Intertie. The Metlakatla Indian Community under direction of the Council Annette Islands Reserve has placed Community participation in the Southeast Alaska Power Intertie as an active primary priority. Commitment to Objectives Over the past ten years the regional leadership has promoted the concept of a regional power intertie that would not only maximize efficiencies but also focus on the economies of scale identified with the generation and transmission of electrical power. The hard fact that faces all communities of Southeast Alaska is the pressures of residential and economic resource development demands of individual communities: This demand now indicates the need for implementation of the intertie concept among our communities. The intertie project serves the common good of the public. As we look at the present situation, we must conclude that our primary objective is a reduction of all dependence on oil and fossil fuel power generation. At the same time we must assure good decisions related to the environment as we select the more favorable utilization of hydro power and a maximization of economic efficiencies found in the Southeast Regional power Intertie concept. Metlakatla Participation Over the next several years the Community of Metlakatla will place a major effort on development of an intertie with Ketchikan as described in the 1987 Southeast Alaska Transmission Intertie Study prepared by Harza Engineering for the Alaska Power Authority. This effort is associated with the development of the Walden Point Road Project (14.5 Miles). At Walden / Race Point underwater cable will cross seven- tenths of a mile to Mountain Point. In view of the expected shortage of electrical power on Annette Island within the next five years, it is deemed good economics for Metlakatla to become not only a future participant in the proposed intertie but also become a strong supporter of the proposed project of Ketchikan Public Utility. Environment It is our feeling that with the availability of good decision criteria and use of state of the art technology in the placement of transmission lines, the environmental impacts can be reduced to a minimum. At the same time it should be recognized that the project will then afford regional residents and visitors an opportunity for increased recreational access pleasure with minimal threat to the environment. Metlakatla Power & Light Manager (907) 886-6661 Business Office (907) 886-4451 Fax (907) 886-3313 oc, hw sés WRS Swan Lake-Lake Tyee Intertie l le SE Tatas 0% Introduction 3 wP This pamphlet describes the planned electrical transmission line intertie that would connect the Swan Lake and Lake Tyee hydroelectric projects. Lake Tyee is located at the head of Bradfield Canal about 37 miles southeast of Wrangell. Swan Lake is located about 23 miles northeast of Ketchikan. The idea behind this intertie is to allow excess power available at Lake Tyee to be sold to supply electrical demand in the Ketchikan area that is beyond the capacity of local hydroelectric projects. It also would give the communities of Ketchikan, Petersburg and Wrangell more flexibility in sharing the development and use of future power resources. Because the intertie would be located in the Tongass National Forest, an Environmental Impact Statement (EIS) must be prepared to analyze the effects of construction on important forest resources. We have contracted with Foster Wheeler Environmental Corporation to conduct the EIS analysis and prepare the document, and to work with the Forest Service, which will actually issue the EIS. This pamphlet is not part of the EIS. The environmental and engineering studies now underway will answer the question of whether the intertie should be constructed. This pamphlet is intended to provide factual information to residents of the Ketchikan, Petersburg and Wrangell areas about this project. The information presented here is based on the Feasibility Study conducted in 1992 by the State of Alaska, the most recent in-depth analysis of the project. Separate public notices and newsletters on the EIS will be issued by the Forest Service. Background The Lake Tyee hydroelectric project was completed in 1984. Lake Tyee is operating at about 31% of its capacity; it currently provides the majority of Wrangell and Petersburg's power requirements, with the remainder supplied by the Crystal Lake project near Petersburg. The Swan Lake hydroelectric project was completed in 1983. Swan Lake currently is operating at about 100% of its capacity. It provides about half the power requirements of Ketchikan, with the other half supplied by the Lake Silvis, Beaver Falls and Ketchikan Lakes hydroelectric projects, and by diesel power. G:\WP16\1185\07175A4 12-28-94 I Both the Swan Lake and Lake Tyee hydroelectric facilities are part of the "Four Dam Pool,” which also includes the Solomon Guich hydro project serving Glennallen and Valdez and the Terror Lake hydro project serving Kodiak. Although these projects were all initiated by local utilities, they are now owned by the State which provided financing through a combination of grants and loans. The Four Dam Pool has since operated as a single organization, governed by representatives from Copper Valley Electric Association, Kodiak Electric Association, the municipal utilities of Ketchikan, Petersburg and Wrangell and the State. Both expenses and revenues are pooled from each of these four projects so that power can be sold to each utility at a single rate (currently 6.6 cents per kilowatt hour). The Swan Lake and Lake Tyee projects are located only 44 air miles apart, so the idea of connecting them has been considered almost since they were constructed. In 1987, the Alaska Energy Authority studied several possible interties in Southeast Alaska. They concluded that the Swan-Tyee intertie had potential long-term economic benefits. During 1990 and 1991, the Authority conducted a preliminary assessment of the power market and the financial feasibility of the intertie. They took the next step during 1991 and 1992 by conducting a Feasibility Study of the intertie. In 1993, the Alaska State Legislature provided for an annual grant to Ketchikan Public Utilities (KPU) of approximately $4.5 million for design and construction of the intertie. In 1994, KPU awarded contracts to Foster Wheeler Environmental to develop the EIS and to Raytheon Infrastructure Services for the design. Need/Benefit This project has potential benefits for both the buyer and the seller. The buyer, Ketchikan, needs additional power to meet its electrical demands. The seller, the Four Dam Pool, has excess water spilling over at Lake Tyee—water that could instead be generating additional power. That excess power could be sold to Ketchikan to meet its needs and generate revenue to offset rates in the communities served by the Four Dam Pool. Financing The 1992 Feasibility Study estimated that the intertie would cost approximately $60 million. A more detailed cost estimate will be completed as part of engineering work to G:\WP16\1185\07175A¢ 12-28-94 D be performed over the next year. The State legislature has provided for an annual grant that should be sufficient to repay the loan and bond issue costs which was also approved. It will take some time however to piece together the final financing plan. The financial benefit of the project must be clearly demonstrated before the State will make the loan and bond issue available. Questions Is there enough power available at Lake Tyee to serve the needs of Petersburg and Wrangell and still have surplus power left over for Ketchikan? Yes. Lake