HomeMy WebLinkAboutRes 2011-04 Execution of the Amended and Restated Alaska Intertie Agreement -11-9-2011MEMORANDUM
TO: Board of Directors
FROM :
Alaska Energy Aut~h~rity
Sara Fisher Goa a:= · ·
Executive Director
DATE: November 9, 2011
SUBJECT: Alaska lntertie Agreement
Efforts to amend the Alaska lntertie Agreement were undertaken after AEA issued notice
of termination of the Original Agreement on October 16, 2006 . Th is notice could lead to
actual termination after four years (termination has been extended to November 15,
2011 ).
The Authority and Participating Utilities, individually and collectively, identified defects in
the Alaska lntertie Agreement. If not cured , these defects were likely to eventually
disrupt the safe, reliable and efficient operation of the Alaska lntertie. A number of major
repairs to the intertie were needed and not being undertaken . The Orig inal Agreement
lacked viable mechanisms fo r funding major repairs and capital improvements .
Additionally, the parties were not following a number of provisions in the contract. The
Authority and Participating Utilities therefore exerted considerable efforts to address
these concerns. Amendments to the Agreement were first brought to the Board at its
June 9 , 2011 meeting. The AEA Board identified some additional concerns and desired
improvements to the Agreement.
Following the June 9, 2011 AEA Board meeting , the deadline for terminat ion of the
Alaska lntertie Agreement ("Agreement") has been extended to November 15, 2011 .
This extension enabled AEA and the Railbelt utilities to successfully negotiate
amendments to the Agreement to address concerns raised by the AEA Board , as
described more fully below. After resolving AEA's concerns , the United States Army
("Army") raised additional concerns , described below. With the resolution of these
issues, the Amendment to the Alaska lntertie Agreement is ready for execution .
I. Background.
A memorandum dated June 9, 2011, provided background on the Alaska lntertie and
efforts to amend the Alaska intertie Agreement. A copy of that memorandum is being
provided .
akenergyauthority.org
813 West Northern Lights Boulevard Anchorage, Alaska 99503 T 907.771 .3000 Toll Free (Alaska Only) 888 .300.8534 F 907 .771 .3044
Board of Directors
November 9, 2011
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II. Resolution of AEA Board Concerns.
The three concerns about the Agreement raised by the AEA Board after the June 9,
2011 meeting have been resolved , including :
1. Section 6.4 now provides AEA with the same rights it has under the current
Agreement to make improvements to the intertie that AEA 'deems beneficial and
reasonable'. Improvements include add ing taps . Improvements wou ld be made
at AEA's expense unless the IMC determ ines the improvements d irectly benefit
Partici pants and Users . See attached.
2. Section 13.4 will expressly allow Partic ipants, Users and AEA, at their own
expense, to require testing of the accuracy of equipment by qualified third
parties . The IMC w ill be responsible to take appropriate act ion if inaccuracies
are discovered . The language is intended to give the IMC flexibility in respond ing
--ranging from re -testing the metering equipment, to f ixing or replacing
equipment. This concept was probably already covered in Section 8.8 with AEA
having step-in rights , but the express provision will eliminate doubt. And, by
giving authority to Participants and Users , each entity can protect the ir own
interests without AEA always having to step-in. See attached .
3. Section 16.3.4.1 will change how "System Demand" will be used under Section
16 .3.4 to ensure that Users (e.g ., IPPs) gain MITCR rights if acceptable open
access rules are not adopted by Ju ly 1, 2013. The approach taken is to clarify
that the User's MITCR calculation will include all wholesa le power sold to utilities
(unless the User agrees otherwise), and that the power will be removed from the
purchasing Utilities' MITCR calculat ion . This ensures the IPP of fa ir ,
substantially equal treatment to Participant utilities . An IPP w ill obtain MITCR
rights calculated w ith all power sales (including wholesale power sold to utilities).
The purchasing utility (if a participant), could not refuse to provide the IPP with a
portion of the Part icipant's MITCR, and then use the IPP 's inability to obtain
MITCR rights as an excuse for not purchasing power. This approach would only
become applicable if the IMC fails to develop acceptable open access rules .
Ill. Resolution of United States Army Concerns.
The proposed amendments to the Agreement we re negotiated to enable the United
States Army to immed iately become a Participant and thereby gain access to the Alaska
lntertie . In August 2011 , the Army reported that it was legally prohib ited from becoming
a Participant because federa l agenc ies may not assume any management
responsibilities/funct ions over non -federal entities . A fundamental concept of the
amended Agreement is that Participants on the lntertie Management Committee assume
management responsib ilities regarding the intertie . The Army a lso reported that it is
Board of Directors
November 9, 2011
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required to use Federal Acquisition Regulations ("FAR" which includes forms and rules)
for acquiring services, including transmission services.
The Army in September 2011 requested the Agreement be further amended to enable
the Army to become a User with special rights , rather than a Participant. The concept is
to enable the Army to gain more access while accommodating legal restrictions on the
Army becoming a Participant.
