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BPMC Meeting Dec 12 Continued Dec. 23, 2013 4
= ALASKA. @@lD ENERGY AUTHORITY BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE REGULAR MEETING AGENDA Thursday, December 12, 2013-— 1 p.m. Alaska Energy Authority’s Board Room 813 West Northern Lights Boulevard, Anchorage, AK 1. CALL TO ORDER ROLL CALL (for Committee members) PUBLIC ROLL CALL (for all others present) PUBLIC COMMENT AGENDA COMMENTS / MOTION FOR APPROVAL APPROVAL OF PRIOR MEETING MINUTES - July 9, 2013 NEW BUSINESS 2013 financial audit — Action item Bradley SVC maintenance agreement — Action item Homer Electric Association (HEA) transmission tariff filing — Action item Adoption of Reliability Standards — Action item Implementation of dynamic scheduling — Action item HEA proposed load balancing area — Action item HEA O & M operator status — Action item Battle Creek update Fish water screen debris removal Fish water flows Purchase or lease of Soldotna-Quartz Creek line Kenai outage in November 2013 . Status of governor replacement project Dispute resolution process 8. ADJOURNMENT So ee ZErA- -rommonwt> To participate by teleconference, dial 1-800-315-6338 and use code 3074#. 813 West Northern Lights Boulevard Anchorage, Alaska 99503 1 907.771.3000 Toll Free (Alaska Only) 888.300.8534 F 907.771.3044 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING REGULAR MEETING Alaska Energy Authority, Anchorage, Alaska July 9, 2013 1. CALL TO ORDER Chair Evans called the regular meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 8:34 a.m. 2. COMMITTEE MEMBERS ROLL CALL Cory Borgeson Golden Valley Electric Association (GVEA) Bryan Carey Alaska Energy Authority (AEA) Brad Evans Chugach Electric Association (CEA) Joe Griffith Matanuska Electric Association (MEA) James Posey Anchorage Municipal Light & Power (AML&P) Harvey Ambrose Homer Electric Association (HEA) John Foutz City of Seward (SEW) 3. STAFF/PUBLIC ROLL CALL Gene Therriault, Wayne Dyok (AEA); Krin Kemppainen (AIDEA); Don Zoerb (MEA); Burke Wick, Brian Hickey (CEA); Brad Janorschke, Alan Owns, Bob Day (HEA); Brian Bjorkquist (Department of Law); Bernie Smith (Regulatory Commission of Alaska); Denali Daniels (MEA); Sunny Morrison (Accu- Type Depositions); 4. PUBLIC COMMENT There were no public comments. s. AGENDA COMMENTS/MOTION FOR APPROVAL The agenda was approved as amended. 6. APPROVAL OF PRIOR MEETING MINUTES - May 17, 2013 The May 17, 2013 meeting minutes were approved as presented. 7 NEW BUSINESS TA. Annual Election of Officers, Chairman and Vice-Chairman MOTION: Mr. Griffith made a motion to reelect the current officers. Motion seconded by Mr. Posey. The motion was approved unanimously. 7B. Budget Amendment Chair Evans requested Item 7, Budget Amendment be addressed before Item 7, Executive Session. Chair Evans inquired about the proposed budget amendment and requested Mr. Janorschke review the issues. BPMC Minutes 7/9/2013 Page | of 2 Mr. Janorschke explained the budget amendment is in excess of 5% of the budget. He stated the budget amendment is for the relay and meter replacement project. There are three phases. The first phase is the design work completed by Electric Power Systems (EPS). It is 95% complete and could come in about $33,000 under budget. Phases Two and Three consist of the project outage/project management testing commissioning and the wiring contract. Before EPS had completed the Phase One design work, they submitted an estimate for Phases Two and Three for $417,000, which HEA included in the Bradley budget. Within the last 30 to 45 days, after the completion of the Phase One design work, EPS updated their estimate for the construction of Phases Two and Three to $827,000. HEA responded by getting additional details from EPS and went out for bid with two other vendors. The determination was EPS' bid was accurate. HEA will discuss this further with the Operations & Dispatch (O&D) Committee on Thursday and if O&D approves the budget amendment, then a contract can be signed this week. There is a concern regarding the delay of the project. Mr. Griffith asked if, in effect, the project cost doubled. Mr. Janorschke stated the cost of Phases Two and Three have doubled. Chair Evans requested further explanation. Mr. Ambrose noted the total project was about one million dollars. The increase is about $400,000, which raises the total project to $1.4 million. EPS did not include all replacements in their original estimate, such as replacing old style relay devices. The other two viable bidders for the project came in at $545,000 and $544,000. In order to minimize outage time at Bradley Lake, the schedule is anticipated to be 12-hour workdays, seven days a week, which incurs overtime and expenses. Thoseare the main reasons for the shortfall of about $410,000. No work has started for Phases Two and Three. HEA wanted to communicate to the Committee before they proceed with the project. MOTION: Mr. Borgeson made a motion to approve the budget adjustment of $410,000 to the FY14 Renewal & Contingency (R&C) Budget requested by HEA for replacing the Electro Mechanical Relays, subject to approval of the OMB Committee. Motion seconded by Mr. Ambrose. The motion was approved unanimously. MOTION: Mr. Carey made a motion to go into Executive Session to discuss the Battle Creek Diversion project. Motion seconded. The motion was approved unanimously. 7C. Executive Session: Battle Creek Diversion project update - 8:49 to 9:35 a.m. 8. ADJOURNMENT There being no further business for the committee, the meeting adjourned. BY: Bradley Evans, Chair Attest: Sara Fisher-Goad Alaska Energy Authority, Secretary BPMC Minutes 7/9/2013 Page 2 of 2 RED-LINED CONSENTING AND APPROVING RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2013-01 Resolution Approving SVC Operation and Maintenance ContraetAgreement WHEREAS, pursuant to Section 13 of the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power (the "Power Sales Agreement") dated as of December 8, 1987, by and among the Chugach Electric Association, Inc. ("Chugach"), Golden Valley Electric Association, Inc., the Municipality of Anchorage d/b/a Municipal Light and Power, the City of Seward d/b/a Seward Electric System, and Alaska Electric Generation & Transmission Cooperative, Inc., and as Additional Parties Homer Electric Association, Inc. and Matanuska Electric Association, Inc. (as used herein collectively, the "Purchasing Utilities"), and the Alaska Energy Authority (the "Authority"—), the Project Management Committee (the "Committee") has been formed for the purposes and with the responsibilities specified by the Power Sales Agreement; and WHEREAS, pursuant to section 13 (c) (ii) (A) the eCommittee is required to make arrangements...” for the operation and managementoperationmaintenance of the Project, and the scheduling, production, and dispatchimprevement-of the Project power...” WHEREAS, Chugach owns and operates electric transmission facilities and is engaged in the transmission, purchase, and sale of electric power and energy; WHEREAS, Chugach as owner of the Daves Creek facilities and historical lessee of the 115 kV portion of the Soldotna Substation, has faithfully, prudently and successfully operated and maintained the SVS facilities a these two locations for over 20 years, and further agrees to continue to operate and maintain the SVS facilities for the benefit of the Bradley Lake Project; WHEREAS, the Authority and Chugach desire to define the terms and conditions governing the operation and maintenance of the SVS facilities at the above described substations; and WHEREAS, pursuant to the Power Sales Agreement, the BPMC has approved the terms of the attached SVS Maintenance Agreement;_and, WHEREAS, the Committee has duly considered whether it is in the best interests of the Purchasing Utilities and their respective customers or members for Chugach Eleetrie-Asseciation to continue in its role as operator and maintainer of the Project Static VAR compensators at Soldotna Substation and Daves Creek. NOW, THEREFORE, IT IS HEREBY RESOLVED BY THE COMMITTEE as follows: Committee Determination. The Committee, has determined that it is in the best interests of the Purchasing Utilities and their respective customers or members that the Alaska-EnergyAuthority enter into the attached SVS operations and maintenance agreement entitled, “BRADLEY LAKE HYDROELECTRIC PROJECT STATIC VAR COMPENSATION SYSTEM OPERATION AND MAINTENANCE AGREEMENT Between CHUGACH ELECTRIC ASSOCIATION, INC., AND ALASKA ENERGY AUTHORITY DECEMBER 12, 2013 Wwith-_Chugach HleetrieAsseciationtne—for the operation and Mmaintenance of the Project Bradley-Lake-Static VAR Compensator Systems _at Soldotna Substation and Daves Creek.- DATED at Anchorage, Alaska, this 12" day of December, 2013. Chair (SEAL) ATTEST Secretary RESOLUTION 2013-01 SVC Maintenance Contract CONSENTING AND APPROVING RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2013-01 Resolution Approving SVC Operation and Maintenance Agreement WHEREAS, pursuant to Section 13 of the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power (the "Power Sales Agreement") dated as of December 8, 1987, by and among the Chugach Electric Association, Inc. ("Chugach"), Golden Valley Electric Association, Inc., the Municipality of Anchorage d/b/a Municipal Light and Power, the City of Seward d/b/a Seward Electric System, and Alaska Electric Generation & Transmission Cooperative, Inc., and as Additional Parties Homer Electric Association, Inc. and Matanuska Electric Association, Inc. (as used herein collectively, the "Purchasing Utilities"), and the Alaska Energy Authority (the "Authority"), the Project Management Committee (the "Committee") has been formed for the purposes and with the responsibilities specified by the Power Sales Agreement; and WHEREAS, pursuant to section 13 (c) (ii) (A) the Committee is required to make arrangements...” for the operation and maintenance of the Project, and the scheduling, production, and dispatch of the Project power...” WHEREAS, Chugach owns and operates electric transmission facilities and is engaged in the transmission, purchase, and sale of electric power and energy; WHEREAS, Chugach as owner of the Daves Creek facilities and historical lessee of the 115 kV portion of the Soldotna Substation, has faithfully, prudently and successfully operated and maintained the SVS facilities a these two locations for over 20 years, and further agrees to continue to operate and maintain the SVS facilities for the benefit of the Bradley Lake Project; WHEREAS, the Authority and Chugach desire to define the terms and conditions governing the operation and maintenance of the SVS facilities at the above described substations; WHEREAS, pursuant to the Power Sales Agreement, the BPMC has approved the terms of the attached SVS Maintenance Agreement; and, WHEREAS, the Committee has duly considered whether it is in the best interests of the Purchasing Utilities and their respective customers or members for Chugach to continue in its role as operator and maintainer of the Project Static VAR compensators at Soldotna Substation and Daves Creek. NOW, THEREFORE, IT IS HEREBY RESOLVED BY THE COMMITTEE as follows: Committee Determination. The Committee, has determined that it is in the best interests of the Purchasing Utilities and their respective customers or members that the Authority enter into the attached SVS operations and maintenance agreement titled, “BRADLEY LAKE HYDROELECTRIC PROJECT STATIC VAR COMPENSATION SYSTEM OPERATION AND MAINTENANCE AGREEMENT Between CHUGACH ELECTRIC ASSOCIATION, INC., AND ALASKA ENERGY AUTHORITY DECEMBER 12, 2013 with Chugach for the operation and maintenance of the Project Static VAR Compensator Systems at Soldotna Substation and Daves Creek. DATED at Anchorage, Alaska, this 12" day of December, 2013. Chair (SEAL) ATTEST Secretary RESOLUTION 2013-01 SVC Maintenance Contract RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2013-02 HEA Tariff Filing WHEREAS, on December 8, 1987, Chugach Electric Association, Inc. (“Chugach”), Golden Valley Electric Association, Inc. (“GVEA”), the Municipality