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HomeMy WebLinkAboutBPMC Meetings Febuary 24, 1994 2BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING AGENDA Thursday, February 24, 1994 Alaska Industrial Development and Export Authority Board Room 10:00 a.m. Ts CALL TO ORDER Highers 2. ROLL CALL 3. PUBLIC COMMENT 4. AGENDA COMMENTS 5. APPROVAL OF MEETING MINUTES - January 25, 1994 6. BUDGET SUBCOMMITTEE REPORT Ritchey 7. OPERATION AND DISPATCH SUBCOMMITTEE REPORT Wolf 8. INSURANCE SUBCOMMITTEE REPORT McCrohan 9. REVIEW OF PROJECT STATUS Eberle 10. OLD BUSINESS ‘A... Spinning Reserves Update Lovas Bs Master Operating Agreement Update Saxton Cc. Transition Duties McCrohan 11. NEW BUSINESS A. Approval of Legal Expenses and Other Payments Ritchey 12 COMMITTEE COMMENTS ANS Next Meeting Date Highers 13. ADJOURNMENT BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE DRAFT MEETING MINUTES Chugach Electric Association, Inc. Training Room Tuesday, January 25, 19 10:00 a.m. Chairman Highers called the meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:05 a.m. in the Training Room at Chugach Electric Association in Anchorage, Alaska, to conduct the business of the Committee per the agenda and public notice. All Committee members were present, and a quorum was established. CALL TO ORDER ROLL CALL Alaska Energy Authority Dennis McCrohan, Designated Representative Chugach Electric Association David L. Highers, Designated Representative and Chairman Golden Valley Electric Association Mike Kelly, Designated Representative City of Seward Dave Calvert, Designated Representative Homer Electric Association Norm Story, Designated Representative Matanuska Electric Association Ken Ritchey, Designated Representative Municipal Light & Power Tom Stahr, Designated Representative Others Present: Dan Beardsley, AIDEA/AEA Sharron Sigafoos, AIDEA Dave Eberle, AEA/AIDEA Stan Sieczkowski, AEA/AIDEA Larry Wolf, Alaska Energy Authority Gene Bjornstad, Chugach Electric Association John S. Cooley, Chugach Electric Association Tom Lovas, Chugach Electric Association David Burlingame, Chugach Electric Association Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt Tim McConnell, Municipal Light & Power Bob Price, Anchorage Municipal Light & Power Sterling Larson, Matanuska Electric Association Dave Fair, Homer Electric Myles Yerkes, Homer Electric Association Bob Huffman, Alaska Electric Generation & Transmission Cooperative Brad Evans, Golden Valley Electric Association Steven Haagenson, Golden Valley Electric Association Vince Mottola, Fairbanks Municipal Utilities System Bradley Lake Project Management Committee Meeting Minutes - January 25, 1994 Page 2 of 11 3. PUBLIC COMMENT There was no public comment. 4. AGENDA COMMENTS There were no comments regarding the agenda. 5. APPROVAL OF MEETING MINUTES - NOVEMBER 18, 1993 MOTION: Mike Kelly moved to approve the minutes of the November 18, 1993 meeting. Seconded by Norm Story. The following corrections and additions were noted: Page 3, Item No. 6, paragraph 3: The reference to Mr. Lovas in the second sentence was changed to Mr. Burlingame. Page 3, Item No. 6, paragraph 4: The two references to MEA were changed to AEA. The words "Bradley O&D" were added in the last sentence of this paragraph to read: "He added that the list has been distributed to Bradley O&D personnel." Page 5, paragraph 2, the word "“monitoring" was changed to "evaluating." Page 6, paragraph 2: The reference to "load-shed- ding unit" was revised to "load-shedding schedule." There being no further corrections, the minutes were approved as revised. 6. TECHNICAL COORDINATING SUBCOMMITTEE REPORT Mr. Highers stated that the Subcommittee has not met. He advised the Committee that the Subcommittee currently has no assignments, and he suggested that, unless the subcommittee does get an assignment, this item be omitted from the agenda in the future. The Committee concurred. 7. BUDGET SUBCOMMITTEE REPORT Mr. Ritchey reported that the Budget Subcommittee had met January 12, 1994. He said the FY ‘94 budget was discussed, as well as the details of the AIDEA budget proposal, which were made available to the Subcommittee for the first time. He said there were still some concerns regarding AIDEA‘s role in the project and the dividing line between each of the parties’ Bradley Lake Project Management Committee Meeting Minutes - January 25, 1994 Page 3 of 11 , duties and responsibilities. He added that the Subcommittee appreciated the information it had received from AIDEA and said it was a very good presentation in terms of information presented to the Subcommittee for the first time. The Budget Subcommittee requested that HEA meet with AIDEA to put together an FY ‘94 revised budget proposal for consider- ation by the Subcommittee so that when the O&M transfer occurs, the revised budget would be in place. Mr. Ritchey reported that Bonnie Godfrey of Parisena Stromberg & Co., APC, had presented the draft of the O&M audit to the Subcommittee. He said AIDEA indicated they would respond to the draft audit, then the Subcommittee would take action on it at a future meeting and present it to the Bradley Lake Project Management Committee. Mr. Ritchey reported that as a result of information contained in flow studies that had been undertaken, the Subcommittee had approved $7,578 for the completion of a fish habitat study. In addition, Mr. Ritchey stated that the Budget Subcommittee had discussed the possibility of supporting a poll for taking of minutes and that sort of thing, and they would be taking a closer look at it in the future. Mike Kelly said he would reserve his questions on the latter topic for discussion under Old Business, Items C. and D. Mr. McCrohan reported that AEA would be meeting that afternoon with Homer with regard to reconciling the Fiscal ‘94 budget, which he anticipated would be reconciled within a week based on a date that HEA will assume O&M. 8. OPERATION AND DISPATCH SUBCOMMITTEE REPORT Mr. Wolf reported that the Operation and Dispatch Subcommittee had met immediately after adjournment of the Project Manage- ment Committee meeting on November 18, 1993. He