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HomeMy WebLinkAboutMahoney Lake Hydro FERC memo 2000a SPIEGEL & MCDIARMID 1350 NEW YORK AVENUE NW WASHINGTON. OC 20005-4798 TELEPHONE (202) 879-400C FACSIMILE (202) 393-2866 EMAIL SPIEGEL@SPIEGELMCD COM FRANCES E FRANCIS PMA EC || Seto esta) : o)EGEIVE suns erances ange cin 2m reat 4 AUG - 8 2000 August 4, 2000 Alaska Industrial Development and Export Authority David P. Boergers Secretary Federal Energy Regulatory Commission 888 First Street, NE Washington. D.C. 20426 Re: Mahoney Lake Project, FERC Project No. 11393-000 Dear Mr. Boergers: This letter addresses the response dated June 23, 2000. provided to the FERC staff in the above-captioned docket by the Licensee, the City of Saxman. Alaska. Saxman is the licensee but has delegated its licensing responsibilities to Ketchikan Electric Company (“KEC”), an alliance between Alaska Power & Telephone Company and the Cape Fox Corporation. The City of Ketchikan wishes to correct several misleading statements made in the June 23 response, and requests that its letter be included in the FERC’s public files. in order to assure that the Commission and the public have a proper understanding of the issues. KEC’s June 23 response answered a FERC inquiry dated April 10. 2000. which requested a response within 60 days. KEC sought an extension of the deadline. On June 15, a meeting was held in Ketchikan before the City Council in which an issue was whether a long-term power sales contract between the City of Ketchikan and KEC for the Lake Mahoney Project power should be executed. The Council determined not to execute the contract. and instead. to defer consideration of the Mahoney Lake Project power contract until the Intertie matter was more clearly determined. The Intertie, if constructed. would permit the City of Ketchikan to purchase additional power from Lake Tyee. an existing FERC-licensed project, owned by the State of Alaska. Attached are the official minutes of the Council meeting held on June 15, 2000. It was thus with some surprise that the City read KEC’s June 23 response. which suggests that the City of Ketchikan and the Licensee are in active negotiations over a power supply contract. They are not. To the contrary, by letter dated July 14, 2000, KEC has sent a notice to the City terminating its contract negotiations with the City and stating its belief that it can require the City to purchase project power. KEC has also sent a letter to the Alaska Energy Authority seeking an interpretation that would require Ketchikan to purchase power from the Mahoney Lake Project ahead of the State’s Swan Lake Project. contrary to the City’s understanding of its obligations with the State. The City has steadfastly declined to breach its contract with the State. David P. Boergers, Secretary August 4, 2000 Page 2 which would have negative economic repercussions for not only the customers of the City’s Department of Public Utilities, but also for the customers of the other municipal systems comprising the Four-Dam Pool Group, all of whom have contracts with the State of Alaska for power from FERC-licensed projects. Under KEC’s interpretation of PURPA, it would appear that KEC assumes a requirement on the part of the City of Ketchikan to enter into a contract to purchase power from KEC’s unconstructed QF Project under terms that could result in the spilling of water at the City’s own FERC-licensed projects if the available power from the Mahoney Lake Project and the City’s available resources exceeded the City’s loads. This is not acceptable to the City, would violate economic common sense and the City’s own FERC license obligations. and is not required by PURPA or the Commission's regulations thereunder. Also enclosed is the City’s response to KEC’s letter of July 14. In addition to correcting any misleading impression that the June 23 letter might present as to the status of any negotiations between the City of Ketchikan and KEC. the City wishes to clarify another issue. It has come to our attention that KEC intends to change the design and construction of its Project. so that costs can be lowered. While the City’s applauds KEC’s initiative in seeking more economic construction. it has also raised a question in the public meetings as to the delay. if any, that a design change at this stage of the process would involve. The City assumes that any major change in the Project design and/or the implementation of that design would require a license amendment or at a minimum. ample notification to the FERC and the resource agencies. to examine what impacts, if any, the proposed change would have on the site and the surrounding resources. Sincerely. aw a nts = (Anes Frances E. Francis Attomey for the City of Ketchikan Enclosures cc: Service List. Project No. 11393-000 " ENCLOSURE 1 Ketchikan Electric Company 14 Borch Street Ketchikan, Alaska 99901 907-225-1950 907-225-4169 fax [F) ECEIVE D July 14, 2000 JUL 19 2000 KPU Manager's Office KETCHIKAN PUBLIC UTILITIES Karl Amylon, General Manager Ketchikan Public Utilities City of Ketchikan 2930 Tongass Avenue Ketchikan, Alaska 99901 Re: Mahoney Lake Hydropower Project: Notice of Commitment to Sell Power from Qualifying Facility and Mandatory Obligation to Purchase under the Public Utility Regulatory Policy Act. Dear Mr. Amylon: Ketchikan Electric Company (“KEC”) has previously advised Ketchikan Public Utilities (“KPU”) of its status as a “qualifying facility” under the regulations of the Federal Energy Regulatory Commission implementing the provisions of the Public Utility Regulatory Policy Act of 1978, as amended (“PURPA”). In addition, by letter dated March 3. 