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HomeMy WebLinkAboutBPMC Meeting September 23, 1994 2ALASKA INDUSTRIAL DEVELOPMENT =~ * AND EXPORT AUTHORITY f= ALASKA @@ =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING AGENDA Friday, September 23, 1994 - 10:00 a.m. Anchorage Municipal Light & Power Commission Room - 1200 East 1st Avenue L. CALL TO ORDER Story 2. ROLL CALL 3 PUBLIC COMMENT 4. AGENDA COMMENTS 5. APPROVAL OF MEETING MINUTES - August 4, 1994 6. BUDGET SUBCOMMITTEE REPORT Lovas 7. OPERATION AND DISPATCH SUBCOMMITTEE REPORT Sieczkowski 8. INSURANCE SUBCOMMITTEE REPORT McCrohan A. Independent Insurance Review B. Professional Liability Cc. General Liability 9. OLD BUSINESS A. Spinning Reserves Update Lovas B. Agreement Progress Report McCrohan Cc. Directors and Officers’ Liability Insurance McCrohan 10. NEW BUSINESS A. Approval of Legal Expenses & other Expenses Bjornstad B. Secretarial Services ll. COMMITTEE COMMENTS A. Next Meeting Date Story 12. ADJOURNMENT ALASKA INDUSTRIAL DEVELOPMENT > ¢ a /= ALASKA @™m :SENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 ALASKA ENERGY AUTHORITY/ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY Public Notice Bradley Lake Project Management Committee Notice is hereby given that the Bradley Lake Project Management Committee will hold a regular meeting to conduct the affairs of the Committee at Anchorage Municipal Light & Power (Commission Room), 1200 East 1st Avenue, Anchorage, Alaska. This meeting will commence at 10:00 a.m., on Friday, September 23, 1994. For additional information, contact Norman L. Story, Chairman, Homer Electric Association, 3977 Lake Street, Homer, Alaska 99603. The State of Alaska (AIDEA), complies with Title II of the Americans with Disabilities Act of 1990. Disabled persons requiring special modifications to participate should contact AIDEA staff at (907) 561-8050 to make special arrangements. /s/ Alaska Energy Authority Project Management Committee Publish: Monday, September 19, 1994 BRADLE: uAKE PROJECT MANAGEMENT COMMITTEE DRAFT MEETING MINUTES Commission Room Anchorage Municipal Light & Power 1200 East lst Avenue Anchorage, Alaska Thursday, August 4, 1994 10:00 a.m. 1. CALL TO ORDER Chairman Norm Story called the meeting of the Bradley Lake Hydro- electric Project Management Committee to order at 10:10 a.m. in the Commission Room of Anchorage Municipal Light & Power, 1200 East lst Avenue, Anchorage, Alaska, to conduct the business of the Committee per the agenda and public notice. All members were present. 2. ROLL CALL Alaska Energy Authority Dennis McCrohan, Designated Representative 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 Jim Woodcock, Designated Representative Anchorage Municipal Light & Power Tom Stahr, Designated Representative Chugach Electric Association Eugene Bjornstad, Designated Representative Others Present: Dan Beardsley, AIDEA/AEA Sharron Sigafoos, AIDEA Stan Sieczkowski, AEA Jim Hall, Matanuska Electric Association Myles Yerkes, Homer Electric Association Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt Bradley Evans, Golden Valley Electric Association Gregory Wyman, Golden Valley Electric Association Tom Lovas, Chugach Electric Association Lee Thibert, Chugach Electric Association Paul Johnson, Chugach Electric Association Tim McConnell, Anchorage Municipal Light & Power Moe Aslam, Anchorage Municipal Light & Power Dean Thompson, Anchorage Municipal Light & Power Mary Ann Pease, Anchorage Municipal Light & Power Vince Mottola, Fairbanks Municipal Utilities System John S. Cooley, Chugach Electric Association Jim Thrall, Locher Interests Ltd. Linda Perry Dwight, Consultant Bradley Lake Projec. Management Committee Meeting Minutes - August 4, 1994 Page 2 of 9 3. PUBLIC COMMENT Mr. Beardsley reported that AEA had hired consultants to handle the FERC licensing for the Bradley Lake project. Mr. Beardsley introduced Dr. Jim Thrall and Linda Perry Dwight at this time. 4. AGENDA COMMENTS Mr. Sieczkowski requested that “Recommendation for Approval on Funding for Construction Funds" be added as Item B. under No. 10, New Business. Mr. Story said “Overview of Bradley Lake Share Agreement" would be added as Item C. under No. 10, New Business. A. Confirmation of Elected Officers in Accordance With Section II of the Alaska Energy Authority Bylaws MOTION: Mr. Stahr moved to affirm the existing officers for the remainder of the year. Seconded by Mr. Calvert. The motion passed unanimously; elected officers were affirmed by voice vote. 5. APPROVAL OF MEETING MINUTES - JUNE 10, 1994 MOTION: Mr. Bjornstad moved to approve the June 10, 1994 minutes. Seconded by Mr. Calvert. The following revisions/corrections were noted: Mr. Bjornstad stated that "Board" should be changed to "Committee" throughout the minutes. Page 5, last paragraph, third line, "stays" should be cor- rected to "studies." Page 6, last line of the first paragraph: "shed load spin" should be corrected to read: “shed in lieu of spin." Page 7, third paragraph, Item B., (1): Revised to read: “It was decided that approximately $4,673 in charges would be paid to the new intertie project." The last line in Item (2) was revised to read: "...budgets of the new intertie project." Page 8, the first line was revised to read: "...Sieczkowski is processing the payment to Ater, Wynne...." The second line under Item C., Dispatch, should be revised to _ read: ",..between Chugach and GVEA...." The question was called; the minutes were approved as corrected. 