HomeMy WebLinkAboutBPMC Meeting March 3, 1993 1Revised Action Nos. - September 7, 1993
RECORD VUOPY
FILE NO
“hb acd BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE ay Soke! mes 3/13/93
APPROVED MEETING MINUTES i
March 3, 1993
1. CALL TO ORDER
Chairman Highers called the Bradley Lake Hydroelectric Project Management
Committee to order at 10:15 a.m. in the Training Room at Chugach Electric
Association in Anchorage, Alaska to conduct the business of the Committee per
the agenda and the public notice.
2. ROLL CALL
Alaska Energy Authority
Brent N. Petrie, Designated Representative
Chugach Electric Association
David L. Highers, Designated Representative and Chairman
Golden Valley Electric Association
Mike Kelly, Designated Representative
City of Seward
Paul Diener, Designated Representative
Homer Electric Association
Dave Fair, Alternate Representative
Matanuska Electric Association
Ken Ritchey, Designated Representative
Municipal Light & Power
Tom Stahr, Designated Representative
Others Present:
Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt
David Burlingame, Chugach Electric Association
John Cooley, Chugach Electric Association
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Tom Lovas, Chugach Electric Association
Jim Hall, Matanuska Electric Association
Bob Hufman, AEG&T
Moe Aslam, Municipal Light & Power
Bob Price, Municipal Light & Power
Dave Calvert, City of Seward
David R. Eberle, Alaska Energy Authority
Stanley E. Sieczkowski, Alaska Energy Authority
Denise Burger, Alaska Energy Authority
Eric Wohlforth, Wohlforth, Argetsinger, Johnson & Brecht
Tom Klinkner, Wohlforth, Argetsinger, Johnson & Brecht
Jim Seagraves, Nuveen
3 PUBLIC COMMENT
There being no public comment, the meeting continued to the next agenda item.
4. AGENDA COMMENTS
The following items were added to the agenda:
11 E. Section 31 Costs
11 F. Agreements Discussion
12 C. Refinancing of Bradley Lake Bonds
Ss APPROVAL OF MINUTES - January 14, 1993
The minutes of the January 14, 1993 Bradley PMC meeting were approved with
minor corrections.
6. TECHNICAL COORDINATING SUBCOMMITTEE REPORT
Mr. Burlingame reported that the TCS had not met and noted that an update of
the SVC testing would be included with the O&D Subcommittee report.
7. BUDGET SUBCOMMITTEE REPORT
Bradley Lake Construction Cost Audit and FY92 O&M Audit
Mr. Ritchey reported that both audits were nearly completed. A draft report on
the construction cost audit is expected from Metzler and Associates by mid-
March. Copies of the audit will be distributed to AEA and members of the
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Budget Subcommittee. Final reports of both audits are expected by the end of
March.
FY94 Budget
Noting that BPMC approval of the budget was required by April 1, 1993,
Mr. Ritchey informed the Committee that the FY94 budget was very similar to
the FY93 budget. It was anticipated that the FY94 budget would be ready for
distribution to the BPMC members by mid-March. Mr. Ritchey recommended
that the BPMC schedule a meeting or teleconference at the end of March to
consider approval of the budget.
Fish Studies
Mr. Ritchey relayed the Subcommittee had discussed continuing funding of the
Bradley River fisheries studies. AEA recommended a three year fisheries
studies program. The studies, also supported by other State and Federal
resource agencies, would determine how much water was actually needed for
salmon spawning. It is anticipated the results may indicate that the current flow
requirements (40 cfs winter and 100 cfs summer) are higher than necessary to
ensure salmon egg incubation. The total cost of the three year studies program
is expected to be $117,000. It was pointed out that a reduction of the minimum
flow requirement could ultimately save the utilities as much as $2,500/day.
Lower minimum flow requirements could reduce potential violations due to
current monitoring difficulties (i.e., icing at the gage stations). Additionally,
information gained by the studies could be used to support alternate monitoring
methods. Mr. Ritchey noted that the Budget Subcommittee revised the FY93
budget to include an additional $4,600 for this year's studies and that additional
funds would be added to the FY94 budget to continue the studies.
