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HomeMy WebLinkAboutBPMC Meeting January 14, 1993 2v BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE 10. ll. 12. 13. 14. MEETING AGENDA RECORD UOPY January 14, 1993 (Revised) FILE NO Chugach Electric oe Inc. Training Room __ PRO Yd) ri :00 a.m. eee 2 Ji4t/ 43 CALL TO ORDER 10:00 a.m. Highers ROLL CALL PUBLIC COMMENT AGENDA COMMENTS APPROVAL OF MEETING MINUTES - November 20, 1992 TECHNICAL COORDINATING SUBCOMMITTEE REPORT Burlingame BUDGET SUBCOMMITTEE REPORT Ritchey A. Bradley Lake Construction Cost Audit Update B. FY93 Budget, AEA Administrative Costs Update Cc. Bradley Lake O&M Cost Audit Update AGREEMENTS SUBCOMMITTEE REPORT Sieczkowski OPERATION AND DISPATCH SUBCOMMITTEE REPORT Sieczkowski REVIEW OF PROJECT STATUS Eberle OLD BUSINESS A. Spinning Reserves/Under Frequency Load Shedding Update Lovas B. Bradley Scheduling vs. Spin Requirement Update Saxton NEW BUSINESS A. Approval of Committee Expenses Ritchey B. Fritz Creek Segment Funding Highers Cc. Bradley Draw-down Highers D. Saxton C BPMC Control Over O&M Decisions and Agreements COMMUNICATIONS A. Schedule Next Meeting ADJOURNMENT Es JAN 14 '93 @9:47 M.E.A. 77) 745-9361 SUR Pancliioriny Ken January 13, 1993 Page 2 FiLE NO V OPA MB ies Bs Pree eet Reet “0! SBOLESKY BILE T/PESE EXPENSES WERE APPROVED 87 THE STK 17 PIL METI Kb | some: em R=96% 907 745 9361 01-14-93 09:44 M P003 #25 ATTACHMENT 1 BRADLEY LAKE OPERATION AND DISPATCH SUBCOMMITTEE SUMMARY OF MEETING JANUARY 7, 1993 CORRESPONDENCE Revised Allocation & Scheduling Procedures, November 24, 1992 Revised Allocation & Scheduling Procedures, December 23, 1993 OPERATIONS A draft operation summary report format was presented by AEA. Beginning with January data, the report will provide project generation statistics and reservoir information in a condensed format. The report will be distributed as an attachment to the O&D Subcommittee meeting minutes. The status of utility DECnet programming was discussed. Due to differing utility information needs and the limited availability of its system programmer, AEA requested AML&P and GVEA develop and implement their own DECnet programming. No significant problems were discovered during the annual maintenance performed in November. Minor problems, most attributed to contractor oversight, were corrected. As anticipated, a small amount of tunnel debris was found. Scarring (due to the debris) on two of the needle nozzles is causing insignificant leakage. No water was detected in the turbine bearing oil. A one day outage will be needed to accommodate repair of a nitrogen leak on one of the transformers. It is anticipated that, in order to clear and reconfigure the fish water by pass intakes, the reservoir level will need to be lowered to 1068 feet by May 1, 1993. A preliminary diving inspection indicated the intakes are obstructed by large rocks, debris and silt, preventing sufficient flow of water to meet minimum FERC flow requirements. In anticipation of the reservoir draw-down, AEA is preparing a reallocation plan to maximize use of project water between February and May. Bradley Lake O&D suvcommittee January 7, 1993 Meeting Summary page 2 of 2 ACTION ITEMS Revisions to the Allocation and Scheduling Procedures: The Subcommittee approved recommendation of the revised Allocation & Scheduling Procedures to the BPMC for adoption. The revised procedures will be distributed to the BPMC in sufficient advance for consideration at the February meeting. All revisions will be presented to the BPMC in a manner which clearly defines the differences between the original procedures and the proposed changes. HEA Line Losses: HEA has not completed line loss calculations. The information will be presented to the next Subcommittee meeting. NEXT MEETING Thursday, January 28, 1993 10:00 a.m. Alaska Energy Authority Main Conference Room ™SEGUHU VOPY FILE NO O~ hy L ety of Anchorage Municipal Light & Power rr 1200 East First Avenue Anchorage, Alaska 99501-1685 Talapnone: (907) 279-7671, Telecopiers: (907) 263-5204, 277-9272 Transmittal Sheet Municipal Light & Power oY Seasons Greetings! Administrative Offices Fax #: (907) 263-5804 Date: December 8, 1932 To: “Brent Petrie, AEA (561-8584) From: Tom Stahr, ML&P Subject: Railbelt Reserve Allocation This