6. BUDGET SUBCOMMITTEE REPORT Mr. Lovas reported that the Budget Subcommittee had met the previous day via teleconference. The following items were discussed: Bradley Lake Projec. Management Committee Meeting Minutes - August 4, 1994 Page 3 of 9 With regard to approval of payment of billings from Chugach for O&M and construction work on the SVC system at Soldotna 1 and Davis Creek, the Budget Subcommittee reviewed the O&M portion for appro- priateness of payment under the project O&M budget. The amount identified by the Subcommittee as O&M activity on CEA billings dating from December 1993 through July 1994 was $131,020.99. There was a consensus of the Subcommittee that the billings be submitted to the PMC for review and approval since they had not been dis- cussed previously in relation to the budget development for fiscal year 1994. The Subcommittee recommended that the PMC approve the $131,020.99 as a revision or addition to the O&M budget and that a motion be made to approve payment of those expenses. The Subcommittee discussed the audit for the operating year just completed June 30. The Subcommittee has had discussions with Stromburg & Carlson regarding providing audit timing and cost information in an effort to provide a more timely audit this year. One of the considerations with respect to timing has to do with preparation of the next year’s budget, which must be submitted to the Committee for approval by April 1 of each operating year. At the last PMC meeting, the PMC had assigned the Budget Subcommit- tee to review cost estimates for secretarial services. Mr. Lovas reported that AEA is currently in the process of compiling this information for the Budget Subcommittee, and he anticipated this would be an agenda item for the next meeting. Mr. Lovas stated that the Budget Subcommittee had discussed its concern with respect to beginning preparation for the next fiscal year budget. The Budget Subcommittee had been provided an update of expenses and accruals to date for the fiscal year 1994 budget, and at this time, the PMC is under budget. Accrued and actual expenditures for FY 94 amount to $2,227,000 as compared with the budgeted amount of $2,707,000. Mr. Lovas reported that AEA’s audit work will be completed in September, and then the PMC would be able to do its O&M audit. Following that, the Budget Subcommittee would report on any carryover from prior year periods which would be applied to a revision to the payments effective January 1, 1995. At an earlier meeting of the PMC, in a discussion regarding obtaining O&M information, the Committee had agreed to require Homer Electric to prepare and provide a work plan and budget associated with the O&M activities they are now performing under the contract; however, no deadline was set by which the work plan and budget must be completed. In that regard, the Budget Subcom- mittee requested that the work plan and budget be submitted to the Subcommittee by no later than mid-November, preferably having the work plan containing the budgeted numbers by the end of October. This schedule would facilitate the Subcommittee’s processing of the next year’s O&M budget for approval by the Committee by early 1995. Bradley Lake Project Management Committee Meeting Minutes - August 4, 1994 Page 4 of 9 There was a consensus of the Committee that Approval for Billing for Soldotna 1 and Davis Creek Expenditures be taken up under No. 10., New Business, Item A., Approval of Legal Expenses and Other Expenses. Mr. Stahr recommended that a person from AEG&T, MEA, or HEA be appointed to the Budget Subcommittee in order to maintain the balance that Ken Ritchey provided before his resignation. Mr. Story said there had been no replacement for Mr. Ritchey, and someone would be appointed to fill the vacant position. Mr. Lovas stated that the formal committee last identified consisted of: Ken Ritchey, Ron Saxton as attorney, Stan Sieczkowski representing AEA, and himself. Mary Ann Pease of ML&P was later added, and, on an operating basis, Brad Evans had routinely been included during the past eight months. Mr. Saxton recommended that as the new Chairman, Mr. Story should reappoint the entire Budget Subcom- mittee. As a point of clarification, for the record, Mr. Lovas reported that the following Budget Subcommittee members were in attendance at the 8/3/94 Budget Subcommittee teleconference meeting: Ron Saxton, Mary Ann Pease, Tom Lovas, Ms. McCambridge, and Dennis McCrohan. 