stated there were no action items at that meeting. Mr. Wolf reported that Homer Electric presented a request for reimbursement for the station service cost for the Soldotna SBC, and the Subcommittee did not approve those costs but advised HEA to present their request to the Budget Subcom- mittee. Mr. Wolf reported that the second half of the annual outage has been completed since the last PMC meeting. He said no significant problems were found with the second unit at that time. Mr. Wolf reported that the governor cards were also Bradley Lake Project Management Committee Meeting Minutes - January 25, 1994 Page 4 of 11 replaced, which has provided improved operating capability. The 115-sync scheme was also completed at Bradley, and that has been tested except for the breaker between Soldotna and Diamond Ridge line, which, he added, is difficult to do without a system outage. In response to Mr. Wolf's comment regarding Homer’s station service costs for the Soldotna SBC, Mr. Story advised that the Budget Subcommittee is considering its position on this item and will be providing its input to the Project Management Committee. In this regard Mr. Burlingame said he felt the PMC should set the policies and procedures on reimbursement, and the O&D Subcommittee would have the responsibility of reviewing the actual costs submitted for accuracy and reasonableness. Then the PMC would be responsible for final approval or rejection of payment of reimbursement requests. 9. REVIEW OF PROJECT STATUS Mr. Eberle stated that the only item he had to report on was the proposed reimbursement of the State surplus funds. He distributed a summary to the Committee members at this time. Referring to his handout, Mr. Eberle said the summation in the upper right-hand corner indicates the breakdown of the costs for the entire project, including financing costs and credit- ing against the §31, comparing that to the amount of the bond issuance versus the utility share of the costs, and the appropriations versus the State’s share of the costs. He stated that because the disbursement of surplus funds to the State had not been made during the summer of 1993, additional interest has accrued, to the benefit of both parties, and there is more surplus than previously thought, primarily because of the additional interest earnings on the State portion. The perfection of the right-of-way leases from the State delayed the reimbursement, but that has now been completed. He said that upon receiving a final legal opinion from Eric Wohlforth, the bulk of the funds can be reimbursed to the State. Mr. Eberle said that, hopefully, $11.5 million will be disbursed to the State within the next week; approximately $1 million will be retained, as well as the approximately $400,000 allocated for utility monies. He reported that a final reconciliation will not be accomplished for probably another year when the remaining construction items have been Bradley Lake Project Management Committee Meeting Minutes - January 25, 1994 Page 6 of 11 recommendation following the next meeting of the RCC on February 17th. Mr. Evans reported that there was a request at the November 18, 1993, meeting for the IOC to get involved in the operating reserve issues. He said he had requested the IOC members to develop a prioritized list of issues from the operator’s perspective. He said he had that list available for distribution to the Committee at this time. The Chair advised that he would have extra copies made. The Chair stated that when the list is made available to everyone, they should review it and respond in writing to Mr. Evans and copy everyone else with their input. B. Master Operating Agreement Update C. HEA O&M Agreement - Terms and Conditions - Mr. Saxton advised that he would provide a status report on Items B. and C. with Mr. McCrohan and Mr. Story providing their input. Mr. Saxton reported that as of this morning, there is agreement among the parties’ attorneys regarding the drafts of both the Master Operating Agreement (MOA) and the HEA O&M Agreement. He said the Master Operating Agreement had a final change that morning; he passed out copies of the MOA at this time. Mr. Saxton stated that although the Agreement reflects the date of January 21, 1994, it had been revised just that morning; the fax date reflects 1/25/94. Mr. Saxton pointed out that the MOA will apply to all other agreements entered into for Bradley Lake, and so it will apply to every entity who provides services for Bradley Lake. Mr. Saxton stated that the MOA must be approved by the PMC and then executed by the Chair of the PMC and AEA. It will then be a binding agreement between the Bradley Lake Project Management Committee and AEA. The MOA sets out that relationship and imposes on the State some obliga- tions when it contracts with other parties to provide Bradley related services. The O&M Agreement will not be executed by the PMC; however, before HEA and the State can execute the agreement, it must be approved by the PMC. Mr. Saxton urged the Committee to approve the MOA and O&M Agreements simultaneously. He said the O&M Agreement should not be approved prior to approving the MOA because they are integrally related, and a portion of the MOA is incorporated as an exhibit in the HEA O&M Agreement; they are intended to be effective in conjunction with one another. Bradley Lake Project Management Committee Meeting Minutes - January 25, 1994 Page 7 of 11 Mr. Saxton stated that the following italicized phrase should be inserted on page 5, Section 4, of the O&M Agreement: "To the extent authorized by the project O&M budget, or as otherwise funded in accordance with this agreement, and consistent with the provisions of Exhibit D...." Mr. Saxton stated that these documents represent a fairly significant compromise by all parties, but all parties are prepared to live with the compromises and execute the documents. He said that the MOA clearly reflects, and AEA accepts, the primacy of the PMC in terms of the budget process and the various decisions that the Power Sales Agreement authorizes. The MOA acknowledges and reinforces that relationship and authorizes