1998, KEC made a formal request of KPU for interconnection, following the Alaska Administrative Code in absence of any implementing regulation by KPU. ‘Thercaficr, KEC and KPU began negotiating a power purchase agreement for the output of the Mahoney Lake Project (“Project”), a process that has been ongoing now for 28 months. Unfortunately, the lack of progress in these power purchase negotiations has led KEC to conclude that it can longer follow the option of a negotiated contract. Accordingly, please be advised that as of the date of this letter KEC is no longer pursuing a negotiated contract with KPU. KEC elects to rcly on the statutory rights and obligations under PURPA and herewith formally advises KPU that KIC agrces to sell the output of the Project to KPU and invokes KPU’s consequent obligations with respect to KEC’s Project under PURPA, including, inter alia, the obligation to purchase the Project output at KPU’s avoided costs, calculated consistent with the requirements of PURPA See 18 C.F.R. § 292.304. KEC further advises that it elects to provide the energy and capacity pursuant to a legally enforceable obligation for the delivery of energy or capacity at rates based on avoided costs calculated not on the date of delivery, but C:\WINNT2\PROFILES\B GRIMM\DESKTOIAK ECPURPA7142000.DOC Ins CAN yu NUNINAISY BA pre ta egees Aqy aneg_ce ane rathcr as of the date of this notification letter pursuant to the provisions of 18 C.F.R. § 292.304(d)(2)(ii). Within 30 days of the date of this letter, KEC requests that KPU acknowledge reccipt of this notification and its obligation to purchase the Project power under PURPA. Failure by KPU to timcly provide this acknowledgment will be interpreted by KEC as a refusal to comply with its obligations PURPA and KEC will take appropriate action to secure its statutory rights. KEC further requests that KPU provide the updated calculation of avoided costs requested and a determination of the applicable rate for purchase of the Project output and such other provisions for the power purchasc agrcement as KPU is authorized under PURPA to require. Although KEC’s commitment expressed herein to sell the Project output to KEC as authorized by PURPA is not conditioned on KEC’s acceptance of KPU’s calculation of the applicable avoided cost rates or of such other conditions as KPU may impose, KEC does reserve the right to challenge such rates and conditions in appropriate forums to the extent they may be unreasonable or inconsistent with the requirements of PURPA. KEC looks forward to your prompt response. Robert S. Grimm, General Manager Ketchikan Electric Company bob.g@aptalaska.com C.\WINNT2\PROFILES\B GRIMM \DESK TOPMKECPURPA7 142000. DOC oO INSSTZING “AN yu NuyTyATV gn pete i Toeet egy anes: ENCLOSURE 2 SPIEGEL & MCDIARMID 1350 NEW YORK AVENUE NW WASHINGTON DC 20005-4798 TELEPHONE (202) 879-4000 FACSIMILE (202) 393-2866 EMAIL SPIEGEL@SPIEGELMCD COM FRANCES E FRANCIS DIRECT DIAL (202) 879-4050 EMAIL FRANCES FRANCIS@SPIEGELMCD COM August 4, 2000 Robert S. Grimm. General Manager Ketchikan Electric Company 14 Borch Street Ketchikan. Alaska 99901 Re: Your Letter of Julv 14. 2000 re the Mahoney Lake Hydropower Project Dear Bob: I am in receipt of your letter dated July 14, 2000. in which you advise the City of Ketchikan that 1. KEC has abandoned its attempts to negotiate a contract with KPU: 2. KEC elects to rely on PURPA: KEC agrees to sell the output of the Mahoney Lake Project to KPU. presumably under PURPA provisions: bo 4. KEC elects to provide energy and capacity (presumably from Mahoney Lake). “pursuant to a legally enforceable obligation for the delivery of energy or capacity at rates based on avoided costs calculated...as of the date of this notification letter.” citing 18 CFR §292.304(d)(2)(ii) as vour authority: an the City should acknowledge its obligation to purchase the Mahoney Lake Project power under PURPA within 30 days. to KEC: 6. absent a response by the City. KEC will interpret the non-response as a refusal to comply with PURPA and take “appropriate action to secure its statutory rights.” In addition. you request KPU to provide you with (1) an updated calculation of avoided costs: (2) a determination of the applicable rate for purchase of the Project output. and (3) “such other provisions for the power purchase agreement as KPU is authorized under PURPA to require.” Robert S. Grimm, General Manager August 4, 2000 Page 2 The City’s Response Points 1-3 above are informational, and do not require a response from the City. On Point 4, the City cannot accept your statement as correct. since PURPA imposes no obligation on KPU to purchase power from Mahoney Lake as of July 14, 2000, and as explained below, there is consequently no obligation on the City’s part to pay the avoided costs rates as of that date. As to the first point. KEC cannot impose an obligation on KPU simply by writing KPU a letter. and providing notice. The Mahoney Lake Project is many times too large to qualify for a mandatory “standard offer” rate under FERC’s regulations; and therefore a PURPA contract for sales of capacity or energy for a specified term must be negotiated. What the City can do, under the law. is to seek a PURPA contract and subject to its meeting the criteria that would allow a PURPA contract to go forward between KEC and the City, KEC could elect to have the contract rates established as of the date of the delivery of the power or fixed in the contract. 18 CFR §292.304(d)(2). Whether a QF generator can impose a legally binding obligation upon the targeted purchaser utility is subject to a finding under 18 CFR §292.304(a) that the rates are “just and reasonable to the electric consumer of the electric utility and in the public interest.” If the City cannot use the power from the QF Project and would have to pay for that power in addition to the power supplies it currently has and for which it has contractual obligations. then the City finds it neither just and reasonable to its electric customers nor in the public interest to raise the rates for the City’s consumers in order to purchase electricity it does not need and the purchase of which would cost its customers more money than not buying that electricity. Because of this fundamentally sound and unremarkable proposition and for the reasons explained below. PURPA provides that PURPA rates may be subject to adjustment to