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HomeMy WebLinkAboutAEA Board Meeting June 2020Alaska Energy Authority DRAFT BOARD MEETING MINUTES Wednesday, June 24, 2020 Anchorage, Alaska 1. CALL TO ORDER ALASKA ENERGY AUTHORITY Chair Pruhs called the meeting of the Alaska Energy Authority to order on June 24, 2020 at 8:30 a.m. A quorum was established. 2. ROLL CALL Members present: Chair Dana Pruhs (Public Member); Vice -Chair Bernie Karl (Public Member); Anna MacKinnon (SOA-DOR), Albert Fogle (Public Member); Bill Kendig (Public Member); and Julie Sande (Public Member). Others participating: Curtis Thayer (Executive Director); T.W. Patch (Director of Planning); Kirk Warren (Director, Engineering & Energy Development); Brenda Applegate (Chief Financial Officer); Amy Adler (AEA Controller); Linda Senn (Human Resources Director); Tim Sandstrom (Director, Rural Programs); Stefan Saldanha (Department of Law); Robert Hawkins (Information Technology); Aimee Sudbeck (AIDEA); Sherrie M. Siverson (AIDEA). 3. AGENDA APPROVAL MOTION: A motion was made to approve the agenda as presented. Motion seconded. The motion to approve the agenda passed without objection. 4. PRIOR MINUTES - April 15, 2020 and May 20, 2020 MOTION: A motion was made by Mr. Kendig to approve the prior minutes of April 15, 2020, and May 20, 2020. Motion seconded by Mr. Fogle. The motion to approve the minutes of April 15, 2020, and May 20, 2020 passed without objection. 5. PUBLIC COMMENTS (2 minutes per person) Chair Pruhs reminded the public that comments are limited to two minutes per person and requested the comments relate to topics on the agenda. Siikauraq Martha Whiting, Planning Director for Northwest Arctic Borough, noted she speaks on behalf of Mayor Lucy Nelson and the Northwest Arctic Borough in support of the Ambler Access Road Project. The Northwest Arctic Borough is the host borough of the Ambler Mining District and is rich with mineral resources coupled with a thriving subsistence economy. 813 West Northern Lights Boulevard, Anchorage, Alaska 99503 1 P 907.771.3000 1 Toll Free 888.300.8534 1 F 907.771.3044 1 WWW.AKENERGYAUTHORITY.ORG REDUCING THE COST OF ENERGY IN ALASKA AEA Board Meeting Minutes June 24, 2020 Page 2 of 8 Ms. Whiting read the Preamble of the Northwest Arctic Borough Home Rule Charter. She discussed the mission is to provide essential programs and services to improve the quality of life. The vision is to improve the living and economic conditions of all residents. The Northwest Arctic Borough supports responsible resource development that provides economic growth and investment, while protecting the environment and ensuring socially responsible development. Ms. Whiting discussed the current joint resolution with the North Slope Borough that; • supports AIDEA's evaluation of the industrial road • acknowledges that food security and public benefits should be considered as a priority by state and federal agencies • recognizes that public engagement and consultation should be meaningful and incorporated into a final decision • agrees both Boroughs will examine ways to maximize community benefit and economic development opportunities while undertaking an analysis of impacts and ways to minimize or mitigate any adverse effects • commits to explore opportunities for coinvestment and ownership of projects and resources Ms. Whiting expressed support for Resolution No. G20-19. She noted understanding that Bureau of Land Management (BLM) has not issued a Record of Decision (ROD) for the Ambler Road Project and Resolution No. G20-19 might be premature until after an ROD is made by BLM. Mr. Whiting stated the NorthwestArctic Borough requests that AIDEA continue to build relationships with stakeholders within the Borough, especially the communities of Ambler, Shungnak, and Kobuk, as the project is in their homeland. Ms. Whiting expressed appreciation to Jeff San Juan for his many presentations to the Northwest Arctic Borough Assembly Planning Commission and looks forward to continued dialog regarding this project. She thanked Board members for their leadership during this time. Chair Pruhs requested Ms. Whiting also provide her comments in writing. 