Tyee can produce an average of 134,400 Megawatt-hours (MWH) of energy annually. The most recent projection provided by the Four Dam Pool is that only 42,052 MWH will be sold by Tyee (19,052 MWH to Wrangell and 23,000 MWH to Petersburg) between July 1994 and June 1995. The Feasibility Study made the following projections of the surplus power available from Lake Tyee (after the requirements of Wrangell and Petersburg are met) and of the additional demand of Ketchikan: Year Tyee Petersburg Ketchikan Unused capacity & Wrangell purchase Tyee energy SISSIES SUS eV CUSUUES Oe SETA Se ULE Re OE 2000 134,400 44,441 30,931 59,028 2005 134,400 47,968 39,278 47,154 2010 134,400 53,548 54,217 26,635 2015 134,400 58,654 66,903 8,843 *Units are in Megawatt-hours (MWH) These numbers show that after meeting the anticipated needs of Petersburg and Wrangell, the Lake Tyee project could satisfy all of Ketchikan's additional power needs through 2015 and still have unused power left over. What guarantees do Petersburg and Wrangell have thar there will be sufficient power to meet their needs in the long-term? The original Long-term Power Sales Agreement executed by the Four Dam Pool communities in 1985 gives preference to the "Purchasing Utilities” (in this case, Wrangell Municipal Light and Power and Petersburg Municipal Power and Light) in the event of competing requests for power. The agreement also defines Lake Tyee as a "Dedicated G:\WP16\1185\07175A¢ 12-28-94 5 Facility” for Wrangell and Petersburg, just as Swan Lake is a "Dedicated Facility" for Ketchikan. As the communities of Petersburg and Wrangell grow, Lake Tyee must first be available to meet their demands for power before power can be provided to anyone else through the intertie. Is the intertie the most cost-effective means of meeting Ketchikan's need for additional Dower? The Feasibility Study compared the cost of the intertie with other options such as diesel power, other hydroelectric generators, Ketchikan Pulp Company wood waste generation, and stringent conservation. The conclusion of this study was that the intertie is clearly the Most cost-effective option. Projections for the Future Ketchikan Public Utilities has been named Project Manager by the State. Legislation enacted to oversee this project (Senate Bills 106 and 126) and funding we have in place will enable KPU to proceed with the EIS and final engineering design of the intertie during 1995 and 1996. The EIS will consider alternative routes and construction techniques to determine which will more effectively minimize potential impacts to endangered plant and wildlife species, cultural resources, subsistence, visual resources, wetlands, and other resources. The engineering study, which will evaluate such things as weather and soil conditions, structure types, methods of construction and economic feasibility, also will be underway in the near future. Construction could begin as early as 1997 with the project on-line in 1999. How to Stay Informed Scoping meetings for the EIS are planned for Ketchikan, Petersburg and Wrangell in February 1995. Additional public workshops also will be held later in 1995. Check the local Ketchikan, Petersburg and Wrangell newspapers for official notices of these meetings. If you wish to be added to the mailing list to receive official project progress reports and meetings notices related to the EIS, please send your request to: Kristin Avery, Public Involvement Coordinator Foster Wheeler Environmental Corporation 10900 NE 8th Street Bellevue, Washington 98004-4405 G:\WP16\1185\07175A4 12-28-94 4 > “| EE 14 ) gtty 7 ag aasdg KPU will be publishing a newsletter periodically that will describe the status of the intertie project more generally. If you would like to be added to the mailing list for that newsletter, please send your name and address to the following address: Intertie Newsletter c/o Ketchikan Public Utilities 2930 Tongass Ketchikan, Alaska 99901 G:\WP16\1185\07175A¢ 12-28-94 5 We Fi le EUGENE N. BJORNSTAD, P.E. General Manager November 10, 1994 William R. Snell, Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Anchorage, Alaska 99503 RE: Southern Intertie Construction Management Agreement Dear Riley: Enclosed is a draft of the Construction Management Agreement for the Southern Intertie. While not entirely different in concepts from the draft for the Northern Intertie, you will note some variation. This draft emphasizes that the Construction Manager (CM) acts solely as the agent for the Participants so as to minimize "us versus them" issues. The draft provides substantial review and approval authority for the Participants acting through the IPG on budget, scope, and major construction contracts, but once the approval is given, the CM may operate freely within the scope of the approvals already given by the Participants. We have also provided for a different leeway for the CM in approving change orders. A rolling six month working capital account and time constraints for decisions by the Participants are key components in the draft. It also provides for a dispute resolution panel to resolve any disputes between the Participants and the CM. We have tried at all times to be fair to Participants while setting up a structure within which Chugach could act as the Construction Manager of the Southern Intertie. I hope the Participants will find this approach acceptable so we can clear the way to begin work on this project. Sincerely, Eugene N. Bjornstad General Manager 5601 Minnesota Drive ¢ P.O. Box 196300 « Anchorage, Alaska 99519-6300 J Phone 907-563-7494 « FAX 907-562-0027 cee: bw CONSTRUCTION MANAGEMENT AGREEMENT This Construction Management Agreement is entered into this _—s day':~oof , 1994, by and between Chugach Electric Association, hereinafter referred to as Construction Manager or Chugach, and the Municipality of Anchorage d/b/a Municipal Light & Power, the Municipality of Fairbanks d/b/a Fairbanks Municipal Utility System, Golden Valley Electric Association, Inc., the City of Seward d/b/a Seward Electric System, Alaska Electric Generation and Transmission Cooperative, Inc., Homer Electric Association, Inc., Matanuska Electric Association, Inc., and Chugach Electric Association, Inc., hereinafter referred to as Participants or Participating Utilities. PREAMBLE WHEREAS, effective August 11, 1993, the Legislature of the State of Alaska enacted 18 Ch. SLA 1993 relating to, among other things, the financing of certain electric power projects within the State of Alaska; and WHEREAS, effective the same day, the State of Alaska enacted Ch. 19 SLA 1993 which, among other things, appropriated $46,800,000 to the Department of Administration for payment of a grant under AS 37.05.316 to Chugach Electric Association for the benefit of all utilities participating in the design, construction, and operation of a power transmission intertie of at least 138 kilovolts between Anchorage and the Kenai Peninsula (hereinafter the Project); and WHEREAS, pursuant to Ch. 19 SLA 1993, the above referenced parties executed an INTERTIE GRANT AGREEMENT dated October 26, 1993, the purpose of which was to satisfy the conditions stated in §§ 2(b) and (c), Ch. 19 SLA 1993; and WHEREAS, effective November 5, 1993, the above referenced parties, the Department of Administration, and the Alaska Industrial Development and Export Authority entered a GRANT TRANSFER AND DELEGATION AGREEMENT under which the duties, responsibilities, and control of the above referenced grant were transferred from the Department of Administration to the Alaska Industrial Development and Export