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HomeMy WebLinkAboutAEA Board Meeting May 2022Alaska Energy Authority BOARD MEETING MINUTES Wednesday, May 25, 2022 Anchorage, Alaska 1. CALL TO ORDER ALAS KA ENERGY AUTHORITY Chair Pruhs called the meeting of the Alaska Energy Authority to order on May 25, 2022, at 8:31 am. A quorum was established. 2. ROLL CALL BOARD MEMBERS Members present: Chair Dana Pruhs (Public Member); Vice -Chair Bill Kendig (Public Member); Julie Sande (Commissioner DCCED) (Arrived 8:50 a.m.); Albert Fogle (Public Member); Deven Mitchell (SOA-DOR); 913ill 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. Mitchell. The motion to approve the agenda, passed without objection. 4. PRIOR MINUTES —April 13, 2022 MOTION: A motion was made by Vice -Chair Kendig to approve the prior minutes of April 13, 2022, as presented. Motion seconded by Mr. Mitchell. The motion to approve the minutes of the April 13, 2022, minutes passed without objection. S. PUBLIC COMMENTS (2 minutes per person) Chair Pruhs asked that comments be limited to two minutes and to be based on today's agenda items. He requested each person state their name and affiliation, if any. Jennifer Bertolini, AEA, provided directions to those online wishing to make a public comment. Gary Hennigh noted that he has been CEO of King Cove Municipal Utility and City Administrator for the last 32 years. He respectfully requested that Board members read the comments he sent today related to comments that King Cove made a year ago. Those comments describe the frustrations of not being considered eligible as a PCE community for reasons that relate directly to King Cove's renewable energy accomplishments. King Cove believes they should be eligible for the PCE Program. Mr. Hennigh discussed the back -and -forth communication with AEA and Commissioner Sande that reveals the misunderstanding of the problems that King Cove is not in the PCE Program and the reasons King Cove should be in the Program. Mr. Hennigh requested 813 W Northern Lights Blvd, Anchorage, AK 99503 • Phone: (907) 771-3000 • Fax: (907) 771-3044 - Email: info@akenergyauthority.org that the Board review the material he provided today and direct AEA to provide King Cove with a serious review of the issue to get beyond the erroneous statements going back and forth. He believes that the issue is being masqueraded in a manner that is not fair to the city of King Cove. He asked the Board to please intervene to help resolve the issues. Ken Castner commented that he is not sure when the financing for the SQ Line was set up in 2020. He noted that there was approval at the prior meeting for a one-time payment to pay down the cost of that acquisition and the funds that were used were earmarked for required project work. Mr. Castner discussed that the approval included a $700,000 fee to be paid, but he does not know if that fee payment will be to AIDEA or to the bond bank. Mr. Castner stated that if the $700,000 payment was to AIDEA, he would ask why terms and conditions were favorable to AIDEA and unfavorable to the consumer. Mr. Castner noted that he would like to know if the payment was a pass -through penalty or any other penalty. There were no members of the public online or in -person who wished to make a public comment. Chair Pruhs requested Curtis Thayer, AEA Executive Director, comment regarding the King Cove issue. Mr. Thayer stated that Mr. Hennigh is correct that much communication has occurred. Mr. Thayer stated that AEA understands King Cove's concerns and the Department of Law (DOL) has communicated to AEA that King Cove is not eligible for PCE. AEA has notified King Cove of Department of Law's determination. Mr. Thayer stated that King Cove has not applied for funding for the PCE Program because they know they do not qualify. Mr. Thayer stated that he has spoken with Commissioner Robert Pickett of the Regulatory Commission of Alaska (RCA) regarding this issue because AEA jointly administers the PCE Program. Ajoint letter will be sent to King Cove to further clarify the understanding. Mr. Thayer will provide the letter to Board members. Mr. Thayer informed that in the history of the King Cove hydro project, AEA has provided $2.8 million in grants. AEA also provided a Renewable Energy Fund (REF) grant of $675,000. King Cove also participated in an AEA project loan of $1.3 million. The Aleutians East Borough granted King Cove $500,000 for their project. King Cove provided matching funds of $150,000. The Alaska Municipal Bond Bank loaned King Cove $525,000, and an additional loan of $1 million. The total receipt is $6.95 million for their successful project. Their project falls below the floor rate of .19 cents and therefore, it is ineligible for PCE. Chair Pruhs requested for the record that Mr. Thayer state the reason again why King Cove does not meet the PCE requirements. Mr. Thayer explained the PCE Program has a floor rate and a ceiling rate. The floor is established at the average rate of Anchorage, Fairbanks, and Juneau. This year, the rate was established at .19 cents. PCE does not pay for any rate that is .19 cents or below. PCE will pay for the delta from the .19 cents floor up to .75 cents. Mr. Thayer stated that King Cove is below .19 cents and has traditionally been below .19 cents, even though they have not filed any paperwork with AEA to verify that they are below .19 cents. Chair Pruhs asked that if