HomeMy WebLinkAboutAEA Financial Statement for FY20The report accompanying these financial statements was issued by
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Alaska Energy Authority
(A Component Unit of the State of Alaska)
Basic Financial Statements and Schedules
June 30, 2020
(With Independent Auditor’s Reports Thereon)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Basic Financial Statements and Schedules
June 30, 2020
(With Independent Auditors’ Report Thereon)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Table of Contents
Page(s)
Independent Auditor’s Report 1-2
Management’s Discussion and Analysis (Unaudited) 3-21
Basic Financial Statements
Government-Wide Financial Statements:
Statement of Net Position 22
Statement of Activities 23
Fund Financial Statements:
Governmental Fund:
Balance Sheet/Statement of Net Position - Governmental Activities 24
Statement of Revenues, Expenditures, and
Changes in Fund Balance/Statement of Activities – Governmental Activities 25
Enterprise Fund:
Statement of Net Position 26
Statement of Revenues, Expenses, and Changes
in Net Position 27
Statement of Cash Flows 28
Notes to Basic Financial Statements 29-55
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Table of Contents
Page(s)
Supplementary Information
Schedules
1 Bradley Lake Hydroelectric Project Trust Account Activities 56
2 Special Revenue Fund – Projects and Programs – Balance Sheet 57
3 Special Revenue Fund – Projects and Programs – Revenues,
Expenses, and Changes in Fund Balance 58
4 Business-Type Activities – Enterprise Fund – Projects and Programs – Statement of Net
Position 59
5 Business-Type Activities – Enterprise Fund – Projects and Programs – Revenues,
Expenses, and Changes in Net Position 60
Supplementary Information (Unaudited)
6 Schedule of Capital Assets Presented under
Federal Energy Regulatory Commission Requirements 61
7 Bradley Lake Historical Annual Project Cost 62
8 PCE Endowment Fund Historical Analysis 63
9 Supplementary Organization and Project Information 64-67
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1
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Independent Auditor’s Report
The Board of Directors
Alaska Energy Authority
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities and
each major fund of Alaska Energy Authority (a Component Unit of the State of Alaska) (Authority), as of and for the
year ended June 30, 2020 and the related notes to the financial statements, which collectively comprise the Authority’s
basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes 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.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
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
opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial
position of the governmental activities, the business-type activities, and each major fund of the Authority as of June 30,
2020, and the respective changes in its financial position and, where applicable, cash flows thereof for the year then
ended in accordance with accounting principles generally accepted in the United States of America.
2
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and
analysis on pages 3-21 be presented to supplement the basic financial statements. Such information, although not a part
of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic,
or historical context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our
audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because
the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise
the Authority’s basic financial statements. The supplementary information in schedules 1 through 9 is presented for
purposes of additional analysis and is not a required part of the basic financial statements.
The supplementary information in schedules 1, 2, 3, 4 and 5 is the responsibility of management and was derived from
and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the United
States of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to
the basic financial statements as a whole.
The supplementary information in schedules 6, 7, 8 and 9 has not been subjected to the auditing procedures applied in
the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on
it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 26, 2020 on our
consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely
to describe the scope of our testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on the effectiveness of the Authority’s internal control over financial reporting or
on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards
in considering the Authority’s internal control over financial reporting and compliance.
Anchorage, Alaska
October 26, 2020
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
3
Overview of the Financial Statements
The Alaska Energy Authority (AEA or Authority) is a public corporation of the State of Alaska
(State) within the Department of Commerce, Community, and Economic Development (DCCED),
but with a separate and independent legal existence and a separate and self-balancing set of
independently audited financial statements. AEA’s operations consist of governmental fund
activities reported as special revenue funds and business-type activities reported as enterprise funds.
The financial information in this report is later reported as a component unit of the State and is
discretely presented in the State’s financial statements.
AEA manages the following projects and programs: owned hydroelectric and intertie projects; rural
energy programs; and energy development programs. AEA’s programs are funded primarily by the
State, federal grants, investment income, and utility companies—for use of AEA owned assets.
Further information on AEA’s programs can be found in note 1 to the financial statements.
Management’s Discussion and Analysis
This section presents management’s discussion and analysis of the financial position and results of
operations for the year ended June 30, 2020. This information is presented to help the reader focus
on significant financial matters and provide additional information regarding the activities of the
Authority. This information should be read in conjunction with the Independent Auditors’ Report,
the audited financial statements, and the accompanying notes.
Government-Wide Financial Statements
The government-wide financial statements report information about the overall finances of the
Authority similar to a business enterprise. These statements combine and consolidate short-term,
spendable resources with capital assets and long-term obligations.
The government-wide financial statements are divided into the following categories:
Governmental activities – These are functions of the Authority that are financed primarily
by intergovernmental revenues. AEA’s governmental activities include Power Cost
Equalization (PCE) Program, Renewable Energy Grant Fund, Emerging Energy Technology
Fund, Trans-Alaska Pipeline Liability Fund, Rural Energy Projects, and Volkswagen Diesel
Settlement Fund.
Business-type activities – These are functions of the Authority in which customer user fees
and charges are used to help cover all or most of the cost of services they provide. AEA’s
business-type activities include the Bradley Lake Hydroelectric Project, the Alaska Intertie
Project, the Susitna-Watana Hydroelectric Project, the Power Project Fund, the Rural
Electrification Revolving Loan Fund, and the Power Development and Railbelt Energy
Projects.
The Statement of Net Position presents information on all of AEA’s assets and deferred outflows of
resources less liabilities and deferred inflows of resources, which results in net position. This
statement is designed to display the financial position of AEA.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
4
The Statement of Activities provides information, which shows how the Authority’s net position
changed as a result of the year’s activities. The statement uses the full accrual basis of accounting
and the economic resources measurement focus, which is similar to the accounting used by private-
sector businesses. Revenues are recognized when earned and expenses are recognized when a
liability is incurred.
Fund Financial Statements
A fund is a grouping of related accounts used to maintain control over resources that have been
segregated for specific activities or objectives. The funds of the Authority are divided into two
categories: governmental fund and proprietary fund, both of which are further described below, and
which provides more detail than the government-wide statements. AEA uses fund accounting to
ensure and demonstrate compliance with finance related legal requirements.
Governmental Funds – Special Revenue Funds
The Authority reports one governmental fund as a special revenue fund. The special revenue fund is
used to account for activities that are supported primarily by intergovernmental revenues.
Governmental funds are used to account for essentially the same functions reported as governmental
activities in the government-wide financial statements. However, unlike the government-wide
financial statements, governmental fund financial statements focus on the short-term view of AEA’s
operations. Because the focus of governmental funds is narrower than that of the government-wide
financial statements, it is useful to compare the information presented for the governmental funds
with similar information presented for governmental activities in the government-wide financial
statements. These funds are combined on the Governmental Fund Balance Sheet/Statement of Net
Position – Governmental Activities and Governmental Fund Statement of Revenues, Expenditures,
and Changes in Fund Balance/Statement of Activities – Governmental Activities.
Proprietary Funds – Enterprise Funds
The Authority reports one enterprise fund. The enterprise fund is used to account for activities for
which a fee is charged to external users for goods and services.
The Statement of Net Position reports the Authority’s assets, deferred outflows of resources,
liabilities, deferred inflows of resources, and resulting net position. The net position is reported as
net investment in capital assets, restricted, and unrestricted. Restricted net position is subject to
external limits such as bond resolutions, legal agreements, or statutes. The Statement of Revenues,
Expenses, and Changes in Net Position reports the Authority’s revenues, expenses, and resulting
change in net position during the periods reported. Both statements report on the full accrual basis of
accounting and economic resources measurement focus.
The Statement of Cash Flows reports the Authority’s sources and uses of cash and change in cash
balance resulting from the Authority’s activities during the periods reported.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
5
Notes to Basic Financial Statements
The notes provide additional information that is essential to fully understand the amounts reported in
the government-wide and fund financial statements.
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents certain
supplementary information, which provides additional information about AEA’s projects and
programs.
Required Components of the Financial Report
Basic Financial
Statements
(audited)
Required and
Optional*
Supplementary
Information
Government‐wide
Financial Statements
(audited)
Fund Financial
Statements
(audited)
Notes to the
Financial
Statements
(audited)
Management's
Discussion and
Analysis
(unaudited)
Summary
Detail
*Optional Supplementary Information:
Schedule 1: Schedule of Bradley Lake Hydroelectric Project Trust Account Activities
(audited);
Schedule 2: Special Revenue Fund Schedule of Projects and Programs – Balance Sheet
(audited);
Schedule 3: Special Revenue Fund Schedule of Projects and Programs – Revenues, Expenses
and Changes in Fund Balance (audited);
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
6
Schedule 4: Business-Type Activities – Enterprise Fund – Schedule of Projects and Programs
– Statement of Net Position (audited);
Schedule 5: Business-Type Activities – Enterprise Fund – Schedule of Projects and Programs
– Revenues, Expenses, and Changes in Net Position (audited);
Schedule 6: Schedule of Capital Assets Presented under Federal Energy Regulatory
Commission (FERC) Requirements (unaudited);
Schedule 7: Bradley Lake Historical Annual Project Cost (unaudited)
Schedule 8: PCE Endowment Fund Historical Analysis (unaudited); and
Schedule 9: Supplementary Organization and Project Information (unaudited).
Government-Wide Financial Analysis
As noted earlier, net position may serve over time as a useful indicator of a government’s financial
position. In the case with AEA as a whole, assets and deferred outflows exceeded its liabilities and
deferred inflows by $438 million at June 30, 2020 and $443 million at June 30, 2019. In FY20, the
Renewable Energy Fund, Emerging Energy Technology Fund, and Trans Alaska Pipeline Liability
Fund had reduced project activity in which program funds net of liabilities were expended reducing
net asset balance overall.
Of the total net position at June 30, 2020, $323 million was invested in capital assets, net of related
debt, and $115 million was restricted. Of the total net position at June 30, 2019, $320.4 million was
invested in capital assets, net of related debt and $122.6 million was restricted. In both years, invested
in capital assets, net of related debt is related to the Bradley Lake Hydroelectric Project, Alaska
Intertie Project, and Susitna-Watana Hydroelectric Project. The remainder of net position is
considered restricted for debt service, or restricted due to agreements with external parties, and
legislation.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
7
Government-Wide Financial Analysis, continued
The following tables are provided to show AEA’s total assets, deferred outflows of resources, liabilities, deferred
inflows of resources, and net position at June 30, 2020 and 2019 (stated in thousands):
Governmental Activities Business-Type Activities
2020 2019 Variance 2020 2019 Variance
Assets:
Current and other
noncurrent assets $ 1,121,289 1,128,648 (7,359)
90,544 104,964 (14,420)
Capital assets - - - 388,046 375,972 12,074
Total assets 1,121,289 1,128,648 (7,359) 478,590 480,936 (2,346)
Deferred outflows of
Resources - - -
3 6 (3)
Total assets and
deferred outflows $ 1,121,289 1,128,648 (7,359)
478,593 480,942 (2,349)
Liabilities:
Current liabilities 1,081,398 1,078,009 3,389 27,734 23,670 4,064
Noncurrent liabilities - 2 (2) 52,584 64,879 (12,295)
Total liabilities $ 1,081,398 1,078,011 3,387
80,318 88,549 (8,231)
Net Position:
Net investment in
capital assets - - -
323,645 320,387 3,258
Restricted 39,891 50,637 (10,746) 74,630 72,006 2,624
Total net position 39,891 50,637 (10,746) 398,275 392,393 5,882
Total liabilities and
net position $ 1,121,289 1,128,648 (7,359)
478,593 480,942 (2,349)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
8
Government-Wide Financial Analysis, continued
Governmental Activities:
Current and other noncurrent assets
The following table is provided to show the details of AEA’s current and other noncurrent assets at June 30,
2020 and 2019:
Governmental Activities-Current and other noncurrent assets
(in thousands of dollars)
2020 2019 Variance
Restricted cash and cash equivalents $ 18,542 30,143 (11,601)
Restricted investments 1,100,867 1,096,193 4,674
Operating receivables 14 213 (199)
Due from Federal Government 1,304 2,197 (893)
Due from State of Alaska 356 156 200
Due (to) from other funds/internal balances 206 (254 ) 460
Current and other noncurrent assets $ 1,121,289 1,128,648 (7,359)
Current and other noncurrent assets in total are $7.4 million lower in the current fiscal year. Restricted cash
and cash equivalents held by AEA decreased $11.6 million related to advances from state appropriations,
which are drawn based on project need; therefore, these balances will fluctuate annually. Restricted
investments increased by $4.7 million, disbursements of $31.2 million to AEA for PCE payments and
expenses of $13.9 million recorded directly to the PCE Endowment Fund from appropriations to other
departments for operating expenses. These items net together to partially offset the total earnings. Operating
receivables decreased $198 thousand mainly due to a reduction of advances on Renewable Energy Grant
Fund grants. Amounts due from the federal government decreased $893 thousand related to timing of
reimbursement requests received from federal agencies on federal awards. Due from the State of Alaska
increased by $200 thousand related to advances from state appropriations which are drawn based on project
need; therefore, these balances will fluctuate annually. Due (to) from other funds/internal balances will
fluctuate annually depending on program activities and cash needs.
Total current and noncurrent liabilities increased in the current fiscal year by $3.4 million. The increase
is primarily a result of the reversal of the prior fiscal year Sweep entry in the current fiscal year, combined
with the Sweep entry into the CBR Fund on June 30, 2020. The PCE Endowment Fund became eligible for
the Sweep in FY19.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
9
Government-Wide Financial Analysis, continued
Governmental Activities, continued:
Net Position
The following table is provided to show the details of AEA’s net position at June 30, 2020 and 2019:
Governmental Activities-Net Position
(in thousands of dollars)
2020 2019 Variance
Restricted by agreements with external parties $ 1,182 1,173 9
Restricted by legislation 38,709 49,464 (10,755)
Net Position $ 39,891 50,637 (10,746)
Net position decreased by $10.7 million during the current fiscal year. Net position restricted by agreements
with external parties increased by $9 thousand compared to the June 30, 2019 balance. Net position restricted
by legislation decreased substantially due to the $1.06 billion sweep at June 30, 2020. AEA also returned
$6.2 million of REF advances to the investment fund managed by Treasury.