Authority, and under which the above referenced grant was made to Chugach Electric Association pursuant to the statute; and WHEREAS, effective January 24, 1994, the above described Participants entered a PARTICIPANTS’ AGREEMENT under which they agreed to carry out the terms of the statutes and prior agreements with respect to the Project; and WHEREAS, effective August 30, 1994, the Alaska Industrial Development and Export Authority ("AIDEA") and the above referenced Participants executed a GRANT ADMINISTRATION AGREEMENT under which the above referenced parties and AIDEA agreed on the manner in which the grant would be administered by AIDEA; and WHEREAS, in order to carry out the obligations of the above referenced parties under the above referenced statutes and agreements, the parties now desire to enter into a CONSTRUCTION MANAGEMENT AGREEMENT between Chugach and the other Participants providing for Chugach's construction management responsibilities, rights, and authorities for accomplishing, on behalf of the Participating Utilities, the design and construction of the Project; and WHEREAS, currently the parties contemplate, but have not finally decided, that the Project shall be divided into the following phases, subphases, and segments after the development and approval of a Project Design Team: Phase I - Route selection & preliminary design (a) Preliminary environmental assessment (b) Preliminary geotechnical and archaeological investigation (c) Preliminary easement investigation (d) Identification of corridors and alternate route alignments (e) Route selection report (£) Investigation of design alternatives (g) Approval of line route end points and preliminary design (h) Development of Phase II budget, schedules, and cash flow projections for IPG approval Phase II - Final design and construction A. Phase IIA Final Design (a) Final environmental, geotechnical, and archaeological investigations (b) Selection of specific locations of facilities (c) Procurement of easements (d) Preparation of final design drawings and specifications for (i) Modifications to Bernice Lake Substation, if any (ii) Submarine cable termination stations, if any =e (iii) Submarine cable crossing, if any (iv) Transmission line materials, equipment, and construction (e) Preparation of construction and material and equipment acquisition contracts (£) Development of Phase IIB budgets, schedules and cash flow projections for IPG approval B. ' : : ee ee ee (a) Right-of-way clearing (b) Modification of Bernice Lake Substation (c) Submarine cable terminal stations (d) Submarine cable crossing (e) Transmission line construction (i) South Kenai line (ii) North Kenai line (iii) Anchorage line (£) Commissioning and project closeout NOW, THEREFORE, the parties agree that: I. GENERAL A. Chugach agrees to perform the construction management duties described herein as agent for the Participants identified above, subject to the terms and conditions of this Contract. The Participants hereby authorize Chugach to perform the construction management duties described herein as their agent according to the terms and conditions of this Contract. All contracts, obligations, liabilities, and duties entered, incurred, undertaken, or suffered by Chugach in carrying out the terms of this Contract, shall be entered, incurred, undertaken, or suffered solely as agent for the Participants and not for its own account. All contracts shall be entered in the name of the Participants acting by and through their agent Chugach. Chugach shall carry out its duties hereunder in the best interests of the Participants and in accordance with Prudent Utility Practices. The Participants shall timely and definitively decide all requests for approvals and authorizations so as to avoid (1) delaying the Project, (2) unnecessarily increasing its costs, and (3) exposing Chugach to unreasonable and unanticipated demands on its management personnel with respect to carrying out the terms of this Contract. B. As between Chugach, as the Construction Manager, and the Participants, the ultimate financial responsibility for all amounts incurred, obligated, or suffered, arising out of the Project shall be that of the Participants. The Participants shall also have the ultimate responsibility to secure the approval of AIDEA for any necessary authorizations to proceed with the Project and for payments of all amounts available under the above referenced legislative grants; provided that Chugach, on behalf of the Participants, may communicate directly with and provide information directly to AIDEA in order to facilitate such approvals and grant disbursements. Ce In accordance with section 6 of the Intertie Grant Agreement dated October 26, 1993 and section 6 of the PARTICIPANTS' AGREEMENT dated January 24, 1994, the Participants hereby designate and authorize the Intertie Participants Group (IPG) to carry out their powers and exercise their rights, responsibilities, and duties under this agreement. The Participants shall be bound by all actions, inactions, decisions, and conduct of the IPG in carrying out their powers and exercising their responsibilities and duties under this agreement. D. Subject to all of the provisions of the this contract regarding approvals necessary for the entering of contracts, Chugach is hereby authorized to perform any of its duties described in this contract through its own forces or through independent contractors specifically retained for that purpose. The determination of whether a particular function shall be performed by Chugach's employees or through an independent contractor shall be in the sole discretion of Chugach. II. DEVELOPMENT AND APPROVAL OF DESIGN TEAM As Chugach shall develop a contract form for design services, including a description of the scope of the design work to be performed for the Project, which scope of work shall be structured according to the phases and segments of the design and construction of the Project. The contract with its description of the scope of work shall be submitted to the IPG for approval in accordance with Article VII below. Chugach shall also submit for approval by the IPG a plan for acquisition of the necessary design and study services for preliminary and final design of the Project. B. Upon approval by the IPG of a design services contract, including a description of the scope of work and the plan for acquisition of design services, Chugach shall select a =4— design engineering firm in accordance with the approved plan. At the conclusion of the selection process, Chugach shall submit to IPG for approval in accordance with Article VII below a report of the process conducted and the recommended design engineering firm. Upon approval by the IPG of a design engineering firm and the contract to be entered with said firm, Chugach shall be authorized to enter said contract on behalf of the Participants. Cc. Chugach shall prepare, as it deems appropriate in the best interests of the Participants, a scope of work for one Or more subconsultants necessary to assist Chugach, as Construction Manager, and the design engineer. Chugach shall submit for approval by the IPG in accordance with Article VII below proposed contracts including descriptions of the scope of work for such subconsultants as Chugach deems appropriate. Upon approval by the IPG, Chugach shall be authorized to retain such subconsultants as are approved on contracts approved by the IPG. III. OVERALL PLAN FOR DESIGN AND CONSTRUCTION OF PROJECT A. Plan. With the assistance of the design engineer and other subconsultants as needed, Chugach shall develop an initial