7. OPERATION AND DISPATCH SUBCOMMITTEE REPORT Mr. Sieczkowski reported that the O&D Subcommittee had met at the Bradley project site the previous day. The O&D Subcommittee was given a tour of the project in the morning, and held the Subcommit- tee meeting during the afternoon. Significant items of discussion included: There would be a plant shut down beginning August 23 which would last approximately seven days. Annual maintenance of each unit would be scheduled to coincide with the shutdown. With respect to the technical standards, the Subcommittee agreed to take an active review at its next meeting and possibly take action at that time. HEA provided a list of known capital projects that was developed from an existing AEA list and from discussions with project personnel. A report has been presented to the Chairman addressing resolved items and those that unresolved. HEA also provided the O&D Subcommittee with a spare parts list developed from manufacturers’ recommendations and project person- nel’s review. The Subcommittee requests PMC action on this item during this meeting. Bradley Lake Projec. Management Committee Meeting Minutes - August 4, 1994 Page 5 of 9 The FY 95 system maintenance schedule is under way and will be developed and coordinated amongst the utilities. It will be presented and formalized at the next meeting. Mr. Sieczkowski concluded by saying that other items discussed by the O&D Subcommittee were outlined in the summary report to the PMC members. Mr. Sieczkowski requested that Mr. Paul Johnson of Chugach Electric address the water allocation for the Bradley project at this time. Mr. Johnson said that with the Bradley plant being shut down for a week for maintenance this month and unit outages scheduled for next month, the focus has been on coordination between all the utili- ties’ major maintenance schedules and coordinating the in-flows with Zanez Matthews at HEA to ensure that the project stays on track. 8. INSURANCE SUBCOMMITTEE REPORT A. Director and Officer Liability Insurance Mr. Beardsley updated the Committee on the solicitation of quotes for directors’ and officers’ liability insurance coverage for the project. Mr. Beardsley provided the PMC members with a copy of Four Dam Pool’s policy for review by the risk managers and/or insurance specialists of the Committee members’ respective organi- zations. He suggested scheduling it as an agenda item for the next PMC meeting. B. Bradley Insurance Review Mr. Beardsley advised that the advertisement should go out next week, and RFPs would be sent to major risk managers in the Lower 48. C. Professional Liability Mr. Beardsley reported that ARECA had questioned the PMC’s ability to cover Homer Electric Association under the PMC’s professional liability insurance in order to absorb some the deductibles the PMC had previously expressed concern about. ARECA will extend the coverage for 60 days, but the PMC needs to address this issue. The primary conflict is in the boiler and machinery coverage. Under HEA’s general policies going through ARECA, Chubb is HEA’s insurer. Chubb is also Bradley Lake’s insurer, and Chubb will not waive one policy for the other. Mr. Beardsley said additional information on this subject will be provided to the PMC at the next meeting. Mr. Story stated that this would be an agenda item for next meeting, at which time, he anticipated the Subcommittee would offer Bradley Lake Projec. Management Committee Meeting Minutes - August 4, 1994 Page 6 of 9 a recommendation for Committee approval. Individual Committee member comments should be directed to Chairman Story. 9. OLD BUSINESS A. Spinning Reserves Update Mr. Lovas reported that statements on reliability parameters have been received from Matanuska Electric Association and Homer Electric Association and will be considered in the RCC’s work. The group has compiled dispatch cases to measure the amount of responsive spin necessary to minimize first-stage load-shedding. The technical groups are currently reviewing case studies and attempting to benchmark those against recent disturbances to verify the results of their analyses. The group will meet on September 8 to refine their results and develop recommendations to the PMC. Brief discussion was heard. Mr. Lovas said that verification of the model and benchmarking against actual disturbances and known changes on governors that have occurred in the last couple of years were the primary concerns of the group at this time. B. Agreement Progress Report Mr. McCrohan reported that AEA had completed its internal review of the Chugach/AEA dispatch agreement, and it will be sent out early next week to Tom Lovas and Ron Saxton. Mr. McCrohan said he anti- cipated being able to provide further information to the PMC regarding the agreement at the next meeting. Mr. Story said that the direction from the PMC at the last meeting was to have the attorneys and AEA work to complete the agreement. Based on Committee comment, Mr. Story directed Mr. McCrohan to present the review to the PMC in final draft form at the next meeting. C. Dispatch Report Mr. Lovas explained that this was an informational agenda item requested by Mr. Stahr at the last meeting with respect to the dispatch agreements between the utility participants. There was no report on this item. 10. NEW BUSINESS A. Approval of Legal Expenses and Other Expenses Mr. Bjornstad reported that bills had been received from Ater, Wynne, Hewitt, Dodson & Skerritt in the amount of $5,372.30 for May and $2,452.17 for June. Bradley Lake Projecc. Management Committee Meeting Minutes - August 4, 1994 Page 7 of 9 MOTION: Mr. Bjornstad moved to approve payment of $5,372.30 for May and $2,452.17 for June. Seconded by Mr. Woodcock. A voice vote was taken, and the motion passed unanimously. MOTION: Mr. Woodcock moved to approve payment of $131,020.99 for O&M and