Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
Sutton Gleenallen Intertie Public Input Process 1995
October 4, 1995 TQ: Randy and Riley FROM: Dennis Attached is draft of briefing. Let me know if | can help more. | will have latest Executive Summary from CH2M Hill tonight. OUTLINE for BRIEFING Scope of the Study 1. The new study is based on Governor’s April 6, 1995 memo. 2. Informal meetings have been held with CVEA, CEA, Petro Star, and Aleyeska to collect new data and consider changed conditions arising since the 1994 DCRA study. Major New and Changed Conditions 1. Conditions and factors which changed since the 1994 DCRA study are incorporated into the new study. 2. In 1995 CVEA has proposed alternative diesel generation configurations. “3. CEA and CVEA have formally through Board actions agreed to participate jointly in the Intertie. 4. Petro Star has agreed in principle not to proceed with self generation subject to specific rate covenants proposed by CVEA and CEA. Results 1. Both the Intertie and Diesel generation are economic resource alternatives. The changes since the 1994 DCRA study have however narrowed the economic differences between the Intertie and Diesel generation. 2. Diesel generation has several possible configurations. The most probable diesel configuration is more economic than the Intertie under no growth and medium low (Petro Star self generates ) growth scenarios. The Intertie is marginally more economic under the medium high(Petro Star remains a customer of CVEA) growth scenario and substantially better under high growth scenarios. 3. CEA’s agreement to substantially participate in the capital cost of the Intertie eliminates any rate increase to CVEA rate payers. In the long term the Intertie will provide the lowest cost power to the CVEA rate payers under all growth scenarios. 4. Aleyeska is not expected to commit to any form of participation in the Intertie prior to an Intertie decision. 5. Other resource alternatives such as Silver Lake, Allison Lake, and Valdez coal are less economic than the Intertie and less econamic than they were in the 1994 study. 6. Energy sales by Aleyseka or Petro Star to CVEA is not economic if the Intertie is built. Advantages of Intertie 1. Makes available to the existing rate payers and future potential developers in Glenallen and Valdez Railbelt priced energy. 2. Replaces CVEA isolated oil fired diesel generation with broader mix of Railbelt energy supplies. 3. Promotes utility interconnection and associated energy efficiencies. Disadvantages of Intertie 1. Direct economic benefits apply to only small number of consumers. 2. Major environmental, community, and legal issues must be resolved prior to proceeding with the Intertie. 3. Loan for the Intertie development may not be the best use of State financial resources. 4. Requires load growth in Valdez and Glenallen to assure broad resource economic benefits. f a chengen|gte fon DE J mb ~f eye (02° nl } nak =I / vé f- Ophro Bhan. Wl B. eh 1 40S fale fa. Aue al Ab VW Hl ow (aad \ #) I | pes bol offedad ely lfle Or | ia! nn p: Dpehe on Fado, 8 Jes | lo phate ehelelle per OSe I eee ae wl) pals “ —— = 636" t+ Shrony h fore w/ Wincor alt gles inwlee - Alyetba - te wah vs fo alto ork Vem what Yt 1s — rot hele, fe & i Wate “7 ublre. daiiiwgee tT - pe? mecgetaaly lh 4 Poh fle ge ie, ior ides PF G EGF rt es * @E ENERGY AUTHORITY ~ * * e ALASKA INDUSTRIAL DEVELOPMENT ron) SATE “sc erorcticnn /=, ALASKA x * 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 561-8998 MEMORANDUM TO: William R. Snell Executive Director FROM: D. Randy Simmons, Finance and Development Manager Katelyn Ohmer, Development Specialist DATE: August 4, 1995 SUBJECT: Public Input Process- Sutton-Glennallen Intertie After thought and discussion , the following is a proposal of options for obtaining public input on the update of the feasibility study on the Sutton-Glennallen Intertie. Each option provides a public review of the findings and would provide information to use in making a decision on project development. We have included the perceived positive and negative factors associated with each option. Form Process Positive Factors Negative Factors Public Hearing Advertised public *Wide-spread public *Cost (staff time, meeting with comment. advertise, room facilitator; agenda; rental). summary of findings *Time (plan meeting, advertise, summarize findings). *Usefulness of findings questionable. *Media coverage unmanageable. *Decision would not be made through process. Roundtable meeting with affected parties. Study sent to affected parties (see below) in advance; face-to-face meeting to discuss the proposed project. Press Release Study sent to affected parties (see below) in advance requesting comments (specific questions provided). Press release drafted for Governor's approval. No Public Comment *Direct feedback by affected parties. *Cost would be limited. *Minimal cost. *Limited staff time. *Managed public input. *Wide spread media coverage. *Decision would be approved by the Administration. *Controlled oversight. *Summary of all parties concerns presented to general public in press release. *Scheduling may be difficult. *Public input may be difficult to manage. *Media coverage may be disruptive. *May require strenuous project oversight and follow- up. *May be difficult to have an Administrative stance. *Some affected parties may be left out. *May be perceived as lacking public process. *May be perceived as lacking public process. *Controlled oversight. *Some affected parties may be left out. Below is a list of “affected parties which would be asked to participate in the public input process. Utilities: Copper Valley Electric Association (CVEA) Matanuska Electric Association (MEA) Chugach Electric Association (CEA) Anchorage Municipal Light and Power (MLP) Four Dam Pool (PMC) Government Entities: Legislators in district (Lincoln, Kubina, Mat-Su legislators) City of Valdez Matanuska Susitna Borough Alaska Public Utilities Commission Dept. of Environmental Conservation Major Private Consumers: Alyeska Pipeline Petro Star Valdez Inc. Others: Cook Inlet Regional Corporation (CIRI), (land use) Ahtna (land use) Parties of the lawsuit Environmental action committees Arco Alaska B.P. Alaska R.W. Beck previously conducted advertised public meetings in Sutton, Glennallen, Chickaloon, the Glacier View area and Valdez to obtain comments from the general public concerning the Intertie, and to repeat the public meetings is viewed as unnecessary and costly (not to mention unruly and time- consuming). For your information, Governor Knowles currently favors a “round table” approach to public input. We are ready to discuss the options at your convenience. Thank you. cc: Percy Frisby SENT BY :DCRA, DOE + 9- 6-95 ; 9:16 ; DCRA DIV OF ENERGY- 907 561 8998;4 1 A Fax From The Department of Community & Regional Affairs Division of Energy Mailing Address: Physical Address: 333 West 4th Avenue, Suite 220 333 West 4th Avenue, Suite 220 Anchorage, AK 99501-2341 Anchorage, AK 99501-2341 Main Telephone Number: (907) 269-4500 Director's Fax Number: (907) 269-4645 Engineering Fax Number: (907) 269-4685 Deliver Fax to: Company Name: Company Adaress: Fax Phone #: = Sender: Sender's Phone # 69 ~ 4p YO # of Pages Sent: & (includes this cover page) Date Fax Sent: q AG, C if you don't receive all of this fax, please call sender DIRECTLY. SPECIAL INSTRUCTIONS TO FAX RECIPIENT: Sutton-Glennallen Intertie Schedule DRAFT 907 561 8898;# 2 $35 million appropriated te DGRA for Sutton-Giennalien |] F&2sibtity study (final repo’) State Loan Appropriation Racer mae Meee By ny intertie loan (Ch 19, SLA 93)" cintaldchaimei DGRA 5 - - Bs 1 / CVEA Loan Agreement [cm o > Administrative Appeal: < Trustees for Alaska et. al. A Lawsuit: Alaska Cogeneration Systems Inc. (ACSH 9:17 5 Environmental impact - Statement wD 4K Public Utilities Commission 1 a— en ~ Other Permits and Approvals Project Design and Construction “Contingent on feasibility study and plan of finance “satisfactory” to DCRA. SENT BY:DCRA, DOE Page 1 9/1/95 Sutton-Gilennalten [ntertie Schedule 1994 DRAFT 907 561 8998;2 3 State Loan Appropriation Administrative Appeal: Trustees for Alaska et. al. DCRA DIV OF ENERGY- Srate / CVEA Loan Agreement Finding issued by DCRA Commissioner: Studies are “satisfactory” Loan application submitted to DCRA by CVEA Administrative appeal filed in Ty State court challenging DCRA September Division of Energy (DOE) sends proposed loan agreement to CVEA Commissioner's finding Lawsuit: Alaska Cogeneration | acs files suit in State court to Se peace cape sete enjoin State from issuing loan nae ee er a a ig Systems Inc. (ACSI) ) J | cf court to stop intertie loan a Environmental Impact Statement - . SAK Public Utilities Commission 1 A : — - Other Permits and Approvals Project Design and Construction SENT BY:DCRA, DOE Page 2 9/1/95 Sutton-Glennallen Intertie Schedule DRAFT #4 1994 1994 907 561 8998;# November December State Loan Appropriation CVEA comments on proposed | ' loan agreement; DOE makes “final” revisions S.ace / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. DCRA DIV OF ENERGY- Federal court issues preliminary injunction against execution of the loan Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Statement Federal! court lifts preliminary injunction 9:18 5 wn “AK Public Utilities Commission I ao we APUC order: CVEA must Chugach Electric and Petro negotiate with ACSI re: power Star move to intervene in |__ sales agreement** CVEA/ ACSI case ~ Other Permits and Approvals | Project Design and Construction “ACSI began APUC Proceedings against CVEA | in Dec. 1993 Page 3 971495 SENT BY :DCRA, DOE Sutton-Glennatlen intertie Schedule . DRAFT +k * go cs ao S in = a a ; Governor suspends further State Loan Appropriation ee with! ction on project; appoints | = _ member review team i mo ww a Stare / CVEA Loan Agreement i mH Oo > Administrative Appeal: Parties agree to stay of pro- a ceedings; case has barely s Trustees for Alaska et. al. | begun due to lengthy delays ft = Lawsuit: Alaska Cogeneration Federal court grants stay of ¥ Systems Inc. (ACSI) proceedings — + a Environmental Impact if Statement 3 - | oAK Public Utilities Commission So . : | | Other Permits and Approvals i Project Design and Construction tu & xs a a fa = Page 4 9/1/95 Fa 7a) Sutton-Glennallen Intertie Schedule 1995 DRAFT 907 561 8998;# 6 State Loan Appropriation By 8/31, AIDEA / CH2M Hilt report issued** September S iaé / CVEA Loan Agreement Public comments / public Govemor's decision and meetings; recommendation to | revised / supplemental DCRA Governor by 9/30 finding by 10/76 TT DOE / CVEA discussions resume on terms of joan agreement DCRA DIV OF ENERGY- Administrative Appeal: Trustees for Alaska et. al. Parties agree to extend stay 9:19 5 Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental [{mpact Statement Federal court grants extension of stay to expire 9/15/95** Stay of proceedings scheduled ees ee I to expire 9/15/95" Litigation continues + Stay of proceedings scheduled Litigation continues** uw 3 AK Public Utitities Commission 1 a- + ~ Other Permits and Approvals SENT BY :DCRA, DOE "Project Design and Construction “tn this schedule, italics signify projection of future actions or events Page 5 “ Attomey General's office to request further extension of these stays intertie project “* In the event lhe Govemor decides to go forward with the 91/95 Sutton-Glennallen Intertie Schedule 1995 1995 Knee === -- Two Years --------——----> DRAFT 907 561 8998;4 7 State Loan Appropriation November December December 1995 - December 1997 if: Jt 2 Loan agresment executed. fa} State / CVEA Loan Agreement Phase 1 (pre-construction) & limited to $7.3 miltion** =I Administrative Appeal: Not possible to predict time period for litigation or likely date = Trustees for Alaska et. al. for court decision. ge 8 Lawsuit: Alaska Cogeneration | Not possible to predict time period for titigation or tikely date = Systems Inc. (ACSI) for court decision. 3 Environmental Impact CVEA retains contractor for | Scoping documents, public meetings, determination of EA vs. Statement in = AK Public Utilities Commission ' aL Other Permits and Approvals Project Design and Construction SENT BY:DCRA, DOE NEPA process /EIS** CVEA retains design contractor** ** inthe event the Governor [** in the event the Governor decides to go forward with the |decides fo go forward with the intertie project intertie project Page 6 EIS. if EtS, preparation of Draft, public review and meetings, preparation of Final. Decision on ROW across federal land. The intertie could be blocked if CVEA is ordered to purchase H power from ACSI at CVEA’s avoided cost, or if APUC does Numerous permits, including Conditional Use Permit from Mat-Su Planning Commission for access through the not approve wholesale power contract. Chickaioon Special Land Use District. Of1/95 907 561 8998;# 8 DCRA DIV OF ENERGY- 9:20 ; > 9- 6-95 ; SENT BY :DCRA, DOE Sutton-Glennailen Intertie Schedule State Loan Appropriation State / CVEA Loan Agreement Administrative Appeal: Trustees for Alaska et. al. Lawsuit: Alaska Cogeneration Systems Inc. (ACSI) Environmental Impact Completion of EIS; acquisition Statement of ROW across federaf land APUC approves wholesale AK Public Utilities Commission | power contract and resolves related matters Acquisition of ROW complete; Other Permits and Approvals supplemental financing obfained; permitting complete Project Design and Design compfete. Con- J g Struction start spring 1998 Construction and complete Dec, 2000** ™ Construction start fail 1997 Phase 1 accelerated Page 7 DRAFT SH1/95 an en Yt sues ae Ko eee { no } [a A Auu @ j Vetco) Grow } Cc ews. tue ka Deeel ; ad 1 pha (6) @' fox Lag ya Go ie - atte i | T — ioe | 7 | i | | | | i 1 ® | | | a—Valdae | En tec oeloes | | | aN ceenstyuas <A— Allison | | } Sv\luen | | leer ve | a4— Qrese\ | \ ' +— Febro4tac ot Dugste | Cieerron | | | | | | | ]+— bs W © ‘ Loptusl CVEA |4—— ee 1a hah and med iver gros |4—_— WP Perro peo w/Alycoke Petr oskar CEA | dake, Volde« Gene Ayesko | | | 3 Troekees | | | | WOK] paea ‘a ie | S jon | | in| ; | | | | i} | 4 ——— Au Dressel | tt acaine t | | i | | “Achon fof | Po j { 1 T } | | | | 1 | } | rf] | } | | | | | | It | | 4 | | | | | | | | | | ri yf | | | i | | ; | | ; | en | | ; | ; | | } | | I || | | ry} yd fd az = | + : ei : i : i | \ =e = ee | ee ; 1 | ie = | | | ' | | Pit dd ed gq i | . SF , ‘ iy 3/27/45 Suto Lacna lon Dock se=s ton, Med. \ous ———* ferroSter off at 30\4 Med thar S No Grown ParxoStac 09 Forenow Fix ak