King Cove has a rate above .19 cents, then they would be within the PCE subsidized category. Mr. Thayer agreed. Chair Pruhs asked who set the .19 cents formula. Mr. Thayer explained that the formula is set legislatively by statute and the RCA makes the calculations Alaska Energy Authority Page 2 of 15 and enforces the formula. Chair Pruhs asked Mr. Thayer if King Cove needs to go to the Legislature or to RCA to get relief for this issue. Mr. Thayer commented that the Legislature would have to change the formula. AEA sought out the Department of Law's opinion, who concurs that King Cove does not qualify for PCE. Chair Pruhs commented that King Cove needs to be made aware of the findings. Mr. Thayer agreed and noted that he has already spoken to Commissioner Pickett regarding thejoint clarifying letter. Chair Pruhs requested for the record that Mr. Thayer respond regarding the comment related to the early payoff of the SSQ Line and the loan documents. Mr. Thayer explained that AEA acquired the SSQ Line, which was the matter of litigation for several years. The line was a stranded asset owned by Homer Electric Association (HEA), and did not serve any of their customers. The line runs between Sterling and Quartz Creek. The line went down during the Swan Lake Fire. AEA worked with all of the utilities and AEA acquired the line for the total cost that was not to exceed $17 million. AEA went out for a bond and AIDEA offered to provide the financing in a private placement bond. The term sheet was agreed to by all parties. The term sheet contained the standard prepayment penalty, which is a fee for an early pay-off. The utilities decided that they wanted to put $12 million in excess payments toward the SSQ Line debt, and by regulation and by statute, the prepayment penalty fee of $700,000 was included as part of the transaction costs. The utilities made the decision and understood the prepayment fee transaction cost of $700,000 and the payment is proceeding forward by July 1. If the utilities had not made the decision to pay the bond down early, then the $700,000 fee would not be absorbed. Mr. Thayer explained that the prepayment penalty provision is a normal market condition within term sheets. It is not special to AIDEA and was not negotiated by AIDEA. It is an industry standard. Mr. Mitchell clarified that governmental purpose bonds are typically issued with 10-year par calls and if the bond is paid off before the 10-year par call, the interest expense is on the principal to the call date and the principal at the call date on the bonds. This is what creates the penalties. Mr. Mitchell explained that the funds have to be invested in U.S. government -backed securities and the differential between the interest rate on the bonds and reinvestment of the funds to the call date creates the penalty. Mr. Mitchell informed that AEA did not get $700,000 as a result of the transaction. The $700,000 went to the investors. There being no other apparent public comments, Chair Pruhs closed the public comment session. 6. NEW BUSINESS - NONE 7. OLD BUSINESS A. Required Project Work Update — Department of Law Memos: Mr. Thayer discussed that the individual memos are linked to the agenda and included in the packet. The required project work to upgrade the transmission lines from Bradley Lake to Quartz Creek, including the addition of a battery system, falls within the provision in the Power Sales Agreement that once the bonds were paid off, the excess payments could be either given back to the State Treasury into the Railbelt Energy Fund or could be given towards required project work, Alaska Energy Authority Page 3 of 15 as deemed by DOL to benefit the Bradley Lake Hydro Project. Mr. Thayer explained that the Bradley Lake Management Committee (BPMC), consisting of the utilities and AEA, sent a letter to DOL last year identifying a series of upgrades to utilize the excess payments for the required project work. DOL has since issued the five different memos linked to the agenda. DOL requires that a third -party independent engineering firm is contracted to provide expert analysis to determine if the designated required project work projects are standard and consistent with Prudent Utility Practice. Mr. Thayer indicated that the five DOL memorandums linked to the agenda are now part of the public record and the confidential and deliberative identifiers have been waived. Chair Pruhs asked when the economic analysis and the return on the investment for the public for the required project work will be provided. Mr. Thayer indicated that analysis is currently being completed. He noted the next steps include determining what work needs to be done and preparing cost estimates and technical feasibilities. The individual utility boards will approve the projects and then the project will come before the AEA Board for final approval before the bonds are issued. This process is almost identical to the recent SSQ Line process. Mr. Thayer commented that the anticipated amount is about $200 million. Chair Pruhs asked for the list of owners for the required project work. Mr. Thayer indicated that AEA will ultimately own the required project work. AEA owns the SSQ Line and is upgrading capacity from Bradley Lake to the SSQ Line. AEA will own that capacity. This is an agreement with the utilities. The project is going to pay for the batteries. The utilities are going to operate the batteries within