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HomeMy WebLinkAboutBradley Lake PMC Meeting-Thurs., March 31, 2005 4BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES 813 W. Northern Lights Boulevard Anchorage, Alaska Thursday, March 31, 2005 — 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 Thursday, March 31, 2005, 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 Joe Griffith Chugach Electric Association Bradley Janorschke Homer Electric Association Wayne Carmony Matanuska Electric Association (teleconference) Jim Posey Anchorage Municipal Light & Power Dave Calvert City of Seward Art Copoulos Alaska Energy Authority 3. PUBLIC ROLL CALL Mike Cunningham, Chugach Electric Association (teleconference) Don Stead, Homer Electric Association Linda MacMillan, AEA and AIDEA Karl Reiche, AEA and AIDEA Ron Saxton, AterWynne Rick Miller, Anchorage Municipal Light & Power John Cooley, Chugach Electric Association Doug Hall, Anchorage Municipal Light & Power Bob Price, Anchorage Municipal Light & Power Ed Ruebling, Anchorage Municipal Light & Power Brian Hickey, Chugach Electric Association Lee Thibert, Chugach Electric Association Don Zoerb, Matanuska Electric Association (teleconference) Bradley Lake PMC M_ ng March 31, 2005 Page 2 of 10 Henri Dale, Golden Valley Electric Association Rick Eckert, Homer Electric Association Brad Janorschke, Homer Electric Association Kate Lamal, Golden Valley Electric Association Gary Stomberg, Parisena, Stromberg & Company Brian Bjorkquist, Department of Law Tim Barman, City of Seward Bob Day, Anchorage Municipal Light & Power Brad Evens, Chugach Electric Association Louis Agi, Anchorage Municipal Light & Power 4. PUBLIC COMMENT There were no public comments. 5. AGENDA COMMENTS Hearing no objection, an additional item was added to Item 7B of the agenda to include a discussion of the monies needed for the formation of the Joint Action Agency. 6. APPROVAL OF MEETING MINUTES — November 18, 2004 The meeting minutes of November 18, 2004 were approved as presented with the addition of Don Stead to the attendance record. 7. NEW BUSINESS 7A. Approve Utilities FY04 Deficit Repayment to the Project. Mr. Stromberg gave a brief overview of the audit. He stated this is a standard opinion special purpose financial statement audit. A clean opinion was issued and the statements presented to the BPMC are signed and bound. He noted that in the balance sheet the total assets are reduced from approximately $2.4 million to approximately $368,000. The Revenues are off budget by $364,000 and that variance is in interest, $73,492 of which is the deficit due back from the participants. He referred the committee to their packets for detail information. In response to committee member questions, Mr. Stromberg stated that the revenues are set by budget and the difference in the revenues was interest expenses and excess. The $73,492 is a receivable from participants this year. Ms. MacMillan stated that this amount has not yet been billed as the Committee needs to approve the billing amount. If the Committee approves staff would like to bill in April. Mr. Jim Posey (ML&P) joined the meeting at this time. MOTION: Mr. Griffith moved to approve the utilities’ FY04 deficit repayment to the project in the amount of $73,492.00. Seconded by Mr. Posey. There being no further discussion, the question was called. A voice vote was taken and the motion passed unanimously. Bradley Lake PMC M~= ng March 31, 2005 Page 3 of 10 7B Approve FY05 Budget Changes to Increase Expenses for the Property Valuation and R&C Fund Repayment and to add $150,000 for the purpose of the formation of the Joint Action Agency MOTION: Mr. Griffith moved to approve the FY05 budget changes to increase expenses for the property valuation and increase for Renewal and Contingency Fund and to add $150,000 for the purpose of the formation of the Joint Action Agency. Seconded by Mr. Posey. Mr. Carmony read into the record the motion that was approved at the previous meeting. Motion: The Bradley Lake Budget Committee be instructed to identify the costs and the scope of the effort on the activity to undertake the transfer of the Bradley Lake Project ownership to the utilities. He said that the motion does not in any way solidify the form of the transfer to an organization such as the JAA. This is not something that we have all agreed to in spite of what we have done. We have not even approved the concept of taking ownership, and now we are talking about a study just to look at what is involved in taking ownership. Until the concept is approved and a decision has been made to take ownership then there should be no discussion about in what form it would be transferred and in what form the new organization would be deemed appropriate. The BPMC is jumping over several stages in assuming that the action already taken is an action that in fact was not. Mr. Cunningham stated that the Budget Subcommittee has discussed this issue