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HomeMy WebLinkAboutBPMC Meeting - March 3, 1989 2FILE COPY UE \ eng ee ee ee ‘ BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MARCH 3, 1989 AGENDA Chugach Electric Association, Inc. Training Room 5601 Minnesota Drive Anchorage, Alaska 1. CALL TO ORDER Kelly 10:00 a.m. 2. ROLL CALL 3. PUBLIC COMMENT 4. MODIFICATION OF AGENDA Kelly 5. APPROVAL OF MINUTES Kelly January 20, 1989 6. FINANCE COMMITTEE REPORT LeResche 7. TECHNICAL COORDINATING COMMITTEE REPORT Yerkes 8. REVIEW OF PROJECT STATUS Eberle 9. OLD BUSINESS Kelly Status Report on Rural Electrification Administration Approvals 10. NEW BUSINESS Kelly a. Define PMC Major Issues b. Develop PMC Objectives c. Develop PMC Timetable for Meeting Objectives d. Schedule Next Meeting Date Location iii, Time 11. COMMUNICATIONS 12. ADJOURNMENT Kelly 40u1 Fousrs Avervs Pasa Heariaee Buael Herre 0600 Saerrus, Wesnrrvros Sains 00 aue-4ni see wera freer. NW Suivx eco Masmisoton. D.C. £0000 woe eeoseeo Liwpsay, T, Neix & WEIGLER wrens Sutts 1090 0n0 &.W. Corvuste Portiarp. Onsoor 67901-8018 ‘Tararnons (800) ee-1191 Tunncor ne (BOO) 698-0079 Teusx 404-7000 February 27, 1989 MEMORANDUM TO: BRADLEY PMC FROM: RON SAXTON RECORD UOPY FILE NO TRO 3-lt MI owe ee 3/3/99 Jacwwentet Mee B00 N UTA SUITS e00 Boiss. insae meroe 20m he ca0e aeesss V ee Cauzoaet. Sraaer Serre 9900 Saw Yawemane, CatsROWNTA 04:04 418 Dee anne RE: ISSUES FOR DISCUSSION AT BPMC MEETING In my memo of November 18, 1988, I identified several issues which would require the BPMC's attention during 1989. Mike Kelly would like to discuss these at the March 3rd BPMC meeting, and asked that I briefly outline the issues in advance. detail at the meeting. The “start-up" of the work on several issues, but the Four Dam Pool PMC and APA have given considerable thought to each of these issues and the BPMC can benefit from those efforts. I will be prepared to explain each of these in greater BPMC will require I cannot eect enpnes tte the importance of addressing these issues early more emp eee at the meet proceed with so issu 1. utions. Insurance. 11 be Prepared to explain each of these ng and help the committee Under the terms of the Bradley Power Sales Agreement, the Bradley PMC has a significant role to oa in the determination and acquisition of appropriate project 7 I have indicated on several occasions, neurance. insurance issues opeene see coverage, level of insurance expenditures to include udget, appropriate retained risks, etc.) have been the single most time consuming and controversial issue facing the Four Dam Pool PMC (4DP PMC). The 4DP PMC arrangement involves some complexities not present in the Bradley arrangement. None- theless, the BPKC must "negotiate" with APA over the appropriate levels of insurance and insurance expense ta include in the annual budget. The committee must consider a wide range of alternatives, including commercial insurance and self-insurance (either by APA or by the BPMC). It must also some advantages could be obtained by coordinating the Bradley insurance program with the 4DP PMC or with the Intertie. Additional questions relate to the possibility of capitaliging an insurance fund from the hond issue as opposed to an annual operating expense approach. consider whether: 35-hF Linpaay, Hart, Nery & WEI0LER TOr BRADLEY PNC FROM: RON S6AXTON Pebruary 27, 1989 Page 2 The important point is that the Power Authority, as owner of the project, has a strong and legitimate interest in requiring comprehensive insurance arrangements for the project. The bond resolution also imposes such a duty on APA. The Purchasing Utilities, however, pay 100% of the cost of such actangements and, therefore, have a very strong interest in the cost and details of such arrangements. The 4DP PMC has devoted substantial resources to evaluating alternatives. About one year ago, the 4DP PMC created an insurance committee consisting of Ed Pefferman (city manager of Petersburg), Brent Petrie from APA and me. Mid-year, Ed left his job and since that time the insurance committee has consisted of Brent Petrie and me. With eubstantial assistance from the State Office of Risk Management and with input from all of the Purchasing Utilities and several APA staff members, Brent and I have worked to address these issues in a comprehensive fashion. The BPMC can take advantage of the «DP PMC work on this issue. The BPKC will need to consider the policy and financial implications of the various options prior to project completion, Suggested Actions: The BPMC needs to create a small working group to explore the ineurance requirements and alternatives. 