their system and give first -use to Bradley Lake power. Chair Pruhs requested additional clarification regarding the ownership of the fixed assets. Mr. Thayer discussed that primarily Homer Electric Association (HEA), AEA, Chugach Electric Association (CEA), and Golden Valley Electric Association (GVEA) own the batteries. Chair Pruhs asked how it works from a legal and fiduciary standpoint that AEA will own the improvements to fixed assets that are owned by an entity other than AEA. Mr. Thayer requested Stefan Saldanha, Department of Law, to respond. Mr. Saldanha expressed the understanding is that most of the upgrades to the transmission line will be a new line right next to the existing line, which makes the upgrade a hard asset. Chair Pruhs asked if the upgrade is a new line on a fixed asset that is owned by a third -party. He asked if AEA would be leasing for $1 a year. Mr. Saldanha agreed. He noted that the pole would be owned by HEA. The leading idea for the design of the upgraded line is a completely new line using HEA's right-of-way. HEA will keep the right-of-way and through a letter of intent will allow AEA to use the right-of-way. All of the new infrastructure will be owned by the Project. Chair Pruhs asked if the upgrades are a comingling of assets. Mr. Saldanha agreed. Chair Pruhs discussed a hypothetical scenario and asked what would happen if there was another fire on the HEA right-of-way with an AEA asset. Mr. Saldanha explained that the access to the right-of-way should be clear in that case. The current letter of intent includes a preliminary agreement on the right-of-way management. The definitive agreement has not been negotiated. Alaska Energy Authority Page 4 of 15 Vice -Chair Kendig asked if the letter of intent is available to review at this meeting. Mr. Thayer noted that he does not have the letter of intent with him. Vice -Chair Kendig asked if there are any plans for further negotiations regarding the letter of intent. He discussed that if the right-of- way stays with HEA, then the possibility remains that the previous issues will occur again. Vice - Chair Kendig asked if the right-of-way will be renegotiated after the design phase is completed. Mr. Saldanha explained that there is a possibility for renegotiation, but at the moment, HEA wants to keep the right-of-way. Commissioner Sande asked Mr. Thayer to explain the design scenario that would necessitate taking down the existing line. Mr. Thayer explained that doubling the size of the line may require new poles. Chair Pruhs expressed his concern regarding the conflicts that can and will happen where there are multiple owners on a common right-of-way. He asked if it is correct that if a utility has an ownership stake, there is a mark-up on their cost of operation. Mr. Thayer agreed there would be a cost of operation, the wheeling rate. Chair Pruhs asked if administrative costs are included within the wheeling rate. Mr. Thayer agreed. Chair Pruhs discussed the costs and administrative costs associated with the SSQ Line owned by AEA. He asked why there is not a wheeling rate on the SSQ Line owned asset. Mr. Thayer explained that it has not been a government practice to set money aside for projects. Chair Pruhs discussed the utilities on either side of the SSQ Line have wheeling rates. He requested a White Paper on the justification that AEA's SSQ Line does not have a wheeling rate and the utility lines on either side of the SSQ Line have wheeling rates. Chair Pruhs commented that there is an economic consequence to AEA for owning the SSQ Line asset and AEA is not being compensated for the costs. He noted that the discussion today costs AEA. Mr. Thayer explained that the costs are charged to the Project and paid by the utilities. The utilities reimburse AEA for costs associated with Bradley Lake, the SSQ Line, and the Intertie, including engineering costs, Mr. Thayer's time, and accounting time. Chair Pruhs noted that the White Paper request is particular to ownership costs, and the comparison with the nonprofit utilities and how they treat ownership costs. Chair Pruhs discussed the importance of understanding ownership and operation of an asset and understanding the economic benefits to the public. He noted another aspect of ownership is the liability side and he wants to make sure that the AEA will have a hold harmless within the program for any reason such as failure, damage, bodily injury, or forest fires. Mr. Thayer referred to the informational map included in the documents which shows the transmission lines from Homer to Fairbanks and delineates the work related to each memo. He noted that also included in the documents is a recent resolution by the BPMC supporting the required project work. i. May 19, 2022 Memo — Soldotna to Sterling Transmission Line Upgrade ii. April 27, 2022 Memo — BESS Purchase Alaska Energy Authority Page 5 of 15 iii. March 7, 2022 Memo — Bradley Junction to Soldotna Transmission Line Upgrade iv. January 24, 2022 Memo — D. Hittle & Associates Report on repair and replacement of infrastructure and equipment V. November 10, 2021 Memo — Sterling to Quartz Creek Transmission Line Upgrade Chair Pruhs requested Mr. Thayer discuss the battery purchases, battery energy storage systems (BESS), for the record. Mr. Thayer indicated that the utilities are currently evaluating the type, size, and life of the battery selection based on their needs. Mr. Thayer