but nothing has been resolved at this point, therefore no recommendation is forthcoming. In response to Committee member questions, Mr. Bjorkquist stated the concern is that if adding this into the budget in effect adds it to the rates that will be chargeable to Bradley Lake, then it is an inappropriate expenditure because it is an expenditure that is not related to the operation of Bradley Lake, it is related to a possible divestiture in forming an organization that could obtain the Bradley facility and other facilities. It is the Alaska Energy Authority's view that this would be an inappropriate expenditure if added to the Bradley budget that would get passed through to rate payers. Mr. Bjorkquist stated the committee could amend the motion by going back to the original budget document and deleting the proposed addition of the $150,000 until such time as there has been additional discussion about how that might be funded and to also have a better definition and scope. He said that while AEA is concerned about the appropriateness of funding it through the project, we are also concerned about the scope of the project being one that has never been agreed to by the participants. MOTION: Mr. Carmony moved to table the motion on the floor and moved the original FY05 budget proposal that did not include the additional $150,000. Seconded by Mr. Janorschke. There being no further discussion, the question was called. A voice vote was taken with three yeas, three opposed, and Mr. Tim Barnum abstained. Bradley Lake PMC M_ ng March 31, 2005 Page 4 of 10 Mr. Barnum stated that he is not up to speed on the subject matter and does not feel comfortable voting. Mr. Bjorkquist stated that the BPMC By-laws provision states that a party is deemed a yes vote unless they make it clear that they have voted no. Section 5.10.3 of the By-laws state “A representative who is present at a meeting of the committee at which action on a committee matter is taken shall be presumed to have assented (voted yes) to such action unless the representative’s dissent is both indicated and recorded at the time of the action.” There is no provision for abstaining, you vote yes unless you vote no. Mr. Bjorkquist informed the committee that unless Mr. Barnum casts a definitive vote then his vote is deemed a yes vote. Mr. Barnum stated that he would change his vote to yes on the motion. Chairman Haagenson reiterated that the motion on the table is an amended motion that moves to approve the FY05 budget changes to increase expenditures for the property valuation and increases to the renewable and contingency fund. For further clarification Chairman Haagenson reviewed the budget changes stating $75,000 will be added for the project appraisal contract; $540,000 will be added to replenish the R&C Fund to the $5 million dollar level, which is in anticipation of the Runner Replacement in subsequent fiscal years. There will also be an increase to the operating reserve to $15,000 in accordance with the covenant by adjusting debt service and the arbiter’s transfer to actuals. Other points, which have already been discussed, are the FYO4 deficit repayments of $73,492. There is a schedule that shows the additional collection over the remaining two months of the fiscal year. Participant payments will total 1,647,000 over May and June of FYOS, and then in FYO6 they drop back down. In response to committee member questions, Ms. MacMillan stated that in April AEA will bill $73,000 for the deficit. If this budget is approved, the monthly contribution will need to change to reflect the new rate for May and June of FY05 to ensure the replenishment of the R&C fund. For clarification, Chair Haagenson stated the motion on the table to approve the FY05 budget changes to increase expenditures for the property valuation and increase the R&C Fund does not include the $150,000. Hearing no further discussion the question was called a second time to confirm the vote. Upon voice vote the motion passed. 7C. Approve the June 2005 Transfer From the Revenue Fund to the R&C Fund Mr. Cunningham stated this motion is an administrative request to grant Linda MacMillan authorization to transfer funds in June in the event that he is not available. MOTION: Mr. Cunningham moved to approve the June 2005 transfer from the Revenue Fund to the R&C Fund in the amount equal to the lesser of amount budgeted or amount required to bring the balance to $5 million dollars. Seconded by Mr. Janorschke. Bradley Lake PMC Mg March 31, 2005 Page 5 of 10 Chair Haagenson stated that the amount actually transferred to the BPMC will be reported back to the committee. There being no further discussion, the question was called. A voice vote was taken and the motion passed. 