Business-Type Activities:
Current and other noncurrent assets
The following table is provided to show the details of AEA’s current and other noncurrent assets, excluding
capital assets and deferred outflows, at June 30, 2020 and 2019:
Business-Type Activities-Current and other noncurrent assets
(in thousands of dollars)
2020 2019 Variance
Restricted cash and cash equivalents $ 39,974 59,186 (19,212)
Restricted investments 21,502 19,110 2,392
Operating receivable 267 85 182
Prepaid expense 251 465 (214)
Loans receivable, net of allowance 27,032 24,742 2,290
Due from State of Alaska 1 - 1
Due from federal government 562 - 562
Accrued interest receivable 1,161 1,122 39
Due (to) from other funds/internal balances (206) 254 (460)
Current and other noncurrent assets $ 90,544 104,964 (14,420)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
10
Government-Wide Financial Analysis, continued
Business-Type Activities, continued:
Current and other noncurrent assets, continued
Current and other noncurrent assets decreased by $14.4 million in the current fiscal year. The decrease in
current and noncurrent assets is primarily due to a decrease in restricted cash and cash equivalents and
restricted investments. The cash decrease was substantially due to the disbursements from debt proceeds for
the construction of the West Fork Upper Battle Creek Diversion (Battle Creek) Project. Operating
receivables and prepaid expenses decreased by $32 thousand, which is related to a decrease in monthly
billing rates and amortization of prepaid expenses on the Alaska Intertie Project at the end of FY20. Loans
receivable (net of allowance) increased $2.2 million related to disbursements on Power Project Fund loans.
Due from the State of Alaska increased by $1 thousand related to advances from state appropriations which
are drawn based on project need; therefore, these balances will fluctuate annually. Due (to) from other
funds/internal balances will fluctuate annually depending on program activities and cash needs.
Deferred outflows of resources decreased in the current fiscal year by $3 thousand, due to the amortization
of costs relating to long-term debt.
Total current and noncurrent liabilities
The following table is provided to show the details of AEA’s total current and noncurrent liabilities at June
30, 2020 and 2019:
Business-Type Activities-Current and noncurrent liabilities
(in thousands of dollars)
2020 2019 Variance
Advances from the State of Alaska $ 385 644 (259)
Accounts payable 13,360 9,686 3,674
Bonds payable 63,684 74,709 (11,025)
Other bond liabilities 1,052 1,269 (217)
Accrued interest payable 1,474 1,744 (270)
Other liabilities 363 497 (134)
Current and noncurrent liabilities $ 80,318 88,549 (8,231)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
11
Government-Wide Financial Analysis, continued
Business-Type Activities, continued:
Total current and noncurrent liabilities, continued
Total current and noncurrent liabilities decreased in the current fiscal year by $8.8 million. Advances from
the State of Alaska decreased by $259 thousand related to advances from state appropriations, which are
drawn based on project need; therefore, these balances will fluctuate annually. Accounts payable increased
due to billings for the construction of Battle Creek Project. Bonds payable decreased $11.0 million related
to debt service principal payments on the Bradley Lake Hydroelectric Project bonds. Other bond liabilities
decreased $217 thousand related to amortization of bond original issue premium and increase in estimated
arbitrage liability. Accrued interest payable decreased by $270 thousand related to original Bradley Lake
debt. Other liabilities decreased $134 thousand related to the estimated repurchase liability to AIDEA for
the portion of the Power Project Fund loan portfolio, which AIDEA purchased from AEA in 2010.
Net position
The following table is provided to show the details of AEA’s net position at June 30, 2020 and 2019:
Business-Type Activities – Net Position
(in thousands of dollars)
2020 2019 Variance
Net investment in capital assets $ 323,645 320,387 3,258
Restricted for capital projects 866 670 196
Restricted for debt service 26,796 26,431 365
Restricted by agreements with external parties 5,703 3,657 2,046
Restricted by legislation 41,265 41,248 17
Net Position $ 398,275 392,393 5,882
Net position increased in the current fiscal year by $5.8 million. Net investment in capital assets increased
$3.3 million due to the net effect of capital asset additions and reduction of debt related to capital projects.
Restricted net position increased by $3.2 million, substantially due to net income provided by operating
activities.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
12
Government-Wide Financial Analysis, continued
The following table is provided to show AEA’s revenues, expenses, and changes in net position at June 30, 2020 and
2019 (stated in thousands):
Governmental Activities Business-Type Activities
2020 2019 Variance 2020 2019 Variance
Revenues:
Program revenues:
Fees, Fines, and
Charges for services $ - -
- 21,889 21,426
463
Operating grants and
contributions 13,184 24,529
(11,345) 898 215
683
Capital grants and
contributions - -
- - 1
(1)
General revenues:
Investment Income 49,406 75,312 (25,906) 2,005 2,696 (691)
Total revenues 62,590 99,841 (37,251) 24,792 24,338 454
Expenses:
Grants and projects 18,714 20,213 (1,499) - - -
Power cost equalization
grants 29,255 28,369
886 - -
-
State of Alaska
appropriations/transfers 21,288 1,097,628
(1,076,340) 66 67
(1)
General and
administrative 4,079 4,046
33 1,663 1,626
37
Interest expense - - - 827 1,746 (919)
Plant operations - - - 5,376 5,350 26
Depreciation - - - 10,917 10,862 55
Loss on disposal of asset - - - - - -
Provision for loan loss
(recovery) - -
- 61 169 (108)
Total expenses 73,336 1,150,256 (1,076,920) 18,910 19,820 (910)
Capital contributions - - - - - -
Transfers in (out) - - - - - -
Change in net position (10,746) (1,050,415 ) 1,039,669 5,882 4,518 1,364
Net position, beginning 50,637 1,101,052 (1,050,415) 392,393 387,875 4,518
Net position, ending $ 39,891 50,637 (10,746) 398,275 392,393 5,882
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
13
Government-Wide Financial Analysis, continued
Governmental Activities:
Total Revenues for governmental activities decreased by $37.2 million, based on the following:
Operating grants and contributions are from State of Alaska operating and capital appropriations
and Federal grant awards. Operating grants and contributions decreased by $11.3 million in the
current fiscal year as a result of reduced spending of State of Alaska appropriations for Rural Power
System Upgrade (RPSU) and Bulk Fuel Upgrade (BFU) projects, in accordance with generally
accepted accounting principles AEA recognizes revenue to the extent of expenditures; and
Investment income is primarily from interest earned in the PCE Endowment Fund and the
Renewable Energy Grant Fund, which are managed by the State Department of Revenue, Treasury
Division. Investment income was $19.3 million lower in the current fiscal year, due to market
fluctuations and a lower overall balance in the PCE Endowment Fund, partially due to appropriations
from the fund.
Expenses for governmental activities decreased by $1.07 billion, based on the following:
Grants and project expenses decreased by $1.5 million in the current fiscal year as a result of
reduced spending of State of Alaska appropriations for Rural Power System Upgrade (RPSU) and
Bulk Fuel Upgrade (BFU) projects; and
PCE grants increased by $886 thousand. This increase is due to an increased rate per kWh
reimbursed to some eligible rural electric utilities and also an increase in kWh reported from some
eligible rural electric utilities. The Regulatory Commission of Alaska (RCA) determines eligibility
and calculates the rate that the PCE program reimburses each eligible utility. The rate is based on
average cost of power in Anchorage, Fairbanks, and Juneau;
State of Alaska appropriations/transfers decreased by approximately $1.07 billion in FY20. This
is substantially the result of the FY20 sweep in the amount of $1.06 billion; and
General and administrative expenses increased by $32 thousand compared to the prior year.
Administrative costs shared between AIDEA and AEA for administrative support and the addition
of administering the Volkswagen Settlement program contributed to this increase.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
14
Government-Wide Financial Analysis, continued
Business-Type Activities:
Total Revenues for business-type activities increased by $456 thousand, based on the following:
Fees, Fines, and Charges for services increased by $465 thousand. Charges for services include
the amounts received from the utilities for plant operations and debt service obligations. These
services are provided under various agreements and are based on project expenditures, operating
cash requirements, and will fluctuate annually. The current year increase is a reflection of an
increase in maintenance projects performed in FY20 on the Alaska Intertie Project compared to the
prior year;
Operating grants and contributions are from State of Alaska operating and capital appropriations.
Operating grants and contributions increased by $683 thousand. The current year increase is a
reflection of the State funded portion of the approved maintenance project on the Alaska Intertie
Project;
Investment income decreased by $691 thousand due to decreased investment earnings on debt
proceeds issued related to the Battle Creek project. FY19 was the first full year of investment
earnings for the Battle Creek project, compared to only half a year when the debt proceeds began
earning interest during the year ended June 30, 2018.
Expenses for business-type activities decreased by $910 thousand, based on the following:
State of Alaska appropriation of funds and transfers for business-type activities decreased by
approximately $1 thousand in FY20. In FY20, the Rural Electrification Revolving Loan Fund
received final payments, which closed the remaining loans. The remaining bank balance at June 30,
2020 of $66 thousand was remitted to the State General Fund in FY21, per Statute, and the program
was closed;
General and administrative expenses increased by $37 thousand. The current year increase is a
result of increased general and administrative support incurred during the construction of the Battle
Creek Project;
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
15
Government-Wide Financial Analysis, continued
Business-Type Activities, continued
Interest expense represents the cost of interest on AEA’s Power Revenue Bonds for the Bradley
Lake Hydroelectric Project. Interest expense decreased in the current fiscal year by $919 thousand.
Outstanding bond balances of the Bradley Lake bonds relating to the original project decreased;
therefore, interest accrued on those balances also decreased. Interest expense on the Battle Creek
Diversion bonds is offset by federal subsidies causing interest expense to be minimal. The Battle
Creek Diversion bonds qualified for two federal interest subsidy programs. In addition, consistent
with generally accepted accounting principles, AEA capitalizes a portion of interest related to the
construction of the Battle Creek Project;
Plant operations for the Bradley Lake Hydroelectric project and the Alaska Intertie project
increased in the current fiscal year by $26 thousand. Plant operations consist of various activities
required to maintain operations of each project;
Depreciation expense increased in the current fiscal year by $55 thousand. In FY20, AEA had no
deletions in capital assets and had $23.0 million in additions. The increase to additions increases the
amount of depreciation for the fiscal year; and
Provision for loan loss (recovery) decreased by $106 thousand from the prior fiscal year. During
FY20, AEA received final payments on the remaining loans related to the Rural Electrification
Revolving Loan fund, which resulted in a reduced amount in the loan loss calculation, as this
calculation only included loans from the Power Project fund.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
16
Fund Financial Analysis
Fund Balances
Governmental Fund:
The focus of AEA’s governmental fund is to provide information on near-term inflows, outflows, and
balances of spendable resources. Such information is useful in assessing AEA’s financing requirements.
The following table is provided to show AEA’s total fund balances for the governmental funds at June 30,
2020 and 2019:
Governmental Fund – Fund Balances
(in thousands of dollars)
2020 2019 Variance
Power Cost Equalization Program $ 13,005 17,258 (4,253)
Renewable Energy Grant Fund 24,583 31,076 (6,493)
Emerging Energy Technology Fund 1,109 1,129 (20)
Trans-Alaska Pipeline Liability Fund 1,182 1,173 9
Rural Energy Projects 12 1 11
Total Fund Balances $ 39,891 50,637 (10,746)
At the end of the current fiscal year, AEA’s governmental funds reported combined ending fund balances of
$39.9 million, which is a decrease of $10.7 million in comparison with the prior fiscal year. The decrease
can be seen across all funds included in the Governmental Funds balance. The Renewable Energy Fund
decreased by $6.2 million as a result of AEA disbursements for the Renewable Energy Fund. The Power
Cost Equalization Program reduced by $4.3 million as a result of a reduction in community grant payments.
The Emerging Energy Technology Fund reduced by $20 thousand as a result of reduced project activity in
FY20.
The combined ending fund balance is categorized as restricted to indicate that there is an externally
enforceable limitation to its use. Specifically, the fund balance is entirely restricted by agreements with
external parties or by legislation.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
17
Fund Financial Analysis, continued
Fund Balances, continued
Proprietary Fund:
AEA’s proprietary fund financial statements consist of enterprise funds, which provide detailed information
of the same type found in the business-type activities section of the government-wide financial statements.
The following table is provided to show AEA’s total net position for the proprietary fund at June 30, 2020
and 2019:
Proprietary Fund – Net Position
(in thousands of dollars)
2020 2019 Variance
Bradley Lake Hydroelectric Project $ 154,772 145,818 8,954
Alaska Intertie Project 18,556 21,645 (3,089)
Susitna-Watana Hydroelectric Project 183,682 183,682 -
Power Project Fund 39,271 39,190 81
Rural Electrification Revolving Loan Fund - 64 (64)
Power Development and Railbelt Energy Projects 1,994 1,994 -
Total Net Position $ 398,275 392,393 5,882
At the end of the current fiscal year, AEA’s proprietary fund reported combined ending net position of $398.3
million, which is an increase of $5.8 million in comparison with the prior fiscal year. The increase of $8.9
million for the Bradley Lake Hydroelectric Project was due to operating revenues greater than operating
expenses by $7.7 million related to revenue collected for debt service payments, the additional increase is
related to $1.8 million in investment earnings. The decrease of $3.1 million for the Alaska Intertie Project
was due to operating revenues less than operating expenses as a result of depreciation expense. The Power
Project Fund increased by $81 thousand due to the addition of new loans. The Rural Electrification Revolving
Loan Fund decreased by $64 thousand due to the final payments and subsequent closure of the remaining
loans in this fund.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
18
Fund Financial Analysis, continued
Fund Balances, continued
Proprietary Fund, continued:
The following table is provided to show the proprietary fund net position by category at June 30, 2020 and
2019:
Proprietary Fund – Net Position Categories
(in thousands of dollars)
2020 2019
Variance
Net investment in capital assets $ 323,645 320,387 3,258
Restricted for capital projects 866 670 196
Restricted for debt service 26,796 26,431 365
Restricted by agreements with external parties 5,703 3,657 2,046
Restricted by legislation 41,265 41,248 17
Total Net Position $ 398,275 392,393 5,882
Net investment in capital assets increased by $3.3 million, which is the net effect of capital asset additions
and retirements and reduction of debt related to capital projects. Restricted net position increased by $2.6
million, substantially due to net income provided by operating activities.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
19
Capital Assets and Debt Administration
Capital Assets:
AEA’s investment in capital assets for its business-type activities as of June 30, 2020 amounts to $388
million (net of accumulated depreciation), which is an increase of $12.1 million from the prior fiscal year.
The investment in capital assets only occurs in the enterprise funds and includes land and rights of way,
infrastructure, equipment, and construction in progress.
