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Bradley Lake PMC Meeting Wednesday May 14, 2008 2
Bradley Lake Project Management Committee Meeting ALASKA ENERGY AUTHORITY Regular Meeting Public Notice Bradley Lake Project Management Committee Notice is hereby given that the Bradley Lake Project Management Committee will hold a regular meeting on Wednesday, May 14, 2008 at 10:00 a.m. For additional information contact Brad Evans, Chairman. This meeting will be conducted by electronic media pursuant to AS 44.88.050(a) and AS 44.62.310 at the following location: Chugach Electric Association’s Board Room, 5601 Minnesota Drive, Anchorage, Alaska; The public is invited to attend. The State of Alaska (AIDEA) complies with Title ll of the Americans with Disabilities Act of 1990. Disabled persons requiring special modifications to participate should contact AIDEA staff at (907) 771-3000 to make arrangements. Attachments, History, Details Attachments Details None . Commerce, Community and Department: Economic Development Revision History Category: Public Notices Created 5/6/2008 3:05:41 AM by bjfuglestad Sub-Category: Modified 5/6/2008 11:05:42 AM by bjfuglestad Location(s): Anchorage Project/Regulation #: Publish Date: 5/6/2008 Archive Date: 5/15/2008 Events/Deadlines: BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES (via teleconference in the Chugach Electric Association’s Board Room) Anchorage, Alaska Wednesday, May 14, 2008 — 10:00 a.m. 13 CALL TO ORDER Chair Evans called the regular meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:00 a.m. on Wednesday, May 14, 2008, from the Chugach Electric Association’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: Bradley Janorschke Homer Electric Association Brad Evans Chugach Electric Association Brian Newton Golden Valley Electric Association Wayne Carmony Matanuska Electric Association Jim Posey Anchorage Municipal Light and Power Tim Barnum City of Seward (teleconference) Bryan Carey Alaska Energy Authority 3. PUBLIC ROLL CALL Shauna Howell, AEA Page 1 of 5 Christa Caldwell, AEA Henri Dale, GVEA Doug Hall, AML&P Peter Raiskums, MOA Mike Chadwick, MOA Brian Bjorkquist, Department of Law Tuckerman Babcock, MEA Rick Miller, AML&P. Charlie O’Hare, HEA Rick Baldwin, HEA Don Zoerb, MEA Linda MacMillan, AEA (teleconference) 4. PUBLIC COMMENT There were no public comments. 5. AGENDA COMMENTS There were no agenda comments. 6. APPROVAL OF MEETING MINUTES — March 11, 2008 MOTION: Mr. Janorschke moved to approve the minutes of the March 11, 2008 meeting. Seconded by Mr. Newton. The meeting minutes were unanimously approved. ifs NEW BUSINESS 7A. O&M Agreement Mr. Baldwin stated that HEA originally proposed a 5-year term with automatically renewable 5- year terms. HEA was looking for change in the contract which would eliminate what they viewed is an unacceptable risk of the operator for uninsured losses. The clear provision for who would be responsible for deductible/coverage gaps/claim in excess of the limits — since HEA is operating at cost it didn’t want to assume any risk. HEA has by this agreement received that — there is a provision that uninsured losses will then be a project expense. HEA still remains liable for willfulness conduct or gross negligence. A second item that came up was the interplay between the legitimate interest of the BPMC in controlling the asset that member utilities are paying for and are responsible for and AEA’s duties as the owner and its obligation under the bond. The intent of this draft was to expand the BPMC’s role of beyond its role in the original contract. The original contract provided for the attachment of a master O&M agreement, which had not been negotiated at the time the original contract was entered into. That O&M agreement later became an attachment to the HEA O&M Page 2 of 5 contract (an agreement between the BPMC and HEA). The terms of that agreement were also integrated into the new agreement. The final significant change is language inserted as a result of an insurance study commissioned by the BPMC (Bud Griffin). There was concern at the BPMC that they were having inadequate input into HEA’s subcontracting practices and needed more oversight. Discussion ensued that each subcontract should be put before the individual BPMC utilities or perhaps the BPMC lawyer for review prior to execution by HEA. That discussion never really came to a conclusion because there were discussions of should a minimum limit be put on the contracts so HEA wouldn't have to come back to the BPMC with the subcontracts for janitorial, etc. They provided HEA will follow the subcontracting procedures as established by the BPMC and AEA. Mr. Bjorkquist added input as to history (in his perspective). Over time there has been a balance of interests addressed. On one hand the PMC has wanted to have oversight and the ability to influence what goes on, but on the other hand there needs to be some flexibility/freedom on HEA’s part so there aren’t cumbersome processes that add to expense. The question at hand is — is there a way for the BPMC to get re-involved midway rather than just at the beginning during contract review? Mr. Carmony asked if there was anything in place where HEA has the ability to allow for adjustments — if they need a change order to a contract if the amount of the change order is less than 2% of the contract, do they have the ability to go forward or do they have to wait until the BPMC approves? Mr. O’Hare stated that there is no percentage buffer specifically. If HEA sees something will be over budget, they are required to go back to the O&D subcommittee to discuss and determine whether to go forward with taking it to the BPMC for approval or increasing the budget, and that would be a budget amendment. Mr. Bjorkquist added that the indemnification provision comes from legislation that was passed this year (Chapter 4, Session Laws of Alaska 2008), in which all state agencies, including AEA, have language similar to this indemnification language for any construction related contract. The O&M work that HEA does, some of it could be characterized as construction related and therefore the legislature in this law requires that this indemnification language be included in the agreement. Mr. Newton made reference to Section 12 — work rules — and requirements of the Authority and the BPMC approving changes. Mr. O’Hare responded that the work rules were put out by AEA in the early 90s and they were incorporated into the union contract — it states how things will be done at the site. If changes were necessary to the work rules, HEA would have to go to AEA to get approval to change the work rules before it could be negotiated into a new contract. Mr. Bjorkquist added that the concept is that those are issues that would be brought to the BPMC or a subcommittee and dealt with in conjunction with AEA, not just AEA dictating what happens. Page 3 of 5 **Action Item for O&M — bargaining and work rules. Finance and O&D committee to get together on subcontracting and when do we step in and when do we complement HEA and when do we let HEA do their thing. 1. Opener clause 2. Bargaining issue — coming back to the PMC 3. Contracting issue — at what level does the PMC take a more active role. 7B. Auditor Selection Mr. Cunningham briefed the group that with the retirement of Gary Stromberg, there was a process of recommending an independent auditor for the project to the BPMC. The finance committee developed an RFP, posted that on the Alaska CPA website and sent out several invitations to select firms that were recommended by members of the finance committee. There were three responses and the finance committee met after reviewing the responses, making a unanimous recommendation of the retention of Swalling & Associates for a three-year term with the option to renew for two years. Criteria to evaluate the responses included cost/understanding the engagement/audit strategy/experience. MOTION: Mr. Newton moved that the Bradley Lake Project Management Committee retain Swalling and Associates P.C. as the project independent auditor for the year(s) ended June 30, 2008 through June 30, 2010, with an option to extend the engagement for two additional years. Seconded by Mr. Carmony. A roll call vote was taken and the motion passed unanimously. 7C. Internal Audit Report 2008-5 Bradley Lake Hydro Project Mr. Raiskums with the Municipality of Anchorage lead off the discussion regarding the report. They were asked by AML&P to audit the O&M costs at Bradley Lake. Overall, costs were reasonable. A few minor exceptions: work rules and HEA having family members at the plant (liability). Discussion ensued in regards to family members at plant sites, family housing, food/meals, transportation, emergency transportation, tours through powerhouse, security cameras, etc. Chair Evans suggested that this matter be taken back to the O&D committee, in relation to security at the plant and non-qualified personnel with access issues. MOTION: Mr. Newton moved to accept the report. Seconded by Mr. Posey. Discussion ensued. Mr. Carmony moved to express appreciation to the Municipality for providing the BPMC with the information for the purposes of assisting with the management of the project. Seconded by Mr. Posey. A voice vote was taken and the motion passed unanimously. Page 4of 5 8. COMMITTEE REPORTS / COMMENTS 8A. Operators Report Mr. O'Hare stated that the annual outage starts July 18" and ends on August 7". R&M is redesigning the replacement for the culvert repair based on closing the runway for a period of time. Construction is anticipated to start in the fall. New flight service (starting June 1, 2008) - Grant has obtained the contract and flight services will be switched to this new airline soon. 8B. Next Meeting Date The next meeting will be Thursday, June 19, 2008, at 10:00 a.m. at Bradley Lake. 9. ADJOURNMENT Meeting adjourned at 11:20 a.m. Sonu Brad Evans, Chair BY: ATTEST: £ Alaska Energy Authority, Secretary Page 5 of 5 Oy = ALASKA IDEN. f= J ; @@i®_ ENERGY AUTHORITY PRP inion autho BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE REGULAR MEETING AGENDA Wednesday, May 14, 2008 — 10:00 a.m. (via electronic media at the Chugach Electric Association Board Room 5601 Minnesota Drive) 1. CALLTO ORDER” Evans 2. ROLL CALL (for Committee meme 3. PUBLIC ROLL CALL (for all others present) ~~ 4. PUBLIC COMMENT __~ 5. AGENDA COMMENTS — 6. APPROVAL OF MEETING MINUTES March 11, 2008 we ; NEW BUSINESS A. O&M Agreement’ B. Auditor Selection . ~~ : C. Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project MacMillan . ~~ 8. COMMITTEE REPORTS / COMMENTS A. Operators Report B. Next Meeting Date Evans 9. ADJOURNMENT 813 West Northern Lights Boulevard * Anchorage, Alaska 99503-2495 www.aidea.org * 907/771-3000 * FAX 907/771-3044 ® Toll Free (Alaska Only) 888/300-8534 ¢ www.akenergyauthority.org Bradley Lake PROJECT MANAGEMENT COMMITTEE MEETING Maze it goog (Date) CEA hood om WwW (Location) PLEASE SIGN IN No. NAME REPRESENTING 1 hl elnal | Howell AEA 2 | Cwe Hace mate REA wlE A CZK Fl We Hert Mo MA ; \ Met pP u re Pea lel onc HEA. 12 ; Byo@ bk Qutyr AGU 13 Hews Dee CYEA 14 MW hupree Grae to MER 5 | Chasta Caldwetl AEA 16 117 18 19 20 21 22 92Q2\IT9884 Bradley Lake PROJECT MANAGEMENT COMMITTEE MEETING (Date) (Location) PLEASE SIGN IN No. NAME REPRESENTING 10 1] 12 13 14 15 16 17 18 19 20 21 22 92Q2\IT9884 Agenda Item No. CITY OF SEWARD MATANUSKA ELEC ASSOC CHUGACH ELEC ASSOC HOMER ELEC ASSOC GOLDEN VAL ELEC ASSOC MUNI LIGHT & POWER ALASKA ENERGY AUTHORITY A=4+ OVER 51% BRADLEY PMC VOTING £4. vditor Sled 42 Rol! Co| pate: —/ 14/2008 ee YES se ABS YES NO ABS 01% 14% Zee AG 30% we 12% He — 17% 7 Co ZE Lo) 26% wea ae CO a i 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) Establishment of FY estimated annual payment obligation and schedule of each purchaser. 4) Determination of annual project costs after each FY. 5) Evaluation of necessity for and scheduling of required project work. 6) Determination of appropriate amount of insurance. 7) Adoption of additional minimum funding amounts for renewal and contingency reserve fund above that required by bond resolution. 8) Selection among alternate methods that involve AEA for funding required project work. 9) Adoption or amendment of procedural committee rules (except dispute resolution). 10) Adoption of project maintenance schedules. 11) Determination of rules, procedures and accounts necessary to manage project when no bonds outstanding. 12) Evaluation and approval of optional project work and compensation for such work. 13) Application of insurance claims proceeds not governed by bond resolution. 14) Approval of procedures and any individual utility agreements relating to electric power reserves for project. 15) Approval of consultants. VOTING METHOD C: Unanimous vote by all (including AEA) VOTING METHOD D: Majority vote (including AEA) Election of Officers DATE: BRADLEY PMC VOTING Agenda Item No. YES NO ABS YES NO ABS YES NO ABS CITY OF SEWARD 01% MATANUSKA ELEC ASSOC 14% CHUGACH ELEC ASSOC 30% HOMER ELEC ASSOC 12% GOLDEN VAL ELEC ASSOC —- 17% MUNI LIGHT & POWER 26% ALASKA ENERGY AUTHORITY 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) Establishment of FY estimated annual payment obligation and schedule of each purchaser. 4) Determination of annual project costs after each FY. — ———5)}—Evaluation-of necessity-for-and-scheduling-of —_13}—Application-of insurance-claims-proceeds-not required project work. 6) Determination of appropriate amount of insurance. 7) Adoption of additional minimum funding amounts for renewal and contingency reserve fund above that required by bond resolution. 8) Selection among alternate methods that involve AEA for funding required project work. 9) Adoption or amendment of procedural committee rules (except dispute resolution). 10) Adoption of project maintenance schedules. 11) Determination of rules, procedures and accounts necessary to manage project when no bonds outstanding. 12) Evaluation and approval of optional project work and compensation for such work. governed by bond resolution. 14) Approval of procedures and any individual utility agreements relating to electric power reserves for project. 15) Approval of consultants. VOTING METHOD C: Unanimous vote by all (including AEA) YOTING METHOD D: Majority vote (including AEA) Election of Officers SECOND AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT FOR BRADLEY LAKE HYDROELECTRIC PROJECT BETWEEN HOMER ELECTRIC ASSOCIATION, INC. AND ALASKA ENERGY AUTHORITY EFFECTIVE AS OF JULY 1, 2008 TABLE OF CONTENTS Section: 1!= Construction) and Definitions srrcaceczsereeececeesesusccnsscocasesessccscsesopaceserseacesssestatorseseetuertesas 2 Sectioni2’= Term! ofA greemenit ..:........--n.r.cocporseserss} szsvssscesvreosnssssoosteonessesserasecasesceceseeesescetascecescecesss 5 SectioniS\= Qualified Utility Status! c..t.0cc.,ccherscsonschessssrsse-sccesecverseasnsaseerovasrertsosnonseneorsesensaseseasecreeca 5 Section 4 - Operator’s General Duties and Right to Subcontract. .........ccseseseseeseseseseeneeeeeneneeneneenes 5 Section’ S\- Operators Specilic Utes: .-2..1c4cstnessatiorosorecrsorecxonsecsetveceeees eesrerarsccusacceccasasestsegcecaceas 6 Section 6:=,Accounts,, Records and/ Audits... ..c.ccovec}eccscvessacecoceoessesah ch osesossssussteorbeonsonossaswoosstossacnsesn 8 Section’ 7 = Bud pete, .!..)..cos::-cs-csscsscecsretssessvoreussnsssestssssoceicesucesusncesesnpescuvscetseicotorareesecececesteese as Section 8 - Extraordinary Costs..... 2009) Section9)= Emergency EXpematures :cescrereticstreccosh psacetrecucocecoussecqoccnsaceecasvonteressesasuseerstecvsrsvactasters 9 Section’ 1(0)- Disbursement Of BUNS .o0c.2. ced cssesercthsteceosnscsrenonvsesoncsesestooecesssvcergseserssucorseecacesegesacore= 9 Section I] /=Access'to Operator’s| Facilities |. i....:ce.cnoesesncwensateogsasosssdeastactessestacssccetcesenestsesessases 10 Section! 12)-' Use! oftProject Living Quarters fostcccsectescersssteeocesosensucessepecctsrocerersesscnopcnsesscrersceessss 10 Section! 13'= Insurance and Indemmity:........34...;...csstthssesscssscevssorstssosensssnssssespsorossaessssessseceos sncacascors 10 Section! 4)=\ Dispute; RESOMON eescesrescceetacsefescdeoe-cthcl snene-cocasacezsoscscasecst senecsocesccncorseasorvstanrasesstecnsrs 13 Section 15 - Notices. Time and Holidays Computation. Designated Representatives ..............+ 13 Section 16] Remedies\Gumulativer...cr.cc:1-cxgs-e-sseteccoeen-ostoncorsssatseveveretvesesstsrsacsreutecsecnessatersesssnce 14 Section 1/7 Availability (of Information erst escscscesteortccnsccnsaccsesaneeeseceseousacssessesrassrserctenasosscesenter 14 Section 18 - Effect of Termination Section 19 - Force Majeure............... Section) 20= Third) Partys Benen Ciarics ecccetoyiesssetecentercscncsccepsieccececstetosontascsroraststscerecectocnsnset serra 15 Section 21 - Assighmentiof Comtract..........0:tscsssvesstesevesesevesssusnsstucucseatnsscerseesensesereceseresesesessoqoresnoss 15 Section 22s IExhibitseeesrecsesssreccsrssssctescscestestistsssscoresescecessustsnsvevensessersnrasessesesesesravarsestseacevecesacce 16 Section) 23 =| Multiple! Copies ercrrssceeccsecossecett costeesoytesterstocesnctesactssosecesassnevencesestosetevesestectsteersersereres 16 Section 24) = Amendment y:.,.:......ce-.cccccsensesoehossgessSegopassracsresssuswonstswonsssssestsesorsrttaceteseesecceceescscereseee> 16 Section(25 = Waiver NOt Continuing oiierectecccecsncteceossorccotreoseonsesusesesaspsesss sonssencasusssrssessnorassesesees 16 Section) 26)= (Severability tress rssvesersscececncrssstosesisetestesssserscerscecncecscesesssesseseransreesecasetavasraesersorsrsrts 16 Section 27 - Conduct in Accord with Applicable Law...........ccssssssssesesseseesssseseseeseeeesesseneeeseseees 16 Section 28 - Section Headings SECOND AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT FOR BRADLEY LAKE HYDROELECTRIC PROJECT THIS SECOND AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT FOR BRADLEY LAKE HYDROELECTRIC PROJECT (“Agreement”) dated as of ; 2008, is entered into by the HOMER ELECTRIC ASSOCIATION, INC. (“Operator’’) and the ALASKA ENERGY AUTHORITY (“Authority”). WITNESSETH WHEREAS, the Authority is a public corporation of the State of Alaska duly created, organized, and existing pursuant to AS 44.83, and authorized by law to sell electric power generated by the Bradley Lake Project (“Project”); WHEREAS, the Bradley Lake Project Power Sales Agreement (the “Power Sales Agreement”) provides that the Bradley Lake Project Management Committee (“BPMC’”) shall arrange for the operation and maintenance of the Project and Project Related Facilities and adopt an annual budget of Project Costs; WHEREAS, to provide for the operation and maintenance of the Project and Project Related Facilities, the BPMC entered into a Master Maintenance and Operating Agreement with the Authority under which the Authority shall enter into contracts necessary to perform services for, or operation and maintenance of, the Project and Project Facilities; WHEREAS, the Authority is authorized under AS 44.83.396 to enter into agreements for the operation and maintenance of power projects owned by the Authority with a “qualified utility”; WHEREAS, the BPMC is authorized under the Master Maintenance and Operating Agreement and its Bylaws adopted pursuant to the terms of the Power Sales Agreement, to approve contracts for the operation and maintenance of Project facilities; WHEREAS, the Operator has been identified in the “Bradley Lake Hydroelectric Project Agreement for the Wheeling of Electric Power and Related Services” (“Services Agreement”) dated June 29, 1989, by the participating utilities as an appropriate entity to operate and maintain the Project; WHEREAS, the Operator is both a qualified utility within the meaning of AS 44.83.425(3) and is authorized to operate and maintain a power project acquired or constructed by the Authority; WHEREAS, the Operator has agreed to operate and maintain the Project in accordance with the terms and conditions of this Agreement; 1 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT WHEREAS, the Operator has provided O&M services pursuant to the Operation & Maintenance Agreement for the Bradley Lake Project dated as of February 11, 1994 (“1994 O&M Agreement”), which was for an initial period of five years and automatically renewable annually thereafter; WHEREAS, the parties extended the 1994 O&M Agreement through an Amendment dated June 22, 1999, which extended the 1994 O&M Agreement through June 30, 2004, and provided that the term shall continue from year to year thereafter; and WHEREAS, the parties have determined that instead of the annual renewal, this Agreement shall be for a term of five (5) years, which may be renewed for successive five-year terms thereafter. NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: Section 1 - Construction and Definitions (a) Construction. This agreement is executed in accordance with the terms of the following underlying agreements (the “Underlying Agreements”): (1) Bond Resolution; (2) Power Sales Agreement; (3) Master Maintenance and Operating Agreement. This Agreement in its entirety including the exhibits and the Underlying Agreements represent the entire Agreement of the Operator and the Authority. Nothing in this Agreement is intended to alter the rights and obligations of the Authority and any Purchaser under the Underlying Agreements. In the event of a conflict between a term or provision in this Agreement and any Underlying Agreement, the term or provision in any Underlying Agreement shall control, and the Underlying Agreements shall be construed in the order of precedence in which they are listed above. In the event of a conflict between any provision in the body of this Agreement and any provision contained in an exhibit hereto, the former shall control. (b) For purposes of this Agreement, the following definitions apply. (1) “Agreement” means this Second Amended and Restated Operation & Maintenance Agreement for the Bradley Lake Project. (2) “Annual Project Costs” shall have the meaning given to that term by the Power Sales Agreement. (3) “Authority” means the Alaska Energy Authority as established by AS 44.83, and any successor agency thereto and, unless the context otherwise requires, the employees, agents, and contractors who are directly responsible, respectively, to the Authority. 2 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) “Bond Resolution” shall have the meaning given to that term by the Power Sales Agreement. “BPMC” means the Bradley Lake Project Management Committee as established under the December 8, 1987, Power Sales Agreement and operating under its Bylaws. “Construction” has the meaning given in AS 36.90.300(c). “Contract Year” means the twelve month period starting July 1 of a calendar year through and including June 30 of the next succeeding calendar year. “Emergency” means an event as declared by the Operator resulting from an unforeseen combination of circumstances or the resulting state that requires immediate action to protect or preserve the Project (or its operations), Project personnel, or public health and safety. “Extraordinary Costs” means costs for operations, maintenance, repair or equipment replacement which were not anticipated to materialize in the Contract Year, and not provided for in the Project O&M Budget. “Effective Date” means July 1, 2008. “Division of Risk Management” means an office which is part of the State Department of Administration and which is established pursuant to AS 44.21.020. “FERC” means the Federal Energy Regulatory Commission, an agency of the United States Department of Energy, or its successor agency. “Master Maintenance and Operating Agreement” means the Master Maintenance and Operating Agreement dated as of May 24, 1994, between the Authority and the BPMC. “O&M” means operation and maintenance of the Project and includes the duties set forth in this Agreement. “Operation and Maintenance Standards” means the Plant Operation and Maintenance Manual, and equipment installation, operation, and maintenance manuals. “Operator” means Homer Electric Association, Inc. (HEA) or its authorized assignee (pursuant to Section 21) and the employees, agents, and contractors who are directly responsible, respectively, to either. “Optional Project Work” shall have the meaning given to that term by the Power Sales Agreement. a 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT (18) (19) (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) “Participant” shall have the meaning given to that term by the Power Sales Agreement. “Party” or “Parties” means each or all the signatories to this Agreement or a party’s authorized assignee. “Percentage Share” shall have the meaning given to that term by the Power Sales Agreement. “Power” or “Electric Power” means electric energy or electric capacity, or both, except where the context requires a distinction, in which case electric energy is expressed in kilowatt hours, and electric capacity is expressed in kilowatts. “Power Sales Agreement” means the Bradley Lake Power Sales Agreement, dated December 8, 1987, among the Authority; the Municipality of Anchorage (d.b.a. Municipal Light and Power (ML&P)); the City of Seward (d.b.a. Seward Electric System (SES)); the Chugach Electric Association, Inc. (Chugach); the Golden Valley Electric Association, Inc. (GVEA); the Alaska Electric Generation and Transmission Cooperative, Inc. (AEG&T), the Matanuska Electric Association, Inc. (MEA); and the Homer Electric Association, Inc. (HEA), as it may be amended from time to time. “Professional Services” has the meaning given in AS 36.90.300(c). “Project” means the Bradley Lake power generation facility and the associated transmission and substation facilities described in Exhibit A. “Project Budget” means the budget for Annual Project Costs as adopted and amended pursuant to Section 13 of the Power Sales Agreement. “Project O&M Budget” means the budget for the operation and maintenance of the Project as adopted and amended pursuant to Section 13 of the Power Sales Agreement. “Project Related Facilities” shall have the meaning given to that term by the Master Maintenance and Operating Agreement. “Prudent Utility Practices” shall have the meaning given to that term by the Power Sales Agreement. “Purchaser” or “Purchasers” shall have the meaning given to that term by the Power Sales Agreement. “Required Project Work” shall have the meaning given to that term by the Power Sales Agreement. 4 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT Section 2 - Term of Agreement (a) This Agreement shall take effect as of the Effective Date, subject to execution by the authorized representatives of both Parties. (b) The term of this Agreement shall be five (5) years from the Effective Date, and shall automatically be renewed for successive five-year terms until terminated as provided herein and subject to the termination rights set forth in Section 2(c) and Section 7(d). Notice of termination by either party shall be given two years in advance of the end of any term. (c) In the event the Authority reasonably determines that the Operator’s performance of its obligations under this Agreement, without immediate remedial actions, could cause substantial damage to the Project or endanger public health or safety, the Authority shall promptly notify the Operator and shall identify the areas where performance must be remedied. The Operator shall submit to the Authority a plan for remedial action to correct its performance within twenty-four (24) hours of such notice. The Authority or its designee shall have the right to temporarily take over the duties of the Operator until a remedial action plan reasonably satisfactory to the Authority is agreed to by the Operator. If the Parties fail to agree to a remedial action plan within thirty (30) days of the date of notice provided by the Authority, the Authority may immediately terminate this Agreement. Section 3 - Qualified Utility Status The Authority has determined that the Operator is a qualified utility within the meaning of AS 44.83.425(3) and has met all the requirements thereof. Section 4 - Operator’s General Duties and Right to Subcontract. To the extent authorized by the Project O&M Budget, or as otherwise funded in accordance with this Agreement, the Operator shall: (a) Operate and maintain the Project so as to make power available to the Purchasers in an amount equal to the amount the Purchasers may schedule from the Project, within the limitations imposed by available Project capability, available water, and the scheduling procedures adopted by the BPMC; (b) Bring to the attention of the Authority and the BPMC Required Project Work, and perform or cause to be performed such Required Project Work to the extent funds are made available for such purpose; provided, however, that any procurement or other contracts related to Required Project Work must be in writing and must be approved in advance pursuant to Section 13 of the Power Sales Agreement. The Operator shall not perform or cause to be performed Optional Project Work unless such Optional Project Work is approved and funded by the BPMC and assigned to the Operator by the Authority. Notwithstanding the foregoing, the Operator may subcontract work in accordance with Section 5(q) on the operation or maintenance of the Project or Project Related Facilities to the extent authorized 3 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT in the Project O&M Budget or with the written approval of the Authority and the BPMC, which shall not be unreasonably withheld. Each subcontract will contain a specific clause providing that it is subject to the provisions of the Master Maintenance and Operating Agreement. In performing its duties hereunder, Operator, or any subcontractor, is performing solely as an independent contractor. Section 5 - Operator’s Specific Duties To the extent authorized by the Project O&M Budget or as otherwise funded in accordance with this Agreement, the Operator shall: (a) Coordinate operation, maintenance, repair and other work schedules with the Purchasers in accordance with the Bradley Lake Allocation and Scheduling Procedures; (b) Operate, maintain, and repair the Project in accordance with the Operation and Maintenance Standards. In addition, the Operator shall use and update the Automated Maintenance Management System or such equivalent system as the Authority may direct. The Operation and Maintenance Standards shall be maintained at the Project site. Any revisions to the Operation and Maintenance Standards shall be effective within a period of time after notice having due regard to the nature of the revisions requested and necessary project budget revisions; (c) Provide all material, labor, engineering and other technical support, subcontract management, and training to operate, maintain, and repair the Project, and all tools, equipment, spare parts, materials, and supplies needed to perform work under this Agreement in accordance with the Operation and Maintenance Standards and written directives by the Authority; (d) | Comply with all applicable federal, state, and local government laws, regulations and permits. If the Operator elects to contest an order issued by a local government, state or federal agency (other than the Authority), the Operator shall promptly notify the Authority and the BPMC; (e) Provide security and access in accordance with a mutually agreed plan; (f) Read, maintain, and operate all Project metering devices, record such readings, and maintain or forward data, forms, relevant graphs, and/or magnetic tapes as required by the Authority; (g) Make annual recommendations to the Authority and BPMC for: (1) operation, maintenance, repair, replacement, and modification of Project facilities; (2) installation of additional protective relaying, instrumentation, control systems, or other apparatus as necessary to maintain or improve the Project and interconnected system reliability, integrity, efficiency, and safety; 6 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT (h) (i) Gi) (k) (I) (m) (n) (0) (p) (q) (r) (3) — afive (5) year schedule of estimated equipment modifications, replacements, additions, and disposals; Prepare monthly and year-end operating and financial statements, in a form acceptable to the Authority relating to the performance of this Agreement; Provide qualified personnel with the ability to perform the duties assigned to the Operator under this Agreement; Prepare and conduct an annual training program that meets the minimum training standards established by the BPMC. The Authority may require the Operator to undertake additional training which the Authority deems necessary, however, funding for such additional training is the responsibility of the Authority; Following a protective relay or alarm action, and upon observation or notification, interpret the cause, identify corrective measures, and take corrective action as the situation warrants. The Operator shall document any such actions within three (3) days of their accomplishment; Take prudent measures to protect equipment, personnel, and the general public from hazards arising from equipment failure such as electrical faults, vandalism, and mechanical failure and repair and report damaged facilities to the Authority, to the BPMC on behalf of the Authority and any appropriate law enforcement authority, as soon as possible following each occurrence; Record the operating characteristics of the power plant equipment and machinery as required; Maintain the Project living quarters, including expenses for utility services, as a cost of operation and maintenance; Update, keep and make available to the Authority, BPMC, or any Purchaser the required Project documents, as-built drawings, and other records, including records to meet FERC license requirements and records required by any project related insurance agreements; Perform water and power operation studies as required to integrate power from the Project into the Purchasers’ systems with due regard for the capability limits of the Project planned water reserves, and Purchasers’ power needs; Arrange for and administer subcontracts or agency agreements related to the O&M of the Project; provided, however, that Operator agrees to comply with any written procedures adopted by the BPMC and approved by the Authority concerning the review and approval of any such contracts, subcontracts, or agreements; Conduct all technical, operation, and maintenance inspections of the Project in accordance with FERC and other permits or agency requirements, and submit inspection and other reports to the appropriate entities as directed by the Authority; 7 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT (s) Support the Project by coordinating related technical and operating activities with the Purchasers; and (t) Perform such other additional duties related to the operation, maintenance and repair of the Project as may be included in the Project O&M Budget. Section 6 - Accounts, Records and Audits In keeping records for work performed under the Agreement, the Operator shall utilize the accounting system required of public utilities and licensees by the FERC for electric plants. The Operator shall make its records available at reasonable times. The Operator shall retain copies of all invoices, payroll records, and other supporting documents sufficient for an audit of all expenditures, for three (3) years following the close of each Fiscal Year. The Operator will furnish the Authority with operating and financial statements related to work performed under the Agreement as may be reasonably requested by the Authority. If delivery of those statements is unreasonably delayed, the Authority may, with its own staff or agents, perform all work necessary to collect the data reasonably necessary, but only at such times and in such a manner as will not unreasonably interfere with Operator’s operations under the Agreement. Section 7 - Budget (a) In accordance with schedules provided by the Authority, the Operator shall prepare and submit each year to the Authority and the BPMC a draft O&M budget for the Project for the following Contract Year. (b) The draft O&M budget shall be based upon prudent estimates and anticipated O&M requirements and expenditures, and reflect appropriate accounting and budgetary principles for utilities. The draft budget shall be prepared in a format and schedule provided to the Authority by the BPMC. (c) Not less than 30 days prior to the beginning of a Contract Year the Project O&M Budget shall be adopted for the Contract Year pursuant to Section 13 of the Power Sales Agreement. (d) The Operator shall perform its duties in a manner consistent with the Project O&M Budget except as provided in Sections 8 and 9 below. If the Operator makes a determination during any Contract Year that it cannot perform its obligations under this Agreement without an increase in the expenditures authorized under the Project O&M Budget, the Operator shall report such finding to the Authority and the BPMC and shall submit a revised budget for the Authority’s and the BPMC’s review and approval. In the event the revised budget is not adopted pursuant to Section 13 of the Power Sales Agreement, and the Operator determines that it cannot perform its obligations under this Agreement, the Operator may terminate this Agreement upon 150 days notice to the BPMC and the Authority. 