7D. Approval of the FY06 Budget MOTION: Mr. Janorschke moved to approve the FY06 Budget. Seconded by Mr. Posey. Mr. Cunningham briefed the committee on the FY06 budget stating there is a $274,000 increase in operating expenses which is primarily due to non recurring costs for SEC Training Project Valuations. Also, there is an increase of $549,000 in the R&C Fund for anticipated expenditures in FYO06. There was a decrease of $200,000 in transmission relay replacements, and a $15,000 decrease for operating fund transfers as we have no operating budget increase. The budget is being decreased from $1,627,000 per month to $1,344,000 which results in a drop in monthly contributions beginning in FY06. He thanked the members of the Budget Subcommittee; Henry Dale, Don Stead, Rick Miller, and Linda MacMillan, for their efforts in pulling the numbers together to produce the budget. AMENDED MOTION: Mr. Griffith moved to amend the FY06 budget to reflect, under Item 920 Administrative Expenses, an additional $150,000 for activities related to the Joint Action Agency Assumption Project. Discussions ensued with regard to the legality of bringing the same amendment to a motion back a second time in the same meeting. Mr. Cunningham stated this motion is not the same as this is for the FY06 budget and the previous motion was for the FY05 budget. Mr. Saxton stated a defeated motion could not be brought back to the table at the same meeting; however, this motion was removed, not defeated. Mr. Carmony stated there was no vote at the last BPMC meeting that a Joint Action Agency would be the vehicle to assume the Bradley Project. There was no specific Motion made at the last meeting of a Joint Action Agency being the vehicle for taking ownership. He advised the committee members to reread the minutes of the previous meeting and the motion that passed as there is an assumption being made today that is inaccurate. There has never been an action by the Management Committee to assert that the JAA was a vehicle for taking ownership of Bradley Lake. AMENDED MOTION: Seconded by Mr. Posey. Chair Haagenson reiterated that the amended motion is to amend the FY06 budget to add a line under Administrative Expenses of $150,000 for activities related to the transfer of the Projects to the JAA. Bradley Lake PMC M: 1g March 31, 2005 Page 6 of 10 In response to committee member questions, Mr. Bjorkquist stated that AEA would have the same concerns if this was part of a budget that would be included within rates. AEA believes this would be an inappropriate addition to the budget. Mr. Copoulos added that costs associated with JAA formation (of Four Dam Pool) did not run through the AEA accounting records Discussions ensued as to how The Four Dam Pool was formed. Mr. Bjorkquist stated that whether something was done improperly in the past does not provide justification for continuing something that might be improper. The concern that AEA has is that the Bradley Lake contract and the rates that are set under Bradley Lake Hydropower Project are not regulated by the RCA. They are exempt from regulation, and therefore it is AEA’s role and responsibility to oversee what is included in the budget to make sure it is properly included in a budget that is not regulated. He said that it was his understanding that this was being discussed at the Budget Subcommittee meetings. Mr. Bjorkquist reiterated that AEA believes that it is inappropriate to add to a budget that is included within the rates that would then be chargeable from Bradley. Mr. Carmony stated he is becoming increasingly concerned that issues of such importance and of such magnitude are being brought to this body on the day of the meeting on the morning of the meeting with no advance notice. This late notice does not allow the participants to conduct an analysis or seek advice from council. He requested that the members vote against this change and that the committee bring important issues before the body in advance of the meeting to allow the members to absorb the information and provide time for due diligence. There being no further discussion, the question was called. Upon voice vote the motion failed with four yeas and three against (State of Alaska voted against the motion). Discussions ensued with regard to the affect the State’s vote has on the outcome of motions. It was noted that, for budget matters, it requires the affirmative vote of the State of Alaska. Chairman Haagenson stated that the amended motion failed as the State voted against it. Mr. Bjorkquist stated AEA has the responsibility, because this is not regulated by the RCA, to make sure that items in the Budget are appropriate. If the committee submits a Budget that has an item that we believe is inappropriate it is our duty to vote no. MOTION: Mr. Griffith moved to rescind the prior amendment to the FY06 Budget. Seconded by Mr. Janorschke. Discussions ensued with regard to AEA’s ability to exercise their veto power. Hearing no further discussion, the question was called. Upon voice vote the motion to rescind the amendment to the FY06 Budget passed unanimously. Bradley Lake PMC M: 4g March 31, 2005 Page 7 of 10 Chairman Haagenson, hearing no objection, supplanted the original Schedule C with the new Schedule C that is dated 3/31/2005 8:44a.m. In response to committee member questions, Ms. MacMillan reviewed the schedule stating there is a technical correction on the top of the form; the numbers carrying FY05 to FY06 were the wrong numbers for FY05. The rest of the budget remains unchanged. MOTION: The FY06 Budget with the amended Schedule C, which was previously moved and seconded by Mr. Janorschke and Mr. Posey respectively, is back on the table. Hearing no further discussion, the question was called. Upon voice vote the motion passed unanimously. 