showed the $115 million Battery Energy Storage Systems for Grid Stabilization line item on the page titled BPMC Special Committee Projects. The total cost for the first tranche is $270 million. He noted that the interest rate changes have affected the amount of work that can be completed from last year's forecasted work. Mr. Thayer discussed that applications for $60 million of formula funding are available for grid resiliency and redundancy. Chair Pruhs commented that the budgeted amount for the batteries is a large portion of the total costs. He noted that a battery is a shorter -term asset that will need to be replaced. Mr. Thayer indicated that batteries will be added in Anchorage in Kenai, and the batteries will be replaced in Fairbanks. Mr. Thayer discussed that the typical life of the batteries is 20 years. Chair Pruhs requested that the battery financing term is less than the useful life of the battery. He does not want a 20-year note on a 20-year battery. Mr. Thayer agreed. There were no additional questions. 8. DIRECTOR COMMENTS A. Response to Board Questions Mr. Thayer discussed that the Power Plant Database overview will be presented at the June 29, 2022 Board meeting. There were no questions. B. AEA Budget Update i. Operating — FY23 ii. Capital — FY23 Mr. Thayer discussed the budgets included in the packet. He commented that AEA had a banner year in Juneau. There were no changes in the operating budget from the previous several years. He reviewed the capital budget; Bulk fuel Upgrades at $5.5 million and a federal match of $7.5 million, Electrical Emergencies Programs at $200,000, Round XIV Renewable Energy Project Grants at $15 million, Rural Power Systems Upgrades at $10 million and a federal match of $10 million, Strategic Plan for Railbelt Assets at $2.5 million, Electrical Vehicle Infrastructure Plan at $1.5 million, interest from Volkswagen Settlement at $400,000, and Grid Modernization, Reliability, Resiliency and Transmission Projects at $250,000. Alaska Energy Authority Page 6 of 15 Mr. Thayer discussed the Infrastructure Investment and Jobs Act (IIJA) funds include Grid and Transmission Resilience federal funding at $12.1 million per year for five years. This requires a State match of $1.8 million. Mr. Thayer explained the timeline. Four new PCN positions were approved by the Legislature and will be added with this appropriation. Chair Pruhs asked if the new positions are separate from the typical organizational chart. Mr. Thayer noted that the positions are AIDEA employees who are designated AEA by fiscal note. The positions will be filled and added into the flowchart. The funding for the positions is in place for five years. Chair Pruhs asked if the employees will be told that there is five years' of funding for their positions during the project time, subject to future projects. Mr. Thayer explained that they will be State employees and additional work or additional IIJA funding is not precluded at this time. Commissioner Sande commented on the excellent job of Mr. Thayer and staff related to the budget, the IIJA funds and questions. Commissioner Sande stated that she would not do anything to deter applicants, given the current status of personnel, recruitment and the internal barriers within State government hiring. She cautioned that the conversation of the five years' of funding could cause a good applicant to step -away from a position. She acknowledged that currently, AEA cannot be nimble or competitive with pay. Mr. Thayer commented that those four employees might move within the organization. He noted the $200 million in upgrades that have not been reflected in personnel. Chair Pruhs stated that he is not questioning the justification. He discussed the transparency that the four positions will be hired as project -related employees and that there will be opportunities as things change in the future. Chair Pruhs commented that he views the five years dedicated funding as a positive aspect when hiring for these positions. Mr. Thayer reiterated that the Governor and the Legislature chose to make the four positions full-time public employees. Mr. Fogle asked if the PCN positions will expire after the project work is complete. Mr. Thayer indicated the positions will not expire in five years. He explained that AEA is currently on a rapid growth curve, but if the workflow lessens, then the organization will change and it is possible that employees could be laid off or moved to another PCN position to meet the needs of the organization. Chair Pruhs expressed his opinion that contract employee positions attract better quality people because contract positions pay more. He does not believe that the State of Alaska has the bandwidth under the PCN positions to attract high -caliber people for projects. Mr. Thayer expressed that State employees are dedicated professionals and that being in the private sector does not mean that the person is more competent. Mr. Thayer requested a recess. Chair Pruhs denied the request. Mr. Thayer told Chair Pruhs not to impugn public employees and the employees of the Agency. Chair Pruhs explained that he is talking about advertising for additional employees related to projects. Mr. Mitchell commented that this type of project funding is the normal course of business within DOT -based project work. He believes that all of Chair Pruhs' viewpoints were represented and Alaska Energy Authority Page 7 of 