6. NEW BUSINESS A. Power Project Fund Loan Curtis Thayer explained AEA Resolution 2020-03 gives AEA the ability to streamline the process to modify the interest rates of loans whose terms stay the same. AIDEA has this loan modification ability. AEA's interest rate modification process currently takes about two to three months and many staff hours. The request today is to authorize AEA to go out for public comment on the proposed regulation change. AEA Board Meeting Minutes June 24, 2020 Page 3 of 8 Ms. MacKinnon read AEA Resolution 2020-03. She inquired if AIDEA has the authority to modify interest rates as the AEA resolution is requesting. Mr. Fogle noted he is the Chair of the Budget and Audit Subcommittee and the Subcommittee has reviewed AIDEA's loan modifications. No interest rate changes are recommended at this time. The Subcommittee is in the process of reviewing the possibility of a new loan modification policy that would include lowering interest rates. Vice -Chair Karl explained the statute AS 42-45 includes modification of interest rates. He believes the ability to streamline the modifications of loans quickly and without additional burden to the businesses is a very positive statement during this time. He expressed support for the resolution. Mr. Kendig agreed with Vice -Chair Karl's comments. Ms. Sande clarified for the record this resolution mirrors the AIDEA language and allows staff to respond more quickly. Chair Pruhs said he does not disagree with the concept, but believes the entire program should be reviewed, and a full policy created before modifications are made. Ms. MacKinnon requested Mr. Thayer read the statute AS42-45.010, the Power Project Fund, regarding loans. Mr. Thayer noted he could distribute the statute to the Board. He read from his document. Ms. MacKinnon informed she is a member of the Budget and Audit Committee, which is trying to balance the needs of the business community and the requests for loan modifications with the fiduciary responsibility of managing AEA's assets. Ms. MacKinnon expressed concern with giving AEA blanket authority when AIDEA is requested to come before their Budget and Audit Subcommittee with a tiered approach. She discussed the goal of creating a level of confidence that AEA is consistently meeting the needs of the community while maintaining fairness to all who come forward. Vice -Chair Karl explained Mr. Thayer has the authority to modify the interest rates without coming before the Board. The request is to streamline the refinancing process to reduce the cost for the residents of Alaska. Mr. Kendig echoed Vice -Chair Karl's comments. Chair Pruhs requested clarification and examples of the reasons a producing asset would request a lower interest rate. Mr. Thayer discussed a current case of a performing hydro asset with an interest rate of about 5%. The producing asset wants to lower the interest rate, which will reduce the community rate and provide for an expansion of the hydro capability. This specific proposal is to lower the interest rate to a floating interest rate floor of 3.16%. Mr. Thayer noted AEA's mission is to lower the cost of energy. He discussed AEA has the discretion to provide loans at 0% interest based on the economics of the project. Loans in the amount up to $2 million go before the Loan Committee. Loans in the amount of $2 million AEA Board Meeting Minutes June 24, 2020 Page 4 of 8 to $5 million go before the AEA Board. Loans greater than $5 million go before the Legislature. The request today is to go out to public comment for policy changes that will establish a level playing field. Ms. MacKinnon commented she does not want to be a blockade in trying to help the business community, but believes a greater discussion is warranted. Providing a 0% interest rate to all communities is not feasible. It may be necessary to delineate criteria for offering 0% interest and perhaps a cap on a percentage of the portfolio that can be exposed to 0% interest loans. Ms. Sande requested Mr. Thayer provide additional information regarding the criteria used to determine the financial feasibility of the loans for modification. Mr. Thayer explained the current process includes an application, application fee, financial feasibility, and technical review. Mr. Kendig commented the proposed changes mirror the streamline process used by banks for residential refinancing. The process would reduce AEA administrative costs and refinancing costs to the asset. He is in favor of amending the policy to include a floating interest rate floor and move forward to public comment. Ms. MacKinnon commented the response to Ms. Sande's question did not include information on the