overall plan for the design and construction of the Project. This plan shall include a budget, a schedule, and cash flow projections for the overall Project. The plan shall address the appropriate sequencing of the various segments and tasks as well as appropriate lead times for the orderly design and construction of the Project in accordance with Prudent Utility Practices. The plan need not conform exactly to the task descriptions and sequencing currently set out in the Schedule A-2. of the GRANT ADMINISTRATION AGREEMENT. The purpose of the initial overall Project plan shall be to establish basic Project order of sequence and ranges of magnitude upon which Chugach will be able to rely in carrying out the subsequent steps of the Project. B. Schedules. The initial overall Project plan shall include a schedule dividing the Project into phases, subphases, and segments as shall best facilitate the orderly design and construction of the Project, including appropriate points where approval of the IPG will be sought. The schedule shall include the initial preliminary estimates of starting dates, ending dates, and durations for the various phases, subphases, segments, tasks, and resources; and shall also identify major milestones to facilitate evaluating progress of the Project. Lo, c. Budget . The initial overall Project plan shall include a budget broken down by phase, subphase, and segment, which budget shall state the then best estimates of all Project costs. D. Cash Flow Projections. Chugach shall develop as part of the initial overall Project plan a cash flow projection broken down by phase, segment, and to the extent reasonably feasible, by quarterly or monthly increments based upon the initial overall Project schedule and budget. E. Approval of IPG. Upon development of the initial overall Project plan, schedule, budget, and cash flow projections, Chugach shall submit them to the IPG for approval in accordance with Article VII below. Upon approval by IPG of the overall Project plan, schedule, budget, and cash flow projections, or upon approval as they may be revised by IPG, Chugach shall proceed with Phase I route selection and preliminary design as described in Article IV below. Iv. PHASE I - ROUTE SELECTION & PRELIMINARY DESIGN A. Development and Approval of Phase I Plan, Budget, po Chugach, with the assistance of the design engineer and other subconsultants as needed, shall develop a Plan for Phase I route selection and preliminary design. The Plan shall identify and describe each of the major segments with subsegments and tasks in as much detail as is appropriate and feasible. The Plan shall include a description of the work for each segment and the method of acquisition of services for the described work. In conjunction with the development of the Plan, Chugach shall also develop a budget, time schedules, and cash flow projections for Phase I broken down by segment and such smaller increments as may be reasonably feasible. The schedule shall include calendar start and end dates and shall reflect the proposed sequencing of the various segments of Phase I. The cash flow projections shall be broken down by segment and such smaller increments as may be reasonably feasible and shall also show total cash requirements on a quarterly or monthly basis for the duration of the Phase I as scheduled. 2s Chugach shall submit to the IPG the Phase I Plan, budget, schedules, and cash flow projections for approval in accordance with the procedures of Article VII below. Upon approval of the Plan, budget, schedules, and cash flow projections, or upon approval as they may be revised by the IPG, Chugach shall proceed to execute the Plan as approved. B. Execution of Plan. 1. Upon approval of the Phase I Plan, budget, schedule, and cash flow projections by the IPG in accordance with procedures in Article VII below, Chugach, in conjunction with the advice of the design engineer and other subconsultants as needed, shall enter contracts, on behalf of the Participants, for the acquisition of the necessary services and work to be performed under Phase I. As long as the contracts are within the approved budget and the scope of services of each contract is reflected in the description of the work of the approved Plan, Chugach may, but is not required to, obtain additional authorization to enter each contract for executing Phase I. 2. Under Phase I, Chugach shall cause to be prepared a route selection report and a report exploring alternative design criteria, all of which criteria shall be feasible and in accordance with Prudent Utility Practices. The route selection report shall recommend a specific line route, including end points, and shall provide appropriate substantiation for the recommendation, including an explanation of the choice of the line route recommended over alternate routes. The report on alternative design criteria shall recommend preliminary design criteria and provide appropriate substantiation for the recommended design criteria, including the basis for their choice over alternatives. 3. Under Phase I, Chugach shall cause to be prepared a budget, schedule, and cash flow projections for Phase II based upon the information developed under Phase I, including the recommended line route, and preliminary design criteria. The budget, schedule, and cash flow projections shall be broken down between Phase IIA and Phase IIB, as outlined herein. The parties acknowledge that the estimated budget, schedule, and cash flow projections for Phase IIA are likely to be more precise than those for Phase IIB. The budget, schedule, and cash flow projections shall be broken down by segment within each phase and by such smaller increments as may be reasonably feasible. The schedule shall reflect sequencing of the various segments, start dates, end dates, and durations of all planned tasks. The cash flow projections shall be broken into quarterly or monthly increments in addition to increments by ates segment. Chugach shall also prepare a Phase IIA Plan which shall describe the organization of the work to be accomplished under Phase IIA including a description of the method of selecting the contractors and vendors necessary to complete Phase IIA, a description of each of the segments and sub-tasks to be accomplished in achieving the final design, their relative sequencing, and a description of the nature of the contracts proposed to be used. 4. Upon completion of Phase I, Chugach shall submit to the IPG for approval in accordance with the procedures in Article VII below, the Phase IIA Plan, budgets, schedules, and cash flow projections for both Phase II in total and, separately, for Phase IIA, as well as the route selection report, and the report on alternative design criteria. Chugach shall also submit to IPG for its approval a recommended Phase II ceiling that IPG may submit to AIDEA. Chugach shall not be obligated to proceed with Phase II unless and until IPG has approved, the Phase IIA Plan, the respective budgets, schedules, and cash flow projections for both Phase II in total and, separately, for Phase IIA, the line selection report and recommendation, and the preliminary design criteria. v. PHASE II FINAL DESIGN AND CONSTRUCTION A. Phase ITA Final Design. dex Upon approval by the IPG of the Phase IIA Plan, the respctive budgets, schedules, and cash flow projections, for both Phase II in total and, separately, for Phase IIA the route selection report and recommendation, and preliminary design criteria, Chugach shall proceed to execute the Phase IIA Plan in accordance with the approved budget, schedules, and cash flow projections. Chugach shall prepare final design contracts in accordance with the Plan,_and select professionals and contractors in accordance with the selection process outlined in the approved Plan. As long as the scope of work, amount, and duration of each contract, are within the approved Plan, budget, schedule, and cash flow projections for Phase IIA, Chugach may, but is not required to, obtain specific approval for each such contract. 