Capital Assets
(net of depreciation, in thousands of dollars)
Business-Type Activities
2020 2019 Variance
Land and Rights of Way $ 11,212 11,212 -
Infrastructure 140,575 150,324 (9,749)
Equipment 1,092 962 130
Construction in Progress 235,167 213,474 21,693
Total $ 388,046 375,972 12,074
Capital assets, net of accumulated depreciation increased by $12.1 million. The increase is a result of $22.9
million in capital asset additions, which is offset by $10.9 million in depreciation expense. Included in the
capital asset additions is $21.7 million of additions for the construction of the Battle Creek Project.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
20
Capital Assets and Debt Administration, continued
Capital Assets, continued:
Capital Asset Additions
(in thousands of dollars)
Bradley Battle Creek Diversion $ 21,664
Bradley Lake Halon fire system upgrade 41
Bradley Lake generator repair and replacement 371
Bradley Lake air gap monitoring system upgrade 42
Bradley Lake fish water valve actuators 3
Bradley Lake tools and equipment 132
Bradley Lake transportation equipment (one vehicle) 41
Bradley Lake UPS replacement 66
Alaska Intertie Douglas substation upgrade 632
Total Capital Asset Additions $ 22,992
Major additions to capital assets during the current fiscal year include construction on the Battle Creek
Project. The reduction in infrastructure is a reflection of current year depreciation. The increase in equipment
is due to the purchase of forklift and truck for the Bradley Lake Hydroelectric project.
Long-Term Debt:
At the end of the current fiscal year, AEA had total long-term debt outstanding of $63.7 million. AEA’s
total long-term debt decreased by $11 million during the current fiscal year as a result of scheduled debt
service payments reducing the principal balance.
Outstanding Debt
(in thousands of dollars)
Business-Type Activities
2020 2019 Variance
Power Revenue and refunding Bonds:
Bradley Lake $ 22,445 33,470 (11,025)
Bradley Lake-Battle Creek private placement 41,239 41,239 -
Total $ 63,684 74,709 (11,025)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2020
21
Outlook
Operations and maintenance of AEA’s Bradley Lake Hydroelectric Project and Alaska Intertie Project will
continue as approved by the Bradley Lake Project Management Committee and Alaska Intertie Committee,
respectively. The construction on the West Fork Upper Battle Creek Diversion Project is anticipated to be
completed in FY21. The purchase of the SQ Line was approved and will be completed in FY21. This provide
additional assets for the Bradley Lake Hydroelectric Project.
Various RPSU and BFU projects are anticipated to continue through FY21 with continued federal and state
funding. AEA and the Denali Commission are leveraging the use of available funding by shifting project
focus to more maintenance and improvement projects. AEA will continue Bulk Fuel and Power Plant
Operator training, Circuit Rider, Technical Assistance, and Electrical Emergency efforts across Alaska.
AEA continues to manage the Renewable Energy Grant Fund (REF) active projects. In FY20, approximately
20% of the remaining REF projects were completed, including several construction projects. AEA began
soliciting applications for the Renewable Energy Fund grant program in FY21.
Alaska is a beneficiary of $8.125 million from the federal Volkswagen Settlement. AEA developed a
Beneficiary Mitigation Plan through a public process that describes how the state proposes to distribute the
funds amongst the eligible mitigation actions defined in the settlement. In FY21, projects include school bus
replacement; public transit bus replacement; electric vehicle charging infrastructure, replacement of diesel
engines used for prime power, and commercial marine vessel upgrade.
In FY19, AEA was awarded a grant from the Wells Fargo Foundation for $1 million for outdoor lighting
retrofits that will be granted to eligible applicants through the Village Energy Efficiency Program. AEA
anticipates making about 50 awards through this program, continuing in FY21. Furthermore, AEA also
received additional funding from the Denali Commission in FY21 to continue these projects.
Management is actively monitoring the global pandemic (COVID-19) and assessing its effect on the
Authority’s financial condition, liquidity, operations, and workforce. Given the daily evolution of the
COVID-19 outbreak and the global response to curb its spread, management is not able to estimate the effects
of the outbreak for FY21 or future periods.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statement of Net Position
June 30, 2020
(stated in thousands)
Governmental Business-Type
Assets and Deferred Outflows of Resources Activities Activities Total
Current assets:
Restricted cash and cash equivalents (note 3) $ 18,542 $ 39,974 $ 58,516
Restricted investments (note 3) 1,062,521 — 1,062,521
Operating receivable 14 267 281
Prepaid expense — 251 251
Due from Federal Government 1,304 562 1,866
Loans receivable, net of allowance (note 8) — 554 554
Due from State of Alaska 344 1 345
Due from component units 12 — 12
Accrued interest receivable — 1,161 1,161
Due (to) from other funds/internal balances 206 (206) —
Total Current Assets 1,082,943 42,564 1,125,507
Noncurrent assets:
Restricted investments (note 3) 38,346 21,502 59,848
Loans receivable, net of allowance (note 8) — 26,478 26,478
Capital assets, net of accumulated depreciation (note 4) — 388,046 388,046
Total Noncurrent Assets 38,346 436,026 474,372
Deferred outflows of resources:
Deferred charge on bond refundings — 3 3
Total Assets and Deferred Outflows of Resources $ 1,121,289 $ 478,593 $ 1,599,882
Liabilities and Net Position
Current liabilities:
Due to State of Alaska (note 6) $ 1,065,346 $ 361 $ 1,065,707
Due to component units 84 24 108
Due to Federal Government — 217 217
Accounts payable 15,968 13,143 29,111
Bonds payable – current portion (note 7) — 11,575 11,575
Other bond liabilities – current portion (note 7) — 940 940
Accrued interest payable — 1,474 1,474
Total Current Liabilities 1,081,398 27,734 1,109,132
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 7) — 52,109 52,109
Other bond liabilities – noncurrent portion (note 7) — 112 112
Other liabilities — 363 363
Total Noncurrent Liabilities — 52,584 52,584
Total Liabilities 1,081,398 80,318 1,161,716
Net Position:
Net investment in capital assets — 323,645 323,645
Restricted for capital projects — 866 866
Restricted for debt service — 26,796 26,796
Restricted by agreements with external parties 1,182 5,703 6,885
Restricted by legislation 38,709 41,265 79,974
Total Net Position 39,891 398,275 438,166
Total Liabilities and Net Position $ 1,121,289 $ 478,593 $ 1,599,882
Commitments and contingencies (note 12)
See accompanying notes to basic financial statements.
22
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statement of Activities
Year ended June 30, 2020
(stated in thousands)
Fees,
Fines, Operating Capital
and Grants Grants
Charges and and Govern- Business-
for Contri- Contri- mental Type
Activities Expenses Services butions butions Activities Activities
Total
Governmental:
Power Cost Equalization Program $ 51,467 $ — $ — $ — $ (51,467) $ — $ (51,467)
Renewable Energy Grant Fund 5,151 — — — (5,151) — (5,151)
Emerging Energy Technology Fund 47 — 27 — (20) — (20)
Trans Alaska Pipeline Liability Fund 6 — — — (6) — (6)
Rural Energy Projects 15,980 — 12,472 — (3,508) — (3,508)
Volkswagen Diesel Settlement Fund 685 — 685 — — — —
Total Governmental Activities 73,336 — 13,184 — (60,152) — (60,152)
Business-type:
Bradley Lake Hydroelectric Project 13,377 20,518 — — — 7,141 7,141
Alaska Intertie Project 4,949 946 898 — — (3,105) (3,105)
Power Project Fund 519 424 — — — (95) (95)
Rural Electrification Revolving Loan Fund 65 1 — — — (64) (64)
Total Business-Type Activities 18,910 21,889 898 — — 3,877 3,877
Total Activities $ 92,246 $ 21,889 $ 14,082 $ — $ (60,152) $ 3,877 $ (56,275)
General Revenues
Interest and investment income 49,406 2,005 51,411
Total General Revenues 49,406 2,005 51,411
Change in Net Position (10,746) 5,882 (4,864)
Net Position - Beginning 50,637 392,393 443,030
Net Position - Ending $ 39,891 $ 398,275 $ 438,166
See accompanying notes to basic financial statements.
Net (Expense) Revenue and
Program Revenues Changes in Net Position
23
Major
Special Statement of
Revenue Net Position
Fund Total
Current assets:
Restricted cash and cash equivalents (note 3) $ 18,542 $ 18,542
Restricted investments (note 3) 1,062,521 1,062,521
Operating receivable 14 14
Due from Federal Government 1,304 1,304
Due from State of Alaska 344 344
Due from component units 12 12
Due (to) from other funds/internal balances 206 206
Total current assets 1,082,943 1,082,943
Noncurrent assets:
Restricted investments (note 3) 38,346 38,346
Total assets $ 1,121,289 $ 1,121,289
Current liabilities:
Due to State of Alaska (note 6) $ 1,065,346 $ 1,065,346
Due to component units 84 84
Accounts payable 15,968 15,968
Total current liabilities 1,081,398 1,081,398
Noncurrent liabilities:
Other noncurrent liabilities — —
Total noncurrent liabilities — —
Total liabilities 1,081,398 1,081,398
Fund balance:
Restricted by agreements with external parties 1,182
Restricted by legislation 38,709
Total fund balance 39,891
Total liabilities and fund balance $ 1,121,289
Net Position:
Restricted by agreements with external parties 1,182
Restricted by legislation 38,709
Total net position 39,891
Total liabilities and net position $ 1,121,289
Commitments and contingencies (note 12)
See accompanying notes to basic financial statements.
Liabilities and Fund Balance/Net Position
Assets
(stated in thousands)
(A Component Unit of the State of Alaska)
ALASKA ENERGY AUTHORITY
Governmental Fund
Balance Sheet/Statement of Net Position - Governmental Activities
June 30, 2020
24
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Governmental Fund
Statement of Revenues, Expenditures, and Changes in
Fund Balance/Statement of Activities - Governmental Activities
Year ended June 30, 2020
(stated in thousands)
Major
Special
Revenue Statement of
Fund Activities
Operating Revenues:
State of Alaska appropriations $ 3,821 $ 3,821
Federal grants 7,845 7,845
Other revenues 1,518 1,518
Total operating revenues 13,184 13,184
Operating Expenditures/Expenses:
Grants and projects 18,714 18,714
Power cost equalization grants 29,255 29,255
State of Alaska appropriations and transfers — 21,288
General and administrative 4,079 4,079
Total operating expenditures/expenses 52,048 73,336
Nonoperating revenues (expenses) and other:
Investment income, net 49,406 49,406
State of Alaska appropriations and transfers (21,288) —
Total nonoperating revenue (expense) and other 28,118 49,406
Net change in fund balance (10,746)
Change in net position (10,746)
Fund balance/Net position – beginning 50,637 50,637
Fund balance/Net position – ending $ 39,891 $ 39,891
See accompanying notes to basic financial statements.
25
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Net Position
June 30, 2020
(stated in thousands)
Assets and Deferred Outflows of Resources
Current assets:
Restricted cash and cash equivalents (note 3)$ 39,974
Operating receivable 267
Prepaid expense 251
Loans receivable, net of allowance (note 8)554
Due from Federal Government 562
Accrued interest receivable 1,161
Due from the State of Alaska 1
Due (to) from other funds/internal balances (206)
Total Current Assets 42,564
Noncurrent assets:
Restricted investments (note 3)21,502
Loans receivable, net of allowance (note 8)26,478
Capital assets, net of accumulated depreciation (note 4)388,046
Total Noncurrent Assets 436,026
Deferred outflows of resources:
Deferred charge on bond refundings 3
Total Assets and Deferred Outflows of Resources $ 478,593
Liabilities and Net Position
Current liabilities:
Due to State of Alaska $ 361
Due to component units 24
Due to Federal Government 217
Accounts payable 13,143
Bonds payable – current portion (note 7)11,575
Other bond liabilities – current portion (note 7)940
Accrued interest payable 1,474
Total Current Liabilities 27,734
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 7)52,109
Other bond liabilities – noncurrent portion (note 7)112
Other liabilities 363
Total Noncurrent Liabilities 52,584
Total Liabilities 80,318
Net position:
Net investment in capital assets 323,645
Restricted for capital projects 866
Restricted for debt service 26,796
Restricted by agreements with external parties 5,703
Restricted by legislation 41,265
Total Net Position 398,275
Total Liabilities and Net Position $ 478,593
Commitments and contingencies (note 12)
See accompanying notes to basic financial statements.
26
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Revenues, Expenses, and Changes in Net Position
Year ended June 30, 2020
(stated in thousands)
Operating revenues:
State of Alaska appropriations $ 898
Revenue from operating plants 21,361
Interest on loans 362
Other revenues 166
Total Operating Revenues 22,787
Operating expenses:
Depreciation (note 4) 10,917
General and administrative 1,663
Interest expense 827
Plant operations 5,376
Provision for loan loss (note 8) 61
Total Operating Expenses 18,844
Operating Income 3,943
Nonoperating revenues (expenses) and other:
Investment income, net 2,005
State of Alaska reappropriations and transfers (66)
Total Nonoperating Revenues (Expenses) and Other 1,939
Increase in Net Position 5,882
Net Position – Beginning 392,393
Net Position – Ending $ 398,275
See accompanying notes to basic financial statements.
27
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Cash Flows
Year ended June 30, 2020
(stated in thousands)
Cash flows from operating activities:
Receipts from customers and users $ 22,230
Payments from State of Alaska 898
Payments to suppliers (5,572)
Net cash provided by operating activities 17,556
Cash flows from noncapital and related financing activities:
Net decrease in short-term borrowings from AIDEA for working capital (65)
Cash flows from capital and related financing activities:
Principal paid on bonds (11,025)
Payments for other liabilities (217)
Interest paid on bonds (2,660)
Investment in capital assets (19,977)
State of Alaska reappropriations and transfers (66)
Net cash used by capital and related financing activities (33,945)
Cash flows from investing activities:
Purchase of investments (14,588)
Proceeds from sales and maturities of investments 12,177
Interest received from investments 2,005
Principal collected on loans 441
Loans originated (2,793)
Net cash used for investing activities (2,758)
Net decrease in cash and cash equivalents (19,212)
Cash and cash equivalents at beginning of year 59,186
Cash and cash equivalents at end of year $ 39,974
Reconciliation of operating income to net cash provided by operating activities:
Operating income $ 3,943
Adjustments to reconcile operating income to net cash provided by operating activities:
Depreciation 10,917
Amortization of bond deferred charges 3
Provision for loan loss 61
Bond interest expense 824
Changes in assets and liabilities that provided (used) cash:
Decrease in operating receivables (182)
Increase in due to from other funds 460
Decrease in accrued interest receivable (39)
Decrease in prepaid assets 214
Decrease in due to from State of Alaska (284)
Increase in due to from component units 24
Increase in due to from Federal Government 217
Increase in operating accounts payable 1,398
Net cash provided by operating activities $ 17,556
Noncash capital and related financing and investing activities:
Change in ending balance of capital assets accounts payable $ 2,124
See accompanying notes to basic financial statements.
