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HomeMy WebLinkAboutBradley Lake PMC Meeting-Thurs., March 31, 2005 5{\ \7 Ss a F BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES eS ae Cc 4 As y” 813 W. Northern Lights Boulevard y woh Anchorage, Alaska her XY Thursday, March 31, 2005-10:00a.m. 3 yf 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) 4 Bradley Lake PMC N ~~ 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 ___ing 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 \___ ing 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 \___ ing 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 FY06. 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 FYO6. 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 I ing 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 N___ ing 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 Nv ing 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 f___ ing 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 FY06 and FYO7 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 N ing 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: Steve Haagenson, Chairman ATTEST: Alaska Energy Authority, Secretary bi /\. (6 \ BRADLEY LAKE PROJECT MANAGEMENT souarret # 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) Yo Bradley Lake PMC N 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 N 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 PMCM 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 FYOS5, 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 M ng 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 FYO6. 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. 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. Chairman Haagenson, hearing no objection, supplanted the original Schedule C with the new Schedule C that is dated 3/31/2005 8:44a.m. Bradley Lake PMCM 1g March 31, 2005 Page 7 of 10 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. TE. 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. 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 Bradley Lake PMC M___ng March 31, 2005 Page 8 of 10 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 M__ng 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 FY06 and FYO7 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 |OC Agreement for whatever the 1OC 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 M 1g 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: Steve Haagenson, Chairman ATTEST: Alaska Energy Authority, Secretary 1. VERBAT Me —_—_—_—_————_-_— BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES 813 W. Northern Lights Boulevard Anchorage, Alaska Thursday, March 31, 2005 — 10:00 a.m. 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 was called by Shauna Howell. The following members were present: ROLL CALL 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 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 Meeting November 18, 2004 Page 2 of 32 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. Te 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 member questions, Mr. Stromberg stated that the revenues are set by budget, and the difference in the revenues was interest expenses and excess. $73,489 is the amount that was really a deficit. The $73,489 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. Giffith 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 Bradley Lake PMC Meeting November 18, 2004 Page 3 of 32 further discussion, the question was called. A voice vote was taken and the motion passed unanimously. 7B Approve FY05 Budget Changes to Increase Expenses for the Property Valuation & R&C Fund Repayment MOTION: Mr. Griffith moved to approve the FY05 budget changes to increase expenses for the property valuation and increase for Renewal and Contingency Fund. Seconded by Mr. Posey. Mr. Carmony read into the record the motion of what was approved at the previous meeting. Mr. Griffith motioned that 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 this 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. Right now we are jumping over several stages in assuming that the action already taken is an action that in fact was not. Mr. Haagenson: To take a step back for you then, Mike please share with us what the recommendation of the Budget Subcommittee was on this issue? Mr. Cunningham: We have discussed it but | don’t think we have resolved anything at this point, Mr. Chairman. But you brought a Motion forward to amend the $150,000 to fund the formation of the Joint Action Agency. How did that come out of the Budget Subcommittee? Linda: We did do it for a reason. Please explain. Brian: There is one concern with adding this into the budget and that is if it get’s added to what is going to become the rates that will be payable by Bradley, there is a real question that is an inappropriate expenditure because it is not related to Bradley and the operation and the generation of electricity; it is related to something completely different: a possible JAA and divestiture. That’s the concern as | understood was being discussed at the Budget Subcommittee, and will resolution that hasn’t occurred yet. Bradley Lake PMC Meeting November 18, 2004 Page 4 of 32 That's the problem the Alaska Energy Authority has with just adding it into the budget. It is part of the budget that is part of the rates that will be chargeable out of Bradley is that it’s inappropriate. Wayne: | can’t hear what he’s saying. Brian: The concern is that, (Alaska Energy Authority, not AIDEA) if adding this into the budget in effect adds it to the rates that will be chargeable to Bradley, then it’s an inappropriate expenditure because it an expenditure that’s not related to the operation of Bradley, it’s related to something different, a possible divestiture in forming an organization that could obtain the Bradley facility and other facilities. So it's Alaska Energy Authority's view that that would be an inappropriate expenditure added to the Bradley budget that get’s passed through to rate payers. Could | offer and an amendment that would go back to the original budget document and delete the proposed addition of the $150,000 until such time as there has been additional discussion and talked about how that might be funded and have a better definition and scope? While AIDEA is concerned about the appropriateness of funding it through the Project, | am concerned about the scope of the Project being one that has never been agreed to by the participants. | would like to amend the Motion on the floor to take us back to the budget proposal that was sent out with our books. Amendment on the table. Second? I'll second. Do you want to discuss on the amendment? Ok. Hearing none. Brian. All who want to remove this from the discussion and take further action, all in favor say aye. Is that three? All opposed. Tim, what did you say? Laughs. What am | the middle man? | didn’t hear you say one way or the other. Actually, | didn’t. | am not really up to speed on enough of everything that’s going on to, I'd like to try to get up to speed, I’ve got some information on the JAA, and I’m really behind the curve on the Bradley Lake