project expenses for the Soldotna 1 and Davis Creek SVCs. Seconded by Mr. Kelly. Mr. McCrohan stated that the PMC had agreed to have Chugach provide these services; however, the Budget Subcommittee was never directed to incorporate the expenses into the FY 94 budget. The costs have been incurred and included in the projections, and there are adequate funds to pay for the O&M related expenditures. Mr. Story clarified that the budget does not need to be revised, the PMC simply needs to approve specific line items. Mr. McCrohan concurred and added that this was the total 1994 billing for these expenses, but that this will be a budget item in the FY 95 budget. Further Committee discussion was heard. The question was called for, and a voice vote was taken. The motion was approved with Mr. Stahr voting nay. B. Recommendation for Approval of Funding for Construction Funds MOTION: Mr. Bjornstad moved to approve the expenditure of $5,000 for project exercise equipment and $284,000 for spare parts. Sec- onded by Mr. Kelly. Committee discussion was heard regarding the content and extent of the spare parts. At Mr. Story’s request, Mr. Kelly identified additional and/or replacement items. Further discussion was heard. Mr. Sieczkowski was directed to present final capital projects list at the next PMC meeting, as well as an itemized list of expendi- tures. It was suggested that the capital projects list be prioritized. Further discussion was heard. The question was called. A voice vote was taken, and the motion passed unanimously. C. Overview of Bradley Lake Scheduling Agreement Mr. Story reported on the Bradley scheduling agreement between HEA, AEG&T, and CEA. Mr. Story said Mr. Lovas and Mr. Hufman were instrumental in the successful negotiations of this agreement, and he invited them to make comments as appropriate during his report. Mr. Story said the PMC members had been provided a copy of the agreement. Mr. Story outlined the terms and conditions of the agreement as follows: Bradley Lake Projec. Management Committee Meeting Minutes - August 4, 1994 Page 8 of 9 Term of the Agreement: ‘'92/'93, '93/'94, and '94/'95 water years. Chugach will schedule and pool AEG&T and HEA’s share with CEA resources and purchased power; no limitations on the scheduling. Chugach will give AEG&T an energy credit on a monthly wholesale billing based on AEG&T allocation and will pay AEG&T $112,000 per project water year for the scheduling rights. This agreement does not modify any other agreements. Chugach will not charge AEG&T for capacity above the 73-megawatt HEA contract as long Bradley Lake is available to be scheduled. Mr. Story explained that a minimum provision of 350,000 megawatt-hour take per year was outlined in the existing Bradley Lake Purchase Power Agreement. If the larger load supplier (CEA) ever dropped off- line, the Agreements’ required minimum “take” could be reduced. Presently the Agreement contains language that the Bradley Lake Project will not be penalized if a drop in megawatt-hour take per year occurs. Payments will be included as purchased power cost in CEA’s revenue requirements and rate-making. CEA will provide operating reserves when scheduling the share for Chugach system purposes. AEG&T retains obligations for capacity reserves. Chugach will maintain AEG&T’s systems security provided for under the existing tri-party wholesale power agreement. All rights and responsibilities of the participation in the project and this Committee are retained by HEA. Chugach has first right of refusal if AEG&T and HEA solicit proposals at the end of the term of this agreement for acquisition of the project shares or any portion of it. Questions and Committee discussion were heard. 11. COMMITTEE COMMENTS A. Letters of Designation for PMC Alternates Mr. Story advised the Committee that both MEA and CEA had provided the PMC letters designating their representatives and alternates. Chugach Electric has appointed Eugene Bjornstad as the Designated Representative and Tom Lovas as the Alternate. Matanuska Electric has appointed Jim Woodcock as its Designated Representative and James Hall as the Alternate. These letters were provided to the recording secretary for inclusion into the record and for copies to be made for all the PMC members. B. Next Meeting Date The next PMC meeting was scheduled for Friday, September 23, 1994, at 10:00 a.m., in the Commission Room of ML&P. Mr. Woodcock stated that Mr. James Hall would be attending as the Alternate for MEA. Bradley Lake Projec. Aanagement Committee Meeting Minutes - August 4, 1994 Page 9 of 9 12. ADJOURNMENT There being no further business of the Committee, the meeting was adjourned at 11:20 a.m. BY: Norm Story, Chairman ATTEST: Dennis V. McCrohan, Secretary ALASKA INDUSTRIAL DEVELOPMENT > ¢ AND EXPORT AUTHORITY = ALASKA iE =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 September 15, 1994 Norman L. Story, Chairman Bradley Project Management Committee Homer Electric Association, Inc. 3977 Lake Street Homer, Alaska 99603 Subject: Operator Liability Bradley Lake Hydroelectric Project Dear Norm: Due to developments in the cost of the liability coverage for operator negligence, the BPMC needs to reassess the position taken at the April PMC meeting concerning Homer Electric