2ia The segments to be completed under Phase IIA shall include the final environmental, geotechnical, and archaeological investigations, selection of specific locations of facilities, procurement of easements, the final design of (1) the modifications to the Bernice Lake Substation, if any; (2) the submarine cable terminal stations, if any; and (3) the submarine cable crossing specifications, if any; and the preparation of the drawings, specifications and contract =§= documents for right-of-way clearing, construction, and material and equipment acquisition contracts. Based upon the information gathered in Phase IIA, the location of the facilities, and the preparation of all final design documents, Chugach shall, in conjunction with the design engineer and other subconsultants as needed, prepare for Phase IIB (1) a plan of procurement for acquisition of all material and equipment, right-of-way clearing, and construction required for the Project; (2) a budget for the material and equipment acquisition and the construction, (3) a schedule for the same; and (4) cash flow projections for the same. Chugach shall submit for approval to the IPG in accordance with the procedures of Article VII below, the Plan for Phase IIB construction and acquisition of equipment and materials, the proposed budget, schedule, and cash flow projections. Chugach shall not be obligated to proceed with Phase IIB unless and until IPG has (1) approved the Phase II Plan, budget, schedule, and cash flow projections for Phase IIB; and (2) obtained all approvals which the Participating Utilities may be obligated to obtain under any governing agreement, law, or regulation before proceeding with Phase IIB. Chugach shall also not be obligated to proceed with Phase IIB unless and until arrangements satisfactory to Chugach have been reached that assure it that the Participating Utilities can and will make timely payment for all Phase IIB Project costs, including the costs of commissioning of the Project and its transition to operational status. 4. The limited automatic rights of withdrawal described in section 4(b)(3) of the PARTICIPANTS' AGREEMENT dated January 24, 1994, shall be exercised in conjunction with the IPG's approval of the Phase IIB Plan, budget, schedule, and cash flow projections. As between the Participating Utilities and Chugach as Construction Manager under this agreement, it shall be the sole responsibility of the Participating Utilities to assure that all requirements of section 4(b)(3) of the PARTICIPANTS' AGREEMENT dated January 24, 1994, with respect to the exercise of rights of withdrawal have been met by the time the IPG approves the Phase IIB Plan, estimated budget, estimated schedule, and estimated cash flow projections for Phase IIB. VI. PHASE IIB CONSTRUCTION A. Upon Chugach's receipt of satisfactory assurances of timely payment of Phase IIB costs, and upon approval by the IPG of the Phase IIB Plan, budget, schedule, and cash flow projections, and receipt by Chugach of the IPG's advices that (1) it has received the approval of any other agencies whose 29u approval the Participating Utilities may be obligated to obtain, and (2) all issues regarding the exercise of rights of withdrawal have been resolved, Chugach shall be authorized to execute the approved Phase IIB Plan in accordance with the approved budget, schedules, and cash flow projections and the terms of this agreement. Chugach shall be authorized to enter into the various construction contracts and the acquisition of materials and equipment contracts in accordance with the approved Plan subject to the requirement that upon Chugach's selection of a proposed contractor, that contractor shall be submitted to IPG for approval in accordance with the provisions of Article VII below. In conjunction with the submittal for approval of the contractor, Chugach shall also submit the contract amount, schedules, and cash flow projections pertinent to that particular contract. Upon IPG's approval, Chugach shall be authorized to enter into the contract as agent for the then Participating Utilities. Chugach shall not be obligated to proceed with any contract unless and until the IPG has approved the identity of the contractor, scope of work, the contract amount, the contract schedule, and the cash flow projections based thereon. As each contract under Phase IIB is submitted to IPG for approval, Chugach shall also submit an updated overall Project budget, schedule, and cash flow projection, reflecting the effect of the proposed contract on the overall Project budget, schedules, and cash flow projections. B. Upon approval of each contract, Chugach shall manage and perform the approved contracts in accordance with the approved budgets, schedules, and cash flow projections and the terms of this agreement. ’ VII. IPG APPROVAL A. General Procedure. Whenever the approval of the IPG is required hereunder or otherwise sought by Chugach, Chugach shall submit in writing to the IPG the request for approval along with all documentation reasonably required for the IPG to act upon the request. The writing shall include a specific and definitively stated recommendation, and shall specify a date by which a decision of the IPG is required in the judgment of Chugach. Copies of the written request and supporting materials shall be mailed to each member of the IPG no less than 10 days before the time when a decision is required; subject to the provisions below regarding an emergency decision in paragraph B. Upon receipt of a written request for an approval or authorization, the IPG shall meet and reach a decision in accordance with section 6(d) and (e) of the PARTICIPANTS' AGREEMENT dated January 24, 1994. -~10- Be Emergency Decision. If an approval or decision of the IPG is required, and either to maintain the schedule or to avoid substantial extra costs from being incurred a decision is needed in less than 10 days, Chugach is authorized to communicate with the chairman of the IPG advising of the nature of the emergency, the decision needed, the date by which it is needed, and the reason it is needed by that date. Chugach shall cooperate with any reasonable request of the chairman of the IPG to disseminate the necessary information to the members of ~the- IPG. The Chairman of the IPG shall convene the IPG which shall meet and reach a decision in accordance with section 6(d) and (e) of the PARTICIPANTS AGREEMENT dated January 24, 1994. Ce Approval. Provided that Chugach has followed the procedures stated above in paragraph A or in paragraph B, as the case may be, if the IPG has not affirmatively rejected the recommendation in accordance with the procedures of section 6(e)(3) of the PARTICIPANTS' AGREEMENT by the date designated in the request, the IPG shall be deemed to have approved Chugach's recommendation. If the IPG rejects the recommendation as submitted by Chugach, Chugach may, but shall not be required to, revise the recommendation and resubmit it as revised for approval. The IPG shall not, without the consent of Chugach, modify the recommendation. D. Binding Effect. As between the Participating Utilities and Chugach as Construction Manager