Project. OK. Let me extension Mr. Chairman. OK Brian, who’s voting? Art, you voted? Bradley Lake PMC Meeting November 18, 2004 Page 5 of 32 It's a three-three tie. The tie doesn’t mean it passed. It doesn’t have a majority to pass. The bylaws provision | was just looking at is that a party is deemed a voted yes unless they make clear they have voted no. The bylaws of the group say, just a second, Section 5.10.3 of the bylaws, “A representative who is present at a meeting of the committee at which an action on a committee matter is taken shall be presumed to have assented (vote yes) to such action unless the representatives descent is both indicated and recorded at the time of the action.” There is not a provision to basic abstain basically, you vote yes unless you vote no. Ok so the extension ..... Laughter. So where does that leave us council? Unless you want to cast a vote, you’re deemed a voted yes. Leave me as a yes vote. Is that where you want to stay? Yeah that’s fine. We will give you a shot at this later on. Ok, so, the motion fails. APS. It has been removed. No. The amendment was to remove it. Right. And so it was a yes vote, because he abstained. So we had four yeses to remove it and three nos. So it has been removed. It has been removed from the budget, or from the Motion. We can go back to the question of whether he is really a qualified voter today but you can skip that one. Laughter. It works for me. We are back to item 7B. An amended Motion now that basically says “approved FYO5 Budget Changes to Increase Expenditures for the Property Valuation and Increases to the Renewable and Contingency Fund”. Anymore discussion? Move approval. Bradley Lake PMC Meeting November 18, 2004 Page 6 of 32 | already have a motion and second. OK. Amended. Do you want to talk about this now Mike? Mr. Chairman, it adds the $75,000 contract amount for the project appraisal that is in process right now, adds $540,000 to replenish the R&C Fund to the 5 million dollar level, in anticipation of the Runner Replacement in subsequent fiscal years. We're increasing the operating reserve to $15,000 in accordance with the covenant doing some adjusting on debt service and the arbiter’s transfer to actuals. Other points, we’ve already discussed the FYO4 deficit repayments $73,492, we have 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, the remaining two months of FYO5, and then in FYO6 and we'll get to this...they drop back down, but we’re making enough to collect the amended amounts in FYO5 or the last two months of the year. Is this in the accounts receivable? Linda: No. We will send a bill. This to add, so in April we'll send a bill for $73,000 for the deficit and we’ll ask people to... if this budget were approved to change their monthly contribution to this new rate for the last two months of the year so that there’s money to put in the R&C Fund to replenish it. Ok. Any questions? Mike or anybody else? Hearing none, all in favor of this motion, to approve the FYO budget changes to increase expenditures for the Property Valuation and increase the R&C Fund say aye. Aye. One clarification, does that also include then the $150,000? That has been amended and removed. Ok. The amendment we took care of a second ago was on the positive side and was moved back from the motion. The Motion is only what you see in front of you in Tab 7 B. | thought the motion didn’t pass. What happened is when Tim abstained it was aimed at being positive; the Motion was to remove it. So when he voted physically for it, to remove the motion, so it has been removed. Ok. Bradley Lake PMC Meeting November 18, 2004 Page 7 of 32 | get it. Makes you head spin doesn’t it? Alright, do you agree with that Brad? lam going with the flow and you now you lost me before | vote. Ok, now let’s go back just so we are really clear what we're voting on. We had a Motion that.... we amended it at the Agenda stage to add it in. We voted, we added it in. Wayne made a motion to remove it. The $150,000 and the JAA reference. We had a three-three, went to Tim, Tim abstained, which is voted as a positive vote. So we’ve had four votes to say yes, to remove it, so we removed it, ok? Now we are back to the original Motion, before we did anything this morning, which is on the Tab 7B and | am not going to read it again. Thank you. Ok. All in favor. Aye. All oppose same sign. 7B passes. 7C. Approve the June 2005 Transfer From the Revenue Fund to the R&C Fund Chair Haagenson Mike do you want to talk about that one? Mr. Chairman, apparently this is an administrative request in case they can’t find me to authorize the transfer of the funds in June, | really don’t think I’m going to be fishing or out of office, so this is a Motion to allow Linda to make that transfer. She may want to go into that a little bit of detail. So you don’t fish? I'll entertain a motion to have 7C which says to approve 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. Motion? So moved. Bradley Lake PMC Meeting November 18, 2004 Page 8 of 32 Second? Ok, Brad got the jump on you Jim. That’s great. Ok. Any more discussion? Are you going to be fishing? We will report back the amount that was actually transferred to BPMC so you will have an accounting of it. Anymore discussion? All in favor? Aye. All opposed same sign. Nay. 7C passes. 7D. Approval of the FY06 Budget Once again, goes to Mike Cunningham, this time I’m going to get the Motion out here, and the Motion is a short one. | entertain a Motion to approve the FY06 Budget. Don’t be shy guys. Ok, a Motion from Brad, anyone need a second? Second. Ok, thank you Jim. Mike. Mr. Chairman, This is an amended Schedule C for the budget. The highlights of the FYO06 Budget are 274,000 increase in operating expenses primarily due to a couple of non recurring costs for SEC Training Project Valuations. Increase in the R&C Fund for anticipated expenditures in FY06 of $549,000; we had a $200,000 decrease in transmition relay replacements, we anticipate that project to be completed by the end of this fiscal year. Again, some small administrative adjustments, we’ve got service and arbiters transfer. And a $15,000 decrease for operating fund transfers as Bradley Lake PMC Meeting November 18, 2004 Page 9 of 32 we have no operating budget increase. Linda can now put the expected or budgeted contributions by participants beginning in July of 05, we’re dropping back from the million 6.27 per month at the amended budget we have reduced that to a million 344,00 a month, so there is a drop is monthly contributions beginning with the FY06 budget. I'd like to thank the members of the Budget Subcommittee Henry Dale, Don Stead, Rick Miller, Linda MacMillan, for their work in pulling the numbers together and producing the budget. Any questions for Mike on the budget? Tough group today. There’s coffee in the other room if you guys want coffee. Laughter. We’re good. Ok, hearing no discussion.... Mr. Chairman, | have a Motion on the 2006 budget. | would like to move to amend the budget under Item 920 Administrative Expense to add $150,000 for activities related to Joint Action Agency Assumption Project. Write that Motion down. Isn't that exactly the