Amendments have been incorporated to accommodate the Army's requests, including :
1. The Army may become an intertie User with (3) months notice to the IMC and
AEA after July 2013, so long as the available lntertie Capacity is not fully
subscribed (e .g ., Section 5.2, );
2 . Upon execution of the lntertie Agreement, the Army would be allowed to
immediately attend aiiiMC meetings (e .g ., Sections 8.1 and 9.2.1 );
3 . The Army would receive a 30-day advance copy of the Annual lntertie Budget
(e .g., Sections 7.1 .2 and 8.6.5);
4 . The agreement clarifies that the Army will be treated as an entity eligible to
become a User -specifically it will be treated as an "other person authorized by
law to engage in the distribution of electricity" (e .g ., 16.3.2); and,
5. The Agreement clarifies that a user agreement may differ from the standard
lntertie User Agreement to accommodate the Army's obligat ions to use Part 49 of
the FAR. This may include allowing (a) the Army the right to terminate the
contract upon advance notice of three (3) months , and (b) federal claims
procedures to apply for dispute resolution, rather than provisions in the Alaska
lntertie Agreement (e .g ., Sections 8 .6.2 , 16 .3.2, and 16.3.5).
IV. Recommendation.
Staff of the Authority recommends that the Board authorize and empower the Executive
Director to execute the Amended and Restated Alaska lntertie Agreement dated
November 2011, with such non-material changes that the Executive Director finds
appropriate and prudent.
Attachments
ALASKA ENERGY AUTHORITY
RESOLUTION NO. 2011-04
RESOLUTION OF THE ALASKA ENERGY AUTHORITY RELATING TO THE
ALASKA INTERTIE; APPROVING EXECUTION OF THE AMENDED AND
RESTATED ALASKA INTERTIE AGREEEMENT: AND RELATED MATTERS
WHEREAS , the Alaska Energy Authorit y (the "Authority") owns the Alaska lntertie;
WHEREAS, the Alaska lntertie Agreement is an agreement re lated to the Alaska lntertie
among the Authority and the Municipality of Anchorage d/b/a Municipal Light and Power;
Chugach Electric Association , Inc .; Golden Valley Electric Associat ion , Inc.; and Alaska Electric
Generation and Transmission Cooperative , Inc. (collectively the "Part icipating Utilities);
WHEREAS , the Authority and Participating Utilities have certain rights and
responsibilities under the Alaska lntertie Agreement for the use , operation and maintenance of
the Alaska lntertie, with many duties addressed collectively by the Authority and Participating
Utilities within the lntertie Operating Committee ("IOC");
WHEREAS , the Alaska lntertie is an integral component of the Railbelt energy
transmission grid , and is essential for the transm ission of electric energy between Fairbanks
and Anchorage, enables the systems of various Participating Utilities to provide economical
electric energy to Railbelt customer ratepayers , and enables the systems of various IOC
Utilities to sell economy energy to other Railbelt and Participating Util ities for the ir systems to
provide economical electric energy to Rail belt customer ratepayers;
WHEREAS, the Authority, Participating Utilities, and IOC individually and collectively
identified defects in the Alaska lntertie Agreement that, if not cured , were considered to be
likely to eventually disrupt the safe, reliable and efficient operation of the Alaska lntertie and the
transmission of economical electric energy for the benefit of various Railbelt and Participating
Utility systems and their customer ratepayers ;
WHEREAS, the Authority, Participating Utilities , IOC , and other interested partie s have
individually and collectively negotiated Amendments to the Alaska lntertie Agreement, identified
as the Amended and Restated Alaska lntertie Agreement and more specifically described in the
Memorandum accompanying this Reso lution ;
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WHEREAS , Amended and Restated Alaska lntertie Agreement, if adopted , will cure the
identified defects in the A laska lntertie Agreement, a nd will help ensu re the cont inued safe ,
re liable and efficient operat ion of the Alaska ln tertie and the transmiss ion of economical electric
energy for the benefit of various Railbelt and Part icipating Utility systems and their customer
ratepayers ;
WHEREAS, it is in the best interests of the Authority, the State , and the people of
Alaska for the Authority to enter Amended and Restated Alaska lntertie Agreement.
NOW, THEREFORE, BE IT RESOLVED BY THE A LASKA ENERGY AU TH ORITY AS
FOLLOWS:
Section 1. The A utho ri ty finds and determ ines that, for the reasons more fully
described and documented and in the Memorandum with Attachments accompany ing th is
Resolut ion 2011-04 , that it is in the best interests of the Authority , the Stat e, and the people of
Alaska for the Authority to enter the Amended and Restated Alaska lntertie Agreement.
Section 2 . The Executive Director of the Authority is author ized, directed , and
empowe red to execute the Amended and Restated Alaska lntertie Agreement, with such non-
material changes that the Executive Director f inds appropriate and prudent.
Section 3. The Executive Di recto r of the Authority is autho r ized and empowered to take
any and all act ions appropriate and cons istent with t his Resolution .
Section 4 . This Resolut ion shall become effective immed iately upon its passage and
approval.
··--··~:·DATED at Anchorage, Alaska , this 9th day of November 20 11.
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Secretary
A m ended and Restated Alaska lntertie Agreement
Res olu t ion No. 2011-04
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