document contains __3 sheets (including cover sheet). If you wish to verify receipt of this document or you did not receive all sheets indicated please cal] ‘Marilynne at (907) 279-7671, ext. _ 5429 . Many thanks! XC i Shan > ; AG WK, o Cc L ss Putting Energy into Anchorage for 60 years "1932 - 1992" renns 001 Uliad do = 16.27 5U3 226 VO7y ATER WYNNE et al @ooi ATER WYNNE wECEIVED sate 1200 HEWITT ssinatecebaten JAN 12 1993 (503) 226-1191 DODSON oa & SKERRITT ALASKA ENERGY AUTHORITY. ATTORNEYS AT LAW RECORU VORP FILE NO FACSIMILE TRANSMITTAT PRO Brie) min SS 4/49 NOTICE: This facsimile contains confidential information that is being transmitted to and is intended only for the use of the recipient named below. ~ Reading, disclosure, discussion, dissemination, distribution, or copying of this information by anyone other than the named recipient or his or her employees or agents is strictly prohibited. If you have received this facsimile in error, please immediately destroy it and notify us by telephone, (503) 226-1191. aaree January 12,1993 0 TO: Ron Garzini and Brent Petrie _ CITY/STATE: § _Anchorage, Alaska FAX NUMBER: 907/561-8584 OFFICE NUMBER: _907/561-7877 FROM: Rep Saxton __ DOCUMENT s —letter re: Bradisy Bond Proceeds __ PAGES (INCL. COVER) 3 USAGE TIME CLIENT NUMBER: 44-000 CO. Stan (font e\m Oe Bree WKc WERE (REN Via ho WoLF 1/13/53 SM 01/12'93 16:27 ATER WYNNE @503 228 0079 ATER ®YNNE et al 2002 222 SW. Cobmnhia HEWITT Portland, Oregon 37201-6618 (503) 226-1191 DODSON Fax (503) 226-0079 & SKERRITT ATTORNEYS AT LAW January 12, 1993 YIA PACSTMILE Ron Garzini Alaska Energy Authority P.O. Box 190869 Anchorage, Alaska 99519-0869 Re: Dear Ron: Bradley Bond Proceeds Brent Petrie recommended that I write you with a question I have regarding the use of Bradley bond proceeds. I would be pleased to discuss the matter further with any of your staff, or your bond counsel. When the Anthority issued the Bradley Lake bonds, it issued them to cover two categories of costs. The first was the "Project Costs" -- ABA’s costs of planning and constructing the Project. issuance. This was the vast majority of the amount of the The second category related to costs incurred by the utilities relative to the Project. These costs are called "Section 31 Costs" in reference to the part of the Power Sales Agreement that provides for their payment. The two categories of costs are important because the "Project Costs" are subject to 50-50 matching by State grant funds, while the Section 31 items are not subject to State matching, and are borne entirely by the utilities. The situation is now that there are surplus Project proceeds, and that the Section 31 funds have been depleted prior to the payment of all utility expenses. In particular, there is $600,000 associated with the Homer transmission line construction that the utilities would like to treat as a Section 31 Cost, but for which there are no designated funds remaining. The question that arises is the possibility of changing the characterization of the remaining funds from Project funds to Searle, Washing Vesting, D.C Sam Prancison, California Afiitamed offices in (206) 23-471. (202) 785-0303 (415) 422-4143 Anchorage. Feirbankcs Fax (206) 467-8406 Pex QTD) 785-8676 Tax (415) 969-1205 and J unea Alesiea 01/1233 16:23 503 226 vo79 ATER WYNNE et al 003 ATER WYNNE Ron Garzini January 12, 1993 Page 2 Section 31 funds. This would have no financial impact whatsoever on the Anthority, nor on bondholders. I consider it a technical legal question of whether the bond documents permit such a recharacterization of the uses to which the funds would be put. My partner Doug Goe, who served as one of the bond attorneys for the utilities during the Bradley Lake financing, has the preliminary view that there may be such flexibility, and that the answer may be tied to the facts of the new proposed use. However, he has not done a thorough review of the issue, and believes it is important to start the process by consulting the Authority. If it would be helpful to getting an answer from the Authority, Doug and I would be pleased to talk with Eric Wohiforth, or whoever else you asked to look at this question. Thank you for your cooperation in this regard. cc: (via facsimile) Brent Petrie, AFA David Highers, CEA Ken Ritchey, MEA mns\535der.1t> CHUGACH ELECTRIC ASSOCIATION, INC. Anchorage, Alaska RECORD UOPY FILE NO January 11, 1993 PRO Fh id . = as FP (NY193 TO: Distribution PRO 1-12 FWBP FROM: Marty M. Lanum, Supervisor, Maint. Plan/Schedule” SUBJECT: Operating Division Scheduling Meeting Minutes and Announcement of Next Meeting ATTENDERS: Mark Bauer Brian Hickey David Braun Burke Wick David Burlingame Jim Wilson Dora Gropp ITEMS DISCUSSED: 1.) The current 1993 Generation Outage Schedule was distributed, reviewed, and a couple of minor deletions made to the Engineering Projects. 