same thing that we just.....you can’t bring the same Motion to the table ... Sure | can.... At the same meeting.. Well | think I can. It’s a different action. | don’t think it’s a different action. | believe it is. That was a 05 budget, this is 06. | believe, | think you are correct Wayne that you can’t bring a defeated Motion back to the table in the same meeting, but we never voted that Motion, we just took it off. Also, we never voted that the Agency to assume, or that a Joint Action Agency would be the vehicle to assume the Bradley Project. That we have a specific Motion that we made at the last meeting to had no mention what so ever of a Joint Action Agency being the vehicle for taking ownership. | wish that everyone would go back and read that motion and what passed, because this is an assumption that is inaccurate. There’s never been an action by the Management Committee to assert that JAA was a vehicle for taking ownership of Bradley Lake. Bradley Lake PMC Meeting November 18, 2004 Page 10 of 32 | have Motion on the floor Wayne right now, before we talk about it. Do | have a second to that Motion? Second. Can you repeat that Motion? The Motion was to have a line under Administrative Expense $150,000 for activities related to the transfer of the Project to the Joint Action Agency or some other activity. Ite Wayne, | am writing this down still, just for me, please... | think | got it close enough... Could you read it back to us please? That’s why I’m writing it down so | can do that. Ok, here’s what | believe... what I’ve got written down. A Motion to amend the FY06 budget to add a line under Administrative Expenses of $150,000 for formation of a Joint Action Agency. Did | capture everything? Transfer of a project | put in there to a Joint Action Agency, or some other entity to recognize Wayne’s concern. May | make a comment please? Yes you can Wayne. Would the change that Mr. Griffith has made | believe that has addressed my concern | would wonder if the attorney for AIDEA would advise me as to whether or not this Motion in the 2006 budget is any more appropriate than it would have been in the 2005 budget. Brad’s coming up to the phone. AEA would have the same concerns if this is part of a budget that would be included within rates then we have the same concern. We think it would be an inappropriate addition to the budget. Point of order Mr. Chairman. Could we hear how the Four Dam Pool did it? Well, this is the point | was actually talking to Brian little bit ago, the Four Dam Pool, when it explored creating a Joint Action Agency to take over ownership of it’s projects funded all of that exploratory work through the Four Dam Pool PMC Budget and AEA voted yes on every one of those instances, so... Bradley Lake PMC Meeting November 18, 2004 Page 11 of 32 Brian was not the attorney involved in doing that, but at that point AEA did not see any problem with it, and the contract language between Bradley and the Four Dam Pool was identical language on the budget process. And the point that | would make in response to that is whether something was done improperly in the past doesn’t provide justification for continuing something that might be improper. The concern that AEA has with this 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's not regulated. That’s the concern that we have. My understanding had been this is something that was being discussed at the Budget Subcommittee. This is the concern that AEA has had and we thought it was being worked through the Budget Subcommittee without an appropriate response to it. So, at this meeting all | can do is repeat that AEA believes that it’s inappropriate to add to a budget that is included within the rates that would then be chargeable from Bradley. May | speak a second time? Go ahead Wayne. Wayne: I’m 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, no ability of the participants to do any independent analysis or give any independent thought or seek any advice or any council, to things of such magnitude. It would be my request that not only that the members vote against this change, but it would be my request that you would honor the normal practice of bringing important issues before the body in advance of the meeting, and not having these things drop on us like they’ve been doing. Ok, any more discussion? You guys are really quiet today. Ok, no more discussion, we will vote this amendment. The amendment right now is worded to read “to amend the FY06 Budget to add a line under Administrative Expense $150,000 for transfer of the Project to a Joint Action Agency or other entity.” Did | get it? Right. Ok, all in favor. Aye. All opposed. Nay. Ok, so it’s four to three, if | heard right? So, the amendment passes. Wayne: Please give us a roll call vote. I’d like to know who voted, and how. Bradley Lake PMC Meeting November 18, 2004 Page 12 of 32 You can do the roll call vote but it takes a double majority. It takes a majority; it takes four utilities and the affirmative vote of the state, and | heard the state vote no. And the affirmative vote of the state. Yes. The budget matters require the affirmative vote of the state. Ok, so then | guess the motion failed. Thank you council. With no affirmative vote. Ok. So we are back to the original motion of approve FY06 Budget. | have motion to second. Anymore discussion on the Budget? Hearing none. Now I’m listening that it’s really hard for the state’s vote here. Everybody in favor of approving FY06 Budget. Let me just back up a minute. The state’s affirmative vote is required on approval of the Budget. | guess we could back up and say revising the Budget could pass without the state’s vote. It’ that the Budget vote itself. So can you help and help me think this through? Now the language is that it’s on approval of Budgets you need the affirmative vote of four utilities and the state. Amending the motion, | guess, is a different... From a practical standpoint, | don’t think you want to present a Budget that’s going to be voted down because you have an item in it that’s inappropriate, and so, | mean you can go through that process; but I’m not familiar with it and | think recess it and give us an opportunity to go through it if you want to. Other wise just take the Budget as | think everybody understands it with the $150,000 out of it. Mr. Chairman | would be in opposition to that and | confer with Ron’s point of view that the state does not have the veto on it. They have a veto on the Budget. Here’s the real funny question | have for the state. If you leave it in are you going to vote yes? | think that’s an inappropriate question. Laughter. How to save some time. | don’t mind going through the motions Wayne if that’s what you want to do. Bradley Lake PMC Meeting November 18, 2004 Page 13 of 32 | think everybody ought to listen to what the man says and save us the problem by agreeing to go ahead and drop it. The provision. Well, if | understand Brian right, our council’s advice is to vote no if it’s included. And the concern is that the Budget as approved by AEA, | believe we have a responsibility because this is not regulated by the RCA to make sure that items in the Budget are