15 considered during the legislative process when they determined that the PCN approach, rather than the contract approach, was the best implementation. Mr. Mitchell agreed that it is difficult in this market to find qualified labor and more flexibility can help attract qualified personnel. He believes there are still individuals who are interested in year-round work and who would be interested in the security of working for AEA for five years. Chair Pruhs commented that he believes that would have been the scenario two years ago. He feels that today, the private companies are having a difficult time filling positions even with their high salary offers. Chair Pruhs discussed that he wants to find a way to attract people to the projects so that AEA looks good and does a good job. He expressed his concern regarding the PCN positions and its constraints. Mr. Mitchell commented that the plan will go forward and if the positions are not filled with qualified people, then the discussion can occur during next year's budget to switch the position from a personnel line item to a contract line item in order to accomplish the mission. Mr. Thayer agreed that finding qualified people is an issue. Chair Pruhs asked for input from Commissioner Sande. Commissioner Sande expressed her understanding that Chair Pruhs' concerns were focused on AEA's ability to be competitive and she believes that Chair Pruhs wants to assist the Agency in finding the best qualified applicants for the positions. Chair Pruhs commented that the State of Alaska is fortunate to have the high price of oil and to have funding from the federal government. The challenges include obtaining equipment, materials, and people. He noted the focus is on managing the challenges. Commissioner Sande discussed that there will be constraints with economic development if the workforce issues are not resolved. The workforce issues are a priority for the State. She noted the concern that using the techniques of recruiting from the Lower 48 may not be available in certain areas and that other options may have to be explored. Chair Pruhs commented that a challenge for workforce development is that they do not have people to train. He expressed concern that it will draw out more than five years to fill the positions and to get the work completed. Mr. Fogle noted that the money that is available now will be affected by inflation. Chair Pruhs agreed that the deliverable will be less. The discussion continued regarding workforce challenges. Chair Pruhs expressed his goal to ensure that Mr. Thayer has the tools for AEA to successfully execute the program and provide a deliverable to the public. Mr. Fogle suggested that the Executive Directors of AIDEA and AEA should have the ability and flexibility to designate the positions either as PCN or contract employee, depending on the circumstance. Chair Pruhs agreed and Commissioner Sande agreed. Commissioner Sande believes the Board has a responsibility to assist in every way to reduce barriers to hiring. Mr. Fogle asked if the 27 renewable energy projects will be completed in the next year. Mr. Thayer Alaska Energy Authority Page 8 of 15 noted that the projects will begin next year and they have a two to five-year span. Mr. Fogle asked if the 27 projects have community matching funds. Mr. Thayer explained that the match ranges from 20% to 100%. Mr. Fogle expressed his belief that there will be cost overruns because of inflation. Mr. Thayer noted that the funding through the grant is the only amount available. Cost overruns are not paid for by the grant. Mr. Fogle asked if the communities know they will have to pay for any cost overruns. Mr. Thayer agreed. Commissioner Sande informed Mr. Thayer that she has committed his participation and further conversations about infrastructure, operating and maintenance. Mr. Thayer agreed. Mr. Thayer discussed another tranche in the IIJA funding of $3.6 million, including the State Energy Program and the Energy Efficiency Conservation Block Grant. The IIJA Electric Vehicle Infrastructure is a joint action with DOT for $7.7 million, with a total of $50 million over the next five years. In addition, there is competitive funding of $2.5 billion dollars. Mr. Thayer commented on the challenge and difficulty of finding a grant writer. Mr. Fogle requested clarification regarding the relationship of the Electrical Vehicle Infrastructure Plan of $1.5 million and the Electric Vehicle Infrastructure funding of $7.7 million. Mr. Thayer explained that the planning funds of $1.5 million will be used to justify the plan for the total $50 million over the next five years. The funds will be used for the State highway system and the marine highway system. It will fund electric vehicle charging stations and upgrades to community power and systems in order to meet the federal requirements and national standards. The application is lengthy, consisting of approximately 200 pages, and is due August 1. AEA has already started the application process because of the previous program that funded nine charging stations. Mr. Fogle asked if any charging stations have been placed on the Alaska -Canadian Highway (ALCAN). Mr. Thayer agreed. Mr. Fogle asked if private sector stations such as Chevron and Tesoro are looking to add electrical charging stations next to their gas pumps, rather than the government funding the cross-country network. Mr. Thayer discussed that