criteria used to determine financial feasibility. Ms. MacKinnon expressed agreement to streamlining the process. The issue regards criteria that the AEA administration might bring to projects that the Board is unaware of. She does not want to delegate the Board's authority over this process. Mr. Thayer requested T.W. Patch, Director of Planning discuss the financial feasibility criteria. Mr. Patch asked if he could respond in writing to outline the criteria used to determine financial feasibility and to provide additional information. There was no objection. Mr. Patch discussed the origins and reasons why this suggested loan modification process is being presented. He described the steps that need to be taken in order to modify the Alaska Administrative Code. Mr. Patch discussed the legislative process of the unusual provision of setting a 0% interest rate. AEA does not have the power to provide a 0% interest rate. The Legislature has the power to provide a 0% interest rate. He noted there is only one case in the AEA portfolio and it is the largest loan in the portfolio. The project involved a $6 million grant to accompany the Power Project Fund loan. The Legislature reviewed the loan and granted an extended period of time of 0% interest rate. Mr. Patch said the lowest interest rate AEA could offer is established by statute and believes it is comprised of the 52-week rolling average index of the municipal bond fund. The rate is calculated and distributed every week. He believes this week's rate is 3.13%. AEA Board Meeting Minutes June 24, 2020 Page 5 of 8 Ms. MacKinnon suggested it might behoove the Board to send a letter or to have a conversation with the leadership in the Legislature informing them of how the 0% interest rate loan is now pressing on other loans available to communities. She noted the possibility of projects contacting the Legislature directly to request 0% interest loans and how that could affect the financial feasibility of AEA. Chair Pruhs called for a brief at -ease. Chair Pruhs called the meeting back to order. Mr. Thayer requested the Board table this resolution. He informed there is another provision staff is reviewing that will be addressed in August and he suggested combining the two provisions. Staff will continue to work with the Budget and Audit Committee on these items. There was no objection to tabling the resolution until August. 7. OLD BUSINESS A. Battle Creek Construction Update Mr. Thayer discussed the provided West Fork Upper Battle Creek Update. The contractor fused most of the HDPE pipe and is on track to complete that portion by the end of June. Substantial completion is expected in July and completion is slated for August 31, 2020. The construction contract bid was $36 million and the project final is estimated to be $38.6 million. There is a claim on this project. Staff is working with the contractor to the settle the claim and discussions are going well. Chair Pruhs inquired if there will be an opening or some type of ribbon cutting at the completion of the project. Mr. Thayer anticipated such an event to occur in late August or early September. Mr. Thayer noted the Governor would like to attend a ribbon cutting at the site. Chair Pruhs informed he would choose Board members who would like to attend. Vice -Chair Karl expressed appreciation for all the efforts and is pleased with the schedule and the budget. MOTION: A motion was made by Ms. Sande to go into Executive Session to discuss confidential matters related to Bradley Lake, Soldotna Quartz Line, and Budget and Audit Subcommittee update. Motion seconded by Mr. Kendig. The motion was approved without objection. AEA Board Meeting Minutes June 24, 2020 Page 6 of 8 8. EXECUTIVE SESSION 9:21 a.m. A. Matters related to Bradley Lake and Soldotna Quartz Line The Board reconvened its regular meeting at 10:04 a.m. Chair Pruhs advised the Board did not take any formal action on matters discussed while in executive session. 