appropriate. If you submit a Budget that has an item that we believe is inappropriate | think it’s our duty to vote no, and that’s what | would advise Mr. Copoulos in this matter. Ok, so | think | got the answer to my question Wayne, even though | shouldn’t have asked it. Ok. | actually, just following the technical advice, | think technically the motion to amend it passed four to three. You now have a vote on the Budget in which AEA’s vote will be necessary. That’s right. Ok. Under the advice of council, the technicality here, the amendment we had a second ago actually did pass. Now it’s included in the Budget, so now we are going to have another vote. Wayne: I'd like to ask a question, then. | believe council advised us the first time one way, and advised us a second time another way. Would not the first time have precedent over the second? Now I’m not aware of the thing; Brian is sitting here with me and we're looking through the bylaws together. Let’s take a five minute recess. You guys can duke it out. We'll figure out where we go from here. Ok, we’re back in session. | entertain a motion to rescind the prior amendment to the FY06 Budget. So move. Do | have a second on that motion, the rescindtion motion? | second. Joe just moved to rescind the prior amending the $150,000 to the administrative costs. Ok. | have a second motion and a second now to rescind the $150,000 and all that language with it. Any discussion on the rescinding it? Bradley Lake PMC Meeting November 18, 2004 Page 14 of 32 Wayne: I'd like to ask a question or make a statement. It’s my understanding that no precedent has been established to the action up until this point and including the vote we are fixing to take. Is that correct? Precedent as to AIDEA or AEA’s... Wayne: | don’t believe that question has; there are people in the room there that evidently disagree with AIDEA’s ability to exercise their veto power on an amendment and there are people that agree or believe that they can. So | don’t believe, well what I'm trying to say is that what we’re voting on is not to establish one way or another whether AIDEA has that authority or not. That's something that would have to be established elsewhere. That's true. The bylaws are what they say. That's correct. We have a Motion in front of us now to rescind the prior amendment. All in favor say aye. Aye. All opposed same sign. Ok. We have a rescinded amendment. Now we're back to the original Motion called FY06 Budget. Approval of FY06 Budget. Anymore discussion on FY06 Budget? Mr. Chairman, | think we need to change Schedule C. That’s amended. So it should be the Budget as amended and it’s your choice whether it requires a motion to accept the new Schedule C. How about a friendly motion to.... | would consider that a friendly amendment to supplant the original Schedule C with the new schedule C that is dated 3/31/205844am although that’s spelled 2005 8:34 am. Linda: It only changes the comparison numbers. Ok. Ok. Now another motion. Mr. Chairman? Bradley Lake PMC Meeting November 18, 2004 Page 15 of 32 Yes sir. Don: I’m not sure that we’ve received the schedule that’s being referred to. Could you describe it a little more completely for us please? Linda. Linda: It’s a technical correction on the top of the form; the numbers carrying FY05 FYO6 were the wrong numbers for FY05. It doesn’t change anything else in the budget. Does that work for you Don or do you want to have a copy of that faxed to you? Don: That’s...let me just ask one follow-up question. Is it my understanding then that nothing has changed in the FY06 column on Schedule C? Linda: No. It’s only in the numbers that were titled Amended FY05. They weren't the right numbers. Don: | think we can go along with that, but we would like a copy of the schedule to be faxed just for our records if you don’t mind. Linda: Yeah, we can do that. Don: Ok. Thank you. Ok. We have FY06 Budget in front of us with the new Schedule C. All in favor; anymore discussion for the last time? Ok, all in favor of approving FYO6 Budget including the new Schedule C say aye. Aye. All opposed same sign. We have a Budget. Just for the record, Art voted yeah. The next topic. Item 7E - HEA O&M Contract Extension Term. I’ve asked Shauna to make copies of the Agreement so we know what Agreement we are extending. And she is handing them out right now. Does MEA have a copy of that do you know? Wayne: We got one over the fax machine, | think around 9 o’clock or so this morning. Ok. She nodded her head when | asked her so, you should have one. And, if you notice, there’s not tab, but, if you look in the 7E that was given to you yesterday, | think to include in your packet, there’s a resolution to extend the Operation’s Maintenance Bradley Lake PMC Meeting November 18, 2004 Page 16 of 32 Agreement with Homer Electric Association. If I’m not mistaken, | think in our bylaws state that we are supposed to number our resolution. Is that true? Does anybody know? If | remember | think that’s what it says. | think you can always pass it and then they number them afterwards. Ok. Wayne: In order to open up the Item then, I’d like to move that Item 7E be approved. Is that a Motion? Wayne: Yes. Do we have a second? Second. Ok. Any discussion? Mr. Chairman | would request an update on the situation with VA Tech, and some of the aspects of the whole Bradley Lake thing. Could we hear that please from the current operator? Would you like to do that now? It's an Item in the Agenda. As it relates to this Agreement. As it relates to this Agreement | would like to hear it now. Ok. Right now. While you get a chair, could | ask you an easier question? Sure. The cover sheet of this is dated August 1996, by the contract it’s a five year extension, so is there an extension in between, or has this contract expired, or what... | don’t see what gets us to 2005. | think there is a provision in here that calls for year-to-year extensions. The original five years from the five. Do you think this is voted on every year? No. It’s automatic. | think there’s some language in here that stresses that. Bradley Lake PMC Meeting November 18, 2004 Page 17 of 32 Ok. I'll look at it while you're talking. Don: Ok. Let’s see, for VA Tech right now, VA Tech is sitting... trying to gather my thoughts just a just little bit. WA 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. 