under this agreement, once the IPG has approved or is deemed to have approved the recommendation or requested action, said approval shall be binding as among the Participating Utilities, the IPG, and Chugach, and may not be revised, modified, or amended without the consent of Chugach. VIII. IPG APPROVAL OF DISBURSEMENT OF DESIGN AND CONSTRUCTION FUNDS --— WORKING CAPITAL ACCOUNT A. Pursuant to the PARTICIPANTS' AGREEMENT of January 24, 1994, the GRANT ADMINISTRATION AGREEMENT of August 30, 1994, and other applicable agreements previously entered and governing the disbursement of grant funds for this Project, upon approval by the IPG of the Overall Project Plan, budget, schedule, and cash flow projections pursuant to Article III above, the IPG shall authorize and direct AIDEA to disburse, pursuant to section 8 of the PARTICIPANTS' AGREEMENT of January 24, 1994, funds to a WORKING CAPITAL ACCOUNT sufficient to meet the first six months cash flow requirements as provided in the then approved cash flow projections. The WORKING CAPITAL ACCOUNT thus established shall be an account or accounts with financial institutions approved by IPG, the =e balance of which shall be available for disbursement to meet contract obligations and permitted project expenses upon approval by Chugach, in accordance with the procedures stated herein. Bo When Chugach receives a pay request from the project engineer, or subconsultants, or during Phase IIB, from contractors and vendors, Chugach shall determine whether the request is in accordance with all applicable contractual requirements. Provided the pay request is in accordance with all applicable contractual requirements, within the IPG approved budget, the contractor is on schedule according to the approved schedule, and the pay request is within the approved cash flow projection for that contract, Chugach shall be authorized to disburse from the WORKING CAPITAL ACCOUNT sufficient funds to pay the pay request. Chugach shall submit all such pay requests covered by this paragraph with all substantiating documentation supporting Chugach's action with respect to each such pay request to the IPG for transmittal to AIDEA. c. If the pay request is deemed By Chugach to be in accordance with contract documents and is otherwise earned, but for any reason payment of the amount would exceed the approved budget or cash flow projections for the work involved, Chugach shall submit to the IPG for approval, a recommendation regarding that portion of the pay request that would exceed the approved budget or cash flow projection. Upon approval by the IPG of the excess amount, Chugach shall pay the excess amount from the WORKING CAPITAL ACCOUNT. Chugach shall in any event be authorized to pay from the WORKING CAPITAL ACCOUNT that portion of the pay request which is in accordance with all applicable contract requirements and which does not exceed the applicable budget or cash flow projection. D. If Chugach determines for any reason that a question exists as to whether any pay request is in accordance with the respective contract documents or is otherwise due the contractor or vendor, Chugach shall submit to the IPG for approval a recommendation regarding the pay request. Upon approval by the IPG of the pay request or any portion thereof, Chugach shall pay the approved amount, if any, from the WORKING CAPITAL ACCOUNT. E. With respect to any pay request submitted to the IPG by Chugach under paragraph B above, IPG shall be deemed to have approved such pay requests. With respect to any pay requests submitted to the IPG under paragraph C or paragraph D above, Chugach shall submit such pay requests with all substantiating documentation supporting Chugach recommendation with respect to each such pay request to the IPG for approval. [10= The IPG shall promptly, and in any event no later than 30 days after submittal to it, act on such request for approval. The IPG shall be deemed to have approved such recommendation submitted under paragraph C or paragraph D above upon the earlier of an affirmative approval by the IPG or the expiration of 30 days after submittal without any action taken by the IPG. Upon the IPG's approval of pay requests or recommendations, either by such approval being so deemed, by affirmative action, or by failure to act, AIDEA shall be and hereby is authorized by the IPG to disburse from the grant funds into the WORKING CAPITAL ACCOUNT, pursuant to section 8(a) of the PARTICIPANTS' AGREEMENT dated January 24, 1994, and § 4.03 of the GRANT ADMINISTRATION AGREEMENT, sufficient funds to meet the pay requests or recommended amounts. Chugach as Construction Manager is hereby authorized to coordinate directly with AIDEA all documentation, information, or other assistance helpful to AIDEA to facilitate disbursement of the Grant Funds into the WORKING CAPITAL ACCOUNT. Article VII regarding IPG approval shall apply to the submittal of pay requests and recommendations by Chugach to IPG under this article. With respect to a recommendation regarding a pay request submitted to the IPG by Chugach under paragraph C or paragraph D above, if the IPG rejects the recommendation, Chugach shall not pay the pay request. Chugach may, but is not required to, submit a revised recommendation with respect to any such pay request or recommendation rejected by the IPG. F. In the event that additional financing for the Project is required pursuant to section 8(b) of the PARTICIPANTS’ AGREEMENT, the Participants, pursuant to section 8(b)(4) of that agreement, shall pay into the WORKING CAPITAL ACCOUNT sufficient funds to meet the approved pay request, pro rata based on project shares. Said payments shall be made sufficiently timely to permit the orderly meeting of all obligations of the Participating Utilities with respect to the Project. 7 G. The IPG and Chugach anticipate that at all times the WORKING CAPITAL ACCOUNT will have a balance sufficient to cover anticipated disbursements for the following six months. The parties anticipate that the period of six months will be adequate to obtain the necessary approvals, pursuant to the Grant Administration Agreement of August 30, 1994, the PARTICIPANTS' AGREEMENT of January 24, 1994, and all other contracts and agreements governing the disbursement of design and construction funds for the Anchorage Kenai Intertie Project. In the event that those approvals take longer and thus require a greater balance in the WORKING CAPITAL ACCOUNT, the Participating Utilities shall cause sufficient additional funds to be deposited into the WORKING CAPITAL ACCOUNT, pro 213 rata based on project shares, to cover the anticipated cash flow needs of the Project in accordance with approved budgets, schedules, and cash flow schedules in order to accommodate the longer than anticipated approval time. Chugach shall not be required to expend at any time for any purpose any of its own funds in carrying out its obligations hereunder except those amounts that it expends for its own personnel costs incurred pursuant to section 7(c) of the PARTICIPANTS' AGREEMENT, which costs are reimbursable under said provision. IX. MANAGEMENT OF PROJECT DESIGN AND CONSTRUCTION Chugach as Construction Manager shall develop, implement, administer, and manage the Anchorage Kenai Intertie Project as Construction Manager on behalf of the Participating Utilities, which construction management services. shall include, but not be limited to: L. Administer and manage the procurement of all Project needs including but not limited to all design and professional services, equipment, materials, and construction services required. 