independent chargers are being established. He noted that one of AEA's solicitations is to find the private sector interest for the charging stations. The charging stations will be owned and operated by the site host. The technology this year changed dramatically from the technology available last year. Mr. Thayer discussed that the charging stations have the capability of taking a credit card. The price is determined by the individual site. Mr. Thayer gave the example that the charging stations at the State Office building in the parking garage required that a credit card is used because of the associated cost. The cost is approximately $1.50 an hour. Mr. Thayer discussed the Endowment line item of Power Cost Equalization of $32 million. There was an increase in available kilowatts to rural Alaska from 500 kW to 750 kW, which is an additional fiscal note of $15 million in this budget category. The Endowment earned $150 million last year and $50 million is being returned after the cascade of PCE, community assistance, and the $25 million available for excess earnings toward powerhouses and the Renewable Energy Program. Chair Pruhs asked for the balance amount. Mr. Thayer noted it is approximately $1.1 billion. Discussion occurred that the year-to-date returns are trending approximately negative 1 %. Alaska Energy Authority Page 9 of 15 Chair Pruhs noted that a drop in 1% is not bad compared to 8% inflation, and 50% for the price of fuel. He believes there will be pressure on the fund next year with the average of fuel at $11 to $16 per gallon. Chair Pruhs requested Mr. Thayer to discuss micro -nuclear reactors. Mr. Thayer informed that the Governor passed a bill regarding micro -nuclear reactors. He explained that due to the Cold War, Alaska had legislation and statutes that did not allow for nuclear. The bill removed those statutes for small targeted nuclear projects. The first small project test case is at Eielson Air Force Base and should be fully operational in 2027. Mr. Thayer noted that many remote mines are looking 10 years in the future for the option of micro -nuclear reactors. Other rural towns are looking at this option for 20 years in the future. Mr. Thayer advised that the Idaho National Laboratory specializes in nuclear research. They are working with the Governor's Office and he met with them on Monday. AEA is participating in the Nuclear Working Group. The anticipation is that micro -nuclear reactors will solve problems, and it will take time and much testing to implement. Chair Pruhs asked if it would be advantageous for AEA to assign a group to become highly educated about the business during the implementation at Eielson. He believes this would be a great opportunity for AEA to understand the process. Mr. Thayer agreed and informed that AEA is a member of the Working Group for Eielson and staff is assigned. Chair Pruhs requested that a 10-year plan is developed for AEA to gain the position of knowledge within the state regarding micro -nuclear as AEA regarding hydrocarbon power generation. Mr. Thayer agreed. Mr. Fogle asked if the waste is going to be shipped to Utah. Mr. Thayer indicated that those details are all part of the discussions. There were no additional questions. C. Bradley Lake Hydroelectric update — Battle Creek Diversion Project Callback Acceptance Mr. Thayer discussed that GVEA did not participate in the original construction of the Battle Creek Diversion Project. The contract contains a provision that allows GVEA to buy -in at a later date. GVEA exercised that right to buy -in at a 16.9% share for approximately $1.88 million, which was refunded to the participating utilities. The call-back is complete. Mr. Fogle asked if GVEA is going to buy into Dixon Diversion. Mr. Thayer agreed that the next step is for GVEA to review that option. Mr. Fogle asked if the buy -in was at a set rate or a premium. Mr. Thayer noted that the set rate was an agreed upon amount within the agreement. There were no additional questions. D. Dixon Diversion Project Update Mr. Thayer advised that the BPMC approved the budget funding for the Dixon Diversion Project. The BPMC requested and received $1 million from the REF. The BPMC matched the funds. AEA filed with Federal Energy Regulatory Commission (FERC). The first agency public meeting is set to be in Homer on June 14. Contractors are being procured for the environmental and engineering work. All of the Railbelt utilities are participating in the feasibility of the project. This Alaska Energy Authority Page 10 of 15 is the largest hydro project in Alaska in the last 30 years, since the construction of Bradley Lake. There were no questions. E. Hydro Update Mr. Thayer discussed the included memorandum from Bryan Carey, AEA Director of Owned Assets, that provides the updates on the major hydro projects, including Cordova Hydro Storage Assessment Project, Fivemile Creek Hydroelectric Project, Nuyakuk River Hydroelectric Project, Thayer Lake, and the Water Supply Creek Hydro Final Design. Chair Pruhs asked if Susitna-Watana is included in this information. Mr. Thayer noted Susitna- Watana is not included in this update because it is not an active funded project. Chair Pruhs asked if the Dixon Diversion Project is considered active. Mr. Thayer agreed. Chair Pruhs asked what is necessary for Susitna-Watana to become active. Mr. Thayer stated there is no funding assigned to Susitna-Watana. The funding