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; if that is clear enough. They've built in now in three different software systems. The first software is their own software, they worked it; it works. They then built it in another software system called Naplab Simulink and it functioned in it similarly to their logic cad model. Now they’re building it in PSSE and they can’t get it to work right. So, they are having some difficulty with that; that is the last hold-up. All of the manufacturing has been completed, all of the parts are in shipment and there is currently some stored at Homer Electric for VA Tech. And there are some that are being stored here in Anchorage, and there are some that are still in transit. Once we start receiving material we then become liable for a million dollar payment. So that’s why Homer Electric is not receiving any of this material it is being held for VA Tech. So, that’s the status of it | guess, everything is built, everything is ready, we’re waiting for the model to work. Once the model is delivered to us, ok, then we turn around and give it 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. Then we turn around and tell them we accept the alga rhythm or reject it, and they have to do more work, one or the other. Then it moves into the next phase. Right now, we’re recommending that we move the outage back to the first of May to give us more time, and to give them enough time to give us a model and for us to evaluate it. Is that clear as mud, sir? Mr. Chairman, if | might. What simulation do we believe, Don? Don: Well, we have to believe the PSSE; because the PSSE model that they're currently working on is the one that we all use in the real belt to model our generation and transmission assets. So that is the critical one. We can say that it works fine in all of the other simulations, but all of those are disconnected from a live system, if you will. So we have to see it work in an interconnected system. Mr. Chairman, if | may continue. How soon do you think you will see that response or that fix or whatever? | am not sure what fix is. Whether their models are wrong or ours are right or ours... Don: Yeah, and that has not been resolved. They have been working on the PSSE model for over four months now. | guess I’m not optimistic, but is the thing going to be by next month? Don: And they may not be. You know, | did in my report and in my discussion with them two weeks ago when we were in Ravensburg, was, you know, we might have to move this all the way back to October. That might be our best time to get it in then. Bradley Lake PMC Meeting November 18, 2004 Page 18 of 32 And again, we are not liable for any payments until they actually deliver parts to site and we accept them. If | may continue Mr. Chairman. So there is no additional cost to any of us for these delays? Don: None. That’s good. Don: All of these delays are strictly on them. They do understand that. | reiterated it to them. They are willing to accept that. So right now we are in a wait and see mode on the model. Who hired the PSSE modeler? Don: VA Tech. VA Tech did. Yes sir. And who data do they use? Don: Whose data is he using? Yes. Don: He is using our current rail built model and then he is constructing the Bradley governor inside of it. So if the, if something happens and we blow up a runner in the interim, it’s just tough for us. Laughter. Don: Yeah, it is. | mean, yes. That’s tough for us. One of the things we are doing, going on with the runner is, the spare runner that we have out on the floor has been repaired, has been heat treated, has been returned to the Bradley Lake Project. On the 18" of April we do a detuning process on it in order to alleviate any of these ringing concerns and excess stresses that might be in the runner due to that. Rebalance it and make it ready to swap in. One of the ways we can alleviate that is to put it in with a two day outage as soon as we are done with that detuning process. Well | don’t want to tell the operators how to do it, but, | thought there was a certain degree of risk here with these guys delaying and my guess is that we will never make the May 1 outage date. So that will shove us automatically, | think, to October. What are any ancillary risks in this, like do we have water problems? Do we have.... Don: Right now you’re just living with the old governor and whatever instability problems that it might present to us. Bradley Lake PMC Meeting November 18, 2004 Page 19 of 32 | believe that shifting schedules and stepping in some other slot of time that some other generator is going to come down for maintenance. Yeah. And we would have to work that out with John and the other rail built utilities on the rail built. And any maintenance schedule. Mr. Chairman, could we ask John if there is any immediate implication of a slip to October. John or Do you have a feel for that? John: Steve....The plan was to do the maintenance in April; starting in April, therefore people have planned out how they want to use their water for the year. If we do it ata different time people are going to have to change how they want to use their water throughout the year. That may have some impact on various different...different utilities will have different impacts based on how that might change. As far as water inflows and spilling, | don’t think it makes any difference. Thank you. Mr. Chairman that answers all my questions. Are you guys meeting all the conditions in this contract? Yes. Laughter. A simple question to ask, hard to answer, possibly. | would agree with you, | just thought of this five seconds ago, but again like Wayne’s comment earlier, we’re going to extend this contract | guess the question | need to know from all the members is does this work for you? | have the answers and the discussion from the last meeting about legal review, specifically construction contracts, not dying on this, but, | think we were under the impression that this new construction we are doing, the modification is under this agreement. Correct? Ok. | think it is. So you probably have somebody to review for your risk; but the discussion we had at the meeting who’s reviewing for our risk. The BPMC. We actually tabled the Motion last meeting, but | think it is an important thing. So, you’re not an agent of this group, you are acting under contract, kind of..., Correct. | want to make sure that we are not just assuming that are agents that are acting in our best interests because, who’s holding the risk, and | guess as an engineer | have one Bradley Lake PMC Meeting November 18, 2004 Page 20 of 32 comment. If we provided all the data to them and the model is not working and something blows up, that’s a get out of jail card free. Get out of jail free card. So, the concerns are like that, but, it seems like the Project, and | am trying to tie it back to this agreement, we have a Project that seems to be slipping. Costs doesn’t appear to be a problem. We have a potentially catastrophic failures mode that could happen, and your monitoring your closer, | just want to make sure that that’s all under this Agreement and we've got all the risks covered in the appropriate manner. | guess, I’m not sure but if we wanted to just say “oh, great” at the operator here, you can take that risk on for us, or not take it on but you’re addressing it and that’s ok, that’s one answer. But | think we need to make a very conscious decision that that’s what we’re saying. We should just delegate it and say “oh, great” where we want to review it because | think specifically on legal review we need to make sure that we’re reviewing it with our best interests in mind because | trust that Rick Baldwin is going to review it with Homer’s best interests in mind. Is that clear? You didn’t table that Motion last time. You passed it. | believe it was tabled. I don't think so. | look back and on top of page 4.... Mr. Griffith motioned that utility council review contracts that affect utilities collectively. We