8 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT Section 8 - Extraordinary Costs (a) (b) If the Operator learns of an event or other contingency which involves an Extraordinary Cost, the Operator shall promptly notify the Authority and the BPMC of the circumstances and request authorization to make such expenditures pursuant to Section 13 of the Power Sales Agreement. After notice is given as provided for in Section 8(a) and if required by the Authority or BPMC, the Operator shall develop a scope, schedule, budget and proposed plan of work and deliver the same with a request to proceed as soon as practicable. The Authority and BPMC shall respond in writing to the Operator’s request as soon as practicable after the receipt of the plan. Upon approval obtained pursuant to Section 13 of the Power Sales Agreement, the Operator shall perform such work consistent with the plan. The Operator shall not incur any Extraordinary Costs without the written approval obtained pursuant to Section 13 of the Power Sales Agreement except as provided in Section 9 below. Section 9 - Emergency Expenditures The Operator shall take such actions as it reasonably believes are necessary in an Emergency, including incurring unbudgeted costs. If, in the reasonable judgment of the Operator, the Emergency requires the Operator to incur costs prior to obtaining written approval from the Authority and the BPMC pursuant to Section 13 of the Power Sales Agreement, the Operator shall notify the Authority and the BPMC of the Emergency as promptly as practicable with due regard to the Emergency. Section 10 - Disbursement of Funds (a) (b) (c) (d) (e) The normal and routine costs of performing under this Agreement shall be initially paid by the Operator. The Operator shall submit complete written invoices to the Authority for payment with cost summaries and support documents as reasonably requested by the Authority and BPMC. The Authority shall expeditiously arrange for payment of all invoices, including invoices for Emergency expenditures, and shall work with the Operator to promptly resolve any disputed billings. All such invoices shall be subject to audit and approval by the Authority, such approval shall not be unreasonably withheld. In the event the Authority disputes any amount set forth in such an invoice, the Authority shall arrange for payment of the undisputed amounts of the invoice. Subject to the availability of funds, the Authority shall reimburse the Operator for all costs under this Agreement. Any undisputed amount on an invoice submitted to the Authority by the Operator shall be paid by the Authority within thirty (30) days of receipt of the invoice. Any amount not paid within thirty (30) days shall accrue simple interest at the legal rate of interest at the time payment was due, until paid by the Authority. 9 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT Section 11 - Access to Operator’s Facilities Authority and BPMC personnel or agents shall be granted reasonable access to the Project and the Project-owned equipment and facilities on the Operator’s premises upon reasonable notice and subject to security measures, for the purpose of inspection and testing. Section 12 - Use of Project Living Quarters (a) Use of living quarters is established by the Bradley Work Rules. Modification of the Work Rules requires the approval of the Authority and the BPMC. (b) The Operator shall schedule occupation of the Project living quarters in an efficient manner. The Operator shall include in such scheduling, quarters for visiting employees of the Operator, subcontractors, the Authority, and the BPMC as needed and available. (c) | On-site operations and maintenance personnel shall have priority in the use of permanent residences at the Project. Section 13 - Insurance and Indemnity (a) General. (1) (2) (3) (4) (5) During the term of this Agreement, the Operator shall use its best efforts to maintain insurance satisfactory to the Authority and the BPMC covering injury to persons or property suffered by any Party or a third party, as a result of errors, omissions, or operations which arise both out of and during the course of this contract by the Operator or by any of its contractors (the “Operator’s Insurance”). The Operator’s Insurance shall be the primary coverage for the exposures delineated in subsection (1) above with respect to the State of Alaska, its officers, agents, and employees, the BPMC, its officers, agents, and employees, and the Operator, its officers, agents, and employees, as named insureds. Any additional insurance or self-insurance separately maintained by the State, except insurance purchased on behalf of the BPMC, shall be in excess of the Operator’s Insurance and shall not contribute to it. The cost of the required insurance shall be paid by the Operator and included in the Project O&M Budget as an operating cost. Policies maintained under this Agreement must provide that any cancellation, non- renewal or material change be upon thirty (30) days written notice to all named insureds. Insurance Companies shown on the certificate of insurance must be acceptable to the Authority. The Authority shall not unreasonably withhold approval of such Insurance Company. The Operator shall, at least thirty (30) days prior to cancellation, non-renewal, or material change, provide the Authority with written evidence of insurance which replaces or reinstates the required insurance coverage. 10 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT (b) (c) (6) (7) (8) (9) A copy of the insurance policies required of the Operator will be furnished to the Authority prior to beginning work under this Agreement. Prior to February 1 of each year thereafter, evidence of insurance shall be provided by the Operator. The Operator’s obligation to obtain and maintain insurance coverage pursuant to this section shall be subject to the general availability of such coverage under reasonable terms and conditions. If one or more of the required insurance coverages is not available under reasonable terms and conditions, the Operator shall, under the guidance and direction of the BPMC and Division of Risk Management, use its best efforts to obtain substantively equivalent insurance coverage acceptable to the BPMC, the Authority, and the Division of Risk Management. If, after utilizing its best efforts, the Operator is unable to obtain the required insurance coverage under reasonable terms and conditions, as reasonably determined by the Operator, the Operator shall request a waiver of the relevant insurance requirement. The request shall outline steps taken by the Operator to obtain such insurance and shall disclose quotations received for coverage. To the extent the waiver will not materially affect the safe and prudent operation of the Project, the Authority, after consulting with the Division of Risk Management, will not unreasonably withhold approval of the requested waiver. Failure to furnish satisfactory evidence of insurance or failure to maintain the policy without complying with this subsection shall result in a material breach of this Agreement. The Authority shall maintain a policy or policies of property damage insurance insuring the Project against loss resulting from fire, explosion, accident, or equipment breakdown for the probable maximum loss of the Project, with deductible amounts as established after consultation with the BPMC. The policy or policies shall contain a waiver of subrogation with respect to the Operator and the BPMC and list the Operator as an additional named insured to the extent of its interests. The Authority shall annually, prior to February 1st each year, furnish evidence of insurance to the Operator and the BPMC. Workers’ Compensation Insurance. qd) (2) The Operator shall provide and maintain, for all employees engaged in work under this Agreement, coverage as required by AS 23.30.045, and, where applicable, any other statutory obligations including but not limited to Federal U.S.L. & H. and Jones Act requirements. The policy must waive subrogation against the State and provide for an All States Endorsement. The Operator is responsible for workers’ compensation insurance for any of its subcontractors who directly or indirectly provide services under this Agreement. Commercial General Liability Insurance. (1) The Operator shall maintain commercial general liability insurance. The Operator shall secure insurance as required to meet its obligations under this subsection. The 11 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT (d) (e) (2) BPMC and the Authority shall be included as additional insureds as respects insurance required in this subsection and shall not, by their inclusion, be responsible to the insurance carrier for payment of the premium These insurance policies must also contain a provision providing for cross liability or severability of interest. The commercial general liability insurance shall be subject to the following limits of liability: (i) Bodily Injury and Property Damage Liability of a minimum $5,000,000 Combined Single Limits each occurrence and affording insurance for Premises Operations, Owners and Contractors’ Protective, Independent Contractors, Products/Completed Operations, Blanket Contractual Liability, Broad Form Property Damage, and personal Injury Liability; (ii) | Commercial Auto Liability Insurance covering all vehicles used by the Operator in the performance of services under this agreement with minimum coverages of not less than $5,000,000 combined single limit each occurrence for bodily injury and property damage liability. Additional Liability Insurance. The Operator shall maintain the following additional insurance, where applicable, for aircraft and watercraft owned or contracted for by the Operator. (1) (2) Owned Aircraft and Non-Owned Aircraft with seating capacity of five seats or less, except commercial, scheduled flights, with limits of liability not less than: $5,000,000 for Bodily Injury per occurrence; $1,000,000 for Passenger Liability per seat; and $5,000,000 for Property Damage Liability per occurrence. Coverage must include Slung Cargo exposures. Except in an Emergency, if an aircraft with more than five seat capacity is used, then special coverage and limits must be obtained and must be approved by the Authority and BPMC. Owned Watercraft and Non-Owned Watercraft with limits of liability not less than $5,000,000 per combined single limit each occurrence. Subcontractor’s insurance. Any contract entered into with a subcontractor, other than a Purchaser, by the Operator to perform part of its obligations hereunder shall require the same insurance provisions stated in paragraphs (b) through (d) of this Section 13. The Operator may request a waiver of part or all of such provisions where such waiver will not materially affect the Project and the Operator determines the waiver is necessary to its performance of this Agreement. The Authority will not unreasonably withhold approval of such waiver. 12 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT (f) (g) Indemnity. The Operator shall indemnify, defend, and hold the Authority harmless from and against any claim of, or liability for, negligent acts, errors, and omissions of the Operator with respect to any Construction-related Professional Services provided under this Agreement. The Operator is not required to indemnify, defend, or hold harmless the Authority for a claim of, or liability for, the independent negligent acts, errors, and omissions of the Authority. If there is a claim of, or liability for, a joint negligent act, error, or omission of the Operator and Authority, the indemnification, defense, and hold harmless obligation of this provision shall be apportioned on a comparative fault basis. In this provision, “independent negligent acts, errors, and omissions” means negligence other than in the Authority’s selection, administration, monitoring, or controlling of the Operator, or in approving or accepting the Operator’s work. Uninsured Loss. The costs of any loss or damage to or arising out of the Project not covered by insurance, including uninsured deductibles and indemnity (including the Operator’s indemnity under Section 13(f), above), shall be included in the Project Budget as an operating cost unless and to the extent caused by the willful act or gross negligence of the Operator. The Operator shall be responsible for paying any such costs if and to the extent the loss or damage is determined to be caused by or arises out of the Operator’s willful act or gross negligence. For the avoidance of doubt, the Operator acknowledges its responsibility, as a Participant, to pay its Percentage share of Annual Project Costs, including its Percentage Share of all amounts included in the Project Budget. Section 14 - Dispute Resolution Pending resolution of a disputed matter, the Parties will continue performance of their respective obligations pursuant to this Agreement. If the Parties cannot reach timely mutual agreement on any matter in the administration of this Agreement, the Operator shall, to the extent necessary for its continued performance, make a determination of such matter without prejudice to the rights of the other Parties. Such determination shall not constitute a waiver of any other remedy belonging to either Party. Section 15 - Notices. Time and Holidays Computation. Designated Representatives (a) (b) Any notice or demand involving a claim of default, breach of the Agreement, or notice of a dispute shall be sent to the appropriate Party by registered or certified mail. Any notice required to be given to any Party by this Agreement shall be effective when it is received by such Party. In computing any period of time from such notice, the period shall commence at 12:01 p.m. on the date of receipt of such notice. Notice to Operator required by this Agreement shall be in writing directed to the General Manager of Homer Electric Association, Inc., 3977 Lake Street, Homer, Alaska 99603. Notice to the Authority required by this Agreement shall be in writing addressed to the Executive Director of the Alaska Energy Authority, 813 West Northern Lights, Anchorage, Alaska 99503. 13 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT (c) (d) If the date for making any payment or performing any act is a day on which banking institutions are closed in the place where payment is to be made or a legal holiday, payment may be made or the act performed on the next succeeding day which is neither a legal holiday nor a day when banking institutions are closed. Each Party shall designate a representative to act for it in matters not requiring formal action by its governing bodies. Either Party may at any time change its designated representative by giving written notice to the other Party. Section 16 - Remedies Cumulative No remedy conferred upon or reserved to the Parties under this Agreement is intended to be exclusive of any other remedy or remedies existing at law or equity. Section 17 - Availability of Information The Parties shall make available to each other, for inspection and copying during business hours, all books, records, plans and other information relating to any calculation or determination to be made under this Agreement. Section 18 - Effect of Termination (a) (b) Not less than 75 days prior to the date of any scheduled termination of this Agreement the parties shall meet for the purpose of discussing arrangements necessary for the orderly takeover of the duties of the Operator by the Authority. At or before the meeting the Operator shall submit to the Authority a takeover plan which sets forth the actions which in the opinion of the Operator are reasonably required to accomplish the takeover, and any budget amendments necessary to accomplish the plan. The Authority shall review and either approve or modify the plan and budget. The Operator shall perform in accordance with the approved plan, subject to any budgetary constraints. The Authority shall secure funding for and pay any Extraordinary Costs reasonably incurred by the Operator in performing its duties hereunder, including close-out and demobilization costs. Following termination of this Agreement for any cause, the Authority shall have the right and a reasonable amount of time, not to exceed six (6) months, to arrange disposition of Project-owned equipment on the Operator’s premises. Section 19 - Force Majeure (a) No Party to the Agreement shall be liable to other Parties for, or be considered to be in breach of or default under this Agreement on account of, any delay in performance or any delay or failure to deliver, receive or accept delivery of energy due to any of the following events: (1) Any cause or condition beyond such Party’s reasonable control which such Party is unable to overcome by the exercise of reasonable diligence (including but not 14 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT limited to: fire, flood, earthquake, volcanic activity, wind, drought and other acts of the elements; court order and act of civil, military or governmental authority; strike, lockout and other labor dispute excluding those disputes wrongfully caused by the Operator; riot, insurrection, sabotage and war; breakdown of or damage to facilities or equipment; electrical disturbance originating in or transmitted through such Party’s electric system or any electric system with which such Party’s system is interconnected; and, any act or omission of any person or entity other than such Party, or Party’s contractors or suppliers of any tier or anyone acting on behalf of such Party); or (2) Any action taken by such Party which is reasonably necessary or prudent to protect the operation, performance, integrity, reliability or stability of the Project or of such Party’s electric system or any electric system with which such Party’s electric system is interconnected, whether such actions occur automatically or manually. (b) — Inthe event of any delay excused under this section, the time for performance thereby delayed shall be extended by a period of time reasonably necessary to compensate for such delay. No cost adjustment will be allowed, only time extensions as appropriate. Nothing contained in this paragraph shall require any Party to settle any strike, lockout or other labor dispute. Each Party shall give the other Parties prompt written notice of any delay which the Party giving notice considers to be an excusable delay of its performance. Section 20 - Third Party Beneficiaries The BPMC, as representative of the Purchasers, is a third party beneficiary of this Contract, with the legal right to enforce the provisions hereof. In any action by the BPMC for damages, the Operator shall have the right to assert against the BPMC any defense which it could have asserted against the Authority. The raising of any such defense by the Operator shall not affect any right of a purchaser or the BPMC under the Master Maintenance and Operating Agreement or Power Sales Agreement. Section 21 - Assignment of Contract This Agreement shall be binding upon and inure to the benefit of the successors, legal representatives or assigns of the Operator and the Authority. However, the Operator may not assign the Agreement or any part thereof without the prior written consent of the Authority and the BPMC. No such assignment shall operate to relieve the Operator of its obligations under this Agreement. If the Authority discontinues its current legal existence, unless the rights, powers and duties of the Authority are transferred to a successor entity with substantially the same expertise within the meaning of Prudent Utility Practices, powers and duties as the Authority, its obligations under the Agreement will automatically be assigned to the BPMC, without the need for consent by the Operator. 15 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT Section 22 - Exhibits The provisions of the following exhibits attached hereto are incorporated by reference herein: Exhibit A - Project Facility Description; Exhibit B - Project Specific Federal and State Agency Requirements; Section 23 - Multiple Copies This Agreement may be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Section 24 - Amendment Any amendment or modification to this Agreement must be in writing and signed by the Operator and the Authority and approved by the BPMC. Section 25 - Waiver Not Continuing Any waiver at any time by any Party of its rights with respect to any default of the other Party hereto, or with respect to any other matter arising in connection with the Agreement, shall not be considered a waiver with respect to any subsequent default, right or matter. Any delay short of the statutory period of limitations in asserting or enforcing any right shall not be deemed a waiver of such right. Section 26 - Severability In the event that any provision of the Agreement shall be finally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement shall be unaffected by such adjudication and all the remaining provisions of the Agreement shall remain in full force and effect as if such provision so adjudicated to be invalid had not been included herein. Section 27 - Conduct in Accord with Applicable Law The Operator and the Authority agree that at all times during the term of the Agreement, they shall conduct themselves in accord with all applicable laws and permits, and they will undertake no action contrary to such laws or permits. Moreover, the Parties specifically acknowledge that the Agreement is subject to all applicable provisions of state and federal law concerning Equal Employment Opportunity as well as all applicable provisions of state and federal law concerning work hours and safety standards. The interpretation and application of the Agreement and the actions of the parties hereunder shall be governed by the laws of the State of Alaska. Section 28 - Section Headings The section headings of the Agreement are for convenience only, and do not purport to, and shall not be deemed to, define, limit or extend the scope or intent of the section to which they pertain. 16 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed the day and year first above written. HOMER ELECTRIC ASSOCIATION, INC. By. Bradley P. Janorschke General Manager Date ALASKA ENERGY AUTHORITY By. Steve Haagenson Executive Director Date 17 2nd AMENDED AND RESTATED OPERATION & MAINTENANCE AGREEMENT 1. EXHIBIT A PROJECT DESCRIPTION PROJECT DESCRIPTION el Ee General The Bradley Lake Hydroelectric Project is located on the Kenai Peninsula at the northeast end of Kachemak Bay about 27 miles from Homer. The project contributes to the electrical generating capacity of Alaska’s Railbelt serving customers from the Kenai Peninsula to Fairbanks. Major elements of the project include a concrete faced, rockfill dam, to raise the level of Bradley Lake about 100 feet, an ungated spillway having discharge capacity of 23,800 cfs at pool elevation 1190.6, a diversion tunnel which also serves as a low level outlet, a submerged intake leading to the power tunnel which, including the vertical shaft, is 19,152 ft. long, a surface powerhouse located on the shore of Kachemak Bay and a tailrace channel into the bay. All elevations given in this report are referred to Bradley Lake Project Datum, at which zero is equal to 13.63 ft. above MLLW at Bear Cove. The two unit plant has a nominal generating capacity of 126 MW at 917 ft. net head. Each generating unit consists of a six jet, vertical shaft Pelton turbine driving a 63 MVA generator at 0.95 power factor. The penstock for a future third unit was also constructed as part of the initial project development. Usable storage in Bradley Lake at full pool (El 1180) is about 280,000 acre ft. The project is connected to the existing Kenai Peninsula transmission line, consisting of two parallel 115 KV lines. The lines run through the Fox River Delta to connect with Homer Electric Association’s Fritz Creek to Soldotna Transmission line. A summary of pertinent project data is given on Table 1. History of Development The power generation potential of Bradley Lake was first studied by the U.S. Corps of Engineers and presented in a report dated March 1955. The project was authorized by Congress in 1962, but despite its feasibility federal funds were not available for its construction, The Alaska Energy Authority (then Alaska Power Authority) assumed responsibility for the project in 1982. Preliminary plans were developed and field investigations started in 1982. In April 1984, the Authority submitted an application for license to the Federal Energy Regulatory Commission (FERC). The license to construct the project was issued on December 31, 1985. The first major contract, “Site Preparation” was let in 1986 and was completed in 1987. This contract included on-site access roads, barge dock, airstrip, permanent facilities, construction camp and diversion tunnel. Following a one year hold on project construction, the General Civil Construction and Transmission Line Clearing A-1 Contracts were awarded in June 1988. The Powerhouse Construction Contract was awarded in December 1988 and the Transmission Line Construction Contract was awarded in June 1989. The General Civil Construction and the Powerhouse contracts were completed in August 1991. The Alaska Energy Authority issued a contract for supply of the turbines and generators in 1987, and issued a contract for supply of the SCADA control systems in July 1989. Smaller contracts were also issued for transmission line surveying, geotechnical surveys, and construction of the Middle Fork and Nuka Diversion structures. The diversion tunnel was closed in October 1990, however all inflow to the reservoir was released through the fish water bypass lines. Actual storage in the lake started in Spring 1991 when enough water was available to meet downstream minimum flow requirements. A contract for Site Rehabilitation was issued in June 1991. Both units were released to dispatch in August 1991, and the Project was declared in commercial operation September 1, 1991. Construction of the project was completed on November 21, 1991, with the completion of the Site Rehabilitation work. 2. DESIGN Zl Geology Except for the transmission line, all major elements of the project are founded on or in the bedrock. The geology of the site is composed of Upper Mesozoic Age metamorphic rocks of the McHugh Complex. Most probably this melange is composed of turbidites which have been slightly to moderately metamorphosed. Rock types encountered are graywacke, argillite, chert, dacite, metatuff, and greenstone. The graywacke, argillite and mixtures of these rocks are dominant. Chert occurs as nodules and lenses in the argillite and metatuff with some massive beds up to 15 ft thick. The diabase occurs as intrusive dikes generally 10 to 20 ft. in width with some dikes about 40 ft. thick. The metatuff is metamorphosed, volcanic pyroclastic debris. Frequently it is intermixed with the argilite but some layers up to 15 ft. thick were encountered. Over all it constitutes less than 5% of the rock mass. The greenstone is metamorphosed volcanics. It constitutes less than 3% of the rock mass. Except where severely weathered, the argillite is moderately hard to hard. The graywacke, chert, dacite and greenstone are hard to very hard. Foliation (cleavage) is poorly developed in the argillite and bedding, when identifiable, is poorly preserved. The graywacke is massive and displays neither bedding nor foliation. The chert, dacite and metatuffs are generally massive and show no foliation. Jointing is well developed. It is widely spaced in the graywacke and moderately to widely spaced in the argillite. Generally three or more sets are observed resulting in blocky structures. There are some open joints in the abutment of the dam and spillway, especially in the rock know between these structures. Hydrosplitting tests Dee, made along the tunnel alignment showed low in situ horizontal stresses ranging from 0.9 to 0.5 of overburden pressure at the depth tested. Open vertical joints striking about parallel to the tunnel (N60 W) were observed during tunnel construction at depths of rock cover of as much as 1200 ft. Geologic Hazards The Pacific Plat is subducting under the North American Plate south of the coast of Alaska. The Aleutian Arc trench marks the surface juncture of the two plates. This trench trends northeast-southwest and is located about 185 miles southeast of the site at its nearest approach. The Pacific Plate is moving north relative to the North American plate. The subduction zone dips northwest and the upper contact of the subduction plate, the Benioff zone, lies at a depth of about 30 miles beneath the surface at the site. The Benioff zone is the locus of great earthquakes. Major faults in the general site area are the Border Ranges fault which lies under Kachemak Bay and the Eagle River Fault which crosses Bradley Lake near its head. Both faults trend NE-SW (about N45 E) parallel to regional structure. Three smaller faults lie within the site area crossing the power tunnel between the intake and the powerhouse. These are the Bull Moose Fault, the Bradley River Fault, and the Bear Cub Fault. These trend approximately north-south. The Bull Moose and Bradley River are the larger of these faults. Where crossed by the power tunnel they consisted of a series of gouge-filled anastamosing shears, a few feet to possibly 20 ft. wide, separated by sound rock and extending over a width of 300 to-400 ft. Lineations and minor shears parallel these faults. Seismicity of the site was investigated by Woodward-Clyde Consultants, “Report on Bradley Lake Hydroelectric Project Design Earthquake Study,” 1981. They recommended an MCE earthquake spectrum normalized to zero period horizontal acceleration of 0.75g with a duration of 25 seconds for design of critical, water retaining structures. Vertical acceleration was taken at 2/3 horizontal. This spectrum has been the basis of investigation and design of the dam, spillway and powerhouse. Dynamic analyses of the dam and spillway were made using Finite Element analyses. The time-history used an accelerogram whose spectrum envelopes the Woodward~ Clyde spectrum. This was constructed by combining two appropriate shorter earthquake records. This hybrid earthquake has a duration of 28 seconds. The nearest active volcanoes are Mt. St. Augustine and Mt. Redoubt which are more: than 100 miles from the site across Cook Inlet. Renewed activity poses no direct threat to the project other than possible development of a tsunami due to large mudflows or slides from Mt. St. Augustine and ash falls from both. The cost of Alaska has been subjected to tsunami generated by uplift due to offshore earthquakes. This hazard was investigated by Stone & Webster Engineering Corporation in a report presented to this Board (September 1987). This report indicated an annual probability (combined earthquake and volcanic activity) of about 0.007 for a wave height at the powerhouse reaching El 25 BLP Datum (El Zz 38.63 MLLW datum). The powerhouse is designed to withstand water to this level without damage. The hazards of seiche in Bradley Lake due to earthquake and the possibility of a wave generated in the lake by a liquefaction generated slide in the Bradley Glacier delta were investigated. It was concluded waves from these sources would not damage the dam or spillway. The mountain sides surrounding Bradley Lake are bare rock which has been scoured by late Pleistocene and recent glaciation. Minor rockfalls may result from earthquake but slides which could cause overtopping are not a hazard. The Kachemak and Nuka glaciers are sufficiently far from the lake that ice falls or slides which might result from earthquake would not reach the lake. Main Dam The dam is a concrete faced, rockfill structure. Top of the embankment is El 1190. A parapet wall at the upstream face extends to El 1194. Normal full pool (crest of the spillway) is El 1180 and pool level under PMF is El 1190.6. The parapet wall is designed to provide wave protection during floods. The face slab is 12 inches thick, constant top to bottom. The toe plinth varies in width along its contact with the rock from 10.5 ft. to 13.3 ft. Minimum thickness varies from 3 ft. to 2.25 ft. depending on location and head. The face slab is underlain by a 12 ft. wide zone of crushed rock grading from fines (passing No. 200 mesh) to 3 inch size. The toe plinth is founded on rock for its full length. General rock level in the river bottom is about El 1065 giving a nominal dam height to the top of the embankment of 125 ft. However, a narrow channel was found along the right side of the river bottom. This was excavated to bedrock, at its lowest point at El 1032, over a length of 28 ft. centered on the toe plinth and backfilled with concrete. Thus the dam is actually 158 ft. high above the lowest point in the bedrock. The rock surface drops slightly south of the left abutment under the gate shaft bench. In this area the rock is covered by overburden and some rock fill. A concrete wall was constructed across this bench. This extends down to rock for its full length of about 175 ft. A single line grout curtain is located along it. The single line ground curtain extends the full length of the toe plinth and into the abutments. Maximum hole depth is 110 ft. In general the rock was tight and takes were small. However several open joints were found in the abutments. These were grouted to refusal and check holes drilled and grouted. Alternative types of dams considered in selecting a concrete face rock fill included a thick arch structure, a concrete gravity dam or a central core embankment dam. The concrete face rockfill was selected because of its excellent resistance to earthquake, relative cost, lack of suitable earth core material, and topographic constraints, especially space for the upstream cofferdam. Slopes upstream and downstream were established at 1.6H to 1V to restrict deformation under the MCE 0.75 g horizontal) to acceptable limits. 