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Home My WebLink AboutBradley Lake PMC Meeting-Wed., July 26, 2006 2BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES 813 W. Northern Lights Boulevard Anchorage, Alaska Wednesday, July 26, 2006 — 10:00 a.m. 1. CALL TO ORDER Chair Haagenson called the meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:00 a.m. on Wednesday, July 26, 2006, from the Alaska Industrial Development and Export Authority's Board Room, Anchorage, Alaska, to conduct the business of the Committee per the agenda and public notice. 2. ROLL CALL Roll was called by Shauna Howell. The following members were present: Steve Haagenson Golden Valley Electric Association Bill Stewart Chugach Electric Association Bradley Janorschke Homer Electric Association Wayne Carmony Matanuska Electric Association Jim Posey Anchorage Municipal Light & Power Tim Barnum City of Seward Bryan Carey Alaska Energy Authority 3. PUBLIC ROLL CALL Rick Miller, Anchorage Municipal Light & Power Mike Cunningham, Chugach Electric Association Tuckerman Babcock, Matanuska Electric Association Don Zoerb, Matanuska Electric Association Lee Thibert, Chugach Electric Association John Cooley, Chugach Electric Association Robert Day, Anchorage Municipal Light & Power Charles O’Hare, Homer Electric Association Rick Eckert, Homer Electric Association Henri Dale, Golden Valley Electric Association Bob Price, Anchorage Municipal Light & Power Linda MacMillan, Alaska Energy Authority Rick Baldwin, Homer Electric Association Bradley Lake Project Mani nent Committee Meeting July 26, 2006 Page 2 of 6 4. PUBLIC COMMENT There were no public comments. 5. AGENDA COMMENTS Mr. Carmony added under New Business — Section F — Legal Matters (2 motions). Chair Haagenson added under New Business — Section G — Letters from AEA. 6. APPROVAL OF MEETING MINUTES -— March 28, 2006 Mr. Janorschke moved to approve the minutes of the March 28, 2006 meeting, seconded by Mr. Posey. The meeting minutes of March 28, 2006, were unanimously approved as presented. 7. NEW BUSINESS 7A. ELECTION OF OFFICERS Mr. Janorschke nominated Mr. Stewart for the position of Chairman, seconded by Mr. Carmony. Mr. Posey nominated Mr. Haagenson for the position of Chairman, seconded by Mr. Barnum. The group voted and Mr. Stewart was voted in as Chairman of the BPMC. Mr. Posey nominated Mr. Haagenson for the position of Vice Chairman, seconded by Mr. Barnum. Mr. Carmony nominated Mr. Janorschke for the position of Vice Chairman, seconded by Mr. Stewart. The group voted and Mr. Janorschke was voted in as Vice Chairman of the BPMC. The position of Secretary/Treasurer remains with AEA. 7B. FERC INSPECTION REPORT - CAREY Mr. Carey reported that during the week of July 10, 2006, the FERC inspection and Part 12 inspection, as well as the Potential Failure Modes Analysis (PFMA) discussions/meetings were held at HEA. Most of the discussions involved the PFMA and the history of Bradley and potential problems. Bradley came out as having more calcite than what the inspectors have seen in other dams. There is a small amount of corrosion down the diversion tunnel, which will be monitored. Seismic movement for Bradley, that was approved by FERC in a record decision, is a greater amount of movement than what FERC normally approves. The discussion came up of why Bradley could have greater seismic movement than other dams. It has been proposed that the tunnel drains which are accessed from the outside be cleaned out next year. Bradley Lake Project Man_, -.nent Committee Meeting July 26, 2006 Page 3 of 6 7C. INSURANCE RENEWAL — CUNNINGHAM Mr. Cunningham gave a summary of the insurance summary Renewal period July 1, 2006 — July 1, 2007 and Expiring period July 1, 2005 — July 1, 2006. Mr. Haagenson’s recommendation was to find a way to fund $20M. Mr. Posey added that the group should look at the cost of borrowing or a letter of credit for $20M from either AIDEA or someone else vs. the cost of insuring it. The group agreed to revisit this item at the next meeting with more information becoming available from the underwriter and Mr. Cunningham, also adding to that AIDEA’s look at how they would help fund the $20M. Mr. Carey clarified that it is Alaska Energy Authority that owns it and not AIDEA. 7D. RENEWAL & CONTINGENCY FUND REDEPOSIT PROCEDURE - MACMILLAN Ms. MacMillan gave a brief overview of the procedure, stating that this was a proposed housekeeping tool so that the movement of cash matches the budget plan. Motion #06-5: Mr. Janorschke moved to approve the Renewal and Contingency Fund redeposit procedure beginning with project fiscal year ended June 30, 2006 as follows: Renewal and Contingency Fund redeposit will be made in early August each year. The amount will equal the approved budget percentage of actual accrued expenditures as of June 30 of the fiscal year just ended. Seconded by Mr. Posey. A voice vote was taken and the motion passed by unanimous approval. 7E. HOMER O&M AGMT —- RECOMMENDATION FROM THE COMMITTEE - DALE Mr. Dale stated that the O&D Committee did meet and the recommendation was to not extend the contract, not change the terms of language at this time. Mr. Carmony added that the document that Homer presented be modified to say 5 years instead of 10 years and we vote in favor of extending this agreement for 5 years. Mr. Posey noted that if we are going to propose that, then to send it back to the O&D Committee and address at the next BPMC meeting. Motion #06-6: Recommend to not extend the contract, and not change the terms of language at this time. Seconded by Chair Stewart. Discussion ensued as to moving this item to the next BPMC meeting allowing more time for the O&D Committee to make changes or a further review. Motion #06-7: Mr. Carey moved to table this item until the next meeting date. Seconded by Mr. Posey. A voice vote was taken and the motion to table passed by unanimous approval. The O&D Committee was tasked with reviewing this document and making necessary changes for presentation and review at the next BPMC meeting. Bradley Lake Project Man.,-.nent Committee Meeting July 26, 2006 Page 4 of 6 7F. LEGAL MATTERS - (2 motions) CARMONY First Legal Matter Motion #06-8: Mr. Carmony moves that the legal services provided to the BPMC by AterWynne be terminated and that an offer be extended to the firm of Davis Wright Tremaine to be retained as interim counsel to the BPMC. Seconded by Mr. Janorschke for discussion. Mr. Carmony’s concern is that there is commingling legal advice across the boundaries of various organizations. Mr. Haagenson stated that on the IOC everyone has their own attorneys, and the IPG is the same. Mr. Carmony added it may be time to terminate their services and obtain a firm that the group is all convinced can provide advice to the group. His research directed him to the firm of Davis Wright Tremaine as a recommendation for an interim counsel, hence the termination of the firm of AterWynne and extend an offer to Davis Wright Tremaine. Mr. Carey stated that the firm of Davis Wright Tremane could have a problem with in the sense that there would be conflict of interest, and asked if there were any other firms that could be used. Mr. Haagenson added that this group has a right to pick their own attorney. AterWynne is the present attorney by letter agreement. If the move is made to Davis Wright Tremaine, he recommended finding another attorney, adding that it may involve extending the search out of state. Mr. Carmony amended the motion to read: Move we terminate the services of AterWynne and have the Chairman begin immediately to identify and employ or retain an interim counsel until such time as something can be brought to the board for a more permanent arrangement. Seconded by Mr. Janorschke for further discussion. Mr. Haagenson stated that terminating before employing could be a big mistake and to use caution if the group proceeds this direction. It might be worth further amending Mr. Carmony’s motion to say we are looking at replacing AterWynne with someone else, and let this group do an evaluation to find a replacement and do the action at the correct time. Mr. Carmony stated that if that was a suggested amendment, he would second it. Mr. Carmony stated that we have made the decision to pursue new counsel and are going to authorize the Chair to do that investigation and bring a recommendation back to the group. Mr. Haagenson restated that he is not authorizing getting new counsel — rather, going out and find someone to replace them and once we have them and pick them, then we will replace them. Mr. Janorschke further amended the motion to include a timeline of the end of the year 2006. Chair Stewart agreed to making the assignment and a timeline. The Chair will bring back recommendations to the next BPMC meeting with a decision at the following meeting by the end of the year. A voice vote was taken and the motion was passed by unanimous approval. Bradley Lake Project Man_,-ment Committee Meeting July 26, 2006 Page 5 of 6 Second Legal Matter Motion #06-9: Mr. Carmony moves that the Chairman promptly inform the utility members of the BPMC of all work assigned to the BPMC attorney. Further, that all work products, including drafts of the attorney be distributed to each utility at the same time it is turned over for review to the Chairman. Seconded by Mr. Janorschke for discussion. It was agreed that the wording “including drafts” will be removed from the above-stated motion. A roll call vote was taken and the results were as follows: City of Seward No Matanuska Electric Association: Yes Chugach Electric Association: No Homer Electric Association: Yes Golden Valley Electric Association: No Anchorage Municipal Light & Power: No Alaska Energy Authority: Yes 7G. LETTERS FROM AEA - HAAGENSON Mr. Haagenson presented three letters: Letter from Bryan Carey to Steve Haagenson dated June 13, 2006 Letter from Steve Haagenson to Bryan Carey