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HomeMy WebLinkAboutBPMC Meeting January 25, 1994 1BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES Chugach Electric Association, Inc. Training Room Tuesday, January 25, 1994 10:00 a.m. CALL TO ORDER 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. 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 Projevc Management Committee Meeting Minutes - January 25, 1994 Page 2 of 11 PUBLIC COMMENT There was no public comment. AGENDA COMMENTS There were no comments regarding the agenda. 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. 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. 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 Projevc 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 Projevc 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 SVC, Mr. Story advised that HEA 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 completed, at which time, the remaining funds would be reimbursed to the State. Bradley Lake Projecc Management Committee Meeting Minutes - January 25, 1994 Page 5 of 11 10. Mr. Eberle reported that they are still trying to resolve the problem regarding the approximately $400,000 that is to be credited to the utilities portion. He said the problem revolves around the way the bond resolution is written with respect to if the project comes in at under $165 million and their inability to retire any of the bonds. The bond resolu- tion does not provide an adequate procedure for crediting the $400,000 to the utilities portion. He said the project costs could be increased until it zeroes out, or all the surplus funds may have to be reimbursed back to the State, and then have the State credit back a portion to be used either as debt service or to set up another fund. Mr. Eberle gave an overview of his handout at the request of Mr. Ritchey. He concluded that $12.9 million is surplus and that his report reflects how that amount is divided. The figures below that are a reconciliation of available cash vis- a-vis projected costs for the remainder of the project. In response to Committee member questions, Mr. Eberle provided further detailed comments regarding his summary. Mr. Eberle added that before the money was released for disbursement to the State, AIDEA wanted to ensure that their financing cost figures were accurate and supportable, and so they hired an auditor to verify the figures. Mr. Eberle stated that the numbers in his report are based on the auditor’s supported numbers. Discussion followed. OLD BUSINESS A. Spinning Reserves Update - Mr. Lovas reported that the Reliability Criteria Committee (RCC) met on January 13, 1994, and reviewed a draft status report of the reserve criteria material that had been developed. MThe status report has now been distributed to the Committee on the operating reserve development issues and is currently out for comments and input. Mr. Lovas said it is the Com- mittee’s intent to finalize the status report on February 17, 1994, prior to the ASCC meeting in March. With regard to UAF, Mr. Lovas reported that the group has reviewed the research proposals from UAF and has narrowed it down to one proposal: the development of a database for transient analysis and network power quality issues. There is a funding grant of approximately $50,000 for work to be performed in the 1994 calendar year. He said that proposal will be finalized by UAF and submitted for recommendation following the next meeting of the RCC on February 17th. Bradley Lake Projeéevcc Management Committee Meeting Minutes - January 25, 1994 Page 6 of 11 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 Projecc 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 Projec. 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 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. 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. BUSINESS NEW 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. Insurance Requirements - Mr. Beardsley reported that as a result of discussions regarding the O&M agreement, he had Bradley Lake Projec. 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 Four Dam 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 Four Dam 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 12. Is c. 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. Bradley Lake Budget & Labor Negotiations - This item was covered in previous discussion relating to Items 10. B. and C. 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. ADJOURNMENT There being no further business of the Committee, the meeting was adjourned at 11:50 a.m. BY: David L. Highe hairman Yn Vv Mc ee PeUMil Dennis V. McCrohan, Secretary Bradley Lake PROJECT MANAGEMENT COMMITTEE MEETING January 25, 1994 (Date) . Chugac h Efec Lye Hezac. (Location) PLEASE SIGN IN No. NAME REPRESENTING | duadly Le balt Bs bLaabie. __| | 4 CHeve Finkscteot CEA. 5 | Joh S Coole 6 | Dow Bue Ling anne cCeA 1 | “Tow Zpu4s 3 | Rov _SAaxTo. | | | a ay ast 19 | Lave L. AHigferts a 10 ‘We ul Sreadlen Goins f 12) | Sr@uRy HAAG IFO. 13 | Zoxw soo 4S fe PO Cp eed | DAVE CALVERT 0B HoFMAN 92Q2\IT9884 Bradley Lake PROJECT MANAGEMENT COMMITTEE MEETING aban 25,1974 (Date) C L ‘ eZ. (Location) PLEASE SIGN IN No. NAME REPRESENTING Li |S4e0) Svecrkowok) A2IDEA 2 | ve Kaseve Ai per s | Vince 10 1] 12 13 92Q2\IT9884 Agenda Item No. CITY OF SEWARD MATANUSKA ELEC ASSOC CHUGACH ELEC ASSOC HOMER ELEC ASSOC GOLDEN VAL ELEC ASSOC MUNI LIGHT & POWER ALASKA ENERGY AUTHORITY A=4+ OVER 51% B = AEA CONCUR With A DATE: January 25, 1994 BRADLEY PMC VOTING ae Roll Call YES NO ABS YES JOC nA OHM Aegeomd- kegel Kopinaes) NO ABS YES NO ABS Za (Ze Ale (Zia [7] rE] | in w([Zi JT) 42) +1473 im EE EEE Ee) ze (ld ME Hee C = UNANIMOUS D= MAJORITY VOTING METHOD A: Requiring four yeas with 51% of utilities, with no AEA vote: 1) Procedures for scheduling, production and dispatch of project power. 2) Establishment of procedures for use of each purchaser's water allocation (AEA assent required for license requirements). 3) Selection among alternative methods that do not involve AEA for funding required project work. VOTING METHOD B: Requiring 4 yeas with 51% of utilities and AEA concurrence: 1) Arranging operation and maintenance of project. 2) Adoption of budget of annual project costs. VOTE(93Q3/BC5272) 3) Establishment of FY estimated annual payment obligation and schedule of each purchaser. 4) Determination of annual project costs after each FY. 5) Evaluation of necessity for and scheduling of required project work. 6) Determination of appropriate amount of insurance. 7) Adoption of additional minimum funding amounts for renewal and contingency reserve fund above that required by bond resolution. 8) Selection among alternate methods that involve AEA for funding required project work. 9) Adoption or amendment of procedural committee rules (except dispute resolution). 10) Adoption of project maintenance schedules. 11) Determination of rules, procedures and accounts necessary to manage project when no bonds outstanding. 12) Evaluation and approval of optional project work and compensation for such work. 13) Application of insurance claims proceeds not governed by bond resolution. 14) Approval of procedures and any individual utility agreements relating to electric power reserves for project. 15) Approval of consultants. VOTING METHOD C: Unanimous vote by all (including AEA) YOTING METHOD D: Majority vote (including AEA) Election of Officers