reflect value and such sales can subject to notice, be halted for operational reasons. The PURPA provisions. in particular Section 292.304(e). set out the basis for fixing the avoided costs over a specified term at the time the obligation is incurred. and these take into account: (1) the data for avoided energy and capacity costs: (2) the availability of the QF to supply capacity and energy to supply the system daily and seasonal peak periods. under seven criteria: and (3) the “relationship of the availability of energy or capacity from the QF as derived in paragraph e(2) ...to the ability of the electric utility to avoid costs. including the deferral of capacity additions and the reduction of fossil fuel use”: and (4) any costs or savings from line losses as a result of self-generation or other power purchases. Based on the above criteria. the City’s avoided cost and the basis for its rates from a new QF facility would arguably be zero, since there is no other cost that would enable the City to maintain its current costs. Indeed. if the City were penalized for failing to take as much as its contracts require. the PURPA price could be negative. to offset the cost of the penalties. KEC seemed to recognize this aspect of the law when it agreed to indemnify the AEA for displacements that would occur in the City of Ketchikan’s Swan Lake purchases because of the Mahoney Lake Project purchases. For a QF project to be revenue neutral to the City’s ratepayers. there could be an obligation to purchase on a one-for-one kwh formula that would enable the City to purchase energy from the QF facility only if the QF could displace the cost of fossil fuel at the time the City required such fossil fuel generated energy at a cost lower than Robert S. Grimm, General Manager August 4, 2000 Page 3 would be incurred by the City at that time. and subject to all existing obligations of the City at that time. The statute provides for this option, but KEC has declined to accept that option. The City has access. through its own resources and through its ongoing contracts. to adequate capacity to provide service to its customers. Occasionally and depending on the factual circumstances. especially the price of fuel oil, the City could use alternate energy priced below its diesel fuel costs. provided it were as reliable as the energy from the diesel units and available at the time the City’s dispatch would rely on diesel. These increments of energy are relatively small and would not necessarily coincide with the availability of Mahoney Lake Project power. For example, the Mahoney Lake Project requires the buyer to take 40% of its output during the months of July and August. when the City has little need for diesel generation. Even if the City might be able to use some of the Mahoney Project power on the formula basis described above, the City presently anticipates that its future needs will not exceed its purchase of power from the State’s Swan Lake Project. and the Tyee Project after the Intertie is completed. While the City may need additional capacity in smaller amounts in the future, the Mahoney Lake Project at 10 MW exceeds the City’s capacity requirements for many years. KEC is familiar with the City’s power supply resources and the City’s avoided costs. since it has negotiated with the City over some period of time as to a power contract and has received the City’s evaluation of its future power needs and plans. To put it as plainly as possible. the City of Ketchikan, as the governing body, cannot at this time obligate itself to a contract for a new QF Project of the magnitude and with the operating characteristics of the Mahoney Project on the terms proposed by KEC or on a basis that would allow KEC to recover the cost of the Project. Either path would increase the cost of electricity to its customers. If KEC were willing to enter into an avoided cost contract that reflects the rates produced in the City’s 1999 avoided cost study (which we understand vou have). until such time as the Intertie were to become available and at a level that reflects dispatch after Swan and the City’s own resources. then such a contract might be possible. This would involve only a few years and would terminate thereafter when the Intertie to Tyee becomes operational. It was our understanding that such a contract would not be acceptable to KEC and could not support outside financing. We believe the law is clear in this regard. Furthermore and most importantly. we note that the City Council on June 15 voted to defer consideration of Mahoney while it pursued the Intertie. Attempts by KEC to interfere with and block the City’s efforts to obtain funding for the Intertie are not in the community’s interests or those of its ratepayers. including those ratepayers in the City of Saxman. The City has spent considerable time and funds to work out a power contract for the Mahoney Lake Project with KEC. but the terms could not be worked out in a way that would benefit the consumers served by the City of Ketchikan’s Department of Public Utilities. It is time for the City to pursue other avenues. To summarize. PURPA does not give KEC the right to obligate the City for excess capacity and energy for years to come pursuant to avoided costs calculated as of July 14. 