8. AGREEMENTS SUBCOMMITTEE REPORT
Mr. Sieczkowski reported the Agreements Subcommittee held two
teleconference meetings. Final revisions were made to the Soldotna Substation
Agreement and Transmission Facilities Maintenance Agreement. Comments
have not been received on the draft Daves Creek or Soldotna SVC Facilities
Maintenance Agreements that were distributed in December.
Agreements Discussion
Mr. Saxton, referring to his memorandum dated March 2, 1993, recommended
that the BPMC establish a master agreement designed to clearly define the role
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and rights of the Committee to which all other agreements would be subject
(Attachment 1). Mr. Saxton explained that the master agreement would define
and preserve the rights of the BPMC without requiring the already completed
agreements to be rewritten. Noting that AEA had only received Mr. Saxton's
memorandum the day before, Mr. Petrie requested additional time to review the
proposal before any action was taken by the Committee. In response to inquiry
by Mr. Kelly, Mr. Saxton stated that the master agreement would recognize the
BPMC as the central authority (rather than AEA). Mr. Lovas noted that there
was no intent to change or create legal entities or relationships, but to reshape
the agreements in order to be consistent. Chairman Highers deferred further
discussion to Agenda Item 11 F., Agreements Discussion.
9. OPERATION & DISPATCH SUBCOMMITTEE REPORT
Mr. Sieczkowski distributed a summary of the January 28, 1993 O&D
Subcommittee meeting without additional comment (Attachment 2).
Fish Water Bypass Update
Mr. Eberle reported AEA anticipated removal of the estimated 40 - 60 cubic
yards of material blocking the intake using hydraulic dredges through the ice.
Proposals will be requested from three diving firms and the contract awarded by
mid-March. Work is expected to begin March 22, 1993 and take about two
weeks to complete. The total cost of the work is currently approximated at
$125, 000.
SVC Testing
Mr. Burringame distributed a summary of SVC Testing (Attachment 3).
Reporting that the SVC systems performed well during testing, Mr. Burlingame
noted the only problem was with the capacitors. The SVC's have not been
energized below zero degrees without experiencing capacitor problems. ABB is
trying to determine if the problem is the capacitors or system harmonics.
Testing of the SVC is expected to be completed by March 5, 1993.
Mr. Burlingame reported two outages had occurred which fully tested the SVC
system. While Bradley was operating at 115 megawatts, a 73 megawatt load
trip islanded the Kenai, splitting the Kenai into two islands. The SVC operated
at 64 hertz and the voltage remained solid until the Kenai blacked out.
Mr. Burlingame noted that the present SVC configuration did not allow the
Kenai to be picked up while black, however, the configuration was being
changed. During the second outage, both Bradley Lake units were synchronized
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10.
11.
on line at 61.2 hertz. A synch-check relay closed the units in, causing a 90
megawatt power swing on the Kenai. The SVC dampened the severe voltage
swings, but hit its ceiling of 70 megavars for five seconds.
Air Crash Accident
Reporting on the February 20, 1993 South Central Air plane crash at the
Bradley Lake Project, Mr. Sieczkowski informed the Committee that the air
craft experienced difficulty upon takeoff from the Project airstrip. Larry Wolf,
John Zidalis and his wife Gail, and their grandson were in the plane. The plane
clipped the fence at the end of the runway and crashed, nose down, into the
tidal flats. The pilot, Larry, John and Gail received multiple injuries, however
all are recovering. The grandson was uninjured. Anticipated recovery time for
both Larry and John is expected to be about two months. Mr. Sieczkowski
noted that Richard Turner has assumed John Zidalis's responsibilities at the
Project site and Dave Eberle is filling in for Larry Wolf. The cause of the
accident is currently being investigated by the FAA and NTSB.
REVIEW OF PROJECT STATUS
Mr. Eberle reported that problems with the Bradley Lake governors (AGC) are
being worked on. ABB is investigating the problem with the SVC capacitors.
ABB suspects the problem may be caused by a manufacturing defect and expects
that, when identified, the faulty capacitors will be replaced.
Eight proposals have been accepted by AEA for the contaminated soil cleanup
work. Bids are expected from the proposers by mid-March.