Association, Inc. assuming liability for operator negligence. In April the PMC addressed the issue of operator liability insurance coverages for the Bradley Lake Hydroelectric Project based on an April 26, 1994 letter to David L. Highers. Subsequently, by letter dated May 16, 1994, Homer Electric was advised that it was responsible for obtaining liability coverage for operator negligence up to the deductible limits of the Property and Boiler and Machinery policies for as long as Homer Electric operates the project. That responsibility was based on nominal cost additional coverage under HEA’s general liability policy. Since that time ARECA has reviewed the coverage and indicated the premium for liability coverage for operator negligence for property loss would be $66,000. That coverage would not cover losses to boiler and machinery. That premium amount appears to be prohibitive for the limited coverage of the policy. In light of that cost the BPMC should reassess its earlier decision. As we see it there are six options available: Norman L. Story September 15, 1994 Page 2 1) include the third party liability under the PMC general liability policy in next year’s insurance package placement. If HEA is unable to obtain an acceptable quote, AEA will seek insurance through the State of Alaska’s broker, any additional cost to be borne by HEA, BPMC or both. 2) require HEA to obtain the coverage at its cost, 3) obtain the coverage at the BPMC’s cost, 4) totally indemnify HEA for such losses, 5) partially indemnify HEA for such losses, (the amount of HEA’s exposure to be set by the PMC), or 6) HEA totally indemnify the PMC from such losses. Our rationale for option one is due to coverage AEA has place for the Four Dam Pool. The minimum premium for general liability is $50,000, The carrier added liability coverage for operator negligence for an additional $5,000 to cover the negligence of each of the four projects’ operator's employees. This coverage included losses to property and boiler and machinery. As specified in Section 13(a)(9) of the O&M Agreement, if HEA cannot obtain commercially reasonable insurance, AEA through Risk Management can place the insurance. AEA’s preference is for HEA to have its brokers reexamine the cost of adding the liability coverage for operator negligence to HEA’s general liability policy. The opinion of the State’s broker and Risk Management remains that the cost of the coverage should be nominal. If HEA’s broker is unable to obtain commercially reasonable insurance, the BPMC needs to address the issue and take one or more of the six options above. Very truly yours; eM ely Dennis V. McCrohan cc: | BPMC Members Brad Thompson, Risk Management ALASKA INDUSTRIAL DEVELOPMENT » ¢ AND EXPORT AUTHORITY / = ALASKA @—™ ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 September 14, 1994 Diana Woodard Vice President Corporate Trust & Agency BankAmerica State Trust Company Box 24425 Seattle, WA 98124-0425 Re: Insurance Requirements AEA/Bradley Lake Hydroelectric Project Dear Diana: As required by Section 714 (3) of the Power Revenue Bond Resolution, enclosed is the review of the insurance requirements for the Bradley Lake Hydroelectric Project prepared by the Division of Risk Management. Sincerely; is ey en Valorie F. Walker ce: Daniel W. Beardsley h:\all\beardsle\dword\blins\blins033.doc DEPARTMENT OF ADMINISTRATION P.O. BOX 110218 ~ eT ATE Oi. NG AS K [i / aaa an 02-B17LH JUNEAU, ALASKA 99811-0218 PHONE: (907) 465-2180 DIVISION OF RISK MANAGEMENT / FAX: (907 465.3680 September 9, 1994 EGEIVE |p) Daniel W. Beardsley, Contracts Mngr. Alaska Energy Authority SEP 1 4 i894 480 West Tudor Road i if Anchorage, AK 99503 Alaska Industria! Developmen and Expert Authority Dear Dan, Re: Bradley Lake Insurance Coverage You have asked that I provide a letter outlining Risk Management’s comments on the adequacy of the present insurance coverage protecting the Bradley Lake Hydroelectric Project to be considered as compliance to the bonding covenant for periodic assessment of the project insurance coverage. Attached is the current coverage synopsis outlining the insurance program for the FY95 policy period. As you recall, the Risk Assessment Evaluation prepared by Stone & Webster in March of 1988 provided detailed calculation of total expected and maximum probable losses for fire, lightning and all other perils (including earthquake and tsunami) at this project. The probable (likely) maximum losses for all components of the project were estimated at $34.8 million with a maximum loss estimated at $140 million -- based on 1991 total project values of $150 million. Presently the AEA is purchasing $60 million in all risk property protection -- the maximum amount reasonably available in the current insurance market. Constriction of world reinsurance markets due to heavy quake and other catastrophic weather losses incurred in recent years has lead to reduction of available quake limits in Alaska. The fact that AEA is able to retain the same policy limit and applicable deductible for quake and flood is remarkable in the current market and I believe reflective of underwriters’ recognition of high quality construction. In summation, I think AEA’s present insurance program is a good combination of self