7E. HEA O&M Contract Extension Term MOTION: Mr. Carmony moved to approve Item 7E HEA O&M Contract Extension Term. Seconded by Mr. Copoulos. Mr. Stead stated that the VA Tech has completed the construction of the new governor with the exception of the alga rhythm and its model in PSSE. They have one contractor that is holding them up, and they have not been able to get the model completed in PSSE. It works but it does not perform in the way that it performed in another simulation. Three different software systems have been built in. The first software is their software and it works fine. The second is a software system called Naplab Simulink and it functioned similarly to their logic cad model. The third is being built in the PSSE and is not currently working. This is the last hold-up. All of the manufacturing has been completed and all of the parts are in shipment or stored at Homer Electric for VA Tech. Once we start receiving material that is in transit we become liable for a million dollar payment, which is why Homer Electric has not accepted receipt of this material and is being held for VA Tech. Once the running model is delivered to Homer Electric it is then given to another contractor who runs the 10 base cases against it. We verify that the 10 base cases are improved by the governor alga rhythm that is proposed to be used. We recommend that the outage be moved back to the first of May, this will ensure the model is complete and can be evaluated. In response to committee member questions, Mr. Stead stated we believe the PSSE simulation because the PSSE model that is currently being worked on is the one that we all use in the railbelt to model the generation and transmission sets. He said they have been working on the PSSE model for over four months. He said that in his report with regard to discussions while in Ravensburg was that this may have to be pushed to October. Mr. Stead stated that there are no additional costs in connection with these delays. Discussions ensued with regard to who hired the PSSE modeler and whose data they are using. Mr. Stead stated that they are using the current railbelt model and they are constructing the Bradley governor inside of it. Mr. Stead also noted for the committee that the spare runner has been repaired and heat treated and has been returned to the Bradley Lake Project. On the 18" of April a detuning process will be performed to alleviate the ringing concerns and excess stresses that might be in the runner. It will then be rebalance and ready in case a swap is necessary. Bradley Lake PMC Mi: 1g March 31, 2005 Page 8 of 10 Mr. Cooley said maintenance was planned for April; therefore people have planned out how they want to use their water for the year. If we change the April date people will need to adjust how they want to use their water throughout the year, which may have an impact on the various users. Mr. Stead commented about the risks involved and stated the committee should have a legal review of the agreements to ensure the BPMC’s interests are protected. In response to committee member questions, Mr. Saxton stated he has not seen the contract. Mr. Stead said they are trying to locate the original FUJI contract but will send the VA Teck contract to Mr. Saxton. Mr. Copoulos stated he is not aware of any details related to the FUJI contract, and he is under the understanding that the contract is approximately fifteen plus years old. Chairman Haagenson stated the contract that is in place continues year to year absent either Homer quitting or AEA terminating it. The reason it is in front of the committee today is that you are requesting the contract be amended to enable a commitment of a five year term instead of a year to year. Mr. Copoulos stated that AEA’s view is that there is benefit in having the stability you receive with a five year contract: benefit of retaining a skilled knowledgeable workforce and planning for future repairs, etc. AEA supports the idea of a five year extension. MOTION: Mr. Griffith moved to table Item 7E pending results of a legal review of the contracts for VA Tech and FUJI. Seconded by Mr. Copoulos. Hearing no further discussion, the question was called. Upon voice vote the motion passed with four yeas and three opposed. 