2000. A ENCLOSURE 3 June 15, 2000 Regular Ketchikan City Council mecting was called lo order by Mayor Weinstein al 7:01 p.m., June 15, 2000, with the following members present: Tom Coyne, Mike Harpald, Robert Norton, Marty West, Lew Williams II, and Steve Williams. Councilmember Joy Butler arrived at 7:12 p.m. The Pledge of Allegiance was given by all persons in the Chanibers. Staff present were City Manager Amylou, Finance Director Newell, Public Works Direclor Hansen, City Attorney Schweppe, Fire Chicf Leipfert, Electric Division Manager Waggoner, Adininistrative Manager SctUje, and City Clerk Suiter. COMMUNICATIONS Mayor Weinstein read a memorandum from Borough Mayor Jack Shay thanking the Council and City staff for the Mowers sent to him during his recent illness. Mayor Weinstcin suggested dial the procedure be that public comment and all the agenda items other than the power supply issue be cunsidered first, then go back to public comment and the agenda item for power, so the Council would have the rest of the evening for Uiat item only. He asked if there were any objections, and hearing none, proceeded in that mauner, PERSONS ‘TO BE LLEARD Phil Lent, Hawkins Street, related the process he has gone trough regarding the start wp of a bicycle tour business. He passed around a copy of the bicycle he invested in, stating that he was given an vutdated ordinance to begin with, which was what he based his purchase on. Ile noted the ordinance did not include the portion that was added later that prohibited human powered vehicles, but he had all the elements in place for this business to happen. He asked if uie Council would consider allowing him to operate his bicycle tour business. Councilmember Coyne asked if this could be considered under New Business for discussion. Mayor Weinsicin asked for five hands to add the item to tic agenda, and at Jeast five were shown. Susan Walsh, 1252 Upper Millar, addressed the item in the packet regarding speed limits on Tongass Avenuc. She cited statistics regarding accidents, reminding the Council that Tongass Avenue dues not have separate bicycle facilities. She fell the comnicnt regarding the number of excessive speeders as being marginal was unwarranted, particularly to Sumcone on a bicycle. She encouraged the Council to nol seck any imercase in speed limits on Tongass Avenue. \tecss cts nw oyue June 15, 2000 CONSENT AGENDA Approval of Minutes Moved by Coyne, scconded by West approval of minutes of the regular meeting of Junc 1, 2000. Motion passed with Harpold, Coyne, Norton, Butler, Lew Williams, Steve Williams and West voting yea. Liquor License Transfer Moved by Coyne, seconded by West the City Council approve the transfer of Beverage Dispensary license - Ketchikan [Entertaiment Center to David I.. Coates; Lori S. Coates; Dwight McBride; George H. Tipton; Mail: 2050 Sea Level Drive, Ketchikan, Alaska 99901 from David L. Coates Jr. & Theodore ‘I’. Brown, same d/b/a and location. Motion passed with Harpold, Coyne, Norton, Buller, Lew Williams, Steve Williams and West voling yea. Application__for Restaurant Designation Permit - Moved by Coyne, scconded by West the City Council approve the restaurant designation applicauion of Ketchikan Entertainment Center and authorize the cily clerk to sign the applicalion on behalf of the City Council. Motion passed with Harpold, Coyne, Norton. Buller, Lew Willianis. Steve Williams and West voting yea. UNEILNISHED BUSINESS Ordjvance No. 00-1434 - rug Abuse and Paraphernalia - Second Reading Copies of Ordinance No. 00-1434 were available for all persons present. Moved by Lew Williams, seconded by Norton the City Council approve in second reading Ordinance No. 00-1434 amending Chapter 9.12 of the Ketchikan Municipal Code entilled Drug Abuse and Paraphernalia; establishing an objective standard for providing a violation of the ordinance; applying federal drug paraphemalia Jaw, allowing for the cuforceinent of the ordinance by citation, and cstablishing an effective date. oO ) oO oO MI uv June 15, 2000 Motion passed with Lew Williams, West, Harpold, Steve Williams, Norton and Butler voling yea; Coyne voling nay. Evaluation_and_Assessmep(_of_Lydroelectric Generation Supply Allernatives — Ketchikan Public Utilities This itein was moved to the end of the mecting. Ordinance No. 00-1433 - Increasing the Value of Single Unit Sales aud Rentals Subject to Sales Tax and Amending Single Unit Sales Definilions ~ Secand Readins Copics of Ordinance No. 00-1433 were available for all persons present. Moved by Norton, scconded by West dic City Council approve in sccond reading Ordinance No. 00-1433 amending the definition of single-unit sales to clarify uiat cach tourist on a lour constilules a separate single-unit sale; amending the definition of single- unit sale to clarify that cach foot or other measurement of length constilutes a separate single-unit sale for harbor and duckage sales; and establishing an cffcctive date. Motion passed with Norton, Warpold, West, Steve Williams, Coyuc, Lew Williams and Buller voling yea. NEW BUSINESS Medical Services grace Moved by West, seconded by Butler the City Council authorize the city manager to offer the position of Emergency Medical Services Licutenant to James Kicinschimidt, Mire Protection Specialist, based on a compensation level of 2311 at an annual salary of $49,127.02. Motion_passed with West, Lew Williams, Buller, Coyne, Steve Williams, Uarpold and Norton voling yea. Resylution No,_00-1980 Establishing Minimum Periods for the Retention of Certain Public Records for the Cily. of Ketchikan Moved by Lew Williais. seconded by Norton dic City Council approve Resolution No 00-1980 cstablishing minimum periods for the retention of certain public records for the City of Ketchikan and establishing an effective date. June 15, 2000 Motivi_passed with Buller, Steve Williams, Coyne, West, Harpold, Norton and Tcw Willianis voting yea. Liunian Powered Bicyele ‘Jours Councilmember Coyne stated this type of business wouldn't harm the City, so we should Ict him do what he wants to do. In response to Councilmember Steve Williams, Manager Amylon recommended an ordinance amending the cude be brought back, and during that interim period, he assuiicd the Council! would allow him to implement the business. In response to Councilmember Buller, Mr. Lent confirmed there would only be one bicycle in operation this summer, and explained his proposed routc. Councilmembers Lew Williams and Harpold expressed concern regarding congestion in the downtown area. Moved by Norton, seconded by West to allow a probationary period for Phil Lent’s request to uperate a huimau-powered vehicle on cily streets cnding Scplember 30, 2000. Mayor Weinstein asked Councilincmber Norton if it was his intent that the