2.) All present were advised that the schedule as distributed may change very rapidly do to a very recent communication about a significant problem at Bradley Lake. Marty Lanum asked David Burlingame to review the Bradley Lake problem for everyone present so that they might have a better idea as to the impact on the 1993 Generation Outage Schedule. 3.) Marty Lanum stated that as soon as all of the Bradley Lake problem options are reviewed and a final decision made a new 1993 Generation Outage Schedule will be distributed. 4.) Brian Hickey distributed a 1993 schedule for his projects with the understanding that a revised 1993 Generation Outage schedule may have a definite impact upon his schedule. 5.) The next meeting is scheduled for Friday February 12, 1993 at 11:00 am in the Production Division Conference Room c.c. File 3423d M. Massin Attenders B. Byrnes G. Bjornstad RECORU VOPY January 13, 1993 i . PRO 37 1/ mind To: File 114143 From: Larry Wolf “ Subject: Report of Activities Concerning Bradley Lake Fishwater Bypass Piping Inspections and Course of Action. 11/9/92 John Zidalis notified me that one of the fishwater by-pass pipes was not releasing full flow through the controllable valves. He suspected a partial blockage in the pipe or intake. 11/12/92 The on-site operators made an unsuccessful attempted to clear the obstruction with a back flow of compressed air. 11/17/92 I inspected the site and observed the exposed bank and shoreline immediately above the intake area. This rocky area contained overburden and some loose fill material. The terracing configuration led me to believe that numerous storms and prevailing winds during various reservoir elevations had caused the bank material to slough off and migrate toward the fishwater by-pass pipe and diversion tunnel intake area. I contacted AEA Contracting Personnel concerning the services of a diver to inspect the intakes. 11/19/92 AEA issued a purchase request for diving services to inspect the intake area to determine the condition of the intakes and what materials were in the area. 11/20/92 I stated the intake blockage situation at the BPMC meeting indicating that we intended to have a diver inspect the intakes on 11/23/92. 11/23/92 The divers mobilized to the site but were unable to complete the dive due to high wind conditions at the reservoir. The reservoir did not contain any ice at this time. 12/8/92 The diver was able to complete a dive after numerous efforts to clear the access road of snow and coordinate site access with the weather conditions. 12/16/92 I discussed the diving results with John Zidalis. He passed on the diver's report that they were able to attain the 1068' elevation and found significant amounts of large rock. The diver had to crawl around these rocks and became wedged between a large smooth rock and the concrete face of the intake structure. John also passed on that the diver indicated there was an amount of soft material at xe: EERE & a the base of the rocks and that the diver never located the pipe flange intakes. The glacial flour in the water does not allow visual inspection at this depth (70). Everything was determined by touch. After review of the diver's report, considering the operators information and my personal inspection, I scoped the necessary work as follows: Clean the overburden and loose material from the rock out-cropping above the intake area avoiding migration of this material into the intake area; draw down the reservoir to expose the intake area to allow clean-out by a hoe or dragline; and install modifications to the fishwater intakes. Draw down of the reservoir versus using a clam bucket from a barge was preferred due to the potential of contacting the intake