seconded it. We seconded it and the roll call vote is all AEA abstained, Matanuska voted no, and everybody else voted yes. And they are on page? On page 7 of 8. Am | not reading that correctly? | was reading on page 4. Top of page 4. Go to page 7 of 8 and it’s the last sentence. Seven. It was tabled till later in the meeting, remember? Till Brian showed up he brought it back. Ok. Anyhow. We still need to decide if we are going to continue down that path and make sure it’s getting reviewed. Bradley Lake PMC Meeting November 18, 2004 Page 21 of 32 Has that review been conducted Mr. Chairman? That’s my question, and if so, what are the results of it? Council. | have not seen the contract. Ok. Why have you not seen the contract? Is there any, do you have any idea? I’ve asked for a copy and have not received it. Who has it? Don: Which contract are we talking about here? VA Tech, Mr. Stead. Ok. Are you talking about the FUJI contract? Go ahead Don. Don: | am spending a lot of time right now reviewing and looking for the original FUJI contract. | thought you asked about the VA Tech. So what we're talking about is that we haven't seen that contract. Ok. | can get you a copy of the contract. You will have it on Monday. Does that include the missing FUJI contract? No, it does not. There was, Mr. Chairman if | might, as | understood from AEA there was some arrangement to clean FUJI or perhaps Don Webster, or whoever the other contractor was regarding acceptance of that, is that the contractual, the last action if you will, of a litigatory nature regarding that whole building contract? And Art, you may not know the answer to that. Art: Yeah. | am not aware of any details related to the FUJI contract. As | understand it is fifteen or so years old. And you don’t have the contracts? Bradley Lake PMC Meeting November 18, 2004 Page 22 of 32 Art: Well, we've been in the process of trying to dig those out and my understanding is that there is four file drawers with FUJI contracts at the Project. Don is in the process of sorting through that to find exactly what Ron needs. Ok. So Ron can’t do this review until he sees those. | think that was the intent of this body that we would look at the FUJI contract as well as the VA Tech contract with the idea being that we might need to take some kind of action in one or both cases, and that review hasn’t been completed. So | say this is an action that probably should be delayed pending that result. | will make that Motion. | am not sure what your Motion is. Well | guess we don’t even have the Item on the table yet. Can | go back and ask. The contract does say that it renews year to year, so why is this on the Agenda today for an action? Just to renew the original five year so instead of going year to year it goes back to renewing the original five year Agreement. Ok. My understanding, Ron, this is something Don and | just talked about, you know, because it is a contract with AEA and | think the perspective we have working with Don is his interest has been to have some sort of long term stability there for the people that work there so they can ensure.... The contract is in place, it continues year to year absent either Homer quitting or AEA terminating it. So the reason it is in front of us is that you want more than a year to year. Ok. | didn’t understand that, | so I’m sorry. And that isn’t the resolution that applies to extension. Right. So it’s not really an extension, well it is, but it’s to commit to a five year term instead of the year to year. Ok. Anymore discussion? | guess | would just follow up with that and say it’s AEA’s view that there is benefit in having some stability that you get with a five year contract; with a benefit of retaining a skilled knowledgeable workforce and planning for the future repairs and that sort of thing. So AEA supports the idea of a five year. Anymore discussion? Do we have a Motion on the floor? Bradley Lake PMC Meeting November 18, 2004 Page 23 of 32 We have a Motion Wayne made on the floor and | think Brad seconded the motion. To approve the 7E? To approve the 7E resolution which should be in your book, you should have a copy of it. Art seconded. Art seconded. Move to table pending the results of the legal review. Ok. | have a Motion on the floor and it takes immediate precedent over anything else at the table. Without discussion. So, all in favor of tabling this motion until legal review is complete say aye. All opposed. Nay or aye whatever it is | am opposed. Ok. So | got three to three again because | didn’t say anything. You have to vote then. So, | am going to vote yeah, so it tabled, so | can get a chance to look through this and make sure this is what we want to happen. You're on a year to year already. Correct. This is not, it doesn’t stop tomorrow, is what I’m saying. Ok, we have a Motion tabled. 7E is tabled until legal review is complete so | guess the legal review on... just a clarification... a legal review on the VA Tech contract and the FUJI contract or just the VA Tech contract? | think both VA Tech and FUJI and we also all should review the O&M Agreement that we passed back in 1996. This will be in the Agenda for next time after the legal is complete. Yes. Ok. Thank you. Item _7F. Turbine Runner Replacement -Risk Analysis, FUJI Contracts, & Replacement Recommendations. Ok. Bradley Lake PMC Meeting November 18, 2004 Page 24 of 32 The Runner Replacement, the O&D Committee has evaluated the, at your request, the recommendation or has evaluated Runner Replacement at Bradley Lake and they do make a recommendation for replacement of the three Runners we currently have at the facility. We have performed the Risk Analysis; | believe that has all been sent out. Is that... | know | saw it. Which document? Do you want to tell everybody about it? Ok. Let me go back to my little seat here and pick it up. It’s... Do we have copies of that? | don’t know. Not in my book. Ok. The Risk adjusted the estimate of avoided cost for the Bradley Lake Runner replacement. That was performed by Mr. Hickey in coordination with myself and under the review of the O&D Committee. We came up and we looked at, | don’t know how many people have looked at this kind of a thing, it was a worst possible occurrence. What would happen if a Runner cracked, failed, and threw parts around and the maximum damage to the facility. We then looked at what would be the most possible occurrence and the most probable occurrence. In other words, a bucket falls off, it might hit a needle, and do a little bit of damage but everything would shut down. Most possible, if | remember correctly, was the bucket would fall off, it would do a lot of damage inside the discharge chamber, and the worst case was we actually had tunnel failures. So we threw a bunch of numbers at those failures, we did the evaluation according to the Effries Methodology for performing that and we came up with a total avoided cost of 4.2 million. We're spending right at 3 million for the Runner Replacements and the O&D Committee came back and said it is not worth the risk we should replace all three Runners. So that was the recommendation from the O&D Committee. Mr. Chairman, could