Eee aera Ovo, Wlyeske ——— __Pocchese Somo A\\ Dicey —— + fagw- sine © aes Og Vm om — Rea Ke gepew Wither PetroSac ———> 16 ke Jon —— off Ferawe Ao CER — £07, pex a\\\ iet0 Generaro, —— 2.0 MLO -. Blyeske baroreta —® QSMLO. S ; —— - = pp — (i a it ; ® , Engineers ; Cd | Planners CHMHILL Bizeenenn ss A Scientists September J, 1995 117526.C0.ZZ Mr. Dennis McCrohan Deputy Director-Energy Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99501 Dear Dennis: As we have discussed, the scope of CH2M HILL services to update the Copper Valley Intertic Feasibility Study for AIDEA has evolved since our work began in June. The purpose of this Jetter is to document these changes, list additional tasks needed to complete the work process you outlined earlier this week, and request an increase in our fee to cover these extra activitics. Scope of Work Completed To Date In addition to work identified in our June 12, 1995, letter to Riley Snell, we have performed the following tasks: ° Lvaluation of alternative bases for power supply from the Railbelt including economy energy, firm energy, and firm energy with the cost of the Intertie integrated into the rate base of Chugach Electric Association (CEA). oe Evaluation of two configurations for Copper Valley Electric Association's (CVEA) all-diesel alternative ° Evaluation of CVEA’s power supply plan ° Review of future electric load possibilities associated with the Trans-Alaska Gas System an the High Altitude Auroral Research Project ° Critical review of R.W. Beck’s resource cost model Seattle Offica 777 108th Avenue NE, Bellevue, WA 98004-5118 P.O. Box 91500, Bellevue, WA 98009-2050 206 453-5009 Fax No. 206 462-5957 Mr. Dennis MeCrohan Page 2 September 1, 1995 1)7526.C0,ZZ Evaluation of potential electric supply development at Silver Lake and at Alyeska In addition to documentation of our technical analysis, dcvclopment of a detailed report for both technical and nontechnical audiences including preparation of several draft reports Several planning and briefing trips between Seattle and Anchorage Upcoming Tasks I understand that you would like for us to continue to support AIDEA on this project in the following ways: Conduct additional analysis as outlined in our August 29 meeting (the scope of these changes were faxed to you on August 30) and prepare a new draft report. Direct and evaluate computer analyses for 36 different rate impact scenarios (these computer analyses were outlined in a August 30 fax to you) Critically review R.W. Beck’s rate impact model Continue to edit the draft report for understanding by nontechnical audiences Participate in meetings with project stakeholders including: CVEA, Petro Star, CEA, Alyeska, the Trustees for Alaska, Sutton community representatives, Glennallen community representatives, and Valdez community representatives Brief the Copper Valley Intertie review committee on study findings and answer questions Prepare three additional iterations of the project report Present study findings at a formal public meeting Of course we will also be available to continue to meet other ATDEA needs that may develop as the evaluation process continues. Cost Estimate The estimated cost to complete this work for AIDEA is $30,800. As shown in the attached tabulation, this includes a 20 percent contingency for tasks that may develop between now and Mr. Dennis McCrohan Page 3 September 1, 1995 117526.C0.ZZ completion of the project. Jf the need for these contingencies do not develop, the estimated cost is $26,500. We Jook forward to continuing to be of service to AIDEA and the review committee as the States deliberation on the Intertic continues. As always, please do not hesitate to call me with any qucstions or concerns you may have about our services to you. Sincerely, Ved O Pe David A. Gray / Project Manager ( , Copper Valley Intertie Feasibility Study Update Workplan for Project Completion Task Description 1 Analysis outlined in August 30 fax; prepare new draft report 2 Direct and evaluate 36 rate analyses 3 Critically review R.W. Beck rate model and analysis 4 Edit for nontechnical audience (up to 2 additional draft reports) 5 Participate in stakeholder meetings 6 Brief Governor's review committee 7 Prepare up to 3 additional iterations of project report 8 Present study findings at a formal public meeting Total Copper Valley Intertie Feasibility Study Update Budget for Project Completion Labor $21,200 Support and Expenses 5,300 Contingency 4,300 Total $30,800 Labor Days = hk Ww N IW oO 25 4 FROM: CH2M HILL-SEA TO: 987 561 8998 JUL 14, 1995 7:52PM #28@ P.@1 3 Xe: ‘Rardsy rs CHMHILL DATE: _July 14, 1995 FAX TRANSMITTAL REQUEST FORM FOR IMMEDIATE DELIVERY FAX OPERATOR: TIME SENT: O AM O PM TO: Dennis McCrohan OFFICE: AIDEA FIRM NAME: State of Alaska CITY: Anchorage STATE: Alaska Fax Phone Number: (907)561-8998 Verification Phone Number: : (907) 344-2661 Total number of pages, incl. this page: 4 Return original?: M YES D NO From: Dave Gray Office: SEA Employee No.: 760 IF YOU DO NOT RECEIVE ALL OF THE PAGES OR THE TRANSMISSION IS UNCLEAR, PLEASE CONTACT OUR FAX OPERATOR AT (206) 453-5000 EXT. 5246. REMARKS: Date Fax Received: Time: o AM O PM FROM: CH2M HILL-SEA TO: 987 561 8998 JUL 14, 1995 7:53PM #288 P.@2 Copper Valley Intertie Feasibility Update Scope of Work The scope of this project will be to reassess the feasibility of the Sutton to Glennallen 138kV transmission linc (Copper Valley Intertic) based on certain conditions that have changed since origina! feasibility studics on this project were completed. ‘lo the extent practical, assumptions and analysis used in the R.W. Beck feasibility study (Feasibility Study--Copper Valley Intertic, January, 1994) will be retained with adjustments restricted to known and documented changes. The project will be conducted in one or two phases. Phase 1--Update of Feasibility Analysis In Phase 1, the existing Copper Valley Intertie feasibility analysis will be updated with data 1o reflect threc new conditions: J.) Petro Star’s announced plan to leave the Copper Valley Electric Association (CVEA) system, 2.) the possibility of Pctro Star generating power for sale to CVEA, and 3.) the possibility of Alyeska connccting its relatively large load to the CVEA system. Other assumptions used in the existing Copper Valley Intertie feasibility study will be reviewed for known and certain changes and will be included in the updated study. The analysis will continue to be made from the perspective of the State of Alaska; notation will be made of significant factors affecting this perspective vs. that of the members of CVFA. The primary product of Phase J will be updates of tables I-5 and 1-6 of the R.W. Beck feasibility study. These will be presented as part of a technical memorandum at the conclusion of Phase 1. This work will include conducting sensitivity analysis for: ° Load growth . Oil prices ° Power supply options . 4-Dam Poo} charge rate for output from Allison Take ‘The load forecast sensitivitics will be limited to a medium load forecast (the medium-high scenario) from the R.W. Beck study (for reference) and consideration of the following load developments: . Loss of Petro Star as a customer of CVEA . Addition of Alyeska as a customer of CVA assuming the existence of a Copper Valley intertie (This will include the addition of Alyeska’s existing requirements (approximately 8 MW), also unccrtainty surrounding the term FROM: CH2M HILL-SEA TO: 9@7 561 8998 JUL 14, 1995 7:53PM #288 P.@3 of the power supply to Alycska will be addressed) Input values for oil price forecasts will be based on the Jatest forecasts from the Alaska Department of Revenue. Analysis of power supply options for CVEA will be limited to the following five development sccnarios: . All diesel ° Copper Valley intertie . Allison Lake ° Silver Lake ° Valdez coal-fired generation ° Petro Star supply There is also a possibility that generation could be increased at Alyeska as a resource option for CVRA, If this is a real possibility, it will also be considered as a new supply option. CH2M HILL will work with R.W. Beck to arrange running the updated analyses on the financial model R.W. Beck uscd in its 1993-94 analysis of the Copper Vallcy Intertic. Analysis will include evaluation of 1.) Icast cost power supply in terms of present value (consistent with the Beck rcport) and 2.) first year nominal supply costs assuming: e No state assistance ° A $35 million loan from the State of Alaska at zero interest Phase 1 will be conducted with input from the various stakeholders (CVEA, CEA, ML&P, Alaska Cogencration Systems, Allison Lake developers, Petro Star, and Alyeska) and with close coordination with ATDFA. Phase 2--More Detailed Study and Decision Analysis If, at conclusion of Phase 1, a clear course of action is not apparent, Phase 2 will provide the additional analysis needed to make a decision regarding the feasibility of the Copper Valley Intertie. In Phasc 2, any important residual issues not considered through the Beck model will be cvaluated, and formal decision analysis will be performed to more directly address future uncertainties. Among the issucs that may require quantification through more detailed analysis in Phase FRUM? CH2M HILL-StA Iu: 37 3561 BYSe JUL 14, 1995 7:54PM #ebU P.U4 2 are reliability differences among the various power supply options. This analysis would consider the costs to put reliability associated with each supply option on a comparable basis with the Intertie option. Phase 2 will also include formal decision analysis. The primary bencfits of this project component will be 1.) to provide an avenue for stakeholder’s to have formal input on probabilities associated with unccrtaintics associated with the project, 2.) to explicitly quantify uncertainty associated with the project, 3.) determine the expected value of costs associated with each supply alternative and the risk profile associated with each. Most of the cost and utility system data for the decision analysis will have been devcloped in Phase 1. Jn Phase 2, uncertainties will be rechecked through an influence diagram, probabilities associated with uncertainties will be estimated, and a decision trec constructed. Irom the decision tree model, the expected value of costs and risk profiles mentioned above will be derived. The influence diagram and probability assessments will be developed though a workshop and individual interviews with key Interlic project stakeholders. Upon complction of Phase 2, a formal report will be prepared. This report will summarize the findings of the study and document the process used to cvaluate the Intertic and other CVEA resource options. we, " ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY / => ALASKA i ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 MEMORANDUM TO: Mike Irwin, Commissioner Department of Community and Regional Affairs John Shively, Commissioner Department of Natural Resources FROM: nid bert fo va ‘Executive Director DATE: June 6, 1995 RE: Sutton-Glennallen Intertie Attached is a draft scope of work, schedule and project estimate for reassessing the feasibility of the Copper Valley Intertie. We took the liberty of asking CH2M HILL to provide this to us since we have them on contract. Hopefully, this will be a good starting point for our discussions and gives us another option from what was discussed earlier. You’ll notice that the initial phase cannot be accomplished until early August, which is outside the timeline the Governor gave us. I’ll be out of the state through June 8. I would be available to discuss this with you, either in person or by teleconference, on or after June 9. Attachment MB Enginces FAX ME Pronners eo 7lgE Economists — Seatte Office Scientists TEL (206) 453-5006, ext 5246, FAX: (206) 462-5957 NE LOL FF 4¢ Fax 7? S6/- 8798 Verification #: Total Pages: Z24 To: Riley Snell From: Daue Grac Company: Alaska Tnd. Dew + Eypevt Auth . Date: (| 5195 od Message: The information in this fax is confidential and proprietary and is intended only for the individual or entity named on the cover sheet. if you are nat the intended recipient, disclosure, copying, distribution or use of this information is prohibited. If you do not receive all of the pages or have received this fax in error, please notify us immediately at the above telephone number. T'd 2TAH WYST:6 S66T ‘S NOL 8668 T9S 406 701 YaS-TIIH WEHD:WOus 2 . Engineers | | tis Planners . CA Economists - ME scientists June 2, 1995 Mr. Riley Snell Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503 Dear Rilcy: Thank you for the opportunity to come to Anchorage to plan additional feasibility analysis of the Copper Valley Intertie, | enjoyed meeting you and Randy Simmons, Based on our discussions, I understand that Govemor Knowles has tasked a blue ribbon committee comprised of you, Mike Irwin, and John Shively to reassess the feasibility of the Copper Valley Intertie and recommend a course of action relative to the $35 million loan appropriated by the state legislature. You have asked CH2M HILL. to provide feasibility analysis to support the committee’s efforts. I have prepared a two-phase approach for our work. Phase | is designed to directly address the two new developments that are fundamental to the feasibility of the Copper Valley Intertie: 1.) Petro Star’s announced plan to Icave the Copper Valley Electric Association (CVEA) system and possibly sell power to CVEA under the terms of PURPA, and 2.) Alyeska’s interest in possibly connecting its relatively large load to the CVEA system. On the basis of our findings in Phase 1, the committee may decide that it has cnough information to formulate its recommendation to the governor and therefore not procced with a second phase, or it may choose to proceed with additional analysis in Phase 2. As currently envisioned, Phase 2 would include more detailed sensitivity analysis and formal decision analysis. Decision analysis and associated documentation may be particularly uscful if significant involvement of project stakeholders is contemplated. Phase 2 would culminate with a comprehensive report on the feasibility of the Intertie. If the committee chooses to proceed with Phase 2, its scope would likely be revised on the basis of information devcloped in Phase 1, Drafts of the scope of work and workplan for this project are attached for your review as Attachments 1 and 2, respectively. The sample decision analysis concept we discussed on Thursday is also attached (Attachment 3) for your easy reference. Please note that the last page of this