flanges with the clam and damaging them. 1/7/93 Initiated a request for proposal from SWEC to provide engineering and consulting services to accomplish contractor specifications for the clean up effort and for design of intake modifications to raise their effective working height. The known information about the fishwater by-pass restriction was presented to the Bradley Lake O&D committee with the proposal to draw down the reservoir to elevation 1068' by May 1, 1993 to clear the rock bank above the intake of any loose debris, clean out the intake area of suspected rock and debris and modify the fishwater by-pass intakes to establish a higher effective level of intake. The utilities voiced a concern about lowering the reservoir to 1068' and implied that this would create a significant increase in alternate generating costs. Contacted SWEC to provide reservoir storage capacity between elevation 1068' and 1080', as requested by the utilities at the O&D meeting, and ascertain plant generating parameters below elevation 1080’. 1/12/93 As a result of the utilities concerns from the O&D meeting, I talked directly with the diver about the dive on 12/8/92. I had hopes of gaining enough additional information that might indicate there was not be enough large material to remove that required large equipment access. From our conversation I was led to believe that the diver did not reach elevation 1068’, that the diver may have been disoriented without any vision at that depth in the glacial water, that I had difficulty visualizing a huge smooth rock in that area as all the material was either shot rock or fractured which should have left sharp edges, that the wind at the time of the dive drove the marker buoy too close to the rock face and that the diver may have possibly entered the stoplog slot which is wedged at the top in order to guide the stoplog into it. I met with another commercial diving company to request a proposal for an inspection dive of the intake area. They will submit a proposal by January 15, 1993. 1/13/93 The second diving company visited the Bradley site to inspect the working conditions and determine the ice thickness. This will determine whether they work from the ice or if we have to try and open a hole above the intake and aerate it to keep it open. This company intends to utilize a hardhat diver versus the scuba gear utilized by the initial diver. I received a faxed proposal from SWEC for the engineering and consulting services to develop contract specifications and design specifications for the contractor's cleaning efforts and intake modifications. Additional information on reservoir capacity between 1068' and 1080' is 18,734 ac.ft.. The plant output below 1080! is between 107.5 - 109.5 MW depending on effective net head. However, due to the resultant pressure transients in the tunnel from a possible needle failure below 1080' , we could experience a tunnel failure at the upper elbow. The transient stability studies were not run below 1080'. I did request a proposal to run those stability studies in the event that we want or need to drain the reservoir below elevation 1080' via generation in the future. Due to uncertainty of the actual conditions at elevation 1068' a defined scope of work is not yet possible. With the presumption that there may be a small amount of rock debris over and around the intakes or water logged trash has migrated over the intakes, possible options to releaving the flow restriction and reducing further occurrences are: 1.) Inspect the intake area with an experienced hard hat diver. 2.) If the material is insignificant and can be handled by the diver at that time, clean the intakes off. 3.) If the material is significant or large: A.) Utilize a clam bucket from the ice or a barge to clean the intake area. The risk here is damaging the intakes. The expense would be to mobilize flexi-floats or a barge and the efficiency of the operation at such depths. The installation of the intake modification would have to be done by a diver. B.) Lower the reservoir to elevation approximately 1090' in order to mobilize a crane or hoe to the pad adjacent to the intake area. The hoe or clam would be picking material in 22' of water. The efficiency of the operation in water would be reduced but would be