7F. Turbine Runner Replacement — Risk Analysis, FUJI Contracts, & Replacement Recommendations Mr. Stead said that at the request of the BPMC, the O&D Committee has evaluated runner replacement at Bradley Lake and the O&D Committee recommends the replacement of the three runners that are currently at the facility. He further stated that the risk analysis adjusted the estimate of avoided cost for the Bradley Lake runner replacement. The risk analysis was performed by Mr. Hickey in coordination with me and under the review of the O&D Committee. We looked at what would happen if a runner cracked, failed, and threw parts around and what the maximum damage to the facility would be (e.g. a bucket falls off, it might hit a needle and do a little bit of damage but everything would shut down; the bucket would fall off and it would do a lot of damage inside the discharge chamber; or in the worst case scenario, actual tunnel failures). Copies of the detailed analysis were handed out to the committee for further review. Mr. Stead said that the O&D Committee also recommends that VA Tech be held responsible for the replacement of the runners. Bradley Lake PMC M19 March 31, 2005 Page 9 of 10 In response to committee member questions, Ms. MacMillan stated the replacement of the three Runners is in the FYO6 and FY07 because it is an eighteen month replacement to manufacture. It does run through the R&C Fund. The committee suggested that this should be funded, to the degree possible, out of the R&C Fund, and to then make a motion to replenish that with long term debt at the earliest opportunity. MOTION: Mr. Griffith moved to have the Finance Committee define long term debt and a funding profile for runner replacement and other activities at Bradley as well as consider the needs of the Alaska Intertie when they are defined. Mr. Carmony stated that any motion would be out of order if it included anything beyond the current scope of the Bradley Lake Project Management Committee. Certainly anything to do with the Alaska Intertie is not within the scope of our activities and should not be funded by us; therefore, it is not appropriate for us to undertake it in this fashion. Mr. Griffith said the reason it would make sense to have the Alaska Intertie included in the motion is that we know that there are fixes that are going to be required for the Alaska Intertie. They should be considered at the same time simply in the interest of saving money. It is not being suggested that the Bradley Project Management Committee pay the bill, the Alaska Intertie portion should be billed under the IOC Agreement for whatever the |OC bonds end up being. It makes sense to bring them up together as in essence the IOC and Bradley PMC are the same people. Mr. Carmony said it is his understanding that AIDEA has already put into motion a plan to address issues around the Intertie and it seems completely inappropriate for this committee to undertake or to usurp the actions that they intend to proceed with. Mr. Griffith withdrew his language in the motion with regard to the Alaska Intertie. AMENDED MOTION: Mr. Griffith moved to have the Finance Committee make a long term plan for the use of the R&C funds to replace the three runners for Bradley Lake and then with a longer term plan using some other vehicle. Seconded by Mr. Posey. There being no further discussion, the question was called. Upon voice vote the motion passed unanimously. Upon reviewing the Analysis System Report it was noted that the worst possible failure case would result in an approximate cost of $289 million. It was also noted that the insurance would not cover this loss. 7G. Audit Approval MOTION: Mr. Griffith moved to approve the FY04 Parisena Stromberg audit as presented. Seconded by Mr. Janorschke. There being no discussion, the question was called. Upon voice vote the motion passed. Bradley Lake PMC Me ig March 31, 2005 Page 10 of 10 8. Committee Report / Comments Mr. Cunningham gave a brief update on the Budget Committee Report/Appraisal Audit Update stating he has been advised by the consultant performing the appraisal that it should be completed by May 1°" no later than June 1‘. The power plant tunnel will be appraised at full replacement cost plus debris removal. We have a July 1 property insurance renewal so we will be able to fold the results of the appraisal into the renewal. He said there is some disagreement in terms of additional insured and waiver of subrogation issues and listing of additional insured on the policies. In response to committee member questions, Mr. Cunningham said the Stone & Webster report should be available by May 1, no later than June 1. There will be another report issued around June/July that will incorporate the Stone & Webster recommendation with the Warren McVey report, which will be issued in final forum after the appraisal is complete. There is a July 1* insurance renewal on the property. 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: LZ Steve Haagenson, Chairman ATTEST: Zam k ' aska Energy Authority, Sécretary