route be worked out with die manager’s office, which Mr. Norton affirmed. Ile also noted the tent of the motion is for one bicycle for this season for Mr. Lent. Mouttion_ passed with Coyne, Norton, Buuer, Steve Williams and West voling yea; Harpold and J.cw Williams voting nay. VOUCHERS - None CITY MANAGER’S REPORT Professional Services Agreement Refund - University _of Alaska Southeast Ketchikan Campus Library In his report. Manager Amylon noted that when the City cntered into an agrecient with the University of Alaska Southeast for the management of the Ketchikan Campus Library, the intent was that (he City would recoup the cust of providing this service including its overhead costs. He included a memorandum fron Finance Director Newell that indicates the payments recetved trum the University over the past three years have exceeded the actual costs of managing the library by $58,501.89 Manager Amylon agreed with Mr. Newell's assessment that the original intent was not for the City to make 4 Sesess ce ca oyue MUM ELIYA pee ens Drone Anat et lane June 15, 2000 a “profit” by providing the services; therefore, unless the Council directed otherwise, he intended to issuc a refund as outlined in the finance director’s report. Mayor Weinstcin noted he agreed with the recunmmendation by management, but after discussing the issuc wilh the librarian and finding out the amount of time that was actually spent by her for oversight, which was more than originally contemplated, he intended to have the manager adjust the figure to reflect that additional time. Tongass Avoue Speed Liniil In response to conments made at the May 4, 2000 meeting, Manager Amylon directed the public works director to undertake a vehicular speed analysis on ‘Tongass Avcnuc. Mr. Amylon included the results of that analysis, which indicated that marginal excessive speed appears to be an issue in dic westbound lance. He noted the data gathered by the public works department supports the 25-mile per hour posted limit and that it is unlikely thal the State would favorably entertain a lower ratc. Ile statcd his office has discussed the matter with the police chief, who has agreed that the Deparunent will continue ils enforcement efforts, particularly in the west bound Janc. Mayor Weiustcin brought to the Council’s attention the fact that the counter in the left lane was broken. and he felt vehicles driving in the Ieft lanc went faster than was reflected. Public Works Director Hansen displayed the traffic counter used for the count, explaining how it is used. Manager Amylon said there has been a police presence in the arca and a report could be brought lo the Council regarding that. ln response to Mayor Weinstein, he stated staff nade inquirics into the devices that read how fast vehicles are moving, and was told Uicy were nol available. Request for Two-lMour Parking - Virst Avenue Parking Lot Manager Aimylon included a request from Bob Pclkcy to consider changing the majority of the two-hour parking spaces in the irst Avenue Parking Lot to twenty-four hour, He explained that if the Council is inclined to accommodate Mr. Pelkey’s request, staff could respond accordingly. Mayor Weinstein asked if Where was any objection to having some of the spaces marked as twenty-four hours for the summer period, and none were heard. Bear Valley (Lybrand) Aunexatiou Update NYY CSTTSN st Gee UE Dae NM a Junc 15, 2000 Manager Amylon included correspondence from Dan Bockhorst of the Departincnt of Conununity and Economic Development, which indicated Uiat no public conmuucents were received concerning the annexation of Mr. Lybrand's property at Bear Valicy. Ic noted (hat DCED staff is considering a suspension of certain procedural requirements couvernmg a future Local Boundary Conunission hearing on the proposed annexation, and staff will keep the Council apprised accordingly. General Government Financial Statements forthe Period Ending March 3, 2000 Manager Amylon included for Council review ue General Government financial statements for the first three months of the year ending March 31, 2000. He stated both he and the finance director will be attending the mecting of June 15" lo answer any questions the Council inay have. Evoul Street Pavement Replacement Manager Amylon attached a Ietter from the Department of Transportation and Public Facilitics regarding the pavement on Front Street. He indicated the public works director lias advised the contactor, Southeast Linginccring, that the pavement must be replaced and that the cily will incur no cost in remedyiug the deficicucy. He said staff would keep the Council apprised. Manager Amylon said they are trying to negotiate the timing of he pavement replacement how, balancing the scason refalive to weather and the number of tourists. He said evening hours are a possibility K.P.U. MANAGER'S REPORT Juspection and Cleaning of Bear Valley Reservoir ln his report. Manager Amylon said the Water Division will be taking the Bear Valley Reservoir off-line for Uiree weeks begining Junc 30, 2000, Ile uuted wie purpose is for inspection and cleaning. He included a copy of an advertisement that will run beginning the last week of June. Councilmember Harpold asked what Uie area of service is for this reservoir. and Manager Amylon said it feeds the main system. He notcd lic would discuss Uie matter with the water division manager, and report the information to him. Manager Amylon noted it is an advisory that all residents should pay allention lo Utility Operating Division's Projcet_Status Reports — June, 000 I se CAN Yue NEY Ges oe 5 eke ee BAe MAEe eee Ee. — =. Manager Amylon included the project status reports of each of the Utility’s operating divisions for the inonth of June, 2000. He noted that division managers will be available tu respond to any questions al die Council meeting of June 15". Request _for__ Negotiations __ for __Tnlerconnection, Collocations, Unbundied. Access to Network-Elements auc Services for__Resale - Alaska Power & Telephone Company Manager Amylon