attachment is not in context of the Intertic. It is simply a sample of a risk Seattle Office 777 108th Avenue NE, Bellevue, WA 98004-5118 206 453-5000 OQ) P.O. Box 91500, Bollovue, WA 98009-2050 Tax No. 206 462 5987 p CB'd Td WedT:6 S66T ‘S NO 8668 TSS 286 201 B3S-TIIH WHS :WOYeS profile that would be developed for the intertie decision or for associated documentation. As shown in Attachment 4, the cost estimate for Phase | of this work is $45,200. An order of magnitude estimate for Phase 2 costs is $44,300. A better estimate of Phasc 2 costs can be devcloped once information from Phase | is available, Thesc estimates are based on the assumption that our analysis can overlay the existing Beck and Bradford analyses using the Beck model without compatibility problems. I will manage the project, assisted by Bob Brooks, Dan Pitzler, Mark Veliccr, and Jeff Haight. Mr. Brooks will be responsible for project modelling and interface with R.W. Beck. Mr. Pitzler will be responsible for assisting Mr. Brooks with model runs and data management. Mr Velicer will be responsible for leading the decision analysis activitics in Phase 2, Mr. Velicer will be assisted by Mr. Haight. Resumes for team members arc provided in Attachment 5. We expect that the draft technical memorandum for Phase | can be completed by August 9. With a one-week period for review and comments, we will complete the final product by August 21. This assumes that we are able to meet with project stakcholders to complete Task 2 during the week of June 12. As I mentioned to you, other commitments will prevent me from mecting in Anchorage between June 19 and July 14. Assuming that by the first or second week of August the committee would know whether Phase 2 is necessary and be able to approve a workplan, we could present initial results by September 5, a Phase 2 draft report by September 27, and, assuming a one-week period for Teview and comments, a final comprehensive report during the sccond week of October. { look forward to working with you and Randy on this project and will call you next week to discuss our plan for project execution, In the meantime, if you have any questions or comments, pleasc call me. Sincerely, CH2N \ HILL ay aay David A. Gray 7 Project Manager EB'd Tce WHLT:6 SE6T ‘S NI 8668 T9S 286 :0L ¥SS-TIIH WEHD :WOsS Attachment | Copper Valley Intertic Feasibility Update Draft Scope of Work The scope of this project will be to reassess the feasibility of the Sutton to Glennallen 138kV transmission line (Copper Valley Intertic) based on certain conditions that have changed since original feasibility studies on this project were completed. To the extent practical, assumptions and analysis used in the R.W. Beck feasibility study (Veasibility Study--Copper Valley Intertie, January, 1994), the Copper Valley Intertie Plan of Iinance by J. C. Bradford (May 3, 1994), and Robert Wilkinson testimony on CVEA avoided cost will be used with changes made only as necessary to reflect changed conditions. The project will be conducted in two phases. Phase 1--Update of Summary Analysis In Phase 1, the existing Copper Vallcy Intertic feasibility analysis will be updated with data to reflect two new conditions: 1.) Petro Star’s announced plan to leave the Copper Valley Electric Association (CVEA) system and possibly sell power to CVEA under the terms of the Public Utility Regulatory Policies Act of 1978 (PURPA), and 2.) Alyeska’s interest in possibly connecting its relatively large load to the CVEA system. The product of Phase 1 will be updates of table I-5 of the R.W. Beck feasibility study and Tables I though LV of the Bradford plan of finance. These will be presented as part of a a technical. memorandum at the conclusion of Phase 1. This work will include conducting sensitivity analysis for: ° Load growth ° Oil prices ° {Interest rate on loans associated with the project C 4-Dam Pool charge rate for output from Allison Lake ° Long-term power supply costs for power from the Railbelt The load forecasts scnsitivitics will be limited to a medium load forecast (the medium-low or the medium-high scenario) from the R.W. Beck study (for reference) and consideration of the following load devclopments: ° Loss of Petro Star as a customer of CVEA D vO'd dtd4H WYST:6 S66T ‘S NOL 8668 T9S 2406 701 ¥SS-TIIH WH :WOdS ° Addition of Alyeska as a customer of CVLA assuming the existence of a Copper Valley intertie (This will include the addition of Alyeska’s existing requirements (approximately 8 MW); also uncertainty surrounding the term of the power supply to Alyeska will be addressed) The load forecast scenarios will likely consist of the following: . Low: Medium forecast less Petro Star Load ° Medium: We will select either Beck’s medium-low or medium-high forecast ° High: Medium forecast plus Alyeska load Input values for oil price forecasts will be reassessed and agreed to with AIDEA before proceeding with the analysis. Analysis of power supply options for CVEA will be limited to the following five development scenarios: . All diesel . Copper Valley intertie . Allison Lake - ° Ifobbs coal-fired generation at Valdez . Petro Star supply CH2M HILL will work with R.W. Beck to arrange tunning the updated analyses on the financial modcl R.W, Beck used in its 1993-94 analysis of the Copper Vallcy Intertie. Analysis will include evaluation of 1.) least cost power supply in terms of present valuc (consistent with the Beck report) and 2.) first year nominal supply costs (consistent with the Bradford report) assuming: . No state assistance e Minimum state assistance, ic. amount necessary only to set first-year rate equal to the base case. ’ A $35 million loan from the State of Alaska at zero interest Phase 1 will be conducted with input from the various stakeholders (CVEA, CEA, ML&P, MEA, Hobbs, Petro Star, and Alyeska) and with close coordination with AIDEA. © SB°d 2&Td# WY8BT:6 S66T ‘S NOL 8668 T9S 286 :0L ¥SS-TIIH W2HD :WOYs Phase 2--More Detailed Study and Decision Analysis Tf, at conclusion of Phase 1, a clear course of action is not apparent, Phasé 2 will provide the additional analysis needed to make a decision regarding the feasibility of the Copper Valley Intertie. In Phase 2, any important residual issues not considered through the Beck model will be evaluated, and formal decision analysis will be performed to more directly address future uncertainties. Among the issues that may require quantification through more detailed analysis in Phase 2 are reliability differences among the various power supply options, This analysis would consider the costs to put reliability associated with each supply option on a comparable basis with the Intertie option. As part of this analysis, costs to firm-up the Allison Lake resource option will be directly assessed. A separate analysis could also be conducted of the likely schedule for the Copper Valley Intertie with realistic consideration given to the time requirements for environmental permitting and line construction. Phase 2 will also include formal decision analysis, The primary benefits of this project component will be 1.) to provide an avenue for stakeholder’s to have formal input on probabilities associated with uncertainties associated with the project, 2.) to explicitly quantify uncertainty associated with the project, 3.) determine the expected yaluc of costs associated with cach supply alternative and the risk profile associated with cach. Most of the cost and utility system data for the decision analysis will have been developed in Phase 1, In Phase 2, uncertainties will be rechecked through an influence diagram, probabilitics associated with uncertainties will be estimated, and a decision tree constructed, From the decision tree model, the expected value of costs and risk profiles = mentioned above will be derived. The influence diagram and probability assessments will be developed though a workshop and individual interviews with key [ntertic project stakeholders. Upon completion of Phase 2, a formal report will be prepared. This report will summarize the findings of the study and document the process used to cvaluate the Intertic and other CVEA resource options. © 98°d dTdH We6ET:6 S66T ‘S NN 8668 T9S 486 201 ¥aS-TNIH WH :WO8S Attachment 2 Copper Valley Intertie Feasibility Update Draft Workplan (Labor days and schedule for cach task shown in parentheses) Phase 1 1. Review project background and develop scope and workplan with AIDEA. (3 days; May 31-June 8) 25 Meet with key stakcholders to get input regarding key issues and probabilities associated with related uncertainties: . CVEA Petro Star Alyeska CEA MEA ML&P Hobbs (4 days; June 12-16) oeeee 3: Meet with R.W. Beck to review financial model. Mect with J.C. Bradford & Co. to gct input re financial plan approach. Obtain Beck model and/or arrange for - custom runs for feasibility update. Do not recheck existing numbers or assumptions in existing Beck model. Continue to usc 1993 dollars as base price levels. (3 days; June 12-16) 4. Reassess analytical needs with AIDRA given findings in Tasks 2 and 3; revise workplan as necessary. (0,5 days; June 28) 5: Obtain additional data needed for update of Beck and Bradford analysis. (6 days; July 3-24) 6. Conduct analysis using R.W. Beck model (15 days--This docs not include time for R.W. Beck assistance; July 17-31) z, Prepare a technical memorandum on analytical results. Reccive comments. (5 days; July 31-August 9) 8. Prepare final technical memorandum. (2.5 days; August 17-21) 20°d 2Ta WYET:6 S66T ‘S NNO 8668 T9S 226 201 YSS-TIIH WH) :WOuS Phase 2 i Review scope and workplan in light of findings/necds from Phase 1. (1 day; August 4) 2 Obtain additional cost and systems data needed for analysis. (4 days; August 7-18) 35 Workshop with key stakeholders to develop influence diagram, outline decision tree and preliminarily assess probabilities associated with certain uncertainties. (3 days; August 14-18) 4, Conduct interview regarding probabilities. (3 days; August 14-18) S: Link Beck model output to decision analysis model. (2 days; August 14-18) 6. Conduct decision tree and risk profile analysis. (10 days; August 21-September 1) A Present results of first-cut to AIDEA, Obtain critical review and dircction. (2 days; Scptember 5-8) 8. Revise analysis in response to critical review in Task 7, (3 days; September 15-22) 9. Present revised results in draft comprehensive report for Phases | and 2. (6 days; September 20-27) 10, Obtain feedback in workshop with AIDEA and other stakeholders, (2 days; - October 2-4) U1. Prepare final report. (5 days; October 4-13) @ 8B'd dTdk Wese:6 S66T ‘S NI 8668 TSS 486 :OL ¥SS-TNIH WHO :WOss 1995 9:20AM #717 P.@9 987 561 8998 JUN 5; TO: FROM: CH2M HILL-SEA Sutton to Glennallen Transmission Line Decision Analysis Conceptual Approach CH2M HILL 5/31/95 € Qusuyoraqy JUN 5S» 1995 9:20AM #717 P.18 987 561 8998 FROM: CH2M HILL-SEA | Sutton to Glennallen Transmission Line | Influence Diagram | | | , 5/31/95 | | Economic | Development / } Load Growth Petro Star Reliability : : Load / Resource | Decision to | uild Transmission | Line —e, Alyeska i Load / Resource : LO Rates | \ : Avalanches | /‘Raiben —— \ Prices / Qe, @ JUN 5, 1995 9:21AM #717 P.11 907 561 8998 TO: FROM: CH2M HILL-SEA r Decision Tree | Sutton to Glennallen Transmission Line Rates < | 5/31/95 Economic = Development / Petro Star Decision to “SYeopment/ ae iene Build Transmissi gad Growth Load / Resource Alyeska Railbelt Line Load/ Resource Avalanches Prices low Zero MW Build / a Low Frequent Low = ie / cS eam = 7\__Med 7<_ Four MW;~ 7X Reliability rm L—. Do Not Buil~< —¢ A High — \4_ Infrequent High \ High \\ Eight MW Reliability Rates / JUN S» 1995 9:21AM #717 P.12 907 561 8998 To: FROM: CH2M HILL-SEA Risk profiles can be used to compare the risks of different policies A TNL I INET INI EIT EE ENT ES OIE TE TES NOTE LIT INI ITE TEE ITT NS FO LLL IIS LITE CTO ES EET IE MTT LIEGE Which policy is riskier? Which has a greater chance of making money (positive profits)? Cumulative Probability Go/Continue $$} -2000 -1000 0 1000 2000 3000 4000 5000 6000 Profits SS ; : ® 6-9 Evaluating Alternatives Attachment 4 Copper Valley Intertie Feasibility Update Estimated Budget Phase 1 Labor (39 professional labor days at average rate of $800) $31,200 Support and expenses (25 percent of labor) 7,800 Contingency (20 percent of labor) _ 6.200 Total | $45,200 Phase 2 Labor (41 professional labor days at average rate of $800) $32,800 Support and expenses (25 percent of labor) 8,200 Contingency (10 percent of labor) 3,300 Total : $44,300 Total $89,500 @ ET*d 2dTéh Wete:6 S6E6Et ‘S NN 8668 T9S 286 :OL WaS-TIIH WH) :WOsS Attachment 5 Resumes : -TIIH WHS : Woes vI'd dTéH WYee:6 SE6ET ‘Ss NOC 8668 TSS 2406 :OL yas: DAVID A. GRAY Senior Energy Economist Education B.A., Economics and Mathematics, Western Washington University Graduate Studics, Economics and Business Administration, University of Washington and Western Washington University Experience Mr, Gray is an economic and financial consultant who scrves as a project manager and advisor on energy, regional, and business economics studies. is expertise also includes financial, utility, transportation, and impact analysis. He devclops and presents expert witness testimony before regulatory bodies. Mr. Gray advises clients on a wide range of energy and utility matters. He conducts utility cost-of-service and rate design studics, load research studies, load forecasts, feasibility analyses, demand-side management and integrated resource planning studies, and contract analyses for a yatiety of clients. Mr Gray has evaluated the economic feasibility of numcrous energy projects in Alaska. For Golden Vallcy Electric Association (GVEA), he evaluated the economic feasibility of participation in the Bradley Lake Hydroclectric Project by Golden Valley Electric Association and supervised the production of an integrated resource plan that supported the utility’s decision regarding the feasibility of the Healy Clean Coal Project. He has also studied tho feasibility of energy conservation resource development for GVEA and for Alaska Electric Light and Power Company (AELP). Mr. Gray also conducted the feasibility studies leading to the installation of AELP’s load management program. He has also conducted reconnaissancc-level feasibility studies of a number of smal! hydroelectric projects in Alaska, His electric ratemaking experience includes testimony on cost-of-service and rate design before the Alaska Public Utilities Commission. He has prepared cost-of-scrvice and rate studies for Scattle City Light, Modesto Irrigation District, AELP, Glacier Uighway Electric Association, and Ketchikan Public Utilities. He managed the environmental impact analysis of rate design changes to the Bonneville Power Administration, Mr. Gray has performed load forecasts for GVEA, AEL&P, Central Electric Cooperative, Inc., in Oregon; the City of Richland, Washington; the Southwest Gas Corporation in Nevada; the Intermountain Gas Company in Idaho; and a number of small towns in southeast Alaska. He has also advised Anchorage Municipal Light and Power, Snohomish County PUD in Washington, and Grant County PUD in Washington on load forecasting as part of a critical revicw of these utility’s load forecasting techniques. Mr. Gray has St'd 2dTd4H WYee:6 S66T ‘S NIL 8668 T9S 2486 :O0L ¥SS-TIIH WH :WOuSs AS DAVID A. GRAY represented the Direct Service Industrial Customers of the Bonneville Power Administration in the preparation of regional load forecasts for the Pacific Northwest. For AELP, Mr. Gray designed the innovative rates to help implement the utility’s conservation and load management programs. These rates included a dual-fuel rate for customers who could have electric heating service interrupted by shifting to an alternate heating source, a water heating control rate, a clean air rate for customers who could use surplus hydroelectric power to displace wood heat, and a heat storage rate, He has also advised AEI.