we get a copy of the Analysis please? Yes sir. Any discussion while we are waiting for those copies? | think the outcome is as we suspected Mr. Chairman, that it is too risky not to take the steps to rectify the problem down there. So my view is we probably should proceed on. Thank you. Bradley Lake PMC Meeting November 18, 2004 Page 25 of 32 Personally, | think it is a good recommendation after the presentation we saw at the last meeting, so, we need to get those cracks resolved. We are looking at replacing with those Microgoose. It would be looking at the Microgoose Runners. Ok. That was the other thing, if we do go down this path the O&D Committee did make a recommendation that we go in full force to VA Tech for the replacement of these Runners. This is the same VA Tech that’s helping us out on this other piece of the Project. Yeah. Yeah. It is. They do build an awful lot of Pelton Runners. | mean they are the number one supplier in the world. Do they build them on the same schedule they do the Control! System Analysis? | think they have a better schedule. You have to remember to, going back to the governor, the governor here is rather unique and we are asking for a lot on this governor, and it is something they are not used to supplying. So, they are modifying their standard governor to fit us and it’s taking them a long time. Ok. Go ahead MR. Chairman. Are the replacement of the three Runners in the FY06 Budget? | can’t remember. | moved them to FY06 and 7 Linda: Yeah, yeah. 6 and 7 because it is an eighteen month replacement to manufacture. It does run through the R&C Fund. Sorry. Well we have to replace it with long term debt someplace because we have to replenish the R&C Fund. Well, that was going to be my suggestion is perhaps we should fund it to the degree we can out of the R&C Fund and then have a motion to replenish that with long term debt at Bradley Lake PMC Meeting November 18, 2004 Page 26 of 32 the earliest opportunity and perhaps we should address the Alaska Intertie at the same time. So if that requires a Motion I’m happy to make that if it’ appropriate at this time. Do you want to make that Motion or do you want to put it back to the Finance.... Well we'll send it back to Finance. That’s a better idea. Let them create the plan. You ok with that Mike? Mike: Yes. So do you want to amend your Motion here? | will amend my Motion and throw that issue back to the Finance Committee. The objective of their efforts to 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. Ok. Unless Shauna is really really good, she didn’t get any of that because she is not here. Laughter. Mr. Chair? Yes Sir Wayne. Wayne: It seems to me that any Motion would be out of order that 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. It certainly is not appropriate for us to undertake it in this fashion. Ok. Mr. Chairman, a comment on that statement. | need a second on that. Thank you, | got a second, now go ahead. What's the Motion again? It was a long one. Something about sending it back to the Finance Committee for recommendation on replacing R&C Funds with long term debt and he threw the word Intertie in there, then that’s what got Wayne’s attention. Ok. Well let me comment on Wayne’s comment. The reason I'd do that is because it would make sense. We know that there perhaps are fixes that are going to be required Bradley Lake PMC Meeting November 18, 2004 Page 27 of 32 for the Alaska Intertie and it would make sense that the IOC and the Bradley PMD, since we are all in essence the same people, and it would be AEA putting the bond packages together and executing the financing. That they be considered at the same time simply in the interest of saving money, and that’s the reason | put that in there. Now | wouldn’t suggest that the Bradley Project Management Committee should pay the bill. It should be billed under the |OC Agreement for whatever the IOC bonds end up being. It is my understanding, Joe, 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 to usurp the actions that they intend to proceed with. Ok, | will withdraw my language about the Intertie, but | still say it makes sense to do a joint financing because it saves money for all of us. | think Wayne, it is almost a point of order, we can act on things for Bradley and |OC meets and act on things for the Intertie, the smart thing to do is to put them together. Alright, we will put them together later. | withdraw my comment and that Motion about the Intertie. Ok. So here is what | captured on your Motion. The Finance Committee will make a long term plan for the use of R&C Funds to replace the three Runners for Bradley Lake and then with a longer term plan using some other vehicle. Make a recommendation on that vehicle. End Control System. Fixes too. Ok. Ok. That’s the Motion and | had a second already so, any more discussion on that Motion? Hearing none; all in favor of the Motion. Aye. All opposed same sign. We have a Motion to approve to replace the FUJI Runners and come up with a financing plan, and we know have copies of the Analysis System Report back from Shauna. Thank you Shauna. Take a moment and read through this very fast. | am happy with the report Mr. Chairman; | just wanted a copy to peruse in greater depth later on. There is one observation. One in a thousand odds are not very good odds for the worst possible occurrence. Basically that comes from a look at 23 utilities evaluated over 2000 failures statistics of them the worst case occurred about 1/10 of 1% of the time. That’s in substation related Bradley Lake PMC Meeting November 18, 2004 Page 28 of 32 failures, but that was the only thing we knew about, so, | took that alga rhythm that we used for awarding costs for substation equipment failures and applied it this. | know but there is a 1.8 billion number in there that | couldn't figure out why it was wrong but | knew it was wrong so | threw it out. | didn’t know it going to the PMC, | thought it was going to O&D. Art was pressuring me to get it out to him in moments so | sent the memo out. | guess the thing we should be very interested in is do we have insurance to cover the worst possible failure case. The worst possible case is 289 million. That’s a tunnel collapse | presume followed by the dam collapsing followed by... Where did that one go? It’s mostly in the tunnel you know; its tunnel damage as well as a power house damage. You don’t have enough money; you don’t have enough insurance to cover that, no. The total | used in 1999 for the tunnel is 100 million dollars to start with for valuation and | just doubled it and figured it cost twice as much now as it did back in 1999. Mike is working on his people getting an actual number for that but we don’t have it yet. So we've go the cart in front of the horse. For the valuation of the cost for a new tunnel. All the more reason to minimize this risk. Just for point for point of clarity, isn’t 60 million, that’s what we have insured? | believe it’s higher. Is that the maximum liability for the insurance? | think it’s less than a hundred though, whatever it is. Yeah, | think it’s 60 million. It's more than 6 though. Yes. Ok, anymore questions for the