advised the Council that AP&T has requested that its filing with the Regulatory Comuuission of Alaska be held in abeyaice until July 1, 2000. Ile stated that the details of a discussion held between the ‘Telecomumunications Division Manager LeRoy Pilant and AP&T Vice President Michael Garrett are summarized in Mr. Pilant's teleconumunication division report. He noted thal discussions will continue with AP&T in order to determine whether the issue can be amicably resolved. Councilember Harpold asked what the wait for telephone service is, and Manager Amylon responded there is currently a back up and il can range anywhcre from ten to twelve business days. He noted this stems from a varicly of reasons: they are down on personnel; and problems with a number of systems are related to the APTIS billing system. Ile said he would be coming to the Council with a number of recommendations relative lo chat at the next miccling. The Council took a short break al 8:03 p.m. and reconvened at 8:12 p.m. CIEY CLERICS FILE - None CITY ATTORNEY'S FILE - None RUTURE AGENDA ITEMS - None PERSONS TO BE WWZARD Jim Elkins, 177 Cranberry Road, referred to die Memorandum of Understanding that has been signed, and noted it mentions the intertic four times. Ile stated it also micntions the governor’s position, and lic passed oul a copy of the MOU with the arcas he pointed out highlighted. Mr. Elkins said it has been exciting representing the Cily in Juneau pulling together this process, which has a positive effect on roughly 120,000 people. close to twenty percent of the population of Alaska. He encouraged the Council to keep the process moving. oO ? »” © oO Ni ul AN yi NUNTEAUSY Ser guile Wi! fae iae nertleslan: Susan Walsh related an expcericnce a clinic slic works al had wilh a salesman that approached them, encouraging them to purchase an item, and paralleled that expericnce with the intertie. She felt the data being presented might be outdated. possibly warranting another EIS based on new technology. Ms. Walsh felt that if this body had taken this approach with the Third Avenuc/Tongass Lixtcnsion, and had insisted a new EIS were filed, maybe we wouldn't be where we arc today with that project. Dennis Lewis. representing Petersburg Power and Light, as well as Four Dam Poul, said ‘they support Scnate Bill 446 and 447 regarding divestilurc, as well as the appropriation bill for divesting Four Dam Pool. He noted along with that they also support heavily the iutertie between Tyce and Swan, as well as the intertie for Southeast Alaska. Ile expressed this would stabilize ratcs, and provide ccunomic service to all (heir customers. Wayne Weilling, 194 Cranberry Road. stated people want reasonable rates with an adequate power supply for the future. Ie encouraged the Council to keep this in mind when they make their decision, giving sume credence to the high vollage DC possibility. Ile addressed the time line regarding uhe intertic, and again cncouraged the Council to take (heir time aud make a good decision on il. Mike Sallee, resident of scveral places, said the inlerlic project depends upon substantial federal subsidy. Le fell that we should look at more efficiency at the electricity we cuceutly have, people who live off the grid and depend on solar or diesel, and learn quick how to turn off lights. He said if he owned Carlavna Lake, he would have a hydro project tapping that resource. Vera Plumb. 441 Ilillcrest. representing IBEW Local 1547, said they support the uerlic. She addressed the Mahoney power sales agreement. citing ils deficiencies, and said millions of dollars have been spent on the iutere and i is time to sce it through to fruiuion. Bill Freer, 748 Miller Ridge Road. stated the report regarding the power supply allcrnatives was onc of the best reports hic has read in his utility life. He cncouraged the Council to follow the recommendations in the report, and he supports the intertic wholeheartedly as the number one alternative. IIe gave a brief history on the Grace Lake Project and the loss it was to the community. Ile said the result of that was going into the years with our dicscls, and in back tracking, we could have had Grace Lake, which had more potential than Swan Lake. Je urged the Council to consider staff's recommendations comlaincd in the report. Eric Hummel, 7960 South Tongass Highway, addressed existing high voltage DC facilitics and some of their problems. He stated if the cost benefit for one proposal is better than the other, you go with the one that works best for the best price. He pointed June 15, 2000 oul a benefit of the high vollage DC line, which is to connect up directly with Ketchikan. Mr. Hlununcl suggested the Council decided to do a supplementary ELS in order to gel the process going. Jim Van Ilurn, 3434 Arnold Avenuc, suggested the problem with Mahoncy Lake is uot the project itself, but rather the power sales agrecinent, slaling il is not a sound business proposition. He commented on several things that were stated at the June 13" special Cily Council mecting, finishing his comments by reading the mission statement for KPU. Le reminded the Council they are representing all the ratcpayers in the community, and = reconunended they go wilh the intertic project, and Whilman/Metlakatla. Mr. Van IIorn answered qucstions from the Council. Dick Coose, 805 Anderson Drive, said that he supports the intertie. He encouraged the Council to approve the project aud move it forward this year. Me noted it is the beginning of the Southeast Interlic, and once approved it is (wo construction seasons and it is done. He pointed out the conununity is not al risk because the Four Dam Pool is willing to take it over. He spoke to the cleiments in place to move the project forward, and he encouraged the Council support it. Dave Carlson thanked the Council for the time spent on the issuc, and pointed out the interconnection between coumpunities up north. He urged support of the interuic. Mr. Carlson answered questions from the Council regarding the amount