of Anchorage d/b/a Municipal Light and Power (“ML&P”), the City of Seward d/b/a Seward Electric System (“Seward”), and Alaska Electric Generation & Transmission Cooperative, Inc. (“AEG&T”), and Additional Parties Homer Electric Association, Inc. (“HEA”) and Matanuska Electric Association, Inc. (“MEA”), entered into the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power (“Power Sales Agreement”) with the Alaska Power Authority (“Authority”) (collectively “Project participants”); and WHEREAS, HEA, GVEA, MEA, ML&P, Seward, and AEG&T also entered into the Agreement for the Wheeling of Electric Power and for Related Services (“Services Agreement”) with Chugach; and WHEREAS, Chugach, GVEA, ML&P and AEG&T also entered into the Agreement for the Sale of Transmission Capability (“Transmission Agreement”) with HEA; and WHEREAS, the Authority issued Power Revenue Bonds under the Power Revenue Bond Resolution (“Bond Resolution”); and WHEREAS, the Power Sales Agreement, the Services Agreement, the Transmission Agreement, and the Bond Resolution (“Bradley Lake Agreements”), among others, collectively set forth the arrangements, responsibilities, and obligations necessary to secure the benefits of the Bradley Lake Hydroelectric Project (“Project”) for all the Project participants; and WHEREAS, pursuant to Section 13 of the Power Sales Agreement, the Project Management Committee (“PMC”) has been formed for the purposes and with the responsibilities specified by the Bradley Lake Agreements including, without limitation, the responsibility to address disputes arising under the Bradley Lake Agreements; and WHEREAS, the State of Alaska has enacted into law provisions (AS 42.05.431(c)(1)) that exempt the Bradley Lake Agreements, and amendments to those agreements, from review or approval of the Regulatory Commission of Alaska (“RCA”) until all long-term debt for the Project is retired; and WHEREAS, HEA entered into the Agreement for the Lease of Facilities (“Lease”) with Chugach wherein Chugach agreed to lease and operate HEA’s transmission line running between the Soldotna Substation and the Quartz Creek Substation (“S/Q Line”); and WHEREAS, the Lease expires on January 1, 2014, and HEA will take over Chugach’s responsibilities and obligations for O&M on the S/Q Line under the Bradley Lake Agreements; and WHEREAS, HEA has refused to operate the S/Q Line consistent with the terms and obligations of the Bradley Lake Agreements or Chugach’s responsibilities and obligations under the Services Agreement that HEA will undertake; and WHEREAS, on November 15, 2013, HEA submitted to the RCA tariff filings TA355-32 (relating to transmission and ancillary services on the S/Q Line) and TA356-32 (relating to line losses from the transmission of energy from the Project (“Project energy”) across the S/Q Line) (collectively “HEA’s tariff filings”), which ignore and are inconsistent with HEA’s obligations under the Bradley Lake Agreements; and WHEREAS, HEA’s tariff filings attempt to unilaterally and detrimentally restructure the Bradley Lake Agreements and disregard the relevant statutes and jurisdictional structure for the resolution of disputes under the Bradley Lake Agreements; and WHEREAS, if approved, HEA’s tariff filings would improperly put at risk the security and reliability of the transmission system over which Project energy is wheeled to the Project participants; and WHEREAS, if approved, HEA’s tariff filings would improperly subvert the priority status that Project energy is entitled to be given over the S/Q Line for transmission purposes under the Bradley Lake Agreements; and WHEREAS, if approved, HEA’s tariff filings would improperly and significantly increase the cost of delivering Project energy to all other Project participants; and WHEREAS, if approved, HEA’s tariff filings would undermine the assurances and commitments made to the Project bond holders by the Authority through the Bond Resolution. NOW, THEREFORE, IT IS HEREBY RESOLVED BY THE PMC AS FOLLOWS: BE IT RESOLVED: HEA’s tariff filings raise a dispute concerning the wheeling of Project energy under the terms of the Bradley Lake Agreements that is within the primary jurisdiction and authority of the PMC to resolve. BE IT FURTHER RESOLVED: HEA’s tariff filings ignore the PMC’s role in resolving disputes relating to the wheeling of Project energy, violate the relevant statutes and terms of the Bradley Lake Agreements, put at risk the security and reliability of the transmission system over which Project energy is wheeled to the Project participants throughout the Railbelt, improperly subvert the priority status of Project energy over the S/Q Line, improperly increase the costs of delivering Project energy, and violate the assurances made to Project bond holders. BE IT FURTHER RESOLVED: The PMC will take all necessary and appropriate action to require Chugach to continue to operate the S/Q Line and to request that the RCA reject HEA’s Res 2013-02 HEA Tariff Filing Page 2 of 3 tariff filings until the dispute over the terms and conditions for the operation of the S/Q Line for the transmission of Project energy may be properly and fully addressed by the PMC. BE IT FURTHER RESOLVED: The PMC will take all necessary or appropriate action to ensure that the relevant statutes and the terms of the Bradley Lake Agreements are upheld including, without limitation, those terms that require the operator of the S/Q Line to operate it in a manner consistent with the terms of the Bradley Lake Agreements. BE IT FURTHER RESOLVED: The PMC will take all necessary or appropriate action to ensure that Project energy will continue to be delivered on an uninterrupted, priority basis along the S/Q Line to the Project participants who rely on that energy. BE IT FURTHER RESOLVED: Chugach shall continue to operate and maintain the S/Q Line in accordance with Chugach’s responsibilities and obligations under the Services Agreement pending the resolution of the dispute between HEA and the other Project participants. BE IT FURTHER RESOLVED: All Project participants will participate in good-faith negotiations in an effort to resolve the dispute regarding the S/Q Line to protect the priority of Project energy, and to ensure reliable, low-cost transmission service across the S/Q Line consistent with the Bradley Lake Agreements. BE IT FURTHER RESOLVED: If the dispute concerning the wheeling of Project energy over the S/Q Line has not been resolved within 90 days from the date of this Resolution, the Committee will adopt formal dispute resolution procedures, pursuant to Section 10(b) of the Services Agreement, to effectuate a final resolution of the dispute. BE IT FURTHER RESOLVED: That all Project participants will immediately designate representatives with the necessary authority to resolve the dispute and will enter into good-faith negotiations to resolve the dispute in a manner that is consistent with the Bradley Lake Agreements. BE IT FINALLY RESOLVED: During the good-faith negotiation period, all Project Participants will share relevant information in response to reasonable requests and will negotiate with each other in a manner that effectuates the intent and purpose of the Bradley Lake Agreements. DATED at Anchorage, Alaska, this 12" day of December, 2013. Chair (SEAL) ATTEST Secretary Res 2013-02 HEA Tariff Filing Page 3 of 3 CONSENTING AND APPROVING RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2013-03 Adoption of Railbelt Reliability Standards WHEREAS, pursuant to Section 13 of the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power ( "Power Sales Agreement") dated as of December 8, 1987, by and among the Chugach Electric Association, Inc., Golden Valley Electric Association, Inc., the Municipality of Anchorage d/b/a Municipal Light and Power, the City of Seward d/b/a Seward Electric System, and Alaska Electric Generation & Transmission Cooperative, Inc., and as Additional Parties Homer Electric Association, Inc. and Matanuska Electric Association, Inc. (as used herein collectively, the "Purchasing Utilities"), and the Alaska Energy Authority (the "Authority" ), the Project Management Committee (the "Committee") has been formed for the purposes and with the responsibilities specified by the Power Sales Agreement; and WHEREAS, pursuant to section 13 (c) (ii) (A) the committee is required to arrange...” for the operation and maintenance of the Project, and the scheduling, production, and dispatch of Project power...”;and, WHEREAS, Article 3 and Article 9 of the Alaska Intertie Agreement, dated December 23, 1985 (“1985 Agreement”), provided that the Intertie Operating Committee (“IOC”) would be responsible for operating the interconnected Railbelt system and for developing operating procedures and standards practices with respect to such operations. The Intertie Management Committee (“IMC”) has assumed these responsibilities under the Amended and Restated Alaska Intertie Agreement, dated November 18, 2011 (“2011 Amended Agreement”). Further, that through Addendum No. 1 to the 1985 Agreement entitled “Reserve Capacity and Operating Reserve Responsibility” (incorporated as Exhibit H of the 2011 Amended Agreement) the Utility Participants of that agreement would be responsible for reserve requirements for the interconnected system; and, WHEREAS, the IMC (and previously the IOC) has essentially been the Railbelt reliability coordinator for the interconnected Railbelt grid for over 25 years; and, WHEREAS, there has always been close coordination between the IOC/IMC and the Committee; and, WHEREAS, Section 3.1 of the 2011 Amended Agreement provides that the IMC shall determine the operating policies and procedures for handling the obligations and responsibilities for providing Reserve Capacity and Operating Reserves for the Intertie; and, WHEREAS, the IMC has the authority to adopt operating policies and procedures, reliability standards, and enforcement mechanisms, for the Intertie; and, WHEREAS, the IMC has adopted the “Intertie Management Committee’s Railbelt Operating and Reliability Standards, updated October 1, 2013,” as the Reserve Capacity and Operating Reserves for the Intertie and as the operating policies and procedures, reliability standards, and enforcement mechanisms, with one modification made at the request of the Alaska Energy Authority (“AEA”) respecting the Alaska Intertie assets and 2011 Amended Agreement: The “sanctions” portions of the enforcement mechanisms in the “Intertie Management Committee’s Railbelt Operating and Reliability Standards, updated October 1, 2013,” shall not become effective for purposes respecting the Alaska Intertie assets and 2011 Amended Agreement until separately approved by the IMC. WHEREAS, the IMC intends to submit these reliability standards as an informational filing to the Regulatory Commission of Alaska (“RCA”). WHEREAS, the IMC has requested that the RCA exercise the authority granted to it under AS 42.05.321 and other applicable authority and to enter an order 1. Finding that the approval of these standards will serve the public convenience and necessity; 2. Formally approving the standards and finding that they are just and reasonable; and 3. Providing for mechanisms and processes for periodic review of the standards. NOW, THEREFORE, IT IS HEREBY RESOLVED BY THE COMMITTEE as follows: Committee Determination. The Committee has determined that it is in the best interests of the Purchasing Utilities and their respective customers or members that the Intertie Management Committee’s “Railbelt Operating and Reliability Standards, updated October 1, 2013” be adopted and applied as required to all applicable Project assets, facilities and activities; and, BE IT FURTHER RESOLVED BY THE COMMITTEE , that the Committee desires that the Operator of the Project to abide by and follow the “Railbelt Operating and Reliability Standards, updated October 1, 2013” in all aspects of the operation of the Project and deliver of energy from the Project; and, BE IT FURTHER RESOLVED BY THE COMMITTEE, that AEA and the Operator make the necessary amendments to the Project Operation and Maintenance Standards and/or Work Rules RES 2013-03 — RELIABILITY STANDARDS PAGE 2 OF3 to accommodate and effectuate this purpose and objective of this Resolution as soon as practicable and report to the Committee when the Operator is complying with the purpose and objective of this Resolution. DATED at Anchorage, Alaska, this 12'" day of December, 2013. Chair (SEAL) ATTEST Secretary REs 2013-03 — RELIABILITY STANDARDS PAGE 3 OF3 RED-LINED CONSENTING AND APPROVING RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2013-04 Adoption of Dynamic scheduling WHEREAS, pursuant to Section 13 of the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power (the "Power Sales Agreement") dated as of December 8, 1987, by and among the Chugach Electric Association, Inc.