2. Budget Process, Funds and Payment Obligation. The Power Sales Agreement creates an annual budget process under the control cf the BPMC. As part of this procase, the committee must budget for operating expenses, insurance, committee activities, etc. The Power Sales Contract and the bond resolution also create, on the part of APA and the purchasers, obligations to create and fund at least seven distinct Project Funds (Revenue Fund, Construction Pund, Operating Fund, Debt Service Fund, a Reserve Fund, Renewal and Contingency Reserve Fund, and Excess Investment Earnings Pund). Both ments leave open the possibility that the BPMC may wish to create additional funds. The committee must also tranealate the budget and fund requirement into monthly or annual payment obligations. As Brent and I have indicated, there are quite complicated issues associated witn creating a BPMC budget provess and a framework for handling project funds. The requirements of the bond resolution, while internally consistent, are potentially Linney. Haut, Nar & Wrioter TO: BRADLEY PHC PROM: RON SAXTON February 27, 1989 Fage 3 at odda with BPMC operations. These issues need to be explored and resolved before any bonds are issued if any changes or simplifications are to be made. a. Funds. The relationship of the various funde to each other is quite complicated. Some of these funds are required to be under the control of the Bond Trustee, while other funds could reside under the control of APA, the BPMC or the truatee, The BPMC has several tasks. Firet, it should carefully evaluate the complicated requirements of the bond resolution and determine whether any simplifications are possible. To the extent the group wishes to make changes, these muat be made before any bonds are issued, fe0ondly, the committee needs to resolve with APA both how decisions will be made relative to each fund, and what entity will have actual control of the monies. Third, the committee needs to develop a budget process that integrates the decisions made relative to these funds. b. Budget. The Bradley PMC must establish a process for determining the Project's annual budget. Under the Power Sales Agreement, the PMC has a duty to adopt a budget of Annual Project Costs for each fiscal year. The Budget should include all costs of producing and delivering power, including operation and maintenance, insurance, administrative expenses, and BPMC costs. The budget should also include debt service on outstanding bonds, and operating and capital reserve require- ments. During the course of the fiscal year, the PMC must revise this budget (and each purchaser's payment obligation derived from it) as is necessary and prudent. At the end of the fiscal year, the PMC must determine actual project costs. These are compared with the payments made by each purchaser to determine whether additional payments or refunds are due, The budget process needs to go well beyond the various funds required by the bond resolution. It will be necessary for the BPMC to annually consider proposed operating budgets, insurance costs and APA administrative costs, Each of these has proved controversial at the 4DP level and will require a thoughtful budget process at the - BPMC. ¢. Payment Obligations. Once the budget is adopted, the PMC must calculate each purchaser's annual payment obligation based on its allocated share of project capacity. Linp6ay, Mawr, Nex. & WHIOLER TO: BRADLEY PMC FROM; ROW 6AXTON February 27, 1989 Page 4 Each purchaser's annual payment obligation is then divided into a schedule of equal monthly payments. ASB part of its budget process, the PMC should consider the different payment cycles for various expenses. For example, the Power Sales Agreement and the Bond Resolution require that bond payments and certain transfers between funds be made at apecific intervals (usually quarterly, but sometimes gemi~annually). Operation and maintenance expenses will arise monthly, while other expenses such as ineurance may require a