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HomeMy WebLinkAboutAEA Board Meeting Dec 2022Alaska Energy Authority BOARD MEETING MINUTES Monday, December 19, 2022 Anchorage, Alaska 1. CALL TO ORDER ,, ALASKA ENERGY AUTHORITY Chair Pruhs called the meeting of the Alaska Energy Authority to order on December 19, 2022, at 8:30 am. A quorum was established. 2. ROLL CALL BOARD MEMBERS Members present: Chair Dana Pruhs (Public Member); Vice -Chair Bill Kendig (Public Member); Albert Fogle (Public Member); Adam Crum (Commissioner DOR); Julie Sande (Commissioner DCCED); Bill Vivlamore (Public Member); and Randy Eledge (Public Member). 3. AGENDA APPROVAL MOTION: A motion was made by Vice -Chair Kendig to approve the agenda, as presented. Motion seconded by Mr. Fogle. The motion to approve the agenda passed without objection. 4. PRIOR MINUTES — October 26, 2022 MOTION: A motion was made by Vice -Chair Kendig to approve the prior minutes of October 26, 2022, as presented. Motion seconded by Mr. Fogle. The motion to approve the minutes of the October 26, 2022, passed without objection. S. PUBLIC COMMENTS (2 minutes per person) There were no members of the public online or in -person who requested to comment. 6. NEW BUSINESS A. 2022 AEA Audit Review Curtis Thayer, Executive Director and Secretary -Treasurer, commented that there were no findings within the audit. He informed that the audit was late. There were issues with the recruiting and the hiring of candidates. Mr. Thayer introduced Pam Ellis, Comptroller, and noted that today is her first day of employment. Mr. Thayer highlighted that the audit shows that the Power Cost Equalization (PCE) lost $112 million last year, which has affected the financials. He informed that REDUCING THE COST OF O. O. 813 W Northern Lights Blvd, Anchorage, AK 99503 • Phone: (907) 771-3000 • Fax: (907) 771-3044 - Email: info@akenergyauthority.org after 30 years, the Bradley Lake Project was fully paid on July 1, 2021. Mr. Thayer advised that AEA repaid $10 million of the $17 million that was borrowed from AIDEA in December of 2020 for the SSQ Line. He discussed that an increase in federal dollars is anticipated over the next five years in the amounts of $52 million for electric vehicles (EV), $60 million for grid resilience, $74 million for energy efficiency with Alaska Housing, and $13 million with Golden Valley Electric Association (GVEA) for power lines to Black Rapids Training Site (BRTS). Mr. Thayer announced that the $166 million bonding for transmission and battery upgrades officially closed on November 30, 2022. He explained that thanks to previous Board member Deven Mitchell's suggestions, the additional negotiation was successful. The rate was lowered 25 basis points and a refinance option is available after 10 years. Mr. Thayer noted the option will be described in more detail at the January meeting. Mr. Thayer added that AEA's Linda MacMillan and Amy Adler also worked diligently on the audit process to complete it in December rather than in January. He explained that the audit procedure is different from previous years, and as of next year, the basic financials will be easier to gather and easier to present. Mr. Thayer commented that Eide Bailey is supportive of the new format going forward. He expressed appreciation to Dona Keppers, CFO, and to the listed individuals on the Audit Team from both AEA and AIDEA for their efforts in completing the audit. Chair Pruhs inquired if the $122 million PCE loss is based on the 12-month period or if it is based on the date the investment is sold. Mr. Thayer explained that the loss is smoothed over a five- year look -back period. Chair Pruhs asked if the PCE loss was realized or unrealized. Ms. Keppers informed that the losses are unrealized. Mr. Thayer commented that the Department of Revenue, by statute, manages the PCE fund and will provide an investment presentation at the January Board meeting to explain the legislative investment parameters. Commissioner Crum advised that he received an update and presentation on Friday by the Chief Investment Officer of the State, Zach Hanna that will be shared with the Board and with the public regarding the mechanics of the investment theory. The objective is to develop a normal process in which to present information regarding each of the separate fiduciary funds and how the investment process is in line with other State Boards, including the Alaska Retirement Management Board. Chair Pruhs expressed appreciation on behalf of the Board to Ms. MacMillan and Ms. Adler for their assistance. He welcomed Ms. Ellis to her new position. Chair Pruhs requested that Ms. Keppers continue the presentation. Ms. Keppers thanked Mr. Thayer for providing the highlights of the last year. She began the review of the Financial Statements for the year ending June 30, 2022. The second page of the report lists the index of the statements and schedules of both government and enterprise funds. Ms. Keppers commented that the format next year will provide the review in a consolidated fashion with a clearer presentation of the comparables. She expressed appreciation to Eide Bailey for working with staff to simplify the report. Ms. Keppers requested Lealan Miller, Eide Bailey, to give the overview and the opinion of the Alaska Energy Authority Page 2 of 5 report. Mr. Miller echoed the comments of appreciation for the efforts to complete the audit before January. He gave a high-level review of the audit report. The format of the report changed, and the auditor's opinion is now contained within the first two paragraphs of the report. The financial statements of AEA have received a clean unmodified opinion. The remainder of the report provides the basis for the clean opinion, lists the responsibilities of management of the financial statements, and lists the responsibilities of the auditor. Mr. Miller brought the Board's attention to the Management's Discussion and Analysis section on page five. He believes this is the most important section of the document, as it gives management the