9. DIRECTOR COMMENTS Mr. Thayer stated the Bradley Lake resolution from the BPMC was requested by the Board at the last meeting and is attached in today's Board packet. A. Alaska Cargo and Cold Storage Executive Summary - Included in the Board packet. B. COVID-E19 Rural Travel Plan - Included in the Board packet. C. Denali Commission Update Mr. Thayer discussed additional funds have been received from the Denali Commission. Staff added the Estimated Jobs Created column to the update as requested by the Board. D. Power Cost Equalization News Mr. Thayer noted the initiatives underway to improve the PCE program include the new web portal, technology training, and the conversion from paper check payments to electronic payments for communities. E. Tuluksak Update Mr. Thayer explained the investment to the power house in December was about $230,000. The power house operators are doing their part in keeping the plant running. Mr. Thayer has requested AEA provide filters and oil to keep the plant running. The community is still having significant issues. Their PCE was suspended by Regulatory Commission of Alaska (RCA). The IRS has placed over $400,000 of liens into the community. The Division of Community and Regional Affairs recently denied the community a loan for bulk fuel. There are outstanding loans to DCRA for the bulk fuel of over $400,000. He noted a key office employee is out of the community right now due to pregnancy. Mr. Thayer explained AEA's commitment is to try to keep the power house running with the supplies needed. The community is in a deep hole and there is no plan developed to get out of the hole. Vice -Chair Karl thinks the community will be turned upside down if no help is provided to develop a plan to address the issues. He asked if AEA could request Calista to assist. Mr. Thayer explained AEA's scope is expanded to include providing filters and oil to maintain the plant, but it is beyond AEA's responsibility to address the community's issues with the IRS, bulk fuel, water, DEC, or PCE. Vice -Chair Karl agreed AEA is not responsible for any of the community's problem, but the community needs assistance nonetheless. Ms. MacKinnon inquired as to the population of Tuluksak. Mr. Thayer informed the population is 98 people. AEA Board Meeting Minutes June 24, 2020 Page 7 of 8 F. AIDEA/AEA Org Chart No significant changes have been made to the provided organizational chart. It is provided on a quarterly basis. G. Akhiok Powerhouse Update and Open House Mr. Thayer anticipates an Akhiok Powerhouse open house will be conducted on July 30. Additional information is forthcoming. H. Snettisham Update (Verbal) Mr. Thayer informed the parties are still talking and movement is slow. The Department of Law is reviewing the question regarding AIDEA as an owner and the extent of its authority to provide direction. More information will be presented in August. Ms. Sande inquired if the final design that was reviewed in the previous meeting has been submitted. Mr. Patch noted a final design proposal has not been submitted. He advised at the last Board meeting that Mr. Mitchell had sought an extension of time for his permission to construct. FERC has not yet provided a ruling on that extension request. The parties have not made significant progress on the three necessary agreements. Mr. Patch requested the parties' counsel earnestly consider the FERC process for dispute resolution. I. Community Outreach Schedule - Included in the Board packet. J. Power Project Fund Dashboard and Loan Report Mr. Thayer informed there are no major changes from the previous report and all loans are current. There are currently five applications pending. K. Articles of Interest - Included in the Board packet. L. Next Regularly Scheduled AEA Board Meeting Wed. Aug 5, 2020 Mr. Thayer announced Ashton Doyle has decided to remain as a full-time mother. Vice -Chair Karl expressed congratulations. Mr. Thayer informed AEA has been asked to be involved in working with a private company on renewables. The first meeting will occur tomorrow and more information will be brought to the Board as it develops. AEA Board Meeting Minutes June 24, 2020 Page 8 of 8 10. BOARD COMMENTS Ms. Sande requested staff provide additional information via email regarding the AK Cargo and Cold Storage project, the question on wetlands mitigation, and the specific statutory reference which authorizes AEA to receive grant funds. She expressed appreciation for information shared today. Vice -Chair Karl expressed appreciation to Mr. Thayer and staff for their efforts. Chair Pruhs echoed comments of appreciation to staff. He noted there is a possibility the next Board meeting may occur sooner than August 5, depending on the outcome of today's AIDEA Board meeting. 11. ADJOURNMENT There being no further business of the Board, the AEA meeting adjourned at 10:20 a.m. NER�r9G . Q� G O `PQR9� �' S S, • ` 0 ?g Secretary