2. Administer and manage all Project activities including but not limited to all design and professional service contracts, all equipment and material acquisition contracts, and all construction services contracts for the Project. 3. Prepare, evaluate, and update schedules in sufficient detail to adequately and effectively evaluate progress on the Project, and to identify delays in sufficient time to minimize their effect. Sm Prepare such financial cast accounting records as may be necessary and appropriate, including the above referenced budgets and cash flow projections, to appropriately track costs, evaluate whether the Project is within budget, and to identify costs that exceed the budget in sufficient time to permit adequate procedures to minimize and eliminate to the extent possible costs greater than those budgeted. S's Prepare monthly reports updating all information concerning progress on the Project, including comparisons between the cost incurred to date and the budget and cash flow projections to date as well as to the overall budget and cash flow projections, comparisons between the progress of the work accomplished to date and the then approved schedule; and comparisons between cash flow needs and those projected according to the then approved cash flow projections. These -14- monthly reports shall include projections of work progress and cash flow requirements at the next month, next three months, and next six month intervals, all in accordance with section 7(g) of the PARTICIPANTS' AGREEMENT dated January 24, 1994. 6. Develop, implement, and enforce effective quality control/quality assurance procedures through its own personnel or through appropriate subconsultants, to assure that all services, materials, equipment, and construction work are in accordance with the respective applicable contracts, including providing for appropriate inspection services where appropriate. Ts Develop, implement, and enforce adequate procedures to assure proper review of all design "deliverables," to assure the reliability of the work product of the design professionals and other professional service contracts, and to properly evaluate all contractor and vendor submittals. 8. Develop, implement, and enforce effective controls for assuring that design and other professionals meet the time and work product requirements of their respective contracts, and that the clearing and construction work performed by construction contractors is performed according to the contract specifications including schedules and budgets. 9. Implement such procedures and take such steps as is necessary and appropriate to assure the reasonable reliability of all cost estimates prepared for project planning and execution purposes, but Chugach shall bear no liability towards the IPG or the Participating Utilities for the failure of actual costs as incurred to fall within approved cost estimates, budgets, or cash flow projections. 10. Organize and maintain sufficient record keeping systems for the route selection, preliminary design, final design, and construction of the Project to assure adequate control and substantiation for all decisions made and actions taken. ll. Establish and implement procedures under which all changes proposed by contractors, the design engineers, IPG, or Chugach are properly evaluated and resolved, either in appropriate contract modifications or otherwise as may be appropriate. Chugach shall evaluate all requests’ for additional compensation or additional time from any contractor for the purpose of determining whether the contractor is entitled to either the additional time or the additional money under the contract documents and applicable legal principles. =15= Chugach shall have authority to determine on behalf of the Participating Utilities all proposed change orders or claims for extra time or money that (1) do not exceed, in the aggregate, 5% of the respective original contract amount; (2) once the threshold of 5% of the respective original contract amount in the aggregate is reached, do not exceed individually the amount of $100,000 per contract; (3) do not materially, in the judgment of Chugach, affect the overall Project schedule; (4) do not result in the increase of any budget previously approved by the IPG; and (5) do not result in any changes to design criteria, line routes, end points, or other material aspects of the previously-approved scope of the Project. Any requested change orders or claims for extra money or time for amounts exceeding these limits of Chugach's authority shall be submitted to the IPG for approval in accordance with the provisions of Article VII above. All change orders, whether prior IPG approval is required or not, shall be reported and explained to the IPG in the next regular monthly report to the IPG following the finalization of the change order. 12. Develop and maintain a current set of contract specifications and drawings which reflect all changes from the original design as drawn and specified. The current set of contract specifications and drawings shall reflect accurately all construction details as performed by the contractors. 13. Appear at all meetings of the IPG to brief the IPG on progress, schedules, financial aspects, and other issues that may be appropriate for IPG consideration and review. 14. Plan, provide for, and manage all pre-commissioning and commissioning activities. 15. Provide for appropriate programs to train permanent Project operating and maintenance personnel. 16. Prepare final Project completion documentation and such other reports and procedures for transitioning the Project from construction to operation. x. INDEMNITY The Participants shall indemnify and hold Chugach harmless from all claims, liabilities, damages, and costs which arise out of or in connection with the Project excepting only ul6= any judgments that are based exclusively and solely upon Chugach's intentional misconduct or "gross negligence." If any claims are made against Chugach, the IPG, or the Participating Utilities arising out of or in connection with the Project, Chugach shall arrange for defense of all parties as their interests may require and all such defense costs, regardless of the allegations made by the claimants, shall be considered Project costs for which the Participating Utilities shall indemnify Chugach. Chugach shall not be obligated to expend or advance any of its own funds on such defense costs. XI. DISPUTE RESOLUTION A. Among Other Parties. Chugach may insert in all contracts entered with respect to the Project provisions to allow for alternate dispute resolution methods to be used to resolve disputes among the design engineer, other consultants, material or equipment vendors, and construction contractors, or between any of them and Chugach, the IPG, or the Participating Utilities. Such methods may, but are not required to, include a Project Dispute Resolution Panel, the costs for which would be a Project cost. Chugach may establish other appropriate provisions within the contracts and other procedures to achieve resolutions of disputes in the least expensive and time consuming manner. B. ; in ere f ETT ee In the event that any claims by other parties are made against Chugach, the IPG, or the Participating Utilities, or any combination of them, arising out of the Project, Chugach shall defend itself, the IPG, or the Participating Utilities or any combination of them. Chugach shall have the responsibility to resolve all claims against itself, the IPG, or the Participants asserted by others and arising out of the Project, either by alternate