retained risk with high limit excess coverage for potential catastrophic loss. Although this project was not specifically addressed, in a recent audit of the State of Alaska’s overall property and casualty insurance program performed by an independent risk management consultant, it was found that the retention levels and excess insurance & printed on recycled paper > ¥ C.0 coverage purchased were appropriate. I believe the same finding would be made by any independent consultant reviewing the Bradley Lake Hydroelectric Project insurance coverage. Please call if you or anyone provided a copy of this letter have any question, or need further clarification of the current insurance program. Brad Thomyson Director wienc. STATE OF ALASKA ALASKA ENERGY AUTHORITY BRADLEY LAKE HYDROELECTRIC PROJECT FY95 INSURANCE PROGRAM COVERAGE SYNOPSIS Submitted by: Willis Corroon Corporation of Seattle July 1, 1994 404 (A) @) (C) @) | se ALASKA ENERGY AUTHORITY (Owner/State Assets) Bradley Lake Hydroelectric Project Insurance Expense FY95 Property (Exhibits 1) Boiler & Machinery (Exhibits 7-8) General Liability Watercraft TOTAL: elf- R *(A) Property: - All Perils including Earthquake and Flood - Transmission Lines: Not Covered Loss Limit: *(B) Boiler & Machinery: - Transformers 100,000 KVA or more - Turbine Generators, Power Distribution Transformers and all objects at Substation and Switchyards - All Other Objects Loss Limit Per Accident: ub-limits: Expediting Expense Ammonia Contamination Water Damage PBC Clean-up Additional Expenses **(C) General Liability: Loss Limit: **(D) Watercraft: Loss Limit: $ 194,000 38,403 10,000 Included in C $ 242,403 $ 1,000,000 $ 59,000,000 S 100,000 50,000 25,000 $ -15,000,000 $ 250,000 75,000 75,000 75,000 5,000 $ 5,000,000 $ 75,000,000 Inclusive of SIR $ 1,000,000 $ 200,000,000 pase BROKER: Willis Corroon Corporation of Seattle CARRIERS: Property (Exhibit 1) Boiler & Machinery Chubb/Pacific Indemnity Best's Rating: At++ 14 General Liability ) Part of overall ) State of Alaska Program Watercraft ) NOTES: * Property and Boiler & Machinery self-insured retention are an Alaska Energy Authority responsibility. ** — General Liability and Watercraft self-insured retention are a State responsibility for the duration of the catastrophic loss fund. 0014 PROPERTY INSURANCE EXCLUSIONS PROPERTY INSURED: This policy insures all real and/or personal property of the Insured, except as follows: PROPERTY EXCLUDED: THIS POLICY DOES NOT COVER: 1) a) Aircraft, watercraft, vehicles licensed for highway use, except while those vehicles are garaged, in storage or parked; jewelry, precious stones, furs or garments trimmed with fur; standing timber, growing crops, animals and land, b) Bills, currency, money, notes, securities, deeds, and evidence of debt. 2) Property in due course of ocean marine transit. 3) Property sold by or under encumbrance to the Insured after it leaves the custody of the Insured or an employee of the Insured. 4) a) Gas and electrical transmission lines and related plants. b) Non-owned substations and equipment located beyond 1000 feet from the Insured premises. 5) Nuclear reactor power plants including all auxiliary property on the site. 6) Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations. 7) Installations for fabricating complete fuel elements or for processing substantial quantities of "special nuclear material" and for reprocessing, salvaging, chemically separating, storing, or disposing of "spent" nuclear fuel or waste materials. 8) Satellites, underground mines and property therein, railroad rolling stock, offshore drilling rigs, production rigs and production platforms including personal property therein. | ” PERILS INSURED: This policy insures Risk of Direct Physical Loss or Damage to property insured, except as follows: PERILS EXCLUDED: THIS POLICY DOES NOT INSURE AGAINST: 1) Loss or damage caused by or resulting from moth, vermin, termites, or other insects; inherent vice; latent defect; wear, tear or gradual deterioration; contamination; rust; wet or dry rot; mold; dampness of atmosphere or smog; extremes of temperature, except as relates to EDP equipment; or loss or damage by normal settling, shrinkage or expansion in building or foundation. However, this Policy shall cover loss or damaged caused by an otherwise insured peril ensuing from the aforementioned excluded perils. 2) Loss or use, delay or loss of markets. 3) Loss to steam boilers, steam pipes, steam turbines and steam engines by bursting, Tupture, cracking, or explosion originating therein (other than explosion of accumulated gases or unconsumed fuel within a fire box or combustion chamber). This exclusion shall not apply to ensuing loss or damage to other property insured. 4) Infidelity, or any dishonesty on the part of the Insured or any of his employees to whom the property may be delivered or entrusted; inventory shortage or unexplained disappearance. 5) Break down or derangement of machinery or loss or damage to electrical appliances, devices, fixtures or wiring caused by artificially generated electrical current, unless fire or explosion ensues, and then only for the actual loss or damage caused by such ensuing fire or explosion, except as relates to EDP equipment or media. 