dated July 17, 2006 Letter from Ron Miller to Steve Haagenson dated July 25, 2006 He stated the two points the letters reference — request for bond counsel for work that they did and request for backup for the other part of the invoice. Mr. Bjorkquist noted that the concern that AEA has with the invoice that was given is the description didn’t describe what was done sufficiently to know that it was related to the operations of Bradley as opposed to something else. Reviewing bond documents — what was the purpose, what was intended, why was that being done. Multiple things are going on amongst the utilities with respect to Bradley and other issues — including possible divestiture. That is not related to operating Bradley, and if that is what this legal review is for, it’s inappropriate to be passed through the Bradley budget. That is fundamentally the question that AEA asks — what was being done with this, what's the work, so that AEA knows. The second part about requesting the work product that came from that, in the past, you have shared work product with AEA, and that is a very efficient way to operate. If there is a common understanding of how things work, things work much better. What was intended was if this is something that you believe is appropriate to share with us, share it so that we don’t have to duplicate the work effort to come to our own conclusion on the very same issues. AEA asks for clarification that it’s appropriate within Bradley operations as opposed to outside Bradley operations into something that would be inappropriate to pass through the Bradley budget. The role that we suggest AEA plays is a minimal role and the only question that we ask related to that is to obtain assurance that what you are invoicing through the Bradley budget, passed through to every ratepayer in the railbelt, is related to Bradley operations and not something else. You are exempt from regulation for Bradley, not from anything else. When the last fiscal Bradley Lake Project Man.,-ment Committee Meeting July 26, 2006 Page 6 of 6 years budget was approved, there was a request to put in $150,000 for formation of a joint action agency, which is unrelated to operating Bradley — it has to do with the potential divestiture of Bradley. The Bradley budget is inappropriate for that and for AEA just to ask for clarification that the invoices relate to Bradley and Bradley operations is a minimal intrusion into the prerogatives of the BPMC. Chair Stewart asked that there be more use of phones and less use of letters to resolve these issues. 8. COMMITTEE REPORTS 8A. OPERATORS REPORT —- UPDATE ON GOVERNOR MODIF. PROJECT — O’HARE Mr. O’Hare gave a brief overview on the project update handout dated July 26, 2006. The overview included items accomplished, major problems encountered and expenditures to date. He stated that construction was completed on Unit 1 as of May 13, 2006 and have started testing, which was put on hold on May 18, 2006 due to a divider issue. The modifications for that divider issue were completed on July 6, 2006, and testing for Unit 1 was completed on July 10, 2006. The testing proved the new design has improved the operation of the Unit. Unit #2 construction started on July 12, 2006. Expect construction to be complete on August 8, 2006, followed by testing of both units on August 16, 2006. Some of the major problems encountered include a deficiency in the design of the hydraulic system that precluded the dividers to operate at the required speed of 1.1 seconds. That mandated that VA TECH go back and do some redesign and hydraulic upgrades, which caused a delay and a change order to the initial contract. During construction of Unit #1 some problems with the linkage were found, including pitting and galling. VA TECH has corrected these problems with Unit #1 and just found that Unit #2 has the same problems. It has resulted in change orders to the contract and a bit of a delay. During testing of Unit #1, it was discovered that the new hydraulic system was not strong enough to pull the dividers out of the stream during four and six needle operations, resulting in VA TECH going back and redesigning the profiles of the dividers so that the force factor angle was changed to allow the present hydraulics to be able to pull the dividers out of the stream. 8B. NEXT MEETING DATE The next meeting date will be at the call of the Chair. 9. ADJOURNMENT The meeting was adjourned at 11:45 a.m. BY: Bill Stewart, Chairman ATTEST: pay c Alaska Energy Authority/ Secretary wk “AIDEN f= ALASKA Hy Alaska Industrial Development He Aas Export Authority 8. 9. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE REGULAR MEETING AGENDA Wednesday, July 26, 2006 — 10:00 a.m. (via electronic media at the AIDEA and AEA Board Room — 813 W. Northern Lights Blvd.) (Corner of Arctic and Northern Lights Boulevard) CALL TO ORDER Haagenson ROLL CALL (for Committee members) re PUBLIC ROLL CALL (for all others present) | PUBLIC COMMENT +f i as AGENDA COMMENTS Move ved ds poy the, APPROVAL OF MEETING MINUTES March 28, 2006 ped Ps NEW BUSINESS . Al Cope ave L/vrerimoudey vA A Election of Officers “ } Haagenson B. FERC Inspection Report “ Carey C. Insurance Renewal .~ . Cunningham D Renewal & Contingency Fund Redeposit Procedure” MacMillan E. Homer O&M Agmt. — Recommendation from the Committee’ Dale F. a Motion 7d pe ue Aavryndin, eye a MMENTS ~~ G. Lerttes fre Steve A. lod Report >» Update on Governor Modification Project Governor Committee B. Next Meeting Date Haagenson ADJOURNMENT 813 West Northern Lights Boulevard * Anchorage, Alaska 99503-2495 www.aidea.org * 907/269-3000 * FAX 907/269-3044 ® Toll Free (Alaska Only) 888/300-8534 * www.akenergyauthority.org BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES 813 W. Northern Lights Boulevard Anchorage, Alaska Tuesday, March 28, 2006 — 10:30 a.m. 1. CALL TO ORDER Hydroelectric Project tch 28, 2006, from the ‘com, Anchorage, Alaska, lic notice. Chair Haagenson called the meeting of the Bradley L Management Committee to order at 10:30 a.m. on Tuesda’ Alaska Industrial Development and Export Authority's Bo; to conduct the business of the Committee per the age 2. ROLL CALL Roll was called by Shauna Howell. The follo embers were prese Steve Haagenson Golden Valley Electric Association Mike Cunningham Chugach Electric As: Bradley Janorschke Homer Electric Associa Wayne Carmony Matanuska Electric Associ Jim Posey Anchorage Municipal Light & Tim Barnum ity of Seward eleconferénce) er (teleconference) Energy Authority PUBLIC ROLL CALL Doug Hall, Anchorage Municipal Light & Power Henri Dale, Golden Valley Electric Association Charles O’Hare, Homer Electric Association Rick Eckert, Homer Electric Association Brian Hickey, Chugach Electric Association Mark Foster, Consultant Linda MacMillan, Alaska Energy Authority Gary Stromberg, Parisena, Stromberg & Co. Jenny True, AterWynne (teleconference) Don Zoerb, Matanuska Electric Association (teleconference) Bradley Lake PMC Meeting March 28, 2006 Page 2 of 5 4. PUBLIC COMMENT There were no public comments. 5. AGENDA COMMENTS There were no agenda comments. 6. APPROVAL OF MEETING MINUTES — June 21, 2005 The meeting minutes of June 21, 2005, were unanimously,approved as presented, with the comment from Chair Haagenson to delete the memorandum attachment. 7. NEW BUSINESS 7A. _FY’06 Budget Revision Mike Cunningham and Linda MacMillan gav of the 2006 Opérating and Capital budget revision. MOTION #06-1: Mr. Janorschk Management Committee approv budget revision as presented. Seconde and the motion was unanimously approved, he Bradley Lake Project Operating and Capital A voice vote was taken 7B. FY’07 Budget MOTION #06-2: ~ Mr. Janorschke moved that the Bradley Lake Project Management Committee approve the fis year 2007 Operating and Capital nded by Mr. Miller. ‘MacMillan gave an overview of the FY’07 Operating and id on the topic of $40,000 budgeted for Bradley Lake PMC jt the firm of AterWynne has an inherent conflict of interest in They believe that the inclusion of $40,000 in the budget is ted that the membership would consider deleting it — either to teps to locate and identify a new legal firm to represent this representing th BPM inappropriate an delete it or to tak organization. Chair Haagenson noted that they were talking about the budget items and wasn’t sure if they could dive into the philosophy of the budget. MOTION #06-3: Mr. Carmony moved to make an Amendment to delete the $40,000 from the 2007 budget that is identified as Bradley Lake PMC Legal and to take that up after taking a look at the potential for identifying and employing a new attorney. Chair Haagenson restated the motion to read: Motion to amend the Bradley Lake PMC Meeting March 28, 2006 Page 3 of 5 budget to remove the $40,000 on page 5 of 9 called Bradley Lake PMC Legal. Seconded by Brad Janorschke. Mr. Carmony stated that there are three months before the fiscal year 2007 budget begins. He believes that in that timeframe we can take up the question of a conflict and add funds back into the budget prior to the commencement of the fiscal year 2007 once this issue of a potential conflict of interest is resolved. Mr. Cunningham added that the FY’07 budget needs to be approved and in place by April 1°' according to bond covenants, and that doesn’t preclude.a future amendment to it. thing was brought up by id. with the pending date Mr. Posey stated that this issue was brought up last yea anybody in that interim period of time to look for new ‘of April right upon us, he didn’t think they sh someone wanted to do the research and look their requirements during this interim period that’s fine but we have to approve the bi motion. t year there had been changes has been formalized and that S everyone was aware, the owned assets placed with Mr. Carmony also stated that over the course of that he wanted to point out to the group. The A organization has named AterWynne as their attorney