the State to enter into various contracts to carry out project work consistent with that. The O&M Agreement is a contract which the State has entered into with.HEA under the Master Operating Agree- ment. The O&M Agreement provides the State with the power and authority to direct HEA to do specific things, but only within the confines of what the State has been authorized to do by the MOA. So the O&M Agreement must be read in conjunction with the MOA. Other agreements for Bradley services will be drafted in the same manner and will be governed by the MOA, and the six to ten Bradley related agreements that are currently in place or ready to be executed will need to be conformed to the MOA. Mr. Stahr pointed out that AEA will have the HEA O&M Agreement before it at its meeting on Friday, January 28th, so the PMC should act on it today. Mr. Saxton added that if the AEA Board acted on it first, the HEA O&M Agreement would become effective when the PMC later acted on it. Discussion followed. The Chairman called a break at 10:50 a.m. to allow PMC members the opportunity to review the O&M agreement. The meeting reconvened at 10:55 a.m. with all PMC members present. Mr. Saxton stated that there are still some problems with the insurance provisions of the MOA; thus, the MOA is not ready to be approved today. Therefore, he said it would be advisable to follow Mr. Stahr’s suggestion to move forward with approval of the O&M Agreement and either change the language or reflect an action that Exhibit D has not yet been included in the O&M Agreement. Bradley Lake Project Management Committee Meeting Minutes - January 25, 1994 Page 8 of 11 Mr. Story advised the Chair that HEA would be willing to have included in the motion to approve the O&M Agreement HEA’s understanding that the approved MOA will become a part of the O&M Agreement. He said one of the problems with the insurance is that the errors and omissions clause is still contained within the insurance provision, and, as the operator, HEA cannot purchase errors and omissions insurance. Discussion followed regarding including a time line in the motion within which Exhibit D must be approved. Mr. Story said he was not comfortable with approval of the O&M Agreement being contingent upon Exhibit D; however, he said he was comfortable with it being incorporated into the O&M Agreement once the MOA is approved. Mr. Saxton pointed out that the O&M Agreement is between Homer and the State; the MOA is the basis for the PMC’s role. Without the MOA, there would be no connection between the PMC and the O&M Agreement. He emphasized that the O&M Agreement, without Exhibit D incorporated into it, is an unacceptable agreement because it fails to address the most important issues. He said he would be comfort- able with the Committee approving the O&M Agreement if language was included in the O&M Agreement that Exhibit D would be incorporated by a time certain. Discussion followed. Mr. Saxton asked that the minutes reflect that if the Committee is going to act on the O&M Agreement, that it is both HEA’s and AEA’s intention to abide by the spirit of Exhibit A. Mr. Stahr stated that he intends to work to ensure that an MOA is approved. However, he reminded the Committee that there is currently an operating project, and it is going to have to be operated and maintained for the next 50 to 70 years regardless of whether there is ever an MOA. Discussion followed. MOTION: Mr. Story moved that the Committee approve HEA and AEA’s O&M Agreement. Homer Electric Association will pledge a best effort to work toward concluding the MOA and abide by the guidelines and the spirit of the approved MOA. Seconded by Mr. Kelly. Discussion followed regarding the revision of the insurance provisions, approval of the MOA Agreement, and incorporation of Exhibit D into the O&M Agree- ment. Mr. Story reiterated that Homer Electric agrees to incorporate the approved MOA into the O&M Bradley Lake Project Management Committee Meeting Minutes - January 25, 1994 Page 9 of 11 Agreement. Mr. Saxton clarified that the motion to approve the O&M Agreement includes the revision of the sentence he corrected above. The Committee concurred. Mr. Highers pointed out that this is the first time the O&M Agreement has been accessible for review by this Committee, and he had some questions pertaining to how duplication of duties would be treated and other items. He said he had been unaware that this Agreement was expected to be approved at this meet- ing. Mr. Story stated that drafts had been distrib- uted for input prior to the meeting, and that input had been incorporated into the document now before the Committee. Discussion followed. The question was called for, and a roll call vote was taken. The motion passed with 6 ayes and 1 nay. D. Homer Electric Association/Alaska_ Energy Authority/ Project Management Committee Duties - Mr. McCrohan reported that the FERC licensing work was not included in the Homer agreement and AEA will continue to provide that service through the end of this fiscal year, and beyond if HEA chooses. The same with the secretarial services for the PMC through the end of this fiscal year; however, HEA can take that responsibility over at any time. Regarding the transition wherein HEA will begin to take responsibility for on-site procurement, miscellaneous engineering work, and other on-site activities, Mr. McCrohan said that AEA has made provisions to continue to support those duties through March 30th, 1994, at which time, AEA would like to withdraw their support with regard to those responsibilities. Discussion followed regarding union negotiations and division of responsibilities. 