2.4 25) Spillway The spillway is an ungated concrete gravity section with side slopes of 3H to 10V upstream and 8H to 10V downstream. Crest length is 175 ft. at elevation 1180.00. Overall length of the spillway is 275 ft. Spillway discharge at PMF would be 23,800 cfs at a lake level of El 1190.6. A drainage and grouting gallery extends the full length of the spillway at or just above rock level. Access to this gallery is from the left abutment. A single line grout curtain having a depth of 30 to 50 ft. below rock surface inclined 20 upstream and fanning into both abutments was constructed. Drain holes are 3 inches diameter, five feet on centers, and 30 ft. deep except at the right abutment where a fan of holes 50 ft. to 60 ft. long were drilled. All seepage from the spillway drainage system is collected and discharged over a vee notch weir to permit monitoring. Ice loading causes some tension in the upstream face at about El 1170. Accordingly reinforcing was placed in the upstream face. Dynamic analyses using the hybrid accelogram confirmed that stresses are within allowable and no lateral displacement of the spillway would occur under the MCE. The spillway was model tested at Colorado State University. The model extended from well upstream of the power tunnel intake to well) downstream of the main dam. Water velocities along the toe of the main dam were measured and riprap along the downstream tow sized to prevent erosion in the event of spillway operations. Power Tunnel & Intake The power tunnel system consists of an upper tunnel 738 ft. long extending from the intake through the upper elbow, a vertical shaft 647 ft. deep and a lower elbow and lower tunnel with a total length of 17,767 ft. The lower tunnel is on a 1.67%) grade. The intake channel is about 350 ft. long, and the bottom at the intake is at El 1030. Dual high-pressure gates are installed in the upper tunnel about 520 ft. downstream of the tunnel portal in a vertical drywell. The gates are hydraulically actuated. An accumulator bank rides on the hydraulic system. This is sized to permit closing each gate without recharging even in the event of complete loss of power. Provision is made for stoplogs at the intake portal. The same stoplogs can also be used at the intake portal of the diversion tunnel. A rock trap is provided just upstream of the intake portal. The downstream 435 ft. of the lower tunnel is designated the manifold section. This section contains three wye-branch penstocks which extend to the powerhouse. Two are in service and one is closed by a hemispherical head to be used for a future third unit. The downstream end of the manifold is closed with a hemispherical head which can be removed as necessary for access to the tunnel. The manifold-penstock section and downstream portion of the tunnel for 2725 ft. upstream of the manifold are steel liner encased in concrete. Inside diameter of this section is 11 ft. Four drain pipes A-S 2.6 Bud are located outside of the steel liner in the concrete encasement. Drain holes extend from these drains into rock at intervals of 10 and 20 ft. Seepage from these drains is collected and passed through the powerhouse where it can be measured. The remainder of the lower tunnel is 13 ft. ID with a 12 inch thick concrete lining. The vertical shaft and upper tunnel are 11 ft. ID lined with concrete. The manifold-penstock section was pressure tested at 960 psi (1.9 times static head) for 1 hour before encasing it in concrete. There were no indications of distress, and distortions were very small and acceptable. In situ horizontal stresses in the rock are low. To protect against possible hydro- splitting of the rock by leakage from the tunnel, the steel lining was carried to Sta. 31 +58 where rock cover was equal to 0.8 of the static head. The concrete lining was reinforced to Sta. 38+60. From Sta. 31 +60 to Sta. 35+60 the rock was high pressure grouted (500 psi) using squeeze grouting procedures. Selected areas of the remainder of the lower tunnel were also reinforced. High pressure grouting (250 psi) was done from Sta. 35+60 to Sta. 38+60 and at selected areas to Sta. 64+00 to ensure that open joints intersecting or close to the tunnel were filled with high strength grout. The tunnel was first filled to the then reservoir level, El 1076, in May 1991. A falling head test for a 12 hour duration was made in late May which showed an average leakage of only 58 gpm. Powerhouse The powerhouse has a concrete substructure with steel framed superstructure. It is founded entirely in rock, and the tailrace excavation is in rock for a modest distance away from the powerhouse. The powerhouse has been designed for safety against excessive structural stresses, sliding, overturning or flotation. Loading conditions include MCE, (0.75g) DBE (0.35g), high tides, storm high tide, tsunami, and various plant conditions such as in operation, servicing, and construction including appropriate factors of safety. Diversion Tunnel The diversion tunnel is approximately 407.5 ft. long and is located in the high rock spur between the spillway and the main dam. It has been converted to a low level outlet which is normally closed by a dual system of high pressure slide gates located in a deep dry well shaft. The tunnel is lined with concrete from the upstream portal to downstream of the gate shaft. Gate operation is by hydraulic actuators. There is a bank of accumulators which can open each gate completely in the event of loss of all power. The gates discharge through a steel penstock 10.5 ft. in diameter which extends past the downstream portal of the tunnel. Two 28 inch- diameter steel pipes encased in concrete extend through the entire length of the tunnel. these discharge through a system of 7 motor operated valves of different sizes so arranged that fish water releases can be made from the reservoir as necessary to maintain required flows in the Lower Bradley River of 40 to 100 cfs at Riffle Reach. 2.8 Diversions into Bradley Lake As a part of the development of the Project, the Middle Fork of the Bradley River, a portion of the outflow from the Nuka Glacier, and a small tributary of Battle Creek were diverted into the reservoir. 2.8.1 2.8.2 Middle Fork Diversion The Middle Fork Diversion is located approximately one mile north of Bradley Lake in an adjacent drainage at elevation 2160 on the Middle Fork Tributary of the Bradley River. The Diversion consists of a small intake basis and two reaches of open channel approximately 760 feet and 483 feet long, separated by a stilling basin which is located in a natural bog area, all of which were established by excavation. The Diversion conveys water from the Middle Fork of the Bradley River to Marmot Creek, a tributary to Bradley Lake, and operates in all seasons. Nuka Diversion Glacial melt forms a pond called Nuka Pool at the terminus of the: Nuka Glacier. Nuka Pool lies on the divide between two drainages, discharging water both into the Upper Bradley River and into the Nuka River. Water discharged into the Upper Bradley River flows to Bradley Lake and that which is discharged to the Nuka River flows to the Kenai Fjords National Park. The purpose of the Nuka Diversion is to cause the glacial melt water flowing through the Nuka Pool to flow in the upper Bradley River, except of an initial increment of flow which must be provided to the Nuka River in accordance with the June 1986 Contract between the Alaska Energy Authority and the U.S. Department of Interior. In compliance with this Contract, the design must assure that when flows are available in the Nuka Pool, 5 cfs will be diverted to the Nuka River prior to any diversion of water to the Upper Bradley River. To accomplish this, flow from the Nuka Pool to the Upper Bradley River passes over a long, uniform weir constructed by modifying the naturally occurring rock weir at the pool outlet. At the Nuka River outlet of the pool, water is constrained to flow through a 12-inch: steel pipe in a gabion dike. This pipe has been sized such that it will discharge 5 cfs when the Nuka Pool level is at the elevation of the Bradley-side weir crest and flow is about to commence to the Upper Bradley River. No flow is allowed to enter the Upper Bradley River from the Nuka Pool until 5 cfs enters the Nuka River. A second, identical pipe is also provided. This second pipe ensures flows if the first pipe becomes inoperative and needs to be repaired. It may also be used to augment flows. 29) 2.10 2th 2.12 2.8.3. Upper Battle Creek Diversion The Upper Battle Creek Diversion is located at elevation 1342 approximately 0.7 miles south-southeast of Bradley Lake Dam and diverts a small tributary of Battle Creek into the reservoir adding 0.9 square miles of drainage area to the Project. Diversion is accomplished by emplacement of a small, talus dike across the tributary at the base of a waterfall. An intake basin 25’x25’ by 3 feet deep was constructed near the bottom of the falls and flow is directed through three interconnected ponds. Approximately 300 feet of ditch was excavated between the ponds to reverse the direction of the flow into the reservoir. Permanent Facilities To accommodate for the needs of on-site personnel, the project is provided with two 32’x82’ duplex living quarters, a 43’x50’ office/transient worker residence building, a 50°x160’ shop-warehouse and a fenced storage yard: which also contains an unheated storage/incinerator building. Project Airstrip The project airstrip is incorporated into the permanent project road system between the barge dock and permanent facilities. The strip is 2400 ft. long and 75 ft. wide and is equipped with plane lights, a taxi and parking apron, weather building and warning lights. The airstrip is designed for VFR use only and is not open to the public. Barge Dock Water access to the project is from a dock facility consisting of five (5) 53 ft. diameter sheet pile cells placed out into the tidal flats of Kachemak Bay. A rockfill, gravel-surfaced causeway extending some 700 ft. from the shoreline connects the barge dock cells to the project access road at the bay shore. Use of this facility is available only during half tides and greater. A small, aluminum floating dock is attached to the sheet pile cells to provide mooring for skiffs belonging to the public. This small dock is removed each winter to prevent it from being damaged by ice. Transmission Line Two parallel and separate single circuit 115 kV transmission lines, each about 20 miles long, connect to the substation at the powerhouse and carry the power generated to the Fritz Creek-Soldotna 115 kV Transmission Line owned by Homer 2.13 2.14 Electric Association, Inc. The point of connection for these two lines is designated as the Bradley Junction. The Bradley Lake transmission line towers are guyed, X-configuration towers manufactured of Corten type steel. The conductor is 556 kemil, 42/19 Aluminun/Steel “Special Dove.” Roads About 1 0.8 miles of gravel surface access roads have been constructed and connect the powerhouse, permanent facilities, airstrip, dam site and other project areas. Instrumentation Settlement and deflection of the main dam are monitored by two rows of monuments set on the upstream face at approximately mid-height of the face and just below the parapet; and three monuments set in the rock fill along the upstream side of the El 1077 berm. Three monuments are set in the crest of the spillway. Instrument pedestals were established along these several lines of monuments. The instrument pedestals are referenced to four primary survey monuments set in rock. Seepage into the spillway drainage gallery is collected and discharged over a vee notch weir. Main dam leakage is estimated by deducting fish water releases and spillway seepage from the flow recorded at the USGS gaging station just downstream of the dam. Four exploratory borings along the line of the tunnel have been converted to open standpipe piezometers to measure groundwater levels above the tunnel. Seepage flow from the drain system around the steel lining in the tunnel is monitored in the powerhouse. INITIAL FILLING OF RESERVOIR . Filling of the reservoir started October 3D, 1990, but was suspended shortly thereafter to meet the fisheries minimum flow requirements. As the hydrograph began to rise the following spring, filling was resumed. The initial rate of filling was slow but accelerated during the summer of 1991. Water level reached full pool during a severe storm in late September 1991. Spilling started on September 27 and continued for 8 days with about 0.5 ft. depth passing over the spillway. The winds during this storm were heavy. Waves splashed over the spillway and to some extend over the parapet wall of the dam. These caused no damage. Measured deflections and settlements of the main dam during filling were very small, maximum displacements being: crest settlement 0.02 ft. displacement 0.03 downstream A-9 upstream face settlement 0.04 displacement 0.02 downstream downstream bench settlement 0.07 displacement 0.01 The settlement and deflection of the crest are only about 0.03% of the dam height. There was no detectable seepage through the dam. 4. POWER HOUSE STARTUP The units were turned over for pre-operational testing in March 1991. Unit 2 was first rotated on May 15, 1991, and Unit 1 on May 18, 1991. The units were released to Chugach Electric Association in Anchorage, Alaska for dispatch on August 1, 1991, and the plant declared in Commercial Operation on September 1, 1991. 5. PROJECT LANDS On the basis of the project boundary shown in Exhibit G, the acreage of the lands belonging to the United States of Alaska are tabulated below: Asterisks (*) denote transmission line ROW acreage only. BLM Area State Area Other Water Subtotal Description Acres Acres Acres Acres Acres T.3S., R.1OW Tract A* 263.62 Total Per TP 263.62 263.62 T.3S., R.11W Section 23 26.15 Section 25 42.48 Section 26 20.78 Tract B* 129.34 Total Per TP 218.75 218.75 T.4S., R.9W Section 30* 45.74 2.79 Section 31* 0.33 182.13 Tract A* 12:73 U.S. Surv. 2937 182.13 12:73 2.79 Total Per TP 46.07 182.13 12.73 2.79 240.93 T.4S., R.10W Section 35 149.14 Section 36 75.94 182.13 4.00 Section 36* 40.17 Tract A* 14.36 A-10 Description Total Per TP T.5S., R.8W Section 19 Section 20 Section 29 Section 30 Section 31 Total Per TP T.5S., R.9W Section 3 Section 6 Section 7 Section 8 Section 9 Section 10 Section 11 Section 14 Section 15 Section 16 Section 17 Section 18 Section 22 Section 23 Section 24 Section 25 Section 26 Section 36 Total Per TP T.5S., R.10W Section 1 Section 2 Section 3 Section 9 Section 10 Section 11 Section 12 Section 13 Section 14 ATS 1418 Total Per TP BLM Area Acres 265.25 388.74 93.63 6.04 139.40 316.24 944.05 40.00 5.64 121-12 267.30 29.21 210.59 5.67 168.73 32.28 69.46 31.37 3.97 66.32 513.20 558.08 372.93 15.07 15.46 2,425.17 26.81 128.83 384.89 127.87 398.57 222.79 64.41 41.59 1.56 139782 State Area Acres Acres 14.36 23.21 84.35 208.39 139.39 139.39 A-11 Other Water Subtotal Acres Acres 4.00 279.61 944.05 100.71 166.95 170.10 0.94 232.80 548.73 145.42 16.63 67.64 35.77 1,485.70 2,633.56 1,536.71 Description T.6S., R.8W Section 6 Total Per TP Total Proj. Area Including Transmission Line Transmission Line Area Only BLM Area Acres 320.00 320.00 5,498.69 86.24 State Area Acres 925.81 407.32 A-12 Other Acres 12.73 Water Acres 1,492.49 Subtotal Acres 320.00 Dam: Spillway: Power Tunnel: Diversion Tunnel: Penstock: Middle Fork Diversion: Nuka Diversion: Battle Creek Diversion: Airstrip: Table A-1 Bradley Lake Hydroelectric Project Data Concrete-faced rockfill, 600 feet long, 125 feet high, 360,000 cubic yards rockfill, and 10,800 cubic yards concrete Ungated concrete ogee section, 175 feet long (11,000 cubic yards concrete) 13-foot nominal diameter, fully concrete lined, approximately 19,152 feet in length 21-foot horseshoe concrete lines/penstock tunnel, 407.5 feet long Steel, 9-foot diameter with 6 1/2 foot diameter branches 1517 foot diversion includes upper and lower channels with intake basin and stilling basin 2 diversion and control dikes, pilot channel and outlet weir 300 foot diversion channel with intake basin, talus diversion weir Gravel surface airstrip 2,400 ft. long by 75 feet wide incorporated into access road A-13 Annual Firm Energy: Average Annual Energy: Transmission Line: Barge Dock: Access Roads: Powerhouse: Turbines: Generators: Governors: 329 gigawatt hrs 376 gigawatt hrs 115 kilovolt, two Sheet pile cells granular fill 10.8 miles, gravel Surface, steel superstructure, 160 feet long, 80 feet wide, 92 feet high 2 each Pelton, vertical shaft, 90,170 horsepower max. 2 each Rated output at max. operating pool is 63 MVA. 2 each VA Tech digital EXHIBIT B BRADLEY LAKE PROJECT SPECIFIC FEDERAL AND STATE AGENCY REQUIREMENTS Dept. of Environmental Conservation (DEC) Dept. of Environmental Conservation (DEC) Corps of Engineers (COE) Corps of Engineers (COE) Corps of Engineers (COE) Corps of Engineers (COE) Corps of Engineers (COE) Corps of Engineers (COE) Dept. of Fish & Game (DFG) Dept. of Fish & Game (DFG) Dept. of Fish & Game (DFG) Dept. of Fish & Game (DFG) Approval to Operate Class “C” Water System Permit date 11/4/88 Permit date 04/3/89 Waiver Approval 5/23/91 Certificate to Construct Class “C” Water System Land Use License DACW85-3-91-88 Land Use License DACW85-2-90-24 Dredge and Fill Permit #07 1-QYD-2-850502 Plus seven modifications Land Use License DACW85-3-86-55 Land Use License DACW85-3-86-73 Land Use License DACW85-3-86-101 Critical Habitat Area FG 88-11-0077 Special Area Permit FG 86-11-0824 Anadromous Fish Stream, Critical Habitat Area FG 86-11-0416 Plus Amendment IV Critical Habitat Area FG 86-11-0115 B-1 Approval to operate permanent facilities -Public water system and wastewater disposal system. Approval to operate permanent facilities - Powerhouse Creek Source. Waiver Approval, Class “C” Water Well. Certificate to construct potable water system at Bradley Lake Powerhouse. Approval to Operate was requested 2/4/92 -No response as of yet. COE land use license to construct and operate the upper Battle Creek Diversion Dam. Land use license for gauging station electrical distribution line. Section 10 - Perform work in or affecting U.S. navigable waters. Section 404 Discharge dredged or fill material into U.S. waters. Extension of land use license to allow for material extraction. Extension of land use license for area used as access road and construction landfill. Land use license to conduct studies and design project. Road Construction Kachemak Bay Critical Habitat Area Airstrip Construction and Operation Transmission Line Construction Powerhouse to Lower Camp Access Road ) Dept. Dept. Dept. Dept. Dept. Dept. Dept. Dept. Dept. Dept. Dept. Dept. Dept. Dept. Dept. Dept. of Fish & Game (DFG) of Fish & Game (DFG) of Fish & Game (DFG) of Fish & Game (DFG) of Fish & Game (DFG) of Fish & Game (DFG) of Fish & Game (DFG) of Fish & Game (DFG) of Natural Resources(DNR) of Natural Resources(DNR) of Natural Resources(DNR) of Natural Resources(DNR) of Natural Resources(DNR) of Natural Resources(DNR) of Natural Resources(DNR) of Natural Resources(DNR) Critical Habitat Area FG 86-11-0114 Plus Amendment I Anadromous Fish Stream Critical Habitat Area FG 86-11-0113 Plus two amendments Critical Habitat Area FG 86-II-0112 Plus Amendment II Anadromous Fish Stream FG 86-II-0110 Plus Amendment II Critical Habitat Area FG 86-11-0108 Critical Habitat Area FG 86-II-0107 Plus Amendment I Anadromous Fish Stream FG 86-II-0106 Plus Amendment II Critical Habitat Area FG 85-II-0824 Plus one amendment Water Rights LAS 13370 Permanent Water Rights LAS 6998 Water Rights Application LAS 14316 Permanent Water Rights LAS 2837 Public and Charitable Lease ADL 225142 Permanent Water Rights LAS 2836 Right -of- Way ADL 223192 Uplands Lease ADL B-2 Airstrip to Powerhouse Access Road Martin River material site access road, Battle Creek. Spoil Disposal/Waterfowl Nesting Area Martin River material site, Martin Barge dock and staging area. Powerhouse and switchyard construction and operation. Bradley River Dam, Bradley. Airstrip construction and operation. Water rights for Upper Battle Creek Diversion Project. Permit to use permanent facilities Well No. 4 for 5 additional years. Bradley Lake Waterfowl Nesting Area Appropriate water for waterfowl nesting area. Lease of State Lands near Fritz Creek for Moose Mitigation. Appropriate water from Middle Fork and Nuka Glacier Pool Final documents issued Final documents issued. Dept. of Natural Resources(DNR) Dept. of Interior (DOI) Federal Energy Regulatory Commission (FERC) Federal Energy Regulatory Commission (FERC) Federal Energy Regulatory Commission (FERC) Federal Energy Regulatory Commission (FERC) Federal Energy Regulatory Commission (FERC) Federal Energy Regulatory Commission (FERC) 222656 Tidelands Lease Contract FERC License Amendment FERC License Amendment FERC License Amendment FERC License Amendment FERC License FERC License Amendment B-3 Final documents issued. Provisions for water from Nuka Glacier Pool. To construct and operate Upper Battle Creek Diversion Project. To adopt modified flow regime during reservoir filling. For relocation of permanent landing strip To adopt modified operational flow regime to be consistent with ADF&G flow regime. FERC order issuing license Order granting extension until January 1, 1992 to complete project construction PLEASE DELIVER TO THE FOLLOWING: Brad Evans Brian Newton Bradley Janorschke Wayne Carmony Jim Posey Tim Barnum Kirk Gibson Chugach Electric Association Golden Valley Electric Association Homer Electric Association Matanuska Electric Association Anchorage Municipal Light & Power City of Seward AterWynne Number of pages including cover sheet: (907) 762-4514 (907) 458-5951 (907) 335-6224 (907) 689-9368 (907) 263-5204 (907) 224-4085 (503) 226-0079 st Shauna Howell From: Shauna Howell Sent: Monday, May 12, 2008 2:29 PM To: ‘Bob Day, HEA’; 'Brad Evans, CEA’, 'Bradley Janorschke, HEA’; ‘Brenda Applegate, AEA’; ‘Brenda Fuglestad, AEA’; ‘Brian Bjorkquist, Dept. of Law’; 'Brian Newton, GVEA’; 'Bryan Carey, AEA’; ‘Charlie O'Hare, HEA’; Christa Caldwell; Connie Owens, Exec. Secretary @ CEA; 'Erin Leaders, Exec. Secretary @ City of Seward’; 'Gary Stromberg’; 'Henri Dale, GVEA’; ‘James Hemsath, AEA’; ‘Jean Schroeder, HEA Secretary’; ‘Jim Posey, AML&P’; 'Karl Reiche, AEA’; ‘Kirk Gibson, AterWynne'’; 'Linda MacMillan, AEA’; 'Mike Cunningham, CEA’; 'Rick Eckert, HEA': 'Rick Miller, AML&P'; 'Sara Fisher-Goad, AEA’; 'Susan Redlin, Exec. Secretary @ GVEA’; 'Teresa Gamble, HEA’; 'Tim Barnum, City of Seward’; 'Wayne Carmony, MEA' Subject: Bradley Lake PMC Meeting Items - Wednesday, May 14, 2008 Attachments: BPMC May 14, 2008 Agenda.pdf; Draft March 11, 2008 Meeting Minutes.doc; Item 7B. - Auditor Selection - Motion for Auditor.doc; Item 7C. ML&P Internal Audit Report.pdf; Response to Draft Findings of Internal Audit Report.pdf; Teleconference Instructions for May 14, 2008 Mtg.pdf Importance: High As a reminder, there is a BPMC meeting this Wednesday the 14" at 10:00 a.m. in Chugach Electric Association’s board room. Attached are the meeting items that are on the agenda as well as teleconference instructions should you not be able to attend in person. | will also be sending these items out via fax as well. If you have questions, please call me at (907) 771-3028. Thank you. Shauna Howell Administrative Assistant Alaska Industrial Development and Export Authority and Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage, Alaska 99503 (907) 771-3028 Phone (907) 771-3044 Fax, showell@aidea.org * * * Transm.scion Result Report (MemoryTX) ( Ma,+.2. 2008 3:37PM) * * * 1) AIDEA/AEA 2) Date/Time: May.12. 2008 2:37PM File Page No. Mode Destination Pg (s) Result Not Sent 7299 Memory TX 97624514 Pee, OK 919074585951 OK 919073356224 OK 96899368 OK 92635204 OK 919072244085 OK 915032260079 Ok Reason for error E23) No eaeeecn nie) re fia Roekccete ile connection PLEASE DELIVER TO THE FOLLOWING: Brad Evans Chugach Electric Association (907) 762-4514 Brian Newton Golden Valley Electric Association (907) 458-5951 Bradley Janorschke — Homer Electric Association (907) 335-6224 Wayne Carmony —- Matanuska Electric Association (907) 689-9368 Jim Posey Anchorage Municipal Light & Power (907) 263-5204 Tim Barnum City of Seward (907) 224-4085 Kirk Gibson AterWynne (503) 226-0078 Mumbo of pages nung coverseot, SF Shauna Howell From: Connie Owens [Connie_Owens@chugachelectric.com] Sent: Monday, May 12, 2008 8:57 AM To: Shauna Howell Subject: RE: Draft BPMC Agenda for Approval _ It's good - | got approval this morning. From: Shauna Howell [mailto:SHowell@aidea.org] Sent: Friday, May 09, 2008 12:19 PM To: Connie Owens Subject: RE: Draft BPMC Agenda for Approval Nothing from Brad as of today. From: Connie Owens [mailto:Connie_Owens@chugachelectric.com] Sent: Friday, May 09, 2008 12:04 PM To: Shauna Howell Subject: RE: Draft BPMC Agenda for Approval Shauna, did he give you approval? From: Shauna Howell [mailto:SHowell@aidea.org] Sent: Thursday, May 08, 2008 12:03 PM To: Brad Evans; Connie Owens Subject: Draft BPMC Agenda for Approval Importance: High Sorry, here is the attachment. From: Shauna Howell Sent: Thursday, May 08, 2008 12:03 PM To: 'brad_evans@chugachelectric.com’; ‘Connie Owens' Subject: Draft BPMC Agenda for Approval Importance: High Attached is the draft Bradley Lake PMC agenda for your approval. Please review and email back your comments/approval. Thank you. Shauna Howell Administrative Assistant Alaska Industrial Development and Export Authority and Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage, Alaska 99503 (907) 771-3028 Phone (907) 771-3044 Fax showell@ aidea.org w« “YIDEX. /=ALASKA x Aisa Industrial Development ws Export Authority BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE REGULAR MEETING AGENDA Wednesday, May 14, 2008 — 10:00 a.m. (via electronic media at the Chugach Electric Association Board Room 5601 Minnesota Drive) 1. CALLTOORDER ~~ Evans 2s ROLL CALL (for Committee naracenta = 3 PUBLIC ROLL CALL (for all others present) 4. PUBLIC COMMENT’. ~ 5. | AGENDA COMMENTS 6. | APPROVAL OF MEETING MINUTES March 11, 2008, 7... NEW BUSINESS A. O&M Agreement Bs Auditor Selection C. Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project MacMillan 8. COMMITTEE REPORTS / COMMENTS A. Operators Report B. Next Meeting Date Evans 9. ADJOURNMENT 813 West Northern Lights Boulevard * Anchorage, Alaska 99503-2495 www.aidea.org * 907/771-3000 * FAX 907/771-3044 ® Toll Free (Alaska Only) 888/300-8534 * www.akenergyauthority.org Item 6 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES (via teleconference in the AIDEA/AEA Board Room) Anchorage, Alaska Tuesday, March 11, 2008 — 10:00 a.m. a. CALL TO ORDER Chair Evans called the regular meeting of the Br: t droelectric Project Management Committee to order at 10:00 a.m. on Tuesd: from the AIDEA/AEA Board Room, Anchorage, Alaska, to conduct the bu: 'S of the Committee"pemmthe agenda and public notice. Bs ROLL CALL present: City of Seward Bryan Carey Alaska Energy Au Tie hori 3. PUBLIC ROLL CALL Shauna Howell, AEA Christa Caldwell, AEA Kirk Gibson, BPMC Charlie O’Hare, HEA Don Zoerb, MEA Page 1 of 6 Rick Baldwin, HEA Linda MacMillan, AEA Rick Miller, AML&P Henri Dale, GVEA Doug Hall, AML&P Bob Price, AML&P Bob Day, HEA Mike Cunningham, CEA 4. PUBLIC COMMENT There were no public comments. 5. AGENDA COMMENTS There were no agenda comments. 6. APPROVAL OF MEETING MINUTES —Fe' MOTION: Mr. Posey moved to sfarettat Seconded by Mr. Newton. Mr. Carme ..and they verbally co r : In item 7B, line 4, add e word form to request. The with budget detail involving increases and isline being FYO9 utility contributions would amount to go up, the same level Of, increasing the operating reserve this year that we did last year isn’t necessary. The debt service —the principal has gone down by $900 for next year. The biggest increase has to do with the’renewal and contingency fund. That is a fund within the bond agreement that is supposed to be funded up to at least $5M, but then is a borrowing account for the utilities for large repairs. It has been used in the past heavily for runners and governor projects. The amount to repay is increasing this year, and in addition, the other portion of that increase has to do with interest in the fund. Other increases in the budget include studies for long range maintenance of structures/buildings, and this year is for a one-time tunnel draining and cleaning inspection. There is an increase cost for Schedule-A capital for vehicles or equipment as needed at the plant. Arbitrage has also been going up — that is a projected increase in how much we will be paying arbitrage, which is a payment to the IRS when the rate Page 2 of 6 of the bonds is better than it should be than the amount of interest we’re paying on the bond funds. Mr. Carmony asked about an increase of 58%. Mr. O’Hare stated that in 2007 they didn’t have the manpower to take care of all the projects they had budgeted for and a lot of the O&M didn’t get done because the correct staffing wasn’t in place to take care of the things that were budgeted. The 2009 budget has risen a bit higher than expected partly because some of the studies proposed by the O&D committee have been placed back into the O&M portion, which is outside of our \ormal O&M. The O&D feels they need to do that at Bradley, as well. The other is the archit al study -- a study of the facilities at is required there, as well as the because of the lack of personnel. Mr. O'Hare will prepare a write-up th MOTION: Mr. Newton moved to accept noted his objection to the $25,000 i of Seward, CEA, HEA, G based on the “ve noted Mr. Carmony asked if this O&N | agreement has been drafted and not released for review? Mr. Carey responded that it has not been released to all of the utilities due to AEA just receiving a new Executive Director who has not yet been briefed. Chair Evans asked that the reason it is being re-drafted is because there is a proposal on the table that we’re going to go to a multi-year O&M agreement instead of a single year and are trying to conform that agreement to a multi-year? Page 3 of 6 Mr. Carey responded that the original agreement was done back in the 90s and needs to be revised and modernized. He expects that a draft will go out shortly after the new Executive Director of AEA approves it and then it will be sent out in draft form for all the utilities to comment. The editing and proposed changes are being done by AEA and HEA. The other utilities are not involved in the discussions at this point. Mr. Carmony asked if Mr. Gibson or AterWynne has in any way shared any part of that proposed agreement with anyone at GVEA. Mr. Gibson replied that he has asked questions with GVEA for clarification or other issues. Mr. Janorschke asked Mr. Baldwin to add clarification. It i the state wanted some changes that would have impacted | anorschke’s understanding that as the operator, and has a hang up - until HEA and the state resolve that issue as th or the state’s assets, and after those issues were resolved then it was understan point then the draft O&M agreement would go to all the participants. Until i. their point of contention mh AEA and HEA stbject to BPMC Mr. Baldwin added that the O&M! ac ties who are members of the contract approval. The efficient way to do it is | "hal ‘e been. Mr. Posey asked what was the anticipatedida inal teview“and, when will the other members be receiving that? Mr. attorney from HEA. occurred and he believes that. that AterWynne has acted improperly and would like an opinion on Chair Evans asked that Mr. Carmony’s request be moved to agenda item 8A -- under Old Business -- Legal Representation for discussion. Mr. Carmony stated he would not like it moved. The complaint you are going to take up is with regards to a long standing objection MEA has had through AterWynne’s representation, but the complaint he just lodged is very specific to a specific issue. Page 4 of 6 Chair Evans stated he does not see that it is not part of MEA’s legal representation matter that is on the agenda later. The Chair's response is that he will defer that to that discussion and MEA can add it to its list of grievances under legal representation under item 8A. 7C. Auditor Selection Mr. Cunningham stated that the finance committee sent out requests for proposal for audit services and three responses were received and have been distributed to the rest of the committee. Deliberations and evaluations of the responses will be taking place and in a month will come to the PMC with a recommendation to retain an auditor 8. OLD BUSINESS 8A. Legal Representation ne spoke on ments attached. ours that he would let AterWynne know if he othing since from. him. It is Mr. Gibson’s i _ from other_affectéd parties. Therefore, MEA intends to seek a formal opinion also. MEA _ f remedies they can find to get out from under what they see as he conflict of interest between AterWynne and MEA. Mr. Carmony made the comment that the specific circumstances that were previously discussed today — these are circumstances that did not come to light until today and he believes that they are relevant to this issue and MEA will be proceeding with the inclusion with these circumstances with whatever remedies we can find to attempt to relieve this situation. 