of debt on the intertie and divestiture, as well as power required and available. Trudy Swink addressed (he Couucil in support of thie Mahoney Lake Project, stating the money spent on diesel compared to the money that Mahoney wants, will save the City $1 million per year. She said this money could be spent on other projects, and asked several hypothetical questions. She commented that we uced short-term answers as well as long term answers. Evaluation_and_ Assessment_of Dydroelectric Generation Supply Alternatives - Ketchikan Public Utilities Cupies of Ordinance No. 00-1429 were available for all persons present. Maved hy Coyne, seconded by Buller the City Council approve in first reading Ordinance No. 00-1429 authorizing the City of Ketchikan, Alaska d/b/a Ketchikan Public Ulililics to execute a Wholesale Powcr Sales Agreement with Ketchikan Electric Company for a 30 year term at the two lier rate (and including such other minimum provisions as determined by uic City Council to be uccessary to protect the Utility); providing for the filing of referendum petitions: establishing an effective date; and directing the general manager to execute such Power Sales Agreement concurrent with 9 Sca7ien ow yee eyrceersy Fb A mee) eee ems ee | any SetUcment Agrccinents as may be required with Cape Fox Corporation to resolve the Beaver Falls Land dispute. Mayor Weinstein asked the Council if they wanted to have a bricf staff presentation, ruling that the motion would be considered after Uic presentation. Councilmembers Coyne and Harpold objected, and after a discussion, the following motion was made. Moved by Harpold, seconded by Cuyne to appeal the ruling of the chair. Mayor Weinstein said if the councilmembers voted yes. Uicre would uot be a staff report, and if they voted no, there would be a staff report, then the Council would return to the motion. Motion failed wilh Lew Williams, West, Steve Williams and Norton voling nay; Harpold and Coyne voting yea. Francis Frances, altorncy for Ketchikan Public Ulilitics, reviewed the process that has taken place regarding negotiations between Ketchikan Electric Company and KPU. She covered the four principles that staff went into negotiations with, including: 1) nothing in te Mahoncy power contract would interfere with the Cily’s ability to operate its own ulility: 2) the Cily would nol be required to pay for electricity it could nol use; 3) fair retmburseiment for the cost that would be uicurred to connect Mahoney to the KPU system as well as the annual cost associated with dispatching the project within the KPU system: and, 4) protection for the City if KEC did not perform ils promise. She stated hat KEC’s objective was tu gel a bavkable agreement, so the project revenues would pay for the project costs. Ms. Frances said neither objective was met. She pointed out that Mr. Gigante said the project was not bankable, meaning dat other asscts would have to be pledged. She explained the cight-ycar contract option, guing over the benefits and drawbacks. She discusscd load usage and loss, as well as the FERC licensing issuc. Ms. Frances displayed a time line regarding ue various project options, explaining that KPU will sull be operating with their existing resources for the next few ycars. She noted all of the projects cannot cucxist together because they represent more power than Ketchikan necds. She addressed the minimum takes required by Maloney and the current needs of the Ketchikan area, and the cost of dicsel to run the generators. Ms. Frances spoke to the opportunilics thal are available to Alaska because of state representation in Washington DC. 10 SAccasiae “AN ye! MEY CUR Dy ge pete um coarse ine aeec_leclaee om June 15, 2000 In response to Councilmember Steve Williams, Ms. Frances said the Mahoney Lake project is a good project. She stated there is no problem with the Mahoney Lake Project itself, but rather the power sales agreement. She noted that becoming cquity owners was discussed and rejected by Ketchikan Electric Company. Peter Gigante, CEO of Cape Fox Corporation, addressed some of the concerns expressed. IIe cxplained part of the negotiations regarding equity ownership in the project, stating that KPU requested one hundred percent equity in the project. He addressed diesel usage, as well as usage froin both the imterlic and Mahoncy. Mc. Giganle cmphasized his only problem with die intertic is that it won't be available to Ketchikan for quite some time, and the high cost of using diesel in the incantimc. He explained why hie felt it was a fallacy for electric costs to drop to 6.8 cents alter the intertic Comes On line, although he said that ducsn’t mean they don’t support the intertie. Mr. Gigante discussed FERC requirements, stating thal because Uicy accepted all the FERC requirements at the get-go, they feel they are more likely to have them loosencd as lime goes on, rather than tightened. He said the timetable for project completion includes all the preconstruction documents and that is why they necd the decision by the Council, in order to proceed with this step. Ie noted they are approaching the point where if they don’t do Unis, it will affect their crilical path for construction. Ie explained the design of the shafts between the two lakes, saying thcy have allowed six months for the FERC approval of the redesign before they enter into dic main phase of the construction. In discussing intercomection and dispatch costs, he pointed out that other projects will have interconnection costs as well. Le said ticy have been pushing tie ciylit-ycar deal, because it would allow KPU to terminate after cight years. which could co-cxist with ‘Tyce. He noted another possibility is looking at (he twenty-year coutrac!, to which options could be added to give KPU the ability to terminate after Wwenty years. Ie recited some of the benefits to taking the thirty-year contract. and he cncouraped he Council to let Mahoney be the project Uncy chose. He requested in the event the issue is passed tonight in one form