11. NEW BUSINESS A. Approval of Legal Expenses and Other Payments MOTION: Mr. Ritchey moved to approve payment of $12,887.59 for Committee legal expenses for the month of November 1993 and $11,507.70 for the month of December 1993. Seconded by Mr. Calvert. A roll call vote was taken, and the motion passed with 6 ayes and 1 nay. B. Insurance Requirements - Mr. Beardsley reported that as a result of discussions regarding the O&M agreement, he had Bradley Lake Project Management Committee Meeting Minutes - January 25, 1994 Page 10 of 11 discussed Bradley insurance coverages with Brad Thompson at State of Alaska, Risk Management Division. He said the bond obligation requires that an independent party review the insurance coverages to determine if they are adequate for the purposes of the bond. He said this will need to be done prior to July 1994. Mr. Beardsley stated that, currently, the project liabil- ity insurance effectively covers the bonds. The property clause covers approximately $59 million and provides a self-insurance reserve of approximately $1 million and $15 million for boiler and machinery. He said that, essentially, this protects against any losses of the facility, including losses by unintentional acts and negligence by the operators. Willful and/or intentional acts that result in loss are not covered by the policy. Mr. Beardsley stated that directors and officers liability is not included in the current insurance provisions. He said Fordham Pool’s coverage on $1 million costs roughly $20,000 per year. It provides protection for suits by third parties against the decision-makers involved in the project. Mr. Beardsley stated that the directors and officers liability insurance would provide supplemental coverage for HEA that they would need to cover over and above their ordinary officers and directors, as well as the PMC and the Alaska Energy Authority for making decisions relating to the project. The operator’s policies which HEA would be required to carry would include general liability, watercraft and aviation, workmen’s comp -- the standard provisions, which are primarily covered in Exhibit C. Indemnification language will be included, and that will be discussed. Mr. Beardsley reported that additional areas that may be incorporated include marine insurance for transportation of petrochemical products, on-site hazardous and contami- nated materials coverage, and a debt service coverage. He felt the latter should be reviewed and addressed by an insurance committee. Discussion followed regarding debt service coverage in the event the project is down, as well as insurance cost in view of Bradley’s operating history. Mr. Kelly asked whether the project would be covered under the individual utility coverage. Mr. Saxton stated that the Fordham Pool decision had been that it would be better to err on the side of caution and have an extra layer of coverage. There was brief discussion regarding this issue. Bradley Lake Project Management Committee Meeting Minutes - January 25, 1994 Page 11 of 11 Chairman Highers asked Dan Beardsley to serve as the Chair of the Insurance Committee. He stated that the previous committee members had included Mr. Cunningham, Mr. Ritchey, Mr. Hanson, and Mr. Saxton. He asked Mr. Ritchey if he wanted to remain on the committee; Mr. Ritchey declined. Mr. Story requested that the Chairman allow Mr. Dave Hutchins to act in an advisory capacity to the committee as a representative of HEA. Chairman Highers asked Mr. Story for the name of an HEA representative to serve on the Insurance Committee in place of Mr. Ritchey; Mr. Story provided Mr. Rick Ekhart’s name. Mr. Beardsley advised the Committee that a questionnaire on each of the officers and/or directors must be completed in order to apply for directors and officers liability insurance. He stated that he would contact the Committee members by telephone the following day to obtain the required information. He stated that the insurance coverage under the bond would be reviewed by an independent consultant within the next month. C. Bradley Lake Budget & Labor Negotiations - This item was covered in previous discussion relating to Items 10. B. and C. 12. COMMITTEE COMMENTS A. Next Meeting Date - There was a consensus of the Committee that the next PMC meeting will be held on Thursday, February 24, 1994, at 10:00 a.m. at Chugach Electric Training Room. 13. ADJOURNMENT There being no further business of the Committee, the meeting was adjourned at 11:50 a.m. BY: David L. Highers, Chairman ATTEST: Dennis V. McCrohan, Secretary BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE INSURANCE SUBCOMMITTEE MEETING MINUTES February 10,1994 The Bradley Lake Insurance Subcommittee meeting convened at 2:00 P.M. on February 10, 1994, at 480 West Tudor Road. In attendance at the meeting were: Dan Beardsley, Committee Chairman Rick Eckert, Homer Electric Association Representative Mike Cunningham, Chugach Electric Association Representative Stan Sieczkowski, AEA Tonya LaMothe, ARECA Via conference call: Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt Robert Hansen, Golden Valley Electric Association, Representative. Insurance Coverage The first item on the agenda was the insurance coverages. The overview attached to the agenda was discussed. Three areas of coverage required for the operator by the Bradley O&M Agreement were discussed at length. Those three provisions were 13(a)(2), Errors and Omissions Insurance, 13(b)(3)(iii), Worker's Compensation Insurance Broad Form All States Endorsement, and 13(d)(1), Aircraft Insurance. With respect to the errors and omissions insurance, HEA was concerned that: (1) AEA does not require such insurance from the dispatcher; since the operator is the only party required to have that coverage, should that coverage be provided for both the operator and the dispatcher by AEA, (2) does the errors and omissions relate to professional liability as well as directors and officers insurance or is there additional coverage contemplated, and (3) | what amount of coverage would be required. As to item #1, any disparity and coverage requirements will be addressed through the Master Operating Agreement for the project. Any inconsistencies with the Master Operating Agreement and existing agreements will be subsequently addressed. As to item #2, the Energy Authority will obtain an interpretation from Brad Thompson of Risk Management as to the contemplated coverage and intent of the errors and omissions provision. For item #3, HEA will obtain quotes to extend its existing directors and officers liability coverage to the Bradley Lake Project