9. COMMITTEE REPORTS / COMMENTS 9A. Operator’s Report Page 5 of 6 Mr. Day reported that the lake level stayed relatively flat throughout the year and has been well managed by CEA as they brought them back into their normal range in February/March. In February the project developed 28,260 megawatt hours and used 29,412 acre feet of water, equating into a 30% load factor, which is a good, normal operation out of Bradley Lake. There were 23 flights for crew change. The plant is running very well and we are getting a number of maintenance items completed. Mr. Day also reported that 2007 was not an indicative year, as HEA was going through difficulties with staffing. It’s part of getting Bradley Lake back to where it needs to be to be managed properly. Mr. O’Hare seconded that 2007 was not,aniiindicative year, as that was the year of the governor project and normal time was spent on: project and they weren't allowed to do the normal maintenance. We had the staff working 0 n that project rather than normal operations and maintenance at the plant. / 9B. Next Meeting Date The next meeting will be May 7, 2008 at 10:00 a: 10. ADJOURNMENT Meeting adjourned at 10:55 a.m. ska Energy Authority, Secretary Page 6 of 6 Item 7B MOTION: Move that the Bradley Lake Project Management Committee retain Swalling and Associates P.C. as the project independent auditor for the year(s) ended June 30, 2008 through June 30, 2010, with an option to exten additional years. Move: Second: Lefont J? él Seuyor— d the engagement for two Item 7C April 22, 2008 Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power Introduction. According to information provided by the Alaska Energy Authority (AEA), the Bradley Lake Hydroelectric Project (Project) is located in South Central Alaska at the southern end of the Kenai Peninsula. The Project includes a 610-foot long, 125-foot high, concrete-faced, rock- filled gravity dam, and a 3.5-mile long power tunnel. The 126-megawatt Project transmits its power to the State’s main power grid via two parallel 20-mile transmission lines. The Project, which cost approximately $328 million (including reserve fund balances), went into commercial operation in 1991. Homer Electric Association (HEA) under contract with AEA now operates the Project. The Project serves Alaska’s Railbelt from Homer to Fairbanks as well as the Delta Junction area. According to data provided by AEA, in fiscal year 2007, about $1.4 million was paid to HEA for Project operation and maintenance expenditures. AEA has entered into several agreements to provide for the operation and maintenance of the Project: —The Power Sales Agreement, December 1987---The-Power-Sales-Agreement-established the = Bradley Lake Project Management Committee (BPMC). One of BPMC’s purposes is to arrange for the operation and maintenance of the Project and the scheduling, production and dispatch of power. In addition, the BPMC is responsible for budgeting annual Project costs and calculating each party’s required contribution to fund annual Project costs. BPMC members include the AEA and the five purchasers under the Power Sales Agreement: Chugach Electric Association, Golden Valley Electric Association, the Municipality of Anchorage (Municipal Light and Power [ML&P]), the City of Seward (Seward Electric System), and the Alaska Electric Generation & Transmission Cooperative. Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Master Maintenance and Operating Agreement, May 1994 - The Master Maintenance and Operating agreement with the BPMC established contract administration and budgeting procedures for Project maintenance and operation contracts. It also provides for the lease or other use of facilities and equipment in a manner consistent with the requirements of the Power Sales Agreement. This agreement authorizes the AEA to enter into any contracts necessary to perform operating or maintenance-type services to the Project, subject to the approval of the BPMC. Bradley Lake Dispatch Agreement, August 1996 - AEA entered into an agreement with Chugach Electric Association to provide all services necessary to dispatch the Project’s electric power output. Static Var Compensation System Agreement, August 1996 - AEA entered into an agreement with Chugach Electric Association to operate and maintain the Static Var Compensation System facilities at the Soldotna Substation and Daves Creek facility. Operation and Maintenance Agreement, June 1999 - The Operation and Maintenance Agreement for the Project was originally executed between HEA and the AEA in February 1994 and amended in 1996 and 1999, The agreement provides for the operation and maintenance of the Project by the HEA. HEA is to be reimbursed for costs associated with the operation, maintenance and repair of the Project as determined in advance through the submission of an annual budget based upon estimates and anticipated operation and maintenance costs. In August 1996, the agreement was __________amended to separate the operation and maintenance of the electric transmission line facilities from the Project. In June 1999, the agreement was again amended to require the HEA to provide communication services in addition to the other services. Objective and Scope. The objective of this audit was to determine whether the charges during fiscal year 2007 for the operation and maintenance of the Project by HEA were in compliance with the applicable agreements. Our review included a review of charges made by HEA from July 1, 2006, to June 30, 2007. -2o0f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 The audit was conducted in accordance with generally accepted government auditing standards, except for the requirement of an external quality control review, and accordingly, included tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. The audit was performed during the period of November through December 2007. The audit was requested by the Administration. Overall Evaluation. Generally, the operation and maintenance expenditures made by HEA in fiscal year 2007 to the Project were in compliance with the applicable agreements. However, our review of selected Project operation and maintenance expenditures revealed over $30,000 in questionable expenditures. Also, HEA did not always segregate Project expenditures, and HEA staff did not code helicopter usage to the correct budget account. FINDINGS AND RECOMMENDATIONS Ee Questionable Expenditures. a. Finding. Our review of judgmentally selected Project expenditures revealed over $30,000 of questionable operation and maintenance expenditures. Some examples of questionable expenditures are. found below. ______________ Training - The entire cost for “Tower Training” was charged to the Project. However, the two HEA employees who received the training were not full-time Project employees. In addition, HEA management stated that HEA also owns towers in addition to the Project’s towers. Telecommunications - From July 2006 to February 2007, the Project was charged for Dish Network service in Haines, Alaska. -3o0f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Legal Fees - Legal fees were charged to the Project for the renewal of the Operation and Maintenance Bradley Lake Agreement. The attorney was not representing the Project, but was representing HEA. Air Transportation - Charges for seventeen airplane flights appeared questionable. Many of these flights appeared to be for family members. These airplane flights were made for transporting individuals to the Project who were not HEA employees, and none of the seventeen flights had a Project employee as a passenger. Vehicle Usage Charges -Vehicle charges to the Project appeared questionable. According to time records, in most months for each work hour supervisors charged to the Project, they also charged one hour of vehicle usage. However, in some months, each work hour charged to the Project did not match vehicle hours charged to the Project. For example, from July 2006 to December 2006, one supervisor had 295 vehicle hours and 295 work hours charged to the Project. However, from January 2007 to June 2007, this same supervisor had only 48 vehicle hours and 242 work hours charged to the Project. In another case, from July 2006 to June 2007, another supervisor had 887 vehicle hours and 887 work hours charged to the Project. Miscellaneous Charges - Our review identified other miscellaneous charges that ___appeared to be questionable. These charges included items such as a get well card, various meals, a dish network subscription, a transcription machine, software support, standby charges for a helicopter, and expenditures lacking supporting documentation. Recommendation. ML&P should bring the questioned costs to the BPMC for evaluation. -40f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 ys cs Management Comments. Management stated, “ML&P sent the draft audit report to AEA and HEA for their review and response. Finance staff from AEA and HEA did respond to this audit report. This audit report along with the combined response from AEA and HEA will be given to the BPMC along with the Budget and Finance Subcommittee of the BPMC this year.” d. Evaluation of Management Comments. Management comments were responsive to the audit finding and recommendation. Air Transportation Costs Not Always Segregated. a. Finding. HEA did not always segregate Project expenditures for air transportation costs between operation and maintenance and capital projects. Since October 2006, HEA discontinued segregating air transportation expenditures between operation and maintenance and the capital projects and started to bill all air transportation expenditures as operation and maintenance expenditures. As a result, operation and maintenance expenses for air transportation may be misleading. b. Recommendation. ML&P should request AEA to require HEA to segregate the expenditures between Project operation and maintenance and capital projects, and ______bill AEA accordingly. cS Management Comments. Management stated, “ML&P agrees with the response from AEA and HEA that HEA scgregates costs for air transportation to capital projects when there is a clear distinction in the purpose of the flight. It appears that flights for the large capital projects were charged to those projects. Some flights carrying both workers and materials can be for both operations and maintenance and capital projects and the effort to spread those costs (based on weight, size, value or -5of7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 some other factor) does not appear to be worth the effort since it doesn’t change the amount the Utilities pay.” Evaluation of Management Comments. Management comments were responsive to the audit finding and recommendation. as Correct Budget Account Not Used. Finding. HEA staff did not code $20,303 of helicopter usage to the correct budget account. The helicopter, used for snow surveys, was coded to account 539.42, Helicopter Transportation for Hydraulic Power Generation Operations. According to AEA staff, the helicopter usage should have been coded to account 556.02, Snow Measurement. Recommendation. ML&P should request that AEA review all invoices more closely to ensure the correct budget account is used. Management Comments. Management stated, “ML&P did request that AEA review all invoices more closely to ensure the correct account is used. During this discussion AEA finance staff was requested to use the proper FERC account regardless of where the activity was budgeted. They confirmed they would do as _ requested.” Evaluation of Management Comments. Management comments were responsive to the audit finding and recommendation. -60f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Discussion With Responsible Officials. The results of this audit were discussed with appropriate Municipal officials. Audit Staff: Scott Lee Michael Chadwick, CICA -7o0f7- March 25, 2008 RE: Response to draft findings of internal audit report on the Bradley Lake Hydroelectric Project (Project). ; Below are the audit findings in the above referenced report with the Alaska Energy Authority's (AEA) and Homer Electric Association's (HEA) responses to the findings. 1. Questionable Expenditures a. Finding. Our review identified $34,113 of questionable operation and maintenance expenditures. See Appendix A for a detailed schedule of questionable purchases. Some examples of questionable expenditures are found below. b. Recommendation. ML&P should request that AEA review all invoices more closely to ensure all expenditures charged to the Project are Project-related expenditures. c. Management Comments. AEA Response AEA does review invoices closely as evidenced by the very few questioned costs. The following explanations from HEA and AEA discuss why “questionable expenditures” were properly charged to the Project, presented in the order of Appendix A, “Summary of Questionable Operation and Maintenance Expenditures By Homer Electric Association”. The parenthetical information is the billing date and FERC coding. Get-well Card, Good-bye Card -$4.88 (Oct 06 O&M-545.61 HEA Response: Itis an accepted practice at HEA to allow expenditures for personne! recognition at the discretion of the Supervisor and/or Department Manager. Administrative Assistance Appreciation-Captain Patties Fish House -$64.38 (Jun 07 O&M- 535.21) HEA Response Itis an accepted practice at HEA to allow expenditures for personnel recognition at the discretion of the Supervisor and/or Department Manager. ~Dish Network Subscription @Bradley Lake $71.49 (Mar 07 O&M-539.50)—$§£._———$$$ HEA Response “Bradley Work Rules” require that the Project fund satellite TV in the Bunk House. See attached Generation Bargaining Agreement, Article XIII, Section 13.3 A. Expenditures Submitted Without Supporting Back-up $169.11 6.63 544.42 O&M-OCTO6 Bumper sticker for mapcon 56.10 556.61 O&M-JULO6 credit card charge Jul, 2006 65.50 544.61 O&M-FEB 07 credit card charge Feb, 2007 40.88 539.5 O&M-FEBO7 vendor is Buckets Sports Grill 169.11 HEA Response The documentation is attached for the above expenditures. The petty cash voucher, signed by the buyer for $6.63, is deemed sufficient documentation for small, petty cash purchases if a receipt is not available. FERC code for the $40.88 expenditure should have been 535.21 Transcription Machine Purchased from eBay $170.40 (May 07 O&M-539.62) HEA Response The transcription recorder used exclusively for Project O&D meetings failed. A similar machine was found on EBAY and was purchased. It is in use at each O&D meeting held monthly. AEA Response The cost is below the capital cost threshold. The classification of capital vs. operating does not impact how much the utilities pay. Meals for “Tait Training”: April 2007 $207.80 (May 07 O&M-538.42) HEA Response Tait Training provided operators and technicians training to operate and maintain the radio system at the Project. HEA paid $15,000 to bring a special trainer to Alaska to do the training that benefitted both HEA and the Project. HEA only charged the Project for cost of the instructor's and a few employees meals. Meals are a labor contract requirement when employees are in training. Load Forecastin ftware Support from “The MathWorks” $324.00 (Apr 07 O&M — 556.61 HEA Response _ This is support for the software purchased for the governor capital project. AEA Response . The cost is below the capital cost threshold. The classification of capital vs. operating does not impact how much the utilities pay. Legal Consulting Fee for VA Tech Dispute (a Capital Project) $495.00 (Various 07 O&M- 539.52) AEA Response The cost is below the capital cost threshold. The classification of capital vs. operating does not impact how much the utilities pay. Dish Network Subscription at Haines, AK: July 2006 - February 2007 2. ious 07 O&M-539.62) HEA Response Bradley Work Rules require that the Project fund satellite TV in the Bunk House See attached Generation Bargaining Agreement, Article XIII, Section 13.3 A. HEA did not pay for a subscription in Haines. The above costs were appropriate to the Project. The vendor had an error in the indicative data for service location on their invoices. HEA's purchasing agent noticed this error and asked them to change the service address. It was changed as of their December 2006 Statement, which was in the January O&M billing. 4,025 Bolts, Nuts, and Washers in Various Sizes $1,427.77 (Mar & Apr 07 O&M-545.61) HEA Response In anticipation of the number of special construction projects on the horizon, one of the Project operators was assigned to inventory and to make sure there was a full supply of fasteners at the Project site. Specifically the runner replacement project was of great concern. 2,000 Danger Tags, Lockout/Tagout $1,444.03 (Dec 06 O&M-538.61) HEA Response These tags are required for any work on the machinery and were re-supplied in anticipation of the number of special construction projects on the horizon. Specifically the runner replacement project was of great concern. There is now a good supply of tags at the Project site. Flight Costs for Individuals Other Than HEA Employees $2,252.50 (Various 07 O&M-539.43) HEA Response The audit questioned 17 one way flights of $132.50 per flight. We investigated the flights to insure that the primary reason for the flights was to bring required freight to the Project site. In times of critical need of parts, flights may be required to and from the Project site. The cost of the flights is a flat fee. Non-employees are allowed on these flights on a “space available” basis because there is no increase to cost of the flights. Project operators typically log the passengers and not the freight on the Project Log or the flight manifest. HEA has implemented a procedure to always log the freight and purpose of the flights toinsure better: documentation of the primary-purpose-for-flights.—— — ‘ Standby Charge for Helicopter, 8.1 hours@$300.00/hour $2,430.00 (Aug 06 O&M-539.42 HEA Response This was for the annual snow survey performed by the US Dept of Agriculture hydrologist. When the snow survey equipment is inspected and repaired there Is typically standby time for the helicopter. The survey requires the hydrologist to inspect and repair equipment at several sites in a remote, mountain area. Itis more efficient and safer for helicopter stand-by at each site versus flying back and forth from Homer after drop-offs and pick-ups. Tower Training: May 2007 $2,460.28 (May & Jun O&M-Acct. 538.42 HEA Response HEA wished to have employees trained (per legal requirements) to climb the tower at the Project to reduce reliance on more expensive contract work force to do work involving tower climbing for the 2007 Fiber capital project. This training only benefited the Project, because under HEA union contracts, HEA employees can only do tower work at the Project. They cannot do work on the other towers on HEA's system (not owned by HEA). Maintenance Software Support from MAPCON Technologies Incorporated -$3,940.00 ay 07 O&M- 544.42 HEA Response MAPCON is only used at the Project. It is maintenance management software used to track equipment, preventive maintenance activities and inventory. AEA Response Software maintenance is not a capital cost. Even if it were, the classification of capital vs. operating does not impact how much the utilities pay. Legal Consulting for Renewal of Bradley Lake Project Operation and Maintenance Agreement $8,456.35 (Various 07 O&M-539.52 AEA Response The BPMC directed AEA and HEA to renegotiate the operating agreement. This process requires attorneys to represent interests of AEA, HEA, and BPMC. Cost of AEA’s attorney is covered under the administrative fee paid annually to AEA. Any cost of BPMC attorney is covered in the operating budget under BPMC costs. HEA is reimbursed It's attorney fees as a project operating cost. HEA operates the Project on a reimbursement basis with no profit margin and therefore HEA would bear a loss by not being reimbursed for this cost incurred at the direction of the BPMC. Vehicle Usage Charges $9,661.78 (Various 07 O&M) HEA Response Vehicle hourly rates are calculated at the beginning of each calendar year, based on prior year __expenses. When an employee has a vehicle assigned to them, (i.e. no one else can use the vehicle) the number of vehicle use hours are charged to the Project based on their labor hours charged to the Project, not on number of hours the vehicle is actually driven. When employees use an unassigned vehicle for Project related work, the hours are charged based on actual use. The methodology for allocating cost is based on the guidance provided by RUS Bulletin 1767B-2, Section 6.2.2.1. HEA applies the same methodology to allocate costs on all vehicle hours, including costs billed to the Project. The methodology has been audited and accepted by the State of Alaska's Department of Transportation for vehicle costs billed to their projects. The two HEA supervisors mentioned in the audit finding have vehicles assigned to them and so the hourly charge is based on their labor hours charged to the Project. 2. Living Quarter Guidelines Not Found. a. Finding. We were unable to locate the “Bradley Work Rules.” As a result, we were unable to adequately determine if Project living quarters were being properly used. According to the contract, these work rules establish the use of the living quarters. Section 12.a of the Operation and Maintenance Agreement states, “Use of living quarters is established by the Bradley Work Rules. Modification of the Work Rules requires the approval of the Authority and the BPMC.” b. Recommendation. ML&P should attempt to locate a copy of the Bradley Work Rules specified in the Operation and Maintenance Agreement. c. Management Comments. HEA Response: See attached Generation Bargaining Agreement between HEA and IBEW, Section 13.3. The agreement incorporates the State of Alaska’s Bradley Lake Work Rules to workers covered under the agreement. 3. Air Transportation Costs Not Always Segregated. a. Finding. HEA did not always segregate Project expenditures for air transportation costs between operation and maintenance and capital projects. Since October 2006, HEA discontinued segregating air transportation expenditures between operation and maintenance and the capital projects and started to bill all air transportation expenditures as operation and maintenance expenditures. As a result, operation and maintenance expenses for air transportation may be misleading. b. Recommendation. ML&P should request AEA to require HEA to segregate the expenditures between Project operation and maintenance and capital projects, and bill AEA accordingly. HEA Response HEA segregates costs for air transportation to capital projects when there is a clear distinction in purpose of the flight. When the governor project and replacement relay project where in full swing, there were some flights that were for the purpose of flying contractors and/or. freight to the Project for these capital projects and they were charged accordingly. = \ ie : HEA endeavors to utilize each flight in the most efficient manner, and so many times flights are for more than one purpose. In these cases the flights are charged to the O&M account 539.43 as it would be very difficult to split the cost of a flight between O&M & Capital proportionally based on what or who is being flown to and from the Project. AEA Response Since flights have mixed purpose, AEA deems the costs meet the definition of FERC 539, “not readily assignable to other hydraulic generation operation expense accounts” and so properly coded to 539.43. Classification of costs as capital vs. operating does not change the amount the utilities pay. 4. Correct Budget Account Not Used. a. Finding. HEA staff did not code $20,303 of helicopter usage to the correct budget account. The helicopter, used for snow surveys, was coded to account 539.42, Helicopter Transportation for Hydraulic Power Generation Operations. According to AEA staff, the helicopter usage should have been coded to account 556.02, Snow Measurement. Improper coding distorts the budget. b. Recommendation. ML&P should request that AEA review all invoices more closely to ensure the correct budget account is used. c. Management Comments. AEA Response There must have been miscommunications between the auditors and AEA staff. AEA staff thought they explained that helicopter charges were correctly coded to 539.42. Budget line item 556.2 for snow measurement is only the cost paid directly to USDA for the surveys. Helicopter service provided by HEA to the contractor to do the work is budgeted for within 539.42. Based on how these costs are budgeted it would distort the budget to code transportation costs to 556.02. AEA does review invoices closely for correct coding and will continue to do so. i ALASKA Alt oN /= ENERGY AUTHORITY Alaska Industrial Development Wr A Export Authority BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE REGULAR MEETING AGENDA Wednesday, May 14, 2008 — 10:00 a.m. (via electronic media at the Chugach Electric Association Board Room 5601 Minnesota Drive) 1. CALL TO ORDER Evans 2. ROLL CALL (for Committee members) a. PUBLIC ROLL CALL (for all others present) 4. PUBLIC COMMENT ef AGENDA COMMENTS 6. APPROVAL OF MEETING MINUTES March 11, 2008 ils NEW BUSINESS A. O&M Agreement B. Auditor Selection Cc. Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project MacMillan 8. COMMITTEE REPORTS / COMMENTS A. Operators Report B. Next Meeting Date Evans 9. ADJOURNMENT 813 West Northern Lights Boulevard * Anchorage, Alaska 99503-2495 www.aidea.org * 907/771-3000 * FAX 907/771-3044 ® Toll Free (Alaska Only) 888/300-8534 * www.akenergyauthority.org Item 6 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES (via teleconference in the AIDEA/AEA Board Room) Anchorage, Alaska Tuesday, March 11, 2008 — 10:00 a.m. i CALL TO ORDER Chair Evans called the regular meeting of the Br: lectric Project Management Committee to order at 10:00 a.m. on Tuesd the AIDEA/AEA Board Room, Anchorage, Alaska, to conduct the bi he agenda and public notice. 2. ROLL CALL Tim Barnum City of Sewa Bryan Carey 3. PUBLIC ROLL CALL Shauna Howell, AEA Christa Caldwell, AEA Kirk Gibson, BPMC Charlie O’Hare, HEA Don Zoerb, MEA Page 1 of 6 Rick Baldwin, HEA Linda MacMillan, AEA Rick Miller, AML&P Henri Dale, GVEA Doug Hall, AML&P Bob Price, AML&P Bob Day, HEA Mike Cunningham, CEA 4. PUBLIC COMMENT There were no public comments. 5. AGENDA COMMENTS There were no agenda comments. 1% 6. | APPROVAL OF MEETING MINUTES - February 4, 2008 MOTION: Mr. Posey moved to approve the minutes of the February 4, 2008 meeting. Seconded by Mr. Newton. Mr. Carmony noted two comments: In item 7B, line 4, add ..and they verbally concurred..., and in line 6, replace the word form to request. The meeting minutes were‘unanimously approved as amended. Te NEW BUSINESS) decreases i, the budget. The bottomline being FY09 utility contributions would amount to $16,881,542: Ms. MacMillan noted that they took out $100,000 for contingencies. The bond agreement requires that there is a certain percentage of the estimated operating budget sitting in an operating reserve should there be a cash flow problem. Since the operating budget didn’t go up, the same level of, increasing the operating reserve this year that we did last year isn’t necessary. The debt service — the principal has gone down by $900 for next year. The biggest increase has to do with the renewal and contingency fund. That is a fund within the bond agreement that is supposed to be funded up to at least $5M, but then is a borrowing account for the utilities for large repairs. It has been used in the past heavily for runners and governor projects. The amount to repay is increasing this year, and in addition, the other portion of that increase has to do with interest in the fund. Other increases in the budget include studies for long range maintenance of structures/buildings, and this year is for a one-time tunnel draining and cleaning inspection. There is an increase cost for Schedule-A capital for vehicles or equipment as needed at the plant. Arbitrage has also been going up — that is a projected increase in how much we will be paying arbitrage, which is a payment to the IRS when the rate Page 2 of 6 of the bonds is better than it should be than the amount of interest we're paying on the bond funds. Mr. Carmony asked about an increase of 58%. Mr. O'Hare stated that in 2007 they didn’t have the manpower to take care of all the projects they had budgeted for and a lot of the O&M didn’t get done because the correct staffing wasn’t in place to take care of the things that were budgeted. The 2009 budget has risen a bit higher than expected partly because some of the | studies proposed by the O&D committee have been shed and possibly splitting a couple of the dupidlis to mt yadditional manpower. The difference between 2007 and 2009 is that, maintenance didn't ‘get done that should have because of the lack of personnel. ih am, .. ; Mr. O'Hare will prepare a write-up the difference in costs and will disburse to the;committee. MOTION: Mr. Newton moved to accept the budget, seconded by Mr. Posey. Mr. Carmony noted his objection to the $25,000 in the legal budget. A roll call vote was taken with City of Seward, CEA, HEA, _ GVEA, AML&P- ~ AEA ing yes, | and MEA voting against, as based on the above Oted objection. » ; 7B. O&M Agreement, = Mr. Carey_sta > that Se agreements i in mo not a final-draft form as of now. AEA has a ves, not been briefed on the draft O&M agreement. He expects at the current O&M agreement is one that has been renewed on an annual joing forward and creating a longer term agreement. Mr. Gibson add edt basis and we are no! Mr. Carmony asked if aMeorcement has been drafted and not released for review? Mr. Carey responded that it has not been released to all of the utilities due to AEA just receiving a new Executive Director who has not yet been briefed. Chair Evans asked that the reason it is being re-drafted is because there is a proposal on the table that we’re going to go to a multi-year O&M agreement instead of a single year and are trying to conform that agreement to a multi-year? Page 3 of 6 Mr. Carey responded that the original agreement was done back in the 90s and needs to be revised and modernized. He expects that a draft will go out shortly after the new Executive Director of AEA approves it and then it will be sent out in draft form for all the utilities to comment. The editing and proposed changes are being done by AEA and HEA. The other utilities are not involved in the discussions at this point. Mr. Carmony asked if Mr. Gibson or AterWynne has in any way shared any part of that proposed agreement with anyone at GVEA. Mr. Gibson replied that he has asked questions with GVEA for clarification or other issues. Mr. Janorschke asked Mr. Baldwin to add clarification. It i isi M Manorschke’ 's understanding that the state wanted some changes that would have impacted HEA as the operator, and has a hang up - until HEA and the state resolve that issue as the contractor for the state's assets, and after those issues were resolved then it was understanding at that ypoint then the draft O&M agreement would go to all the participants. Uni | HEA and the state Maine point of contention € Mr. Baldwin added that the O&M agreement is bet ween ‘AEA and HEA subject to BPMC approval. The efficient way to do it is to have | the two parties who are members of the contract put together the contract and then submit it to the»BPMC for review and ratification. i “a s t Rncine > not this process has been } he just stepped into the BPMC and it would be i improper to commen on it. Mr. Carmony ask ke for a complete account of all the information that has been shared with GVEA — when it was shared, and who it was shared with. Mr. Carmony sguilies lke tol now if GVEA has made any request for information to Mr. Gibson. Chair State hat w with the issuance of the draft - information would all be forthcoming with s to what the discussions might have been. Mr. Posey asked what was the review anid. when will the other members be receiving that? Mr. Carey responded hopefully this month. } upon the conduct of N r 1 attorney from HEA. fe ‘believes that accurately represented what was supposed to have occurred and he believes ‘that AterWynne has acted improperly and would like an opinion on that. Chair Evans asked that Mr. Carmony’s request be moved to agenda item 8A -- under Old Business -- Legal Representation for discussion. Mr. Carmony stated he would not like it moved. The complaint you are going to take up is with regards to a long standing objection MEA has had through AterWynne’s representation, but the complaint he just lodged is very specific to a specific issue. Page 4 of 6 Chair Evans stated he does not see that it is not part of MEA’s legal representation matter that is on the agenda later. The Chair's response is that he will defer that to that discussion and MEA can add it to its list of grievances under legal representation under item 8A. 7C. Auditor Selection Mr. Cunningham stated that the finance committee sent out requests for proposal for audit services and three responses were received and have been distributed to the rest of the committee. Deliberations and evaluations of the responses will be taking place and in a month will come to the PMC with a recommendation to retain an auditor 8. OLD BUSINESS 8A. Legal Representation Mr. Gibson stated that based on the discussio ting, he spoke with the ethics council regarding MEA’s wish to use “Dé r Boggs to do the discussions with AterWynne. Mr. Mayberry and )Mr. . Blackhurst of AterWynne spoke on February 12" and there was email cérrespondence between them with doc ents attached. That goes back to a letter from Ron Saxton | to the group ¢ August 14, 1989) as representing he would be the attorney for the group, that | ho rep resentation thatis adverse to the group would be undertaken by AterWynne,., but that the gore" ion of the group does not preclude Mr. Saxton or the firm ranffePreBetro adverse to an” ndividual member of the group and was signed by the BPM C. They went,on to makes the by-laws. as to how consultants would be collected. Mr. Mayberrysresponded within three hours that he would let AterWynne know if he had any questions and ‘AterWynne,, has heard nothing since from him. It is Mr. Gibson’s recommendation to more forward with the ~~ Ragin of the Bar. % Mr. proceeding ‘a a bh. from other affected parties. “Therefore, MEA intends to seek a formal opinion also. MEA intends to seek whatever other remedies they can find to get out from under what they see as an improper representation due to the conflict of interest between AterWynne and MEA. Mr. Carmony made the comment that the specific circumstances that were previously discussed today — these are circumstances that did not come to light until today and he believes that they are relevant to this issue and MEA will be proceeding with the inclusion with these circumstances with whatever remedies we can find to attempt to relieve this situation. 