28
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
29
(1) Organization and Operations
The Alaska Energy Authority (AEA or Authority) was created by the Alaska State Legislature in 1976. AEA
is a public corporation of the State of Alaska (State) within the Department of Commerce, Community, and
Economic Development with separate and independent legal existence. AEA has its own self-balancing set
of financial statements independently audited separate from the State. For financial reporting, AEA is a
component unit of the State. AEA finances various energy infrastructure projects and energy programs to
reduce the cost of energy throughout the State. AEA receives funding from the State, federal grants, and
utility companies for use of AEA owned assets.
Pursuant to legislation enacted in 1993, the Members of the Board of the Alaska Industrial Development and
Export Authority (AIDEA) also serve as the Board of Directors of AEA. AIDEA provides personnel services
for AEA (per statute, AEA has no employees) and has a Board approved borrowing agreement to provide
short-term working capital funds to AEA. AIDEA and AEA have separate executive directors, both are
employees of AIDEA. There is no commingling of funds, assets, or liabilities between AIDEA and AEA
and there is no responsibility of one for the debts or the obligations of the other. Neither AIDEA’s accounts
nor activities are included in the accompanying financial statements.
The following is a description of AEA’s existing owned projects and programs:
(a) Bradley Lake Hydroelectric Project
The project has 120 megawatts of installed capacity and transmits its power to the State’s main power
grid via two parallel 20–mile transmission lines. The project, which cost in excess of $300 million,
went into commercial operation in 1991. The Bradley Lake Project Management Committee (BPMC)
oversees the activities of the Bradley Lake Hydroelectric Project. The BPMC consists of
representatives from the following utilities and AEA: Golden Valley Electric Association (GVEA) ,
Chugach Electric Association (CEA), Matanuska Electric Association (MEA), Homer Electric
Association (HEA), the City of Seward, and the Municipality of Anchorage, d/b/a Municipal Light
and Power (ML&P). The project is now operated by Homer Electric Association under contract with
AEA. Bradley Lake serves Alaska’s Railbelt (the power-sharing area between Interior Alaska and
South Central Alaska, connected by roads, generating facilities, and transmission lines) from the Kenai
Peninsula to Fairbanks, as well as the Delta Junction area. The BPMC utilities pay AEA for the costs
of operations and maintenance of the Bradley Lake Hydroelectric Project.
In September 2016 the Authority received an amendment to the Federal Energy Regulatory
Commission (FERC) license for a diversion of West Fork Upper Battle Creek into Bradley Lake. The
diversion will increase the Bradley Lake projects annual energy by approximately 37,000 megawatt
hours (MWh). Construction began in 2018 and was completed in August 2020.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
30
(b) Alaska Intertie Project
The Alaska Intertie is a 170–mile transmission line designed for 345 kilovolts and operating at 138
kilovolts. It runs between Willow and Healy and interconnects the electric utilities in the Southcentral
region with Fairbanks area electric utilities. The Intertie Management Committee (IMC) and AEA
manage the Alaska Intertie according to the terms and conditions of the Alaska Intertie Agreement.
AEA contracts with the following utilities for operations and maintenance: GVEA in Fairbanks, and
Southcentral Alaska utilities, CEA, MEA, and ML&P (Participating Utilities). The Intertie reduces the
number of black/brownouts throughout the system by enabling power to move either north or south
when major system disturbances occur. The Intertie enables GVEA to purchase low cost power from
Southcentral utilities and allows Southcentral Alaska utilities to purchase power from Fairbanks during
power shortages. It also enables GVEA to receive power generated by the Bradley Lake Project, which
is some of the lowest priced power in the Railbelt region.
(c) Susitna-Watana Hydroelectric Project
The Alaska Legislature appropriated $192 million in funding to AEA towards the development of a
large hydroelectric project to be built in the Railbelt Region. The proposed project would be located
approximately half-way between Anchorage and Fairbanks on the upper Susitna River and would
include a single dam that would produce 2,800,000 MWh annually, equivalent to approximately 50%
of the Railbelt’s annual electrical use.
AEA pursued a FERC license. Pursuant to Administrative Order No. 271, AEA advanced the licensing
process through FERC’s issuance of an updated Study Plan Determination on the environmental
studies completed between 2013 and 2015. The engineering feasibility study and economic analysis
have been completed; FERC’s updated Determination on the environmental work completed thus far
was favorable to the State. The licensing effort is currently in abeyance. On February 21, 2019,
Governor Michael Dunleavy issued Administrative Order (AO) No. 309 which rescinded several AOs,
including AO No. 271. However, AEA has not been directed to re-initiate the licensing process.
(d) Rural Energy Programs
The rural energy programs include Bulk Fuel Storage Upgrades, Rural Power System Upgrades, the
Power Cost Equalization (PCE) Grant Program, Utility Training, Technical Assistance, one active loan
program (the Power Project Fund), and one inactive loan program (Rural Electrification Revolving
Loan Fund). Subject to appropriations, the PCE Endowment Fund provides the PCE grant program a
long-term stable financing source in order to reduce electricity costs for residential and community
facility customers in otherwise high-cost service areas.
(e) Energy Development Programs
The energy development programs include the Renewable Energy Grant Fund and Recommendation
Program, Alternative Energy and Energy Efficiency (AEEE) programs, and the Emerging Energy
Technology Fund (EETF) grant program.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
31
The purpose of the Renewable Energy Grant Fund and Recommendation program is to finance
renewable energy projects in Alaska. The AEEE programs support the development of alternative
energy resources specific to Alaska. The purpose of the EETF grant program is to promote and provide
financial assistance to applicants to test, conserve, and improve emerging energy technologies.
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting
As a component unit of the State, and for the purpose of preparing financial statements in accordance
with U.S. Generally Accepted Accounting Principles (GAAP), the Authority, as a public corporation
of the State with separate and independent legal existence, is subject to the accounting requirements
as set forth by the Governmental Accounting Standards Board (GASB).
The funds of the Authority are organized as Governmental Fund and Proprietary Fund. The financial
activities of the Authority are recorded in various funds as necessitated by sound fiscal management.
The funds are combined for financial statement purposes.
(b) Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of
activities) report information on all of the activities of the Authority. In general, the effect of inter-
fund activity has been removed from these statements to minimize the double-counting of internal
activities. Governmental activities, which normally are supported by intergovernmental revenues, are
reported separately from business-type activities, which rely primarily on fees and charges to external
parties.
The statement of activities demonstrates the degree to which the direct expenses of a given function
or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with
a specific function or segment. Program revenues include 1) fees, fines and charges to customers or
applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a
given function or segment and 2) grants and contributions that are restricted to meeting the operational
or capital requirements of a particular function or segment. Other items not properly included among
program revenues are reported instead as general revenues. Investment earnings are general revenues.
Separate financial statements are provided for the special revenue fund and enterprise fund.
(c) Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide and proprietary fund financial statements are reported using the economic
resources measurement focus and the full accrual basis of accounting. Revenues are recorded when
earned and expenses are recorded when a liability is incurred, regardless of the timing of the related
cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements
imposed by the provider have been met.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
32
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as
they are both measurable and available. Revenues are considered to be available when they are
collectible within the current period or soon enough thereafter to pay liabilities of the current period.
For this purpose, the Authority considers all revenues, except reimbursement grants, to be available if
they are collected within 60 days after year end. Reimbursement grants are considered available if they
are collected within one year of the end of the current fiscal period. Expenditures generally are
recorded when a liability is incurred, as under full accrual accounting. However, debt service
expenditures are recorded only to the extent they have matured.
(d) The Authority reports the following major funds:
Major governmental funds:
AEA uses a special revenue fund to account for its governmental activities. This fund does not have
a legally adopted budget, and hence the budget to actual is not presented in the financial statements.
Major proprietary funds:
The enterprise fund accounts for all financial activities primarily related to fees and charges to external
parties.
(e) Revenue Recognition
AEA does not have a General Fund since all funds are legally restricted with specific purposes by external
agreements, legislation or statute. As a general rule, the effect of inter-fund activity has been eliminated
from the government-wide financial statements.
Amounts reported as program revenues include 1) fees, fines, and charges to customers or applicants for
goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and
contributions. Internally dedicated resources are reported as general revenues rather than as program
revenues.
For purposes of proprietary fund presentation, the Authority considers its revenues and expenses, except
investment income, the sale of program loans, certain fund transfers and appropriations with the State, and
conveyance of capital assets, to be part of its principal ongoing operations and, therefore, classifies these
revenues and expenses as operating in the statement of revenues, expenses, and changes in net position.
(f) Fair Value Measurement and Application
Securities or other assets are reported and measured at fair value if (a) we hold it primarily for the
purpose of income or profit and (b) it has a present service capacity based solely on its ability to
generate cash or be sold to generate cash.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
33
(g) Cash and Cash Equivalents
All of AEA’s cash and cash equivalents are restricted or designated as to use. AEA has trust accounts
defined by bond resolutions, agreements with external parties, and state legislation restricting the use
of cash and investments.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash, short-term
commercial paper, and money market funds.
(h) Investments
Marketable securities are reported at fair value in the financial statements. Unrealized gains and losses
are reported as components of the change in net position. Fair values are obtained from independent
sources. Investments are segregated between current and noncurrent based on stated maturity and
intended use. Investments maturing within a year are classified as current if they are considered to be
potentially needed for current operations. This classification recognizes that a portion of our
investment portfolio may be needed for current operations. A noncurrent investment may be sold for
operational cash flow needs, if needed, and is beneficial under current market conditions.
(i) Loans and Related Interest Income
Loans are generally carried at amounts advanced less principal payments collected. Interest income is
accrued as earned. Accrual of interest is discontinued whenever the payment of interest or principal is
more than ninety days past due or when the loan terms are restructured. The Authority considers
lending activities to be part of its principal operations and classifies it as operating in the statement of
revenues, expenses, and changes in net position. For purposes of the statement of cash flows, the loan
program activities are treated as investing activities.
(j) Allowance for Loan Losses
The allowance for loan losses represents management’s judgment as to the amount required to absorb
probable losses in the loan portfolio. The factors used by management to determine the allowance
required include payment history, individual loan size, collateral values, and other factors.
Management’s opinion is that the allowance is currently adequate to absorb known losses and inherent
risks in the portfolio.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
34
(k) Capital Assets
Capital assets are stated at cost and depreciation is charged to operations by use of the straight-line
method over their estimated useful lives.
The estimated economic lives of the assets are as follows:
Utility plant Life in years
Intangible 30–50
Production 30–50
Transmission 20–40
General 5–30
AEA recognizes intangible assets per the guidance of GASB Statement No. 51, Accounting and
Financial Reporting for Intangible Assets. Intangible assets are assets which are nonfinancial in nature,
lack physical substance, are identifiable and have a useful life extending beyond a single reporting
period. Costs associated with the generation of internally generated intangible assets are capitalized
when incurred after the following milestones have been met:
Determination of the specific objective of the project and the nature of the service capacity that is
expected to be provided by the intangible asset upon the completion of the project
Demonstration of the technical or technological feasibility for completing the project so that the
intangible asset will provide its expected service capacity
Demonstration of the current intention, ability, and presence of effort to complete or, in the case
of a multiyear project, continue development of the intangible asset
The Authority recognizes impairment losses for long-lived assets whenever there is a significant
unexpected decline in service utility.
Interest on short-term and long-term borrowing for construction projects are capitalized during the
construction phase of the projects.
(l) Fund Balance
In the fund financial statements, the Special Revenue Fund reports aggregate amounts for five
classifications of fund balances based on the constraints imposed on the use of these resources. The
nonspendable fund balance classification includes amounts that cannot be spent because they are either
(a) not in spendable form—prepaid items or inventories; or (b) legally or contractually required to be
maintained intact. The spendable portion of the fund balance comprises the remaining four
classifications: restricted, committed, assigned, and unassigned.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
35
Restricted fund balance – this classification reflects the constraints imposed on resources either (a)
externally by creditors, grantors, contributors, laws, or regulations of other governments; or (b)
imposed by law through constitutional provisions or enabling legislation.
All of the Authority’s fund balance is restricted.
(m) Net Position
Net position is displayed in three components, as follows:
Net investment in capital assets – This consists of capital assets, net of accumulated depreciation, less
the outstanding balances of any bonds, mortgages, notes, and accounts payable or other borrowings
that are attributable to the acquisition, construction, or improvement of those assets.
Restricted – this consists of net assets that are legally restricted by outside parties. Those restrictions
come in the form of legislation or State statute that cannot be modified by AEA’s board of directors.
Unrestricted – This consists of net assets that do not meet the definition of “restricted” or “net
investment in capital assets.”
The Authority’s spending policy is to evaluate, on a case by case basis, whether restricted or
unrestricted net position should be spent. This evaluation is performed by management as part of the
overall spending plan.
(n) Environmental Issues
The Authority’s policy relating to environmental issues, including pollution and contamination
remediation obligations to address the current or potential detrimental effects of existing pollution by
participating in pollution remediation activities such as site assessments and cleanups, is to record a
liability when the likelihood of Authority responsibility for clean-up is probable and the costs are
reasonably estimable.
(o) Income Taxes
The Internal Revenue Code provides that gross income for tax purposes does not include income
accruing to a state or territory or any political subdivision thereof which is derived from the exercise
of any essential governmental function or from any public utility. AEA is a public corporation of the
State performing an essential governmental function and is therefore exempt from State and federal
income taxes.
(p) Appropriations and Grants
The Authority recognizes appropriations and grant revenue when all applicable eligibility
requirements, including time requirements, are met.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
36
(q) Estimates
In preparing the financial statements, management of the Authority is required to make estimates and
assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities,
deferred inflows of resources and disclosures of contingencies as of the date of the Statements of Net
Position. These estimates impact revenue and expenses for the period. Actual results could differ from
those estimates.
(r) Deferred Outflows of Resources
In addition to assets, the statements of net position reports a separate section for deferred outflows of
resources. This separate financial statement element, deferred outflows of resources, represents a
consumption of net position that applies to a future period(s) and so will not be recognized as an
outflow of resources (expense) until then. AEA only has one item that qualifies for reporting in this
category. It is the deferred charge on debt refunding reported in the Statement of Net Position. A
deferred charge on debt refunding results from the difference in the carrying value of refunded debt
and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the
refunded or refunding debt.