and submit any proposed increase in premium to the committee for review. Homer Electric provided a letter dated February 7, 1994, addressed to Dan Beardsley of the Alaska Energy Authority from Mike Yerkes of Homer Electric Association requesting a waiver of the Broad Form All States Endorsement required under Section 13(b), The substantive provisions of that letter were read to the committee members. Based on the letter, and information and comments by Ms. LaMothe, the subcommittee was advised that HEA employees are based in Alaska exclusively and that any travel by HEA employees on project business would be covered under the Alaska Worker's Compensation policy. In addition, the subcontractor insurance provisions require any subcontractor with employees based in other states to include statutory coverage for states where those employees are engaged in work or employed. The committee recommends granting HEA the requested waiver. Two provisions of the aircraft insurance raised concern, the coverage for slung cargo exposures and special coverage for use of an aircraft with more than five seat capacity. According to Ms. LaMothe an endorsement with a reporting provision can be obtained for slung cargo coverage. Typical slung cargo coverage requires 48 hours notice to put in place, the endorsement only requires prior notice of a slung cargo load with a subsequent billing of the appropriate premium by the insurer. Homer will obtain such a provision. HEA anticipates using a nine passenger Islander aircraft. Since an aircraft with more than a five seat capacity is contemplated for use, HEA needs to know the terms and limits of special coverage they must obtain to get AEA's approval. AEA will provide this information to Homer. In the interim HEA will operate with the existing $5 million coverage. Bradley Lake Project Management Committee Insurance Subcommittee Meeting Minutes -2- BPMC Directors and Officers Liability The BPMC directors and officers liability insurance coverage was discussed, but was tabled until the next meeting when the premium information would be available. Marine Insurance The marine insurance issues revolve primarily around transportation of fuel and waste oil. Presently fuel is transported to the project site via a fuel truck barged to the site. To reduce liability Homer has entered into contracts where the fuel is to be delivered FOB to the dock at Bradley. After discussion the committee recommended that future fuel deliveries be FOB at the fuel tanks rather than the dock location. This would increase the distance from the most critical area, the wetlands and tidelands and further AEA's potential liability for a spili during transfers at the dock. The second major area of concern involves removal of waste oil. Presently the oil is removed via drums from the site. A maritime spill is the primary concern related to handling of the waste oil. Homer Electric will analyze the following alternatives: (1) the purchase of specialized equipment for transporting hazardous or contaminated materials in maritime circumstances, (2) insurance to cover losses as a result of the spill, (3) the impacts of self insurance and associated risks, and (4) contracting with an independent party to remove the oil and assume ownership on the site. A secondary concern is to address the extent of whether waste oil and contaminated products should be stored on site resulting in less frequent but larger removal of materials, or more frequent smaller cargoes of such material. Homer is to provide a report to the operations and dispatch committee for their recommendations to the PMC. Hazardous or Contaminated Materials Insurance HEA was not aware that the property insurance does not cover contaminated or hazardous material spills on the site. HEA will address the risk associated with such on site spills. HEA's spill containment coordinator and the AEA spill containment coordinator will address the potential risk with the regulatory agencies involved in regulating contaminated substances. Mr. Sieczkowski advised those present that the petroleum facilities are the state-of-the-art and were designed and constructed to reduce potential liability through facility failure. Bradley Lake Project Management Committee Insurance Subcommittee Meeting Minutes -3- Debt Service Insurance The debt service coverage premiums for business interruption for durations from 1, 2, and 5 years through the remaining life of the bond will be researched by AEA. The correlation between the project property insurance and such business interruption or loss insurance should be examined as a part of that effort. During the independent insurance review required by the bond, the relationship between the maximum probable loss and property insurance will be reviewed. Independent Insurance Review As required by the bond AEA will seek an independent insurance review. Prior to initiating a proposal for such services, AEA will consult with the bond counsel to determine if Risk Management is a sufficient independent reviewer to meet the criteria of the bond. If Risk Management is not eligible, AEA will either request Risk Management to amend the scope of their current insurance analysis contract, or initiate a multi-year term contract to provide the review. Indemnification Clauses The difference between the indemnification clauses in the Homer O&M Agreement, the Chugach Electric Dispatch Agreement and the Master Operating Agreement were discussed. The principal analysis of the committee was that the property coverage provides essentially the same function to both AEA contractors. It covers for all losses except for those that are grossly negligent or willful and wanton. The major difference relates to the errors and omissions/or professional liability provision. As indicated above the professional liability or errors and omissions clause is to be reviewed with Risk Management. Existing Agreements will be reviewed in conformance with the Master Operating Agreement at such time as it is adopted. Next Meeting The next meeting is scheduled for March 9, 1994, at 2:00 P.M. in the AIDEA offices at 480 West Tudor Road. Meeting