discussions at the end of the legislative session did not result in any funding. Chair Pruhs asked if the money that was spent is off the books. Mr. Thayer informed that the $200 million is still being carried on the books and there have been no write-offs. Chair Pruhs asked when that accounting function will occur. Mr. Thayer advised that staff has a conversation with the auditors every year on the activity status. Chair Pruhs asked Mr. Thayer's opinion if the conversations regarding moving the project forward will ever materialize between the Administration and the Legislature. Mr. Thayer believes it would solve problems because it would take the Railbelt to 50% to 60% renewable energy. The utilities would have an interest in using about 450 megawatts of the approximately 600 megawatts produced. This leaves excess capacity for industry. The cost estimates were at .06 cents, without inflation. There are interested parties in building, operating, and possibly owning the project. It would take approximately $80 million to $100 million to obtain a FERC license. Chair Pruhs asked Dona Keppers, AEA, what percentage of the balance sheet does the $200 million represent. Ms. Keppers indicated that she can provide that answer to Chair Pruhs. Mr. Fogle asked if the utilities can come together to finance the project. Mr. Thayer discussed that this is a State project. The State can derisk the project by finishing the FERC permits. The State has invested $200 million in the permits. Ongoing work includes focusing on BLM issues with DNR regarding ownership of some of the land and transfer to the State. This would reduce lease payments on the land. Mr. Fogle asked if the State is the only entity that can get the FERC license. Chair Pruhs noted that once a license is obtained, then there are options as to what entities can build and operate the project. Mr. Fogle asked if there is a way that AIDEA can float a bond to have AEA finish the FERC licensing. Chair Pruhs indicated that there has to be support from others besides AEA. Mr. Thayer noted that the last time Susitna-Watana was before the Legislature, it passed unanimously. He cannot say that would be the case today and there will be a new Legislature in January. Mr. Thayer discussed that there are adamant supporters of the project and he believes that there is overwhelming support for the project. AEA is assigned responsibility per statute for obtaining the FERC license and developing the project. Alaska Energy Authority Page 11 of 15 Chair Pruhs asked if it would help if AEA created a line item in the budget for the work that is being completed on the land issues. Mr. Thayer agreed. He stated that conversation can occur in the fall when the budget is being developed. The cost estimates also need to be funded and updated because the world has changed since 2014. If the cost of power remains at .06 cents or .07 cents, then it is better than the current cost. If the cost of power is at .20 cents, then it becomes a dead issue. Mr. Fogle asked if the Permanent Fund could invest in Susitna-Watana. Mr. Mitchell commented that the Permanent Fund has an allocation of approximately $200 million for in -state investments. He noted that it would be difficult for the Permanent Fund to take on the project due to concentration issues, but it could be considered. There has been a historical reluctance for the Permanent Fund to be a development fund for Alaska because of Alberta's lack of success with economic development efforts within their permanent fund. Chair Pruhs noted that the FERC permit has to be obtained before any conversations begin with the Permanent Fund regarding the multiple ways that they could discuss financing the project. Mr. Fogle asked for suggestions on how to obtain the $100 million to complete the FERC licensing without going to the Legislature. Mr. Thayer explained that the State is the owner and the Legislature has to provide the financing for the FERC licensing. Mr. Mitchell added that only a special category of high -risk investors would make an investment of at -risk capital for high return expectations. Chair Pruhs commented on the challenges that Alaska has had with spending money for engineering and environmental studies on mostly good projects that did not come to fruition due to the political or economic environment. Chair Pruhs expressed utmost concern that the auditors will make AEA write off the money spent. He reiterated the strategic standpoint to keep the project viable and to determine how to get the funding to complete the FERC licensing. Mr. Thayer discussed that the Board passed a resolution regarding owned assets that was used as part of the negotiation features with the Governor's Office and with the Legislature to get that funding approved. He agreed that putting forward a Board resolution that identifies the need to update cost estimates and analysis for Susitna-Watana would be a helpful foundation in negotiations with the Governor's Office during the next budget cycle. Chair Pruhs expressed his support. He believes this would preserve the asset, providing concurrence that the project is viable and warrants additional funding. Mr. Mitchell commented that it would be interesting to have the information available in the report to determine the cost per kWh in order to understand the viability. Mr. Thayer advised that information and economic evaluation is available, and he will provide