&P on its strategy to market temporary clectric service during periods of hydroelectric surplus to promote conservation during periods of hydroelectric deficits. For GVEA, Mr. Gray has prepared four successive power requirement studies (1985, 1987, 1990, and 1993), conducted an innovative load research project, and prepared the utility’s demand-side ‘management and conservation plans. The conservation plan received the National Energy Award from the U.S. Department of Energy in 1994 for utility technology. He managed an intensive study of energy markets and balances in the state of Kansas to establish a policy for curtailing natural gas during periods of short supply. Mr. Gray testified on the study findings bcfore the State Corporation Commission of Kansas, He also planned this commission's major investigation into electric utility load management, rate design, and conservation. Mr. Gray performs market feasibility studies for public and private projects including port projects, cnergy facilities, and real estate development. For example, he recently conducted a market study that supported a $95 million bond issue for a wood-waste cogeneration facility. His real estate economics background includes warchouse siting analysis and market and financial feasibility analysis of office park development. He also routinely provides least-cost and financial analyses for major public works projects. Mr. Gray has performed a number of transportation development studics, For the Port of Tacoma, Washington, he managed the feasibility study for a successful $60 million bond issuc. He has performed economic analyses for a number of other port developments including developments at the Port of Portland, Oregon; the City of Saxman, Alaska; and the Alaska Marine Highway system in Ketchikan, Alaska. For Seattle Metro he prepared an analysis of the potential economic impact of a bus strike. He advised in the preparation of a major trade forecast by the Chicago, Milwaukee, St. Paul, and Pacific Railroad to assist in zoning changes for switchyard development near ‘Tacoma, Washington. [ec also prepared a report documenting the potential economic impact of Rock Island Railroad abandonment in northwest Kansas. This report was submitted in evidence before the U.S. District Court for the Norther Division of Ulinois. @® 9T'd dTdH Wee?:6 S66T ‘S NN 8668 T9S 2426 :OL ¥aS-TNIH WEHD :WOuS DAVID A. GRAY Mr. Gray has performed numerous economic base and development studies including analyses of cconomic impact resulting from both major construction of new facilities and closure of existing facilities. Mr. Gray regularly performs feasibility studies for public and private projects. Papers and Publications Practical, Low-Cost Load Research for Electric Utilities. Public Utilities Fortnightly. August 1, 1994. Load Forccasting for Small Utilities: Credibility Without a Black Box. Presented at NWPPA Consultants Workshop and Ratcs Symposium, Seattle, Washington. 1985. "The Economics of a Regional Approach to Load Research." Public Utilities Fortnightly. January 1, 1981, Fully Allocated Average Cost of Service Bascd on Forccast Loads and Revenue Require- ments. Presented at NWPPA Rate Symposium, Seattle, Washington. 1978. aTt’d dtd WYHEC:6 S66t ‘S NOC 8668 T9S 2486 sOL ¥SS-TIIH WHO :WOdS ROBERT G, BROOKS Senior Economist Education Graduate Studies in Business Administration, Suffolk University B.A,, Economics, University of Colorado Experience Mr. Brooks specializes in utility planning and analytical studies, including integrated resource planning, financial forecasting, cost of service, and rate design studies for electric, gas, water, sewer, and solid waste utilities. [is background includes the design and development of software for both mainframe and microcomputers. Mr. Brooks recently testified on an integrated resource planning study for the Golden Valley Electric Association. Le developed a dispatch simulation model to evaluate supply- and demand-side resources and presented expert witness testimony before the Alaska Public Utilities Commission. He also served as the lead economist on an integrated resource planning study for the Juneau Alaska area. Earlicr, Mr. Brooks performed power supply planning studics for Ketchikan Public Utilities. Lake Worth Utilities Authority, and Anchorage Municipal Light and Power Company.. Ile has assisted the Omaha Public Power District in evaluating their demand-side management programs, and performed ‘a study of solar power and conservation technologies for the Gas ” Company of New Mexico (now part of Public Service Company of New Mexico). Mr. Brooks was the project manager responsible for the development of MICROCOS™., CH2M HILL’s microcomputer-based cost of service program. He also designed and developed the firm’s detailed financial forecasting program for utilities (VINCAST). Mr. Brooks routincly manages and executes cost of service and rate design studies for clients including the Modesto Irrigation District, Alaska Electric Light and Power Company, Ketchikan Public Utilities, and the Public Utility District No. | of Grays Llarbor County (electric); the City of Aurora, Colorado, and the Salt Lake County Water Conservancy District (water); the City of Alexander City, Alabama (sewer); and the City of Centralia, Washington, Kitsap County, Washington, and the Matanuska-Susitna Borough, Alaska (solid waste); and the cities of Decatur, Illinois and Corpus Christi, Texas (gas). As lead economist on a cost of service and regulatory intervention on behalf of the City of Saskatoon, Saskatchewan, his responsibilities included the analysis and critique of the wholesale supplier’s cost of service and rate design study, and assistance in the preparation of expert witness tcstimony for presentation before the provincial Public Utilities Review Commission, 8t'd dtéH WeE?c:6 S6E6Et ‘S NIL 8668 T9S 2486 :0L ¥AS-TIIH WZHO :WO8s 18, ROBERT G. BROOKS Page 2 “Prior to joining Cl12M HILL, Mr, Brooks worked for a large consulting firm where he was involved in financial forecasting and load research for electric utilities. For the Kingdom of Saudi Arabia, he conducted field surveys of electric utilities and assisted in the design of a large-scale computer-based financial modeling system. This scries of computer programs integrated load forecast and system plan data with financial and operating statistics and projected the Kingdom's electrical requirements for 25 years. As an analyst on load management research, Mr. Brooks developed specialized computer programs to analyze the cost-effectiveness of various load management techniques for South Carolina Public Service Authority, As Programming Consultant to the Economic Council of Canada, he designed and developed a computerized load dispatch simulation model and presented results cost summaries by province for each year of a 5-year planning period. The model performed generation scheduling to minimize opcrational costs, subject to user-selected constraints. As Project Administrator on a 345-kV transmission interconnection project for the New York Power Authority, Mr. Brooks was responsible for progress monitoring and reporting; devel- opment and implementation of project procedures; coordination of specifications, drawings, and contract documents; and accounting and cost control. Membership in Professional Organizations National Association of Business Economists - AREE/Demand-Side Management Society D 6T'd 2TdH Were:6 SEe6Et ‘S NN 8668 T9S 2486 :OL ¥SS-TIIH WHO :WOuS MARK A, VELICER Management Systems Analyst Education M.S. Engineering Management and Environmental Systems, Cornell University B.S. Civil-Environmental Engineering and International Studies, Univ. of Llinois Summary Mr. Velicer specializes in environmental systems management for C1I2M UILL’s Bellevue officc. His expertise lies in the areas of integrated management planning and implementation, quantitative management methods, organizational analysis, economic feasibility analysis, and management information systems. Le has formal training and project experience in environmental systems modeling, decision analysis, uncertainty analysis, and other computerized decision aids. Experience Mr. Velicer was the lead management systems analyst for a Fortune 200 manufacturing firm’s management assessment of company-wide remcdiation systems. This review included asscssment of corporate remediation costs, risks, and liabilities, evaluation of corporate environmental strategics to reduce risk and liability, internal communication processes, an organizational assessment, and staffing analysis relative to risk at various plant sites. - Mr. Velicer was recently task leader for the decision and uncertainty analysis for a Fortune 500 energy firm, This project involved realistic assessment of the risks and uncertainties associated with managing over 300 of the companies hazardous waste sites. Mr. Veliccr guided a team of engineers to perform approriate cost estimates, conducted a decision and uncertainty analysis, and communicated the results in a clear and understandable format to upper management. The results of this analysis were used in successful insurance cost recovery negotiations. Mr. Velicer is currently performing a decision analysis to assist a Fortune 500 oil and gas production firm in its decision to relocate a local municipalities water supply well system, ‘This analysis involves a comprehensive analysis of the financial and public image risks faced by the company, and employs a multi-attribute decision technique to combine both quantitative and non-quantitative risk considerations. Mr. Velicer recently managed a strategic, risk-based biomedical waste management plan for Swedish Medical Center (SMC), the largest medical facility in Seattle. ‘This comprchensive assessment is driven by simultaneously changing organizational, technological, regulatory, and economic influences affecting SMC. ‘This project includes an audit of staffing levels and budgets for current waste management practices. Recommendations for reduced costs and improved operations are based on waste stream A ap es! 7 @2°d 2Ttd4H Wepe:6 SE6Tt ‘S NN 8668 T9S 486 :0L ¥YAS-TIIH WHS :WOeS projections, a treatment and disposal technology review, cconomic analysis, and regulatory strategy. Mr. Velicer is currently performing an effectiveness and organizational evaluation of hazardous and moderate risk waste managenient programs implemented by four agencies in King County, WA, in conjunction with SERA, Inc, ‘lhis evaluation is designed to assess how existing program activities are meeting stated objectives and budgets, and design new evaluation procedures to measure program performance in the future. Evaluation methods and success indicators will be designed and implemented for all programs, including recommendations regarding methods of data collection, compilation, presentation, and analysis. Mr. Velicer is currently assistant project manager for the Regional Needs Assessment in King County, Washington. This project is a consensus based decision process to implement a new watershed/ecosystem approach to surface water management in the region. This project involves establishment of existing environmental conditions and modeling of future water resource conditions; consensus building decision approaches for stakeholders, surface water managers, and elected officials; evaluation of the economic implications of surface water regulations; evaluation of institutional alternatives; and implementation of a preferred regional arrangement for storm and surface water management. Mr. Velicer is currently structuring a consensus based alternatives analysis and decision process for the Washington State Ferry system, using the Nominal Group Technique. This ferry terminal master planning process will formall develop siting and development criteria for both technical and community concerns, develop value tradeoffs and criteria weights - through an interactive and community based process, and sclect a development alternative for recommendation to policy makers. Mr. Velicer was assistant project manager for the full development process for the Lewis County transfer station, This process included comprehensive system planning, economic feasibility analysis, siting, and conceptual through full design. The siting process was structured to allow full Solid Waste Advisory Committee (SWAC) involvement in criteria setting, scoring, and evaluating for a broad screening process to narrow the number of feasible sites to three before detailed enginecring investigations took place, Mr. Velicer assisted the County in a bid procurement for waste export services, and was responsible for export and transfer system compatibility issues. ‘This process included bid options for other Counties in the region to participate in a shared export arrangement. Mr. Velicer was project manager for conceptual design and siting of the Kitsap County moderate risk waste management facility. This facility will accept household hazardous and small quantity business wastes from all County residents. For four western Washington counties, Mr. Velicer has developed comprehensive solid waste management plans, including administrative and financial strategies. In each case he lead the development of system cost assessments detailing the funding and financing a) Te'd dtd WeSe:6 S66t ‘S NN 8668 T9S 286 :0L ¥AS-TIIH W2HO :WOuS mechanisms for all operating and capital costs components over a detailed 6-year implementation horizon. I{e also contributed to a regional plan for system of 8 counties .