9. COMMITTEE REPORTS / COMMENTS 9A. Operator’s Report Page 5 of 6 Mr. Day reported that the lake level stayed relatively flat throughout the year and has been well managed by CEA as they brought them back into their normal range in February/March. In February the project developed 28,260 megawatt hours and used 29,412 acre feet of water, equating into a 30% load factor, which is a good, normal operation out of Bradley Lake. There were 23 flights for crew change. The plant is running very well and we are getting a number of maintenance items completed. Mr. Day also reported that 2007 was not an indicative year, as HEA was going through difficulties with staffing. It’s part of getting Bradley Lake back to where it needs to be to be managed properly. Mr. O’Hare seconded that 2007 was no indicative year, as that was the year of the governor project and normal time was spent o roject and they weren't allowed to do the normal maintenance. We had the staff w that project rather than normal operations and maintenance at the plant. 9B. Next Meeting Date The next meeting will be May 7, 2008 at 10:00 a. 10. ADJOURNMENT Meeting adjourned at 10:55 a.m. ska Energy Authority, Secretary Page 6 of 6 Item 7B MOTION: Move that the Bradley Lake Project Management Committee retain Swalling and Associates P.C. as the project independent auditor for the year(s) ended June 30, 2008 through June 30, 2010, with an option to extend the engagement for two additional years. Move: Second: Item 7C April 22, 2008 Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power Introduction. According to information provided by the Alaska Energy Authority (AEA), the Bradley Lake Hydroelectric Project (Project) is located in South Central Alaska at the southern end of the Kenai Peninsula. The Project includes a 610-foot long, 125-foot high, concrete-faced, rock- filled gravity dam, and a 3.5-mile long power tunnel. The 126-megawatt Project transmits its power to the State’s main power grid via two parallel 20-mile transmission lines. The Project, which cost approximately $328 million (including reserve fund balances), went into commercial operation in 1991. Homer Electric Association (HEA) under contract with AEA now operates the Project. The Project serves Alaska’s Railbelt from Homer to Fairbanks as well as the Delta Junction area. According to data provided by AEA, in fiscal year 2007, about $1.4 million was paid to HEA for Project operation and maintenance expenditures. AEA has entered into several agreements to provide for the operation and maintenance of the Project: The Power Sales Agreement, December 1987 - The Power Sales Agreement established the Bradley Lake Project Management Committee (BPMC). One of BPMC’s purposes is to arrange for the operation and maintenance of the Project and the scheduling, production and dispatch of power. In addition, the BPMC is responsible for budgeting annual Project costs and calculating each party’s required contribution to fund annual Project costs. BPMC members include the AEA and the five purchasers under the Power Sales Agreement: Chugach Electric Association, Golden Valley Electric Association, the Municipality of Anchorage (Municipal Light and Power [ML&P]), the City of Seward (Seward Electric System), and the Alaska Electric Generation & Transmission Cooperative. Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Master Maintenance and Operating Agreement, May 1994 - The Master Maintenance and Operating agreement with the BPMC established contract administration and budgeting procedures for Project maintenance and operation contracts. It also provides for the lease or other use of facilities and equipment in a manner consistent with the requirements of the Power Sales Agreement. This agreement authorizes the AEA to enter into any contracts necessary to perform operating or maintenance-type services to the Project, subject to the approval of the BPMC. Bradley Lake Dispatch Agreement, August 1996 - AEA entered into an agreement with Chugach Electric Association to provide all services necessary to dispatch the Project’s electric power output. Static Var Compensation System Agreement, August 1996 - AEA entered into an agreement with Chugach Electric Association to operate and maintain the Static Var Compensation System facilities at the Soldotna Substation and Daves Creek facility. Operation and Maintenance Agreement, June 1999 - The Operation and Maintenance Agreement for the Project was originally executed between HEA and the AEA in February 1994 and amended in 1996 and 1999. The agreement provides for the operation and maintenance of the Project by the HEA. HEA is to be reimbursed for costs associated with the operation, maintenance and repair of the Project as determined in advance through the submission of an annual budget based upon estimates and anticipated operation and maintenance costs. In August 1996, the agreement was amended to separate the operation and maintenance of the electric transmission line facilities from the Project. In June 1999, the agreement was again amended to require the HEA to provide communication services in addition to the other services. Objective and Scope. The objective of this audit was to determine whether the charges during fiscal year 2007 for the operation and maintenance of the Project by HEA were in compliance with the applicable agreements. Our review included a review of charges made by HEA from July 1, 2006, to June 30, 2007. -2o0f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 The audit was conducted in accordance with generally accepted government auditing standards, except for the requirement of an external quality control review, and accordingly, included tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. The audit was performed during the period of November through December 2007. The audit was requested by the Administration. Overall Evaluation. Generally, the operation and maintenance expenditures made by HEA in fiscal year 2007 to the Project were in compliance with the applicable agreements. However, our review of selected Project operation and maintenance expenditures revealed over $30,000 in questionable expenditures. Also, HEA did not always segregate Project expenditures, and HEA staff did not code helicopter usage to the correct budget account. FINDINGS AND RECOMMENDATIONS A Questionable Expenditures. a. Finding. Our review of judgmentally selected Project expenditures revealed over $30,000 of questionable operation and maintenance expenditures. Some examples of questionable expenditures are found below. Training - The entire cost for “Tower Training” was charged to the Project. However, the two HEA employees who received the training were not full-time Project employees. In addition, HEA management stated that HEA also owns towers in addition to the Project’s towers. Telecommunications - From July 2006 to February 2007, the Project was charged for Dish Network service in Haines, Alaska. -30f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Legal Fees - Legal fees were charged to the Project for the renewal of the Operation and Maintenance Bradley Lake Agreement. The attorney was not representing the Project, but was representing HEA. Air Transportation - Charges for seventeen airplane flights appeared questionable. Many of these flights appeared to be for family members. These airplane flights were made for transporting individuals to the Project who were not HEA employees, and none of the seventeen flights had a Project employee as a passenger. Vehicle Usage Charges -Vehicle charges to the Project appeared questionable. According to time records, in most months for each work hour supervisors charged to the Project, they also charged one hour of vehicle usage. However, in some months, each work hour charged to the Project did not match vehicle hours charged to the Project. For example, from July 2006 to December 2006, one supervisor had 295 vehicle hours and 295 work hours charged to the Project. However, from January 2007 to June 2007, this same supervisor had only 48 vehicle hours and 242 work hours charged to the Project. In another case, from July 2006 to June 2007, another supervisor had 887 vehicle hours and 887 work hours charged to the Project. Miscellaneous Charges - Our review identified other miscellaneous charges that appeared to be questionable. These charges included items such as a get well card, various meals, a dish network subscription, a transcription machine, software support, standby charges for a helicopter, and expenditures lacking supporting documentation. Recommendation. ML&P should bring the questioned costs to the BPMC for evaluation. -40f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Management Comments. Management stated, “ML&P sent the draft audit report to AEA and HEA for their review and response. Finance staff from AEA and HEA did respond to this audit report. This audit report along with the combined response from AEA and HEA will be given to the BPMC along with the Budget and Finance Subcommittee of the BPMC this year.” Evaluation of Management Comments. Management comments were responsive to the audit finding and recommendation. 2. Air Transportation Costs Not Always Segregated. Finding. HEA did not always segregate Project expenditures for air transportation costs between operation and maintenance and capital projects. Since October 2006, HEA discontinued segregating air transportation expenditures between operation and maintenance and the capital projects and started to bill all air transportation expenditures as operation and maintenance expenditures. As a result, operation and maintenance expenses for air transportation may be misleading. Recommendation. ML&P should request AEA to require HEA to segregate the expenditures between Project operation and maintenance and capital projects, and bill AEA accordingly. Management Comments. Management stated, “ML&P agrees with the response from AEA and HEA that HEA scgregates costs for air transportation to capital projects when there is a clear distinction in the purpose of the flight. It appears that flights for the large capital projects were charged to those projects. Some flights carrying both workers and materials can be for both operations and maintenance and capital projects and the effort to spread those costs (based on weight, size, value or -Sof7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 some other factor) does not appear to be worth the effort since it doesn’t change the amount the Utilities pay.” Evaluation of Management Comments. Management comments were responsive to the audit finding and recommendation. cH Correct Budget Account Not Used, Finding. HEA staff did not code $20,303 of helicopter usage to the correct budget account. The helicopter, used for snow surveys, was coded to account 539.42, Helicopter Transportation for Hydraulic Power Generation Operations. According to AEA staff, the helicopter usage should have been coded to account 556.02, Snow Measurement. Recommendation. ML&P should request that AEA review all invoices more closely to ensure the correct budget account is used. Management Comments. Management stated, “ML&P did request that AEA review all invoices more closely to ensure the correct account is used. During this discussion AEA finance staff was requested to use the proper FERC account regardless of where the activity was budgeted. They confirmed they would do as requested.” Evaluation of Management Comments. Management comments were responsive to the audit finding and recommendation. -60f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Discussion With Responsible Officials. The results of this audit were discussed with appropriate Municipal officials. Audit Staff: Scott Lee Michael Chadwick, CICA -7of7- March 25, 2008 RE: Response to draft findings of Internal audit report on the Bradley Lake Hydroelectric Project (Project). Below are the audit findings in the above referenced report with the Alaska Energy Authority's (AEA) and Homer Electric Association's (HEA) responses to the findings. 1. Questionable Expenditures a. Finding. Our review identified $34,113 of questionable operation and maintenance expenditures. See Appendix A for a detailed schedule of questionable purchases. Some examples of questionable expenditures are found below. b. Recommendation. ML&P should request that AEA review all invoices more closely to ensure all expenditures charged to the Project are Project-related expenditures. c. Management Comments. AEA Response AEA does review invoices closely as evidenced by the very few questioned costs. The following explanations from HEA and AEA discuss why “questionable expenditures” were properly charged to the Project, presented in the order of Appendix A, “Summary of Questionable Operation and Maintenance Expenditures By Homer Electric Association”. The parenthetical information is the billing date and FERC coding. Get-well Card, Good-bye Card -$4.88 (Oct 0 M-545.61 HEA Response: Itis an accepted practice at HEA to allow expenditures for personnel recognition at the discretion of the Supervisor and/or Department Manager. Administrative Assistance reciation-Captain Patties Fish House -$64.38 (Jun 07 O&M- 535.21) HEA Response It is an accepted practice at HEA to allow expenditures for personne! recognition at the discretion of the Supervisor and/or Department Manager. Dish Network Subscription @Bradley Lake $71.49 (Mar 07 O&M-539.50) HEA Response “Bradley Work Rules” require that the Project fund satellite TV in the Bunk House. See attached Generation Bargaining Agreement, Article XIII, Section 13.3 A. Expenditures Submitted Without Supporting Back- 41 6.63 544.42 O&M-OCTO6 Bumper sticker for mapcon 56.10 556.61 O&M-JULO6 credit card charge Jul, 2006 65.50 544.61 O&M-FEBO7 credit card charge Feb, 2007 40.88 539.5 O&M-FEBO7 vendor is Buckets Sports Grill 169.11 HEA Response The documentation is attached for the above expenditures. The petty cash voucher, signed by the buyer for $6.63, is deemed sufficient documentation for small, petty cash purchases If a receipt is not available. FERC code for the $40.88 expenditure should have been 535.21 Transcription Machine Purchased from eBay $170.40 (May 07 O&M-539.62) HEA Response The transcription recorder used exclusively for Project O&D meetings failed. A similar machine was found on EBAY and was purchased. It is in use at each O&D meeting held monthly. AEA Response The cost is below the capital cost threshold. The classification of capital vs. operating does not impact how much the ulilities pay. Meals for “Tait Training”: April 2007 $207.80 (May 07 O&M-538.42) HEA Response Tait Training provided operators and technicians training to operate and maintain the radio system at the Project. HEA paid $15,000 to bring a special trainer to Alaska to do the training that benefitted both HEA and the Project. HEA only charged the Project for cost of the instructor’s and a few employees meals, Meals are a labor contract requirement when employees are in training. Load F. astin ftware Support from “The MathWorks” $324.00 (Apr 07 O&M — 556.61 HEA Response This is support for the software purchased for the governor capital project. AEA Response The cost is below the capital cost threshold. The classification of capital vs. operating does not impact how much the utilities pay. Legal Consulting Fee for VA Tech Dispute (a Capital Project) $495.00 (Various 07 O&M- 539.52) AEA Response The cost is below the capital cost threshold. The classification of capital vs. operating does not impact how much the utilities pay. Dish Network Subscription at Haines, AK: July 2006 - February 2! ious 07 O&M-539.62) HEA Response Bradley Work Rules require that the Project fund satellite TV in the Bunk House See attached Generation Bargaining Agreement, Article XIII, Section 13.3 A. HEA did not pay for a subscription in Haines. The above costs were appropriate to the Project. The vendor had an error in the indicative data for service location on their invoices, HEA’s purchasing agent noticed this error and asked them to change the service address. It was changed as of their December 2006 Statement, which was in the January O&M billing. 4,025 Bolts, N and Washers ariou 1,427.77 (Mar & Apr 07 O&M-545.61 HEA Response In anticipation of the number of special construction projects on the horizon, one of the Project operators was assigned to inventory and to make sure there was a full supply of fasteners at the Project site. Specifically the runner replacement project was of great concern. 2,000 Danger Tags, Lockout/Tagout $1,444.03 (Dec 06 O&M-538.61) HEA Response These tags are required for any work on the machinery and were re-supplied in anticipation of the number of special construction projects on the horizon. Specifically the runner replacement project was of great concern. There is now a good supply of tags at the Project site. Flight Costs for Individuals Other Than HEA Employees $2,252.50 (Various 07 O&M-539.43) HEA Response The audit questioned 17 one way flights of $132.50 per flight. We investigated the flights to insure that the primary reason for the flights was to bring required freight to the Project site. In times of critical need of parts, flights may be required to and from the Project site. The cost of the flights is a flat fee. Non-employees are allowed on these flights on a “space available” basis because there is no increase to cost of the flights. Project operators typically log the passengers and not the freight on the Project Log or the flight manifest. HEA has implemented a procedure to always log the freight and purpose of the flights to insure better documentation of the primary purpose for flights. Standby Charge for Helicopter, 8.1 hours@$300.00/hour $2,430.00 (Aug 06 O&M-539.42 HEA Response This was for the annual snow survey performed by the US Dept of Agriculture hydrologist. When the snow survey equipment is inspected and repaired there Is typically standby time for the helicopter. The survey requires the hydrologist to inspect and repair equipment at several sites in a remote, mountain area. It is more efficient and safer for helicopter stand-by at each site versus flying back and forth from Homer after drop-offs and pick-ups. Tower Training: May 2007 $2,460.28 (May & Jun O&M-Acct. 538.42) HEA Response HEA wished to have employees trained (per legal requirements) to climb the tower at the Project to reduce reliance on more expensive contract work force to do work involving tower climbing for the 2007 Fiber capital project. This training only benefited the Project, because under HEA union contracts, HEA employees can only do tower work at the Project. They cannot do work on the other towers on HEA’s system (not owned by HEA). M nance So re Support from MAPCON Technologies Incorporat 3,940.00 May 07 O&M- 544.42 HEA Response MAPCON is only used at the Project. It is maintenance management software used to track equipment, preventive maintenance activities and inventory. AEA Response Software maintenance is not a capital cost. Even if it were, the classification of capital vs. operating does not impact how much the utilities pay. Legal Consul for Renewal of Bradley Lake Project Operation and Maintenance Agreement $8,456.35 (Various 07 O&M-539.52 AEA Response , The BPMC directed AEA and HEA to renegotiate the operating agreement. This process requires attorneys to represent interests of AEA, HEA, and BPMC. Cost of AEA's attorney is covered under the administrative fee paid annually to AEA. Any cost of BPMC attorney is covered in the operating budget under BPMC costs. HEA is reimbursed It's attorney fees as a project operating cost. HEA operates the Project on a reimbursement basis with no profit margin and therefore HEA would bear a loss by not being reimbursed for this cost incurred at the direction of the BPMC. Vehicle Charges $9,661.78 (Various 07 O&M HEA Response Vehicle hourly rates are calculated at the beginning of each calendar year, based on prior year expenses. When an employee has a vehicle assigned to them, (i.e. no one else can use the vehicle) the number of vehicle use hours are charged to the Project based on their labor hours charged to the Project, not on number of hours the vehicle is actually driven. When employees use an unassigned vehicle for Project related work, the hours are charged based on actual use. The methodology for allocating cost is based on the guidance provided by RUS Bulletin 1767B-2, Section 6.2.2.1. HEA applies the same methodology to allocate costs on all vehicle hours, including costs billed to the Project. The methodology has been audited and accepted by the State of Alaska's Department of Transportation for vehicle costs billed to their projects. The two HEA supervisors mentioned in the audit finding have vehicles assigned to them and so the hourly charge is based on their labor hours charged to the Project. 2. Living Quarter Guidelines Not Found. a. Finding. We were unable to locate the “Bradley Work Rules.” As a result, we were unable to adequately determine if Project living quarters were being properly used. According to the contract, these work rules establish the use of the living quarters. Section 12.a of the Operation and Maintenance Agreement states, “Use of living quarters is established by the Bradley Work Rules. Modification of the Work Rules requires the approval of the Authority and the BPMC.” b, Recommendation. ML&P should attempt to locate a copy of the Bradley Work Rules specified in the Operation and Maintenance Agreement. c. Management Comments. HEA Response: See attached Generation Bargaining Agreement between HEA and IBEW, Section 13.3. The agreement incorporates the State of Alaska’s Bradley Lake Work Rules to workers covered under the agreement. 3. Air Transportation Costs Not Always Seqregated. a. Finding. HEA did not always segregate Project expenditures for air transportation costs between operation and maintenance and capital projects. Since October 2006, HEA discontinued segregating air transportation expenditures between operation and maintenance and the capital projects and started to bill all air transportation expenditures as operation and maintenance expenditures. As a result, operation and maintenance expenses for air transportation may be misleading. b. Recommendation. ML&P should request AEA to require HEA to segregate the expenditures between Project operation and maintenance and capital projects, and bill AEA accordingly. HEA Response HEA segregates costs for air transportation to capital projects when there is a clear distinction in purpose of the flight. When the governor project and replacement relay project where in full swing, there were some flights that were for the purpose of flying contractors and/or. freight to the Project for these capital projects and they were charged accordingly. HEA endeavors to utilize each flight in the most efficient manner, and so many times flights are for more than one purpose. In these cases the flights are charged to the O&M account 539.43 as it would be very difficult to split the cost of a flight between O&M & Capital proportionally based on what or who is being flown to and from the Project. AEA Response Since flights have mixed purpose, AEA deems the costs meet the definition of FERC 539, “not readily assignable to other hydraulic generation operation expense accounts” and so properly coded to 539.43. Classification of costs as capital vs. operating does not change the amount the utilities pay. 4. Correct Budget Account Not Used. a. Finding. HEA staff did not code $20,303 of helicopter usage to the correct budget account. The helicopter, used for snow surveys, was coded to account 539.42, Helicopter Transportation for Hydraulic Power Generation Operations. According to AEA staff, the helicopter usage should have been coded to account 556.02, Snow Measurement. Improper coding distorts the budget. b. Recommendation. ML&P should request that AEA review all invoices more closely to ensure the correct budget account is used. c. Management Comments. AEA Response There must have been miscommunications between the auditors and AEA staff. AEA staff thought they explained that helicopter charges were correctly coded to 539.42. Budget line item 556.2 for snow measurement is only the cost paid directly to USDA for the surveys. Helicopter service provided by HEA to the contractor to do the work is budgeted for within 539.42. Based on how these costs are budgeted it would distort the budget to code transportation costs to 556.02. AEA does review Invoices closely for correct coding and will continue to do so. Shauna Howell From: Mike Cunningham [Mike_Cunningham@chugachelectric.com] Sent: Tuesday, April 22, 2008 2:42 PM To: Shauna Howell Ce: Linda MacMillan; Eckert, Rick; Miller, Richard E; H F. Dale (GVEA); Brad Evans; Connie Owens Subject: Agenda Items for May 7th PMC Meeting Shauna, The Finance Committee met on April 22, 2008 to consider the responses to the Bradley Lake Project Management Committee's request for proposal to provide in dependent audit services. Three responses were evaluated using four criteria: 1. Price 2. Understanding of the audit services required 3. Proposed audit strategy 4. Relevant experience and qualification The committee unanimously selected the firm of Swalling and Associates P.C. to be recommended to the PMC for retention as the project's independent auditor for the year(s) ended June 30, 2008 through June 30, 2010 with an option to extend the agreement for 2 additional years. The motion could read: " Move that the Bradley Lake Project Management Committee retain Swalling and Associates P.C. as the project independent auditor for the year(s) ended June 30, 2008 through June 30, 2010 with an option to extend the engagement for two additional years." The second agenda item is "Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project". This is the report of an audit the Municipality did on the project. Mr. Peter Raiskums, Municipal Auditor, will attend the meeting to report out on the audit findings. Linda Macmillan will provide the audit report, HEA's and AEA's responses and associated schedule. Mike Cunningham Chief Financial Officer Office - 907-762-4778 fax - 907-762-4514 cell - 907-230-9478 mike _cunningham@chugachelectric.com Shauna Howell From: Linda MacMillan Sent: Tuesday, April 22, 2008 2:55 PM To: Shauna Howell Subject: FW: Final audit report on Bradley Lake Attachments: 2008-5.pdf; ResponseToML&PinternalAuditReport-Bradley. pdf Here are the two attachments Mike referred to in his earlier email. The response document is 45 pages long because it includes a copy of a union agreement. If you print for the board package, only print pages 1-6 and do not print the attachments. Linda From: Miller, Richard E [mailto:MillerRE@ci.anchorage.ak.us] Sent: Tuesday, April 22, 2008 1:24 PM To: Cunningham,Mile; Eckert, Rick; Dale, Henry; Linda MacMillan Subject: Final audit report on Bradley Lake Attached is the published audit report on Bradley Lake. April 22, 2008 Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power Introduction. According to information provided by the Alaska Energy Authority (AEA), the Bradley Lake Hydroelectric Project (Project) is located in South Central Alaska at the southern end of the Kenai Peninsula. The Project includes a 610-foot long, 125-foot high, concrete-faced, rock- filled gravity dam, and a 3.5-mile long power tunnel. The 126-megawatt Project transmits its power to the State’s main power grid via two parallel 20-mile transmission lines. The Project, which cost approximately $328 million (including reserve fund balances), went into commercial operation in 1991. Homer Electric Association (HEA) under contract with AEA now operates the Project. The Project serves Alaska’s Railbelt from Homer to Fairbanks as well as the Delta Junction area. According to data provided by AEA, in fiscal year 2007, about $1.4 million was paid to HEA for Project operation and maintenance expenditures. AEA has entered into several agreements to provide for the operation and maintenance of the Project: The Power Sales Agreement, December 1987 - The Power Sales Agreement established the Bradley Lake Project Management Committee (BPMC). One of BPMC’s purposes is to arrange for the operation and maintenance of the Project and the scheduling, production and dispatch of power. In addition, the BPMC is responsible for budgeting annual Project costs and calculating each party’s required contribution to fund annual Project costs. BPMC members include the AEA and the five purchasers under the Power Sales Agreement: Chugach Electric Association, Golden Valley Electric Association, the Municipality of Anchorage (Municipal Light and Power [ML&P)]), the City of Seward (Seward Electric System), and the Alaska Electric Generation & Transmission Cooperative. Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Master Maintenance and Operating Agreement, May 1994 - The Master Maintenance and Operating agreement with the BPMC established contract administration and budgeting procedures for Project maintenance and operation contracts. It also provides for the lease or other use of facilities and equipment in a manner consistent with the requirements of the Power Sales Agreement. This agreement authorizes the AEA to enter into any contracts necessary to perform operating or maintenance-type services to the Project, subject to the approval of the BPMC. Bradley Lake Dispatch Agreement, August 1996 - AEA entered into an agreement with Chugach Electric Association to provide all services necessary to dispatch the Project’s electric power output. Static Var Compensation System Agreement, August 1996 - AEA entered into an agreement with Chugach Electric Association to operate and maintain the Static Var Compensation System facilities at the Soldotna Substation and Daves Creek facility. Operation and Maintenance Agreement, June 1999 - The Operation and Maintenance Agreement for the Project was originally executed between HEA and the AEA in February 1994 and amended in 1996 and 1999. The agreement provides for the operation and maintenance of the Project by the HEA. HEA is to be reimbursed for costs associated with the operation, maintenance and repair of the Project as determined in advance through the submission of an annual budget based upon estimates and anticipated operation and maintenance costs. In August 1996, the agreement was amended to separate the operation and maintenance of the electric transmission line facilities from the Project. In June 1999, the agreement was again amended to require the HEA to provide communication services in addition to the other services. Objective and Scope. The objective of this audit was to determine whether the charges during fiscal year 2007 for the operation and maintenance of the Project by HEA were in compliance with the applicable agreements. Our review included a review of charges made by HEA from July 1, 2006, to June 30, 2007. -20f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 The audit was conducted in accordance with generally accepted government auditing standards, except for the requirement of an external quality control review, and accordingly, included tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. The audit was performed during the period of November through December 2007. The audit was requested by the Administration. Overall Evaluation. Generally, the operation and maintenance expenditures made by HEA in fiscal year 2007 to the Project were in compliance with the applicable agreements. However, our review of selected Project operation and maintenance expenditures revealed over $30,000 in questionable expenditures. Also, HEA did not always segregate Project expenditures, and HEA staff did not code helicopter usage to the correct budget account. FINDINGS AND RECOMMENDATIONS 1. Questionable Expenditures. a. Finding. Our review of judgmentally selected Project expenditures revealed over $30,000 of questionable operation and maintenance expenditures. Some examples of questionable expenditures are found below. Training - The entire cost for “Tower Training” was charged to the Project. However, the two HEA employees who received the training were not full-time Project employees. In addition, HEA management stated that HEA also owns towers in addition to the Project’s towers. Telecommunications - From July 2006 to February 2007, the Project was charged for Dish Network service in Haines, Alaska. -30f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Legal Fees - Legal fees were charged to the Project for the renewal of the Operation and Maintenance Bradley Lake Agreement. The attorney was not representing the Project, but was representing HEA. Air Transportation - Charges for seventeen airplane flights appeared questionable. Many of these flights appeared to be for family members. These airplane flights were made for transporting individuals to the Project who were not HEA employees, and none of the seventeen flights had a Project employee as a passenger. Vehicle Usage Charges -Vehicle charges to the Project appeared questionable. According to time records, in most months for each work hour supervisors charged to the Project, they also charged one hour of vehicle usage. However, in some months, each work hour charged to the Project did not match vehicle hours charged to the Project. For example, from July 2006 to December 2006, one supervisor had 295 vehicle hours and 295 work hours charged to the Project. However, from January 2007 to June 2007, this same supervisor had only 48 vehicle hours and 242 work hours charged to the Project. In another case, from July 2006 to June 2007, another supervisor had 887 vehicle hours and 887 work hours charged to the Project. Miscellaneous Charges - Our review identified other miscellaneous charges that appeared to be questionable. These charges included items such as a get well card, various meals, a dish network subscription, a transcription machine, software support, standby charges for a helicopter, and expenditures lacking supporting documentation. Recommendation. ML&P should bring the questioned costs to the BPMC for evaluation. -40f7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Management Comments. Management stated, “ML&P sent the draft audit report to AEA and HEA for their review and response. Finance staff from AEA and HEA did respond to this audit report. This audit report along with the combined response from AEA and HEA will be given to the BPMC along with the Budget and Finance Subcommittee of the BPMC this year.” Evaluation of Management Comments. Management comments were responsive to the audit finding and recommendation. 