opportunity to describe the changes that occurred during the year, provide explanations for those changes, and give forward -looking information. Mr. Miller noted that the Statement of Net Position on pages 18 and 19 is also the balance sheet. The biggest changes from last year to this year were the pay -down of the debt, the change within the restricted cash and investments, and the effect of the unrealized investment losses. Mr. Miller indicated that the unrealized investment losses are not unusual during this time, as Eide Bailey has seen similar losses with other Alaska State agencies, as well as state agencies around the country. Mr. Miller reviewed the Statement of Activities on page 20, identifying the governmental activities and business -type activities. The majority of the $187 million loss in the net position of governmental activities is due to the investment loss. The majority of the $8.8 million loss in the net position of business -type activities is due to the amount of utility revenue recognized this year versus last year because the debt was paid down. Mr. Miller discussed the Statement of Cash Flows on page 26. The overall increase for the year of restricted cash and cash equivalents was $1.5 million. Mr. Miller explained that the footnotes beginning on page 28 provide additional explanation regarding the financial information, including more detail pertaining to the debt and loan programs. He advised that there were no new significant accounting standards issued this year, and therefore, no new notes were released as part of this year's audit. Mr. Miller indicated that final audit will include suggested grammatical changes to the language and to the format of the audit, but there will be no changes to the numbers. Chair Pruhs asked Mr. Thayer for the typical expectation of when an audit should be completed. Mr. Thayer indicated that next year's audit will be completed in October. He explained that the books are closed about two months after the end of the fiscal year of June 30th, and then the audit is completed. Mr. Thayer commented that the PCE accounting and accrual may delay the process because they have up to 90 days to report. Mr. Fogle expressed appreciation to Mr. Thayer, Ms. Keppers, and the team for their efforts. He commented that this year's request for proposal (RFP) for auditor included the stipulation that the audit was to be completed by the end of September so that the Board could review and approve it at the October Board meeting. Mr. Fogle asked if that same stipulation will be included in next year's RFP for auditor. Mr. Thayer agreed. He explained that the delay in this year's audit was AEA's delay. Alaska Energy Authority Page 3of5 MOTION: A motion was made by Mr. Fogle to accept the 2022 Alaska Energy Authority Audited Financial Report, as presented today at this Board meeting. Motion seconded by Vice -Chair Kendig. A roll call was taken, and the motion to accept the 2022 Alaska Energy Authority Audited Financial Report passed unanimously. Chair Pruhs echoed the comments of appreciation to Mr. Thayer and all staff involved in successfully completing the challenging audit. Chair Pruhs requested that Megan Schmidt, AEA, remain in the room during Executive Session. MOTION: A motion was made by Vice -Chair Kendig to enter into Executive Session to discuss confidential personnel issues. This is supported by the Open Meetings Act, which allows a Board to consider confidential matters in Executive Session. In this case, the Board believes that these are subjects which would have an adverse effect upon the finances of AEA or are protected by law due to rules protecting personal privacy and certain business information. Motion seconded by Mr. Fogle. A roll call was taken, and the motion to enter into Executive Session was approved unanimously. 7. EXECUTIVE SESSION: 8:58 a.m. — Discuss confidential personnel matters The Board reconvened its regular meeting at 9:55 am. Chair Pruhs advised that the Board did not take any formal action on the matters discussed while in Executive Session. 8. DIRECTORS COMMENTS A. Next Regularly Scheduled AEA Board Meeting Wednesday, January 18, 2023 9. BOARD COMMENTS Commissioner Sande extended appreciation to staff for their diligent work in preparing the audit. She welcomed Commissioner Crum and thanked him for his meaningful participation on the Board. Commissioner Sande welcomed John Springsteen as the new liaison between the agencies and the Governor's Administration. She thanked staff again for their work, and extended holiday wishes to all. Commissioner Crum expressed that he is glad to participate in the process of the good work of AEA. He thanked staff for their efforts and for providing a thorough orientation. He looks forward to continued involvement. Chair Pruhs extended appreciation to all for their time during this holiday season. He wished everyone a Merry Christmas. He reiterated thanks to Mr. Thayer and staff for the herculean effort Alaska Energy Authority Page 4of5 regarding the audit. He thanked Ms. Schmidt for her efforts. Chair Pruhs suggested to Mr. Thayer that strategic planning opportunities are discussed during the January Board meeting. Mr. Thayer agreed. Chair Pruhs suggested that work begin on preparing AEA's public comment regarding the Governor's budget and how it positively affects AEA. Commissioner Sande requested the Board's indulgence as she and Commissioner Crum look to navigate their existing Board schedules and other commitments in relation to the published AEA Board calendar for the upcoming year. Chair Pruhs requested that Commissioner Sande and Commissioner Crum disseminate any calendar conflicts to Ms. Bertolini. Vice -Chair Kendig commented for planning purposes, that he usually schedules his travel during the last week of the month. There were no additional comments. 10. ADJOURNMENT There being no further business of the Board, the AEA meeting adjourned at 10:02 am. poy T4P OR ' Q Curtis W. Thayer, Executive Director / Secretary SEAL Alaska Energy Authority Page 5 of 5