or another, that any reference to Beaver Falls is stricken to (he moon, because they fecl it is a separate issue unrelated to the City’s selection of a hydro power alternative. He also fell dhat the motion should add language Uiat the City will coutinue to support efforts lo build the Swan - Tyee intertic. [ce again cmphasized thal timclincss is of the essence. The Council took a short break at 10:07 p.m. and reconvened at 10:12 p.m Motion failed with Lew Williams, West and Uarpold voting uay, Butler and Coyne voung yea; Steve Williams and Norton abstaining. Moved by Lew Williams, seconded by Harpold the City Council direct staff to piuisue alictnalive hydroelectric generation options as detailed in the general Manager's report dated June 1, 2000, including the Swan Lake - Lake Tyce intertic and the Whiunan Lake/Metlakatla options, contingent upon the understanding that should the Four am ify » 3 ’ r Junc 15, 2000 Pool Purchasing Utilities not proceed with divestiture and secure a funding package for the Swan Lake - Lake Tyce Intertic, the Utility will abandon the project and move forward with Wie Whitman Lake/Mctlakatla allernative only. Moved _by Coyne, seconded by West to amend tie last sentence by adding “Mahoney Lake” after the words “Whitinan Lake/Metlakaula ” Councilmember Lew Williams pointed out thal if the interlic docs nol proceed we will need Whitman, Metlakatla and dic Mahoncy Project to mect Ketchikan's power necds. Motion to amend passed with Harpold, Coyne, Buller ant West voling yea; Lew Williams voling nay: Norton and Steve Williams abstaining. Motion. as amended, passcd with Lew Williams, West, Ilarpold and Butler voting yea: Coyne voting nay; Norton and Steve Williams abstaining. MAYOR AND COUNCIL COMMENTS Councilmember Coyne said he wished Uic mayor would allow some independent thinking without interrupting. He noted there are people wilh all kinds of good ideas but the way the mayor pounces on him (Councilmember Coyne), they don't want lo take a chance that he is nol going to pounce on them. Ie said the mayor needed lo give everyone the benefit of the doubt and slop interrupting all the time. Councilmember Lew Williams said the mectings were good, and the Council did good work Councilmember West said it was a tough decision, and she did a Jot of thinking before she made her decision. She stated she knew there were a lot of people who were disappointed, but she felt she did what was in the best interest of the majority of the community. Ms. West noted now thal the City is pursuing the intertic, she would like to see what the option of high voltage DC holds for us, and maybe it might be something workable. Councilmember Norton said it has been real tough to keep his mouth shut for the last wo meetings and that Mahoncy is a very youd proyccl. He expressed appreciation for all the hard work those folks put into il, and he recognized how hard they worked for it and how hard it was for them. He said it boils down to conjecture in a lot of ways, and the intcrue was going before hc caine onty te Council. He noted the intertic is what everyouc would like to see in the long run. He noted it has been a draining week and he appreciated everyone's involvement. il? Siscsacine al yiis EY PO Sy Jo gen we SS sae winwl coc Ses _one Councilmember Steve Williains Uianked the mayor fur running two good micclings on a contentious issue. He thanked the manager for taking care of the horse smell, and expressed that he was glad the Council put some teeth into the drug paraplicrnalia issuc. He reminded everyone of the Fireman’s Ball on Saturday, and hopes it becomes a tradition we can keep. Ic thanked the staff of the Mahoney Lake project and cncouraged then to continue to work and persevere for their shareholders. He also expressed appreciation lo Mr. Yununel and noted that no matter what, we will have to deal with environmentalists regardless of what power project the City pursucs. Ie said thal necds to be figured into the costs, and we need to realize there are people oul in the world that can affect us, whether we want to work with them or not. Mr. Williams said he fell we are on the verge of something big and great wilh the intertic, and hic Uiought the intertie is the future fur our part of the world. Councilmember Buller said everyone put a lot of work and energy imlv the last two mectings, and she dianked everyone for that, She said when the year 2035 was thrown out, she noted no one on the Council would be there except Councilmember Steve Williams. She hoped the Council did what was right for the people. Councilinember Harpold commented he is interested in duing a study on the high voltage DC possibility, and asked the wanager how to accomplish this. Manager Amylon said he would like to be able to come back al the next meeting with some type of game plan relative to the CI filing and where KPU may be going. Councilmember Harpold objected to things laid on the table the night of the mecting Mayor Weinstein said he didn’t think anyone objected to secing additional information will respect to the letter SEAK has filed, but he pointed out that SIZAK could bave hired somcone to do a study or a fuundation that is interesicd in environmental issucs could do a study and present it to die Council, rather than an outdated Ictter from AP&T that doesn’t guarantee that the project could be designed, permitted and built for a sum of money. He stated there are a lot of issues in terms of what will happen if there is a supplemental cuviromuental impact statement: docs that delay the intertic; is Wat a whole new EJS? He pointed oul we do not have any guarantee that any project will be supported whether it is over iand or under water, He noted he is nol opposed to sccing credible information on an aliernative, whether it is new technology, less expensive or both, that docs not significantly delay a permitted project aud open the whole thing up to further challenges. Councilmember Covne said he would do radio. OTHER NEW BUSINESS - Nonc Ro RRR SS RR A ye