Mr. Eberle noted that the capacitance rating of the existing CEA breaker at the
Soldotna Substation was not high enough and that AEA was purchasing a new
breaker to replace it. Installation of the new breaker is expected to be
completed by the end of July 1993.
IBEW Labor Negotiations
Mr. Sieczkowski reported the IBEW made an initial proposal to AEA to which
AEA provided a counter proposal. The negotiations broke down and the IBEW
issued a complaint of unfair labor practice. AEA is preparing another counter
proposal and will be meeting with the IBEW on March 22, 1993.
OLD BUSINESS
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Spinning Reserve/Under Frequency Load Shedding Update
Mr. Lovas reported that the Intertie Operating Committee had received a
load shedding schedule recommendation. The proposal included
recommendations for additional work and investigation by the ASCC
Reliability Criteria Committee (or some other group). The current
proposed load shedding schedule is subject to action on or before March
19, 1993. If approved, the new schedule will go into effect within 60
days. The ASCC is focusing on defining various aspects of spin and
spinning resources (i.e., quality, character, distribution and location of
spinning resources). The Reliability Criteria Committee is currently
compiling utility input regarding the spinning reserve and operating
reserve issues.
Bradley Scheduling vs. Spin Requirement
Mr. Saxton stated that, with the exception of AML&P, neither the
utilities or AEA had submitted any comments regarding spin
requirements. Mr. Lovas noted that CEA had agreed to carry additional
spin on behalf of SES and MEA (and HEA) to cover the portion
attributable to each utility until February 1, 1993. It was clarified that
CEA was no longer covering that portion of spin.
Mr. Stahr stated that the utilities still had a spin obligation and
recommended that the BPMC consider whether AEA had a spin
obligation. Mr. Saxton pointed out that both issues needed to be
addressed, stating that the only binding spin requirement was in the
Intertie Operating Agreement. Mr. Lovas stated that the RCC was
investigating system technical requirements and representative shares of
the utilities, but it had not discussed the issue of AEA spin obligation.
In response to Mr. Kelly, Mr. Lovas confirmed that the issue of utility
spin obligations and share proportions ( allocation of spin
responsibilities) could be addressed by the RCC. However, Mr. Lovas
felt that determining any AEA spin obligation was beyond the authority
of the RCC.
Mr. Kelly cautioned against allowing the issue to be dropped.
Mr. Saxton stated it was his understanding from a previous BPMC
meeting that the utilities were to submit written comments on the spin
requirements to him. Mr. Stahr observed that, at some point, the
utilities were going to have to find a consensus solution, rather than a
solution favorable to an individual utility. Mr. Kelly suggested that the
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utilities review the AML&P comments and either agree with them or
provide their own comments. Mr. Petrie stated AEA will provide
comments on the spin requirement issue to Mr. Saxton. Mr. Stahr will
distribute AML&P's previous comments to the utilities for reference and
recommended that all utility responses be forwarded to Mr. Saxton.
Mr. Petrie, acting as Chairman, directed the utilities to submit responses
to Mr. Saxton no later than March 30, 1993.1 Additionally, Mr. Kelly
recommended that the utilities send each other a copy of their response
(Action 93-151).
Gc Fritz Creek Segment Funding
Mr. Petrie reported the Energy Authority bond counsel and accountant
were researching methods to restructure money within the bond issue to
cover HEA's acceleration cost for the Fritz Creek transmission line
segment. Mr. Petrie stated that AEA expected to be able to make a
recommendation to the Committee at its next meeting. Mr. Saxton
requested that AEA forward its findings to him. Mr. Petrie confirmed
that the information and resulting recommendations would be forwarded.
Mr. Saxton asked if HEA had developed any alternative proposals in
case AEA's efforts were unsuccessful. Reiterating HEA's position
presented by Mr. Story at the January 14, 1993 BPMC meeting,
Mr. Fair stated it (funding of the Fritz Creek line costs) was not HEA's
problem. Mr. Fair noted that it was an obligation of the Project and that
three financing options had been provided in the Transmission
Agreement. Mr. Fair stated that HEA was not responsible to
independently resolve the problem.