dispute resolution, settlement or judgment, and shall have the responsibility to solely control the defense of any such claims. However, subject to Article X, any and all defense costs including attorney's fees, as well as any agreed settlements or judgments rendered against any of them, shall be -l17— satisfied by the Participating Utilities according to their respective interests in the Project. c. i es Between Chugach and IPG or Participating Uti li EL es. Li Any disputes arising out of the performance of this Construction Management Agreement between Chugach on the one hand as the Construction Manager and the IPG or Participating Utilities on the other hand, shall be resolved by submission of the dispute to a panel of three persons whose identities shall be agreed upon by Chugach on the one hand and the IPG on the other simultaneously with the signing of this contract. One of the three persons shall be an attorney licensed to practice law in the State of Alaska experienced in construction litigation, one shall be a person experienced in the design and construction of transmission lines of the size and nature involved in this Project; and one shall be experienced in the financing of electrical utility operations and construction, including the financing of construction of transmission lines similar in size and nature as this Project. None of the three persons shall have any economic or professional relationship with any of the Participating Utilities at the time this document is signed nor at any time thereafter for the duration of the Project including the rendition of any decisions by the panel after the completion of the Project. None of the three persons shall have participated in any way on behalf of any of the Participating Utilities with respect to this Project or the Northern Intertie Project being managed by GVEA. The intent of the parties is that the individuals selected shall be free of any bias towards or against any of the Participating Utilities including Chugach; and that the stature of each of them in their respective profession is accepted by each of the Participating Utilities. 2. Also simultaneously with the signing of this contract, the IPG and Chugach as the Construction Manager shall jointly agree on the identities of three additional persons to serve as alternates. Each of the three alternates, respectively, shall have the same qualifications as each person or the panel of three persons selected under paragraph C.l. above. If at any time one or more of the original three panel members is unable or unwilling to serve, or becomes for any reason disqualified from serving as a panel member, the ig alternate whose qualifications match the original person whose service on the panel is ending will replace the original panel member. The alternates shall not be consulted or become involved in any disputes unless and until they replace one of the original panel members. Ze In the event any disputes covered by this Paragraph arise, Chugach and IPG shall each respectively prepare a written statement of their position of the dispute indicating what facts are not disputed and which facts or conclusions are disputed. The panel of five shall hold at least one conference in which Chugach and the IPG shall present orally their respective positions along with any witnesses or documents desired by either. The panel may hold more than one conference if in its discretion it determines such would be productive to reaching a decision. After reviewing all written comments and oral presentations, the panel shall meet out of the presence of the parties and render a written decision resolving the dispute in its entirety. The panel may secure consultation from those disinterested and impartial professionals that it, in its discretion, deems appropriate in order to assist it to reach a decision. The decision shall be rendered in accordance with (1) Prudent Utility Practice, (2) the terms of the statutes and various contracts applying to the project, and (3) in general with Alaska law. The decision thus rendered by the panel shall be binding on both Chugach and the Participating Utilities. All costs incurred by the parties and the panel itself shall be considered Project costs. XII. ADMINISTRATIVE PROVISIONS A. This Contract shall be interpreted and enforced pursuant to the laws of the State of Alaska. B. The parties hereto do not intend to create any rights, interests, immunities, or privileges with respect to any entity not a party signing this Contract. Ce. If any portion of this agreement is deemed unenforceable for any reason, the remaining provisions of the Contract shall remain in effect. Die This Contract may not be modified or amended other than by a written document signed by all parties hereto. -19- Ey Terms defined in any of the agreements identified in the Preamble above shall have the same meaning when used in this Contract, unless such terms are defined differently in this Contract. F. With respect to the construction management rights and duties of Chugach hereunder, where the terms of this Contract differ from any other prior contracts between the Participating Utilities and Chugach, the terms of this Contract shall govern with respect to the parties hereto. This agreement is intended to constitute the full agreement between the parties relative to the construction management rights and duties of Chugach for the Anchorage Kenai Intertie Project and all prior oral negotiations between the Participating Utilities, the IPG, and Chugach relative to the construction management activities of the Anchorage Kenai Intertie are hereby merged herein. CHUGACH ELECTRIC ASSOCIATION By. Lets “CONSTRUCTION MANAGER” ALASKA ELECTRIC GENERATION HOMER ELECTRIC ASSOCIATION AND TRANSMISSION COOPERATIVE, INC. By. By. Its Its MATANUSKA ELECTRIC ASSOCIATION CHUGACH ELECTRIC ASSOCIATION By. By. Its Its -20- MUNICIPALITY OF FAIRBANKS GOLDEN VALLEY ELECTRIC d/b/a FAIRBANKS MUNICIPAL ASSOCIATION, INC. UTILITY SYSTEM By. By Its Its THE CITY OF SEWARD THE MUNICIPALITY OF ANCHORAGE d/b/a SEWARD ELECTRIC SYSTEM d/b/a MUNICIPAL LIGHT & POWER By. By. Its Its “PARTICIPANTS” PSA94:477/4343.19 ~21= Fy le SE, Tadwwise October 13, 1994 TO: Riley (We i FROM; Dennis McCrohan S SUBJECT: SE Tyee to Swan Transmission Line In the Four Dam Pool PMC meeting on October 12, 1994 Tom Stevenson expressed concern regarding the ownership of the SE Transmission Line. He sees the possible owners as the 4DP in its current form or as a G&T, the State( he means AIDEA or AEA), or KPU. He indicated that KPU does not want to be the owner. If KPU were the owner, he stated that there must be a fixed payment charge assuring revenue from other utilities. He did not foresee KPU bearing the capital cost above the grant or the O&M. He is very concerned that if the 4DP imposes self help to solve the capital Projects problems on the current 4DP projects that KPU will lose the transmission line funding. I stated that AEA could not participate as an owner in the line. AIDEA cond participate. I stated that t the Transmission Line was a beneficial project but that we shared his concerns regarding self help. He asked for 4DP support for the concept of the 4DP or the 4DP G&T owning the SE Transmission Line. Petersburg, and Wrangell were supportive. CVEA and KEA were cool and reserved and obviously not cooperative. The PMC at KPU’s request agreed to have Ron Saxton look at ownership options for the Transmission Line. Saxton’s fees will come from Stevenson’s engineering and feasibility funds for the new line. No action was requested of AIDEA or AEA. ce 58 Vw