single annual Fecece These various payment cycles, if not conéidered during the budget process, could oreate cash flow shortfalls over the course of the fiscal year. Suggested Actions: A small committee should outline the legal requirements and alternatives ras handling of funds, and budgets and present a recommended proposal to the BPMC. 3. Tax Treatment of Bradley PMC. As reported previously, the 4DP PMC has become embroiled in tax pecrnene as a result of interest earnings on funds controlled by that committee. To the extent the BPMC determines that it ghould itself handle any monies, the potential is raised for the same type of tax issuea that have been dealt with by the 4DP PMC. Under the Four Dam Poo] arrangement there are no outstanding bonds, and the 4DP PMC controle both the reserve funds and the annual operating funds. This was done to avoid any problems associated with State restrictions on state held “dedicated funds." The arrangement proved quite satisfactory until the IRS asserted that this arrangement exposed the group to potential taxation. For approximately two years, the 4DP PMC has been dealing with the IRS and the U.S. Senate Finance Committee to attempt to resolve this matter. It has proved quite complex and ie not as yet resolved, To the extent the handling of Bradley funds is dictated by the bond resolution, the tax questions should not arise. However, it ia possible that the Bradley PMC may wish to establish certain funds under the control of the BPMC. If this is to be done, we should try to tle those funds in with bond resolution requirements in order to avoid the tax problen. Liwpsay, Ham, Neit & WHIGLEU TO: BRADLEY PMC FROM: RON SAXTON February 27, 1989 Page 5 Failing that, it will be neceasary to evaluate the tax questions on their own merit, Suggested Actions: Those persons assigned to deal with the determination of appropriate funds and the budget process should be cognizant of the tax issue and structure arrangements in order to avoid tax consequences. If the group decides to establish BPMC funds that would not be protected under the bond resolution analysis, then the group should carefully consider the tax research accomplished on behalf of the 4DP PMC and structure BPMC held funds accordingly. 5S. FERC License Fee Issue. Under the Federal Power Act, PERC imposes annual license fees on operating projects, The fees levied against Bradley Lake will likely amount to tens of thousands of dollars per year. A facility may be entirely exempt from the FERC fees if it is state owned and its power is sold directly or indirectly to the ultimate consumer without “profit.” The APA applied for a full exemption from the PERC fees for the Pour Dam Pool projects on these grounds, but FERC staff denied the exemption. A formal appeal is pending. I will more precisely explain the APA-4DP PMC efforts at our BPMC meeting. The Bradley purchasers need to consider whether to have APA seek an exemption for the Bradley lake a: Qualifying for an exemption may require changes in the handling of funds by individual utilities and the group needs to decide whether it ia worth the effort. . The barriers to getting an exemption are substan- tial and its important that we begin to anticipate the obstacles we will ear face, and take steps now that may strengthen our application if we expect to seek an exempticn. feisecces Actions: The BPMC needs to be briefed on the exemption Boues and decide whether to attempt to obtain an exemption. The 4DP PMC and APA will continue to pursue an exemption for the Four Dam Pool projects. FERC's ultimate decision will be an important precedent for Bradley Lake's application for exemption. RLSder747 uw F&F Ww N oo oN DN 10 i 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Offered: 2/23/89 6-0582E Referred: Fina Original sponsors: Uehling, Sturgulewski, Pearce, et al. RECORD LOPY FILE NO Funding Information PRD On lel) Gey General Fund §224,314,306 ea, en Other Funds -0- 212/%4 $22,314, 306 eee BY THE LABOR AND IN THE SENATE COMMERCE COMMITTEE CS FOR SENATE BILL NO. 130 (L&C) IN THE LEGISLATURE OF THE STATE OF ALASKA SIXTEENTH LEGISLATURE - FIRST SESSION A BILL For an Act entitled: "An Act making a special appropriation to the Alaska Power Authority for certain electrical projects; making a special appropriation to the Alaska Power