(s) Recently Issued Accounting Pronouncements
GASB Statement No. 84, Fiduciary activities (Statement 84) was issued by the GASB in January 2017.
The objective of Statement 84 is to improve guidance regarding the identification of fiduciary activities
for accounting and financial reporting purposes and how those activities should be recorded. This
Statement establishes criteria for identifying fiduciary activities of all state and local governments. The
focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary
activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are
included to identify fiduciary component units and postemployment benefit arrangements that are
fiduciary activities. The provisions of this Statement are required to be implemented for the reporting
periods beginning after December 15, 2018. The Authority has not implemented Statement 84 and will
evaluate the impact on future financial statements.
GASB Statement No. 87, Leases (Statement 87) was issued by GASB in June 2017. The objective of
Statement 87 is to better meet the information needs of financial statement users by improving
accounting and financial reporting for leases by governments. This Statement increases the usefulness
of governments’ financial statements by requiring recognition of certain lease assets and liabilities for
leases that previously were classified as operating leases and recognized as inflows of resources or
outflows of resources based on the payment provisions of the contract. It establishes a single model
for lease accounting based on the foundational principle that leases are financings of the right to use
an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an
intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred
inflow of resources, thereby enhancing the relevance and consistency of information about
governments’ leasing activities. The provisions of this Statement are required to be implemented for
the reporting periods beginning after December 15, 2019. We have not implemented Statement 87 and
are currently evaluating the impact on future financial statements.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
37
GASB Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction
Period (Statement 89) was released in June of 2018. The objectives of this Statement are (1) to
enhance the relevance and comparability of information about capital assets and the cost of borrowing
for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a
construction period. This Statement establishes accounting requirements for interest cost incurred
before the end of a construction period. Such interest cost includes all interest that previously was
accounted for in accordance with the requirements of paragraphs 5-22 of Statement No. 62,
Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989
FASB and AICPA Pronouncements which are superseded by this Statement. This Statement requires
that interest cost incurred before the end of a construction period be recognized as an expense in the
period in which the cost is incurred for financial statements prepared using the economic resources
measurement focus. As a result, interest cost incurred before the end of a construction period will not
be included in the historical cost of a capital asset reported in a business-type activity or enterprise
fund. This Statement also reiterates in the financial statements prepared using the current financial
resources measurement focus that interest cost incurred before the end of a construction period should
be recognized as an expenditure on a basis consistent with governmental fund accounting principles.
The requirements of this Statement are effective for reporting periods beginning after December 15,
2019. The Authority has not implemented Statement 89 and will evaluate the impact on future
financial statements.
GASB Statement No. 90, Majority Equity Interests (Statement 90) was issued August 2018. The
primary objectives of this Statement are to improve the consistency and comparability of reporting a
government’s majority equity interest in a legally separate organization and to improve the relevance
of financial statement information for certain component units. It defines a majority equity interest and
specifies that a majority equity interest in a legally separate organization should be reported as an
investment if a government’s holding of the equity interest meets the definition of an investment. A
majority equity interest that meets the definition of an investment should be measured using the equity
method, unless it is held by a special-purpose government engaged only in fiduciary activities, a
fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund.
Those governments and funds should measure the majority equity interest at fair value. For all other
holdings of a majority equity interest in a legally separate organization, a government should report
the legally separate organization as a component unit, and the government or fund that holds the equity
interest should report an asset related to the majority equity interest using the equity method. This
Statement establishes that ownership of a majority equity interest in a legally separate organization
results in the government being financially accountable for the legally separate organization and,
therefore, the government should report that organization as a component unit. This Statement also
requires that a component unit in which a government has a 100 percent equity interest account for its
assets, deferred outflows of resources, liabilities, and deferred inflows of resources at acquisition value
at the date the government acquired a 100 percent equity interest in the component unit. Transactions
presented in statements of the component unit in that circumstance should include only transactions
that occurred subsequent to the acquisition. The requirements of this Statement are effective for
reporting periods beginning after December 15, 2018. The requirements should be applied
retroactively, except for the provisions related to (1) reporting a majority equity interest in a component
unit and (2) reporting a component unit if the government acquires a 100 percent equity interest. Those
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
38
provisions should be applied on a prospective basis. The Authority has not implemented Statement 90
and will evaluate the impact on future financial statements.
GASB Statement No. 91, Conduit Debt Obligations (Statement 91) was issued May 2019. The primary
objectives of this Statement are to provide a single method of reporting conduit debt obligations by
issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2)
arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement
achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing
that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and
financial reporting of additional commitments and voluntary commitments extended by issuers and
arrangements associated with conduit debt obligations; and improving required note disclosures. This
Statement requires issuers to disclose general information about their conduit debt obligations,
organized by type of commitment, including the aggregate outstanding principal amount of the issuers’
conduit debt obligations and a description of each type of commitment. Issuers that recognize liabilities
related to supporting the debt service of conduit debt obligations also should disclose information
about the amount recognized and how the liabilities changed during the reporting period. The
requirements of this Statement are effective for reporting periods beginning after December 15, 2020.
The Authority has not implemented Statement 91 and will evaluate the impact on future financial
statements.
GASB Statement No. 92, Omnibus 2020 – Provisions of this Statement related to the effective date of
Statement No. 87 and Implementation Guide 2019-3, reinsurance recoveries, and terminology used
to refer to derivative instruments are effective upon issuance (Statement 92). This Statement addresses
a variety of topics such as leases, the applicability of Statement No. 73 and Statement No. 74 for
reporting assets accumulated for postemployment benefits, the applicability of Statement No. 84 to
postemployment benefit arrangements, the measurements of liabilities and assets related to asset
retirement obligations in a government acquisition, reporting of public entity risk pools, referencing
to nonrecurring fair value measurements, and terminology used to refer to derivative instruments. The
requirements of this Statement are effective for reporting periods beginning after June 15, 2020. . The
Authority has not implemented Statement 92 and will evaluate the impact on future financial
statements.
GASB Statement No. 93, Replacement of Interbank Offered Rates (Statement 93). The provisions of
this Statement, except for paragraph 11b, are required to be implemented for year-end June 30, 2022
The requirements in paragraph 11b are required to be implemented for year-end June 30, 2023. This
Statement addresses accounting and financial reporting implications that result from the replacement
of an interbank offered rate (IBOR). The Authority has not implemented Statement 93 and will
evaluate the impact on future financial statements.
GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment
Arrangements, Statement 94. The primary objective of this Statement is to improve financial reporting
by addressing issues related to public-private and public-public partnership arrangements (PPPs) and
also provides guidance for accounting and financial reporting for availability payment arrangements
(APA). The requirements of this Statement are effective for reporting periods beginning after June 15,
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
39
2022. The Authority has not implemented Statement 94 and will evaluate the impact on future
financial statements.
In light of the COVID-19 Pandemic, on May 8, 2020, the GASB issued Statement No. 95,
Postponement of the Effective Dates of Certain Authoritative Guidance, to provide relief to
governments (Statement 95). This Statement, which was effective upon issuance, postpones the
effective dates of certain provisions in the above noted pronouncements for one year, except for
Statement No. 87 and provisions related to leases in Statement No. 92 which are postponed for eighteen
months. Certain other provisions of Statement No. 92 are excluded from Statement No. 95.
Additionally, Statement No. 95 excludes provisions in Statement No. 93 related to lease modifications
and excludes Statement No. 94 since the GASB considered the pandemic in determining effective
dates. Earlier application of the standards is encouraged and is permitted to the extent specified in each
pronouncement as originally issued.
GASB Statement No. 96, Subscription-Based Information Technology Arrangements, Statement 96.
Effective for year-end June 30, 2023. This statement provides guidance on the accounting and financial
reporting for subscription-based information technology arrangements (SBITAs) for government end
users. This statement, among other things, defines a SBITA, establishes that a SBITA results in a right-
to-use subscription asset (an intangible asset) and a corresponding subscription liability, provides
capitalization criteria for outlays other than subscription payments, and requires note disclosures
regarding a SBITA. The Authority has not implemented Statement 96 and will evaluate the impact on
future financial statements.
GASB Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting
for Internal Revenue Code Section 457 Deferred Compensation Plans, (Statement 97). Effective for
year-end June 30, 2022, except the portion of the pronouncement related to component unit criteria,
which is effective for year-end June 30, 2020. This statement modifies certain guidance contained in
Statement No. 84 and enhance the relevance, consistency, and comparability of the accounting and
financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section
457 plans) that meet the definition of a pension plan and for benefits provided through those plans.
The Authority determined that the portion of Statement 97 that is related to component unit criteria
has no impact on the presentation of the financial statements for the year ended June 30, 2020. The
Authority has not implemented the remaining pronouncements of Statement 97 and will evaluate the
impact on future financial statements.
(3) Cash and Investments
Pursuant to various agreements, appropriations, and statutory requirements relating to its operations, AEA
has established accounts for assets restricted to construction, operation, and financing activities. As used
throughout this note, “Fund” means a separate account established by the State legislature and does not refer
to a separate group of self-balancing accounts as contemplated by GAAP.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
40
At June 30, 2020, the Authority’s carrying amount of cash and cash equivalents (all of which were restricted
or designated for specific purposes) was $58,516,000. The total of all bank balances on the same date
amounted to $59,414,000.
The restricted cash and cash equivalents and investments were held in trust and restricted accounts for the
following activities as of June 30, 2020:
Restricted Cash and Cash Equivalents
(in thousands of dollars)
Governmental
Business-
Type
Activities Activities Totals
Bradley Lake Hydroelectric Project $ - 25,484 25,484
Alaska Intertie Project - 1,541 1,541
Power Project Fund - 12,549 12,549
Power Development and Railbelt Energy
Projects - 334 334
Rural Energy Projects 4,556 - 4,556
Power Cost Equalization Program 2,907 - 2,907
Renewable Energy Grant Fund 3,064 - 3,064
Emerging Energy Technology Fund 1,125 - 1,125
Trans-Alaska Pipeline Liability Fund 1,184 - 1,184
Rural Electrification Revolving Loan
Fund - 66 66
VW Settlement 5,706 - 5,706
Total restricted cash and cash equivalents $ 18,542 39,974 58,516
Restricted Investments
(in thousands of dollars)
Governmental
Business-
Type
Activities Activities Totals
Bradley Lake Hydroelectric Project $ - 21,502 21,502
Power Cost Equalization Program 1,078,153 - 1,078,153
Renewable Energy Grant Fund 22,714 - 22,714
Total restricted investments $ 1,100,867 21,502 1,122,369
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
41
Investment Holdings
The Power Cost Equalization Endowment Fund (PCE Fund), created under Alaska Statute (AS) 42.45.070,
the Renewable Energy Grant Fund (RE Fund), created under AS 42.45.045, and the Emerging Energy
Technology Fund (EET Fund), created under AS 42.45.375, are under the fiduciary authority of the State
Department of Revenue, Treasury Division (Treasury). AEA requests draws from these funds as needed for
program cashflow needs.
Other AEA Cash and Investments – a portion of Bradley Lake Hydroelectric Project investments are invested
pursuant to investment agreements with JP Morgan Chase Bank that guarantees annual interest earnings of
7.38% or 7.41% per annum that end the earlier of July 1, 2021 or the date of repayment of the Bradley Lake
Power Revenue Bonds, First Series. These investments are in nonparticipating contracts and are measured
at cost in accordance with GASB 31. Additional funds are held by a trustee bank and invested in accordance
with the requirements of the trust agreement.
Under the Internal Revenue Code of 1986, as amended, certain earnings in excess of arbitrage yield on the
Bradley Lake bonds must be rebated to the U.S. Treasury. Bradley Lake investments, associated with the
Power Revenue Bonds and Refunding Bonds, are subject to rebate computation.
Internal staff manage AEA’s internally managed portfolio for liquidity and safety. There is no AEA Board
approved investment policy; however, staff follows AIDEA’s Board approved investment policy for
internally managed investments (the Resolution). The AEA managed portfolio consists of the following
eligible securities:
Debt instruments issued or guaranteed by the U.S. government, its agencies and instrumentalities, and
Government Sponsored Enterprises (GSEs);
Money market funds collateralized by U.S. Treasury, agency securities, and repurchase agreements;
Units in the investment pool or any series of investment pool of the Alaska Municipal League
Investment Pool, Inc., or any successor to that entity, or any other investment pool for public entities
of the State of Alaska that is established under the Alaska Investment Pool Act (AS
37.23.010-37.23.900); and
Other investments specifically approved by the board.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
42
Fair Value Measurement
AEA categorizes fair value measurements within the fair value hierarchy established by generally accepted
accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of an
asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant
other observable inputs; and Level 3 inputs are significant unobservable inputs. Following is a summary of
the AEA’s cash and investments at the recurring fair value measurement at June 30, 2020 (in thousands):
Fair Value of Cash and Investments
(in thousands of dollars)
Governmental Business-Type
Activities Activities Totals
Deposits $ - - -
Money market funds 18,542 39,974 58,516
Investment agreements - 21,502 21,502
Investments managed by
Treasury
1,100,867 - 1,100,867
Total invested assets $ 1,119,409 61,476 1,180,885
Cash and cash equivalents, including investment agreements, are reported at amortized cost, investments
managed by Treasury are invested in a pooled environment and the remaining investments have a fair value
level of 2.
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will negatively affect the fair value of an investment.
The Resolution addresses interest rate risk. Duration is an indicator of a portfolio’s market sensitivity to
changes in interest rates. In general, major factors affecting duration are (in order of importance):
1) Maturity
2) Prepayment frequency
3) Level of market interest rates
4) Size of coupon
5) Coupon payments
Rising interest rates generally translate into the fair market value of fixed income investments declining,
while falling interest rates are generally associated with increasing market values. Effective duration attempts
to account for the price sensitivity of a bond to changes in prevailing interest rates, including the effect of
embedded options. For example, for a bond portfolio with a duration of 5.0, a one percentage point parallel
decline in interest rates would result in an approximate price increase on that bond portfolio of 5.0%.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
43
AEA Internally Managed Investments – AEA has no written policy for interest rate risk for internally
managed investments; however, staff follows and believes to be in compliance with AIDEA’s written policy
for interest rate risk. The duration for investments is 2 years or less. The maximum maturity of any issue is
3 years from the date of purchase.
Credit Risk
AEA has no written policy with regard to credit risk; however, staff follows and believe to be in compliance
with AIDEA’s written policy for credit risk with regards to its internally managed portfolio. Since AEA only
invests its internally managed portfolio in highly rated money markets and U.S. government and agency
securities and GSEs, credit risk is minimal.