-- in southwestern Washington. e Mr. Velicer has worked several western Washington jurisdictions regarding the procurement of contracted private services for construction and operation of solid waste management programs and facilities. His negotiating and procurement cxpericnce includes the joint Lewis/Grays Tarbor waste export contract awarded for a value of $38 million over a 20 year period, and the Grays Harbor transfer station construction and operation services contract worth $21 million. Mr. Velicer has developed several customized computer decision aids for use in environmental systems management planning. He worked with the Tellus and Cornell Waste Management Institutes to develop the WastcPlan (c) cost model and develop in- house municipal and County staff expertise in New York State, and currently is responsble for training CH2M HILL staff in all offices in the usc of WastePlan. Mr. Velicer has customized the EXTEND graphic simulation model for usc in water resources and solid waste system-wide planning and analysis, and has also applied the model to specific technical problems such as pollutant loading analysis. Mr. Velicer has practical experience in the application of simulation packages Stella and Ithink, the VP-Expert expert system shell, multi-objective decision tools BestChoice and Multi-Objective Reasoning Environment (MORE), uncertainty and risk analysis tools including At-Risk and Crystal Ball, and decision tree analysis for risk management using DPL. Prior to joining CII2M HILL, Mr, Velicer developed diverse environmental systems experience, including solid waste system software development and implementation for Me Cornell’s Waste Management Institute, hydropower and environmental modeling for Pacific Gas and Llectric, international training in water resources engineering, and instream flow methodology work for the Illinois Natural Llistory Survey. Affiliations il Association of Northwest Environmental Professionals Governmental Refuse Collection and Disposal Association Association of Hospital Engineers King County Municipal League Alki Foundation Publications Choosing a Medical Waste Treatment Technology. With Terrill Chang, P.C. Air and Waste Management Pacific Northwest International Section, November, 1993. Managing Integration: A Local Government Guide to Cost-Lifficient Program Implementation, or, “What Wasn’t Written in Your Solid Waste Management Plan." Biocycle Conterence Presentation, March 1993 and Biocycle Magazine, April 1995. .) @? 9 vee e2'd 2teH WeSe:6 S66T ‘S NNEC 8668 T9S 486 2OL YAS-TIIH WEHD :WOeS Avoided Costs of Waste Reduction and Recycling in New York State. With Dr, Daryl Ditz, Cornell University Waste Management Institute. lebruary 1991, Avoided Costs From Recycling Investment. Corncll University Waste Management Institute. July 1990, The Tompkins County WastePlan (c) Report. Engineering Management Project Report. Cornell University. May 1990. Guidelines for Minimizing Environmental Impacts From River Diversions. With E.F. Herricks, University of Illinois, For Illinois Department of Transportation. August 1987. E2'd Ltat wWw9Z:6 S66T ‘S NOC 8668 19S 206 :0L BSS-THTH WEHO :WO8s JEFF A. HAIGLT Solid Waste Engincer Education M.S., Engincering Management, Cornell University B,S., Environmental Engineering, Cornell University Experience Mr. Haight is a member of the solid waste department in CII2M [1ILL’s Seattle regional office. His responsibilities include system planning, cost modeling, facility design, and recycling plan development. For the city of Istanbul, Turkey he assisted with the evaluation of specific multi-family recycling options for Istanbul’s recycling initiative. For BC Uydro, Vancouver, Canada, Mr. Haight assisted in the final solid waste management plan, including incorporation of detailed cosV/bencfit information, In addition, Mr. Haight has assisted with the planning and design of a landfill gas drainage system for the closure of the Kent Iighlands Landfill in Kent, Washington, Currently, Mr, [aight is working with Lewis County, Washington, in the preliminary design of a new solid waste transfer station. [lis responsibilities include assistance in cost estimation and operational impacts on design. Prior to joining CH2M HILL, Mr. Haight acquired diverse environmental planning experience. As a maritime development advisor, he preparcd cost and feasibility assessments for maritime development projects in the Washington D.C. area. — While working for the Center for Environmental Research at Cornell University, Mr, [aight developed water-level management plans for Skaneatcles Lake in New York. ‘These plans outlined annual dam operation schedules in order to satisfy environmental, flood, and re- creational needs. For both assignments, his recommendations involved striking delicate balances between political, economic, and environmental considerations. As a graduate student at Cornell University, Mr. Haight ercated a decision model for the utilization and disposal of waste ash for Monroe County, New York. ‘The first part of this model involved comprehensive economic and feasibility studies for the uses of ash generated from the incineration of the County’s waste treatment sludge. The second part formulated alternatives through joint linear and integer programming. All the recommendations were then examined in an extensive sensitivity analysis before presentation to the County. Membership in Professional Organizations Government Refuse Collection and Disposal Association seal2220,wpi/t 11/19/92 be'd LTdH Wede:6 SE6tT ‘S NIU 8668 T9S 246 :0L YSS-TIIH WHO :WOdS DANIEL RK. PITZLER Economist Distinguishing Qualifications Experienced leader of feasibility studies for many types of projects Conducted over 20 cost of service and rate design studies Related Experience Mr. Pitzler provides strategic planning and technical assistance to public- and private-sector clients on a wide range of cnergy and waste management issues. Flis areas of expertise include feasibility analysis, cost of service and rate design, computer modcling, financial management and analysis, procurement, and forecasting, Representative Projects Lead technical analyst for a demand side management plan, multi-quarter load research program, and rate analysis for Alaska Electric Light and Power, Technical analyst and lead computer modeler for power supply planning and cost of service studies for Ketchikan Public Utilities. ‘Task leader for a cost of service study and rate analysis for Glacier Highway Electric Association. Task leader for marginal cost rate analysis and yarious other rate issues for Omaha Public Power District (NL). cad computer modeler and technical analyst for a cost of service and retail rate study for Central Electric Power Coop. (SC). Technical analyst for a cost of service analysis for the City of Saskatoon, Saskatchewan. ‘Technical analyst for a rate analysis for revenue bond issue, Grant Co, PUD, (WA). Task leader for a cost of service study for Midstate Electric Cooperative (OR). Technical analyst for a cost of service study for Modesto Irrigation District (CA). Task leader for an analysis of solid waste rate structure alternatives for the Matanuska-Susitna Borough. uy) S@*d dTdH Wete:6 S66T ‘S NN 8668 T9S 206 :0L ¥SS-TIH WEHD :WOuS . Project manager for a solid waste rate study and two updates to that study for the City of Unalaska. * Lead economist for a 20-month series of housing market studies conducted for US army bases in Germany. . Task leader for an analysis of waste management funding alternatives for Citrus County (FL). . Project manager of a solid waste rate study for Kitsap County (WA). . Task leader for an econometric waste stream forecast for Snohomish County (WA) as part of an engineer's report for a revenue bond issuc. ° Task leader for evaluation of proposals submitted to B.C. Hydro (B.C.) by private vendors for construction and operation of a refrigerator recycling and buyback program. * Project manager of a feasibility study of installing pre-load compaction equipment in five transfer stations for the King County Solid Waste Division (WA). ° Task leader for an economic analyses of disposal alternatives for the City of Unalaska. e Task leader for an economic analysis of disposal alternatives for the Kenai Peninsula Borough. . ‘Task leader for development of CH2M HILI.'s methodology and computer template for conducting cost assessments that are ceviewed by the Washington Utilitics and Transportation Commission as part of the approval process for completing Comprehensive Solid Waste Management Plans in Washington State. e Task leader for devclopment of a computer model that simulates countywide solid waste system opcrations using a transportation network analysis, an econ- ometric forecast, and information from regional planning agencies as part of a system operating plan for King County (WA). Education M.A., Economics, University of Washington B.A., Economics, Westem Washington University Membership in Professional Organizations Scattle Economists Club e Solid Waste Association of North America 92é*d dTdH WeSe:6 SE6t ‘S NN 8668 T9S 2486 :OL ¥SS-TIIH WHS :WOuS Format for Summary Results of Supplementary Analysis to Copper Valley Intertie Feasibility Study (April 1994) I | f | T i | i Tati 1 T | Med-High 4 | Med-High | ! + Weerigh Fet Less TMed-Hignt Fet Less | T Medium! Fet tess | PetroStar | Medium | Fot Less| PetroStar_| 1 er Es Pease Plus Alveska (2| High Fet. | PetroStar Sus Alves | | ! Present Value (000): | | | | = = = t 1 | - | All Diesel | | i i Tatertie (3) _ oT TC —T Allison Lake (4) Tt | | | Silver Lake TT | I ! Valdez Coal I | ; | | PetroStar Generation (5) [SOOXXXX JXXXXXXKK T |= i Alyeska Generation (6) | ml TOSI IXXXXXXXXXKK | | | \ Benefit/Cost Ratio: I 2 __t | \ | | i Ail Diesel T L | 1 Intertie (3) + T | aa Allison Lake (4) Z | 7 I = Silver Lake I is 2 | Valdez Coal I | PetroStar Generation (5) IXXXXXXXX | [XXXXXXXK | I Alyeska Generation (6) | XOX XKKAAXKKK | XXXKXXXXXXKK | T ~ t “7 i — i — } =I ———— | (1) Assumes a loss of all sales to PetroStar (for sales to PetroStar, see page VIlI-10 of Intertie study) | i (2) Assumes Alyeska sales of 50 milllon kWh per year, capacity requirements of 8 MW a | (3) Does not include | consideration of $35 million loan _ | (4) Includes no payment for additional Solomon | Gulch energy | | (5) Assume 6MW resource at plant factor annually, reserve requirements at Valdez increase from 2. : MW to 3.9 (6) Data on generation cost and other characteristics currently not available. _—_| | Page 1 z00B TIIH NZHO 4962 29F 902 X¥d Le7eT © gByeovi0 coog Changed Conditions Since Completion of Copper Valley Intertie Study (April 1994) Allison Lake: New configuration and costs. Valdez Coal (Possible) Oil prices are down. In 1995, CVEA pays $0.63 and $0.65 per gallon in Valdez and Glennallen, respectively. Assumptions used in Intertie feasibility study were $0.70 and $0.75, respectively, in 1993 dollars. (Works against Intertie) DOR appears to have lowered its low oil price forecast significantly. R.W. Beck lowered its corresponding low fuel price forecast from +0.66 percent per year in the Intertie study to -1.5 percent in its June 1995 Evaluation of Power Supply Alternatives for CVEA. (Works against intertie) Diesel generator costs are down. (Works against intertie; Appears to be relatively low impact) Transmission losses on the Intertie are now estimated by Beck to be 5%. In the Intertie study they were set at 3%. (Works against intertie; Insignificant change) Variable O&M cost for diesel generators is now estimated to be 1.25 cents per kWh compared to 1.00 cents for new units and 3.00 cents for old units in the intertie study. (Works against Intertie) TIIH W2HO May 8, 1995 TO: Riley and Randy FROM: Dennis SUBJECT: Draft Scope of Work Sutton-Glenallen Intertie Feasibility As usual, Bob LaResche has provided a good start and lots of ideas. While the scope does not address this topic, I believe there is a fairness issue which must be addressed. It is my understanding that CVEA issued an RFP for power supply proposals and that several companies responded. It seems only fair to give these companies an opportunity to respond to this initiative. In addition there are APUC related actions and litigation being considered regarding power supply proposals to CVEA. These need to be considered too. My comments are: Parties: 1. I would recommend that the communities for Glenallen and Valdez be involved in some manner. 2. Why is Golden Valley a party? They have taken a position that no intertie to the north is feasible. Previ tudi 1. I recommend that Petro Star be asked to submit a written proposal supported by an outside consultant. This is too important a action to rely only on their internal assessment. 2. Contrary to Bob’s view, I believe the right way is to have Petro Star respond to an RFP for power supply. 1. Petro Star’s proposal can be pinned down by a proposal and response to a power sales agreement. What is Petro Star’s position regarding their own back up power? 2. CVEA’s intentions can be best be addressed by defining the conditions of purchase. This should be done in an RFP. 3. Clarification of Alyeska involvement is important. In addition to their intentions regarding power purchase, we need to address whether CVEA will wheel power to Alyeska, define Alyeska intentions relative to their own generation, and status of all parties backup obligations. 4. Chugach intentions as noted must be defined or assumed as input for the study. lin ibl 1. No comments. Assess Relative Impacts 1. It appears that this task is what the PUC is supposed to consider. 