Runner in there that will break Don? Laughter. Brian’s making me do it. Bradley Lake PMC Meeting November 18, 2004 Page 29 of 32 Laughter. Ok. You good? I’m good. 8. Committee Report / Comments Do you want anything else from the governors Project Status? That’s the next thing on the Agenda. Right. | think the legal review will give us the answers we need to hear on that whether we need to, | guess, the ultimate question is “are we doing all that we can to insure that those people are moving at an appropriate rate”? What | hear you say is you think we are. : Yeah, and we are incurring no additional costs. Ok. And we will have a quality product in the end. And we will have a quality product in the end. Ok. | request that you keep us updated in between meetings so we kind of know what's going on so if we need to get together and get some direction, if we take a harder stance or something, as a group we cover ...... Ok. Unlabeled Item G Audit Approval. DO we need to approve the audit? That was already done, | believe. In the Deficit Approval. We need to approve the audit. We didn’t take that step. We approved the change. | think we should approve it, just for the record if nothing else. Ok. So | Move approval of the Parisena Stromberg audit that was presented earlier. Do | hear a second? Second. Ok, any discussion on the audit earlier? Bradley Lake PMC Meeting November 18, 2004 Page 30 of 32 Hearing none. All in favor approving the FY04 audit that was presented earlier in the meeting? Aye. All opposed same sign. Nay. Ok. Have the approved audit. Committee reports. Operator report under the Governor Status Don just gave us a little information already. Any other questions of Don on the Governor Status? And how about the Budget Committee Report/ Appraisal Audit Update? Mike. Mike: | am advised by the consultant performing the appraisal that it should be completed by May 1* and no later than June 1°, Power Plant Tunnel will be appraised at full replacement cost plus debris removal. We have a July 1 property insurance renewal so hopefully we will be able to fold in the results of the appraisal into the renewal. How about all the other recommendations the consultant made in terms of incorporating those into the renewal? There’s four open Items left and we're still looking at those. In terms of additional insured and Waiver of Subrogation Issue? There’s some disagreement.... Yes .... | am about ready to elevate that disagreement to be honest with you. Disagreement is at what level? Regarding additional insured and Waiver of Subrogation and listing of additional insured on the policies. Things of that nature. There’s disagreement | need to talk with ?. And that’s the issue we talked about a year ago now. We talked about Chugach’s exposure. Homer already has insurance. Ok. Are we going to get a report from the consultant sometime so we can have a little time in advance? Bradley Lake PMC Meeting November 18, 2004 Page 31 of 32 It should be available May 1°. Ok. | thought you were talking the Stone and Webster but that’s going to actually be the Warren McVey May 1°. It will be a Stone and Webster appraisal by May 1* no later than June 1. What are you looking for? Isn't there going to be another report that’s going to incorporate the Stone and Webster recommendation with the Warren McVey Right. He’ll issue that in final forum. After the appraisal is complete. So it will be after that. In June or July time frame? Yes, we have a July 1“ insurance renewal on the property. So that means we need to see that assessment at least by no later than a June meeting. i decide if we want to increase the coverage to the degrees that might be suggested in That will be the recommendation out of the Finance Committee also, right? Yes. Ok. We are at the end of our Agenda. The next meeting date, anybody have a preference? We meet this summer; do you want me set the call of the Chair? Call of the Chair. That’s ok by me. We'll do it. Without objection we are adjourned. 9. Adjournment The meeting was adjourned at BY: Bradley Lake PMC Meeting November 18, 2004 Page 32 of 32 Steve Haagenson, Chairman ATTEST: Alaska Energy Authority, Secretary Alaska Industrial Development and Export Aut AIDEAVAEAY Alaska Energy Authority BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE REGULAR MEETING AGENDA Thursday, March 31, 2005 — 10:00 a.m. (Via electronic media at AIDEA/AEA — 213 W. Northern Lights Boulevard) (Corner of Arctic and Northern Lights Boulevard) 1. CALL TO ORDER wall Haagenson 25 ROLL CALL (for Committee SSH | 3 PUBLIC ROLL CALL (for all others presert) vl 4. PUBLIC COMMENT »~ . AGENDA COMMENTS Ue) 6. APPROVAL OF MEETING MINUTES November 18, 2004 Tt; NEW BUSINESS A. Approve Utilities’ FYG4 Deficit Repayment to the Project Cunningham H 4500" ‘)—B. Approve FY05 Budget Changes to Increase Expenses for the” ya Property Valuation Y > Da Gaga =" Cunningham c Approve tine 2005 Transfer from the Revenue Fund wm to the R&C Fund | Cunningham ack D. Approval of FY06 Budget ~~ Cunningham igh’ E HEA O&M Contract Extension Term ~~ Stead/Copoulos — F Turbine Runner Replacement — Risk Analysis, FUJI Contracts, & Replacement Recommendations ~ Audit Approval Stead/Hickey/Copoulos 8. COMMITTEE REPORTS / COMMENTS A. Operators Report 1. Governor Project Status “| a Stead 2, Budget Committee Report/Appraisal Audit Update “ Cunningham B. Next Meeting Date Haagenson 9. ADJOURNMENT 813 West Northern Lights Boulevard * Anchorage, Alaska 99503 907 / 269-3000 * FAX 907 / 269-3044 * Toll Free (ALASKA ONLY) 888 / 300-8534 * www.aidea.org Al Steve Aloe sereten 4 Doug Hell il Rick Miller -A MIA > aa ©. as ae a: AM ee Tobe fe © ® | Metivw hy de ATR =— held Sehr —te inetode ‘inet azhiog —* [5° 60d \e 422 ead poi i Dbriaw = Cow v [ad ny to budgoh - ( yore ) hsb yelotea to BL 411 BA Bd Heir. oo feces few SCUS IK , a ee “Fehon ty bd repel At Bad Janeschke otaa pe _ CH of Senard — fes- vote. Amend to enone: Portis Ttem lemoredifim Motion . Ie) (pdb wn VA Ted ra De polite h de oS. ‘jl bes Stead. is nr Hex rls Lpe js) ma Fe x jl sh v VeeA 7; nytt ey A fA (@ 3/31/05 DATE: BRADLEY PMC VOTING Agenda Item No. 1m ae ee ves Wo ABs YES NO ABS YES NO ABS CITY OF SEWARD 01% a LC MATANUSKA ELEC ASSOC 14% Ze . CHUGACH ELEC ASSOC 30% Zi Petr HOMER ELEC ASSOC 12% ve [ | GOLDEN VAL ELEC ASSOC 17% is for Tr MUNI LIGHT & POWER 20% (Ze a ALASKA ENERGY AUTHORITY Ze EL | A=4+ OVER 51% B=AEA CONCUR With A C = UNANIMOUS D= MAJORITY 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) 3) 4) 5) 6) 7) 8) 9) Establishment of FY estimated annual payment obligation and schedule of each purchaser. Determination of annual project costs after each FY. Evaluation of necessity for and scheduling of required project work. Determination of appropriate amount of insurance. Adoption of additional minimum funding amounts for renewal and contingency reserve fund above that required by bond resolution. Selection among alternate methods that involve AEA for funding required project work. Adoption or amendment of procedural committee rules (except dispute resolution). 10) Adoption of project maintenance schedules. 11) 12) 13) 14) 15) 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