The Bradley Lake Hydroelectric Project investments contain a portion that are invested in guaranteed
investment contracts collateralized by federal obligations, which minimize credit risk.
Custodial Credit Risk
Custodial credit risk is the risk that deposits may not be returned in the event of a bank failure. Treasury’s
policy with regard to custodial credit risk is to collateralize State deposits to the extent possible. At June 30,
2020, AEA’s deposits managed by Treasury were uncollateralized and uninsured.
With respect to AEA managed investments, amounts totaling approximately $58,516,000 at June 30, 2020
are held in money market funds with the custodian, the trust department of a commercial bank; therefore, no
custodial risk exists for these securities. Investment agreements in the amount of $21,502,000 are held with
the custodian institution and are collateralized.
Renewable Energy Grant Fund
The State Department of Revenue – Treasury Division has created a pooled environment by which it
manages the investments for which its Commissioner has fiduciary responsibility. Actual investing is
performed by investment officers within Treasury or by contracted external investment managers. The Fund
invests in the State’s internally managed General Fund and Other Non-Segregated Investments Pool
(GeFONSI). The GeFONSI consists of investments in the State’s internally managed Short-term Fixed
Income Pool, Short-term Liquidity Fixed Income Pool and the Intermediate-term Fixed Income Pool. The
complete financial activity of the Fund is shown in the Comprehensive Annual Financial Report (CAFR)
available from the Department of Administration, Division of Finance.
Assets in the pools are reported at fair value. Investment purchases and sales are recorded on a trade-date
basis. Securities are valued each business day using prices obtained from a pricing service.
The full accrual basis of accounting is used for the investment income and GeFONSI investment income is
distributed to pool participants monthly if prescribed by statute or if appropriated by the State legislature.
Income in the Short-term, Short-term Liquidity, and Intermediate-term Fixed Income Pools is allocated to
the pool participants daily on a pro-rata basis.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
44
At June 30, 2020, the GeFONSI total for the Renewable Energy Grant Fund was $22,714,000. For additional
information on interest rate risk, credit risk, foreign exchange, derivatives, fair value, and counterparty credit
risk see the separately issued report on the Invested Assets of the Commissioner of Revenue at:
http://treasury.dor.alaska.gov/Investments/Annual-Investment-Reports.aspx.
Power Cost Equalization Endowment Fund Investment Holdings
Treasury has created a pooled environment by which it manages the investments for which the Commissioner
has fiduciary responsibility. Actual investing is performed by investment officers in Treasury or by
contracted external investment managers. The Fund invests in the State’s internally managed Short-term
Fixed Income Pool, the Broad Market Fixed Income Pool, as well as the State’s internally managed Domestic
Equity and International Equity Pools. The complete financial activity of the Fund is shown in the
Comprehensive Annual Financial Report (CAFR) available from the State - Department of Administration,
Division of Finance.
Assets in the pools are reported at fair value. Investment purchases and sales are recorded on a trade-date
basis. Fixed income and equity securities are valued each business day. Securities expressed in terms of
foreign currencies are translated into U.S dollars at the prevailing exchange rates.
The full accrual basis of accounting is used for investment income. Income in the Short-term and Broad
Market Fixed Income Pools is allocated to pool participants daily on a pro-rata basis.
At June 30, 2020, the Fund’s share of pool investments was as follows:
Power Cost Equalization Endowment Fund
Investment Pools
(in thousands of dollars)
FY20
Cash and cash equivalents
Short-term fixed income pool $ 4
Fixed income – broad market pool 386,618
Equity
Domestic equity pool 443,291
International equity pools 248,244
Net Invested Assets $ 1,078,157
Less: Cash and cash equivalents (4 )
Restricted Investments – Power Cost Equalization Program $ 1,078,153
For additional information on interest rate risk, credit risk, foreign exchange, derivatives, fair value, and
counterparty credit risk see the separately issued report on the Invested Assets of the Commissioner of
Revenue at: http://treasury.dor.alaska.gov/Investments/Annual-Investment-Reports.aspx.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
45
(4) Capital Assets
Capital asset activity for the year ended June 30, 2020 was as follows (stated in thousands):
Balance at Balance at
Business-Type Activities
July 1,
2019
Additions
Deletion
s
June 30,
2020
Capital assets not being depreciated:
Land and Rights of Way $ 11,212 - - 11,212
Construction in progress:
Intangibles 189,151 - - 189,151
Other 24,323 21,692 - 46,015
Total capital assets not
being depreciated 224,686 21,692 - 246,378
Depreciable capital assets:
Equipment 6,416 217 - 6,633
Infrastructure 442,060 1,082 - 443,142
Total depreciable capital assets 448,476 1,299 - 449,775
Less accumulated depreciation:
Equipment (5,454 ) (87 ) - (5,541 )
Infrastructure (291,736 ) (10,830 ) - (302,566 )
Total accumulated depreciation (297,190 ) (10,917 ) - (308,107 )
Capital assets, net $ 375,972 12,074 - 388,046
For the year ended June 30, 2020 total interest costs on long-term borrowings for construction projects was
$1,749,000, of that amount $890,000 was capitalized as a part of construction in progress-other.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
46
Depreciation expense was charged to the functions as follows for the year ended June 30, 2020 (stated in
thousands):
Business-Type Activities
Bradley Lake Hydroelectric Project $7,196
Alaska Intertie Project 3,721
Total depreciation expense – business type activities $ 10,917
(5) Interfund Receivables, Payables, and Transfers
Interfund balances typically result from short-term operating or capital advances. Transfers typically result
from operating activities. A schedule of interfund balances as of and for the year ended June 30, 2020 follows
(stated in thousands):
Due from other funds
Due to Special Revenue Fund from Enterprise Fund $ 206
(6) Due to the State of Alaska
Article 9, sec 17(d) of the Alaska Constitution requires that money in the general fund available for
appropriation at the end of each fiscal year be deposited into the Constitutional Budget Reserve Fund (CBR)
to repay amounts withdrawn from the CBR. This is referred to as the “sweep” into the CBR. The State of
Alaska Department of Law (DOL) reviewed whether this requirement applies to the unobligated balance of
the Power Cost Equalization Endowment Fund (PCE Endowment Fund). In 2019 DOL determined the PCE
Endowment Fund is available for appropriation and has all the essential attributes of general fund money
and is therefore subject to the sweep. The balance in the PCE Endowment Fund is subject to the sweep to
the general fund and then to the CBR. As of June 30, 2020, the Authority recorded a liability in the amount
of $1.06 billion related to the sweep. Legislation approved the reversal of the sweep to be effective July 1,
2020, which returns the swept funds back to the PCE Endowment Fund. The PCE Endowment Fund balances
are therefore re-established with the reversal of the sweep.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
47
(7) Long-Term Debt
Long-term debt activity for the year ended June 30, 2020 was as follows (stated in thousands):
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
Balance at Balance at Due
Business-Type Activities
July 1,
2019 Additions Deletions
June 30,
2020
within
one year
Power Revenue Bonds
Bradley Lake:
First Series $ 75 - (25) 50 25
Refunding, Fourth Series 12,455 - (3,915) 8,540 4,145
Refunding, Sixth Series 20,940 - (7,085) 13,855 7,405
Bradley Lake – Battle Creek:
Diversion – Private Placement
Seventh Series 40,000 - - 40,000 -
Eighth Series 1,239 - - 1,239 -
Total bonds payable 74,709 - (11,025) 63,684 11,575
Arbitrage interest payable (c) 1,110 243 (346) 1,007 895
Bond original issue premium 159 - (114) 45 45
Total other bond liabilities 1,269 243 (460) 1,052 940
Total long-term debt $ 75,978 243 (11,485) 64,736 12,515
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
48
AEA issued the following Bonds in support of the Bradley Lake Project (Bradley Lake Bonds):
First and Second Series in September 1989 and August 1990, respectively, for the long-term
financing of the construction costs of the Bradley Lake Hydroelectric Project and refunded
AEA’s Variable Rate Demand Bonds which were issued in November 1985 to provide
interim financing for the Project.
Third and Fifth Series Power Revenue Refunding Bonds in April 1999 to refund a portion
of the First Series Bonds and pay costs of issuance. The First Series refunded bonds were
called on July 1, 1999.
Fourth Series Power Revenue Refunding Bonds in April 2000 to refund a portion of the
Second Series Bonds and to provide costs of issuance. The Second Series refunded bonds
were called on July 1, 2000.
Sixth Series Power Revenue Refunding Bonds in July 2010 in the amount of $28,800,000
to refund and defease $30,640,000 aggregate outstanding principal amount of the
Authority’s Power Revenue Refunding Bonds, Fifth Series, and to pay costs of issuing the
bonds. The refunded bonds were called on August 2, 2010.
The outstanding Bradley Lake bonds above mature annually each July 1 through the year 2021 with
interest rates ranging from 4.0% to 6.25%.
The Bradley Lake Bonds below were issued as a private placement in support of the Battle Creek
Diversion project, an improvement to the Bradley Lake Project:
$40,000,000 Seventh Series New Clean Renewable Energy Bonds.
$1,239,000 Eighth Series Qualified Energy Conservation Bonds.
$5,761,000 Ninth Series Taxable Draw-Down Bonds.
Only the Seventh and Eighth Series have amounts outstanding as of June 30, 2020. During the period
of construction, interest only payments are due on the outstanding bonds at a fixed interest rate of
4.24%. The outstanding bonds mature annually each July 1 starting in 2021 through the year 2050.
The draw period for the Ninth Series ends in December 2020; no draws have been made as of June 30,
2020. The Seventh and Eighth Series Bonds qualify for federal tax credits under the New Clean
Renewable Energy Bond and Qualified Energy Conservation Bond Programs, respectively. These
programs provide for a partial federal subsidy of interest due on such bonds, subject to federal funding
availability.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
49
The bonds are direct and general obligations of AEA and the full faith and credit of AEA are pledged to
pay principal and interest on the bonds. Payment of the bonds is secured by a pledge of revenues of the
project, including all payments to be made by power purchasers under the Agreement for the Sale and
Purchase of Electric Power by and among named powers purchasers and AEA (PSA). Under the Power
Sales Agreement (PSA), the power purchasers are obligated to make payments to AEA in an aggregate
amount sufficient to pay annual project costs, including debt service on all outstanding bonds.
Under the terms of the Bond Resolution, as additional security for repayment of the bonds, a capital reserve
fund has been established in an amount equal to the capital reserve fund requirement. The capital reserve
fund is supported by the moral obligation of the State of Alaska. In the event amounts are drawn from the
capital reserve fund to pay debt service on the bonds the Authority is to certify in writing to the Governor
and the State Legislature the sum required to restore the capital reserve fund to the capital reserve
requirement. The State Legislature may, but is not obligated to, appropriate to the Authority the sum
certified by the Chair of the board of the Authority necessary to restore the capital reserve fund to the
capital reserve fund requirement.
The Fourth Series Bonds are further secured by bond insurance.
All Bradley Lake bonds above were issued under the Alaska Energy Authority Power Revenue Bond
Resolution (Bond Resolution). Events of Default under the Bond Resolution include:
Late payment or non-payment of principal or Redemption Price (as defined in the Bond
Resolution) whether at maturity or upon call for redemption.
Late payment or non-payment of interest or on the unsatisfied balance of any sinking fund
installment.
Non-performance or non-observance of any of the other covenants, agreements or conditions
in the Bond Resolution or in the Bonds, and such default continues for 60 days after written
notice to the Authority by the Trustee or to the Authority and the Trustee by the Holders of
not less than 25% in the principal amount of the outstanding bonds.
Dissolution or liquidation of the Authority or filing by the Authority of a voluntary petition in
bankruptcy, or the commission by the Authority of any act of bankruptcy, or adjudication of
the Authority as bankrupt, or assignment by the Authority for the benefit of its creditors, or
the entry by the creditors, or the approval by a court of competent jurisdiction of a petition
applicable to the Authority in any proceedings for its reorganization instituted under the
provisions of the federal bankruptcy act, as amended, or under any similar act in any
jurisdiction effective now or in the future.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
50
If an order or decree is entered with the consent or acquiescence of the Authority, appointing
a receiver(s) of the Bradley Lake Project, in whole or part, or of the Bradley Lake Project
rents, fees, charges or other Revenues therefrom (as defined in the Bond Resolution). If the
order or decree is entered without the consent or acquiescence of the Authority and is not
vacated or discharged or stayed within 90 days after the entry.
If a judgment for the payment of money shall be rendered against the Authority resulting from
the construction, improvement, ownership, control or operation of the Bradley Lake Project,
and the judgment is not discharged within 90 days, or an appeal or decree to set aside or stay
the execution or levy of the judgment is not filed in such manner as to set aside or stay the
execution of or levy under such judgment, or order, decree or process or the enforcement
thereof.
In the Event of Default the Authority shall pay over or cause to be paid over to the Trustee (i) all moneys,
securities and funds then held by the Authority in any Fund or Account under the Bond Resolution, and
(ii) all Revenues (as defined in the Bond Resolution) as promptly as practicable after receipt. During the
continuance of an Event of Default, per the Bond Resolution the Trustee shall apply funds in the following
order:
Expenses of Fiduciaries
Operating Expenses
Principal, redemption and interest payments
Additionally, AEA has covenanted to notify the State Legislature of any failure to maintain the capital
reserve fund at its required level. If the capital reserve fund is less than the required level the State
Legislature may appropriate funds (but not legally bound) to bring the capital reserve to the required level.
Under the Alaska Constitution, appropriations passed by the State Legislature are subject to line item veto
by the Governor.
The arbitrage interest payable is due to the U.S. Treasury for the excess of investment income on the
proceeds of each series of AEA’s tax exempt and tax advantaged Bradley Lake bonds over the related
interest expense computed in accordance with Section 148 of the Internal Revenue Code of 1986, as
amended. The accumulated arbitrage interest payable amount is computed each year, and the amount for
each series is first due after the end of the fifth bond year and every five years thereafter. AEA maintains
a separate account for each series with the trustee and each year sets aside a sufficient amount to satisfy
the liability.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
51
The minimum payments related to all bonds, for the years subsequent to June 30, 2020, are as follows:
Business-Type Activities
(in thousands of dollars)
Principal Interest Total
Fiscal Year Ending June 30:
2021 $ 11,575 2,647 14,222
2022 12,245 2,011 14,256
2023 1,375 1,661 3,036
2024 1,375 1,603 2,978
2025 1,375 1,545 2,920
2026-2030 6,873 6,848 13,721
2031-2035 6,873 5,391 12,264
2036-2040 6,873 3,934 10,807
2041-2045 6,873 2,477 9,350
2046-2050 6,873 1,020 7,893
2051 1,374 29 1,403
Total $ 63,684 29,166 92,850
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
52
(8) Loans Receivable
The Authority administers the Power Project Fund Loan Program and the Rural Electrification Revolving
Loan Program. Loans outstanding at June 30, 2020 are classified as follows (stated in thousands):
Business-Type Activities
(in thousands of dollars)
No. of
Loans Amount
Power Project Fund Loan Programs 16 $ 27,559
Less: Allowance for Loan Loss (527)
Balance, at end of year $ 27,032
Loans more than 90 days past due are not included in the accrual of interest. At June 30, 2020, there were
no loans more than 90 days past due.