intense lobbying efforts are taking place to have various that organization (JAA). Chair Haagenson added that ‘the question now was do we take the money out of the budget now or not; and it doesn't specify who our legal counsel is. As the Amendment stands now — do we remove the $40, 000 from the budget or not? escommented that regardless Of what is done with the current legal, the d Pe sked for a roll call vote). City of Seward No Matanuska Electric Association Yes Chugach Electric Association Homer Electric Association No Golden Valley Electric Association No Anchorage Municipal Light & Power No Alaska Energy Authority Abstain Chair Haagenson stated that the motion failed. Bradley Lake PMC Meeting March 28, 2006 Page 4 of 5 hy aye ay) die a Motion of Approving the FY’07 budget as presented. A voice vote for the Approval of the FY’07 budget was taken and the only nay vote was from MEA. The motion passed with one nay vote from MEA. 7C. —FY’05 Audit Report from Parisena, Stromberg & Company MOTION 06-4: Mr. Janorschke moved that the Bradley Lake Project Management Committee accept the results of th Management Committee Operating and Revenue Fu presented by Parisena, Stromberg & Co., APC. Secon Gary Stromberg presented the audit report. A voice vote was taken and the motion pas, y unanimous ap 7D. Direction from Chair Haagenson . Direct the O&D Committee to re Maintenance Agreement. the Homer Operation and . Consider the. Homer Electric request to sign a 10-year term Agreement. . Identify necessary modifications to the contract, such as BPMC attorney review of construction contracts, as approved by the BPMC — timeframe to be by. the next‘meeting in July. 8. COMMITTEE,REPORTS / COMMENTS Charlie are stated that the governor project started a couple of weeks ago. There are no m f this time. Brian Hickey added that from a technical perspective they ked with VA Tech to develop a governor control algorithm to eliminate the instal lity problem in conjunction with the new deflectors. By August they will know the results. Completion date is set for the end of August. 8B. Next Meeting Date The next meeting date is at the call of the Chair, and will be held at the Bradley Lake Project site. Bradley Lake PMC Meeting March 28, 2006 Page 5 of 5 9. ADJOURNMENT The meeting was adjourned at 11:20 a.m. BY: ATTEST: Steve Haagenson, Chairman y Authority, Secretary BR = .EY LAKE HYDROELECTRIC PROJECT INSURANCE SUMMARY RENEWAL 07/01/06 - 07/01/07 Deductible Premium $ 105,535 Limits of Liability $5,000,000 per occurrence Excluding Terrorism Type of Insurance $2,000,000 per occurrence for buildings equipment and contents $7,500,000 per occurrence for Earthquake and flood $15,000,000 excess of $5,000,000 per occurrence Excluding Terrorism $50,000,000 per accident Excluding Terrorism First Excess $ 195,992 Boiler & Machinery $2.50 per kW for Hydro Turbine Generators | $ 127,937 $100,000 Transformers 100 MVA and larger $50,000 All other objects Second Excess $20,000,000 excess underlying $ 131,350 $20,000,000 excess self insured Total Annual Premiums $ 560,814 EXPIRING 07/01/05 - 07/01/06 Limits of Liability Deductible $5,000,000 per occurrence $2,000,000 per occurrence for buildings Excluding Terrorism equipment and contents $7,500,000 per occurrence for Earthquake and flood $2,000,000 per occurrence for buildings equipment and contents Type of Insurance $ 91,769 First Excess $ 170,428 $15,000,000 excess of $5,000,000 per occurrence Excluding Terrorism $50,000,000 direct damage $2,000,000 expediting expense Excluding Terrorism $40,000,000 excess underlying $20,000,000 excess self insured $2.50 per kW for Hydro Turbine Generators $100,000 Transformers 100 MOA and larger $50,000 All other objects Boiler & Machinery $ 116,306 Second Excess $ 150,000 Total Annual Premiums $528,503 AGENDA ITEM: Approve Renewal and Contingency Fund redeposit procedure beginning with project fiscal year ended June 30, 2006 as follows: Renewal and Contingency Fund redeposit will be made in early August each year. The amount will equal the approved budget percentage of actual accrued expenditures as of June 30 of the fiscal year just ended. REASON FOR THE PROCEDURE: Section 13(b) of the “Power Sales Agreement” authorizes the BPMC to adopt rules of procedure for operation of the project including “sufficiency of the annual budget”. Section 4 of the “Investment Agreement for the Renewal and Contingency Reserve Fund” (R&C) says: In the event of a withdrawal which brings the balance of Invested Funds below the Initial Deposit, the Trustee will have four (4) years from the date of the withdrawal to redeposit funds sufficient to bring the balance of Invested Funds back up to, but not higher than, without the written consent of the Bank, the Initial Deposit. The BPMC approved FY06 budget contemplates reimbursement of 25% of accrued R&C expenditures as of June 30, 2006. In the past AEA, per direction of the chairman of the project Budget and Finance subcommittee, has reimbursed the fund at 25 % or 100% of actual R&C fund expenditures at the end of June. The BPMC has never adopted specific rules of procedure for R&C fund reimbursement. This is probably because in the past there has not been a significant difference between accrued and actual R&C expenditures as of year end. At June 30, 2006, accrued R&C expenditures are projected to be $600,000. If R&C is reimbursed based on actual expenditures at year end, reimbursement will be $150,000 less than budgeted in FY06 and $150,000 more than budgeted in FY07. This difference will result in the need for FY07 budget amendment offset by a refund for FY06. AGREEMENT AMENDING AND EXTENDING THE TERM OF THE OPERATION AND MAINTENANCE AGREEMENT FOR BRADLEY LAKE PROJECT AMENDMENT NO. 3 THIS AGREEMENT entered into this day of , 2006, between the Homer Electric Association, Inc. (the “Operator’) and the Alaska Energy Authority (the “Authority’). Recital Effective February 11, 1994, the parties entered into an agreement titled Operation and Maintenance Agreement for Bradley Lake Project (the “Agreement”). The term of the Agreement was for an initial period of five years, automatically renewable annually thereafter. The parties extended the Agreement through an Amendment dated June 22, 1999. The Amendment extended the Agreement until June 30, 2004, and provided that the term shall continue from year to year thereafter. The parties have determined that instead of the annual renewal, the Agreement shall be renewed for an additional period of ten years and automatically renewed annually thereafter; and that the Agreement be further amended as hereafter set forth. Amendments NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. Section 2 of the Agreement as amended by the June 22, 1999 Amendment is hereby amended as follows: Effective July 1, 2006, the term of the Agreement shall be ten years and the term shall automatically be renewed for successive one-year periods, until terminated as provided in the Agreement. 25 Paragraph 13(a)(1) of the Agreement is amended to read as follows: Each Party shall be liable for the negligent, willful and grossly negligent acts of its officers, employees, agents and contractors with respect to the ownership, <_ constructiofjoperation, maintenance or repair of the Project. It is recognized that the project insurance does not cover the willful and grossly negligent acts of a party. Each Party shall be solely liable for the willful and grossly negligent acts of its officers, employees, agents and contractors to the extent not covered by insurance. A party's maximum cumulative liability relative to all other claims and liabilities, including that with respect to direct damages and obligations under any indemnity, will not exceed the limits of any insurance policies insuring against such claims or liabilities. In no event will a Party be liable for incidental, indirect or consequential damages of any kind. Agreement Amending and Extending the Term of the Operation and Maintenance Agreement for Bradley Lake Project 3. Paragraph 13(a)(8) of the Agreement is amended to read as follows: (8) | Acopy of the insurance policies required of the Operator by this Section will be furnished to the Authority prior to beginning work under this Agreement. Prior to February 1 of each year thereafter, evidence of insurance shall be provided by the Operator. 4. Paragraph 13(a)(9) of the Agreement is amended to read as follows: (9) | The Operator’s obligation to obtain and maintain insurance coverage pursuant to this Section shall be subject to the general availability of such coverage under reasonable terms and conditions. If one or more of the required insurance coverages is not available to the Operator under reasonable terms and conditions, the Operator shall, under the guidance and direction of the BPMC and Division of Risk Management, use its best efforts to obtain substantively equivalent insurance coverage acceptable to the BPMC, the Authority, and the Division of Risk Management. 5. A new subsection 13(f) is added to the Agreement to read as follows: (f) The Authority shall maintain a policy or policies of property damage insurance fully insuring the Project against loss resulting from fire, explosion, accident, or equipment breakdown for the full insurable value of the Project. The policy shall contain a waiver of subrogation with respect to the Operator and the BPMC and list the Operator as an additional named insured. IN WITNESS WHEREOF, the parties have caused this agreement to be executed as of the date first written above. HOMER ELECTRIC ASSOCIATION, INC. Date By General Manager ALASKA ENERGY AUTHORITY Date By Executive Director Agreement Amending and Extending the Term of the Operation and Maintenance Agreement for Bradley Lake Project Lisp: pick nod Pauerlhawe tenyed . lowe = Mmeiad- to nned digits. Qecined dl Prine atride nowr = lat 829 94 © ty vere He iw. EYE Lette in Petre’ vole a te "on to ee (or wold bone beow Too 7 vs. R520 5 503 risk hAonn e fae Din - lok e@ lt J ends fo! 28, CD Steeda ete (enewad 4 Ca— 90 bolt to nde Zap be Libaiin a Al yp las 4 Y fo. eae, ‘hee coms ag of %o Linde lM? Hemi Dobe Wot evbondd cotyoh vet che Towne @ this tine. eet Povpon dee Dus dk, (9 yer. “Posey —“Sidk beck te 0+D [afee — felling obet © lent aye. 