2s Air Transportation Costs Not Always Segregated. Finding. HEA did not always segregate Project expenditures for air transportation costs between operation and maintenance and capital projects. Since October 2006, HEA discontinued segregating air transportation expenditures between operation and maintenance and the capital projects and started to bill all air transportation expenditures as operation and maintenance expenditures. As a result, operation and maintenance expenses for air transportation may be misleading. Recommendation. ML&P should request AEA to require HEA to segregate the expenditures between Project operation and maintenance and capital projects, and bill AEA accordingly. Management Comments. Management stated, “ML&P agrees with the response from AEA and HEA that HEA segregates costs for air transportation to capital projects when there is a clear distinction in the purpose of the flight. It appears that flights for the large capital projects were charged to those projects. Some flights carrying both workers and materials can be for both operations and maintenance and capital projects and the effort to spread those costs (based on weight, size, value or - 5 of7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 some other factor) does not appear to be worth the effort since it doesn’t change the amount the Utilities pay.” Evaluation of Management Comments. Management comments were responsive to the audit finding and recommendation. 3. Correct Budget Account Not Used. c. Finding. HEA staff did not code $20,303 of helicopter usage to the correct budget account. The helicopter, used for snow surveys, was coded to account 539.42, Helicopter Transportation for Hydraulic Power Generation Operations. According to AEA staff, the helicopter usage should have been coded to account 556.02, Snow Measurement. Recommendation. ML&P should request that AEA review all invoices more closely to ensure the correct budget account is used. Management Comments. Management stated, “ML&P did request that AEA review all invoices more closely to ensure the correct account is used. During this discussion AEA finance staff was requested to use the proper FERC account regardless of where the activity was budgeted. They confirmed they would do as requested.” Evaluation of Management Comments. Management comments were responsive to the audit finding and recommendation. - 6 of 7- Internal Audit Report 2008-5 Bradley Lake Hydroelectric Project Municipal Light and Power April 22, 2008 Discussion With Responsible Officials. The results of this audit were discussed with appropriate Municipal officials. Audit Staff: Scott Lee Michael Chadwick, CICA - 7of7- March 25, 2008 RE: Response to draft findings of internal audit report on the Bradley Lake Hydroelectric Project (Project). Below are the audit findings in the above referenced report with the Alaska Energy Authority's (AEA) and Homer Electric Association’s (HEA) responses to the findings. 1. Questionable Expenditures a. Finding. Our review identified $34,113 of questionable operation and maintenance expenditures. See Appendix A for a detailed schedule of questionable purchases. Some examples of questionable expenditures are found below. b. Recommendation. ML&P should request that AEA review all invoices more closely to ensure all expenditures charged to the Project are Project-related expenditures. c, Management Comments. AEA Response AEA does review invoices closely as evidenced by the very few questioned costs. The following explanations from HEA and AEA discuss why “questionable expenditures” were properly charged to the Project, presented in the order of Appendix A, “Summary of Questionable Operation and Maintenance Expenditures By Homer Electric Association". The parenthetical information is the billing date and FERC coding. Get-well Card, Good-bye Card -$4.88 (Oct 06 O&M-545.61) HEA Response: It is an accepted practice at HEA to allow expenditures for personnel recognition at the discretion of the Supervisor and/or Department Manager. Administrative Assistance Appreciation-Captain Patties Fish House -$64.38 (Jun 07 O&M- 535.21) HEA Response It is an accepted practice at HEA to allow expenditures for personnel recognition at the discretion of the Supervisor and/or Department Manager. Dish Network Subscription @Bradley Lake $71.49 (Mar 07 O&M-539.50) HEA Response “Bradley Work Rules” require that the Project fund satellite TV in the Bunk House. See attached Generation Bargaining Agreement, Article XII], Section 13.3 A. Expenditures Submitted Without Supporting Back- 69.11 6.63 544.42 O&M-OCTO6 Bumper sticker for mapcon 56.10 556.61 O&M-JULO6 credit card charge Jul, 2006 65.50 544.61 O&M-FEBO7 credit card charge Feb, 2007 40.88 539.5 O&M-FEBO7 vendor is Buckets Sports Grill 169.11 HEA Response The documentation is attached for the above expenditures. The petty cash voucher, signed by the buyer for $6.63, is deemed sufficient documentation for small, petty cash purchases if a receipt is not available. FERC code for the $40.88 expenditure should have been 535.21 Transcription Machine Purchased from eBay $170.40 (May 07 O&M-539.62 HEA Response The transcription recorder used exclusively for Project O&D meetings failed. A similar machine was found on EBAY and was purchased. It is in use at each O&D meeting held monthly. AEA Response The cost is below the capital cost threshold. The classification of capital vs. operating does not impact how much the utilities pay. Meals for “Tait Training”: April 2007 $207.80 (May 07 O&M-538.42) HEA Response Tait Training provided operators and technicians training to operate and maintain the radio system at the Project. HEA paid $15,000 to bring a special trainer to Alaska to do the training that benefitted both HEA and the Project. HEA only charged the Project for cost of the instructor’s and a few employees meals, Meals are a labor contract requirement when employees are in training. Load Forecasting Software Support from “The MathWorks” $324.00 (Apr 07 O&M — 556.61 HEA Response This is support for the software purchased for the governor capital project. AEA Response The cost is below the capital cost threshold. The classification of capital vs. operating does not impact how much the utilities pay. Legal Consulting Fee for VA Tech Dispute (a Capital Project) $495.00 (Various 07 O&M- 539.52) AEA Response The cost is below the capital cost threshold. The classification of capital vs. operating does not impact how much the utilities pay. Dish Network Subscription at Haines, AK: July 2006 - February 2007 $532. ious 07 O&M-539.62) HEA Response Bradley Work Rules require that the Project fund satellite TV in the Bunk House See attached Generation Bargaining Agreement, Article XIII, Section 13.3 A. HEA did not pay for a subscription in Haines. The above costs were appropriate to the Project. The vendor had an error in the indicative data for service location on their invoices. HEA’s purchasing agent noticed this error and asked them to change the service address. It was changed as of their December 2006 Statement, which was in the January O&M billing. 4,025 Bolts, Nuts, and Washers in Various Sizes $1,427.77 (Mar & Apr 07 O&M-545.61) HEA Response In anticipation of the number of special construction projects on the horizon, one of the Project operators was assigned to inventory and to make sure there was a full supply of fasteners at the Project site. Specifically the runner replacement project was of great concern. 2,000 Danger Tags, Lockout/Tagout $1,444.03 (Dec 06 O&M-538.61) HEA Response These tags are required for any work on the machinery and were re-supplied in anticipation of the number of special construction projects on the horizon. Specifically the runner replacement project was of great concern. There is now a good supply of tags at the Project site. Flight Costs for Individuals Other Than HEA Employees $2,252.50 (Various 07 O&M-539.43) HEA Response The audit questioned 17 one way flights of $132.50 per flight. We investigated the flights to insure that the primary reason for the flights was to bring required freight to the Project site. In times of critical need of parts, flights may be required to and from the Project site. The cost of the flights is a flat fee. Non-employees are allowed on these flights on a “space available” basis because there is no increase to cost of the flights. Project operators typically log the passengers and not the freight on the Project Log or the flight manifest. HEA has implemented a procedure to always log the freight and purpose of the flights to insure better documentation of the primary purpose for flights. Standby Char. r Helicopter, 8.1 hours@$300.00/hour $2,430.00 (Aug 06 O&M-539.42 HEA Response This was for the annual snow survey performed by the US Dept of Agriculture hydrologist. When the snow survey equipment is inspected and repaired there Is typically standby time for the helicopter. The survey requires the hydrologist to inspect and repair equipment at several sites in a remote, mountain area. It is more efficient and safer for helicopter stand-by at each site versus flying back and forth from Homer after drop-offs and pick-ups. Tower Training: May 2007 $2,460.28 (May & Jun O&M-Acct. 538.42) HEA Response HEA wished to have employees trained (per legal requirements) to climb the tower at the Project to reduce reliance on more expensive contract work force to do work involving tower climbing for the 2007 Fiber capital project. This training only benefited the Project, because under HEA union contracts, HEA employees can only do tower work at the Project. They cannot do work on the other towers on HEA's system (not owned by HEA). Maintenance Software Support from MAPCON Technologies Incorporated -$3,940.00 (May 07 O&M- 544.42) HEA Response MAPCON is only used at the Project. It is maintenance management software used to track equipment, preventive maintenance activities and inventory. AEA Response Software maintenance is not a capital cost. Even if it were, the classification of capital vs. operating does not impact how much the utilities pay. Legal Consulting for Renewal of Bradley Lake Project Operation and Maintenance Agreement $8,456.35 (Various 07 O&M-539.52) AEA Response The BPMC directed AEA and HEA to renegotiate the operating agreement. This process requires attorneys to represent interests of AEA, HEA, and BPMC. Cost of AEA’s attorney is covered under the administrative fee paid annually to AEA. Any cost of BPMC attorney is covered in the operating budget under BPMC costs. HEA is reimbursed it’s attorney fees as a project operating cost. HEA operates the Project on a reimbursement basis with no profit margin and therefore HEA would bear a loss by not being reimbursed for this cost incurred at the direction of the BPMC. Vehicle Usage Charges $9,661.78 (Various 07 O&M) HEA Response Vehicle hourly rates are calculated at the beginning of each calendar year, based on prior year expenses. When an employee has a vehicle assigned to them, (i.e. no one else can use the vehicle) the number of vehicle use hours are charged to the Project based on their labor hours charged to the Project, not on number of hours the vehicle is actually driven. When employees use an unassigned vehicle for Project related work, the hours are charged based on actual use. The methodology for allocating cost is based on the guidance provided by RUS Bulletin 1767B-2, Section 6.2.2.1. HEA applies the same methodology to allocate costs on all vehicle hours, including costs billed to the Project. The methodology has been audited and accepted by the State of Alaska’s Department of Transportation for vehicle costs billed to their projects. The two HEA supervisors mentioned in the audit finding have vehicles assigned to them and so the hourly charge is based on their labor hours charged to the Project. 2. Living Quarter Guidelines Not Found. a. Finding. We were unable to locate the “Bradley Work Rules.” As a result, we were unable to adequately determine if Project living quarters were being properly used. According to the contract, these work rules establish the use of the living quarters. Section 12.a of the Operation and Maintenance Agreement states, “Use of living quarters is established by the Bradley Work Rules. Modification of the Work Rules requires the approval of the Authority and the BPMC.” b. Recommendation. ML&P should attempt to locate a copy of the Bradley Work Rules specified in the Operation and Maintenance Agreement. c. Management Comments. HEA Response: See attached Generation Bargaining Agreement between HEA and IBEW, Section 13.3. The agreement incorporates the State of Alaska’s Bradley Lake Work Rules to workers covered under the agreement. 3. Air Transportation Costs Not Always Segregated. a. Finding. HEA did not always segregate Project expenditures for air transportation costs between operation and maintenance and capital projects. Since October 2006, HEA discontinued segregating air transportation expenditures between operation and maintenance and the capital projects and started to bill all air transportation expenditures as operation and maintenance expenditures. As a result, operation and maintenance expenses for air transportation may be misleading. b. Recommendation. ML&P should request AEA to require HEA to segregate the expenditures between Project operation and maintenance and capital projects, and bill AEA accordingly. HEA Response HEA segregates costs for air transportation to capital projects when there is a clear distinction in purpose of the flight. When the governor project and replacement relay project where in full swing, there were some flights that were for the purpose of flying contractors and/or. freight to the Project for these capital projects and they were charged accordingly. HEA endeavors to utilize each flight in the most efficient manner, and so many times flights are for more than one purpose. In these cases the flights are charged to the O&M account 539.43 as it would be very difficult to split the cost of a flight between O&M & Capital proportionally based on what or who is being flown to and from the Project. AEA Response Since flights have mixed purpose, AEA deems the costs meet the definition of FERC 539, “not readily assignable to other hydraulic generation operation expense accounts” and so properly coded to 539.43. Classification of costs as capital vs. operating does not change the amount the utilities pay. 4. Correct Budget Account Not Used. a. Finding. HEA staff did not code $20,303 of helicopter usage to the correct budget account. The helicopter, used for snow surveys, was coded to account 539.42, Helicopter Transportation for Hydraulic Power Generation Operations. According to AEA staff, the helicopter usage should have been coded to account 556.02, Snow Measurement. Improper coding distorts the budget. b. Recommendation. ML&P should request that AEA review all invoices more closely to ensure the correct budget account is used. c. Management Comments. AEA Response There must have been miscommunications between the auditors and AEA staff. AEA staff thought they explained that helicopter charges were correctly coded to 539.42. Budget line item 556.2 for snow measurement is only the cost paid directly to USDA for the surveys. Helicopter service provided by HEA to the contractor to do the work is budgeted for within 539.42, Based on how these costs are budgeted it would distort the budget to code transportation costs to 556.02. AEA does review invoices closely for correct coding and will continue to do so. ~ PEETY CASH V R NO: DATE: Flas “+ FOR_ ua etic Ma On DEPT#__Sb.0 — AMT $ ore ACCT#_G4+442 _ ITEMYD, mselos Qe detente Received by Approved by HEA Form #0116 (Rev. 3/97) . . Fireweed.. i i Hit | Invoice Fence 289-SA6S pet 6/21/2006 | 09-67 Fax: (907) 283-2628 "Bill To Homer Electric Association sae taon) si | [Tom tm Signature: NL AL A ee aeuere eke eae PRATT ; erCNTERUTTNY RTE u@ INVOICE NUMBER é 2 HIGHWAY'212 « MICHIGAN oir, INDIAN, 46361-( | SALES (219) 879:8000 - OFFICE (219) 879-8868 - CHICAGO (312) 733-7883 2/09/07 02452957 FAX (219) 872-9057 - FED. iD, 35-0961454 - D-U-N-S 00-508-1237 5 DIVISIONS OF DWYER INSTRUMENTS, INC. i TEAMSNET 30 DAYS - 7 Hl MERCOID » W.E. ANDERSON + PROXIMITY CONTROLS * LOVE CONTROLS - 33919700 33919700 KS i 7 NO STATEMENT FURNISHED, BILL TO: SHIP TO: FIEMITTO: GVEA INSTRUMENTS, ANC. Ih hil lotlalliandh luih Hole ili Horlallilal : } - MICHIGAN CITY, IN 48381 HOMER ELECTRIC ASAOCTRTECN Inc ALT HOMER ELECTRIC ASSOCIATION INC 3977 LAKE ST 3977 LAKE ST “HOMER AK 99603-7652 TAMARA FLETCHER HOMER SII AK . 99603 YRDER: S$600363 3RD PARTY #: 113010894 ~ _ SHIP DATE __ VIA . 2/09/07 FEDERAL EXP PL COLL _ ORDER DATE’ CUSTOMER ORDER NUMBER REQUISITION NUMBER LIABILITY POINT 2/09/07 | CREDIT CARD $600363 Hd : FOB FACTORY DESCRIPTION UNIT PRICE UNIT NET ° _ AMOUNT 1 114045-00 ws 65.,50' |||; 65.50 65.50 530 AIR FLOW SWITCH | B/L 544.61. i SUB-TOTAL 65.50. YOUR MASTER~CARD HAS BEEN CHARGED 65.50 AUTHORIZATION # 009198 j . PDRDER ea BALANCE DUE $.00 . i BALANCE DUE $.00 Our new catal is now available...... phone, fax, ph ‘ eae) your request ASAP. 1lso visit our website at .dwyer-inst. tom : REPEIVED yables : FEB 1 5 2007 Homer Electric Assh., Inc. UWIEn INUMENID, INV, P.O. BOX 973-- 102 HIGHWAY 212 - MICHIGAN CITY, INDIANA 46361-0373 SALES (219) 879-8000 - OFFICE (219) 879-8868 - CHICAGO {312} 733-7883 FAX (219) 872-9057 - FED. |,D, 35-0961464.- D-U-N-S 00-508-1237 ‘ DIVISIONS OF OWYER INSTRUMENTS, INC. MERCOID @ W.E. ANDERSON ¢ PROXIMITY CONTROLS * LOVE CONTROLS SHIP DATE | SALES ORDER NUMBEF 5600363 CARTONS | PACKEF POSTAGE aa wadoealial aa) fi © VISA / MASTER CARD 339149700 . E . 33915700 © RIS SPSS SIA RNASE OS ENS © 8/ HOMER ELECTRIC ASSGCTATION INC s| KOMER ELECTRIC ASSOCIATION ING ll a977 LAKE at M3977 LAKE Bt L] HOMER AK P| TAMARA FLETCHER rr . 99603. 1) HOwRR ~ ORK 0 lo $4404 . : * NO PARTIALS * , Le PICK# 136957 SHIP FROM FOO WBLBR IGE WBLIRER BLE a VIA | 1 : FEDEX S10 OVERNIGHT COLL 5 ACCOUNT #: 149010894 . H.C. ORDER DATE " =; CUSTOMER OROER NUMBER | REQUISITION NUMBER | ____«F.0.8. 2/09/07 | CREDIT GARD 8606363 | vos PAUTORY UA |. QUARETEY s | CUANSTY DESCRIPTION FG 26 01- i “> 114045-00 z60-3 520 AIR FLOW SWITCH HT a B/L 544.64 : wid D X\ ie 209/07 12:64:39 PAGE 1 (LAST: 3E 106 1994} PACKING LIST HOMER ELectRic ASSOCIATION REQUISITION FORM 28007 VIC: Dept. No.: a : Proj/Job\No.: 2. PLOLNow_ Date: 2-6 i 7 VENDOR: ‘ SHIP TO: De-yelr Toto mat : : Brad Te vy. £ TK . P2 Bex 373, (en Triana wey sl Whehigan City, EV HERS Ze. V7 ~ GORD CONFIRMINGF2X $72 ~ 72S 7 __ neo sy date: “FOB PORT: ie cope -___ MANUFACTURER'S PART NUMBER jay 7] MEASURE PRICE ITEM TOTAL os S9Y b[ |Model 522. air Fle -seNe ( en 65.52 7 . | ‘ ~ | ‘ a jew, d Ww Yer - fest. a we 4 Z q 7 = ; = + + U Ko = j-- ——t | ails This request is within the APPROVED CURRENT Action Plan and within the remaining approved annua! budget: : Yes O No. TOTAL Capital Budgét Line No.: : Budgeted Amount: $ + AFE No.: Ale AUTHORIZATIONS: _typ/\| REASON FOR PURCHASE: corer J 4 On ACCOUNTING gwite A pp Er fe uarels fe ble & face. ats fF lec G deeting ve fn. i tern. dec . Fletcher, Tamara. : From: . CUSTSERV@DWYERMAIL.COM Sent: . Friday, February 09, 2007 9; 41 AM To: . Fletcher, Tamara -Subject: DWYER INSTRUMENTS ACKNOWLEDGEMENT - $800363 (NOTE’ - PLEASE DO NOT REPLY TO THIS EMAIL.) Thank you for your order, Here is your confirmation and promised ship dates, Our order #: $600363 Order Date: 02/09/2007 Customer PO#;: CREDIT CARD S600363 Ship Via: FEDEX STD OVERNIGHT COLL 113010894 FOB: FOB FACTORY ° Bill-to: Ship-to: HOMER ELECTRIC ASSOCIATION INC HOMER ELECTRIC ASSOCIATION INC 3977 LAKE ST 3977 LAKE ST HOMER AK 99603 TAMARA FLETCHER HOMER AK 99603 Line Qty Catalog# - Net Total Ship Date 01 1 530 $65.50 $65.50 02/13/2007 _ Order Total: . $65.50 Applicable shipping charges and tax will be added to, your order total. You may view your most current order status by referencing www, dwyer-inst.com and clicking on the check order status. After a one-time registration, you will be able to track Status for . all your open orders. Transactions conducted under Dwyer Instxuments Terms and Conditions. For a copy of our terms, please reference www.dwyer- -inst.com or contact Dwyer Customer mera at 800-872-9141. Please do not reply to this email. Buckets Sports Grill Soldotna, AK 99669 fen 8 6/200%) “135% Sale: 98) A 5 | Transaction BS :* Card Type: MasterCard Acc: Me MMMB EMO 25S Entry: Swiped _ Srur # tt Invoice # 36278 Bse Amt: 34.88 Ge Tip Amount § oS Tota) Amt: gO. ee Auth Code: 026674 Respon. APPROVED 026671 COLLECTIVE BARGAINING CONTRACT. THIS AGREEMENT is made and entered into by and between HOMER ELECTRIC’ ASSOCIATION of Homer, ‘Alaska (hereinafter referred to as “HEA” or the “Employer”), and INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, LOCAL 1547, AFL-CIO, of Anchorage, Alaska (hereinafter referred to as the “Union”). ARTICLE I SCOPE AND DURATION OF AGREEMENT Section 1.1. Scope. This Agreement is: applicable to those generation job classifications described in Article XX herein or otherwise subsequently created within the Generation Department by the company. Wagés for any additional seeraccaaials shall be agreed between the parties. ; ; Section 1.2. Duration. This Agreement will continue in effect from May 1, 2003, until April 30, 2008, and thereafter from year to year; provided; however, that either party may give the other written notice of its desire to terminate the Agreement or to effect changes therein as described. Such written notice will specify the nature of any changes-desired and will be served on the other party not fess than sixty (60) days prior to the end of the initial period of this Agreemént or of any annual extension thereof. The parties will meet to negotiate on such termination, modifications, or amendments within thirty (30) days from the receipt of ‘such notice, except that such meetings may be delayed -by mutual consent, Nothing herein will preclude the termination, modification, or amendment of the Agreement at any time by mutual written consent of the parties. Section 1,3. No-Strike Agreement. There will be no stoppage of work either by strike, sympathy strike, slowdown, or other work interruption during the term of this Agreement. Similarly, there’shall be no lockouts during the term of this Agreement, Disputes between the parties over alleged violations of this Agreement shall be resolved under the Grievance and Arbitration clause as set forth in Articles XVI and XVII, Section 1,4. Assignability. This Agreement shall be binding upon the successors and assigns of the parties to this Agreement, and no provisions, terms, or obligations herein contained shall be affected, modified, altered, or changed in any respect whatsoever by the consolidation, merger, sale, transfer, or assignment of either party hereto or by any change, " geographic: or otherwise, in the location or place of business of either party hereto. The parties recognize that the Employer ponies the Bradley Lake Hydroelectric Generation Facility as an operator through an agreement with the State of Alaska and that agreement is aeibject to termination or renewal from time to time. Section 1.5, HEA and Union agree that either party may, upon changed regulatory or legislative circumstances which significantly affect the Employer, or upon entry of fe\HBA\Lbr\2003Negos\Generatlon\9-26-03\F competitors who propose to provide competing services related to HEA’s primary business within HEA’s service area, open the contract to negotiate changes which would place HEA in a more competitive position. The right to reopen under this section shall be limited to a need to address genuine competitive circumstances which threaten the economic health of the cooperative and shall be based upon tangible evidence and information that will be shared and discussed during the course of the first meeting. The right to reopen will not be used as a method or means to reduce benefits, overtime rates, or to change the subcontracting provisions of the Agreement. The intent of this provision is to ‘permit opening of the contract and to facilitate “negotiated changes, where possible, in order to preserve HEA as a viable employer and also to _ preserve the jobs and work that HEA provides, If HEA reopens the Agreement and implements ‘ changes after impasse, the Union reserves the right to avail itself of the remedies that are " normally. available upon impasse, including strike. The parties agree that any change instituted “by agreement or by the Employer’s implementation in the event agreement is not reached will be reviewed by the parties at the conclusion of one (1) year to determine whiether the work rule -change should be continued. If, at the end of the initial one (1) year period, the Employer and - Union‘cannot agree that a contract provision that has been changed or implemented should be * retained,-the Union may bring the dispute before an interest arbitrator for a decision that shall.be _ binding on the parties until one (1) day prior to the termination of the Agreement. The interest - - arbitrator shall be a neutral, independent arbitrator experienced in interest arbitration who shall _ be acceptable to the parties and shall be selected pursuant to the Labor Arbitration Rules of the American Arbitration Association. The interest arbitrator shall be governed by normal interest . arbitration standards and shall consider relevant factors, such as increases in costs, economic ‘health of the Employer, Employer’s competitive position, feasibility, the parties’ bargaining history, changes in Anchorage CPI-U, current utility practice in Alaska, and effect on employees and personnel. The implementation of a changed work rule under this provision will in no event extend beyond one (1) day before the term of the Agreement ends (April 29, 2008). The right of _ either party to reopen under this Agreement shall be limited to ane (1) occasion each during the term of the contract. > ARTICLE MANAGERIAL PREROGATIVES OF THE EMPLOYER - Section 2.1. Management Rights. The Employer retains, exclusively, all rights related'to the management and operation of the company and direction of the company’s business and work forces, including the right to prescribe all work and safety rules, rules of conduct, work schedules and techniques, assign work.and work times, establish different " Jocations of work,. establish qualifications requirements, standards of- work, evaluate qualifications and performance, and’to otherwise exclusively control the staffing, methods, _ systems, and operations of the business and the firing, retention, discipline, transfer, and usé of work forces. The listing of of failure to list specific rights in this Agreement is not intended, nor- shall it be restrictive of or waive, any of the rights of the Employer not specifically surrendered herein, whether or riot such rights have been exercised by the company in the past, and _ management shall have reserved, exclusively, all other rights not specifically expressed above. Homer Blectric Association/IBRW Local 1547 Electrical Generation Collective Bargaining Agreement Page 2 fs\HBA\Lbr\2003Negos\Generation\9-26-O3\F “In the event a specific right in this Section is in express conflict with a specific provision in tis contract, such provision shall prevail, Section 2.2. Union as Sole Bargaining Agent’ The Employer recognizes the Union as the sole bargaining agent for all classifications of employees = hereby -siga respect to hours, wages, and other conditions of employment, ‘Section 2.3. Legal Status of the Parties. The Union recognizes that the Employer i is a non-profit cooperative electric utility which was organized to participate in the - programs: of the Rural Utilities Service, an agency within the United States Department of Agriculture, and that the Employer must comply. with federal and other laws and regulations applicable to such electric utility cooperatives. The Employer recognizes that Local Union No. 1547 is affiliated with the International Brotherhood of Electrical Workers. Section2.4, Good Standing with the Union. The Union may notify the _ Employer in writing that an employee covered herein is not in good standing with the Union, in that such employee is in arrears for current dues or initiation fees. The Union will inform the ~ employee of such notification and, except that the employee acquire good standing with the Union within‘a period of two (2) full work days after being so informed by the Union, he may be terminated by the Employer. The Employer agrees to deduct Union dues from the pay of its employees and pay * to the Local Union No, 1547 such amount as is authorized in writing by the employeé on a form acceptable to the Employer. The Employer agrees to make this deduction from the second _ payroll period of each month and send a chéck for the total amount, together with a list of the individuals’ names for whom the deductions were made, to the Financial Secretary as designated by the Union on or before the fifteenth (15") day of the following month. This authority shall be révocable by the employee by notice in writing delivered by mail to the General Manager of the Employer and the Financial Secretary of the Union once per year. The Union agrees that the Employer assuines no responsibility in connection with deduction of dues, except that of ordinary diligence and care in forwarding monies deducted as set forth in this Article. The Union shall indemnify the Employer and save the Employer harmless from any and all claims against the Employer for amounts deducted and withheld from earnings. A. . . The Union shall have as its representative a business representative who shall be authorized to speak for the Union in all matters covered by this Agreement and who shall be permitted to visit the Employer’s premises during work hours. The business : representative will make a reasonable effort-to notify the Employer of his intent to visit the. premises. No Union meetings will occur on the Employer's time without permission of the Employer. Homes Blectric Association/IBEW Loéal 1547 Blectrical Generation Collective Bargaining Agreement Page 3 fs\HBA\Lbr\2003Negos\Goneratlon\9-26-03\F B. . The Union shall appoint one (1).shop steward from among the employees of the Employer who are represented under this Agreement and such alternate shop stewards as shall be necessary to conduct Union business in the absence of the shop steward. Grievances and steward business shall.be handled on company time and, after obtaining approval by his supervisor, the shop steward may be free for the shortest possible period to confirm, check, or verify necessary facts to fulfill his responsibilities, In no event will the shop steward interrupt job duties without prior approval from his supervisor, The shop steward shall not abuse the right to investigate and resolve grievances ~ and shall make every effort to keep time spent on such activities at an absolute minimum. Inthe event management determines that such exercise of time has been abused, management reserves the right to discipline the shop steward. In the event of discharge of the shop steward, the Union shall be notified by management at the time of discharge. Neither the shop steward nor any other business representative shall campaign or conduct other Union activities on the company’s premises during work hours (lunch time and break time shall not be considered work hours). - A. The Palebe shall have- the right to subcontract work normally performed by bargaining unit employees. B. No regular employee shall be geographically relocated, laid off, terminated, or discharged, nor shall his wages, benefits, or working conditions be reduced as a result of the Employer subcontracting any work normally performed by bargaining unit employees, . -C.. The parties shall each endorse the principle of free, open, and competitive bidding for purchases of supplies, services, equipment, and construction.. However, when, because of the nature of a particular project, the Employer is then operating as an “employer in the construction industry” as defined by. 29 U.S.C. 158() and applicable judicial precedent interpreting that section, Employer agrees that it will require that its subcontractors performing a new electrical or replacement electrical or mechanical construction or maintenance on a * generation site covered by this Agreement must have a current collective bargaining agreement with IBEW Local 1547 covéring ‘traditional electrical classifications. Further, routine maintenance and operations shall be performed by IBEW-represented personnel. This Agreement shall ‘not restrict Employer's right to perform any work: which is not new. or replacement electrical construction work traditionally performed by the electrical craft positions as reflected in the National Electrical Contractor Association collective bargaining agreement with IBEW Local 1547. I D. This collective bargaining agreement shall not be construed to in any way restrict the Employer from utilizing factory representatives, technical advisors, technicians, Homer Electric Association/IBEW Local 1547 Electrical Generation Collective Bargaining Agreement Page 4 fs\HBA\Lbr\2003Negos\Generation\9-26-03\F professional personnel, or other similar classifications who may be associated with and involved in troubleshooting, diagnosis, repair, performance, testing, or the installation and repair of SCADA systems and other work associated with warranty or factory-recommended inspections, as well as with other associated generation systems or activities which require’ special expertise. Finally, this Section shall not prohibit the Employer from subcontracting clearing of rights-of- way to non-signatory contractors and shall not extend to or affect any aspect of Employer's operations or responsibilities apart from the generation facility located on the generation site of work for which employees are responsible, . E, The use of a contractor or management personnel at the generation site in _ Seldovia shall not be deemed to be in violation of this Section 2.6. At such, time as the generation plant in Seldovia has been replaced and is operational, the scheduled maintenance at the plant shall be done by the bargaining unit or in compliance with Section 24 6(C), ARTICLE “ "HIRING AND FILLING OF JOB VACANCIES Section 3.1. Job Bidding. The following procedure will govern job posting, Job bidding, and job award, A. - Job Posting. Race regular job or position coment by this agreement which | has been vacated and is to be filled, or any such job to perform.work normally done by ~ bargaining unit employees that is being created, shall be posted. Posting shall state details and .qualifications applicable to the job or position. Only regular employees covered by this agreement at the Nikiski Cogeneration Facility or the Bradley Lake Hydroelectric Generation Facility may bid on such posting.. Boe Job Bidding. Any regular employee covered by this agreement may, within five (5) work days from the date of job posting, present in writing to his immediate supervisor his request to bid. Such request will include all data required by the posting. ‘Temporary jobs or reassignments are not biddable. Employees may be assigned to temporary jobs for periods not exceeding forty-five (45) calendar days, C.