("Chugach"), Golden Valley Electric Association, Inc., the Municipality of Anchorage d/b/a Municipal Light and Power, the City of Seward d/b/a Seward Electric System, and Alaska Electric Generation & Transmission Cooperative, Inc., and as Additional Parties Homer Electric Association, Inc. and Matanuska Electric Association, Inc. (as used herein collectively, the "Purchasing Utilities"), and the Alaska Energy Authority (the "Authority" ), the Project Management Committee (the "Committee") has been formed for the purposes and with the responsibilities specified by the Power Sales Agreement; and WHEREAS, pursuant to section 13 (c) (ii) (A) the eCommittee is required to arrange...” for the operation and ey ean of the Project, and the scheduling, production, and dispatchimprovement of the Project (i WHEREAS, Bradley lake is within the Chugach Load Balancing Area (LBA); and, WHEREAS, dynamic scheduling provides the capability for parties outside of the Chugach LBA to dispatch thereir Project Bradley-shares in Rreal time through the Chugach SCADA/EMS System; and, WHEREAS, dynamic scheduling of the Project will provide each of the pPurchasersing Utilities maximum flexibility in efficiently using their respective shares of the Prejeets-energy and capacity produced by the Project; and, WHEREAS, Chugach, as the Project dispatcher, has the technical capabilities within its existing SCADA/EMS master station to implement dynamic scheduling; NOW, THEREFORE, IT IS HEREBY RESOLVED BY THE COMMITTEE as follows: Committee Determination. The Committee has determined that it is in the best interests of the Purchasing Utilities and their respective customers or members that the dynamic scheduling be implemented for the Project. To that end, The Committee directs the Operations and Dispatch Subcommittee to work closely with Chugach to develop a scope, schedule, and budget for the implementation of master station dynamic scheduling as quickly as is reasonably practical. And further, to develop a budget amendment for this project and submit this amendment to the BPMC and the next quarterly BPMGC-meeting of the BPMC. DATED at Anchorage, Alaska, this 12" day of December, 2013. (Seal) Attest Chair Secretary CONSENTING AND APPROVING RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2013-04 Adoption of Dynamic scheduling WHEREAS, pursuant to Section 13 of the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power (the "Power Sales Agreement") dated as of December 8, 1987, by and among the Chugach Electric Association, Inc.("Chugach"), Golden Valley Electric Association, Inc., the Municipality of Anchorage d/b/a Municipal Light and Power, the City of Seward d/b/a Seward Electric System, and Alaska Electric Generation & Transmission Cooperative, Inc., and as Additional Parties Homer Electric Association, Inc. and Matanuska Electric Association, Inc. (as used herein collectively, the "Purchasing Utilities"), and the Alaska Energy Authority (the "Authority" ), the Project Management Committee (the "Committee") has been formed for the purposes and with the responsibilities specified by the Power Sales Agreement; and WHEREAS, pursuant to section 13 (c) (ii) (A) the Committee is required to arrange...” for the operation and maintenance of the Project, and the scheduling, production, and dispatch of the Project power;...” WHEREAS, Bradley lake is within the Chugach Load Balancing Area (LBA); and, WHEREAS, dynamic scheduling provides the capability for parties outside of the Chugach LBA to dispatch their Project shares in real time through the Chugach SCADA/EMS System; and, WHEREAS, dynamic scheduling of the Project will provide each of the Purchasing Utilities maximum flexibility in efficiently using their respective shares of the energy and capacity produced by the Project; and, WHEREAS, Chugach, as the Project dispatcher, has the technical capabilities within its existing SCADA/EMS master station to implement dynamic scheduling; NOW, THEREFORE, IT IS HEREBY RESOLVED BY THE COMMITTEE as follows: Committee Determination. The Committee has determined that it is in the best interests of the Purchasing Utilities and their respective customers or members that the dynamic scheduling be implemented for the Project. To that end, The Committee directs the Operations and Dispatch Subcommittee to work closely with Chugach to develop a scope, schedule, and budget for the implementation of master station dynamic scheduling as quickly as is reasonably practical. And further, to develop a budget amendment for this project and submit this amendment to the BPMC and the next quarterly meeting of the BPMC. DATED at Anchorage, Alaska, this 12" day of December, 2013. (Seal) Attest Chair Secretary CONSENTING AND APPROVING RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2013-05 Telemetry of Bradley Lake into Chugach Load Balancing Area WHEREAS, pursuant to Section 13 of the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power (the "Power Sales Agreement") dated as of December 8, 1987, by and among the Chugach Electric Association, Inc.(Chugach), Golden Valley Electric Association, Inc., the Municipality of Anchorage d/b/a Municipal Light and Power, the City of Seward d/b/a Seward Electric System, and Alaska Electric Generation & Transmission Cooperative, Inc., and as Additional Parties Homer Electric Association, Inc. (“HEA”), and Matanuska Electric Association, Inc. (as used herein collectively, the "Purchasing Utilities"), and the Alaska Energy Authority (the "Authority" ), the Project Management Committee (the "Committee") has been formed for the purposes and with the responsibilities specified by the Power Sales Agreement; and WHEREAS, pursuant to section 13 (c) (ii) (A) the committee is required to arrange...” for the operation and maintenance of the Project, and the scheduling, production, and dispatch of the Project power...”; and WHEREAS, as of December 31. 2013, HEA will transition from a net requirements customer of Chugach (via the tri-partite agreement) operating within Chugach’s Load Balancing Area; and, WHEREAS, on January 1, 2014, HEA will begin operating its own Load Balancing Area (LBA) and take on the duties of a Load Balancing Authority; and, WHEREAS Chugach Electric will remain the Project Dispatcher; and, WHEREAS, HEA is the Operator of the Project Power Plant and through various agreements the Project transmission lines south of Quartz Creek; and, WHEREAS, the Project facilities must telemetered out of the HEA LBA and into the Chugach LBA; and, WHEREAS, it is in the best interest of the Project and the interconnected Railbelt grid to accurately account for and allocate electrical losses; and, WHEREAS, the following LBA interchange configuration will minimize the magnitude of required Project loss adjustments, and simplify real and reactive power energy accounting. NOW, THEREFORE, IT IS HEREBY RESOLVED BY THE COMMITTEE as follows: Committee Determination: The Committee has determined that it is in the best interests of the interconnected Railbelt grid, the Purchasing Utilities and their respective customers or members that Project facilities south of Quartz Creek be telemetered out of the HEA LBA and into the CEALBA with the LBA boundary defined by following interchange points: Bradley Lake MOD 2425 (real and reactive interchange with Diamond Ridge line) Soldotna 115 -69 kV transformer (real and reactive interchange ) Soldotna 115 kV line to Diamond Ridge (real and reactive interchange ) Soldotna 115 kV line to Bernice Lake (real and reactive interchange ) Soldotna LM 6000 generator (real and reactive interchange) Sterling Substation T-1 (Sterling real and reactive ) Quartz Creek Breaker 442 (Quartz to Soldotna 69 kV line) CEA, the Project dispatcher, will continue to schedule energy and capacity, for the participants delivered to CEA, at HEA’s Soldotna Substation, as currently defined in the Bradley Lake “Agreement for the Wheeling of Electric Power and for Related Services. DATED at Anchorage, Alaska, this 12 day of December, 2013. (SEAL) ATTEST Secretary Chair RES 2013-05 LOAD BALANCING CONSENTING AND APPROVING RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2013-06 Change of Project Operator WHEREAS, pursuant to Section 13 of the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power (the "Power Sales Agreement") dated as of December 8, 1987, by and among the Chugach Electric Association, Inc., Golden Valley Electric Association, Inc., the Municipality of Anchorage d/b/a Municipal Light and Power, the City of Seward d/b/a Seward Electric System, and Alaska Electric Generation & Transmission Cooperative, Inc., and as Additional Parties Homer Electric Association, Inc. and Matanuska Electric Association, Inc. (as used herein collectively, the "Purchasing Utilities"), and the Alaska Energy Authority (“‘AEA" ), the Project Management Committee (the "Committee") has been formed for the purposes and with the responsibilities specified by the Power Sales Agreement; and WHEREAS, pursuant to section 13 (c) (ii) (A) the committee is required to arrange...” for the operation and maintenance of the Project, and the scheduling, production, and dispatch of the Project power...”; and WHEREAS, to provide for the operation and maintenance of the Project and Project Related Facilities, the Committee entered into a Master Maintenance and Operating Agreement (“Master M&O Agreement”) with the AEA to establish a contract administration and budgeting procedure for contracting for the operation and maintenance of the Project and Project Related Facilities, and the related services, facilities, and equipment; and, WHEREAS, the Committee is authorized under Master M&O Agreement and the Committee Bylaws (adopted pursuant to the terms of the Power Sales Agreement), to approve contracts for the operation and maintenance of Project facilities; and, WHEREAS, the Committee approved the contract between AEA and Homer Electric Association, Inc. (“HEA”), for HEA to provide O&M services pursuant to the “Second Amended and Restated Operation and Maintenance Agreement for Bradley Lake Hydroelectric Project Between Homer Electric Association, Inc. and Alaska Energy Authority” dated effective July 1, 2008 (“Project O&M Agreement”); and, WHEREAS, the Committee no longer believes it is in the best interests of the Project that HEA be utilized to provide the services of Operator under the Project O&M Agreement; and, WHEREAS, the terms of the services of require that the Operator be provided with timely notice that the Project O&M Agreement will be terminated; and, WHEREAS the Committee desires to provide HEA with sufficient notice of its intention to not utilize the services of HEA; WHEREAS, the Committee has adopted this Resolution to acknowledge its intent to not renew HEA as Operator under the Project O&M Agreement pursuant to its authority under the Master M&O Agreement. NOW, THEREFORE, IT IS HEREBY RESOLVED BY THE COMMITTEE as follows: Committee Determination. The Committee has determined that it is in the best interests of the Purchasing Utilities and their respective customers or members that the services of HEA as Operator of the Project not be extended beyond the current term which under the terms of the Project O&M Agreement ends on July 1, 2018. BE IT FURTHER RESOLVED BY THE COMMITTEE, that AEA is directed to immediately provide notice to HEA that the Project O&M Agreement will not