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If you are unable to attend the meeting in person, please use the following phone instructions: TELECONFERENCE INSTRUCTIONS Wednesday, July 26, 2006 — 10:00 a.m. To join the meeting, please do the following: Dial 1-800-315-6338 Enter 813# (Fhe BRADLEY GOVERNOR PROJECT UPDATE July 26, 2006 Items Accomplished Major Unit #1 construction completed on May 13, 2006 Unit #1 testing put on hold May 18, 2006 due to divider issues Unit #1 divider modifications completed July 6, 2006 Unit #1 testing completed July10,2006 Unit #2 construction commenced July 12, 2006 Problems Encountered A deficiency in the initial design required a redesign and modification to the hydraulics system. This was required to ensure adequate system capacity to operate the dividers at the required speed of 1.1 seconds. During disassembly of unit #1, divider linkages, shafts, and pins were found to be pitted and galled. Change orders were initiated to have VATECH correct these problems. The shafts and pins were stoned and/or replaced. The linkages were redesigned to incorporate high density plastic washers to prevent galling. These same issues have been discovered on unit #2 and will be handled the same as unit #1. During testing of unit #1, it was discovered that the hydraulic system was unable to draw the dividers out of the water streams when in four and six needle operation. This required VATECH to redesign the profile of the dividers to redirect the force vector and decrease the torque on the divider shafts. The redesign was succesfull and the problem was eliminated. During certain needle mode transitions, there were step changes in unit output large enough to be unacceptable. This problem was corrected through minor changes in the programming logic. Expenditures To Date FY06 FY07 Budgeted Expenditures to date $2,493,351 $1,721,748 $867,681 N/A Note: FY06 expenditures are low due to delays in the project. FY07 will be comparatively higher. 25/2003/TUE 26:11 AIDEA FAX No. 907 269 3944 P. 002 IDEN [= ALASKA GRE ENERGY AUTHORITY vr + Alaska Industrial Development and Export Authority July 25, 2006 Mr. Steve Haagenson Chairman Bradley Lake Project Management Committee Golden Valley Electric Association, Inc. 758 Illinois Street P.O. Box 71249 Fairbanks, AK 99707-1249 Dear Mr. Haagenson: Bryan Carey has forwarded to me your July 17, 2006 letter responding to his June 13, 2006 letter related to billing invoices for legal services to review bond covenants that you submitted to the Alaska Energy Authority (AEA) (not “AIDEA” as you reference in your letter), AEA disagrees with your assertion that the review and approval of invoices for BPMC legal services is solely the prerogative of the BPMC chair. In order to protect Railbelt utility ratepayers, it is appropriate for AEA to seek verification of billing invoices that do not clearly demonstrate that the amounts invoiced are related to the operation or maintenance of the Bradley Lake hydroelectric project. Invoiced amounts, when paid, are automatically passed through to utility ratepayers, without any RCA or other regulatory review or approval. Railbelt utility ratepayers deserve at least minimal assurances that only appropriate Bradley Lake expenses are passed through. AEA’s June 13, 2006 letter to you requested clarification of activity described in invoices as “researching and summarizing Bradley Bond covenants,” and whether such activity related to Bradley Lake operations or other matters that would be inappropriate for payment. AEA needs this clarification to “timely process” the payments as you request. In addition, you have objected to AEA’s request for any deliverable related to the Bradley Lake Bond covenants. AEA requests the BPMC reconsider this decision as a means to foster efficiency in BMPC operations. AEA notes that in the past, BPMC has shared with AEA legal analyses from the BPMC’s counsel. Such sharing helps form a common understanding of contractual/legal relationships without wasteful duplication of effort. Sihcerely, ~ iller Executive Director Alaska Energy Authority cc: Bryan Carey, AEA BPMC Members 813 West Northern Lights Boulevard * Anchorage, Alaska 99503-2495 www.aidea.org * 907/269-3000 * FAX 907/269-3044 ® Toll Free (Alaska Only) 888/300-8534 * www.akenergyauthority.org GVEA ete Val Electric Association PO Box 71249, Fairbanks, AK 99707-1249 * (907) 452-1151 * www.gvea.com Your Touchstone Energy Cooperative at pig July 17, 2006 Mr. Bryan E. Carey, PE Project Manager 813 W. Northern Lights Blvd. Anchorage, AK 99503-2495 Dear Mr. Carey: This letter is in reference to your inquiry regarding legal services work performed by Ater Wynne LLP in the months of March and April 2006. First, | want to be clear that the Bradley Lake Project Management Committee is responsible for the management, operation, maintenance and improvement of the Bradley Lake Project, which includes the responsibility for counsel reports to the Committee Chair, subject to the non-delegable duties of the Alaska Energy Authority. As Chair, it is my role to review and approve bills. | have previously approved these legal bills and expect AIDEA to process the payments in a timely manner. AIDEA questions in the past have been limited to verification of expenses, such as travel. Second, while AIDEA review of legal work is not appropriate, | will tell you that | have approved the research on Bradley Bond Resolution covenants by Ater Wynne. We rely on our attorneys to occasionally do research and other forms of due diligence review to assure that any actions contemplated and discussed by the Committee are in compliance with the requirements of the bond documents and do not potentially jeopardize the project's financing arrangements. Sincerely, a Steven H. Haagenson President & Chief Executive Officer RECEIVE] eae oe AIDEN. vom JE ALASKA Alaska Industrial Development WA Export Authority June 13, 2006 Mr. Steve Haagenson, President and CEO Golden Valley Electric Association P.O. Box 71249 Fairbanks, Alaska 99707-1249 Dear Mr. Haagenson: The Alaska Energy Authority (AEA) needs further information to evaluate whether invoices for legal services regarding the Bradley Lake Hydroelectric Project (Bradley) are appropriate for payment. Golden Valley Electric Association (GVEA) recently submitted two invoices (March and April 2006) to AEA for legal services performed by AterWynne. Most of the activity is described as “researching and summarizing Bradley Bond covenants.” It is not clear from these descriptions whether the legal services properly relate to Bradley operations, or to other matters that would be inappropriate for payment (e.g., possible utility acquisition of Bradley). Please provide a more detailed explanation of the legal services provided. If you prefer that AEA contact AterWynne directly for a more detailed explanation, please inform both AEA and AterWynne of that fact so that AEA can expedite processing the invoice. AEA also desires a copy of any deliverable produced related to Bradley Bond covenants. Sincerely, Alaska Energy Authority A fr 4 © ’ Bryan E. Carey, P Project Manager (CG: Ron Miller, AEA Executive Director BPMC Members 813 West Northern Lights Boulevard * Anchorage, Alaska 99503-2495 www.aidea.org ¢ 907/269-3000 * FAX 907/269-3044 ® Toll Free (Alaska Only) 888/300-8534 * www.akenergyauthority.org Bradley Lake PROJECT MANAGEMENT COMMITTEE MEETING / / Yel A Z JW (Date) AT DEA SAEA (Location) PLEASE SIGN IN No. NAME REPRESENTING t| Marre Lheuel/ AEM 2 STEVEN MHAACAL Sow GUGA 3 | Bie SFewaar COA 4 jel Le keeg— Heh 5 O'Hare. HEA 6 | Koeser Day MUX? 7 Bryan Cosy PEA 8 | whe a CES p- 9 Heuer Doe SG VEA 0 | BSAyce LIL &. | Geld rMVilbe We+P 12 | Yom eae Crty ef Sturae d ee HEA inne: WE 15 Tw Ca. WOW MAE Px 16 | sbhn © Geo fees i Chatga br | OMe Kae) Phe xe We Le 18 ghee Paaens dae 19 COE THIGCRT Chl GApe fF 20 | nda, Mach la ALR 21 22.7 92Q2\IT9884 pate: _//46/oe BRADLEY PMC VOTING YES lO ABS YES NO S YES NO ABS 01% ae Ty Agenda Item No. CITY OF SEWARD MATANUSKA ELEC ASSOC. 14% [ZT ZI CHUGACH ELEC ASSOC 30% [oz] HOMER ELEC ASSOC 12% TEE | ZI GOLDEN VAL ELEC ASSOC 17% ze : MUNI LIGHT & POWER 26% ALASKA ENERGY AUTHORITY Ze A=4+ OVER 51% B= AEA CONCUR With A C = UNANIMOUS ~ VOTING METHOD A: Requiring four yeas with 51% of utilities, with no AEA vote: 1) Procedures for scheduling, production and dispatch of project power. 2) Establishment of procedures for use of each purchaser's water allocation (AEA assent required for license requirements). 3) Selection among alternative methods that do not involve AEA for funding required project work. VOTING METHOD B: Requiring 4 yeas with 51% of utilities and AEA concurrence: 1) Arranging operation and maintenance of project. 2) Adoption of budget of annual project costs. VOTE(93Q3/BC5272) X aah fv tele 3) Establishment of FY estimated annual payment obligation and schedule of each purchaser. 4) Determination of annual project costs afier each FY. 5) Evaluation of necessity for and scheduling of required project work. 6) Determination of appropriate amount of insurance. 7) Adoption of additional minimum funding amounts for renewal and contingency reserve fund above that required by bond resolution. 8) Selection among alternate methods that involve AEA for funding required project work. ~7 9) Adoption or amendment of procedural committee rules (except dispute resolution). 10) Adoption of project maintenance schedules. 