- Witliout the express permission of the General Manager: (1) No regular employee may submit a bid for a job until such employee has completed twelve (12) full months’ employment with the Employer, ; (2) All regular employees are limited to one (1) successful bid- during each twelve (12) month period. DI Job Award. Within five (5) working days after the closing date of the bids, the bidders will be considered and the job awarded. All bids will first be reviewed for Homer Electric Association/IBEW Local 1547 Electrical Generation Collective Bargaining Agreement Page 5 fs\HEA\LbA2003Negos\Generation\9-26-03\F validity of qualifications by a committee composed of one (1) representative from the Union and one (1) representative from management. All qualified. bids will then be considered by the committee on the basis of leadership, job performance, judgment, getting along with others, oral and written expression, appearance.and decision-making and seniority. Pay shall begin when the employee assumes the duties of the position but in no event later than two (2) weeks after award. - The recommendation of the bid comimittee shall be forwarded to the General Manager for, consideration and his selection. - EB. In the event the position is not filled through the bidding procedure, the- Employer shall proceed to fill the position under Section 3.2, VY Raee* below. Section 3,2. Vacaricies. All employees to perform services covered by this : Agreement shall be penance through the offices of the Union, subject, however, to the following: A.. The Binphoyer shall notify the Union of possible vacancies which it intends to fill from applicants for employment. ; B. In accordance with Employer’s application procedures, the Union shall refer applicants for jobs, provided that the selection of applicants for referrals shall be'on a.non- discriminatory basis and shall not be based upon or in any way affected by Union membership, bylaws, rules, regulations, constitutional provisions, or any other aspect or observance of Union membership, — or requirements, Cc, The Employer shall have the right to reject any _— applicants referred by the Union. If Employer rejects an applicant, he shall immediately notify the Union in writing by noting same on the introductory form presented by the applicants,- © : D. If the: Union does not refer qualified job applicants who’ shall ‘be - acceptable to the Employer for filling the existing vacancies within two (2) working days after - receipt of notice of bisa the Employer shall be free to recruit employees from other sources. - Section 3,3. Probation, All new ee with the exception of temporary employees, shall be considered employed on a probationary basis and classified as.such for a ‘ period not to exceed the first six (6) months of their employment, If retainéd after six (6) months in the same position, such employee shall thereafter be considered a regular employee, be classified as such, and be entitled to all rights and privileges contained in this Agreement retroactive to their first date of hire as a probationary employee. Employees on probation may be terminated for any reason and without cause, Probationary employees are not regular employees and enjoy no rights to employment retention save those established by law. The Employer may terminate probationary employees without age of ape . Section 3.4. Reduction in Force and Layoff. Whenever, in the opinion of the Employer, sound management requires the reduction of the work force in any department, activity, or job classification, the employee to be terminated or laid off to effect such reduction Homer Blectric Assoclation/IBBW Local 1547 Blectrical Generation Collective Bargaining Agreement Page 6 fs\HBA\LbrA2003Negos\Generation\9-26-03\f will be determined by appropriate application of the same factors which govern the selection of - employees as described in Section 3.1(D) and provided that a regular employee terminated or laid off pursuant to a reduction in force will be given two (2) weeks’ notice of such action by the Employer or two (2) weeks’ basic wages. Additionally, any regular employee laid off for other than cause will have recall rights in the filling of a subsequent job vacancy of a regular position in the same classification for a period of two (2) years following the layoff, conditioned upon the einployee continuing to be qualified for the position. Employer shall notify the shop steward of the position, and the shop steward shall have a period of four (4) work days to inform Employer of the acceptance, and any employee accepting xeon shall be prepared to return b to work within three (3) calendar weeks ‘of notice. . Section 3.5. beeen When a regular employee aos, ‘he will provide management with a two (2) weeks’ notice of his resignation. , Section 3.6. Discharge. No regular employee shall be discharged without just _ cause. The existence of cause for discharge, if disputed; shall be subject to the grievance - procedure contained herein, . Section 3,7, Job Change. | Ang employee who is ; changed to a different job shall ” be given a reasonable period, not to exceed ninety (90) days, to become familiar with the job and to demonstrate ability to fill the job satisfactorily. Time may be extended for familiarization upon mutual consent, If, during the familiarization period, the employee demonstrates unsatisfactory ability for the job, the ‘employee Shall be returned to the employee's former a at loss of seniority. Section 3.8. Employer reserves the right to cross- utilize all seiearellca employees between Nikiski Cogeneration Facility and Bradley Lake Hydroelectric Generation Facility except that in such case the following will apply: A. — Employees normally assigned to one generation site will not be assigned on a routine and recurring basis to the other generation site (except for the classification of Power Plant Operator/Rover) but rather will be used only in unusual circumstances such as vacation fill-in, major inspections or overhauls, emergencies, illness, or other = events. B. In the event that personnel assigned to one generation site are reassigned to another generation site for a period of time, employer agrees to normally give 72 hours’ notice but in no event less than 24 hours’ notice of the reassignment and further agrees that the employee shall be permitted to wih, a minimum of ten (10) hours per day. Homer Electric Association/IBEW Local 1547 Electrical Generation Collective Bargaining Agreement Page 7 fi\ HBA\Lbr\2003Negos\Generatlon\9-26-03\ ’ ARTICLE IV “WORK SCHEDULE Section 4.1, Work Scheduling. Because of the nature of work to be performed . by employees covered by this Agreement, establishment of employee’s work schedules, will be accomplished by the Manager of Power Production or his designee. Employer shall have the right to set differing “work weeks for purposes of the federal Fair Labor Standards Act to accommodate shifting, and the Employer and Union agree that, from time to time, Employer may establish a work shift based upon four consecutive 10- hour days in one week followed by four consecutive 10-hour days in the following work week followed by six days off duty. In such a case, Employer shall give not less than 24 hours’ notice of the change of shift, and employees shall work the 10-hour days at the straight-time rate. HEA does not commit to implement or change any shift: Section 4.2. Wo doday: The workday will cover a seerpaly dna (24) hour paliad or any part thereof per the following schedule: ‘Day Shift - . Between 6:00 a.m, and 6:00 p.m. Swing Shift Between-2:00 p.m. and 2:00 a.m. Graveyard Shift Between 10:00 p.m. and 10:00 a.m. . The normal work shift for Nikiski Cogeneration Facility personnel will be Monday through Friday from 8 a.m. to 12 p.m. and from 12:30 Pan. to 4:30 p.m. . The normal work shift for Bradley Lake personnel will be from m a.m, to 12 p.m, and meat to 5:30 p.m, . ; . Employees required by the Ecnployée to work through their lunch outiead will be compensated one-half (1/2). hour at the double-time rate and be allowed to eat on Company time. Starting and ending times for an employee" s work shift may be changed _ depending upon the circumstances, . _. Section 4.3. Wo rhwe: ek, The normal workweek will commence on Monday, 12:01 a.m, and continue through Sunday, 12:00 midnight. The workweek = be changed from time to time based upon circumstances, : Homer Electric Association/IBEW Local 1547 Electrical Generation Collective Bargaining Agreement Page 8 fs\HBA\Lbr\2003Negos\Generation\9-26-03\f ARTICLE V COMPENSATION Section 5,1. Compensation, Scheduled, ‘and Unscheduled. The Employer “agrees to provide a minimum of forty (40) hours per week, 52 Weeks per year, to any regular, full- time aes . A. ~ Rest Time. Any HEA generation employee who has been on duty for four or more hours after 8 p.m. shall not report to work the. day next following until he. has had a minimum of eight consecutive hours of relief, provided, however, that such employee shall be paid at his applicable straight-time rate for those hours of his regularly scheduled shift included in his eight hours of relief, and provided, further, if such employee does not report for work following such ¢ight hours of relief, he will not be entitled to straight-time pdy for those hours of his regularly scheduled shift which were included in his eight hours of relief, If an employee is not relieved for eight consecutive hours, he shall receive the double-time rate until relieved. . ‘ . Be Shift Differential. . Operating personnel scheduled to work ainy shift other than Day Shift will receive a five (5) percent pay differential in addition to the straight-time rate. [on che: uled. When saiclewhel who are working a Monday fire Friday shift ra are ro roquited to work overtime continuing a shift, they shall be compensated at one and one-half (1-1/2) times the regular rate of pay for up to two (2) additional hours beyond the regular shift or, with twelve (12) hours’ notice, up to ten (10) hours on Saturday. Otherwise, any overtime will be paid at the double-time rate. Regardless, any such employee working in excess of fifty (50) hours per week will be compensated at the double-time rate. . 2 When employees who are- working an eight (8) days on and six (6) days off shift schedule are required to work overtime continuing a shift, they shall be compensated at one and one-half (1-1/2) times the regular rate of pay for up to two.(2) additional hours beyond the regular shift, or up to ten (10) hours the day prior to or the day immediately following the employee’s normal rotation. Otherwise, any overtime will be paid at the double-time rate, Regardless, any such employee working in excess of ninety (90) hours per rotation will be - compensated at the double-time rate. : : After an employee has worked one hundred (100) hours of ovettime at the time and one-half (1- 1/2) rate in a calendar year, all future overtime will be paid at the double- time rate, Dz. - Call-back Pay. Any employee who is called back to work after his regular . hours of duty will be pat a minimum of two (2) hours pay at two (2) times the regular hourly rate. Homer Electric Association/IBEW Local 1547 Electrical Generation Collective Bargaining Agreement Page 9 fs\HEA\Lbr\2003Negos\Goneratlon\9-26-O3\F ; _ EB. Standby Pay. An-employee-required to be on standby duty shall be compensated one (1) hour per day at two times-regular pay and two hours per day on weekend ‘days and holidays at two times regular pay in addition to all call-out time: Employees on standby on holidays shall be compensated two hours at the double-time rate. When an employee ‘is assigned standby, an employee will be required to be available for contact by the Association _ through teleplione, pager, or HBA radio system and remain within the general service area of the power plant, available for reasonably prompt Tesponse, The employee will be free otherwise to use his time in the manner he sees. fit. F. os 1, When an employee is required to work two (2) hours or more immediately following his regularly scheduled shift without time off to take a meal, the ‘employee shall, at the conclusion of the two-hour period, be entitled to, a meal at company expense or, at his option, payment of $10.00 in lie of the meal. x When an ‘employee i is called out and works four (4) hours or more, ie shall be furnished a meal after working four hours (and after every four-hour period of work ’ thereafter) and 1/2 hour at the appropriate rate to eat the meal; and if the employee is released from work after the four-hour period, the employee may, at his option, take payment of the $10.00 meal allowance in lieu of the meal. _ If the employee is not released t to take his meal after the four-hour petiod of wotk, the employee will be entitled to payment of the meal allowance of $10. 00 and. 1/2 hour work at the appropriate rate for such missed meal. If the employee is not released to have breakfast at home before the start of his normal shift, the employee shall be furnished a meal, not to exceed $10.00 and 1/2 hour at the appropriate rate to eat the meal or, at the employee’s option, shall be paid for the meal at the end of his shift. dy If Employer requires an employee to travel to a location away from the vicinity of employee’ s assigned work location and to remain away overnight, Employer will either: : : : a. Reimburse employees for actual costs of meals and lodging whit will me arranged by Employer, or b. At the employee’s option, pay to.employee a per diem rate of $60.00 for each day for which the employee is required to remain away from his assigned work location on an overnight basis, in lieu of Employer-furnished meals and lodging, | > ¢, + In unusual cases, ‘Employer may advance employee funds for meals and/or lodging. Homer Blectric Associntion/IBEW Local 1547 Electrical Generation Collective Bargaining Agreement Page 10 fs\HBA\Lbr\2003Negos\Cenerationt9-26-03\¢ ARTICLE Vi HOLIDAYS . Section 6.1. ‘The following holidays will be recognized by the parties hereto as paid holidays: . a New Year’s Day - _ so Veterans’ Day Washington’s Birthday Thanksgiving Day Seward’s Day / : Day after Thanksgiving Memorial Day a Christmas Eve Independence Day Christmas Day - Labor Day New Year’s Eve ’. Holidays listed above will be celebrated on days recognized as such by the*State of Alaska, - If any of the foregoing holidays fall on a Sunday, it will’be observed on the’ Monday next following. When a named holiday falls on a Saturday, the Employer shall declare Friday a non- working day, Employer agrees that if a recognized holiday falls on a Bradley Lake employee’s " scheduled day off, it will be recognized and observed on the next scheduled day of work. The Bradley Lake employée will not eet to work on this any unless expressly directed to do so by the Employer. : Section 6.2. / Holiday Compensation. Work performed on holidays shall be paid at straight time in addition to two times the regular hourly rate for hours worked. Section 6.3, When a holiday falls on a regular workday during an employee’s annual leave, that holiday shall not be counted against accrued vacation time. ARTICLE VII ANNUAL LEAVE Section 7.1, Accrual Rate. © All regular employees, except temporary employees, shall accrue annual leave at the following rates beginning at the first date of last hire: A. First three years: 18 days .B. Fouith year and thereafter: 30 — Total leave accumulation for each employee will be compiled on December 31 of each year, and any leave in excess of ninety (90) days’ annual leave will be forfeited’ by the employee, An - employee on annual leave will be considered in active service, and an employee on approved leave without pay will not be considered in active service. All annual leave accrued will be paid ’ .at the current wage rate when leave is taken. Homer Blectric Association/IBEW Local {547 Electrical Generation Collective Bargaining Agreement Page 11 fs\HBA\Lbr\2003Nogos\Generatlon\9-26-03\f Section 7.2. Vacation Pay. Vacation pay shall be calculated at the employee’ s ’ hourly rate multiplied times the hours of leave taken. Section 7.3. After an employee has completed six (6) months’ employment, he shall be entitled to be paid for leave-carned but not accrued i in the event of termination. Section 7.4, Ancual leave shall be. scheduled by-the Employer after consulting with the employees ‘and taking into consideration seniority and other factors. Annual leave may be. postponed dependent upon the nets of the Employer. _ “Section 7.5. Vacation time shall be utilized for illness of a Employer may require a medical certificate for verification of illness. ! Section 7.6. Jury Duty. Jury duty shall be treated as administrative leave from HEA duty without loss of longevity, leave, or pay. Service in court when subpoenaed as 4 witness on behalf of HBA or when called as an expert on a matter of HEA concern, or relating to ‘an HEA function, or when called as a witness to something that occurred while on work status for HBA in the Anchorage, Soldotna, Kenai, and Homer areas or while on travel status for HRA - will be treated the same as jury duty. In order to be entitled to jury leave, the employee shall provide the department head with written proof of the requirement of his presence for the hours claimed. Fees paid by the court or attorneys calling HEA employees as witnesses (other than travel and subsistence allowances) will be turned in for deposit to the HEA general fund, except that fees paid for court duty which occurs on the employee’s normal non-workdays may be retained by the employee. Witness service for any purpose other than just described will be — covered ‘by annual leave or leave without pay, and any fees received in this connection may be retained by the individual, ; Section 7.7. Workers’ Compensdtion Benefits. The Employer will pay to any . employee.disabled in the Employer’s employment a sum equal to the difference between the total amount of compensation to.which the employee is entitled under the Alaska Workers’ Compensation Act and seventy-five percent (75%) of the total wages to which the employee _ would haye been entitled, computed at the straight-time rate for his regularly scheduled hours of employment, had the employee been on active employment. Provided, however, that all such payments in lieu of wages shall be limited to the period for which the employee is entitled to disability compensation (not to exceed a total of twenty-six [26] weeks), and provided further that the Employer may require the employee to furnish satisfactory evidence of the sums received as disability compensation and medical evidence justifying his continued receipt of such disability compensation. Employees on Workers’ Compensation for temporary disability shall additionally receive pension contributions for forty (40) hours per week for each week while absent from employment on Workers’ Compensation, but not to exceed one (1) year contribution for Homer Blectric Associatiow/IBEW Local 1547 Blecirical Generation Collective Bargaining Agreement Page 12 fs\HBA\Lbr\2003Negos\Generation\9-26-03\¢ employees with less than five (5) years’ employment with HBA and two (2) years’ contribution for employees with five (5) or-more years’ employment with HEA. ARTICLE VII SENIORITY / Section 8.1.. Seniority as used herein shall mean the length of continuous employment in the classification with the Employer. Employees shall not accumulate seniority during the period of probationary employment. After employees have completed the probationary period and have been transferred into regular status, seniority will be dated from the date of hire, Section 82; The seniority of an employee shall terminate if — employee: A. Is laid off for a period of more than twelve (12), imac months. Be - _ Resigns from cenplobitieat with the Employer Cc. Is discharged for Just cause, D. Is temporarily laid off and fails to returi to work within ten (10) working days after written notice requesting the individual to return-to work is delivered by certified mail to the individual’s last known address or to thé individual personally, and fails to notify the Employer of an intention to return to work within forty-eight (48) hours after having received ~ -guch notification. ARTICLE IX LEAVE WITHOUT PAY Section 9.1. All leaves of absence without pay are to be requested from the Employer in writing as far in advance as possible, stating the reason for the leave and the amount of time requested. The granting of leaves of absence is a matter of discretion with the Eniployer depending upon the needs of the company; and, in any event, the granting of a leave of absence without pay shall be considered an SeRLAORIUy event, Section 9.2 Except as otherwise provided for in Section 9,4, leaves of sheets without pay may be granted for periods of up to one hundred eighty (180) calendar days depending upon the needs of the Employer. In special cases, leaves of absence may be extended " by mutual agreement, During such periods of approved leaves of absence, seniority shall be frozen. All other benefits will,be terminated during such periods of leaves of absence. Homer Blectric Association/IBBW Local 1547 * Blectrical Generation Collective Bargaining Agreement - Page 13 fs\HBA\LbA2003Negos\Generation\9-26-03\f Section 9.3. ieee aera Emergency ‘paid leave for absence due to the critical illness or death of an employee’s immediate family (parents, spouse, children, . brother, sister, grandparents, and parents-in-law) will be granted as soon as possible after ~ -application to the Employer. This emergency paid leave will not exceed three (3) working days per calendar year per employee and will not be accumulative. If travel outside the ‘state is . required, up to two (2) additional a may be granted upon application to the Human Resources . Eee Section 9.4: Medical Leaye of Absence. Upon exhaustion of annual! leave — credit, and upon satisfactory proof to the Employer that additional leave is necessary because of ’ illness or medical attention or disability, the Employer will-grant such employee leave without .. pay until he returns to work, or until it has been medically determined that he is physically ’ unable to return to work;.provided, that such-leave will not exceed_one (1) year if the employee had less than five (5) years of service credit at the start of such leave, or exceed two (2) years if the employee had five (5) years or more service credit at the start of such leave, and the Employer will continue health insurance benefits during such period. — ARTICLE X APPRENTICESHIP/TRAINING ; Section 10.1, "When assigned to a school or training facility by HEA, employees will not suffer a Joss in wages. Wages will * limited to eight (8) hours per day for forty (40) hours per r week at straight time. Section 10.2. Travel Qutside the State. Employees cwiilions directly to or from a . training location will be compensated in accordance with federal and state wage and hour laws’ ' and regulations. Employees traveling on company business shall be compensated in accordance with federal and state wage and hour laws and regulations but shall, at a minimum, receive straight-time pay for actual travel time not to exceed eight (8) hours‘each way. Employeés will be consulted on their desired travel schedule, but the es retains the discretion to schedule all employee travel. : wees Section 10.3. Apprentice. An apprentice is an employee who is being trained in one of the electrical trades covered by this Agreement, The Employer shall provide. the required training and education for advancement to the status of a qualified journeyman Plant Operator. Upon request, the Employer will meet and confer with the Union's business representative and/or a representative from the bargaining unit to review the education and training plans for any apprentice, but the Employer reserves the right to establish the training program for the apprentice, As an alternative approach, the Employer may decidé to participate in the Generation Apprenticeship Program being developed by the Alaska Electrical Apprenticeship and Training Trust. The Employer will then meet with the Union to discuss the terms and it conditions for participation in the program, Homer Electric Association/IBEW Local 1547 Electrical Generation Collective Bargaining Agreement Page 14 AiUmrAKLA“ONiHNapedCGonoriolg 26-09 ARTICLE XI HEALTH BENEFITS Section 11.1, Health And Welfare Plan. During the first ive (2) years of the Sects, the Employer shall pay into the Alaska Electrical Health and Welfare Fund the full cost for health insurance in Plan 312 per month for every employee covered by this Agreement . who was compensated for 80 hours or more in thé previous month, said payment to be made on or before the 10" day. -of each month, During each of the remaining three (3) years of this Agreement, premium increases will be shared as 8 follows: A. The Employer will pay the first 7.5% increase in premiums over the prior year, and any remainder will be shared equally by Employer and employee up to a total increase of 25%, and Employer wal pay any additional increase beyond 25%. B, There will bea cunmlladtve cap of $100 | per month for employees that will apply during the term of the Agreement. (1) ‘The benefits to be provided under this Section are those’ currently provided by the Alaska Electrical Health and ‘Welfare Fund for Plan 312 participants. (2) Employer will shovide NRECA LTD = insurance and life insurance at current levels. — ; Cc, oe will pay the cost of the ICC physicals. not covered by their . health and welfare i insurance. D. Employees will be allowed to take their physical exams on company time, scheduled in advance and approved by their supervisor. The time excused off for the exam will not exceed one half (1/2) hour of company time. ARTICLE Xi - RETIREMENT CONTRIBUTION Section: 12.1, Effective May 1, 2003, the Employer shall dcatstiens $4.52 per compensable hour worked to the’ Alaska Electrical Pension Plan on behalf of the employees covered by this Agreement. Employees have elected that contributions made by Employer shall be invested in the five-year vesting plan provided by the Alaska Electrical Pension Fund. Employer’s obligation — be limited to such contributions. - Effective May 1, 2004, the Employer contribution shal] increase to $4.87 per compensable hour. Homer Electric Association/IBEW Local 1547 ° Blectrical Generation Collective Bargaining Agreement Page 15 fs\HBA\Lbs\2003Negos\Generation\9-26-03\F Bffective May 1,-2005, the Employer contribution shall increase to $5.17 per compensable hour. . . _ Section 12.2. IBEW Hardship and Benevolent Fund, The Employer shall, ‘beginning with the first pay period following notification by the Union that a majority of the bargaining unit employees covered by the Generation Agreement elect to participate in the. IBEW Hardship and Benevolent Fund (“IHBF”), reduce each employee's base hourly wage by five cents ($0.05) and contribute five cents ($0.05) per hour to the IHBF for each compensable hour worked by all bargaining unit employees, The Union agrees that the Employer assumes no responsibility in connection with the IHBF éxcept that of ordinary diligence and care in forwarding monies deducted as set’ forth in this Article. The Union shall indemnify the Employer and save the Employer harmless from any and all claims against the- Employer for amounts deducted and withheld from wagep. . ARTICLE XI . - 4 EMPLOYMENT PRACTICES ; “Section 13.1: The Employer shall furnish a'room with lockers for clothing and tools. ae Section 13.2, An employee who is laid off or discharged by the Employer shall receive all accrued earnings, less any personal obligations owed the Employer, not later than seventy-two: (72) working hours after the time of layoff or termination, An employee who resigns shall receive at the time of resignation all accrued earnings, less any personal obligations owed the Employer, provided the employee has given the minimum notice of two weeks, Section 13.3. Bradley Lake, A The Bradley Lake generation personnel shall continue to be allowed to inhabit housing at Bradley Lake under the terms and conditions of the project site work rules attached hereto as Attachment 1, When Soldotna generation Nikiski Cogeneration Facility - personnel and other personnel are assigned to Bradley Lake on a temporary basis, they: shall utilize existing Bradley Lake bunkhouse facilities in accordance with site rules, In the event that Employer assigns Nikiski Cogeneration Facility personnel to the Bradley Lake site for an extended period of time (in excess of 45 days) and if housing other than the bunkhouse facilities - is reasonably available, such facilities will be extended to the personnel; subject to the commitments and needs of the Employer. HEA agrees to continue to fund the cost of satellite ‘television to transient personnel who ate living in the bunkhouse facilities. Bradley Lake Generation Facility personnel shall fund the cost of satellite television i in their duplex. - - B. HBA agrees that the housing agreemerit as amended between the parties will apply. HEA agrees that at time of hire, Employer will fund the transportation of up to 3,000 pounds of personal goods from Homer, Alaska to the Bradley Lake site for personnel who are Homer Blectric AssociatiowIBBW Loca) 1547 Electrical Generation Collective Bargaining Agreement Page 16 fAHBA\Lbr\2003Negos\Generation\9-26-03\F assigned there as regular employees and to fund the transportation of 3,000 pounds of personal goods from the site to Homer, Alaska, at a time of termination of employment at Bradley Lake. : c Housing. Employer will provide existing housing (owned by the State of Alaska), to include existing furniture and appliances, to employees regularly assigned to the Bradley Lake Hydroelectric Generation Site. Such housing will.be provided rent free, and "Employer will pay water, sewer, heat, and electricity, as well as the cost of routine maintenance. Employees will be responsible for maintaining the premises which they inhabit in a clean and well-kept manner and shall not commit waste upon the premises, Employees will be responsible . to Employer for any damages resulting from employee’s occupancy and which are the result of misconduct, negligence, or misuse of the property by employee or his dependents. For - ‘employees dispatched to the site by Employer but who are not regularly assigned there, Employer will provide rooming, kitchen facilities, linen, and periodic cleaning services. Employees shall occupy the premises subject to the reasonable restrictions of'the Employer. D. . Employer agrees‘ to provide air transportation for employee and spouse - from the Bradley Lake Hydroelectric Generation Site to Homer, Alaska, following completion of an employee’s shift and to provide return transportation from Homer, Alaska, prior to the beginning of the employee’s shift. Employee dependents shall -be provided transportation on a " space-available basis. Additionally, employees shall be entitled to transport groceries on scheduled flights and non-essential personal items on a space-available basis. In this paragraph and in paragraph F, below, a shift means that. period of consecutive work days between scheduled days off. Travel to and from the generation site is on the employee’ s time., : E. HBA agrees to arrange medical emergency transportation from the Bradley Lake Generation Site for employees and dependents in case of medical emergency. ‘HEA agrees that employees should not be responsible for emergency medical evacuation for employees or dependents and neers this is covered by insurance, F, When an employee i is unable to fly to or from the site at ‘the start or finish of a shift due to bad esau the following will apply: “4, 0 Ikan employee i is weathered in at Homer and reports immediately to HEA offices, he will be used as HEA requires and paid at the applicable Sesion rate. . 