be renewed. BE IT FURTHER RESOLVED BY THE COMMITTEE that AEA notify the Committee when the notice has been provided to HEA that its services as Operator under the Project O&M Agreement will not be renewed and therefore conclude July 1, 2018. BE IT FURTHER RESOLVED BY THE COMMITTEE that AEA notify the Committee when AEA and HEA are to meet to discuss the arrangements necessary for the orderly takeover of duties of the Operator in accordance with Section 18 (a) of the Project O&M Agreement. DATED at Anchorage, Alaska, this 12" day of December, 2013. Chair (SEAL) ATTEST Secretary RES 2013-06 CHANGE OF PROJECT OPERATOR Audited Financial Statements and Other Financial Information BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS Years ended June 30, 2013 and 2012 SWALLING & ASSOCIATPS Certified Public Accountants & Business Advisers BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS Financial Statements and Other Financial Information Years ended June 30, 2013 and 2012 Contents Page Independent Auditor’s Report 1-2 Balance Sheets 3 Statements of Revenues and Expenses 4 Statements of Cash Flows 5 Notes to Financial Statements 6-11 Independent Auditor’s Report on Other Financial Information 12 Statements of Expenses 13 SWALLING & ASSOCIATES Certified Public Accountants & Business Advisers INDEPENDENT AUDITOR’S REPORT Bradley Lake Project Management Committee Anchorage, Alaska We have audited the accompanying special-purpose financial statements of the Bradley Lake Project Management Committee (a project management committee) Operating and Revenue Funds, which comprise the special-purpose balance sheets as of June 30, 2013 and 2012, and the related special-purpose statements of revenues and expenses, and special-purpose statements of cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements The Bradley Lake Project Management Committee is responsible for the preparation and fair presentation of these special-purpose financial statements in accordance with the accounting requirements of the Operating and Revenue Funds established under the Alaska Energy Authority Power Revenue Bond Resolution as described in Note A. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these special-purpose financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 3201 C Street, Suite 405 : Anchorage, Alaska 99503 @ Independent member of DFK International - a worldwide association of independent accounting firms and business advisers Ph 907.563.7977 + Fax 907.561.7683 + www.swallingepas.com Bradley Lake Project Management Committee Opinion In our opinion, the special-purpose financial statements referred to above present fairly, in all material respects, the assets, liabilities and surplus of the Bradley Lake Project Management Committee Operating and Revenue Funds as of June 30, 2013 and 2012, and its revenue and expenses and its cash flows for the years then ended, on the basis of accounting described in Note A. Basis of Accounting We draw attention to Note A of the special-purpose financial statements, which describes the basis of accounting. The financial statements are prepared on the basis of the accounting requirements of the Operating and Revenue Funds established under the Alaska Energy Authority Power Revenue Bond resolution, as discussed in Note A, which is a basis of accounting other than accounting principles generally accepted in the United States of America to comply with accounting requirements of the bond resolution referred to above. Our opinion is not modified with respect to that matter. They are not intended to be a complete presentation of the Bradley Lake Project Management Committee’s financial statements. Restriction on Use This report is intended solely for the information and use of the Bradley Lake Project Management Committee and is not intended to be and should not be used by anyone other than this specified party. aalleg fe CAsaecelly | Pts Anchorage, Alaska December 4, 2013 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS BALANCE SHEETS June 30, 2013 and 2012 2013 2012 ASSETS Current assets: Investments (Note B) $ 1,466,992 $ 2,086,967 Due from R & C Fund (Note A) 767,078 773,898 Other receivable 2,150 - Prepaid expense 5,640 5.640 Total assets $2,241,860 $2,866,505 LIABILITIES AND SURPLUS Current liabilities: Due to AEA (Note D) $ 305,117 $ 389,806 Accounts payable 905,331 908,063 Payable to utilities -O & M (Note E) 264,334 794,738 Payable to utilities —R & C refund (Note A) 767.078 773,898 Total liabilities $ 2,241,860 $2,866,505 See accompanying notes to the financial statements. 3 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS STATEMENTS OF REVENUES AND EXPENSES Years ended June 30, 2013 and 2012 Revenues: Utility contributions, net of surplus refund Interest receipts State Renewable Energy Total revenue Expenses, fixed asset replacements, transfers and debt service: Operations and maintenance 6,144,846 Debt service Arbitrage transfer Fixed asset replacements Battle Creek — State Interfund transfer Total expenses, fixed asset replacements, transfers and debt service Excess of revenues over expenses, fixed asset replacements, transfers and debt service 2013 Variance Favorable 2012 Budget Actual (Unfavorable) Actual $ 17,207,567 $16,176,157 $ (1,031,410) $ 15,408,840 1,868,406 1,936,516 68,110 1,959,302 - 477,363 477,363 22,637 19,075,973 18,590,036 (485,937) 17,390,779 5,070,732 1,074,114 4,733,201 12,107,950 12,107,950 - 12,100,750 220,000 296,812 (76,812) 196,112 520,625 554,627 (34,002) 401,579 - 477,363 (477,363) 22,637 82,552 82,552 - (63.500) 19,075,973 18,590,036 485,937 17,390,779 See accompanying notes to the financial statements. 4 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS STATEMENTS OF CASH FLOWS Years ended June 30, 2013 and 2012 Cash flows from operating activities: Excess of revenues over expenses, fixed asset replacements, transfers and debt service Adjustments to reconcile excess of revenues over expenses, fixed asset replacements, transfers and debt service to net cash provided by (used in) operating activities: Decrease (increase) in accounts receivable (Decrease) increase in accounts payable Decrease in amounts due to other funds (Decrease) increase in payable to utilities Decrease in R & C refund Net cash used in operating activities Available cash and cash equivalents, beginning of year Available cash and cash equivalents, end of year Supplemental disclosure of cash flows information: Interest paid See accompanying notes to the financial statements. 5 2013 $ = 4,670 (87,233) (188) (530,404) (6,820) (619,975) 2.086.967 $1,466,992 $_5,014,350 it — nN (583,628) 164,886 (320,879) 195,264 (537,901) (1,082,258) 3,169,225 $2,086,967 $ 5,415,600 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS June 30, 2013 and 2012 NOTE A: SIGNIFICANT ACCOUNTING POLICIES Description of Business: The Bradley Lake Project Management Committee (the Committee) was established pursuant to Section 13 of the Agreement for the Sale and Purchase of Electric Power (Power Sales Agreement) dated December 8, 1987. The purpose of the Committee is to arrange for the operation and maintenance of the Bradley Lake Hydroelectric Project (the Project), which became operational in September 1991, and the scheduling, production and dispatch of power. The members of the Committee include the Alaska Energy Authority (AEA) and the five purchasers under the Power Sales Agreement - Chugach Electric Association, Inc.; Golden Valley Electric Association, Inc.; the Municipality of Anchorage (Municipal Light & Power); the City of Seward (Seward Electric System); and the Alaska Electric Generation & Transmission Cooperative, Inc. (AEG&T). AEG&T assigned its rights pertaining to Homer Electric Association, Inc. (HEA) under the Power Sales Agreement to Alaska Electric and Energy Cooperative, Inc. (AE&EC) in 2003. HEA and the Matanuska Electric Association, Inc. (MEA) are additional parties to the Power Sales Agreement but are included as power purchasers for purposes of representation while AEG&T and AE&EC have no direct vote as a consequence of the individual representation of HEA and MEA. Section 13 of the Power Sales Agreement delineates other Committee responsibilities, including: establishing procedures for each party's water allocation, budgeting for annual Project costs and calculating each party's required contribution to fund annual Project costs. Committee approval of operations and maintenance arrangements for the Project, sufficiency of the annual budgets and wholesale power rates and the undertaking of optional Project work requires a majority affirmative vote and the affirmative vote of AEA. The Power Sales Agreement extends until the later of: 1) 50 years after commencement of commercial operation or 2) the complete retirement of bonds outstanding under the AEA Power Revenue Bond Resolution along with the satisfaction of all other payment obligations under the Power Sales Agreement. Renewal options for additional terms exist. At June 30, 2013, slightly more than $2.5 million of capital additions occurred relating to the Battle Creek Diversion project to enhance the Bradley Lake Hydroelectric Project. The funding for this project comes from State appropriations and the Bradley Lake R & C Fund. This project would divert the upper part of Battle Creek into Bradley Lake. The increase in water will enable the Project to produce an additional annual average of 36,000 MW-hrs. (nearly a 10% increase in Bradley Lake’s annual energy). Diversion engineering is in final design and various environmental studies are ongoing. An amendment to the Bradley Lake Hydroelectric Project Federal Energy Regulatory Commission license is expected in 2014 with construction completed in 2016. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 2013 and 2012 NOTE A: SIGNIFICANT ACCOUNTING POLICIES (Continued) Establishment of Trust Funds: Article V, Section 502 of the Alaska Energy Authority's Power Revenue Bond Resolution established a Revenue Fund and an Operating Fund, including an Operating Reserve account, to be held by AEA. In actuality these funds, along with the Debt Service, Excess Investment Earnings (arbitrage), and various construction funds related to the Bradley Lake Hydroelectric Project are all held by the Corporate Trust Department of US Bank in Seattle, Washington. All deposits, including utility contributions and interest transferred from other funds, are made into the Revenue Fund, which transfers amounts approximately equal to one-twelfth of the annual operating and maintenance budget into the Operating Fund on a monthly basis. Additional transfers are made from the Revenue Fund to the Debt Service Fund in order to satisfy semiannual interest payments and annual principal payments on the Project's outstanding bonds payable. Interest earnings available for operations and maintenance are derived from the following funds: Debt Service Fund; Operating Reserve Fund; Operating Fund; Revenue Fund; Capital Reserve Fund; and the Renewal & Contingency Fund when the fund balance is $5,000,000 or greater. Revenue and Expense Recognition: Utility contributions are recognized as revenue when due to be received under the terms of the Power Sales Agreement. Transfers from other funds are recognized when the transfer is made and interest earnings are recognized when received. Operating and maintenance expenses are recognized when incurred, while transfers to Debt Service Fund and Excess Earnings Funds are recognized when the transfer is made. Purchases of fixed asset replacements are expensed when purchased. The Operating Fund reimburses the Renewal and Contingency Reserve Fund (R & C Fund) for capital costs over a four year period. Transfers to the R & C Fund for repayment of funds withdrawn for capital costs occur monthly based on the budgeted R & C expenditures. At year end the actual Operating Fund and R & C Fund expenses are compared to the actual revenue and a refund is given to the utilities when a surplus of revenues occurs or invoices are issued to the utilities if expenses exceed revenues. At June 30, 2013, the surplus to be refunded was $767,078, resulting