Authority for the rural electrification revolving loan fund; making a special appropriation to the Alaska Power Authority for payment for certain grants; and providing for an effective date." BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: * Section 1. The sum of $213,785,000 is appropriated from the Railbelt energy fund in the general fund (AS 37.05.520) to the Alaska Power Author- ity for the design and construction of the following capital projects: Bradley Lake Intertie to Anchorage $ 80,000,000 Seward transmission line from Lawing to Fort Raymond substation 15,000,000 Northern Intertie from Wasilla to Willow and from Healy to Fairbanks 118,200,000 Hollis power plant and distribution system 350,000 Tenakee Springs electrification completion 235,000 * Sec. 2. The sum of $7,029,306 is appropriated from the Railbelt energy fund in the general fund (AS 37.05.520) to the Alaska Power Author- ity for payment as a grant under AS 37.05.316 to Golden Valley Electric Association for extending electrical service in certain areas as follows: Ester to Little Goldstream S| 25633),.296 Cantwell to McKinley Village 2,219,325 SBO130b -1- CSSB 130(L&C) SS. -F Sf w Re Nn nD Ww 10 ll 12 13 14 15 16 17 18 19 20 21 Mercers Corner (on the Parks Hwy.) to Ferry and the Rock Creek Subdivision 946,335 Kobe to Ferry and the Rock Creek Subdivision 1,234,350 * Sec. 3. The sum of $1,250,000 is appropriated from the Railbelt energy fund in the general fund (AS 37.05.520) to the Alaska Power Author- ity for payment as a grant under AS 37.05.316 to Mat-Su Electric Asso- ciation, Inc. for extending electrical service in certain areas as follows: Caswell Lake electric line extension $500,000 Burma Road electric line extension 750,000 * Sec. 4. The sum of $250,000 is appropriated from the Railbelt energy fund in the general fund (AS 37.05.520) to the Alaska Power Authority for Payment as a grant under AS 37.05.316 to Chugach Electric Association for the Bean Creek subdivision electric line in Cooper Landing. * Sec. 5. The sum of $2,000,000 is appropriated from the Railbelt energy fund in the general fund (AS 37.05.520) to the Alaska Power Author- ity for the rural electrification revolving loan fund under AS 44.83.361. * Sec. 6. The appropriations made by secs. 1 - 4 of this Act are for capital projects and are subject to AS 37.25.020. * Sec. 7. The appropriation made by sec. 5 of this Act is to capitalize a loan fund and does not lapse under AS 37.25.010. * Sec. 8. This Act takes effect immediately under AS 01.10.070(c). CSSB 130(L&C) =2- SBU130b { s Ls SENATE JOURNAL _ Yebruary 23, 1989 The Labor and Commerce Committee considered SENATE BILL NO. 130 (An Act making a special appropriation to the Alaska Power Authority for Bradley Lake Intertie; and providing for an effective date) and a majority of the committee recommended it be replaced with CS FOR SENATE BILL NO. 130 (L&C), entitled: "An Act making a special appropriation to the Alaska Power Authority for certain electrical projects; making a special appropriation to the Alaska Power Authority for the rural electrification revolving loan fund; making a special appropriation to the Aiaska Power Authority for payment for certain grants; and providing for an effective date." _ enator £liason, Chair, signed "no recommendation." Senators Coghill, Kerttula, Faiks and Rodey signed "do pass." SENATE BILL NO. 130 was referred to the Finance Committee. $B139 The Finance Committee considered SENATE BILL NO. 139 (An Act providing for retroactive extension of the termination date of the Task Force on Guiding and Game; and providing for an effective date) and a majority of the committee recommende? the Resources Committee Substitute (page 441) be adopted and do pass. The report was signed by Senators Uehling and Binkley, Co-Chairs, and concurred in by Senators Zharoff, Duncan, Frank and Pearce. Previous fiscal notes. SENATE BILL NO. 139 was referred to the Rules Committee. SJR_32 The Rules Committee considered SENATE JOINT RESOLUTION NO. 32 (Relating to a celebration of the 250th anniversary of the Ru: an discovery of Alaska) and a majority of the committee recommended do pass and calendar. The report was signed by Senator Rodey, Vice-Chair, and concurred in by Senators Kelly and Eliason. Zero fiscal note published today from Senator Szymanski. o <¢