the information. There were no additional questions. Alaska Energy Authority Page 12 of 15 F. VW Settlement Update Mr. Thayer informed that the Volkswagen Settlement update is included in the packet. The Legislature will allow the $400,000 in interest to be used for Diesel Emission Reduction Act (DERA) projects in rural Alaska for powerhouse upgrades. G. Electric Vehicle (EV) Update Mr. Thayer noted this information was previously reviewed. The applications will be provided in the next Board packet. Public outreach is occurring and is one of the components for the EV infrastructure. Mr. Fogle asked if the Electric Vehicle Association is happy with AEA. Mr. Thayer believes they are. He noted that they are part of the process and are attending the Working Group meetings. H. Electric Utility Relief Program (EURP) Update Mr. Thayer discussed the Electric Utility Relief Program utilized COVID-19 funding through the Department of Commerce and was administered by AEA. Approximately $3 million of the available $7 million was disbursed. This is one of many relief program options for reimbursements to utilities for COVID-19 residential debt. Mr. Thayer informed that Round 3 will begin next week. The relief time period will be from April 30, 2021 to December 21, 2021. The federal funding disbursement period has been extended a couple of years beyond the end of 2022. Discussion with Department of Commerce will occur after Round 3 to determine how the remaining balance will be handled. Commissioner Sande commented that Alaska is not the only state that is experiencing similar situations with multiple relief programs. She asked if the federal government has received push - back to try to change or loosen any of those rules in order to access a bigger portion of the funding. Mr. Thayer noted that the federal government extended of the usage years. He suggested that Commissioner Sande have a conversation with the Governor's Office to determine if they want to utilize the remaining funds for another COVID-19 related program that is within the parameters of the federal guidance. There were no additional questions. I. Village Energy Efficiency Program (VEEP) Update Mr. Thayer informed that the VEEP Program had approximately $567,000 available from various sources. The four communities who have eligible projects and received funding are Saint George, Port Heiden, Galena, and Gakona. The eligible projects on the provided list that received no funding total approximately $1.8 million. Mr. Thayer discussed that there will be a review of using the $2 million federal monies to fund those. The map provided shows the rural communities of the projects. J. Power Cost Equalization Update Alaska Energy Authority Page 13of15 Mr. Thayer reviewed the earlier discussion about the increase from 500 kW to 750 kW. There are now 15 communities that need to become compliant by August 31, 2022. Staff continues to work with the communities and with Alaska Power Association to get the community submissions out of the delinquent status. K. Legislative Update Mr. Thayer discussed that many of the recent responses to legislators are included in the Board packet. L. Community Outreach Mr. Thayer informed that he will be joining Alan Weitzner, AIDEA, for continued community outreach events in urban and rural communities. The schedule will be provided at the next meeting. M. Articles of Interest — Included in packet. N. Next Regularly Scheduled AEA Board Meeting Wednesday, June 29, 2022 Mr. Thayer expressed appreciation to Brandy Dixon, AEA, for her excellent efforts in coordinating with the Governor's Office on the Governor's three-day Energy Sustainability Conference that is underway. Mr. Thayer noted that he will be moderating a panel today, and Mr. Weitzner moderated panels yesterday. The attendees and participants include over 500 people from as far away as Australia and Norway. Mr. Thayer discussed that there has been good debate at the conference on many issues regarding sustainability. He commented that the Governor is very pleased with the conference. Mr. Thayer announced that TW Patch, AEA Director of Planning, will be retiring for the second time on June 1, 2022. He was brought out of retirement to serve in his current role. Mr. Thayer invited Mr. Patch to provide comments. Mr. Patch offered his well wishes and words of advice to Board members. Mr. Thayer informed that AEA and the Governor's Office are extending a trip to Bradley Lake and Battle Creek the day before the next Board meeting to the new Board members; Mr. Mitchell, Mr. Eledge, and Mr. Vivlamore. Mr. Thayer thanked Ms. Bertolini for her efforts for today's meeting. 9. EXECUTIVE SESSION: NONE 10. BOARD COMMENTS Chair Pruhs expressed appreciation to Mr. Thayer and staff. Alaska Energy Authority Page 14 of 15 Commissioner Sande commended the team for all of their work. She noted that before she became Commissioner, she did not have a full appreciation of the staff's tremendous involvement in responding to requests from legislators and producing information to the legislators. She thanked staff for their impressive assistance during the session. Commissioner Sande expressed appreciation and respect to Mr. Patch on behalf of the Board. 11. ADJOURNMENT There being no further business of the Board, the AEA meeting adjourned at 10:33 am. zq-, 9,,-, Curtis W. Thayer, Executive Director / Secretary Alaska Energy Authority Page 15 of 15