11) 12) 13) 14) 15) D = MAJORITY Determination of rules, procedures and accounts necessary to manage project when no bonds outstanding. Evaluation and approval of optional project work and compensation for such work. Application of insurance claims proceeds not governed by bond resolution. Approval of procedures and any individual utility agreements relating to electric power reserves for project. Approval of consultants. VOTING METHOD C: Unanimous vote by all (including AEA) VOTING METHOD D: Majority vote (including AEA) Election of Officers Shana Re BK = AIDEN. [= ALASKA Le Thy Alaska industrial Development G2 ENERGY AUTHORITY and Export Authority July 25, 2006 Mr. Steve Haagenson Chairman Bradley Lake Project Management Committee Golden Valley Electric Association, Inc. 758 Illinois Street P.O. Box 71249 Fairbanks, AK 99707-1249 Dear Mr. Haagenson: Bryan Carey has forwarded to me your July 17, 2006 letter responding to his June 13, 2006 letter related to billing invoices for legal services to review bond covenants that you submitted to the Alaska Energy Authority (AEA) (not “AIDEA” as you reference in your letter). AEA disagrees with your assertion that the review and approval of invoices for BPMC legal services is solely the prerogative of the BPMC chair. In order to protect Railbelt utility ratepayers, it is appropriate for AEA to seek verification of billing invoices that do not clearly demonstrate that the amounts invoiced are related to the operation or maintenance of the Bradley Lake hydroelectric project. Invoiced amounts, when paid, are automatically passed through to utility ratepayers, without any RCA or other regulatory review or approval. Railbelt utility ratepayers deserve at least minimal assurances that only appropriate Bradley Lake expenses are passed through. AEA’s June 13, 2006 letter to you requested clarification of activity described in invoices as “researching and summarizing Bradley Bond covenants,” and whether such activity related to Bradley Lake operations or other matters that would be inappropriate for payment. AEA needs this clarification to “timely process” the payments as you request. In addition, you have objected to AEA’s request for any deliverable related to the Bradley Lake Bond covenants. AEA requests the BPMC reconsider this decision as a means to foster efficiency in BMPC operations. AEA notes that in the past, BPMC has shared with AEA legal analyses from the BPMC’s counsel. Such sharing helps form a common understanding of contractual/legal relationships without wasteful duplication of effort. Sifcerely, N iller Executive Director Alaska Energy Authority ce: Bryan Carey, AEA BPMC Members 813 West Northern Lights Boulevard * Anchorage, Alaska 99503-2495 www.aidea.org * 907/269-3000 * FAX 907/269-3044 * Toll Free (Alaska Only) 888/300-8534 * www.akenergyauthority.org Agenda Item: 7A MOTION: Move to approve the following nominated individuals as Officers to the BPMC. CHAIRMAN Move: Second: VICE CHAIRMAN Move: Second: SECRETARY/TREASURER Move: Second: Chairman: Vice Chairman: Secretary/Treasurer: DU a~ Cavey Agenda Item: 7D MOTION: Move to approve the Renewal and Contingency Fund redeposit procedure beginning with project fiscal year ended June 30, 2006 as follows: Renewal and Contingency Fund redeposit will be made in early August each year. The amount will equal the approved budget percentage of actual accrued expenditures as of June 30 of the fiscal year just ended. / App ed Unanimensty ” AGENDA ITEM: Approve Renewal and Contingency Fund redeposit procedure beginning with project fiscal year ended June 30, 2006 as follows: Renewal and Contingency Fund redeposit will be made in early August each year. The amount will equal the approved budget percentage of actual accrued expenditures as of June 30 of the fiscal year just ended. REASON FOR THE PROCEDURE: Section 13(b) of the “Power Sales Agreement” authorizes the BPMC to adopt rules of procedure for operation of the project including “sufficiency of the annual budget”. Section 4 of the “Investment Agreement for the Renewal and Contingency Reserve Fund” (R&C) says: In the event of a withdrawal which brings the balance of Invested Funds below the Initial Deposit, the Trustee will have four (4) years from the date of the withdrawal to redeposit funds sufficient to bring the balance of Invested Funds back up to, but not higher than, without the written consent of the Bank, the Initial Deposit. The BPMC approved FY06 budget contemplates reimbursement of 25% of accrued R&C expenditures as of June 30, 2006. In the past AEA, per direction of the chairman of the project Budget and Finance subcommittee, has reimbursed the fund at 25 % or 100% of actual R&C fund expenditures at the end of June. The BPMC has never adopted specific rules of procedure for R&C fund reimbursement. This is probably because in the past there has not been a significant difference between accrued and actual R&C expenditures as of year end. At June 30, 2006, accrued R&C expenditures are projected to be $600,000. If R&C is reimbursed based on actual expenditures at year end, reimbursement will be $150,000 less than budgeted in FY06 and $150,000 more than budgeted in FY07. This difference will result in the need for FY07 budget amendment offset by a refund for FY06. Page 1 of 2 Shauna Howell From: — Linda MacMillan Sent: Tuesday, June 27, 2006 9:46 AM To: Mike Cunningham; Shauna Howell Ce: Meg_Stegall@KeyBank.com; Henri F. Dale; Eckert, Harley (Rick); Shellie M. Helton Subject: RE: Bradley Lake PMC Meeting Notice Shauna, Attached is an agenda item with discussion to include in the July 26 BPMC meeting. Let me know if you have questions. If anyone has suggested changes, let me know. Thanks. Linda From: Mike Cunningham [mailto:Mike_Cunningham@chugachelectric.com] Sent: Tuesday, June 27, 2006 9:25 AM To: Linda MacMillan Subject: RE: Bradley Lake PMC Meeting Notice Can you put the agenda item together for this? Thanks. Mike Cunningham Senior Vice President, Chief Financial Officer Chugach Electric Association, Inc. 907-762-4778 (office) 907-762-4514 (fax) 907-230-9478 (cell) mike_cunningham@chugachelectric.com From: Linda MacMillan [mailto:Imacmillan@aidea.org] Sent: Tuesday, June 27, 2006 9:14 AM To: Mike Cunningham Subject: FW: Bradley Lake PMC Meeting Notice Importance: High Mike, Can we have the procedure regarding annual R&C transfer presented for approval at this meeting? Thanks. 6/27/2006 Page 2 of 2 From: Shauna Howell Sent: Tuesday, June 27, 2006 9:11 AM To: Bill Stewart, CEA; Bradley Janorschke, HEA; Brenda Applegate, AEA; Brenda Fuglestad, AEA; Brian Bjorkquist, Dept. of Law; Bryan Carey; Charlie O'Hare, HEA; Dianne Hillemeyer, Exec. Secretary @ CEA; Erin Leaders, Exec. Secretary @ City of Seward; Henri Dale, GVEA; Jean Schroeder, HEA Secretary; Jim Posey, AML&P; Karl Reiche, AEA; Linda MacMillan, AEA; Mike Cunningham, CEA; Rick Eckert, HEA; Ron Saxton, AterWynne; Steve Haagenson, GVEA; Susan Redlin, Exec. Secretary @ GVEA; Tim Barnum, City of Seward; Wayne Carmony, MEA Subject: Bradley Lake PMC Meeting Notice Importance: High The next Bradley Lake PMC meeting will be held on Wednesday, July 26, 2006 at 10:00 a.m. in the AIDEA Board Room. Please mark your calendars to attend. Meeting agenda and packets will be sent out at a later date. Please email or call with questions. Shauna Howell AEA (907) 269-3000 6/27/2006 From: Steve H. Haagenson [mailto:SHHaagenson@gvea.COM] Sent: Friday, June 02, 2006 11:16 AM To: Shauna Howell Cc: Mike_Cunningham@chugachelectric.com; Henri F. Dale; Susan K. Redlin Subject: BPMC Meeting in July Shauna would you please schedule a meeting of the BPMC at the project site, unless this is too much of a challenge. Someone on the BPMC requested our next meeting be on site. (Please arrange for good weather!) The dates | am available are July 6-7, 25, 26 Draft Agenda items: 1) Election of Officers 2) Report on the Governor Modification - Homer (possible field trip) 3) FERC Inspection report - Carey 4) Insurance Renewal- Cunningham Homer O&M Agreement to the agenda and get a recommendation from the committee (Henri has this). Operator Report- Homer Committee reports? If anyone has other items for the agenda, please let me know. Steven Haagenson President & CEO Golden Valley Electric Association, Inc. (907) 458-5866 shh@gvea.com Page | of 3 Shauna Howell From: Steve H. Haagenson [SHHaagenson@gvea.com] Sent: Thursday, June 22, 2006 11:25 AM To: Shauna Howell; Susan K. Redlin Subject: RE: BPMC Meeting Thank you for your research. This sounds like it is possible but will be a large imposition on everyone, so lets cancel the on-site meeting concept and schedule the meeting in the AIDEA Board room if still available. | am still waiting for a recommendation from the O&D Committee on the Homer O&M Agreement. Would you please place the Homer O&M Agreement on the agenda, assuming | will have the recommendation buy the Mailout. Steven Haagenson President & CEO Golden Valley Electric Association, Inc. (907) 458-5866 shh@gvea.com From: Shauna Howell [mailto: SHowell@aidea.org] Sent: Thursday, June 22, 2006 9:04 AM To: Steve H. Haagenson; Susan K. Redlin; Steve H. Haagenson Subject: RE: BPMC Meeting Importance: High Good morning Steve, I've been doing some more research into having the meeting at the Bradley Lake site. | pulled up flights for that day - here is what is available on Alaska Airlines: Anchorage to Homer: Depart Anchorage @ 6:35 a.m. — Arrive Homer @ 7:25 a.m. Depart Anchorage @ 10:00 a.m. — Arrive Homer @ 10:40 a.m. Depart Anchorage @ 2:15 p.m. — Arrive Homer @ 2:55 p.m. Homer to Anchorage: Depart Homer @ 3:20 p.m. — Arrive Anchorage @ 3:55 p.m. Depart Homer @ 6:35 p.m. — Arrive Anchorage @ 7:10 p.m. Depart Homer @ 9:50 p.m. — Arrive Anchorage @ 10:40 p.m. | spoke with Jean at Homer Electric to find out how long it takes to get to the site once you land at the Homer airport. She said the flight over is 8 minutes and those flights are set up and coordinated by Bob Zacharski at the site. If you figure that everyone could be all set and ready for a meeting by noon — do you think you would be finished by 2:00? The reason | ask, is because on that day | have to leave our office at 2:00 for the day and since I'll be taping, I'll need the meeting to be finished up by then. What are your thoughts on if everything can be completed in a 2 hour timeframe? Would that leave enough time for the field trip for after the meeting ends and before those any of those return flights depart from the Homer airport? There is also the subject of a meal for you to have over there. Jean said she could get some meat/cheese trays from the store and have someone take them over on one of the flights over to the site that day. It would pretty much be a make your own, but she would make sure 7/11/2006 Page 2 of 3 that everything you need would be there. | will be taping from our office and Bob Zacharski said that the crew's quarters would be available for a meeting room at the site. Let me know your thoughts on the timeframe and I'll proceed from there. I'm in the process of drafting up an agenda for your review. I'll make a note on my calendar to get that to you for review on Monday. Thanks — Shauna From: Susan K. Redlin [mailto: SKRedlin@gvea.COM] Sent: Tuesday, June 20, 2006 8:09 AM To: Shauna Howell Subject: FW: BPMC Meeting Shauna: This is what | know! Can | help with anything else? Steve is out of the office this week! | hope that all is well! Any new baby pictures? Susan From: Steve H. Haagenson Sent: Tuesday, June 20, 2006 5:49 AM To: Susan K. Redlin Subject: FW: BPMC Meeting Would you call Shauna and set this up for an on-site visit. We also need to add the Homer O&M Agreement to the agenda and get a recommendation from the committee (Henri has this). Steven Haagenson President & CEO Golden Valley Electric Association, Inc. (907) 458-5866 shh@gvea.com From: Shauna Howell [mailto:SHowell@aidea.org] Sent: Monday, June 19, 2006 9:03 AM To: Steve H. Haagenson Subject: BPMC Meeting 7/11/2006 Page 3 of 3 Good morning, Here are the replies in reference to where the July 26th BPMC meeting should be held: CEA — AIDEA Board Room works best. AML8P — Site would be fine. Seward — Tentatively set to go to the site. HEA - Site would be fine. MEA — No preference — will be attending via phone either way. Saxton — Not attending. I'll let you make the final call as to where it will be held. Please let me know so arrangements can be made at either location. For me personally, it’s easier to have it here at our office, but we can also make it happen at the site, too. --Shauna 7/11/2006 Page 1 of 1 Shauna Howell From: Mike Cunningham [Mike_Cunningham@chugachelectric.com] Sent: Tuesday, June 27, 2006 9:19 AM To: Shauna Howell Ce: Bryan Carey Subject: RE: Bradley Lake PMC Meeting Notice Shauna, I believe Steve wanted the property insurance renewal put on the agenda. See bellow - when do you need agenda items. Bryan, When you get the final numbers, can you send them to me and I will put together a schedule of expiring and renewal prices? Mike Cunningham Senior Vice President, Chief Financial Officer Chugach Electric Association, Inc. 907-762-4778 (office) 907-762-4514 (fax) 907-230-9478 (cell) mike_cunningham@ chugachelectric.com From: Shauna Howell [mailto: SHowell@aidea.org] Sent: Tuesday, June 27, 2006 9:11 AM To: Bill Stewart; Bradley Janorschke, HEA; Brenda Applegate, AEA; Brenda Fuglestad, AEA; Brian Bjorkquist, Dept. of Law; Bryan Carey; Charlie O'Hare, HEA; Dianne Hillemeyer; Erin Leaders, Exec. Secretary @ City of Seward; Henri Dale, GVEA; Jean Schroeder, HEA Secretary; Jim Posey, AML&P; Karl Reiche, AEA; Linda MacMillan, AEA; Mike Cunningham; Rick Eckert, HEA; Ron Saxton, AterWynne; Steve Haagenson, GVEA; Susan Redlin, Exec. Secretary @ GVEA; Tim Barnum, City of Seward; Wayne Carmony, MEA Subject: Bradley Lake PMC Meeting Notice Importance: High The next Bradley Lake PMC meeting will be held on Wednesday, July 26, 2006 at 10:00 a.m. in the AIDEA Board Room. Please mark your calendars to attend. Meeting agenda and packets will be sent out at a later date. Please email or call with questions. Shauna Howell AEA (907) 269-3000 7/11/2006 Page | of 2 Shauna Howell From: Mike Cunningham [Mike_Cunningham@chugachelectric.com] Sent: Tuesday, June 27, 2006 9:24 AM To: Shauna Howell Ce: Connie Owens; Bryan Carey Subject: RE: Bradley Lake PMC Meeting Notice Ok, thanks. I should have the info on renewal prices by then. Mike Cunningham Senior Vice President, Chief Financial Officer Chugach Electric Association, Inc. 907-762-4778 (office) 907-762-4514 (fax) 907-230-9478 (cell) mike_cunningham@chugachelectric.com From: Shauna Howell [mailto: SHowell@aidea.org] Sent: Tuesday, June 27, 2006 9:23 AM To: Mike Cunningham Subject: RE: Bradley Lake PMC Meeting Notice Hi Mike, That is correct for the agenda item. I'll probably be sending packets out the week of July 10th. From: Mike Cunningham [mailto:Mike_Cunningham@chugachelectric.com] Sent: Tuesday, June 27, 2006 9:19 AM To: Shauna Howell Cc: Bryan Carey Subject: RE: Bradley Lake PMC Meeting Notice Shauna, I believe Steve wanted the property insurance renewal put on the agenda. See bellow - when do you need agenda items. Bryan, When you get the final numbers, can you send them to me and I will put together a schedule of expiring and renewal prices? Mike Cunningham Senior Vice President, Chief Financial Officer 7/11/2006 Page 2 of 2 Chugach Electric Association, Inc. 907-762-4778 (office) 907-762-4514 (fax) 907-230-9478 (cell) mike_cunningham@chugachelectric.com 7/11/2006 From: Shauna Howell [mailto: SHowell@aidea.org] Sent: Tuesday, June 27, 2006 9:11 AM To: Bill Stewart; Bradley Janorschke, HEA; Brenda Applegate, AEA; Brenda Fuglestad, AEA; Brian Bjorkquist, Dept. of Law; Bryan Carey; Charlie O'Hare, HEA; Dianne Hillemeyer; Erin Leaders, Exec. Secretary @ City of Seward; Henri Dale, GVEA; Jean Schroeder, HEA Secretary; Jim Posey, AML&P; Karl Reiche, AEA; Linda MacMillan, AEA; Mike Cunningham; Rick Eckert, HEA; Ron Saxton, AterWynne; Steve Haagenson, GVEA; Susan Redlin, Exec. Secretary @ GVEA; Tim Barnum, City of Seward; Wayne Carmony, MEA Subject: Bradley Lake PMC Meeting Notice Importance: High The next Bradley Lake PMC meeting will be held on Wednesday, July 26, 2006 at 10:00 a.m. in the AIDEA Board Room. Please mark your calendars to attend. Meeting agenda and packets will be sent out at a later date. Please email or call with questions. Shauna Howell AEA (907) 269-3000 Page | of 2 Shauna Howell From: — Linda MacMillan Sent: Tuesday, June 27, 2006 9:46 AM To: Mike Cunningham; Shauna Howell Ce: Meg_Stegall@KeyBank.com; Henri F. Dale; Eckert, Harley (Rick); Shellie M. Helton Subject: RE: Bradley Lake PMC Meeting Notice Shauna, Attached is an agenda item with discussion to include in the July 26 BPMC meeting. Let me know if you have questions. If anyone has suggested changes, let me know. Thanks. Linda From: Mike Cunningham [mailto:Mike_Cunningham@chugachelectric.com] Sent: Tuesday, June 27, 2006 9:25 AM To: Linda MacMillan Subject: RE: Bradley Lake PMC Meeting Notice Can you put the agenda item together for this? Thanks. Mike Cunningham Senior Vice President, Chief Financial Officer Chugach Electric Association, Inc. 907-762-4778 (office) 907-762-4514 (fax) 907-230-9478 (cell) mike_cunningham@chugachelectric.com From: Linda MacMillan [mailto:Imacmillan@aidea.org] Sent: Tuesday, June 27, 2006 9:14 AM To: Mike Cunningham Subject: FW: Bradley Lake PMC Meeting Notice Importance: High Mike, Can we have the procedure regarding annual R&C transfer presented for approval at this meeting? Thanks. 7/11/2006 Page 2 of 2 Linda From: Shauna Howell Sent: Tuesday, June 27, 2006 9:11 AM To: Bill Stewart, CEA; Bradley Janorschke, HEA; Brenda Applegate, AEA; Brenda Fuglestad, AEA; Brian Bjorkquist, Dept. of Law; Bryan Carey; Charlie O'Hare, HEA; Dianne Hillemeyer, Exec. Secretary @ CEA; Erin Leaders, Exec. Secretary @ City of Seward; Henri Dale, GVEA; Jean Schroeder, HEA Secretary; Jim Posey, AML&P; Karl Reiche, AEA; Linda MacMillan, AEA; Mike Cunningham, CEA; Rick Eckert, HEA; Ron Saxton, AterWynne; Steve Haagenson, GVEA; Susan Redlin, Exec. Secretary @ GVEA; Tim Barnum, City of Seward; Wayne Carmony, MEA Subject: Bradley Lake PMC Meeting Notice Importance: High The next Bradley Lake PMC meeting will be held on Wednesday, July 26, 2006 at 10:00 a.m. in the AIDEA Board Room. Please mark your calendars to attend. Meeting agenda and packets will be sent out at a later date. Please email or call with questions. Shauna Howell AEA (907) 269-3000 7/11/2006 Page 1 of 1 Shauna Howell From: Steve H. Haagenson [SHHaagenson@gvea.com] Sent: | Wednesday, June 28, 2006 1:46 PM To: Shauna Howell Subject: RE: Bradley Lake PMC - Draft Agenda This looks great. We should include the O&M Contract recommendation in the packet, and include a draft motion per the recommendation. Thanks. Steven Haagenson President & CEO Golden Valley Electric Association, Inc. (907) 458-5866 shh@gvea.com From: Shauna Howell [mailto: SHowell@aidea.org] Sent: Monday, June 26, 2006 9:37 AM To: Steve H. Haagenson Subject: Bradley Lake PMC - Draft Agenda Please review and comment. 