2. I strongly agree that the $35M must be clarified as to use and could be considered as an already committed sum for the general purposes considered in the study. However I do not necessarily believe this is a “given” since it basically precludes the no action alternative benefits. May 22, 1995 TO: Riley ofan) FROM: Dennis SUBJECT: Copper Valley Intertie First draft. I am not very pleased with this draft. I think it is because I am not sure of the Committee purpose. General Purpose The purpose of the Committee is to determine if under current conditions, including the recent Petrostar proposal and policies of the major participants, whether the Intertie remains the most economic choice for Copper Valley and the State. The major participants are envisioned to be CEA, CVEA, Alyeska, and the State. If the Intertie is no longer the most economic choice, the Committee needs to define a process or methodology to determine the most economic choice. General Approach The scope of work described below has for the most part been completed over the last several years. However it has been done in a disjointed manner without specific precedent conditions. The lack of precedence when the Intertie was first considered by the legislature and the prolonged Intertie environmental assessment have created a situation where any specific action taken by CVEA or direction provided by the Committee will be questioned due to the inconsistency of the underlying assumptions and policies. Petrostar’s concept of combustion turbines producing power for self generation and export and waste heat for self use is a mid term energy solution for CVEA and the State. While economic benefits may be developed for Petrostar’s proposal and compared to other generation options for CVEA mid term energy needs, these benefits depend more importantly on policies of the major participants regarding long term energy requirements. Therefore it appears prudent to start at the policy level and evaluate Petrostar’s proposal only after defining the major participants’ and State policies toward energy development. After this is completed, it can be determined how the Petrostar proposal matches the long term policy goals of the major participants. A long term perspective is recommended in light of the $35M interest free state loan. Background The first task is to assemble and review previous studies and work. Activities are: 1. Collect and summarize all the previous energy and generation requirements studies for the major participants. 2. Assess the current validity of these studies. Determine if more background data or studies are required. 3. Sort the previous work and studies into mid term and long term energy options. 4. Initiate scoping discussions with the major participants to determine their role. 5. Redefine the scope of work as necessary. Precedent Conditi The establishment of the precedent conditions should be done prior to considering any specific proposal from Petrostar. This process could be accomplished by scoping discussions and through presentations by the major participants. Each participant will be asked to present their long range plans relative to energy growth and generation. It is important to note that the State is a major participant whose policies have major impact. Much of the current confusion is a result of changes in State policy and inconsistent approaches due to the prolonged process CVEA has incurred. Major precedent conditions for consideration are: 1. Determine the State policies towards the following: 1.1 energy requirements and generation alternatives. Will these be considered based upon CVEA perspective or a broader regional perspective including the Railbelt? 1.2 National issues. Determine State policy towards issues such as independent power, open and retail wheeling access, and role of the APUC. 1.3 Legislation. Determine the allowable legislative uses of the $35M interest loan and whether the “do nothing return to the State” is a option. What are the opportunity costs for a $35M State interest free loan? 2. Define the Alyeska role and clarify whether it is as a purchaser of power, independent self generator, or an independent power producer. 3. Define CEA’s role and whether they intend to be a long term supplier to consumers in the CVEA service territory. 4. Determine CVEA’s long term policy whether to be a producer or distributor of energy. 5. Define whether the mid term options will be limited to the Petrostar proposal. 6. Evaluate the current proposed Intertie for any fatal flaws regarding: -environmental concerns or State policy issues - financing viability with and without State assistance -conflicts with precedent conditions At this point the most appropriate option may be self evident and all later work aborted. However if the answer is not self evident, the study would be defined and could proceed as described below. Mid Term $ ; The first step of this task is to define the number and types of mid term options to be considered. Particularly the following issues need to be addressed; 1. State policy toward continuance of diesel oil fired generation 2. Determine whether the scope of the evaluation will include other generation options in addition to Petrostar. These may include: Allison Lake. Note they are proceeding with a FERC application Glenallen Coal Project. Note APUC appeal and litigation Other projects. Responses to CVEA RFP’s. 3. Request specific presentations from the selected generation options for the mid term solution. Alternatively these potential suppliers could be asked to respond to a RFP for energy and capacity which CVEA may have already prepared. Cost Benefit Analysis The cost benefit analysis should be based upon the proposals from the mid term participants in the context of the precedent conditions developed above. Of particular importance is whether it will be done from CVEA or the regional perspective. 1. Define CVEA’s current and mid term energy and capacity needs on an annual and a seasonal basis. 2. Develop a conceptual RFP which will be a starting point for discussions with Petrostar or other generation suppliers. 3. Examine Petrostar’s ability to satisfy these needs and to be a provider for the duration of the CVEA requirements. 4. Define the terms and conditions under which such purchase would be made including the duration and the seasonal 5. Seek specific proposals and presentations from Petrostar and any other eligible suppliers. 6. Define impact of Petrostar on and off the CVEA system based on their proposal. 7. Examine other proposals in a like manner 8. Determine the economic benefits of the Petrostar proposal and other proposals as deemed prudent. Sensistivity Analyses At this point it may be necessary to reexamine the results and determine what conditions may have the most impact upon the results of the study. These could include a better and higher use for oil than diesel generation, availability natural gas for generation and/or export, and future decline of energy requirements in the CVEA service territory due to decline of oil and fishing industries. _PPR= 10-96 MON 09:47 ST ALASKA DORA ANCH FAX NO. 9072694520 P, 01/04 TONY KNOWLES F.0. Bax 116004 GOVERNOR Juneau, Matis Saati oent (807) 485.9500 Fax (907) £85-3532 STATE OF ALASKA QFFIGE OF THE GOVEANOR JUNEAU MEMORANDUM TO: Commissioner Mike Irwin Department of Community and Regional Affairs Commissioner John Shively Department of Natural Resources Reilly Snell, Director : : . - swat yeas Alaska Industrial Development and Le FROM: Governor Tony Knowles i DATE: April 6, 1995 RE: Sutton-Glcnnallen intertie fn er ene a tre ot pee 8 er nn nn en nn ee eee Upon review of your April 5 memo regarding the Sutton-Glennallen intertic, I am directing you to lead an interagency review of key issues in connection with the project, Those issucs include: 1. Long-term futare of the trans-Alaska pipeline. 2. Power demand and cogeneration options for the Petro Star Valdez Refinery. 3. Future options for the trans-Alaska Gas System. 4, Cogeneration and possible power purchase options for the Alyeska Marine Terminal 5. Loan agreement options, The other team members are the Alaska Department of Natural Resources and the Alaska Industrial Development and Export Authority. This revicw should include obtaining the most current data upon which a decision can be made regarding the intertie project. The review should be completed no later than July 1, 1995. Post-it” Fax Note 7671 _ AE MON 09:48 ST ALASKA DCRA ANCH. FAX NO. 9072694520 P, 02/04 2 i MEMORANDUM STATE OF ALASKA Community and Regional Affairs TO: Tony Knowles DATE: April 5, 1995 Governor FILE: Thra Jim Ayers Chief of Staff z PHONE NO: 465-4700 Meee FROM: Mike Iewin Finkeop SUBJECT: Sutton-Glennallen Intenie Commissioner Dept. of Community and Regional Affairs As you know, the 1993 legislature appropriated $35 million to be used as a zero-interest loan for the Sutton-Glennallcn intertic but made the appropriation contingent on completion of a feasibility study and plan of finance “satisfactory” to this department. My predecessor issued a finding in July 1994 that the required studies were satisfactory in his judgment, and directed the Division of Energy to move forward with issuance of the loan. To date, however, agreement has not becn reached on the terms of the loan and none of the appropriation has yet been spent. Based on our March 17 briefing with you and subsequent discussions with other members of our administration about this project, we have concluded that additional information is needed before a-well informed decision about proceeding is possible. What follows are a list of issues about which further information is needed. The issues will be reviewed in the context of: 1. What approach best protects the long term interest of the consumers; 2. The statutory terms of the proposed loan, 3. The continued financial feasibility ofthe project; and 4. Sound management practices. 1. PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended Action: Top management at Petro Star should be contacted to gain insight into the company’s long-term plans with respect to power supply, although Petro Star may not have developed clear long-term plans at this point. Two basic issues that require review and analysis are: ; A. Will Petro Star generate power for its own use and for sale into the utility grid? B. Will Petro Star purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? APR-10-95 MON 09:48 ST ALASKA DCRA ANCH. ___ FAX. NO. 9072694520 uo. eee P 03/04 Tony Knowles, Governor April 5, 1995 Page 2 I. LONG-TERM FUTURE OF TRANS-ALASKA PIPELINE Recommended Action: The uncertainty associated with predictions of pipeline shut down should be addressed by soliciting views directly from top management of the major oil companies operating onthe North Slope. | Discussion: If the pipeline and marine terminal are shut down by 2020, very possibly taking the Petro Star refinery with it, the intertie would not be viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth. WJ. TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action’ For gaining insight into the likehood of TAGS construction 10. years from now, the State should contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arion Tussing. There ate two main questions that should addressed: A. Is TAGS likely to be built in the time frame identified in the intertie feasibility study? B. If TAGS is built, will the effect on the CVEA electric utility be primarily to increase the demand for utility power or to provide a local, low-cost supply of power from the TAGS terminal operation? If the primary effect is to increase demand, intertic viability is enhanced. Ifthe primary effect is to introduce a new local powcr supply, the intertie may become unnesessary for purposes of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted, however, is very small in relation to Railbelt power requirements. IV. ALYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE Recommended Action: For gaining insight into the future prospects of Alyeska either " purchasing power from the utility grid for its marine terminal operations, or selling power into the utility grid, the State should contact top management at Alyeska, Although the subject has been reviewed and negotiated on numerous accasions in the past, Alyeska has always decided in the end to remain isolated electrically. One reason commonly cited for Alyeska’s historical reluctance to sell power into the utility grid is the company’s unwillingness to subject itself ta APUC regulation with regard to such power sales. A. Will Alyeska generate power for its own use and for sale into the utility grid? APR-10-95 MON 09:49 ST ALASKA_DCRA ANCH FAX NO. 9072684520 P, 04/04 OLY bis . Tony Knowles, Governor Apni 5, 1995 Page 3 B. Will Alyeska purchase power from the utility over the long term, and sign a power purchase agreement locking in substantial minimum purchases? V. PROVISIONS OF PROPOSED LOAN AGREEMENT. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction, supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to secure the financing. We need a measure of confidence now to authorize proceeding with Phase 1, but greater confidence in the long-term financial viability of the intertic will be needed to get to Phase 2. It should be noted that the Administration does not have the statutory authonty to forgive repayment of the loan, even if the project is abandoned after completion of Phase 1. SUMMARY COMMENT We recommend that top State officials undertake the recommended discussions with industry matagement, with relevant department Commissioners, and with other sources as needed to gain insight into the probabilities surrounding certain key long-term developments that bear on the intertie’s viability, The Department of Community and Regional Affairs is of course ready to assist in any way you deem appropriate. 3 PAA NW. 9UIs00C940 ol UE TOTES iss entuns ee YET VONGOY 55 6 oe + LARA UL UP CACRUTS DU /4DDZUIE FE B v. MEMORANDUM STATE OF ALASKA . Community and Regional Affairs TO: Percy Frisby DATE: April 5, 1995 Director Division of Energy FILE: 1 PHONE NO: 269-4644 FROM: Richard Emerman if nb SUBJECT: Sutton-Glennalien Senior Economist Intertie ; Division of Energy A recent newspaper article indicated that the Petro Star refinery in Valdez plans to. discontinue purchasing power from Copper Valley Electric Association (CVEA) within the next couple of years and plans to generate jts own power instead. In addition to |j meeting its own needs, the refinery may decide Lo sell surplus power to the utility as well. Because the Petro Star electrical load‘is an important factor in the economic feasibility of the Sutton~Glennallen intertie, this development would seriously erode the economic case for the intertie in the absence of any other compensating factors. This in tum could lead to reconsideration and possible reversal of the July 5, 1994 administrative finding, in . which the DCRA Commissioner declared that a “reasonable demonstration” had been made that the intertie is economically feasible. In view of this development, I suggest that the Administration proceed as follows: IL. In our March 17, 1995 meeting with the Governor; a preliminary consensus was reached that top officials should look into certain issues of particular importance in judging the feasibility of the intertie, specifically: A, the long-term future of oil production on the North Slope and of the oil pipeline to Valdez; B. power supply plans of the Petro Star Valdez refinery; C. possibilities associated with the proposed natural gas pipeline to Valdez, and, D. power supply plans of the Alyeska marine terminal in Valdez. tr PMA NU. 9UI40DE94O i yunnud, ay IY sct vera JUNENY oa§ s toedd » LRA ULV Ur ENCRGY~ 90746520468: 9 : j | ‘ i H Percy Frisby April 5, 1995 : Page 2 i This recommended course of action was formalized in the attached memorandum dated March 24, 1995 to the Governor from Commissioner Irwin. 