D. Fish Water Bypass Update
This item was previously discussed under Item 10, Review of Project
Status.
E. Section 31 Costs
This item refers to funding of the Fritz Creek Segment previously
discussed under Item 11 C.
! In the temporary absence of the Committee Chairman and in the absence of the Vice Chairman, the
Committee Secretary, Mr. Brent Petrie, served as Acting Chairman.
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Agreements Discussion
Review of List of Agreements
Mr. Saxton stated that no comments had been received on the list of
railbelt agreements distributed at the last Committee meeting.
Mr. Petrie directed the utilities to submit revisions of the list to Tom
Lovas.
Master A ment
The Committee continued discussion of the master agreement concept
started under Item 8., Agreements Subcommittee Report, Agreements
Discussion. Mr. Saxton stated that his memorandum outlined the east
intrusive way to accomplish transfer of the BPMC to the central role
without throwing away the work already done on the agreements.
Mr. Petrie reiterated his earlier request for more time to review the
proposal, stating that AEA was not prepared to vote on the
recommendation. AEA wanted, however, to pursue closure of the
current agreements. Mr. Petrie stated that if the agreements could not
be signed, AEA would need to develop an interim memorandum of
understanding with HEA. Mr. Saxton stated, according to the Power
Sales Agreement, the BPMC was given the authority to operate and
maintain the Project. Mr. Saxton further stated, at question was the
right of AEA to independently contract with the utilities. Mr. Saxton
explained that his recommendation ensured that both the BPMC and
AEA agreed, adding that neither had the right to act independently.
Mr. Saxton clarified that the proposed master agreement would relate to
both past and future agreements (excluding power sales, services and
transmission agreements).
Mr. Fair expressed concern over the potential delay of completing the
Substation Maintenance Agreement. Mr. Fair noted that HEA had a
temporary Transmission Maintenance Agreement but no Substation
Maintenance Agreement. Mr. Sieczkowski and Mr. Fair agreed that, a
temporary substation agreement was needed in the absence of a final
agreement. Mr. Saxton contended that the creation of a master
agreement would not produce any more substantial delays, citing the
process had already taken about one year.2 Mr. Fair requested direction
from the Committee on whether HEA should delay signing the current
2 Chairman Highers returned to the meeting.
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agreements. Mr. Stahr recommended that the established process
continue and all agreements be done the same way and all modified the
same way. It was the understanding of Mssrs. Petrie and Fair that the
members of Agreements Subcommittee were ready to approve the
agreements for signature. Mr. Saxton disagreed, stating his
understanding was that the members of the Subcommittee had not
reached a consensus favorable to signing the present agreements.
Mr. Sieczkowski stated that prior to Mr. Saxton's memorandum, all
final comments had been incorporated and the agreements were
recommended for signature and, in fact, were ready to sign.
In response to Mr. Kelly, Mr. Saxton stated that the BPMC had the
ability to contract directly, however, that it would result in disadvantages
as well as advantages.
Mr. Fair commented that he did not disagree with the proposed master
agreement and even supported the concept. Noting that HEA now had
SVC equipment installed at its substations, Mr. Fair added that any
further delay finalizing the agreements created a practical problem for
HEA. Mr. Saxton pointed out that, even though the agreements were
ready to sign, the agreements and resulting budgets needed to be
approved by the BPMC. Mr. Saxton stated that the development of a
master agreement could be accomplished within two or three days and
would not cause a significant delay.
Mr. Kelly asked what would happen if the Energy Authority ceased to
exist and how that would affect the Project under the proposed master
agreement. Mr. Saxton explained that the agreements would be
composed of three parties: the BPMC, the Energy Authority, and the
individual utility, and to accommodate for loss of the Energy Authority
would be more complex than the current proposed master agreement.