An analysis of changes in the allowance for loan losses for the years ended June 30, 2020 follows (stated in
thousands):
Balance at beginning of year $ 466
Provision for loan loss 61
Balance at end of year $ 527
On September 30, 2010, the Authority sold a portion of its Power Project Fund loan portfolio to AIDEA.
Under the agreement, upon AIDEA’s request, AEA is required to repurchase any loan upon a payment
default. On June 30, 2020, the outstanding principal balance of the loans sold was $12,091,000 for which
AEA has recognized an estimated liability for potential repurchase of $363,000.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
53
(9) Fund Balance
Fund balances reported in the aggregate on the governmental fund balance sheet are subject to the following
constraints (stated in thousands):
Restricted by
External Parties Restricted by Legislation
Power Cost Equalization Program $ - 13,005
Renewable Energy Grant Fund - 24,583
Emerging Energy Technology Fund - 1,109
Trans-Alaska Pipeline Liability Fund 1,182 -
Rural Energy Projects - 12
Total fund balance $ 1,182 38,709
(10) Risk Management
AEA is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets; errors
and omissions; and natural disasters. AEA covers that risk through the purchase of commercial insurance
and participation in the State’s Risk Management Pool. The Risk Management Pool administers a self-
insurance program for each State agency, which covers all sudden and accidental property and casualty
claims. Annual assessments allocated by Risk Management are the maximum each agency is called upon to
pay, forestalling the need for supplemental appropriation or disruption of vital state services after a major
property loss, adverse civil jury award, or significant workers compensation claim.
(11) Related Parties
(a) Alaska Industrial Development and Export Authority
Pursuant to understandings and agreements between AIDEA and AEA, AIDEA provides
administrative, personnel, data processing, communications, and other services to AEA. AEA has a
Board approved borrowing agreement with AIDEA to provide short-term working capital funds up to
a maximum of $7.5 million.
At June 30, 2020, AEA recognized expenses for services from AIDEA in the amount of $5.19 million.
AEA administers the Bradley Lake Hydroelectric Project and Battle Creek Project for which it
reimburses AIDEA $200,000 and $105,000, respectively, for project management and shared services
cost. In addition, AEA had $3.39 million payable to AIDEA for services and borrowings, which are
included in accounts payable.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
54
As a result of implementing GASB Statement No. 68 Accounting and Financial Reporting for
Pensions, AIDEA recorded a net pension liability. Additionally, as a result of implementing GASB
Statement No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other than
Pensions, AIDEA recorded a net liability for other postemployment benefits. AEA’s annual payments
to AIDEA for personnel services supporting AEA activities includes a Public Employees’ Retirement
System contribution component. Payments to AIDEA for personnel services supporting AEA
activities comprise over half of AIDEA’s personnel costs.
(b) Alaska Intertie Management Committee
AEA is party to agreement with utilities (GVEA, MEA, CEA, and ML&P) using the Alaska Intertie
for wheeling of electrical power. Pursuant to the Intertie Agreement, the IMC was established to
manage the system. The IMC is comprised of a representative from AEA and each of the utilities.
AEA is reimbursed for operation and maintenance costs on a monthly basis with an annual settlement
to adjust the payments to actual costs. AEA received $101,058 during fiscal year 2020 for
administrative services.
(c) Bradley Lake Project Management Committee
On December 7, 1987, AEA entered into a Power Sales Agreement (PSA) with utilities (GVEA, MEA,
CEA, ML&P, HEA, and City of Seward) purchasing electric power produced by the Bradley Lake
Hydroelectric Project. In 1988, legislation was passed which made the PSA effective. Pursuant to the
PSA, a Project Management Committee (PMC) was formed to manage the project. The PMC is
comprised of a representative from AEA and each of the utilities. The participating utilities make
monthly payments directly to the bond trustee based on their respective percentage share of the
estimated annual project costs. AEA has an agreement with the PMC to provide administrative
services to the Bradley Lake Project and received $305,000 for these services.
(12) Commitments and Contingencies
In the normal course of business, AEA also has various commitments, such as commitments for the extension
of credit and award of grants. At June 30, 2020, AEA had Power Project Fund loan commitments of
$5,587,000.
At June 30, 2020, AEA had cumulative prior year commitments from grant awards that are funded by State
appropriations and federal awards; the amounts committed were $26,325,000.
(13) Risks and Uncertainties
In late January 2020, the World Health Organization (“WHO”) announced a global health emergency
regarding a new strain of virus called coronavirus (COVID-19). This virus originated from within China and
spread globally, including Alaska. Further, in March 2020, the WHO classified the coronavirus as a
pandemic. On March 12, 2020, the Mayor of Anchorage declared a state of emergency to protect and preserve
public health and safety, and subsequently closed all civic, cultural, and recreational facilities in the
Municipality. The Governor of Alaska declared a public health disaster as did the President of the United
States. The Governor instituted a number of public health measures that affected intrastate and interstate
travel and the movement of goods and services.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2020
55
Management is actively monitoring the global situation and assessing its effect on the Authority’s financial
condition, liquidity, operations, and workforce. Given the daily evolution of the COVID-19 outbreak and the
global responses to curb its spread, the Authority is not able to estimate the effects of the COVID-19 outbreak
on its results of operations, financial condition, or cash flows for FY21; however, the Authority may
experience a short term reduction in cash flows relating to our loan portfolio during the economic slowdown
that appears to be resulting from the health emergency. In addition, our investment portfolio might
experience periods of high volatility and temporary or permanent decline. This might affect amounts
available for future PCE reimbursements. Long term impacts are unknown.
On March 27, 2020 President Trump signed into law the “Coronavirus Aid, Relief and Economic Security
(CARES) Act.” The CARES Act, among other things, appropriated funds for the Coronavirus Relief Fund
to be used to make payments for specified uses to States and certain local governments. The Authority will
continue to examine the impact that the Cares Act may have. Currently, the Authority has not received any
funds and is unable to determine the full impact that the CARES Act will have on the Authority financial
condition, results of operations or liquidity.
Schedule 1ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Schedule of Bradley Lake Hydroelectric Project Trust Account ActivitiesYear ended June 30, 2020(stated in thousands)ExcessCapital Renewal and InvestmentOperatingConstruction Debt Service Reserve Contingency Earnings Revenue Operating ReserveFund Fund Fund Reserve Fund Fund Fund Fund Account TotalBalance at July 1, 2019 $ 24,375 12,769 15,575 2,434 941 2,585 1,158 1,005 60,842 Interest received 197 266 985 175 63 302 70 75 2,133 Bond principal paid — (11,025) — — — — — — (11,025) Bond interest paid — (3,228) — — — — — — (3,228) Arbitrage paid— — — — (457) — — — (457) IRS interest subsidy received— — — — — 567 — — 567 Operating budget surplus paid — — — (88) — (965) (783) — (1,836) Capital expenditures (16,022) — — (720) — (912) — (150) (17,804) Operating revenue received — — — — — 22,074 — — 22,074 Operating expenses paid — — — — — — (4,280) — (4,280) Transfers between funds — 14,267 (985) 2,121 106 (21,441) 5,713 219 — Balance at June 30, 2020 $ 8,550 13,049 15,575 3,922 653 2,210 1,878 1,149 46,986 See accompanying independent auditors’ report.56
Schedule 2ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Schedule of Projects and Programs – Balance SheetJune 30, 2020(stated in thousands)Renewable EmergingTrans AlaskaVolkswagenPower Cost EnergyEnergyPipeline Rural DieselEqualizationGrant TechnologyLiabilityEnergySettlementProgram FundFundFundProjects FundEliminationsTotalsCurrent assets:Restricted cash and cash equivalents $ 2,907 3,064 1,125 1,184 4,556 5,706 — 18,542 Restricted investments 1,062,521 — — — — — — 1,062,521 Operating receivable — 12 — — 2 — — 14 Due from Federal Government— — 22 — 1,282 — — 1,304 Due from State of Alaska— — — — 344 — — 344 Due from component units— — — — 12 — — 12 Due (to) from other funds/internal balances — — — — 3,278 — (3,072) 206 Total Current Assets1,065,428 3,076 1,147 1,184 9,474 5,706 (3,072) 1,082,943 Noncurrent assets:Restricted investments 15,632 22,714 — — — — — 38,346 Total Assets$ 1,081,060 25,790 1,147 1,184 9,474 5,706 (3,072) 1,121,289 Liabilities and Fund BalanceCurrent liabilities:Due to State of Alaska$ 1,062,537 — — — 2,809 — — 1,065,346 Due to component units— — — — 84 — — 84 Due to Federal Government— — — — — — — — Accounts payable 4,429 534 38 — 5,342 5,625 — 15,968 Due to (from) other funds/internal balances 1,089 673 — 2 1,227 81 (3,072) — Total Current Liabilities1,068,055 1,207 38 2 9,462 5,706 (3,072) 1,081,398 Other liabilities-noncurrent— — — — — — — — Total Noncurrent Liabilities— — — — — — — — Total Liabilities1,068,055 1,207 38 2 9,462 5,706 (3,072) 1,081,398 Fund Balance:Restricted by agreements with external parties — — — 1,182 — — — 1,182 Restricted by legislation13,005 24,583 1,109 — 12 — — 38,709 Total Fund Balance13,005 24,583 1,109 1,182 12 — — 39,891 Total Liabilities and Fund Balance$ 1,081,060 25,790 1,147 1,184 9,474 5,706 (3,072) 1,121,289 See accompanying independent auditors’ report.Special Revenue FundAssets57
Schedule 3ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Special Revenue FundSchedule of Projects and Programs – Revenues, Expenses, and Changes in Fund BalanceYear ended June 30, 2020(stated in thousands)Renewable EmergingTrans Alaska VolkswagenPower Cost EnergyEnergyPipeline Rural DieselEqualization Grant TechnologyLiabilityEnergySettlementProgram Fund Fund Fund Projects Fund TotalsOperating revenues:State of Alaska appropriations $ — — — — 3,821 — 3,821 Federal grants — — 27 — 7,818 — 7,845 Other revenues — — — — 833 685 1,518 Total Operating Revenues— — 27 — 12,472 685 13,184 Operating expenditures:Grants and projects — 4,255 47 4 13,899 509 18,714 Power cost equalization grants29,255 — — — — — 29,255 General and administrative924 896 — 2 2,081 176 4,079 Total Operating Expenditures30,179 5,151 47 6 15,980 685 52,048 Nonoperating revenues (expenses) and other:Investment income, net48,808 572 — 15 11 — 49,406 Interfund capital grants and contributions (1,594) (1,914) — — 3,508 — — State of Alaska appropriations and transfers (21,288) — — — — — (21,288) Total nonoperating revenues (expenses) and other:25,926 (1,342) — 15 3,519 — 28,118 Increase (Decrease) in Fund Balance(4,253) (6,493) (20) 9 11 — (10,746) Fund Balance – Beginning17,258 31,076 1,129 1,173 1 — 50,637 Fund Balance – Ending$ 13,005 24,583 1,109 1,182 12 — 39,891 See accompanying independent auditors’ report.58
Schedule 4ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Schedule of Projects and Programs – Statement of Net PositionJune 30, 2020(stated in thousands)Susitna- Rural Power Develop-Bradley Lake Alaska Watana Power Electrification ment andHydroelectric Intertie Hydroelectric Project Revolving Railbelt EnergyAssets and Deferred Outflows of Resources Project Project Project Fund Loan Fund Projects Eliminations TotalsCurrent assets:Restricted cash and cash equivalents $ 25,484 1,541 — 12,549 66 334 — 39,974 Operating receivable — 173 — 86 — 8 — 267 Prepaid expense — 251 — — — — — 251 Loans receivable — — — 554 — — — 554 Due from Federal Government562 — — — — — — 562 Accrued interest receivable 1,100 — — 61 — — — 1,161 Due from the State of Alaska — 1 — — — — — 1 Due (to) from other funds/internal balances — — — (94) — 1,738 (1,850) (206) Total Current Assets27,146 1,966 — 13,156 66 2,080 (1,850) 42,564 Noncurrent assets:Restricted investments 21,502 — — — — — — 21,502 Loans receivable, net of allowance — — — 26,478 — — — 26,478 Capital assets, net of accumulated depreciation185,824 18,540 183,682 — — — — 388,046 Total Noncurrent Assets207,326 18,540 183,682 26,478 – — — 436,026 Deferred outflows of resources:— Deferred charge on bond refundings 3 — — — — — — 3 Total Assets and Deferred Outflows of Resources$ 234,475 20,506 183,682 39,634 66 2,080 (1,850) 478,593 Current liabilities:Due to the State of Alaska — 212 — — 66 83 — 361 Due to component units 24 — — — — — — 24 Due to Federal Governments $ 217 — — — — — — 217 Accounts payable 11,493 1,647 — — — 3 — 13,143 Bonds payable – current portion11,575 — — — — — — 11,575 Other bond liabilities – current portion940 — — — — — — 940 Accrued interest payable 1,474 — — — — — — 1,474 Due to (from) other funds/internal balances 1,759 91 — — — — (1,850) — Total Current Liabilities27,482 1,950 — — 66 86 (1,850) 27,734 Noncurrent liabilities:Bonds payable – noncurrent portion, net52,109 — — — — — — 52,109 Other bond liabilities – noncurrent portion112 — — — — — — 112 Other liabilities — — — 363 — — — 363 Total Noncurrent Liabilities52,221 — — 363 — — — 52,584 Total Liabilities79,703 1,950 — 363 66 86 (1,850) 80,318 Net position:Net investment in capital assets 121,423 18,540 183,682 — — — — 323,645 Restricted for capital projects 866 — — — — — — 866 Restricted for debt service 26,796 — — — — — — 26,796 Restricted by agreements with external parties 5,687 16 — — — — — 5,703 Restricted by legislation— — — 39,271 — 1,994 — 41,265 Total Net Position154,772 18,556 183,682 39,271 — 1,994 — 398,275 Total Liabilities and Net Position$ 234,475 20,506 183,682 39,634 66 2,080 (1,850) 478,593 See accompanying independent auditors’ report.Business-Type Activities - Enterprise FundLiabilities and Net Position59
Schedule 5ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)Business-Type Activities - Enterprise FundSchedule of Projects and Programs – Revenues, Expenses, and Changes in Net PositionYear ended June 30, 2020(stated in thousands)Rural Power Develop-Bradley Lake Alaska Susitna-Watana Power Electrification ment andHydroelectric Intertie Hydroelectric Project Revolving Railbelt EnergyProject Project Project Fund Loan Fund Projects TotalsOperating revenues:State of Alaska appropriations $ — 898 — — — — 898 Revenue from operating plants 20,415 946 — — — — 21,361 Interest on loans — — — 361 1 — 362 Other revenues 103 — — 63 — — 166 Total Operating Revenues20,518 1,844 — 424 1 — 22,787 Operating expenses:Depreciation 7,196 3,721 — — — — 10,917 General and administrative 1,043 163 — 457 — — 1,663 Interest expense 827 — — — — — 827 Plant operating 4,311 1,065 — — — — 5,376 Provision for loan loss (recovery) — — — 62 (1) — 61 Total Operating Expenses13,377 4,949 — 519 (1) — 18,844 Operating Income (Loss)7,141 (3,105) — (95) 2 — 3,943 Nonoperating revenues (expenses) and other:Investment income, net 1,813 16 — 176 — — 2,005 State of Alaska transfers — — — — (66) — (66) 1,813 16 — 176 (66) — 1,939 Increase (Decrease) in Net Position8,954 (3,089) — 81 (64) — 5,882 Net Position – Beginning145,818 21,645 183,682 39,190 64 1,994 392,393 Net Position – Ending$ 154,772 18,556 183,682 39,271 — 1,994 398,275 See accompanying independent auditors’ report.Total nonoperating revenues (expenses)and other60
Schedule 6
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Capital Assets Presented under Federal Energy Regulatory Commission Requirements
June 30, 2020
(stated in thousands)
Balance at Balance at
July 1, 2019 Additions Deletions June 30, 2020
Capital assets:
Intangible $ 183,696 — — 183,696
Production 292,121 22,318 — 314,439
Transmission 191,610 603 — 192,213
General 5,735 70 — 5,805
Total capital assets 673,162 22,991 — 696,153
Less accumulated depreciation:
Intangible (6) — — (6)
Production (143,983) (5,549) — (149,532)
Transmission (147,822) (5,343) — (153,165)
General (5,379) (25) — (5,404)
Total accumulated
depreciation (297,190) (10,917) — (308,107)
Capital assets, net $ 375,972 12,074 — 388,046
Unaudited - See accompanying independent auditors’ report.