1 Ii. This course of action still makes sense today and should be undertaken as planned} Tmanagement directly to inquire about its plans, as proposed in the March 2 memorandum. We cannot assume that the newspaper article contain ’ complete and accurate information. A. With regard to Petro Star, the Administration should contact 34 B. There may be compensating factors. For example, if Alyeska decides td purchase utility power for the marine terminal in the event the intertie ig: built, the effect of losing Petro Star as a utility customer might be offset; Top management at Alyeska should still be contacted directly by Administration officials for insight into their power supply plans. : C. Overall, it is best to consider these issues in a careful and deliberatel| manner. The State is presently in litigation with respect to thel! Commissioner’s July 5, 1994 administrative finding, and may be involved! in additional litigation if that finding is amended. or revoked. D. ~— After the consultations recommended in the March 24 memorandum are completed, the Administration should invite CVEA to come in and make its|| esse, CVEA may be able tv convey additional information or ideas that the Administration should consider. UI. If the Administration is considering a2 policy reversal on the intertie after the |) process outlined above has been completed, the next step should be to direct our | consultant to produce one or more new runs of the computer model that was | developed for the economic feasibility analysis. For example, if the only significant change to the previous assumptions is that Petro Star will remove itself as a utility customer, the comparison of the intertie with the diesel “base case” should be re-run to determine formally how this changes the long-term economics. IV. If the Administration at this point decides to disapprove the intertie, the Commissioner of DCRA would issue a new administrative finding declaring the State’s revised conclusion and describing the review process that Iced up to it, including the cansultations and revised economic projections noted above. A new VITmMVveUTU be Ut yh Di LAAT Te were eee ys 2 13:44 + DERA DIV OF ENERGY- SITES H Percy Frisby April 5, 1995 Page 3 finding might also be based in part on a revised weighting of environmental |} criteria. As you know, the $35 million appropriation for the zero-interest loan was contingent on completion of a feasibility study and plan of finance “satisfactory” to DCRA. A revised finding would essentially declare that the studies had not produced a satisfactory demonstration of the intertie’s feasibility. t Vv. If the Administration disapproves the intertie, CVEA consumers will still be burdened with rates that are roughly twice the level paid in Anchorage and in the larger communities of Southeast Alaska. A proposal to use part or all of the $35 . million to help reduce rates for CVEA consumers could be put forward by the || Administration: | A. Use of these funds to subsidize a different power supply alternative might not be appropriate if Petro Star does proceed to sell power to the utility. Surplus power from Petro Star could be an attractive alternative to diesel without State subsidy, B, The State-owned Solomon Gulch hydro project will continue to provide a major sharc of CVEA’s power requirements. Wholesale power rates of 7.0 cents/kWh or more will be paid under the existing power sales contract which extends until the year 2030. It may be impractical to reduce this obligation contractually because Solomon Gulch js tied into the Four Dam Pool, and it would be very difficult to affect the obligations of one |} participant without affecting the others. ; t Even so, the clearest and most direct approach to reducing ratcs over the long term for CVEA consumers would be to somehow reduce their payment obligation for Solomon Guich power. One idca would be to invest some or all of the $35 million over a 35 year tenn and use the carnings of the investment to pay a portion of the wholesale power cost for Solomon Gulch otherwise payable by CVEA consumers, For illustration, assume that CVEA consumers presently purchase 45 million kWh from Solomon Gulch at $0.07 per kWh - about $3.1 million per year. If $35 million were invested at 7.5%, interest eamings alone would be $2.6 million per year. Less than 535 million could be invested and still provide very significant long-term rate reduction. Perhaps Percy Frisby April 5, 1995 Page 4 Attachment tyveotu AEA/AIDEA, as owner of the hydro project, could invest the funds an enter into a long-term rate reduction agreement of this nature. peu Teese 6 saa: DORA DTV OF ENERGY- 9074652946211 i i | Intertie/Energy Briefing Healy to Fairbanks ¢ — Issues: 1. Ownership of Project: Legislation vs. Participant’s Agreement. 2. Benefits to utilities other than GVEA. 3. Scaled back project. ¢ Current Status: 1. Design and permitting underway. 2. Project completion projected for March 1997. ¢ Funding and Cost Estimate: 1. Funding: Grant: $43.2 million ($760k expended to date) Bonding Authority: $60 million 2. Construction Estimate: $75.3 million ¢ — Interested Parties: 1. GVEA 2. Participating Railbelt Utilities 3. Labor (project labor agreement) 4. APUC ¢ Actions Needed and Timing: 1. Resolution of Core Business Issues. 2. Action needed within next 60 days to keep project on schedule. one a ¢ Issues: 1. Ownership of Project: Legislation vs. Participant’s Agreement. 2. Unsatisfactory progress to date. ¢ Current Status: 1. Construction estimated for completion third quarter 2001. ¢ Funding and Cost Estimate: 1. Funding: Grant: $46.8 million Bonding Authority: $60 million 2. Construction Estimate: $84.1 million 1 Interested Parties: 1. CEA 2. Participating Railbelt Utilities 3. Labor (project labor agreements) 4. APUC Actions Needed and Timing: 1. Resolution of Core Business Issues. 2. Action needed within 30-60 days to keep project on schedule. Sutton to Glennallen Issues: Possible further action by Hobbs. Request for Appeal of Administrative Decision by DCRA. APUC filing concerning possible coal project by Hobbs. Opposition by Sutton and other residents. Significant environmental issues Governor’s concurrence with feasibility study. NAS oh = Current Status: 1. Feasibility Study completed. 2. Negotiation for loan package in process. 3. Injunction by Hobbs lifted. 4. Design scheduled after loan package completed. 5. Start-up of construction anticipated in 1997 or 1998. Funding and Cost Estimates: 1. Funding: Loan: $35 million Bonding Authority: $25 million 2. Construction Estimate: $53.6 million Interested Parties: 1. CVEA 7. Petro Star ML&P CEA Labor (project labor agreement) Consumers Area legislators DS ie) Actions Needed and Timing: 1. Agreements between parties determined. 2. Immediate if project to proceed on schedule. Swan Lake to Tyee Lake Issues: Valdez Rehmery DAE VN i= Annual appropriations of $4.0 million grants. KPU’s lack of financial capability to bond project without grants. Impact on 4 Dam Pool self-help re annual grant. Ketchikan generation capacity problem. Significant environmental issues. Without additional grant or other financing project not financially feasible. Current Status: 1. 2 Preliminary design and environmental process underway. Construction anticipated to start between spring 1997 and fall 1998. Funding and Cost Estimates: 1. 2. Funding: Grant: $4 million (annually) Loan: $20 million Bonding Authority: $40 million Construction Estimate: $65 million Interested Parties: 1, DAP oy KPU City of Petersburg City of Wrangell Cape Fox Native Corp. City of Kodiak CVEA Actions Needed and Timing: 1. ~ Issues: 1. 2. 3. 4. No immediate action needed or within next 6 months re intertie. By end of session re self-help. Four Dam Pool Capital appropriation for needed repairs. Self-help provision. Revenue stream legislatively appropriated to cover: -40% to PCE and Rural Electrification Funds -40% to Southeast Energy Fund -20% to Power Project Fund Divestiture of facilities. Current Status: 1. Legislative capital appropriation request for $20.0 million Interested Parties: 1; City of Ketchikan 2. City of Petersburg 3. City of Wrangell 4. CVEA 5. Kodiak Electric Assoc. 6. Rural Alaska 7. DCRA Actions Needed and Timing: 1. Funding issues needs to be addressed during current legislative session or utilities may invoke self-help. SUTTON TO GLENNALLEN INTERTIE Interested Parties: e CVEA ¢ ML&P e CEA « MEA e Labor (project labor agreement) e Consumers (in general) e Area Legislators e Petro Star (Arctic Slope Regional Corp. & Dale Lindsey) e ~=Alyeska e¢ Hobbs ¢ Four Dam Pool Comm.-Dennis Lewis e Chickaloon -George Harrison e Ak Citizens for Responsible Energy Development-Robin McClean e Mat-Su Borough e = Ahtna Inc, e = City of Valdez e Community of Glennallen ou ore o-vi-vd +» O-UUAM + UUV. UrrIUC-JUNEAL? YU7 561 BYY8:# 2/ 7 SENT BY :DCRA, DOE + 6-24-95 ; 14:23 ; DCRA DIV OF ENERGY- 919074653455;# 2 rs 3 MEMORANDUM STATE OF ALASKA Cornmunity and Regional A {fairs TO; Tony Knowles DATE; March 24, 1995 Governor FILE: fe PHONE NO: 465-4700 FROM: Mike on fe SUBJECT: Sutton-Glennallen Intertie Commiasidher Dept. of Community and Regional Affairs As you know, the 1993 legislature appropriated $35 million to be uscd as a voro-interest loan for the Sutton-Glennallen intertie but made the appropriation contingent on completion of a feasibility study and plan of finance “satisfactory” to this department. My predecessor issucd a finding in July 1994 thar the required studies were satisfactory in his judgment, and directed the Division of Energy to move forward with issuance of the loan. To date, howcvcr, agreement has not been reached on the terms of the loan and none of the appropriation has yet been spent. At this point, this administration has sevcral options, One is for this department to continue to \ negotiate a loan agrcement with Copper Valley Electric Association (CVEA), Another is having this department reconsider our policy on this intertie project. Regardless of which option is pursued, we belicve that additional information is necessary before a well-informed decision is possible, As we discussed with you on March 17, there arc a number of issues which we believe you should consider carefully in ¢valuating the proposed Sutton-Glennullen intertic. In each casc, we recommend that you or top administration official undertake discussions with top management in the identified industries to seck a greater measure of insight and confidence in forecasting long-term devclopmenis. We believe that thosc high-level contacts are more likely to promote openoess and candor from the private intercsts than could be achicved through this department's Division of Energy. As always, this department is ready to assist you in any way you deen} appropriate, I. LONG-TERM FUTURE OF TRANS-ALASKA PLPELINF. Recommended Action: The uncertainty associated with predictions of pipeline shift down should be addressed by soliciting views directly from top management of the major oi companies operating on the North Slope. : vu wie u-vi-dv + O-ULAM +» WU. UPP IUCTJUINCAL7 DU/ DOL OVIG-F S/ / SENT BY:DCRA, DOE + 9-24-95 ; 14:24 ; DCRA DIV OF ENERGY- $18074653455;3# 3 ‘Tony Knowles, Governor March 24, 1995 Page 2 Discussion: If the pipeline and marine terminal are shut down by 2020, very possibly taking the Petro Star refinery with it, the intertie would not he viable over the long term unless other economic growth in the region is sufficient to compensate for the loss. In the feasibility study, only the “Low” case incorporates a shut down of the pipeline without compensating economic growth, A judgment on the long-term viability of the intertie therefore rests to a greal extent on one’s vision of the long-term future of the pipeline and, therefore, of oi! production on the North Slope. As stated in the following excerpt from the feasibility study, neither the ' Division of linergy nor our contractors can help very much with this underlying vision: “The authors of this report have not attompted to attach any probability estimates to factors like the prospects for continued oil pipeline operations aftcr 2018, or to related factors such as the long-term oil price and prospects for major additions to North Slope oil production, or to the long-term likelihood of building a natural gas pipeline into Valdez. These are major uncertaintics that continue to be debated by informed observers and participants, and which we cannot begin to resolve within an intertie feasibility study. Consequently, this study does not identify any one of the four scenarios as the “expected case” or “most likely case,” but: rather prescnts the analytical results for cach case for consideration and judgment by Alaska decision- makers,” (p. 1-14, Volume 1) By way of background on this issuc, the feasibility study docs include the following information: “In April 1993, tho United States General Accounting Ollice (GAO) issucd a report entitled “Trans-Alaska Pipeline -- Projections of Long-Term Viability Are Unvertain.” In its report, the GAO focused much of its effort on the review of projections made in 1991 in a report prepared by the United States Department of Energy (DOE), of the year in which the Trans-Alaska pipelinc would be shut down. DOE concluded that the pipeline will shut down between 2006 and 2011, with 2009 identified as the “most likely” year considering projected oil availability on the North Slope, the pipeline’s minimum operating levels, and other factors. GAO indicated that although the shut down could actuully be