in a net balance due to the R & C Fund of $372,249. The balance due to the R & C Fund at June 30, 2012 was $328,496. Estimates: The preparation of the special-purpose financial statements of the Operating and Revenue Funds requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 2013 and 2012 NOTE A: SIGNIFICANT ACCOUNTING POLICIES (Continued) In fiscal year 2009, the Federal Energy Regulatory Commission (FERC) land use fee increased significantly due to a new methodology for estimating the fee. The increased 2009 fee of $378,141 was paid to FERC and the Committee participated in litigation to dispute this new methodology. In fiscal year 2010, $380,000 was accrued for the fee, but was not paid pending an outcome of the litigation. During fiscal year 2011, the dispute was settled and the new land use fee methodology was discontinued. The fees for fiscal years 2009, 2010 and 2011 were estimated to be the same amount billed prior to the new methodology resulting in a refund receivable of $190,270 at June 30, 2011 that was received in September, 2011. Additional information regarding the refund of FERC fees is contained in footnote E, Surplus Refund. Income Taxes: The Bradley Lake Project Management Committee is exempt from income taxation under Section 501 (a) of the Internal Revenue Code. Therefore, the Committee had no deferred tax liabilities or assets or tax carryforwards as of June 30, 2013 and 2012 and no current or deferred tax expense for the years then ended. NOTE B: INVESTMENTS Substantially all of the balances in the following funds are invested in collateralized investment agreements with JP Morgan Chase Bank through the trust department of US Bank. The specified interest rate for monies from the Operating and Revenue Funds invested in the agreements is 7.38% per annum. Balances at June 30, 2013 and 2012 are as follows: 2013 2012 Operating Fund $ 1,310,642 $ 1,176,629 Revenue Fund 156,350 910,338 Total investments 4 92 $ 2,086,967 Investments are sold as needed to cover operating requisitions submitted to the trustee and are therefore considered to be short-term and available for sale. Investments are presented at aggregate cost. For purposes of the cash flow statements, management considers the full amount of the investment balance to be cash available for operations. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 2013 and 2012 NOTE C: MAJOR CONTRACTS AND AGREEMENTS During May 1994, the Alaska Energy Authority entered into the Master Maintenance and Operating agreement with the Committee. The purpose of the agreement is to establish contract administration and budgeting procedures for maintenance and operation contracts of the Bradley Lake Hydroelectric Project and to provide for the lease or other use of facilities and equipment in a manner consistent with the requirements of the Power Sales Agreement. The term of the Master Agreement is indefinite, remaining in effect until termination of the Power Sales Agreement or until AEA no longer legally exists. This agreement authorizes AEA to enter into any contracts necessary to perform operating or maintenance-type services to the Project, subject to the approval of the Committee. On behalf of the Committee, the AEA entered into an agreement with Chugach Electric Association, Inc. (CEA) in August 1996, for the provision of all services necessary to dispatch the Project's electric power output. The dispatch agreement runs concurrently with the wheeling and related services contract entered into by and among the parties to the Power Sales Agreement in December 1987 and remains in effect for the term of the wheeling agreement unless CEA ceases to be the output dispatcher. In August 1996, the Alaska Energy Authority entered into an agreement with CEA on behalf of the Committee for the provision of maintenance services for the Daves Creek and Soldotna SVC Substations. An operation and maintenance agreement dated February 11, 1994, was executed between Homer Electric Association, Inc. and the Alaska Energy Authority. This agreement provides for the operation and maintenance of the Bradley Lake Hydroelectric Project by Homer Electric Association, Inc. The agreement, as amended effective July 1, 2008, is through June 30, 2013 and automatically continues in successive five year terms thereafter unless terminated by either party as set forth in the amended agreement. Generally, to avoid an automatic, successive five year term extension, notice of termination by either party must be given two years in advance of the termination date. HEA is to be reimbursed for costs associated with the operation, maintenance and repair of the Project as determined in advance through the submission of an annual budget based upon prudent estimates and anticipated operation and maintenance costs. In August 1996, the agreement was amended to separate the maintenance of the transmission facilities from the hydroelectric project. The transmission agreement continues from year to year, except upon written notice to terminate by either party. Notice of termination must be given six months in advance of termination dates. In June 1999, the transmission agreement was again amended to require HEA to provide communication services in addition to the other services. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 2013 and 2012 NOTE D: RELATED PARTY TRANSACTIONS During the years ended June 30, 2013 and 2012, costs incurred under the various contracts with related parties described in Note C were as follows: 2013 2012 Homer Electric Association, Inc. — operation, maintenance, communications and fixed asset replacements $ 2,627,680 $ 2,480,366 Chugach Electric Association, Inc. — substation service maintenance $ 316,905 $ 126,578 Alaska Energy Authority — administrative fees $ 200,000 $ 200,000 For the years ended June 30, 2013 and 2012, Chugach Electric Association, Inc. provided dispatch services to the Committee at the agreed upon amount which is zero. Amounts payable to related parties at June 30, 2013 and 2012 were as follows: 2013 2012 Included in accounts payable: Homer Electric Association, Inc. $ 499,683 $ 589,952 Chugach Electric Association, Inc. $ 16,281 $ 1,586 Due to others: Alaska Energy Authority — short-term borrowings for vendor payments $ 305,117 $ 389,806 NOTE E: SURPLUS REFUND AND UTILITY CONTRIBUTIONS RECEIVABLE The $794,738 surplus at June 30, 2012 was refunded to member utilities in fiscal year 2013 pursuant to the Power Sales Agreement and direction of the Committee. At June 30, 2013, a surplus of $264,334 will be refunded to member utilities in fiscal year 2014 pursuant to the Power Sales Agreement and direction of the Committee. 10 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS NOTES TO FINANCIAL STATEMENTS (Continued) June 30, 2013 and 2012 NOTE F: SUBSEQUENT EVENTS The Committee has evaluated subsequent events through December 4, 2013, the date the financial statements were available to be issued, and did not identify anything requiring additional disclosure. 11 SWALLING & ASSOCIATES Certified Public Accountants & Business Advisers INDEPENDENT AUDITOR’S REPORT ON OTHER FINANCIAL INFORMATION Bradley Lake Project Management Committee Anchorage, Alaska ‘ We have audited the special-purpose financial statements of the Bradley Lake Project Management Conimittee Operating and Revenue Funds as of and for the years ended June 30, 2013 and 2012, and our report thereon dated December 4, 2013, which expressed an unmodified opinion on those special-purpose financial statements, appears on the page preceding the balance sheets. Our audits were conducted for the purpose of forming an opinion on the special-purpose financial statements taken as a whole. The supplemental special-purpose Statements of Expenses are presented for purposes of additional analysis and are not a required part of the special-purpose financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the special-purpose financial statements. The information has been subjected to the auditing procedures applied in the audits of the special-purpose financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the special-purpose financial statements or to the special-purpose financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the special-purpose financial statements taken as a whole. This report is intended solely for the information and use of the Bradley Lake Project Management Committee and is not intended to be and should not be used by anyone other than this specified party. aenlling fF Ceaecutly | PC. Anchorage, Alaska December 4, 2013 3201 C Street, Suite 405 : Anchorage. Alaska 99503 @ Independent member of DFK International - a worldwide association . 7 of independent accounting firms and business advisers Ph 907.563.7977 + Fax 907.561.7683 + www.swallingcpas.com BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE OPERATING AND REVENUE FUNDS STATEMENTS OF EXPENSES Years ended June 30, 2013 and 2012 Expenses: Generation expense: Operation supervision and engineering Hydraulic operation Electric plant operation Hydraulic power generation operation FERC land use fees Structure maintenance Reservoir, dam, and waterway maintenance Electric plant maintenance Hydraulic plant maintenance System control and load dispatching Substation operation and maintenance Overhead line maintenance Total generation expense Administrative, general and regulatory expense: Insurance AEA administrative fee PMC costs Regulatory commission: FERC administrative fees FERC licensing and study Total administrative, general and regulatory expense Total operations and maintenance expenses, before capital project reimbursement R & C Fund repayment Total operations and maintenance expenses 2013 Variance Favorable 2012 Budget Actual (Unfavorable) Actual $ 275,481 247,827 $ 27,654 $ 260,557 113,111 82,269 30,842 76,032 222,043 283,620 (61,577) 199,474 593,896 347,507 246,389 328,990 62,623 132,158 (69,535) 62,623 355,125 345,860 9,265 345,862 118,579 139,872 (21,293) 38,193 425,378 330,064 95,314 309,307 167,344 196,120 (28,776) 154,124 400,397 355,710 44,687 341,247 133,500 316,905 (183,405) 126,578 562,239 26,562 535,677 233,130 3,429,716 2,804,474 625,242 2,476,117 614,490 535,894 78,596 535,825 200,000 200,000 - 200,000 60,600 50,931 9,669 49,262 232,714 257,840 (25,126) 208,552 71,000 79,438 (8.438) 70,540 1,178,804 1,124,103 54,701 1,064,179 4,608,520 3,928,577 679,943 3,540,296 1,536,326 1,142,155 394,180 1,192,905 $6,144,846 070. $1,074. $ 4,733,201 13 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE P.O. Box 196300 Anchorage, Alaska 99519-6300 December 4, 2013 Swalling & Associates, P.C. 3201 C Street, Suite 405 Anchorage, Alaska 99503 This representation letter is provided in connection with your audit of the special-purpose financial statements of the Bradley Lake Project Management Committee Operating and Revenue Funds (PMC), which comprise the balance sheets as of June 30, 2013 and 2012, and the related special- purpose statements of revenues and expenses, and of cash flows for the years then ended and the related notes to the financial statements for the purpose of expressing an opinion as to whether the special-purpose financial statements are presented fairly, in all material respects, on the basis of accounting described in Note A. Certain representations in this letter are described as being limited to matters that are material. Items are considered to be material, regardless of size, if they involve an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. An omission or misstatement that is monetarily small in amount could be considered material as a result of qualitative factors. We confirm, to the best of our knowledge and belief, as of December 4, 2013, the following representations made to you during your audit. Financial Statements e Wehave fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated October 29, 2013, including our responsibility for the preparation and fair presentation of the special-purpose financial statements. © The special-purpose financial statements referred to above are fairly presented in conformity with special-purpose