Mr. Eberle suggested that the Committee execute the current pending
agreements with a provision that the agreements be subject to the
proposed master agreement. Mr. Kelly concurred, recommending that a
clause be included in the pending agreements recognizing the authority
of the master agreement and that the master agreement address the
possible disappearance of the Energy Authority or a change in BPMC
policy. Mr. Saxton proposed CEA, HEA and ABA sign a letter of
agreement subjecting all utility operating agreements to a master
agreement which would allow the current process to continue and
pending agreements to be signed. Mssrs. Petrie, Fair and Highers
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preferred that a clause be included in the pending agreements rather than
a separate letter agreement. In accordance with the consensus of the
Committee, Mr. Saxton will draft and distribute the clause to the utilities
within a few days (Action 93-152).
12. NEW BUSINESS
A. Revised Scheduling & Allocation Procedures
Mr. Sieczkowski reported that the Operation & Dispatch Subcommittee
recommended adoption of the revised Allocation & Scheduling
Procedures. Mr. Kelly moved to approve the revised procedures.
Seconded by Mr. Petrie, the revised Allocation & Scheduling Procedures
were approved by unanimous role call vote after minor corrections were
noted (Action 93-153).
B. Operations Fund Contingency Resolution
Mr. Saxton deferred discussion of this item to the next regular
Committee meeting.
GC. Refinancing Bradley Lake Bonds
Chairman Highers noted a memorandum regarding possible refinancing
had been sent to the Committee by Mr. Petrie (Attachment 4).
Mr. Petrie informed the Committee that AEA had received three bond
refunding proposals, noting that two were later withdrawn. The
remaining proposal, submitted by Nuveen, specifically addressed the
portion of the bond funds allocable to AML&P and the City of Seward.
Mr. Petrie noted that, due to anticipated changes in the tax laws, there
was only a limited amount of time to complete the bond refunding
transaction.
Addressing the Committee, Mr. Seagraves explained that private activity
bonds cannot be typically advance refunded, however under the current
tax law, the portion of the bond funds attributable to municipal entities
(i.e., AML&P and Seward) could be refunded. Referring to the Nuveen
proposal, Mr. Seagraves noted a calculated savings of $3,000,000 (under
present market conditions).
Mr. Wohlforth relayed that treasury regulations amended last year
allowed portions of bond fundings to be allocated for different purposes.
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The regulations also state that governmental purpose (not private) bonds
may be advance refunded. Therefore, those portions of the Bradley
bond which qualified as government purpose were eligible for refunding.
However, the regulation that allows advance refunding of the bond will
end with new treasury regulations effective July 1, 1993.
Mr. Wohlforth stated his firm was confident that the municipal portions
of the Bradley bonds could be refunded under the current regulations and
would survive any Treasury scrutiny.
Mr. Kelly asked if the bond refunding could be insured against a later
(retroactive) determination of tax liability. Mr. Wohlforth explained the
bond insurer does not insure for legal risk (only economic).
Mr. Wohlforth stated that any potential problem would become evident
prior to the bond closing and expressed confidence in the tax analysis.
Mr. Seagraves, citing the Daily Bond Buyer, stated that the only post
closing, retroactive tax liability decisions occurred in obvious fraudulent
cases. Mr. Klinkner stated that the tax analysis was innovative and
within the law, however, the law was expected to change to disallow this
type of transaction. Mr. Lovas questioned whether the analysis
addressed the receipt of the savings produced by the refunding by private
participants. It was Mr. Wohlforth's belief that the effect of the
refunding would not influence any tax liability determination. Chairman
Highers stated that investigations by CEA indicated a lack of consensus
regarding the interpretation of current Treasury regulations.
Mr. Seagraves noted that, as a general rule, a three percent savings
guideline is applied when evaluating the cost effectiveness of refunding.
It was clarified that all expenses related to the bond sale could be
capitalized. In response to inquiry by Mr. Lovas, Mr. Seagraves
indicated that a simultaneous series of bonds could be issued to provide
for additional project costs (i.e., HEA acceleration costs for the Fritz
Creek transmission line).
Mr. Seagraves estimated that the preliminary bond sale efforts would
cost approximately $15,000 and that the majority of the associated costs
would not be incurred until the final decision is made just before the
sale. It was noted that the utilities must first unanimously agree to the
bond sale.
Mr. Petrie informed the Committee that a letter of intent to issue bonds
was required by the State sixty days in advance of the sale. Mr. Petrie
anticipated minimal legal costs associated with the preliminary effort.