6) Loss or damage arising directly or indirectly from nuclear reaction, nuclear radiation or radioactive contamination, however, such nuclear reaction, nuclear radiation or radioactive contamination may have been caused. Nevertheless if a fire arises directly or indirectly from nuclear damage arising directly from that fire shall (subject to the provisions of this Policy) be covered excluding, however, all loss or damage caused by nuclear reaction, nuclear radiation or radioactive contamination arising directly or indirectly from that fire. 7) Loss of or damage to the property insured occasioned directly or indirectly by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, Page military or usurped power to martial law or confiscation by order of any Government or public authority. 8) Loss or damage to personal property caused by processing, renovating, repairing or faulty workmanship thereon, unless fire and/or explosion ensues, and then only for direct loss or damage caused by such ensuing fire or explosion. 9) Loss or damage to personal property resulting from: shrinkage; evaporation; loss of weight; exposure to light; or change in color, texture or flavor; unless such loss or damage is caused directly by fire or the combating thereof. 10) Loss or damage caused by theft or exposure to weather conditions where any personal property insured is left in the open and not contained in buildings on permanent foundations, except as regards field research or testing equipment. Permanent foundations include skids, posting pads and other foundations required due to Arctic conditions. 11) Loss or damage caused by or arising out of accidental erasure of electronic data processing media. 12) Loss or damage caused by freezing to property hereunder in any vacant building which has not been properly maintained. Vacant is defined as abandoned in this context. 13) Loss, damage, costs or expenses in connection with any kind or description of seepage and/or pollution and/or contamination, direct or indirect, arising from any cause whatsoever. NEVERTHELESS, if a fire is not excluded from this Policy and a fire arises directly or indirectly from seepage and/or pollution and/or contamination any loss or damage insured under this Policy arising directly from that fire shall (subject to the terms, conditions and limitations of the Policy) be covered. However, if the insured property is the subject of direct physical loss or damage for which Underwriters have paid or agreed to pay then this Policy (subject to its terms, conditions and limitations) insures against direct physical loss or damage to the property insured hereunder caused by resulting seepage and/or pollution and/or contamination. 14) Seizure of destruction by order of public authority, except destruction by order of public authority to prevent spread of fire or explosion. ” 15) 16) Doois Asbestos material removal unless the asbestos itself incurs a direct physical loss or damage caused by fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicle contract, riot or civil commotion, vandalism or fire protection system leakage. Mechanical breakdown, including rupture or bursting caused by centrifugal force. TTT Tree ier ene TTT RT TT GT et BOILER & MACHINERY EXCLUSIONS THIS POLICY DOES NOT APPLY: 1) To loss from an accident caused directly or indirectly by: a) A hostile or warlike action, including action in hindering, combating or defending against an actual, impending or expected attach, by (i) any government or sovereign power (de jure or de facto) or any authority maintaining or using military, naval or air forces, (ii) military, naval or air forces, or (iii) | an agent of any such government, power, authority or forces. b) Insurrection, rebellion, revolution, civil war or usurped power, including any action in hindering, combating or defending against such an occurrence, or by confiscation by order of any government or public authority. 2) To loss, whether it be direct or indirect, proximate or remote. a) From an accident caused directly or indirectly by nuclear reaction, nuclear radiation or radioactive contamination, all whether controlled or uncontrolled; or b) From nuclear reaction, nuclear radiation or radioactive contamination, all whether controlled or uncontrolled, caused directly or indirectly by, contributed to or aggravated by an accident; Nor shall the Company be liable for any loss covered in whole or in part by any contract of insurance, carried by the Insured, which also covers any hazard or peril of nuclear reaction or nuclear radiation. 3) To any increase in the loss necessitated by any ordinance, law or regulation, rule or ruling regulating or restricting repair, alteration, use, operation, construction or installation. 