adjourned at 4:30 P.M. Daniel W. Beardsley Contracts Manager Bradley Lake Project Management Committee Insurance Subcommittee Meeting Minutes -4- AGENDA BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE INSURANCE SUBCOMMITTEE February 10, 1994 AIDEA Conference Room 2:00 P.M. CALL TO ORDER INTRODUCTION OF COMMITTEE MEMBERS NEW BUSINESS A. Overview of Present Coverages and Premiums 1. Property 2s Boiler and Machinery 3. General Liability 4. Watercraft and Aviation B. Additional Coverages/Limits a HEA Additional Directors and Officers Liability Zr BPMC Directors and Officers Liability an Marine Insurance 4. Environmental Insurance Se Debt Service Coverage 6. Subcontractor Requirements Ce Self Insurance Fund Ds Project Specific Issues aL. Indemnification Clauses er Loss Liability - Operator/Dispatcher E. Independent Insurance Review - Bond Requirement COMMENTS ASSIGNMENTS NEXT MEETING DATE ADJOURNMENT PRESENT COVERAGES i Project Insurance Coverage: Protects against facility loss - including losses caused by unintentional acts of operators. Does not protect against losses resulting from failure to prudently maintain and operate. Types: Property Project Value: $162,981,800 (Based on Bonded Indebtedness amount) Amount of Coverage: $60,000,000 with $1,000,000 Self Insured Risk (SIR) Premium: $151,000 Boiler and Machinery Amount of Coverage: $15,000,000 with SIR of $25,000 to $100,000 Premium: $37,650 aie State of Alaska Operator's Policies (Principally Self Insured through State of Alaska Risk Management ) General Liability (Includes Bodily Injury and Property Damage) Amount of Coverage: $75,000,000 with $5,000,000 SIR Premium: $5,000 Automobile Liability (Provided by State of Alaska Risk Management ) Amount of Coverage: $75,000,000 with $2,500,000 SIR Premium: Risk Management is researching £, Watercraft Amount of Coverage: $200,000,000 with $1,000,000 SIR Aviation Amount of Coverage: $300,000,000 with $250,000 SIR Workers' Compensation Amount of Coverage: SIR Premium: 1.12% of employee wages Operator's Subcontractor's Policies Worker's Compensation: Amount of Coverage: $100,000 Employer's Liability Other required State & Federal Comprehensive General Liability Insurance: Contract under $1,000,000 Amount of Coverage: $300,000 per occurrence, $300,000 aggregate Contract over $1,000,000 Amount of Coverage: $1,000,000 per occurrence $1,000,000 aggregate Comprehensive Automobile Liability Insurance: Amount of Coverage: $100,000 bodily injury $50,000 property damage. Professional Liability Insurance: Amount of Coverage: Contract Amount Coverage Under $100,000 $100,000 $100,000 to $499,999 $250,000 $500,000 to $999,999 $500,000 $1,000,000 and up NEGOTIABLE Dispatcher's Insurance: None COVERAGES REQUIRED FOR OPERATOR General Liability (Includes Bodily Injury and Property Damage) Amount of Coverage: $5,000,000 Automobile Liability Amount of Coverage: $5,000,000 Watercraft and Aviation Amount of Coverage: $5,000,000 Bodily Injury $1,000,000 Passenger Liability $5,000,000 Property Damage Workers' Compensation Amount of Coverage: $500,000 Employer's Liability Other required State & Federal Subcontractor's Coverages See number 3 above. POSSIBLE ADDITIONAL COVERAGES abe Directors' and Officers' Liability Protects against suits by third parties against decision makers. Utilities should provide this coverage for their staff as additional coverage over and above the officers and directors of the utility as a part of the BPMC. Amount of Coverage: $1,000,000 Premium (Estimate): $20,000 : Marine Insurance Coverage for marine transport of hazardous and contaminated materials. Amount of Coverage: To be discussed 3. Environmental Insurance Coverage for spills of hazardous and contaminated materials on the project site. Amount of Coverage: To be discussed 4. Debt Service Coverage Coverage for loss of commercial operation to pay debt service during insured outage. Amount of Coverage: To be discussed Issues for discussion by BPMC Insurance Subcommittee: doe Operator/Dispatcher Issues Do the agreements address the potential conflicts regarding loss questions between the different parties? What coverages should they have and what is the additional cost as a result of the two independent parties? Do the indemnification clauses provide consistent and appropriate coverages? Self Insured losses In the event of a loss not the fault of the operator, is it clear that the Purchasers bear that risk of loss? Should the Project have a self insurance fund? Are there tax consequences? INDEMNIFICATION as Proposed in Bradley Lake Master Operating Agreement, Exhibit A (h) Indemnity. The Authority, to the extent permitted by applicable law and subject to the availability of funds, and each Contractor (as Indemnitor") agrees to and shall indemnify and defend the other, its officers, employees, and agents (as "Indemnitee") for tort liability for all claims for damages and injuries of any character or nature whatsoever arising from the sole negligence of the Indemnitor, including its office, employees or agents in relation to performance under this Agreement. Indemnitor agrees to assume the defense thereof and to pay all expenses (including attorney's fees) connected therewith. For purposes of this section, "sole negligence" shall include acts or omissions of the Indemnitor, its officers, employees, or agents, or any combination thereof, and situations where such acts or omissions, in combination with the negligence of third parties combines to cause injury or damages to persons or property. It shall not include situations where the acts or omissions of the Indemnitor, its officers, employees, or agents combines with the negligence of Indemnitee to cause such injury, which situations shall be governed by the provisions of the subsection below relating to concurrent negligence. Each party agrees that liability (including costs of defense and attorney's fees) for claims arising from the concurrent negligence of both Parties shall be apportioned according to the respective percentage of fault attributable to each Party as determined by agreement or by the trier of fact. 25 Dispatch Agreement, Section 7, Miscellaneous Provisions (a) Chugach as agent for the Authority. As Dispatcher, Chugach acts as agent for the Authority to dispatch Project output on behalf of the Authority so that the Authority is able to sell that output. In consideration for Chugach acting as Dispatcher, the Authority will therefore, indemnify and hold Chugach harmless from all claims against Chugach in its capacity as Dispatcher, and from all claims based on Chugach's acts or omissions as Dispatcher, to the full extent provided by law; provided, that the Authority shall not indemnify or hold Chugach harmless to the extent of any liability arising from Chugach's gross negligence or Chugach's wanton, willful, or intentional misconduct. 