predicted to occur anytime between | 2001 and 2021 by varying the basic assumptions, it could not estimate a more reliable temnination date than DOE. 1t is important to note that both DOF and GAO assume new oi) field devclopment in making their projections, but ncither has assumed, development of oil fields in the Arctic National Wildlife Refuge (ANWR).” (p. VII- 5, Volume 1) ) onv Die SONI BY->DORA, _d-di-vo § 6:02AM i GOV. OFF 1CE-JUNEAU> 907 561 8998;+ 4/7 Dot: > 3-24-95 ; 14:24 ; DCRA DIV OF ENERGY> 919074653455;# 4 Tony Knowles, Governor March 24, 1995 Page 3 U. PETRO STAR VALDEZ REFINERY -- POWER DEMAND AND COGENERATION Recommended Action: Top management at Petro Star should be contacted to gain insight into the company’s long-term plans with respect to power supply, although Pctro Star may not have developed clear long-term plans ut this point. Discussion: Two basic issues arc: A. Will Petro Star generate power for its own use and for sate into the utility grid? B. Will Petro Star purchase power from the utilily over the long term, and sign a power purchase agreement locking in substantial minimum purchases? Tn a letter to our consultant dated November 2, 1993, the Engineering Manager at Pctro Star Valdez stated that on-site cogeneration was not an attractive alternative: “Petro Star has investigated the installed cost and operating cost of on-site cogeneration to supply power to the refinery. This was looked at with using the lowest grade oil for fual and the possibility of using waste heat from the tefincry process, Several factors make it an unatlractive allemative to Copper Valley Elcctric ulilily power... In addition to these reasons, cogeneration is less reliable and reliability is of the utmost importance to safety and production in a refinery,” This position appears to have changed. In documents filed with the Alaska Public Utilities Commission (APUC) on January 27, 1995, CVEA states the following: “CVRBA has also recently been approached by Petro Star Valdez Refinery concerning the possibility of using the wasle gases from the refinery for the generation of electricity. Thete are numerous questions which remain to be answercd with respect to this potential energy resource. However, indications are that such a regource is feasible. CVEA has been informed that Petro Star Valdez Refinery will be petitioning to intervene in this proceeding in order to protect its interest with respect to being able to supply power to CVEA.” TRANS-ALASKA GAS SYSTEM (TAGS) Recommended Action: For gaining insight into the likehood of ‘TAGS construction 10 yeurs from now, the State should contact not only Yukon Pacific but perhaps a skeptical observer as well, such as Arlon Tussing. Questions on the likelihood and amount of excess power production could also be asked. Discussion: In the feasibility study, construction of TAGS in the 2000-2010 time frame was assumed in the “Lligh” case. ‘Lhe scenario developed was that TAGS would generate ouvI pie O-d1-vo § GUAM; UWOY. OFF ICE-JUNEAL- 907 561 8998;# 5/ 7 DON BY UUKA, JUL + d-24-Yo ; 14°25 4; DCRA DIY OF ENERGY? 919074653455;# 5 ‘Yony Knowlcs, Governor March 24, 1995 Page 4 power for its own use at the Valdez terminal, but would neither sell excess power to the utility nor purchase any additioual power from the utility. We understand, however, that Jeff Lowenfels of Yukon Pacific has suggested that TAGS may in fact have a considerable arnount of excess power to sell beyond what it would nced for its own operations. There are two main questions, then: A. Is TAGS likely to be built in something like the time frame identified in the intertie feasibility study? 4 i BR. Tf TAGS is built, will the effect on the CVRA electric utility be primarily to increase the demand for utility power or to provide a local, low-cost supply of power from the TAGS terminal operation? If the primary effect is to increase demand, intertie viability is enhanced. If the primary cffect is to introduce a new local power supply, the intertie may become unnecessary for purposcs of supplying CVEA customers. In this event, perhaps power from the TAGS terminal could be sent over the intertie in the other direction for sale in the Railbelt. The amount that can be transmitted, however, is very smu] in relation to Railbelt power requirements. IV. AJLYESKA MARINE TERMINAL -- COGENERATION OR POWER PURCHASE $ Recommended Action: lor gaining insight into the future prospects of Alyeska either purchasing power from the utility grid for its marine terminal operations, ot selling power into the utility grid, the State should contact top management at Alyeska. Although the subject has been reviewed and negotiated on numerous occasions in the past, Alycska has always decided in the end to remain isolated electrically. One reason commonly cited fur Alyeska's historical reluctance to sell power into the utility grid is the company’s unwillingness to subject itself to APUC regulation with regard to such power salcs. V. HIGH ALTITUDE AURORAL RESEARCH PROJECT (HAARP) Recommended Action: No action is recommended. The HAARP project is presently excluded from all cases considered in the feasibility study. Because full funding and construction of the HAARP project is considered speculative, the only case it could be included within is the “High” case. Since the intertie is already identified as the Icast cost alternative in the “High” case, adding the HAARP load would not change the outcome of the feasibility study. Discussion: This subject was raised by the Commissioncr of DO'TPF. = isa federal project under devolopmont by the military ucar Gakona and has becn sponsored thus far by Senator Stevens. A $20 million prototype facility has been completcd. The ’ : -o179d + O-UDAM + UUY, UPrIUC-JUNEAU? YU7 S61 BYYB:F G/ 7 SUN UOT ura, DUE (9°zaae' 5) 1426's DORA DIV OF ENERGY> 919074653455;# 6 Tony Knowles, Governor March 24, 1995 Page 5 (ull project would require about $70 million more in federal finds. If connected to the utility grid, the full project would add an annua! demand of about 5 million kWh. (The total cnergy requirement for the utility in 1993 was 70 million kWh.) During the feasibility study, the Division of Energy spoke on several occasions with a Mr. John Hecksher, who represented federal management on the project -- telephonc (617) 377-5121. Mr. Hecksher consistently stated that this was a “Congressional project,” that it did not represent an initiative of the military, and that its prospects for full funding should be considered speculative. This assessment was shared by the Governor's office in Washington D.C. We were informed, however, that Scnator Stevens intended to request $20 million per year for the project, and would continue to support it. . VI. PROVISIONS OF PROPOSED LOAN AGREEMENT. The proposed loan agreement limits disbursement of State funds to $7.3 million for pre- construction only before certain key milestones are achieved. To go beyond this into project construction, supplemental financing must be in place. For this to occur, there will have to be sufficient confidence on the part of one or more additional lenders with respect to future loads to sccurc the financing. We necd a measure of confidence now to authorize proceeding with Phasc 1, but greater confidence in the long-term financial viability of the intertie will be needed to get to Phase 2. Note that the Administration does not have the statutory authority to forgive repayment of the loan, even if the project is abandoned after completion of Phase 1. SUMMARY COMMENT As noted at the top of this memo, we recommend that top State officials undertake the recommended discussions with industry management, with relevant department Commissioners, and with othcr sources as needed to gain insight into the probabilitics surrounding certain key long-term developments that bear on the intertic’s viability. The Division of Exergy is of course ready to assist in any way you deem appropriate. v-vi-go +» O-U0AM +) UWUV. UPrILC-JUNEAL YU7 561 BY9B:F 7/ 7 wuss we Intertie options: A. Hand C&RA memo to Anchorage Daily News as public release. Appoint inter- agency task force to collect info detailed in C&KRA memo, set timetable for having info in hand (90 days). Craft letter to Copper Valley, IBEW and others concerned explaining our plan to collect more info. Ask CVEA and other proponents to provide more info about how intertie benefits tourism and other development. This reserves our right to pull the plug later. B, Appoint task force as outlined above with no public announcement. Public response would be that proposal still under administration review. Downside is our review process would leak out, so better to control on our own terms. C. Cancel C&RA finding that project is feasible - essentially tubing project - and kick issue back to legislature. Downside: all hell breaks lose. D. Order C&RA to begin contract negotiations with CVEA, essentially proceeding with project. Downside: opponents flip out. SUTTON-GLENNALLEN INTERTIE March 17, 1995 I. Present Situation -- Copper Valley Electric Association (CVEA) A. Serves Glennallen and Valdez. Valdez represents about 80% of power requirements. 1. Solomon Gulch hydro project, part of Four Dam Pool owned by State, supplies over half of power requirements. Di Balance of power requirements supplied by diesel generators. 3. Existing transmission line connects Glennallen and Valdez, but CVEA is not presently connected to any other utility system. 1993 power requirement -- 70 million kWh. E; 50 million kWh from Solomon Gulch hydro project. 25 20 million kWh from diesel generators. Petro Star refinery is largest industrial customer. Alyeska marine terminal supplies its own power. 2000 projected power requirement -- 90 million kWh. 1. 50 million kWh from Solomon Gulch hydro 2. 40 million kWh from diesel generators. Most of this growth due to projected Petro Star refinery expansion. CVEA retail rates are about twice the average level in the Railbelt -- residential rates in 16-20 cent/kWh range. He Alternatives to Replace Diesel Generation A. Sutton-Glennallen intertie -- $50 million estimated cost. Sutton-Glennallen Int March 17, 1995 Page 2 III. B. Gc: D. fi Allison Lake hydro project -- $35 million estimated cost. 27 milli EWA Coal-fired power plant -- $35 million estimated cost. Cogeneration from Petro Star refinery -- details unknown. Alyeska excess Copier & Feasibility Study A. 1993 Legislature appropriated $35 million for a zero-interest loan for the intertie, but contingent on feasibility study “satisfactory” to Department of Community and Regional Affairs. Economic results of study are heavily dependent on long-term forecast for Valdez power requirements. I. Will oil pipeline shut down by 2020, and take the refinery with it? If so, none of the capital projects make sense. 25 If pipeline and refinery keep going, intertie and Allison Lake both look better over the long run. a. Allison Lake came out as least cost in mid-range cases over the long run. b. Intertie came in a close second. Public process. 3 rounds of public meetings were held in 5 affected communities -- at beginning of study, at mid-point, and after publication of the draft report. Route selection -- line is proposed to be located out of sight of Glenn Highway in undeveloped backcountry. CVEA not bound by route proposal in feasibility study. Route modifications were made in response to public comment. DCRA Commissioner issued administrative finding in July 1994 that the feasibility study is “satisfactory,” and directed the Division of Energy to develop a loan agreement with CVEA. Sutton-Glennallen Int March Page 3 IV. 17, 1995 Litigation A. Administrative appeal filed in State court by environmental groups challenging DCRA Commissioner’s finding. B. Lawsuit filed in federal court by developer seeking to build the coal- fired power plant in Valdez. Preliminary injunction issued in November but now lifted. Status of Loan Agreement A. Division of Energy most recently proposed a loan agreement to CVEA in November 1994. B. CVEA objections include: 1, Interest retention on the $35 million 2. Placement of $35 million with a trustee. C. As far as CVEA has been informed, our November offer is still valid. No statement has been made to date that the offer is suspended pending review. Options i Go forward with development and execution of loan agreement. A. Our proposal limits disbursement of loan proceeds for pre- construction tasks only (and only up to $7.3 million) prior to a written determination by DCRA that all required approvals and agreements are in hand, including: 1. Completion of NEPA process and acquisition of right- of-way across federal land. We believe an EIS will be required. 2. Resolution of all matters submitted to APUC. 3: Permits and supplemental financing in hand. Sutton-Glennallen Int March 17, 1995 Page 4 VII. B. Pre-construction period is estimated at roughly 2 years, followed by construction period of about 1.5 years. Withdraw the administrative finding that released the $35 million appropriation. A, Leave it at that, which might send the issue back to the legislature. B: Propose additional studies, or review of studies. Ci Propose to CVEA and the legislature some alternative use of the funds. Withdrawing the finding may have litigation consequences -- CVEA may file suit in place of the environmental groups. Recommendation Go forward with development and execution of the loan agreement. Gov - suspead Cundings al A el | Le Cer he colle ted . MEMORANDUM TO: Tony Knowles DATE: March 17, 1995 Governor ; FROM: Tim Towarak PHONE: (907) 465-3500 Special Staff Assistant FAX: (907) 465-3532 Office of the Governor SUBJECT: Sutton/Glennallen & Other Interties AGENDA I. INTRODUCTIONS: DCRA: Commissioner Mike Irwin (via phone) Deputy Commissioner Lamar Cotten Director, Division of Energy Percy Frisby Divison of Energy Specialist Gloria Manning Division of Energy Economist Dick Emerman Se eS AIDEA: 1. Riley Snell, Executive Director (via phone) ATTORNEY GENERAL'S OFFICE 1. Barbara Ritchie, Deputy Director 2. Mary Gilson, Assistant AG, Anchorage (via phone) GOVERNOR'S STAFF 1. Tim Towarak 2. Kurt Parkan II. Purpose of Meeting - Tim Towarak III. Overview - DCRA Staff IV. AIDEA Involvement - Riley Snell V. Legal Interpretations - Barbara Ritchie/Mary Gilson VI. Other Interties/4 Dam Pool/PCE Discussions III adie vse of g¢ 7 7 hong Term atet on = a7ER for economic Ley elon” ufo Low x gost =| |ipateaagens ||| ee A gerke suk peheo Cn es Po kyeess prow X 9 ners Soon anh pour gencratior ULE |