4) Under Sections I, I, and III to loss: a) from fire concomitant with or following an accident or from the use of water or other means to extinguish fire, Pm md b) g) h) from an accident caused directly or indirectly by fire or from the use of water or other means to extinguish fire, from a combustion explosion outside the Object concomitant with or following an accident. from an accident caused directly or indirectly by a combustion explosion outside the Object, from flood unless an accident ensues and the Company shall then be liable only for loss from such ensuing accident, from an accident caused directly or indirectly by earth movement, including, but not limited to earthquake, landslide, mud slide, subsidence or volcanic eruption. from delay or interruption of business or manufacturing or process, from lack of power, light, heat, steam or refrigerations, and from any other indirect result of an accident. Exhibit 1 BRADLEY LAKE HYDROELECTRIC PROJECT July 1, 1994to July 1, 1995 Total Insured Values: $170,986,800 Insured Loss Limit: $59,000,000 All Perils including Earthquake and Flood Self Insured Retention: $1,000,000 Premium: $194,000 Best's Rating $9 Million Excess $1 Million SIR Premium: $76,500 RLI $4,560,000 (50.67%) A VIII Lexington $3,000,000 (33.33%) At++ XV Lloyd's & Cos. $1,440,000 (16.00%) * $40 Million Excess $10 Million Premium: $100,000 Lloyd's & Cos. $40,000,000 (100%) * $10 Million Excess $50 Million Premium: $17,500 Fireman's Fund $10,000,000 (100%) A XIV Note:* — Lloyd's of London is not listed by Best's. It has been approved by the Director of the Department of Insurance for the State of Alaska for surplus lines. ” Exhibit 2 BRADLEY LAKE HYDROELECTRIC PROJECT SYNOPSIS OF BOILER & MACHINERY INSURANCE COVERAGE COVERAGE: Utility Comprehensive (Broad Form Repair or Replacement Coverage Included Breakdown Coverage on all Turbine Generators LIMITS: Limit per Accident of $15,000,000 Expediting Expense Sublimit of $250,000 Ammonia Contamination Sublimit of $75,000 Water Damage Sublimit of $75,000 PCB Clean-up Sublimit of $75,000 Additional Expenses Sublimit of $5,000 SPECIAL FEATURES: Coverage for Computer Process Control Equipment Explosion Elimination Endorsement to avoid duplication with the Fire and Extended Coverage perils Contractual Acceptance Provision Annual Property Damage aggregate deductible of $300,000. Any property be subject to a $10,000 deductible. this is applicable to the following locations: Solomon Gulch Hydro Electric Plant Swan Lake Hydro Electric Plant Tyee Lake Hydro Electric Plant Terror Lake Hydro Electric Plant Anchorage-Fairbanks Intertie Coverage for Computer Process Control Equipment located at the following locations: Copper Valley Electric Diesel Plant, Valdez, AK Bailey Diesel Plant, Ketchikan, AK Wrangell Diesel Plant, Wrangell, AK Kodiak Diesel Plant, Kodiak Island, AK damage loss in excess of $10,000 and up to the applicable deductible per loss shall be accrued until the annual aggregate is reached. Thereafter, each future loss shall ” BRADLEY LAKE HYDROELECTRIC PLANT BOILER & MACHINERY DEDUCTIBLES Property Damage Deductible of $25,000 per occurrence for all object except: Property Damage Deductible of $50,000,000 per occurrence for all Turbine Generators. Property Damage Deductible of $100,000 per occurrence for any Transformer having a capacity of 100,000 KVA or more. rn ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY {= ALASKA @@ =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 September 16, 1994 Norman L. Story, Chairman Bradley Project Management Committee Homer Electric Association, Inc. 3977 Lake Street Homer, Alaska 99603 Subject: Agreement Update Status Dear Norm: The status of the various Bradley Lake Agreements and anticipated revision by AEA is listed below. Each of the documents will be reviewed and revised as necessary to reflect the mandatory Master Operating Agreement provisions. Except for the Dispatch Agreement, the remaining agreements are all drafts that have not been previously completed. Dispatch Agreement AEA RevisionsTransmitted to CEA/Saxton 8/10/94 Transmission Facilities Maintenance Agreement AEA-HEA Last Draft 3/3/93 Modification by AEA and Circulation 9/30/94 Transmission Interconnect AEA-HEA Last Draft 5/18/92 Modification by AEA and Circulation 10/14/94 SVCS Right of Entry Agreement AEA-HEA Last Draft 3/3/93 Modification by AEA and Circulation 11/4/94 SVCS Daves Creek and Soldotna Maintenance Agreement AEA-CEA Last Draft 12/--/92 Modification by AEA and Circulation 11/4/94 Conia UM, Coto ~ Dennis V. McCrohan ce: BPMC Members i ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY / = ALASKA @@ =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE, ALASKA 99503 907 / 561-8050 FAX 907 /561-8998 August 4, 1994 Norman L. Story Homer Electric Association 3977 Lake Street Homer, Alaska 99603 Willis Corroon has provided quotes for Director and Officer Liability Coverage for the Bradley Lake PMC. The quotes are as follows: Limits of Liability Retention Each Loss Premium (Includes Defense Cost) (Indemnifiable Claims) (Annual) $1,000,000 $ 50,000 $23,300 1,000,000 75,000 21,000 1,000,000 100,000 18,750 2,000,000 50,000 35,000 2,000,000 75,000 31,500 $2,000,000 $100,000 $28,500 The Four Dam Pool has Directors and Officers coverage of $1,000,000 with a $75,000 retention. That policy premium is $18,000. A copy of that policy is enclosed for your review. Please review this package prior to the next PMC meeting. We request that the PMC to advise AEA at the next meeting as to whether Willis Corroon should place this coverage if the PMC does not want D&O coverage. Should you have any questions, please direct them to Dan Beardsley. Sincerely, SIGNED 8/4/94 Dennis V. McCrohan Deputy Director, Energy DWB:bif h:all\beardsle\dword\blins\blins028, Enclosure