2: If an employee is weathered i in at the generation site, he may work at the option of HEA. i i G. | HEA agrees to pay an amount of $30 per day as compensation for meals and food for those personnel who are temporarily assigned to Bradley Lake and who reside in the bunkhouse facilities. Bunkhouse ene will be provided rent free to employees. . H. The parties agree to establish as bargaining unit positions temporary full- time and temporary part-time positions at Bradley Lake. The Facility Maintenance Worker shall Homer Electric Association/IBBW Local 1547 Electrical Generation Collective Bargaining Agreement Page 17 fe\HEA\Lbr\2003Negos\Generation\9-26-03\F be used for maintenance work at the facility extending to and including the operation of heavy equipment located outside of the power plant. Both the Employer and the Union understand that the Employer is under no obligation to either continue to utilize the “eight days on and six days off” shift or continue to utilize temporary employees at the generation site except as it deems necessary. The parties agree that Employer's continuation of such practice shall’ be as an accommodation to the employees in the bargaining unit as well as the Employer's present needs = shall not constitute binding past practice. With tespect to temporary part-time and temporary full-time positions -established under this gett, the following shall apply: (1) Employer agrees to hire — employees according to the referral procedure in Article III except that 4 person, on the out-of-work list applicable to the position to be filled who resides within the distribution service areca of the’ Employer, shall be referred before non-residents. Temporary employees shal] be considered émployed “at. will,” and Employer shall be free to utilize employees and terminate employees as Employer’s needs dictate. : : (2) Employer will be free to utilize temporary employees in the above - classifications as Employer in its discretion deems necessary or appropriate except that, in the’ event of a reduction in force, all temporary cenpguyees will be laid ‘off before any regular employee is affected. (3) - Temporary employees shall be covered by this Agreement except that the following articles and the provisions. contained therein shall not apply to temporary ‘ employees: @* Article VIL (ii) Article XI. (iii)** Article XII’ * Article VII shall apply to temporary employees upon completion of 1,040 hours of employment i in any calendar year. . ** In place of Article XII, for a facility maintenance worker HEA will contribute $3.97 per . compensable hour for the benefit of each temporary Bradley Lake employee to.the Money Purchase Pension Plan (Defined Contribution Plan) as provided through the Alaska Pension Trust. Pension contributions will be adjusted at a rate equivalent to 76.4% of pension adjustments which may be provided for in Article XX of this Agreement. All journeyman-level employees shall be paid pension benefits in accordance with the IBEW/NECA Inside and | Outside Agreement. Additionally, HEA will contribute funds to the IBEW/NECA health insurance for each compensable hour worked by.’ temporary Bradley Lake employees in Homer Electric Association/IBBW Local 1547 Electrical Generation Collective Bargaining Agreement Page 18 " f\HELAMLbA2003Negos\Generatlon\9-26-03\¢ accordance with the rate established by-the IBEW/NECA Inside and Outside Agreement. Further, Section 6.2 of this Agreement does not apply to the temporary Bradley Lake employees. Ih lieu of holiday compensation, they will be paid at two (2) times the regular straight-time ‘hourly rate for hours worked on a holiday for holidays identified in Section 6.1 of this Agreement. A. If the employee is temporarily assigned to Seldovia, the employee shall have the opportunity, if the employee chooses, to work eight (8) hours per day at the plant if the employee is unable to leave the work site at the end of a work shift because of weather or other conditions which prevent air travel. . , B, If a regular full-time employee has completed a regularly scheduled work week at the Nikiski Cogeneration site or the Bradley Lake site and is temporarily assigned to’. _ work the next consecutive day at Seldovia, the next consecutive day shall be paid at the applicable overtime rate, C,. If the employee. is temporarily assigned to work at the Seldovia Plant alone, the employee shall receive the lead compensation differential above his regular rate of - pay. “Dd. If the employee is temporarily assigned to work alone at the Seldovia Plant, the employee-shall receive standby pay. B. The employee shall not be assigned to work at Seldovia n more than ten (10) consecutive days without two days off. Fr. If the employee is temporarily assigned to work at Seldovia, he will have ~ actual meal and lodging expenses paid by the Employer in licu of per diem, ARTICLE XIV SAFETY Section 14.1. State Safety Code. The applicable electrical safety ‘laws and "regulations which have been.adopted by the State of Alaska, and any duly adopted amendments thereto or substitution thereof, are hereby adopted by the parties as the minimum standards of safety to be met in the implementation of this Agreement and i in the assignment to and discharge of work by employees covered herein. Homer Blectric Association/IBEW Local 1547 Electrical Gencration Collective Bargaining Agrecmsnt Page 19 fs\HBA\Lbr\2003Negos\Generalion\9-26-03\F courteous and businesslike manner, particularly where other employees or the public are concerned. Employees may be subject to disciplinary actions, including oral admonishment, written’ reprimand, suspension, discharge, and any combination of the above, for breach of employmient practices. Examples of employee misconduct which may justify disciplinary action by the Employer include the following: A. Rudeness, profanity, slander, or discourtesy to members of the public, other employees, or the company. [ : B, Fighting, horseplay, or prohibited activities during work hours or on employment premises not related to employment Rees ; Cc. Conduct of work or other activities while on duty or on | Boployer 8. premises in violation of safe working practices or other written safety rules. w Dz. Illegal activities conducted while off duty which directly affect the | a ai s sini to —— serve the Employer and the public. E Violation of any of the express or implied work rules of the Employer, Implied work rules must. be known or reasonably ascertainable _by an employee who is ~ disciplined. Section 15.2, HEA agrees “nr discipline to be administered under this Agreement requires the existence of ‘ Just cause.” ARTICLE XVI GRIEVANCE PROCEDURE “A. ~~ Grievance Procedure. A grievance is hereby defined. as an alleged .violation of the terms of this Agreement. Any employee, group of employees, or Employer having a: grievance shall proceed according to the following steps to seek a satisfactory settlement of the grievance. To provide the best opportunity for the grievance to be solved at the lowest level, notie of the following steps shall be omitted. Step One: The employee shall discuss the grievance with his immediate supervisor. If the employee and the supervisor fail to agree on the matter, Step Two will be followed. Step Two: The employee will discuss the grievance with the Shop Steward who will, in turn, seek to settle the grievance with the-employee’s immediate supervisor. If the Shop Steward cannot reach an agreement with the employee’s supervisor within five working days, Step Three will follow. Homer Blectric Association/ IBEW Local 1547 Blectrical Generation Collective Bargaining Agreement Page 21 {s\HEA\Lbr\2003Negos\Gencratlon\9-26-03\F Section 14.2. Dangerous and Hazardous s Work, A. In the interest of safety, no employee will be required to work directly on energized circuits of 480 volts or higher without a second person qualified in in first aid and CPR in the immediate proximity. B. Helicopters. Employees required to ride in or work under a iene ‘shall receive one hour’s pay plus the applicable hourly rate for clock time worked under the: helicopter or actually riding in the helicopter. This shall not apply to travel to and from the . Bradley Lake Hydroelectric Generation Facility. c. : Pilots. The employee shall have the right to refuse to fly with a pilot * .whom he deems unsafe. Rejection of a pilot will be done through normal supervisory channels. - Except in the event of an emergency, an employee may select a pilot of his own choosing. Section 14.3. Safety Training. The Employer will schedule, and the employees - on shift will participate in, not less than two (2) hours each month of safety training which will be during regular walk hours, including eight (8) hours of first aid training per year. " Section 14.4, Emergency and First Aid Equipment. The Employer will furnish stich safety devices and equipment as may be reasonably necessary to the safety of employees hereunder, and such first aid equipment and supplies as may be reasonably necessary for proper emergency treatment of such employees, All reasonably necessary protective equipment for employees working on energized facilities, including hard hats, rubber gloves, goggles, and hearings protectors, will be furnished and maintained by the Employer. Employees hereunder will use safety equipment on all appropriate occasions. - Section 14.5. The Employer and the employees shall attempt to operate,’ maintain, and construct the Company’s plant, headquarters facilities, and nee in such a "manner as to receive the Safety Accreditation Certificate, Section 14.6. All employees shall be responsible for working in a safe and proper manner, and. their failure to do so shall be a subject of discipline. ; Section 14,7. Dmg and Alcohol Testing. ‘The parties hereby incorporate by- reference and agree to follow the drug and alcohol testing guidelines, policies, and standards applicable to the Outside Collective Bargaining Agreement ‘between the Employer and the Union, as those guidelines; policies, and standards may be amended-from time to time. ARTICLE XV DISCIPLINE . Section 15.1. All employees shall be required to carry out their duties in a Homer Blectric Association/IBBW Local 1547 Blectrical Generation Collective Bargaining Agreement Page 20 {a\HIBANL.be\2003Nogox\Generation\9-26.03\" courteous and businesslike manner, particularly where other employees or the public are concerned, Employees may be subject to disciplinary actions, including oral admonishment, written reprimand, suspension, discharge, and any combination of the above, for breach of employmient practices. Examples of employee misconduct which may justify disciplinary action by the Employer include the following: A. Rudeness, profanity, slander, or dinoausioay to members of the public, other employees, or the company. ! Ey I B, Fighting, horseplay, or prohibited activities during work hours or on employment premises not related to employment fiat | Cc. Conduct of work or other activities while on duty or on . Employer’ 8 premises in violation of safe working practices or other written safety rules, v D. Illegal activities conducted while off duty which directly affect the ; employee’ s — to suai serve the Employer and the public. E Violation of any of the express or implied work rules of the Employer, Implied work ‘rules must, be known or reasonably, ascertainable, by an employee who is - disciplined. Section 15.2, HEA agrees that discipline to be administered under tits Agreement requires the existence of ‘ just cause.” ARTICLE XVI GRIEVANCE PROCEDURE A. Grievance Procedure, A grievance. is hereby defined. as. an alleged violation of the terms of this Agreement. Any employee, group of employees, or Employer having a grievance shall proceed according to the following steps to seek a satisfactory settlement of the grievance. To provide the best opportunity for the grievance to be solved at the lowest level; norie of the following steps shall be omitted. Step One: The employee shall discuss the grievance with his immediate supervisor. If the employee and the supervisor fail to agree on the matter, Step Two will be followed. Step Two: The employee will discuss the grievance with the Shop Steward who will, in turn, seek to settle the grievance with the-employee’s immediate supervisor. If the Shop Steward cannot reach an agreement with the employee’s supervisor within five working days, Step Three will follow. Homer Bleciric Association/IBEW Local 1547 Blectrical Generation Collective Bargaining Agreement Page 21 fs\HEA\Lbr\2003Negos\Gencratlon\9-26-03\F Step Three: The Shop Steward shall state the grievance in writing; the statement will include the following: (a) The nature of the grievarice and the circumstances out of which it arose, including the date of occurrence, (b) The.remedy or correction the Employer is cml to make, c) The section or sections of the Agreement relied upon or alleged to have been violated, . (d) The ee of-the grievant and the Shop Steward. - (e) The date the statement of the grievance was prepared. * Step Four: The written statement of the grievance shall be turned over ‘to the Union's Business’ Manager or his representative to be presented to the ae s designated representative within 15 working days of the occurrence. Step Five: The Union and the Employer will have 14 days.to discuss the grievance, hold meetings, and try to come to a mutually agreeable scttlement. Prior-to the end-of the specified 14 day period, Employer will provide Union with a written statement of their position on the grievance. Step Six: If the grievance is not resolved at Step Five, either party may submit the matter to ‘arbitration within seven days from the date Union ieceives Employer's statement, as stated in Step Five. B. The parties agree, upon request for arbitration, that any alleged violation _ shall proceed .immediately to arbitration and that it shall be their intent to take such matter to arbitration as expeditiously as possible. For purposes of grievance processing, “working days” * shall mean Monday through Friday. ‘The’ failure of the Union to satisfy the time limits contained . herein will constitute a waiver of the grievance, . ARTICLE XVII ARBITRATION A. The parties agree that unresolved grievances, upon request of either party, shall be taken to arbitration before a neutral, independent arbitrator selected by the parties, whose decision shall be binding upon the an and whose decision the parties agree to songnlee and abide by. : B. Upon request or demand for arbitration in compliance with the article .. Homer Electric Association/IBEW Local 1547 Blectrical Generation Collective Bargaining Agreement Page 22 fs\HBA\Lbr\2003Negos\Generation\9-26-03\F concerning grievances, the parties shall designate an agent or representative for the purpose of selection of an arbitrator. Notice to either party shall be given as to. whom should have the authority to commit that party for purposes of selection of an arbitrator. The parties shall, within fifteen (15) working days, meet to attempt to select an arbitrator agreeable to the parties, If the parties are unable to select an agreeable arbitrator, the parties shall submit a request to the . American Arbitration Association for appointment of an arbitrator to conduct the arbitration. —c; Whether the parties have independently selected their arbitrator or have selected an arbitrator through the services of the American Arbitration Association, except as provided elsewhere herein, the Rules For Voluntary Labor Arbitration promulgated by the © American Arbitration Association shall govern the conduct of any arbitration, D. The parties agree that the non-prevailing party shall’ bear all costs and expénses of the arbitrator, including transportation, per diem, and professional fees, as well as all fees for preparation of transcript and other direct costs incurred by the arbitrator. Hach party shall bear its own costs and fees for preparation and presentation of its case at an arbitration, E. The parties agree that the arbitrator shall have no authority-to amend or alter the terms of this contract. Rather, the arbitrator shall be limited to an interpretation of the. - terms of this contract and resolution of the precise issues submitted to the arbitrator. The arbitrator shall not be empowered to interpret or apply Alaska Jaw or federal Jaw, except as may be absolutely necessary and incidental to an interpretation of the Collective Bargaining Agreement in resolution of the grievance. ARTICLE XVIII NONDISCRIMINATION . - Section 18.1, Union and Employer agree not to discriminate against employees where prohibited by law. : . : f Section 18.2. For the purpose of this Agreement, when the ‘male gender is used, it shall mean both male and female ai at ine ; ARTICLE XIX MISCELLANEOUS Section 19.1. Previous Agreements. Any and all agreements previously entered ~ into by the — hereto are in all things mutually canceled and superseded by this Agreement. Section 19.2. Invalid Articles, Should any article, section, or prevision herein contained be rendered or declared invalid by reason of any existing or subsequently enacted statute or other law or by the decree of judgment of nay court of competent jurisdiction, the. Homer Electric Association/IBEW Local 1547 Electrical Generation Collective Bargaining Agreement Page 23 [s\HEA\LbA2003Nogos\Generatlon\9-26-03\F invalidation: of such article, section, or provision will not affect the remaining portions hereof; and such other parts and provisions will remain in full force and effect. Upon the invalidation of any article, section, or provision hereof, the parties will meet and negotiate the parts and provisions concerned within thirty (30) days from the date the fact of such invalidation is ‘communicated to them; provided, however, that the parties may mutually agree to extend the time for such negotiations, ARTICLE XX _ WAGE AND CLASSIFICATION SCHEDULE : Plant Operator Journeyman Rate ; 5/1/03 “$31.75 - Foreman ° : 112% _ Plant Operator/Blectrician 100% "Plant Operator/Mechanic 100% Plant Operator/Rover ae 100% Facility Maintenance Worker 76.4% ‘Apprentice =) -1000 Hours 50% - 1001-2000 Hours Ls 55% 2001-3000 Hours ~ ‘ 60% ‘3001-4000 Hours * 65% 4001-5000 Hours . “10% 5001-6000 Hours - . , . 15% 6001-7000 Hours 80% 7001-8000 Hours 85% Bffective May 1, 2004, the wage rates for the jourheyman ‘positions will be increased in an amount equal to one hundred percent (100%) of any increases in the Anchorage CPI-U published by the.U.S. Department of Labor and measured from the first one-half of 2003 to the second one- half of 2003, with a minimum increase of two percent (2%) and a maximum increase of four percent (4%). Effective May 1, 2005, the wage rates for the journeyman positions will be increased in an amount equal to one hundred percent (100%) of any increases in the Anchorage CPI-U published Homer Electric Association/IBEW Local 1547 Blcctrical Generation Collective Bargaining Agreement Pago 24 {s\HEA\Lbr\2003Negos\Generation\9-26-03\F _ by the U.S. Department of Labor and measured from the first one-half of 2004 to the second one- half of 2004, with a minimum increase of two percent (2%) and a maximum increase of four percent (4%). : Effective May 1, 2006, the wage rates for the journeyman positions will bé increased in an amount equal to one hundred percent (100%) of any increases in the Anchorage CPI-U published by the U.S. Department of Labor and measured from the first one-half of 2005 to the second one- half of 2005, with a minimum increase e of [wo percent (2%) and a maximum increase of four - percent (4%). Effective May 1, 2007, the wage rates for the journeyman positions will be increased in an amount equal to one hundred percent (100%) of any increases in the Anchorage CPI-U published by the U.S..Department of Labor and measured from the first one-half of 2006 to the second one- half of 2006, with a minimum increase of two percent (2%) and a maximum increase of four percent (4%). . 7 4% Any increase in the rates may, at the option of the bargaining unit; be applied to retirement. The - unit may, at its option, elect to place any increase into the 401(k) Plan as an —— Employer _ contribution. . HOMER ELECTRIC ASSOCIATION, INC. ’ INTERNATIONAL BROTHERHOOD OF Homer, Alaska - ELECTRICAL WORKERS, LOCAL 1547 . Anchorage, Alaska — wy Mew K boyy David R. Carey - Title:____Board President. ick Eckert . Jack Beemer Title: Interim Gener. nage! . Title:___Business Representative’ _- . Date:_/O- 23-03 Date LZ? -24Y- OF oN we NESS By: Duane Parlow . John Sherlock Title: \dministrati vices Title:____ Bargaining Team Member pat Lo\R NOR - Date: Homer Electric Association/IBEW Local 1547 Blectrical Generation Collective Bargaining Agreement Page 25 INTERNATIONAL QEFICE= {4.8 NOV 2 5 2003 Edvain D. Hil, Proskiont ‘This epproval does riot make tho f\HEA\Lbr2003Negos\Goneratlon\9-26-03\F : {ntemationa a party to thle agoement, Donald C. Ellis : 9/2 pie Homer Blectric Association/IBBW Local 1547 Blecirical Generation Collective Bargaining Agreement Page 26 fe\HBA\LbA2003Negos\Generntion\9-26-03\F BRADLEY LAKE HYDROELECTRIC PROJECT » _ PROJECT SITE WORK RULES The Alaska Energy Authority (Energy Authority) welcomes you to the Bradley Lake Hydroelectric Project (Project) and hopes that it will be a comfortable worksite for you. While you are an employee of the Energy Authority stationed at the Project, you will be provided furnished living quarters. The following guidelines are provided to explain the various dutles and responsibilities for living at the project site In a fair, equitable and nondiscriminatory manner. While the Information offered here is intended to be comprehensive, It Is not all-inclusive, is subject to change’ and may be updated or revised from time-to-time at the direction of the Executive Director and/or the Director/Facilities Operations and Engineering. For these reasons, please check with the Senior Operations Englneer for verification prior to taking any questionable action. The following guidelines are separated Into two main sections: 1) Project Residency . Guidelines and 2) Project Employment Guidelines. PROJECT RESIDENCY GUIDELINES Ae Moving Expenses/Logistics To and From Site. _Upon assignment to the Project, the Energy Authority will move personal household belongings to Homer at the Energy Authority's expense in compliance with the State of Alaska moving regulations/Energy Authority policy as directed by. the Executive Director. The move will be coordinated through the General: Foreman/Bradley and the Personnel Officer. In addition, the Energy Authority will transport up to 3,000 pounds of personal belongings _between the project site and Homer at. the commencement and the termination of employment at ine" Project. ‘ 2; Housing Provided. At no cost to the employee, the Energy Authority will provide a two bedroom furnished housing unit at the Project site for use by each employee, their family, and visitors. On-call employees will be required to, be on-site continuously throughout their normally scheduled workshifts. © Major appliances, maintenance equipment and normal kitchen, living room, and bedroom furniture are provided by the Energy Authority in the housing units, Small appliances, cooking utensils, bedding, entertainment devices, personal belongings and other. furnishings are the responsibility of the employee and are not supplied by employer. The General Foreman/Bradley will provide employees with a list of the provided furnishings and household goods and their condition both at the commencement of employment and at the end of émployment at the Project. 3. Utilities. The Energy Authority will provide electricity, heat, sewer, and water. Employees will be responsible for and pay for their personal telephone calls and any service charges for telephone and television. ATTACHMENT 1 4, Food/Supplies/Mail. Employees will be responsible for the purchase and preparation of their own food. Food and mail will be transported from Homer to the Project on a space-available basis on scheduled flights by the contracted flight operator. Delivery of food and mail to the contracted flight operator will be the responsibility-of the ii; employees, All transportation of employee food, supplies and mail must be coordinated for transportation through the General Foreman/Bradley or his vealgiated representative. d nos Condition and Maintenance of Housing. Employees are responsible for _ maintaining the original condition of housing with the exception of normal wear and tear. . Employees are responsible for damage to their housing: unit and/or common areas or any equipment thereon which may be sustalned by reason of carelessness, negligence or inténtional acts of employee or his/her relatives and visitors to the project site. ; Routine maintenance, housekeeping and repair of the provided housing is the responsibility of the employees. Employees are expected to keep their housing units repaired and maintained i in good sy order and condition. 6. Damages. Employees are not required to pay an n up-front damage deposit for their housing unit. ‘Damages to the housing unit determined to be caused by the employee or family/frlends of the employee, other than normal wear and tear, may be deducted from the employee's pay. . ; a, Personal Property. The Energy Authority Is not responsible for damages by wind, fire, water, theft, earthquakes or natural disaster, etc., to personal effects located within the housing units or stored at the Project. Employees will be responsible for maintaining their own personal property insurance for their personal belongings. 8, _ . Rental. Employees are not allowed to rent any portion of the Energy Authority- provided housing, or permit its use by Individuals not approved as visitors. , 9. Alterations. Structural alterations are be allowed to the. housing units nor are additions or alterations to the common areas. Outside installations such as antennas, basketball hoops, etc, are prohibited unless approved In writing In advance of Installation by the General Foreman/Bradley or the Senior Operations Engineer. a 40. Owner/Access. The Senlor Operations Engineer or the General Foreman/Bradley, or other Energy Authority management official, may authorize entry to an employee-occupied housing unit in emergencies if there is reason to believe there _ ‘may be imminent danger. Such entry may be authorized whether or not the employee is present at the time. . The Energy Authority also maintains the right, in times of non-emergency, to conduct unit inspections, usually after a 24 hour notice, to ensure the health and safety of all residents, to protect the Energy Authority’s property and a general maintenance of the facility. BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT SITE WORK RULES Page 2 11; Drugs/Alcohol. In keeping with Energy Authority polioy, the- Project shall remain - drug-free and alcohol-free. 12. - Noise/Offenses. Employees ‘and’ their guests: may.not cause a nuisance to other resident employees. This includes, but Is not limited to, noise, nolse producing _ activities and noxious or other offensive activities. No Improper, offensive ' or unlawful use shall be made of any part of the Project. 43. Trash. Employees will deliver trash from the housing units to thé site incinerator. _ No storage of trash will be permitted in or outside of any residence in such a manner as to permit the spread of fire or encouragement of vermin. : 14, Pets. One dog or cat or other non-exotic pet per family is allowed. The General Foreman/Bradley may authorize exceptions to this guideline for birds} fish, gérbils, etc. No kennels, dog teams, livestock, horses and/or other exotic pets are allowed. Owners of pets are responsible and liable for injury, damage or loss caused by their pets; it is their responsibility to ensure that pets are not nuisances and that they do not create unsanitary conditions in/around living quarters. Pets must be leashed or under the owner's control while on Energy Authority-owned or controlled premises. 15. Storage. Common areas in and around housing units and project facilities shall . not be obstructed or littered. Explosives or illegal products shall not be kept In the housing units. Paint, stain or other inflammable products should be stored in approved containers. Personal property storage, with the exception of firewood piles, is not ' permitted outside of the employee’s housing unit or assigned yard space. Outside property storage will be in a designated area as approved in writing by the General Foreman/Bradley. 16. Firewood. lf employees so desire, they may store flrewood for use in their fireplaces. Wood plles shall be allowed in common areas around the housing units at a - location, or.locations, specified by the General Foreman/Bradley. Wood shall be neatly stacked, and shall not touch the common area walls. 7. Gardens. Upon approval of the General Foreman/Bradley, garden plots may be permitted. 18, Education. Education for school age dependent children of employees Is the sole responsibility of the employees. 19. Voting. Voting privileges will be by means of absentee ballot and will be the responsibility of the a BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT SITE WORK RULES Page 3- 20. Firearms. Storage of firearms will be permitted in the housing units only. Use of firearms will be in accordance with local and state law. Discharge of firearms will not be aera within one-half (1/2) mile of the Project facilities. 21. Medical Emergencies. The General Foreman/Bradley or deistoreatedd authority will arrange for and coordinate assistance or. evacuation to treatment facilities for. medical emergencies pursuant to the facllity emergency action plan or evacuation plan. The General Foreman/Bradley or designated authority should be contacted immediately ‘concerning any Worker's Compensatlon-related illnesses or accidents. The General Foreman/Bradley will provide and complete the necessary forms regarding the Worker's . Compensation Incident(s) to the Energy Authority Personnel ‘Officer within-72 hours of ‘the accidentiliIness report, ; 22. Personal: Vehicles. Employees may not store or operate motorized personal wheeled vehicles on the Project roads. x Petroleum products for personal use may be purchased from the Project at the ~ current price pald by the Project tothe vendor. Purchases may be made through the General Foremen/Braciey or designated authority. 23. Recreational Vehicles. Snowmobiles, four wheelers, and other motorized off- -road vehicles including trall bikes, jeeps and other four wheel drive vehicles not used in project maintenance are prohibited on Project roads per stipulations of the FERC license. ' 24. Private Boats. Private boats are allowed to the extent that they do not interfere with Project operations. Private boats on the site must be approved by the General Foreman/Bradiey or Senior Operations Engineer. ; 25. Private Aircraft. The Project landing strip may be used by employees who own aircraft. Use is governed by Federal Aviation Administration rules and regulations and is to be used as Visual Flight Rules only. A State liability walver will be required for its use, Only aircraft meeting.requirements of the State Division of Risk Management to _ .use a State facility will be allowed to use the alr strip. All aircraft services procured by - the Energy Authority and utilized by employses and their. guests must be logged .and _° coordinated through the General Foreman/Bradley. No personal aircraft storage |s. provided. Employees are liable and responsible for their personal equipment on site. 26. Parking. Project vehicles may not be parked in such a manner as to Heck i access to Project facilities, fire hydrants, designated fire lanes; they may not be parked on lawns or in such-a manner as to damage yards or yardwork. 27, Project Vehicles. Project vehicles are not to be used by persons other than employees except in the case of emergency, In the case of emergency use by non- employees, the General Foreman/Bradley, or his/her designee will be immediately BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT SITE WORK RULES Page 4 notified.. Project vehicles may be used only. in the conduct and support of Project business. 28. Speed Limit. The speed limit on the Project site is as posted and as Is ‘reasonable for current conditions. 29. Transportation to and from. Project. Transportation to and from Homer will be provided through the Energy Authority's contract carrier as scheduled by the Senior Operations Engineer and/or the General Foreman/Bradley for the employee at the start - and finish of each workweek schedule. On-site persons residing with the employee will be accommodated on a space-available basis on these flights. Those persons Involved _ in a medical emergency will have first priority. Transportation for employee and dependants other than scheduled flights will be arranged and paid for by the employee. ‘ Only approved air cartlers meeting the -requirements of the State Division of Risk Management to use a Sfate facility will be 7 allowed to utilize the alr strip. 30. Visitors. Project visitation by relatives or friends will be permitted. Transportation will be by private boat or on a space available basis on. the scheduled contracted flight operator or other approved charter. It Is the employee's responsibility to have their guests/Invitees sign In and out with the General Foreman/Bradley upon arrival to and departure from the Project. : : Visitors will abide by these Work Rules while at the Project site. The Energy _ Authority reserves the right to ask guests to leave the Propet site for safety reasons or disobeyance of site rules. 31. Energy Authority Personnel Project Visitations. When Energy Authority - personnel visit the Project they shall be housed .in the visitor's quarters and shall abide by all the guidelines and regulations for the Project. During their stay, they are responsible for their own meals and shall do their own -house cleaning, Including washing any dishes and bed linens used. ; 32. Project Facilities. Spouses; other residents. or Project guests are not allowed unaccompanied in Project facilities except in housing units. Project facilities includes the powerhouse, maintenance bullding, crews quarter's, and dam site. 33. Project Equipment/Workspaces. Project materials, supplies, equipment and workspace and other Energy Authority belongings are not available for employees’ ‘personal use. If Project facilities are needed to be used, prior-approval shall be received from the Senior Operations Engineer or the General Foreman/Bradley. 34, Policies Not Covered in these Guidelines. All existing practices for the benefit and welfare of Energy Authority employees assigned to the Project presently In effect BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT SITE WORK RULES Page 5 and not specifically covered by the terms of thls Agreement shall:be continued unt! superseded by a future memorandum or directive. 35. Project Description and Definition. 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