accounting requirements described in Note A. © We acknowledge our responsibility for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. e We acknowledge our responsibility for the design implementation, and maintenance of internal control to prevent and detect fraud. Page 2 Swalling & Associates, P.C. December 4, 2013 Significant assumptions we used in making accounting estimates, including any measured at fair value, are reasonable. Related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the special-purpose accounting requirements described in Note A. All events subsequent to the date of the special-purpose financial statements and for which the special-purpose accounting requirements described in Note A, requires adjustment or disclosure have been adjusted or disclosed. The effects of all known actual or possible litigation, claims, and assessments have been accounted for and disclosed in accordance with the special-purpose accounting requirements described in Note A. Material concentrations have been properly disclosed in accordance with the special-purpose accounting requirements described in Note A. Guarantees, whether written or oral, under which the company is contingently liable, have been properly recorded or disclosed in accordance with the special-purpose accounting requirements described in Note A. Information Provided We have provided you with: o Access to all information, of which we are aware, that is relevant to the preparation and fair presentation of the special-purpose financial statements, such as records, documentation, and other matters. o Additional information that you have requested from us for the purpose of the audit. o Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. All material transactions have been recorded in the accounting records and are reflected in the special-purpose financial statements. We have disclosed to you the results of our assessment of the risk that the special-purpose financial statements may be materially misstated as a result of fraud. Page 3 Swalling & Associates, P.C. December 4, 2013 We have no knowledge of any fraud or suspected fraud that affects the entity and involves: o Management, o Employees who have significant roles in internal control, or o Others where the fraud could have a material effect on the special-purpose financial statements. We have no knowledge of any allegations of fraud or suspected fraud affecting the PMC received in communications from employees, former employees, regulators, or others. We have no knowledge of any instance of noncompliance or suspected noncompliance with laws and regulation whose effects should be considered when preparing the special-purpose financial statements. We have disclosed to you all know actual or possible litigation, claims, and assessments whose effects should be considered when preparing the special-purpose financial statements. We have disclosed to you the identity of the entity’s related parties and all the related party relationships and transactions of which we are aware. We have complied with all aspects of contractual agreements that would have a material effect on the special-purpose financial statements in the event of noncompliance. The Alaska Energy Authority has satisfactory title to all owned assets, and there are not liens or encumbrances on such assets nor has any asset be pledged as collateral, except as disclosed in the notes to the financial statements. We acknowledge our responsibility for presenting the statements of expenses in accordance with the special-purpose reporting accounting requirements described in Note A, and we believe the statements of expenses are fairly presented in accordance with the special- purpose accounting requirements described in Note A. The methods of measurement and presentation of the statements of expenses have not changed from those used in the prior period, and we have disclosed to you any significant assumptions or interpretations underlying the measurement and presentation of the supplementary information. Page 4 Swalling & Associates, P.C. December 4, 2013 Ror bout Ron Woolf, irman Bradley Lake Budget Subcommittee The undersigned signs this letter as an accountant for the Alaska Energy Authority (AEA) which has contracted to provide accounting and other administrative services for the PMC. I have undertaken no special inquiry of the PMC regarding any matter referenced in this letter, but rather sign based upon information I obtained while performing accounting and other administrative duties on behalf of AEA. KW Kelli Veech, Accounting Systems Analyst Alaska Energy Authority Bradley Lake Project Management Committee Meeting Tuesday, December 12, 2013 Agenda Item: 7A MOTION: Move that the Bradley Lake Project Management Committee accept the fiscal year 2013 Audit Report and approve a refund of $1,031,411.11 ($264,333.51 O&M and $767,077.60 R&C) to the utilities. Move: Second: BRADLEY LAKE HYDROELECTRIC PROJECT STATIC VAR COMPENSATION SYSTEM OPERATION AND MAINTENANCE AGREEMENT Between CHUGACH ELECTRIC ASSOCIATION, INC., AND ALASKA ENERGY AUTHORITY DECEMBER 12, 2013 Section Wn OONA OH 10 12 13 14 15 TABLE OF CONTENTS De FINITIONS 0.0... ee ceeeeeeeescceceteesescescescenceceeeseseeesessasscssessesssssssesssssesssessessseseesessenees 1 Effective: Date, Term and Termination .cssssicecseseeserscessavsesessnsenccsssensosoveneoe 2 General Provisions and Incorporation of Exhibit A of the Master Operating AGreCMeN............essssecsecesessessesesstsstsstssessseees Operational REQUIFEMENTS .........eeeseeseseeeee Maintenance Plan, Schedule and Budget 3 4 4 6 Emergency Expenditure ....... cc eecesecseeseseseessescseeseeeseessseeeeeeees 7 Extraordinary Maintenance and Equipment Replacement .. bi} MOifications ANA ACCITIONS........ceeesceceeeeeseseseseseseteteteesesessssssscscssseeessseteees 7 Authorized REPIeseNniGliVe’ ...:...cssssssscesssscessseasccecssscestascavesusssssesscvensonsesstveeves 7 Access to Facilities 8 FOTECSMGJOUIC.. cts. scsisssascssscvseseosscsavevasrevesogscenesescasesessvovssesensesegnovsesesoenesionensiee 8 Dispute Resolution 9 Notices wd Tire PGITY BENSTICIONIOS.....1......-..rcetersocerssrsnnssdenntssnncescssctbsseassvssesszsesasuesuesns 9 BRADLEY LAKE HYDROELECTRIC PROJECT STATIC VAR COMPENSATION SYSTEM OPERATION AND MAINTENANCE AGREEMENT This Agreement (hereinafter referred to as “Agreement”), is made and entered into this 12h day of December, 2013, by and between ALASKA ENERGY AUTHORITY, a public corporation of the State of Alaska (hereinafter referred to as “Authority"), and CHUGACH ELECTRIC ASSOCIATION, INC., (hereinafter referred to as “Chugach”), a non-profit electric cooperative membership corporation of the State of Alaska. WITNESSETH: WHEREAS, the Authority is the owner of the Bradley Lake Hydroelectric Project, including the Project Power Transmission Lines between the substation at the Bradley Lake Power House and Bradley Junction and the Static VAR Compensator Systems (SVS) Located at Chugah's Daves Creek substation and Homer Electric Association's Soldotna substation; WHEREAS, Chugach owns and operates electric transmission facilities and is engaged in the transmission, purchase, and sale of electric power and energy: WHEREAS, Chugach as owner of the Daves Creek facilities and historical lessee of the 115 kV portion of the Soldotna Substation, has faithfully, prudently and successfully operated and maintained the SVS facilities for over 20 years and further agrees to continue to operate and maintain the SVS facilities for the benefit of the Bradley Lake Project: WHEREAS, the Authority and Chugach desire to define the terms and conditions governing the operation and maintenance of the SVS facilities at the above described substations; and WHEREAS, pursuant to the Power Sales Agreement, the BPMC has approved the terms of this Agreement; NOW THEREFORE, IN CONSIDERATION of the mutual covenants herein contained the Parties hereto agree as follows: SECTION 1_ DEFINITIONS The terms used in this Agreement shall be as defined in the Power Sales Agreement, except as specified below. For the purposes of this Agreement, the following definitions and abbreviations apply: SVS O&M AGREEMENT Page 1 “Agreement” means this Agreement. “BPMC" means the Bradley Lake Project Management Committee. “Emergency” shall mean an unforeseen circumstance or the resulting state that requires immediate action to protect or preserve the SVS Facilities, personnel, public health and safety, or the operation of the interconnected system in accordance with Prudent Utility Practice. “Party” or “Parties” means the signatories to this Agreement. “Power Sales Agreement" means the Bradley Lake Power Sales Agreement, dated December 8, 1987, among the Authority; the Municipality of Anchorage (d.b.a. Municipal Light and Power (ML&P)); the City of Seward (d.b.a. Seward Electric System (SES)); the Chugach Electric Association, Inc. (Chugach); the Golden Valley Electric Association, Inc. (GVEA); the Alaska Electric Generation and Transmission Cooperative, Inc. (AEG&T), the Matanuska Electric Association, Inc. (MEA); and the Homer Electric Association, Inc. (HEA). “Soldotna Substation” shall mean the 115 kV portion of HEA'’s substation at Soldotna, Alaska. “Substation Operator" means the Party operating and maintaining the SVS equipment at Daves Creek and Soldotna substations. “SVS" means a Static VAR Compensation System. SECTION 2_ EFFECTIVE DATE, TERM AND TERMINATION A. Effective Date and Term of Agreement. This Agreement shall become effective on the date set forth above and shall continue in effect until terminated as provided in Section 2B. Termination of Agreement. 1. This Agreement may be terminated under the following conditions: a. In the event of a material breach of this Agreement by a Party, the other Party shall give the breaching Party written notice of the breach and an opportunity to cure the breach within a reasonable time considering the circumstances of the breach. In the event the breach is not cured within a reasonable time, the non-breaching Party, except as provided in Section 2.B.3., may terminate its SVS O&M AGREEMENT Page 2 obligations, duties and all rights it has under this Agreement. Any dispute as to a reasonable time to cure the breach shall be adjudicated by the BPMC. b. By the Substation Operator providing 90 days written notice to the Authority and BPMC. 2. In the event this Agreement is terminated, the Authority, or its contractors, shall have the right to enter upon the substation facilities to operate and maintain the SVS facilities. Upon termination of this Agreement, the Substation Operator shall release all relevant records to the Authority. All liabilities accruing under this Agreement prior to its termination shall be and are hereby preserved until satisfied SECTION 3 GENERAL PROVISIONS AND INCORPORATION OF EXHIBIT A OF THE MASTER OPERATING AGREEMENT This Agreement is subject to the terms of the Master Operating Agreement between the Authority and the BPMC. Except for paragraphs (0) Notice and Communications and (t) Third Party Beneficiaries, the provisions of Exhibit A, Master Contract Provisions, of the Master Operating Agreement are expressly incorporated by reference in this Agreement. Paragraphs (0) and (t) are modified and included below as Sections 14 and 15. Nothing in this Agreement is intended to alter the rights and obligations of the Authority and the Purchaser(s) under the Power Sales Agreement. In the event the terms of this Agreement and the Power Sales Agreement or Master SVS O&M AGREEMENT Page 3 Operating Agreement are found to be in conflict, the terms of the Power Sales Agreement shall have first priority with the Master Operating Agreement having second priority. The provisions of this Agreement are not intended, nor shall they be construed, to alter or modify any previous contracts or agreements of any Party or preclude any Party from performing existing obligations. In their performance of this Agreement, the Parties will comply with the terms and provisions of the Power Sales Agreement. SECTION 4 OPERATIONAL REQUIREMENTS A. Systems Operation. The Parties agree to operate their respective systems in accordance with the provisions of Section 10 (c) of the Power Sales Agreement. B. Substation and SVS Operation and Maintenance. In accordance with the provisions of this Agreement, the Substation Operator shall be responsible for the operation and maintenance of the SVS equipment on behalf of the Authority and for provision of increased transfer capacity resulting from operation of the SVS for the Purchasers in proportion to their Project shares. Chugach, as owner of the Daves Creek Substation and as historical operator of the Soldotna SVS, shall be the Substation Operator for both the Daves Creek Substation and Soldotna SVS equipment. SECTION 5 OPERATION AND MAINTENANCE PLAN, SCHEDULE AND BUDGETS A. Maintenance Plan and Schedule Requirements. 