61
Schedule 7
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Bradley Lake Historical Annual Project Cost
Year ended June 30, 2020
(stated in thousands)
Operating Data 2020
Project costs:
Operations and maintenance $ 3,400
Repairs 173
General and administrative 1,301
Insurance 653
Capital purchases 933
Contributions to renewal and contingency fund and operating reserve account 2,422
Subtotal 8,882
Debt service 14,532
Less Federal interest subsidy (567)
Less investment income (1,766)
Total cost of power $ 21,081
Energy delivered (MWh) 499,183
Total unit cost of power (cents per kWh) 4.22
Unaudited - See accompanying independent auditors’ report.
This schedule is provided as part of the municipal secondary market disclosure requirements relating to the
Bradley Lake Hydroelectric Power Revenue and Refunding Bonds.
62
Schedule 8 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020Beginning cash and investment balance $ 320,714 364,529 751,780 840,215 977,867 969,389 946,939 1,023,566 1,073,378 1,072,825 Inflows:Annual investment earnings 67,651 10,948 111,488 171,112 33,192 8,912 112,331 76,602 74,142 48,303 Capital fund transfers in — 400,000 — — — — — — — — Total inflows 67,651 410,948 111,488 171,112 33,192 8,912 112,331 76,602 74,142 48,303 Outflows:Transfers to AEA for PCE payments (1) (23,458) (23,154) (22,527) (32,773) (41,002) (30,622) (34,956) (25,595) (29,719) (27,000) Transfers and appropriations to Other Funds — — — — — — — — (44,000) (14,867) Program administration - AEA (174) (211) (198) (241) (248) (255) (243) (624) (444) (575) Administrative fee - Regulatory Commission (78) (129) (90) (110) (107) (100) (112) (113) (102) (108) Management fee - Department of Revenue (126) (203) (238) (336) (313) (385) (393) (458) (430) (421) Total outflows (23,836) (23,697) (23,053) (33,460) (41,670) (31,362) (35,704) (26,790) (74,695) (42,971) Ending cash and investment balance $ 364,529 751,780 840,215 977,867 969,389 946,939 1,023,566 1,073,378 1,072,825 1,078,157 (1) Transfers to AEA for PCE Endowment grant payments at June 30, 2020 were $27,000,000. Subsequent transfers were $2,600,000 based on estimated PCE costs paid in FY21. Unaudited - See accompanying independent auditors’ report.ALASKA ENERGY AUTHORITY(A Component Unit of the State of Alaska)PCE Endowment Fund Historical AnalysisJune 30, 2020(stated in thousands)63
Schedule 9
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2020
64
Organization and Operations
Throughout the 1980’s, Alaska Energy Authority (AEA or Authority) worked to develop the State’s energy
resources as a key element in diversifying Alaska’s economy. A number of large-scale projects were constructed;
four of those projects were sold in 2002 and one was transferred to the City of Larsen Bay in the fall of 2010. The
Bradley Lake Hydroelectric project provides some of the least expensive electric energy to the Railbelt. The Alaska
Intertie provides for connection and movement of power north or south to increase reliability and allow Interior
Alaska to obtain less expensive electric energy available from the Southcentral portion of the state.
Pursuant to statute, on August 12, 1993, the Board of the Alaska Industrial Development and Export Authority
(AIDEA), a public corporation and a political subdivision of the State, became the Board of Directors of AEA.
AEA continues to exist as a separate legal entity. The corporate structure and operating assets of AEA were
retained, but the ability to have employees and construct or acquire energy projects was eliminated. Among other
things, AIDEA provides personnel services to AEA. The AEA executive director is an employee of AIDEA, but
is separate and independent and is not subject to supervision by AIDEA’s executive director. There is no
commingling of funds, assets, or liabilities between AIDEA and AEA, and there is no responsibility of one for the
debts or the obligations of the other. Consequently, the accounts of AIDEA are not included in the accompanying
financial statements. The Legislature, in 1993, required AEA, to the maximum extent feasible, to enter into
contracts with public utilities and other entities to carry out AEA duties with respect to the ongoing operation and
maintenance of the AEA owned operating assets; this has occurred with oversight responsibility retained by AEA.
Rural energy programs previously administered by the former Department of Community and Regional Affairs,
Division of Energy, were transferred to AEA for administration, as part of a larger reorganization of State agencies.
These rural energy programs were originally part of AEA prior to the 1993 reorganization. During fiscal year 2009,
legislation added energy development programs to AEA.
The Alaska Legislature empowered AEA to acquire a Susitna River power project under AS 44.83.080 (18),
effective July 1, 1999. Effective July 14, 2011, the legislature empowered AEA to acquire, construct, own, and
operate a hydroelectric project located on the Susitna River. Under this legislative authorization, AEA worked on
planning, designing, and Federal Energy Regulatory Commission (FERC) licensing of the Susitna-Watana
Hydroelectric Project. Pursuant to Administrative Order No. 271, AEA advanced the licensing process through
FERC’s issuance of an updated Study Plan Determination on the environmental studies completed through 2015
and the licensing effort is currently in abeyance.
Bradley Lake Hydroelectric Project
The project has 120 Megawatts (MW) of installed capacity and transmits its power to the State’s main power grid
via two parallel 20–mile transmission lines. The project, which cost in excess of $300 million, went into
commercial operation in 1991. Homer Electric Association now operates the project under contract with AEA.
Bradley Lake serves Alaska’s Railbelt from the Kenai Peninsula to Fairbanks, as well as the Delta Junction area.
Schedule 9, Continued
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2020
65
In September 2016, the Authority received an amendment to the FERC license for a diversion of West Fork Upper
Battle Creek into Bradley Lake. The diversion will increase the Bradley Lake Hydroelectric Project annual energy
output by approximately 37,000 Megawatt hours (MWh). The Battle Creek project addition includes construction
of three miles of road, a concrete diversion dam, and a pipe and canal to convey the water to Bradley Lake. The
estimated cost of construction is approximately $47.2 million. Construction began in 2018 and is anticipated to be
complete in the fall of 2020.
Alaska Intertie Project
The Alaska Intertie is a 170–mile transmission line designed for 345 kV and operated at 138 kV. It runs between
Willow and Healy and interconnects the power systems in the Southcentral and Fairbanks areas. The Intertie
reduces the number of black/brownouts throughout the system by enabling power to move either north or south
when major system disturbances occur. The Alaska Intertie allows GVEA to purchase economy power to lower
the costs to rate paying consumers. It also allows Southcentral Alaska utilities to purchase power from Fairbanks
during power shortages. AEA contracts with the following utilities for operations and maintenance: Golden Valley
Electric Association (GVEA) in Fairbanks, and Southcentral Alaska utilities, Chugach Electric Association (CEA),
Matanuska Electric Association (MEA), and the Municipality of Anchorage, d/b/a Municipal Light and Power
(ML&P). The Alaska Intertie also enables GVEA to receive power generated by the Bradley Lake Project, which
is some of the lowest priced power in the Railbelt region. It also allows Southcentral Alaska utilities to purchase
power from Fairbanks during power shortages.
The Intertie Management Committee (IMC) and AEA manage the activities of the Alaska Intertie project under
the terms and conditions of the Second Amended and Restated Intertie Agreement (Agreement) executed on March
11, 2014. AEA contracts with certain Participating Utilities for operations and maintenance. The Agreement
improves the reliability of the interconnected electrical systems, outlines how the transfer over the Intertie of
electrical capacity and energy among the participants will occur, and establishes the IMC. The IMC’s primary
responsibility is to provide governance, control, operation, maintenance, repair, and improvement to the Intertie,
subject to AEA’s oversight. The IMC is comprised of a representative from AEA and each of the Participating
Utilities.
Summarized below are the State’s appropriations to upgrade and extend a portion of the Alaska Intertie (in
thousands):
Appropriation Description Year Amount
Upgrade and extension of the Intertie
(net of FY08 and FY12 reappropriations) FY02 $ 9,300
Repair of Static VAR compensators (SVC)
and a tower foundation repair FY08 10,000
Substation upgrades and tower repairs FY12 5,000
Railbelt transmission plan FY12 1,000
Schedule 9, Continued
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2020
66
ML&P was contracted to perform the repairs and upgrades. The tower repairs are now complete. Design and
construction of the new static VAR compensators (SVC’s) is complete. AEA will continue to work with the
Railbelt utilities to extend the intertie to Lake Lorraine.
Susitna-Watana Hydroelectric Project
Starting in 2010, AEA conducted preliminary planning and conceptual design for a large hydroelectric project to
be built in the Railbelt Region. A number of hydroelectric generation alternatives were studied and AEA issued a
Preliminary Decision Document selecting what is now known as the Susitna-Watana Hydroelectric Project as the
primary large hydroelectric project for the State to pursue.
The proposed Susitna-Watana Hydroelectric Project would be located approximately half-way between Anchorage
and Fairbanks on the upper Susitna River. The Susitna-Watana dam would be located within a steep-sided valley
of the Susitna River below Watana Creek at River Mile 184, approximately 22 miles upstream of the Devil's
Canyon rapids.
The project would include a single roller compacted concrete dam with a height providing nominal crest elevation
at 2,050 feet mean sea level with a 23,546 acre, 42.5-mile long reservoir with an average width of one to two miles.
The height of the dam was determined to be 705 feet tall during the engineering feasibility studies. The powerhouse,
dam, and related facilities would be linked by transmission lines connecting the project to the Alaska Intertie. The
project would produce about 50% of the Railbelt's electrical demand or an annual average of 2,800,000 MWh.
AEA filed a Notice of Intent and Pre-Application Document with the FERC to begin the licensing process for the
project in December 2011. The FERC approved 58 environmental study plans in early 2013. In implementing the
study plans, AEA worked closely with the Alaska Department of Fish and Game in conducting the fishery and
wildlife studies. On June 3, 2014, AEA filed the Initial Study Report (ISR) for the project. The approximately
7,000 page ISR presents information collected from the first year of field studies.
The Alaska Legislature has appropriated a total of $192 million for AEA to plan, design, and obtain a FERC permit
for the project. On December 26, 2014, Governor Bill Walker of Alaska (Governor Walker) issued Administrative
Order 271 suspending discretionary spending on the project. On January 8, 2015, the FERC granted AEA’s request
to hold the licensing process in abeyance. On July 6, 2015, Governor Walker’s office authorized AEA to proceed
with the Integrated Licensing Process (ILP) using previously appropriated funds. AEA, in August 2015, requested
the FERC’s permission to resume the licensing efforts. On August 4, 2016, Governor Walker issued a letter to
FERC requesting to proceed with the ILP to the point of issuing an updated Study Plan Determination (SPD) to
preserve the State of Alaska’s investment in the project. On August 26, 2016, FERC responded to the Governor’s
letter stating that FERC will proceed with the ILP to complete the SPD. After issuing the SPD, the project will be
put into abeyance as requested by the Governor.
Schedule 9, Continued
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2020
67
On June 22, 2017, FERC issued its Determination on the ISR for Susitna. Overall, it was very favorable to the
State. However, since it was issued more than 100 days beyond the ILP schedule of March 10, 2017, there was
insufficient time within FY17 to complete previously authorized scopes of work to complete a comprehensive
analysis of the Determination and revise study reports as needed. AEA requested that a portion of the Susitna
appropriation be extended for 90 days to complete this work and preserve the value of the State’s investment to
the maximum extent possible.
On July 18, 2017, the OMB issued a memo to AEA authorizing the continued spending on the project 90 days
from June 30, 2017. AEA was granted concurrence and authorization to spend necessary funds in order to proceed
to the point where the State’s investment, to date, is preserved and the project was put in abeyance. The work was
completed and all remaining contracts were terminated September 30, 2017. The remaining funds, approximately
$1,893,000, were returned to the State in FY19.