13. (a) Bradley Lake Operations and Maintenance Agreement Insurance Provisions Insurance General. qd) Each Party shall be liable for the negligent, willful and grossly negligent acts of its officers, employees, agents and contractors with respect to the ownership, construction, operation, maintenance or repair of the Project. Its is recognized that the project insurance does not cover the willful and grossly negligent acts of a party. Each Party shall be solely liable for the willful and grossly negligent acts of its officers, employees, agents and contractors. (2) 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. Such "Operator insurance" may be obtained either by the Operator or be provided by the Authority or the BPMC under insurance policies covering the Project. (3) Such Operator's insurance shall be the primary coverage for the exposures delineated in subsection (2) 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. (4) The Operator will bear the cost of the required insurance, which cost shall be included in the Project O&M Budget as an operating cost. (5) If the Operator elects to individually obtain the insurance required by subsection (2) above, it may be maintained as part of any other policy or policies of the Operator so long as the coverage of such policy or policies is substantially the same as if such coverage were maintained under a separate policy. The policy must be acceptable to the Division of Risk Management. (6) (7) (8) (9) (10) a1) (12) 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. A copy of the insurance policies required by this Section will be furnished to the Authority prior to beginning work under this Agreement. Prior to February | of each year thereafter, evidence of insurance shall be provided by the Operator. The 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. Any Party, before the expiration date of the existing policy, may reopen the insurance requirements on sixty (60) days notice. The Authority shall annually, prior to February Ist each year, furnish evidence of insurance to the Operators and the BPMC. (b) Workers' Compensation Insurance. Q) (2) G) The Operator shall maintain, for all employees of the Operator engaged in work under this Agreement, workers' compensation insurance as required by AS 23.30.045. The Operator is responsible for workers' compensation insurance for any of its subcontractors who directly or indirectly provide services under this Agreement. The insurer shall agree to waive all rights of subrogation against the State of Alaska, its officers agents, and employees for losses arising from operation of the Project. Workers! compensation insurance policy must include: (i) statutory coverage for states in which employees are engaging in work; (ii) | Employer's Liability Protection of not less than $500,000 per occurrence; (iii) | Broad Form All States Endorsement; and (iv) coverage as required by all State and Federal Acts where applicable. (c) Comprehensive General Liability Insurance. Q) (2) The Operator shall maintain comprehensive general liability insurance. The Authority, acting on behalf of the BPMC, has as of the effective date of this Agreement acquired general liability insurance which satisfies part of this requirement. The Operator shall secure any additional insurance as required to meet its obligations under this subsection to the extent the insurance so acquired by the Authority is not sufficient to meet the Operator's obligations. The BPMC and the Authority shall be included as additional insureds as respects insurance required in this Section and shall not by their inclusion be responsible to the insurance carrier for payment of premium therefor. These insurance policies must also contain a provision providing for cross liability or severability of interest. The comprehensive general liability insurance shall be subject to the following limits of liability: iC) (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) Automobile Liability Insurance covering all vehicles. Such insurance shall provide coverage 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) 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. If an aircraft with more than five seat capacity is used, special coverage and limits must be obtained and must be approved by the Authority; and (2) Owned Watercraft and Non-Owned Watercraft with limits of liability not less than $5,000,000 per single occurrence as provided in the "in Rem Endorsement" under "Maritime Coverage B." 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 include the indemnity and insurance provisions attached as Exhibit C. 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. EXHIBIT "C" INSURANCE 1. Contractor to purchase/maintain insurance for duration of agreement, plus one year following final payment. 2. Specified limits are minimum levels. If the policy contains higher limits, contracting agency is entitled to coverage of higher limits. 