7/11/2006 Message Page | of 1 Shauna Howell From: Mike Cunningham [Mike_Cunningham@chugachelectric.com] Sent: Thursday, July 06, 2006 8:34 AM To: Linda MacMillan; cohare@homerelectric.com; Rick Miller; hfdale@gvea.com; Shauna Howell; Bryan Carey Subject: FW: Bradley Lake Insurance Attached is the renewal information for the agenda item for the PMC meeting. This will be an "information only" agenda item as the coverage has been renewed. I expect some discussion of the Terrorism coverage will occur. Mike Cunningham Senior Vice President, Chief Financial Officer Chugach Electric Association, Inc. 907-762-4778 (of fice) 907-762-4514 (fax) 907-230-9478 (cell) mike_cunningham@chugachelectric.com From: Amber VanTreeck Sent: Thursday, June 29, 2006 9:45 AM To: Mike Cunningham Subject: Bradley Lake Insurance I've attached the summary of Bradley Lake insurance. Let me know if you need anything else. Amber 7/11/2006 Page 1 of 1 Shauna Howell From: Saxton, Susan [ssaxton@HomerElectric.com] Sent: Thursday, April 27, 2006 3:25 PM To: Shauna Howell Subject: Amendment 3-16-06 corrected.doc Hi Shauna: | can’t remember if you get these or Brenda, but | know you'll forward on if it’s not you. Rick Baldwin made a formatting error and a typographical error which was presented in the last version of the attached Bradley Lake O&M Agreement. Can you please use this version for the next BPMC meeting? Thanks, Susan Saxton Homer Electric Association, Inc. 7/11/2006 Message Page | of 1 Shauna Howell From: Mike Cunningham [Mike_Cunningham@chugachelectric.com] Sent: Thursday, July 06, 2006 8:34 AM To: Linda MacMillan; cohare@homerelectric.com; Rick Miller; hfdale@gvea.com; Shauna Howell; Bryan Carey Subject: FW: Bradley Lake Insurance Attached is the renewal information for the agenda item for the PMC meeting. This will be an "information only" agenda item as the coverage has been renewed. I expect some discussion of the Terrorism coverage will occur. Mike Cunningham Senior Vice President, Chief Financial Officer Chugach Electric Association, Inc. 907-762-4778 (office) 907-762-4514 (fax) 907-230-9478 (cell) mike_cunningham@chugachelectric.com From: Amber VanTreeck Sent: Thursday, June 29, 2006 9:45 AM To: Mike Cunningham Subject: Bradley Lake Insurance I've attached the summary of Bradley Lake insurance. Let me know if you need anything else. Amber 7/7/2006 BR... EY LAKE HYDROELECTRIC PRO °T INSURANCE SUMMARY RENEWAL 07/01/06 - 07/01/07 Limits of Liability Deductible $5,000,000 per occurrence Excluding Terrorism Type of Insurance $2,000,000 per occurrence for buildings $ 105,535 equipment and contents $7,500,000 per occurrence for Earthquake and flood $15,000,000 excess of $5,000,000 per occurrence Excluding Terrorism $50,000,000 per accident Excluding Terrorism First Excess $ 195,992 $2.50 per kW for Hydro Turbine Generators $100,000 Transformers 100 MVA and larger $50,000 All other objects Boiler & Machinery $ 127,937 Second Excess $20,000,000 excess underlying $20,000,000 excess self insured $ 131,350 Total Annual Premiums $ 560,814 EXPIRING 07/01/05 - 07/01/06 Limits of Liability Deductible $5,000,000 per occurrence $2,000,000 per occurrence for buildings Excluding Terrorism equipment and contents $7,500,000 per occurrence for Earthquake and flood First Excess $15,000,000 excess of $2,000,000 per occurrence for buildings $5,000,000 per occurrence equipment and contents Excluding Terrorism Boiler & Machinery |$50,000,000 direct damage $2.50 per kW for Hydro Turbine Generators $2,000,000 expediting expense $100,000 Transformers 100 MOA and larger Excluding Terrorism $50,000 All other objects $40,000,000 excess underlying $20,000,000 excess self insured Premium $ 91,769 Type of Insurance $ 170,428 $ 116,306 Second Excess $ 150,000 Total Annual Premiums $_528,503 Page 1 of 1 Shauna Howell From: Henri F. Dale [HFDale@gvea.com] Sent: Wednesday, July 19, 2006 9:53 AM To: Shauna Howell Subject: RE: BPMC Meeting Motion Shauna, didn't get your email until this morning (was at AIDEA yesterday afternoon). You could have asked me and save a few electrons. Wasn't expecting to propose a motion. The O&D was tasked at looking at this issue and the recommendation that it will make to the BPMC is to continue the contract as is without any changes or new extensions. Needless to say, this was not a unanimous position. | believe Charlie O'Hare (HEA) will be present to discuss it at the Mtg. Henri From: Shauna Howell [mailto: SHowell@aidea.org] Sent: Tuesday, July 18, 2006 2:15 PM To: Henri F. Dale Subject: BPMC Meeting Motion Importance: High Please email me the motion language you would like put into the BPMC meeting packets for the item of Homer O&M Agreement — recommendation for the committee. In an email from Steve, he noted that you would have this information. If there is a chance you could email that to me today, that would be great, as the packets are scheduled to go out tomorrow. Thanks. --Shauna 7/19/2006 ¢ i yy [Motion EA =MOTION#T: | move that the chairman promptly inform the utility members of the BPMC of all work assigned to the BPMC attorney. Further, that all work products, inchiding-drafts; of the attorney be distributed to each utility at the same time it is turned over for review to the Chairman. wt Bead Covers lo 42_ jncled Wy o p LIEA MOTION #2 | move that the legal services provided to the BPMC by Ater Wynne be terminated and that an offer be extended to the firm of Davis Wright Tremaine to be retained as interim counsel to the BPMC. If you are unable to attend the meeting in person, please use the following phone instructions: TELECONFERENCE INSTRUCTIONS Wednesday, July 26, 2006 — 10:00 a.m. To join the meeting, please do the following: Dial 1-800-315-6338 Enter 813# Ww xk “WIDEX = ALASKA x Gil) ENERGY AUTHORITY Alaska Industrial Development ie Export Authority BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE REGULAR MEETING AGENDA Wednesday, July 26, 2006 — 10:00 a.m. (via electronic media at the AIDEA and AEA Board Room -— 813 W. Northern Lights Blvd.) (Corner of Arctic and Northern Lights Boulevard) a CALL TO ORDER Haagenson 2 ROLL CALL (for Committee members) 3. PUBLIC ROLL CALL (for all others present) 4. PUBLIC COMMENT 5. AGENDA COMMENTS 6. APPROVAL OF MEETING MINUTES March 28, 2006 Us NEW BUSINESS A. Election of Officers Haagenson B. FERC Inspection Report Carey C. Insurance Renewal Cunningham D. Renewal & Contingency Fund Redeposit Procedure MacMillan E: Homer O&M Agmt. — Recommendation from the Committee Dale 8. COMMITTEE REPORTS / COMMENTS A. Operators Report >» Update on Governor Modification Project Governor Committee B. Next Meeting Date Haagenson 9. ADJOURNMENT 813 West Northern Lights Boulevard * Anchorage, Alaska 99503-2495 www.aidea.org * 907/269-3000 * FAX 907/269-3044 ® Toll Free (Alaska Only) 888/300-8534 * www.akenergyauthority.org ITEM 6 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES 813 W. Northern Lights Boulevard Anchorage, Alaska Tuesday, March 28, 2006 — 10:30 a.m. 1. CALL TO ORDER Chair Haagenson called the meeting of the Bradley Lake’ on Project Management Committee to order at 10:30 a.m. on Tuesda! “Me 2. ROLL CALL Roll was called by Shauna Howell. The follo Steve Haagenson Wayne Carmony : Matanuska Electric Associ Jim Posey ‘ Anchorage Muna Light & Power (teleconference) Tim Barnum ; City of Seward Bob Pride Anchorage Municipal Light & Power Doug Hall, \nc rage Municipal Light & Power Henri Dale, Golden Valley Electric Association Charles O’Hare, Homer Electric Association Rick Eckert, Homer Electric Association Brian Hickey, Chugach Electric Association Mark Foster, Consultant Linda MacMillan, Alaska Energy Authority Gary Stromberg, Parisena, Stromberg & Co. Jenny True, AterWynne (teleconference) Don Zoerb, Matanuska Electric Association (teleconference) Bradley Lake PMC Meeting March 28, 2006 Page 2 of 5 4. PUBLIC COMMENT There were no public comments. 5) AGENDA COMMENTS There were no agenda comments. 6. APPROVAL OF MEETING MINUTES —~ June 21, 2005 .. The meeting minutes of June 21, 2005, were unanimously approved as presented, with the comment from Chair Haagenson to delete the memorandum attachment. Ts NEW BUSINESS 7A. FY’06 Budget Revision Mike Cunningham and Linda MacMillan gave Capital budget revision. MOTION #06-1: Mr. Janorsch Management Committee approve, the isc budget revision as presented. Seconded! yy Mr. Mil and the motion was unapimously ap ved dara A voice vote was taken 7B. FY’07 Budget y MOTION #06-2: Mr. Janorschke m ed that the Bradley Lake Project Management Committee ap the. fi sal year 2007 Operating and Capital budget as.presented. Seconded by Mr Miller. Mikes Cunningham and Linda MacMillan gave an overview of the FY’07 Operating and Capital pudoet. ee: Wayne Carmony commented on the topic of $40,000 budgeted for Bradley Lake PMC Legal. MEA’s position is that the firm of AterWynne has an inherent conflict of interest in representing the BPMC; They believe that the inclusion of $40,000 in the budget is inappropriate and. requested that the membership would consider deleting it — either to delete it or to take steps to locate and identify a new legal firm to represent this organization. Chair Haagenson noted that they were talking about the budget items and wasn’t sure if they could dive into the philosophy of the budget. MOTION #06-3: Mr. Carmony moved to make an Amendment to delete the $40,000 from the 2007 budget that is identified as Bradley Lake PMC Legal and to take that up after taking a look at the potential for identifying and employing a new attorney. Chair Haagenson restated the motion to read: Motion to amend the Bradley Lake PMC Meeting March 28, 2006 Page 3 of 5 budget to remove the $40,000 on page 5 of 9 called Bradley Lake PMC Legal. Seconded by Brad Janorschke. Mr. Carmony stated that there are three months before the fiscal year 2007 budget begins. He believes that in that timeframe we can take up the question of a conflict and add funds back into the budget prior to the commencement of the fiscal year 2007 once this issue of a potential conflict of interest is resolved. Mr. Cunningham added that the FY’07 budget needs to be approved and in place by April 1*' according to bond covenants, and that doesn’t preclude a future amendment to it. Mr. Posey stated that this issue was brought up last year nothing was brought up by anybody in that interim period of time to look for new counsel ar ith the pending date i idn’ udget now, but if motion. Mr. Carmony also stated that over the course of that he wanted to point out to the group. The AR has been formalized and that organization has named AterWynne as their attorney andas everyone was aware, the intense lobbying efforts are taking place to have various State-owned assets placed with that organization (JAA). . st year there