1. The Substation Operator uses a well-developed and robust Reliability Centered Maintenance (RCM) Program. This programs is T&D system wide and covers all equipment in the Chugach substation T&D asset register including the AEA SVSs. This program utilizes a predictive maintenance strategy to optimize equipment life-cycle costs. This program is available for inspection, or relevant portions will be provided to the Authority at any time given reasonable notice. B. Annual SVS Facilities Budget. 1s After the effective date of this Agreement, and in accordance with schedules provided by the Authority, the Substation Operator shall prepare and submit each year to the Authority and to the BPMC a draft Annual SVS SVS O&M AGREEMENT Page 4 Facilities Budget for the following Fiscal Year as provided in Section 5 D. The draft budget shall be prepared in a format and schedule provided to the Authority by the BPMC. The draft Annual SVS Facilities Budget shall be based upon prudent estimates and anticipated operation and maintenance expenditures, and reflect appropriate accounting and budgetary principles for utilities. The Substation Operator shall perform its duties in a manner consistent with the Annual SVS Facilities Budget except as provided in Sections 7 and 8 below. If the Substation Operator makes a determination during any Fiscal Year that it cannot perform its obligations under this Agreement without an increase in the expenditures authorized under Annual Project Budget, the Substation Operator shall report such finding to the Authority and the BPMC and shall submit a revised budget for the Authority's and the BPMC’s review and approval. In the event the revised budget is not adopted by the BPMC and the Authority, or in the event the Authority, pursuant to Section 13(e) of the Power Sales Agreement does not authorize and agree to fund such expenditures, and the Substation Operator determines that it cannot perform its obligations under this Agreement, the Substation Operator may terminate this Agreement as provided for in Section 2 A.1.b. te Three Year Major Maintenance and Improvements Plan and Budget. Annually the Substation Operator shall prepare and submit a forward looking plan and budget for proposed major maintenance and improvements, (e.g., major equipment replacement) and other projects deemed by the Substation Operator to be required to insure continued safe and economical operation of the respective SVS facilities that are not included in that Fiscal Year's proposed annual maintenance plan or require more than one year to complete. The plan shall be revised annually. SVS O&M AGREEMENT Page 5 D. Budget and Plan Submittal. The Substation Operator shall submit the schedule and budget, and the forward looking plan and budget to the Authority and the BPMC no later than November 1 for the next Fiscal Year. The plans, schedules and budgets may be modified through negotiations between the Substation Operator and the Authority, subject to approval by BPMC. SECTION 6 PAYMENT A. The ordinary costs of performing under this Agreement, including station service costs, shall be initially paid by the Substation Operator. The Substation Operator shall prepare an invoice each month identifying the actual and reasonable costs incurred in a format mutually agreeable to the Authority and the Substation Operator. The invoice shall be furnished to the Authority by the end of the month following the month in which the costs are incurred. All such invoices shall be subject to audit and approval by the Authority, such approval shall not be unreasonably be withheld. The Authority shall reimburse the Substation Operator for all costs reasonably incurred and properly invoiced and approved under this Agreement. Any amounts owed by the Authority to the Substation Operator and not in dispute shall be paid by the Authority within thirty (30) days of receipt of an appropriate invoice from the Substation Operator. Any amounts not paid within thirty (30) days shall accrue simple interest at the legal rate of interest beginning at the time payment was due. Within thirty (30) days after the Substation Operator submits an invoice, the Authority shall notify the Substation Operator in writing of any amount in dispute and the basis for the dispute. If the Parties cannot settle the dispute informally within 60 days following the written notice of dispute, the dispute shall be submitted to the BPMC for resolution. In the event a resolution of the dispute through the BPMC fails, either party may file an action in the Alaska Superior Court for the SVS O&M AGREEMENT Page 6 Third Judicial District to obtain a decision resolving such dispute and to obtain any other remedy permitted by law. Pending final resolution of any such dispute the Parties shall continue to perform under this Agreement. SECTION 7_ EMERGENCY EXPENDITURES The Substation Operator shall take such actions as it reasonably believes are necessary in an emergency. If, in the reasonable judgment of the Substation Operator, the emergency requires the Substation Operator to incur costs prior to obtaining written approval from the Authority, the Substation Operator shall notify the Authority and the BPMC within 72 hours after discovery of the emergency. SECTION 8 EXTRAORDINARY MAINTENANCE AND EQUIPMENT REPLACEMENT When the Substation Operator learns of an equipment failure or other contingency which, in the Substation Operator's judgment, necessitates incurring an extraordinary maintenance and equipment replacement cost, the Substation Operator shall promptly notify the Authority and the BPMC of the circumstances. Except as provided in Section 7, the Substation Operator shall obtain the Authority's written approval prior to incurring an extraordinary maintenance and equipment replacement cost. Except in emergency circumstances the Substation Operator shall incur no extraordinary maintenance and equipment replacement cost for which the approval of the Authority has been requested and expressly denied in writing. SECTION 9_ MODIFICATIONS AND ADDITIONS Except in emergencies, no modifications or additions shall be made to the SVS equipment without the prior written approval of the BPMC. SECTION 10 AUTHORIZED REPRESENTATIVE The Parties shall each designate one representative to carry out the provisions of this Agreement. Within 30 days after execution of this Agreement, each Party shall notify the other Party in writing of its designated representative. Any Party may change its representative at any time and shall promptly provide written notice of such change to the other Party. SVS O&M AGREEMENT Page 7 SECTION 11_ ACCESS TO FACILITIES Authority and BPMC personnel or agents shall be granted reasonable access to the substations, SVS equipment and facilities upon reasonable notice and subject to security measures, for the purpose of inspection and testing. SECTION 12_ FORCE MAJEURE A. No Party to this Agreement shall be liable to the other Party for, or be considered to be in breach of or default under this Agreement on account of, any delay in performance or any delay or failure to deliver, receive or accept delivery of energy due to any of the following events: 1. Any cause or condition beyond such Party's reasonable control which such Party is unable to overcome by the exercise of reasonable diligence, including but not limited to: fire, flood, earthquake, volcanic activity, wind, drought and other acts of the elements; court order and act of civil, military or governmental authority; riot, insurrection, sabotage and war; breakdown of or damage to facilities or equipment; electrical disturbance originating in or transmitted through such Party’s electric system or any electric system with which such Party's system is interconnected; and, any act or omission of any person or entity other than such Party, or Party's contractors or suppliers of any type or anyone acting on behalf of such Party. Strikes, lockouts, and other labor disturbances shall be considered Force Majeure events and nothing in this Agreement shall require either Party to settle a labor dispute against its best judgment: provided, that during any labor dispute each Party shall make all reasonable efforts under the circumstances, including, to the extent permitted by law and collective bargaining agreements, the use of replacement personnel and or management personnel and/or other personnel under the provisions of a mutual aid agreement to ensure, if possible, the continued ability of the Parties to carry out their obligations under this Agreement, or Any action taken by such Party which is reasonably necessary or prudent to protect the operation, performance, integrity, reliability or stability of the Project or of such Party's electric system or any electric system with which such Party's electric system is interconnected, whether such actions occur automatically or manually. SVS O&M AGREEMENT Page 8 B. In the event of any delay excused under this section, the time for performance thereby delayed shall be extended by a period of time reasonably necessary to compensate for such delay. No cost adjustment shall be allowed, only time extensions as appropriate. Nothing contained in this paragraph shall require any Party to settle any strike, lockout or other labor dispute. Each Party shall give the other Party prompt written notice of any delay which the Party giving notice considers to be an excusable delay of its performance. SECTION 13 DISPUTE RESOLUTION Pending resolution of a disputed matter, the Parties shall continue performance of their respective obligations pursuant to this Agreement. If the Parties cannot reach timely mutual agreement on any matter in the administration of this Agreement, the Substation Operator shall, to the extent necessary for its continued performance, make a determination of such matter without prejudice to the rights of the other Party. Such determination shall not constitute a waiver of any other remedy belonging to any Party. SECTION 14 NOTICES Notices shall be addressed as follows: Executive Director, Alaska Energy Authority, 813 West Northern Lights Boulevard, Anchorage, Alaska 99503. Notices to Chugach will be addressed to: Chief Executive Officer, Chugach Electric Association, Inc., P.O. Box 196300, Anchorage, Alaska 99519-6300. A Party may change the foregoing designations of its name or address to which notices or demands are to be directed at any time by written notice given to the other Party. Any notice or request not otherwise provided for in this Agreement shall be given in such manner as the Parties agree. SECTION 15 _ THIRD PARTY BENEFICIARY This Agreement gives no rights or benefits to anyone other than the Parties, Chugach and the Authority, and the BPMC as a third party beneficiary. The BPMC is the only third party beneficiary. In any action by the BPMC for damages Chugach shall have the right to assert against the BPMC any defense which it could have asserted against the Authority. The raising of any such SVS O&M AGREEMENT Page 9 defense by Chugach shall not affect any right of a Purchaser or the BPMC under the Master Operating Agreement or Power Sales Agreement. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their authorized officers or representatives and their corporate seals to be hereunto affixed as the day and year first above written. ALASKA ENERGY AUTHORITY x By: Sara Fisher-Goad Its: Executive Director CHUGACH ELECTRIC ASSOCIATION, INC. ) (en ne By: Bradley Evans Its: Chief Executive Officer SVS O&M AGREEMENT Page 10 BRADLEY LAKE HYDRO FISH-WATER SCREEN, DEBRIS REMOVAL PROJECT May-JUNE 2014 Bradley Lake Water Supply System Water flow from Bradley Lake consists of three main parts. 1.Power Tunnel — main supply of water from Bradley Lake to the Power House turbine-generators. 2. Diversion Tunnel — bypasses the dam, used during construction or emergency condition to divert Bradley Lake water flow around the dam. 3. Fish-water bypass (2- 28” pipes) — used to bypass the dam to supply a regulated water flow to the Bradley River fish and eco-system as part of the project permit. /\ xX Ar Z Power tunnel inlet. Supplies water to power house turbines via a3 mile tunnel system. Fgike along ns Main dam face Vehicle road on dam crest FINGR EL 11955! Zz PROBABLE MAXIMUM FLOOD LEVEL EL 1190.6" Z NORMAL MAXIMUM OPERATING RESERVOIR LEVEL EL 118 = GROUND oRGAAL LINE (APPROX) ORIGINAL GROUND LINE (APPROX) / GATE SHAFT-—— / ae 4 SAN, DAM /SPrLLWAY Rockfall Bench ROCKFALL BENCH EL 1120.0" SLPE1 Ont SCALEA Diversion Tunnel and Fishwater Bypass Pipe Screens Two 28” pipes located at the bottom of the diversion tunnel supply water to various controls valves ranging from 6” to 24”. eee The control valves are positioned to maintain minimum fishwater flow requirements to the Bradley River. The flat inlet far left were type screens in 1993. screens shown replaced with these birdcage sca oe een Te en en a ee Graph illustrates the low lake level period is normally during the month of May. The project will need to be scheduled when ice is melting off the lake before high spring runoff begins. Lake level can fluctuate several feet in a few days. Problem = Fishwater Bypass Pipe Flow Reduction Noted Minimum fishwater flow to the Bradley River is supplied by two methods: 1. Snow melt and natural runoff into the Bradley River. 2. Bypass flow from Bradley Lake through the fishwater bypass pipes. ¢ In May of 2013 annual spring runoff was late due to cooler temperatures. * It was noted by the Bradley Plant Operators that fishwater flow manifold #1 was not able to meet traditional expected flow rates. * The Bradley Operating permit requires that minimum flow rates be met or it is considered a violation of the FERC permit. E Investigation = Fishwater Bypass Screen Evaluation Global Diving Inc. was contracted to inspect and clean the intake screens. ¢ In June of 2013 diving operations were conducted at Bradley Lake to determine screen condition and evaluate any accumulated debris. * Pipe #2 inlet screen was cleared of debris and proved to be functional * Pipe #1 inlet screen could not be located due to the amount of debris that was covering the screen. Global Diving conducted two separate diving expeditions using bubble elevation techniques to quantify the debris covering fishwater pipe #1 inlet screen. Evaluation = Fi +13’ Evaluation = Fishwater Bypass Screen #1 Debris (2 of 2) — Vertical Cross Section of Diversion Tunnel Looking into Tunnel | = L?c9o8a 5 Manifold #1 Inlet Tunnel Manifold #2 Inlet Tunnel 20" gee Tals) Perle CL) Fishwater piping below inlet screen. Source of Debris Covering Fishwater Screen #1 (photo 1 of 2) | This construction photo from June 14*, 1990 indicates a large amount of loose material above and to the right of the diversion tunnel inlet. This loose material is not present today as illustrated by the next slide. It indicates the field has been eroded by wave action over several years. Source of Debris Covering Fishwater Screen #1 (photo 2 of 2) Rock fall ledge above tunnel inlet. Exposed boulder field below loose Debris Removal Options Option #1 — Airlift Hydraulic Dredging — Reduce lake level initially to 1080’, range 1080’-1098’ Floating platform to support a venturi suction system Air lift is provided by diesel driven compressors Divers used to stage the suction piping Debris is discharged off the end of the platform into deeper water 75% fishwater flow through piping, 25% through pumping if required (FERC) Option #2 — Excavator Equipment Working from the side of the Tunnel-— Reduce lake level to approximately 1080’ Use a crane to place medium sized excavators near the side of the tunnel and remove the material from around the screen Use a small dozer or skid steer to transport the debris away from the tunnel 75% fishwater flow through piping, 25% through pumping if required (FERC) Option #3 — Excavator Equipment Working from inside the Tunnel- Reduce lake level to 1068’ Use excavators to work down inside the diversion tunnel area Use external pumps to provide fishwater flow Possibly get a fishwater waiver from FERC Solution #1 — Air Lift Hydraulic Dredging (Slide 1 of 2) July 2013 — Project specifications were sent to various crane, and diving companies in Alaska. Global Diving and Salvage was the only company that responded with a proposal. The estimate was received on November 27*. Proposal Overview — (Remove 75-100% of the debris, some factors unknown) * Lake level between 1080’- 1098’ * Global will provide barge mobilization and transportation of equipment to the Bradley barge dock. They will transport flexi floats, crane, and compressors by flatbed trailer to the dam site. * Provide two 1000 cfm air compressors to hydraulically air lift (dredge) the debris covering the #1 fishwater inlet screen. One compressor can operate the lift. However, they propose two for maximum production and mechanical failure. * Supply enough equipment and fuel for a 12 hour/day operation. (5000 gallons of fuel). * Should be able to remove the majority of the debis. Some pockets of debris may still remain, however fishwater flow capability will be restored Solution #1 — Air Lift Hydraulic Dredging (Slide 2 of 2) Cautions and Considerations of Hydraulic Dredging ¢ Lake level reduction to 1080’ will reduce the ability to maintain full fishwater flow through the fishwater piping. * Can maintain approximately 75% of required flow (75 CFS) * Firm commitment of fishwater flow requirements need to be obtained from FERC and the other agencies. Cost Proposal from Global Diving and Salvage (30 days of operation) 1. A -Total estimate without pumping costs $971,109 Able to maintain 75% fishwater flow at 1080’ 1. B- Additional Pump Cost if 100 CFS (44,000 GPM) Fishwater Flow is Required Pump cost per 13,500 gallon unit (if required/month 171,000* Total cost of dredging and pumping (one month) $1,142,109 Solution #2 — Reduce Lake Level and Mechanically Remove the Debris working from the side of tunnel area (slide 1 of 2) Proposal Overview — (Remove 75-100% of the debris, some factors unknown) Reduce Lake level to approx. 1080’ (below 1100’ fishwater flow reduced) * Itis important to note that required fishwater flow through the normal piping system cannot be maintained below 1100’, thus the need to pump if 100% fishwater flow is required. * Crane and tractor trailer of counter weights would self drive to the dam. * The crane would be used to lower small to medium sized, dozers, skid steer loaders and excavators near the tunnel entrance to mechanically remove the debris. (tunnel entrance is beyond the reach of crane) * Fishwater flow would be maintained through normal piping and additional pumping if required by FERC. * Excavators would access the debris reaching from the side of the tunnel * Should be able to remove the majority of the debis. Some pockets of debris may still remain, depending on the ability of the equipment to maneuver around or within the water flow. Fishwater flow capability will be restored. Solution #2 — Reduce Lake Level and Mechanically Remove the Debris working from the side of tunnel area (slide 2 of 2) Solution #3 — Reduce Lake Level and Mechanically Remove the Debris while pumping fishwater flow Proposal Overview - (Remove 100% of the debris) This includes the cost of equipment in proposal #2 + the cost of pumping to maintain fish water flow while reducing level through generation to enter the diversion tunnel. * Pumping cost to maintain fishwater flow is very labor intensive and requires a vast amount of fuel to operate the pumps. (48,960 gallons/month) * Four 13,500 GPM pumps would each require 50’ of 14” suction hose and 300’ of 14” discharge pipe to reach over the top of the spillway. 3.A.-Crane, equipment and operators (proposal #2) S 474,832 3.B.-Additional cost of pumping per month. Pumps, operators, piping and fuel (1 month, $683,778x2) _ $1,367,556 Estimated equipment and pump cost $1,842,388 Solution Overview Option #1 — Airlift Hydraulic Dredging — (Remove 75-100%) 1. A- Can maintain 75 CFS fishwater flow without additional pumping Lake Level 1080’ - Base bid by Global $971,109 1. B— Additional Pumping cost (*depends on FERC response) $171,000* Total $1,142,109 Option #2 — Excavator Working from side of the Tunnel — (Remove 75-100%) 2. A.- Can maintain 75 CFS fishwater flow without additional pumping Lake Level 1080’ - Crane and equipment $474,832 2. B— Additional Pumping cost (*depends on FERC response 171,000* Total $645,832 Option #3 — Excavator Working from inside the Tunnel Area — (Remove 100%) 3. A- Crane, equipment, and operators (proposal #2) Lake level 1068’ — Crane and equipment $474,832 3. B. — Additional cost 100% pumping (1 month, $683,778 x 2 1,367,556 Estimated equipment and pump cost $1,842,388 | Known and Unknown Factors | Required fishwater flow during project — Requires response from FERC and other known agencies. Dredging operations — Least impact on tunnel and downstream ego-system. Lake level will be reduced to 1080’. This limits fishwater flow capacity to 75% without pumping. Will FERC allow a reduced flow of 75CFS, during repair time? If not then pumping will be required. ($171,000/month of pumping) Considerations of working from the side of tunnel — FERC and other agency response required to determine if maintaining 75% fishwater flow. Long excavator with 30’ reach would remove most of the debris. If 100% fishwater flow is required, the screen would be cleared first and may also require additional pumping. Delay until 2015 if these questions cannot be answered soon — If lake level is maintained above 1100’ the project could be delayed until 2015. Worst case is rental of one pump during low runoff period. Would FERC allow for reduced runoff of 75% until project can be implemented. ($171,000/month of pumping) Level and Distance Overview Lake Level and Tunnel Elevation Overview ¢ The bottom of the diversion tunnel is 1068’ * Power tunnel inlet channel was initially excavated to 1055’ * Power tunnel bottom is 1030’ ¢ Power tunnel top is 1061’ * Distance from Crane to diversion entrance — 230’ * Crane boom length — 200’ * Crane capacity at 105 ft - 33,100 Ibs — 30,000 + rigging * Crane capacity at 150 ft - 18,000 Ibs - 16,000 + rigging ¢ Crane capacity at 200 ft- 8,500 Ibs- 6,000 + rigging * The transport weight of the crane itself is 140,000 Ibs ¢ Total counter weights are 158,500 Ibs * Total machine weight will be around 300,000 Ibs * Weight of medium sized dozer and excavator — 18,000 Ibs ¢ Weight of small excavator and skid-steer — 6000 - 8000 Ibs Bradley River Fish Water Operation = License requires minimum flows in Bradley River = HEA operates to avoid violations = Operations result in “over release” of flows with loss of >10,000 MWh = Five year trial allows short term deviation [= AbbSka— a Bradley River Fish Water Path = AEA to discuss with FERC and agencies potential license amendment to minimize “over release” while maintaining fish habitat = Convert allowable trial flow deviation to implementable plan that meets minimum flow requirements over a 24-hour period = ALASKA __ / @@mm> ENERGY AUTHORITY Bradley sab Bian > gm ENERGY AUTHORITY National Hydropower Association Operational Excellence Program « As NHA member Bradley Lake Project entitled to participate « Program benefits licensees in following areas = Safety « Operations and maintenance « Environmental performance « Web based program with mobile accessible module * Training available in 2014 to operations personnel al f= gm) ENERGY AUTHORITY