3; Certificate of insurance must be furnished to contracting agency. ¢ Must provide for 30-day prior notice to the contracting agency of cancellation, reduction in liability. ¢ Failure to furnish constitutes material breach and grounds for termination. Types of Insurance Worker's Compensation: Contractor responsible for subcontractors. Coverage must include statutory coverage for states where employees are engaging in work and employer's liability protection not less than $100,000 per person, $100,000 per occurrence. Where applicable, coverage for all federal acts must also be included. Comprehensive of Commercial General Liability Insurance: Covers all operations of contractor providing insurance for bodily injury and property damage liability including coverage for: e Premises and Operations e Products and Completed Operations ¢ Broad Form Damage; and ¢ Personal Liability Comprehensive Policy: Minimum combined single limit of liability is $300,000 per occurrence, $300,000 aggregate for bodily injury, property damage and personal injury. Commercial Policy: Minimum limits of liability are $300,000 per occurrence (combined single limit) for bodily injury and property damage, $300,000 per occurrence for personal injury, $300,000 aggregate for products-completed operations, and $300,000 general aggregate. Comprehensive Automobile Liability Insurance: Covers all owned, hired, and non- owned vehicles with coverage limits not less than $100,000 per occurrence bodily injury and $50,000 property damage. Professional Liability Insurance: Covers all negligent errors, omissions which the contractor, subcontractor or their employees make in the performance of the agreement which results in financial loss to the contracting agency. Minimum Limits: Combined Single Limit Contract Amount Occurrence and Annual Aggregate Under $100,000 $100,000 $100,000 to $499,999 $250,000 $500,000 to $999,999 $500,000 $1,000,000 and up NEGOTIABLE Contracting agency reserves right to implement an Owner Controlled Insurance Program with option of obtaining Professional Liability Insurance, contractor isn't required to carry Professional Liability Insurance. EXHIBIT C Page 2 of 2 INSURANCE PROVISIONS Proposed in Bradley Lake Master Operating Agreement, Exhibit A. (g) Insurance. During the term of the Contract, the Contractor shall purchase and maintain insurance covering injury to persons or property suffered by the Authority or a third party, as a result of errors or omissions or operations by a Contractor or its subcontractor which arise both out of and during the course of the Contract. The Contractor shall require all subcontractors providing services directly or indirectly under a Contract to provide the same insurance as required of the Contractor. Coverage shall also provide protection against injuries to all employees of the Contractor and the employees of any subcontractor engaged in work under a Contract. Copies of all required insurance policies shall be furnished to the Authority prior to beginning work under a Contract. These policies will show evidence of coverage and provide for ninety (90) days notice of written cancellation, non-renewal for material change in the coverage. The Contractor shall purchase insurance adequate to cover its operations in connection with the work under the Contract. Specifically, each Contractor shall maintain Worker's Compensation Insurance and Comprehensive General Liability Broad Form Insurance, Automobile Liability Insurance, Owned Aircraft Insurance (where applicable), and Owned Watercraft (where applicable), in amounts acceptable to the Authority and consistent with the Power Sales Agreement. ALASKA INDUSTRIAL DEVELOPMENT A y AND EXPORT AUTHORITY 480 WEST TUDOR * ANCHORAGE, ALASKA 99503-6690 + (907) 561-8050 » FAX (907) 561-8998 February 17, 1994 Mr. David L. Highers Chugach Electric Association P.O. Box 196300 Anchorage, AK 99519-6300 Subject: Transition Duties Dear Mr. Highers: As you are aware, we have executed the O&M Agreement which transfers a substantial portion of the Authority's duties and responsibilities to HEA. However, there are several remaining duties which require clarification. These are: FERC licensing administration Water management and hydrology studies PMC meeting recording PMC budget coordination PMC travel Cie GaN To assure that these items are budgeted, we have included these items under Authority costs in our FY95 budget submission to the PMC _ Budget Subcommittee. We would be pleased to continue to provide the services required for Items 1 and 2. These services would be provided by outside contract services in lieu of in-house staff used in FY94. We may be able to achieve some savings for these items since we have been requested to propose these services on other AEA projects. Items 3 and 4 are completely optional. Item 5 is an allocation for PMC members’ travel which could be simply deleted if PMC members do not require travel reimbursement for meetings. Please let me know your direction on the above items. Very truly yours, ROM Cope ~ Dennis V. McCrohan Deputy Director (Energy) DVM:ec eva100.doc cc: R. Saxton, AWHD&S R. Snell, AIDEA ‘ ALASKA INDUSTRIAL DEVELOPMENT y AND EXPORT AUTHORITY 480 WEST TUDOR + ANCHORAGE, ALASKA 99503-6690 + (907) 561-8050 +» FAX (907) 561-8998 February 17, 1994 Mr. David L. Highers Chugach Electric Association P.O. Box 196300 Anchorage, AK 99519-6300 Subject: Transition Duties Dear Mr. Highers: As you are aware, we have executed the O&M Agreement which transfers a substantial portion of the Authority's duties and responsibilities to HEA. However, there are several remaining duties which require clarification. These are: FERC licensing administration Water management and hydrology studies PMC meeting recording PMC budget coordination PMC travel o> 2S To assure that these items are budgeted, we have included these items under Authority costs in our FY95 budget submission to the PMC Budget Subcommittee. We would be pleased to continue to provide the services required for Items 1 and 2. These services would be provided by outside contract services in lieu of in-house staff used in FY94. We may be able to achieve some savings for these items since we have been requested to propose these services on other AEA projects. Items 3 and 4 are completely optional. Item 5 is an allocation for PMC members’ travel which could be simply deleted if PMC members do not require travel reimbursement for meetings. Please let me know your direction on the above items. Very truly yours, Dennis V. McCrohan Deputy Director (Energy) DVM:ec eva100.doc ce: R. Saxton, AWHD&S R. Snell, AIDEA