had been changes Chair Haagenson added that the question now was do we take the money out of the budget now or not, and it doesn’t specify who our legal counsel is. As the Amendment stands now — do we remove the $40,000 from the budget or not? City of Seward No Matanuska Electric Association Yes Chugach Electric Association - Homer Electric Association No Golden Valley Electric Association No Anchorage Municipal Light & Power No Alaska Energy Authority Abstain Chair Haagenson stated that the motion failed. Bradley Lake PMC Meeting March 28, 2006 Page 4 of 5 Motion of Approving the FY’07 budget as presented. A voice vote for the Approval of the FY’07 budget was taken and the only nay vote was from MEA. The motion passed with one nay vote from MEA. 7C. _FY’05 Audit Report from Parisena, Stromberg & Company MOTION 06-4: Mr. Janorschke moved that the Bradley Lake Project Management Committee accept the results of theBradley Lake Project Management Committee Operating and Revenue Funds. ; of June 30, 2005, as presented by Parisena, Stromberg & Co., APC. Seconde by Mr. Posey. Gary Stromberg presented the audit report. A voice vote was taken and the motion pa by unanimous app oval 7D. Direction from Chair Haagenson : Direct the O&D Committee to re Maintenance Agreement. the Homer Operation and . Consider the. Homer Electric request to sign a ‘10-year term Agreement. . Identify necessary modifications to the contract, such as BPMC attorney review of construction contracts, as approved by the BPMC - timeframe to be by the next meeting in July. 8. COMMITTEE.REPORTS / COMMENTS perspective th ave worked with VA Tech to develop a governor control algorithm to eliminate the instability. problem in conjunction with the new deflectors. By August they will know the results. Completion date is set for the end of August. 8B. Next Meeting Date The next meeting date is at the call of the Chair, and will be held at the Bradley Lake Project site. Bradley Lake PMC Meeting March 28, 2006 Page 5 of 5 9. ADJOURNMENT The meeting was adjourned at 11:20 a.m. BY: ATTEST: Steve Haagenson, Chairman y Authority, Secretary ITEM 7C BRADLEY LAKE HYDROELECTRIC PROJECT INSURANCE SUMMARY RENEWAL 07/01/06 - 07/01/07 Type of Insurance Limits of Liability Deductible Premium Primary $5,000,000 per occurrence $2,000,000 per occurrence for buildings $ 105,535 Excluding Terrorism equipment and contents $7,500,000 per occurrence for Earthquake and flood First Excess $15,000,000 excess of $ 195,992 $5,000,000 per occurrence Excluding Terrorism | Boiler & Machinery |$50,000,000 per accident $2.50 per kW for Hydro Turbine Generators | $ 127,937 Excluding Terrorism $100,000 Transformers 100 MVA and larger $50,000 All other objects Second Excess $20,000,000 excess underlying $ 131,350 $20,000,000 excess self insured Total Annual Premiums $ 560,814 EXPIRING 07/01/05 - 07/01/06 Type of Insurance Limits of Liability Deductible Premium Primary $5,000,000 per occurrence $2,000,000 per occurrence for buildings $ 91,769 Excluding Terrorism equipment and contents $7,500,000 per occurrence for Earthquake and flood First Excess $15,000,000 excess of $2,000,000 per occurrence for buildings $ 170,428 $5,000,000 per occurrence equipment and contents Excluding Terrorism Boiler & Machinery |$50,000,000 direct damage $2.50 per kW for Hydro Turbine Generators | $ 116,306 $2,000,000 expediting expense $100,000 Transformers 100 MOA and larger Excluding Terrorism $50,000 All other objects Second Excess $40,000,000 excess underlying $ 150,000 _| $20,000,000 excess self insured Total Annual Premiums $ 528,503 eS eM Agenda Item: 7D MOTION: Move: Second: Move to approve the Renewal and Contingency Fund redeposit procedure beginning with project fiscal year ended June 30, 2006 as follows: Renewal and Contingency Fund redeposit will be made in early August each year. The amount will equal the approved budget percentage of actual accrued expenditures as of June 30 of the fiscal year just ended. AGENDA ITEM: Approve Renewal and Contingency Fund redeposit procedure beginning with project fiscal year ended June 30, 2006 as follows: Renewal and Contingency Fund redeposit will be made in early August each year. The amount will equal the approved budget percentage of actual accrued expenditures as of June 30 of the fiscal year just ended. REASON FOR THE PROCEDURE: Section 13(b) of the “Power Sales Agreement” authorizes the BPMC to adopt rules of procedure for operation of the project including “sufficiency of the annual budget”. Section 4 of the “Investment Agreement for the Renewal and Contingency Reserve Fund” (R&C) says: In the event of a withdrawal which brings the balance of Invested Funds below the Initial Deposit, the Trustee will have four (4) years from the date of the withdrawal to redeposit funds sufficient to bring the balance of Invested Funds back up to, but not higher than, without the written consent of the Bank, the Initial Deposit. The BPMC approved FY06 budget contemplates reimbursement of 25% of accrued R&C expenditures as of June 30, 2006. In the past AEA, per direction of the chairman of the project Budget and Finance subcommittee, has reimbursed the fund at 25 % or 100% of actual R&C fund expenditures at the end of June. The BPMC has never adopted specific rules of procedure for R&C fund reimbursement. This is probably because in the past there has not been a significant difference between accrued and actual R&C expenditures as of year end. At June 30, 2006, accrued R&C expenditures are projected to be $600,000. If R&C is reimbursed based on actual expenditures at year end, reimbursement will be $150,000 less than budgeted in FY06 and $150,000 more than budgeted in FY07. This difference will result in the need for FY07 budget amendment offset by a refund for FY06. ee ices 0 AGREEMENT AMENDING AND EXTENDING THE TERM OF THE OPERATION AND MAINTENANCE AGREEMENT FOR BRADLEY LAKE PROJECT AMENDMENT NO. 3 THIS AGREEMENT entered into this day of , 2006, between the Homer Electric Association, Inc. (the “Operator’) and the Alaska Energy Authority (the “Authority’). Recital Effective February 11, 1994, the parties entered into an agreement titled Operation and Maintenance Agreement for Bradley Lake Project (the “Agreement’). The term of the Agreement was for an initial period of five years, automatically renewable annually thereafter. The parties extended the Agreement through an Amendment dated June 22, 1999. The Amendment extended the Agreement until June 30, 2004, and provided that the term shall continue from year to year thereafter. The parties have determined that instead of the annual renewal, the Agreement shall be renewed for an additional period of ten years and automatically renewed annually thereafter; and that the Agreement be further amended as hereafter set forth. Amendments NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. Section 2 of the Agreement as amended by the June 22, 1999 Amendment is hereby amended as follows: Effective July 1, 2006, the term of the Agreement shall be ten years and the term shall automatically be renewed for successive one-year periods, until terminated as provided in the Agreement. 2. Paragraph 13(a)(1) of the Agreement is amended to read as follows: Each Party shall be liable for the negligent, willful and grossly negligent acts of its officers, employees, agents and contractors with respect to the ownership, construction operation, maintenance or repair of the Project. It is recognized that the project insurance does not cover the willful and grossly negligent acts of a party. Each Party shall be solely liable for the willful and grossly negligent acts of its officers, employees, agents and contractors to the extent not covered by insurance. A party's maximum cumulative liability relative to all other claims and liabilities, including that with respect to direct damages and obligations under any indemnity, will not exceed the limits of any insurance policies insuring against such claims or liabilities. In no event will a Party be liable for incidental, indirect or consequential damages of any kind. Agreement Amending and Extending the Term of the Operation and Maintenance Agreement for Bradley Lake Project Date Date Paragraph 13(a)(8) of the Agreement is amended to read as follows: (8) A copy of the insurance policies required of the Operator by this Section will be furnished to the Authority prior to beginning work under this Agreement. Prior to February 1 of each year thereafter, evidence of insurance shall be provided by the Operator. Paragraph 13(a)(9) of the Agreement is amended to read as follows: (9) The Operator's obligation to obtain and maintain insurance coverage pursuant to this Section shall be subject to the general availability of such coverage under reasonable terms and conditions. If one or more of the required insurance coverages is not available to the Operator under reasonable terms and conditions, the Operator shall, under the guidance and direction of the BPMC and Division of Risk Management, use its best efforts to obtain substantively equivalent insurance coverage acceptable to the BPMC, the Authority, and the Division of Risk Management. A new subsection 13(f) is added to the Agreement to read as follows: (f) The Authority shall maintain a policy or policies of property damage insurance fully insuring the Project against loss resulting from fire, explosion, accident, or equipment breakdown for the full insurable value of the Project. The policy shall contain a waiver of subrogation with respect to the Operator and the BPMC and list the Operator as an additional named insured. IN WITNESS WHEREOF, the parties have caused this agreement to be executed as of the date first written above. HOMER ELECTRIC ASSOCIATION, INC. By General Manager ALASKA ENERGY AUTHORITY By Executive Director Agreement Amending and Extending the Term of the Operation and Maintenance Agreement for Bradley Lake Project