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Chairman Highers expressed reservations committing to the bond sale.
Mr. Stahr noted that what he estimated to be an annual saving of
$25,000 might not provide sufficient incentive to take even a small risk.
Mr. Petrie recommended that the Committee approve only the
preliminary work and defer the final decision. Mr. Wohlforth noted that
the next opportunity to refinance (after July 1, 1993) was not until 1999,
when the bonds were callable. Mr. Seagraves cautioned that, as in any
bond sale, market conditions were subject to change.
Addressing tax liability, Mr. Wohlforth stated that if the proposed
refunding received an unfavorable tax determination, it would not effect
the previous bonds. Mr. Seagraves added that application of a
retroactive tax was highly unlikely, however, if, in a hypothetical
extreme case, it did occur, the bond holders would sue. Mr. Seagraves
explained that the burden became the bond holders and that the utilities
were only obligated to pay the debt service originally agreed to.
Mr. Seagraves informed the Committee that the bonds had to close by
July 1, 1993 and that preparation for the bond sale should by complete
by June 1, 1993. If the notice of intent to issue bonds was given within
the next few days, Mr. Seagraves stated the bond sale could take place
as early as the first week of May, or any time favorable between then
and July 1, 1993.
Mr. Stahr stated that AML&P counsel was conservative and hesitant to
proceed without an IRS opinion, however, AML&P would agree to
proceed with limited preliminary steps. Mr. Kelly motioned that AEA
be directed to give notice to the Legislature of intent to issue bond. The
motion was seconded and passed by the following role call vote:
City of Seward Yes
Matanuska Electric Association Yes
Chugach Electric Association Yes
Homer Electric Association Yes
Iden _V; Electric Association Yes
Anchorage Municipal Light & Power Abstain
Alaska Energy Authority Yes (Action 93-154)
Mr. Kelly motioned that the BPMC reimburse costs incurred to
investigate the Bradley Lake bond refunding not to ex 25 3
3 Costs include AEA bond counsel and AML&P legal counsel.
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The motion, seconded by Mr. Ritchey, passed by unanimous role call
vote (Action 93-155). Chairman Highers requested that the utility
managers be kept informed on the issue.
13. COMMUNICATIONS
A. Schedule Next Meeting
March 30, 1993
9:00 a.m.
via Teleconference
The teleconference will address approval of the budget and the Bradley
bond refunding.
Mr. Burlingame noted that the Committee would need to meet in April to
discuss release of the 90 megawatt interim operating restriction. Mr. Stahr
motioned that the Operation & Dispatch Subcommittee be authorized to increase
the project output to 120 megawatts (or another determined appropriate level)
only by consensus of the Subcommittee. The motion, seconded by Mr. Kelly,
was approved by unanimous role call vote (Action 93-156).
Mr. Ritchey requested approval of attorney legal expenses for the month of
January 1993. Mr. Kelly moved the Committee approve the expenses.
Seconded by Mr. Ritchey, the expenses were approved by unanimous role call
vote (Action 93-157).
14, ADJOURNMENT
0 further business before the Committee, the meeting adjourned at 1:05 p.m.
ighers, Chairman
Attest: Brot My =
Brent N. Petrie, Secretary
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eonor es reer @PoVy 640 VVIY ALEK WYNNE — i
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DATE: March 2.1993 0
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FROM: 16) eS ee
DOCUMENT : Memo re: Master Operating Agreement Outline _
PAGES (INCL. COVER) 6 USAGE TIME
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Fax No, Office No.
Dave Highers, Tom Lovas, CEA, Anchorage, AK 907/562-0027 907/563-7494 Ken Ritchey, MEA, Palmer, AK 907/745-9368 907/745-3231 Paul Diener, City of Seward, Seward, AK 907/224-3248 907/224-3331 Norm Story, HEA, Homer, AK 907/235-3313 907/235-8167 Mike Kelly, GVEA, Fairbanks, AK 907/451-5633 907/452-1151
Tom — ML&P, Anchorage, AK 907/263-5204 907/263-5201 Ro ent omnes tan Sieczkows BA, Anchorage ———907/561-8584 907/561~7877
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