better than working from a barge at a greater depth. Mobilization costs would be reduced. A diver would still be necessary to determine the conditions at elevation 1068’. The risk of contacting the intakes with the hoe or clam still exists but is less than at greater depths. The utilities may not be able to pond the amount of water they would like to. The installation of the intake modification would have to be done by a diver. C.) Lower the reservoir to elevation 1068' to expose the intakes. Clean out the intake area with equipment on site and install the intake modification without a diver. The disadvantage of this option is the inability to pond water by the utilities and the additional time required to refill the reservoir to normal operating level. The efficiency of the stored energy is less at these lower elevations. There is a possible transient instability in the tunnel if a needle should fail and slam shut with the reservoir below elevation 1080. The fishwater by-pass is a FERC license requirement to provide water at the lower Bradley River for salmon spawning and habitat. November through April we are required to maintain 40 cfs at the lower Bradley River. During May we ramp up to 100 cfs which we maintain through September when we ramp back down to 40 cfs. We have the potential of being fined $10,000 a day by FERC for violating this license requirement and revocation of the project license. At reservoir elevation 1136.1 our maximum current flow through this fish water by- pass system is 86 cfs with the one pipe partially plugged. The partially plugged pipe is releasing a maximum of just over 7 cfs. The other pipe is capable of releasing 71- 72 cfs at this head. We could not, therefore meet our minimum required flow of 100 cfs in May with the current flow restriction. Natural inflows into the Bradley River catchment basin below the dam begin to increase in May, depending on the weather. During extreme warm spells or rainy weather the natural inflow below the dam can meet or exceed the required 100 cfs. This is uncertain and must be supplemented by our releases if it does not occur naturally. RAILBELT UTILITY MANAGERS: At the last Railbelt Utility Managers’ meeting following discussion of Ron Saxton's memo on the Alaska Intertie Agreement, it was suggested that each Manager inform the others as to their concerns regarding the Railbelt Reserve allocation. CONCERNS ML&P's concerns revolve around practices which reduce railbelt spinning reserves below contractually required levels. This practice has resulted in deterioration of railbelt reliability and inequities in the burden of supplying spinning reserves, Current efforts to redefine spinning reserve contributions have so far ignored the principal deficiencies in present practices, DISCUSSION Addendum #1 to the Alaska Intertie Agreement delineates how the utility participants will establish and meet the reserve and operating reserve requirements of the intertie. Paragraph B- 2.4.1 defines spinning reserve for the purposes of the addendum. This definition can not be changed or abrogated by the Operating Committee. The definition is “B-2.4.1 System Spinning Reserve shall be calculated at any given instant as the difference between the sum of e net a of all generating units on line in the respective system and the integrated Systems Demand of the system involved." Opcration of B-2,2.3 might possibly lower the amount of spinning reserve available but in no case can it increase it. Paragraph B-2.4.2 describes under what situation load shed may be used to satisfy a participants spinning reserve obligation. Based upon recent P.T.I. studies, it is extremely doubtful that present load shed in lieu of spin schemes meet the criteria of not causing objectionable system conditions or preventing cascading effects. The fact that the operating: committee may have — of these schemes is irrclevant unless the load shed in lieu of spin program satisfies the basic contractual requirements which are based on results, Of major concern is the practice of "selling spin", This simply is a po age for not having ee spin and abrogating the contract. The arrangement for others to supply a utility participants operating reserve under B-2.4.5 docs not apply because when spin is "sold" it is non existent. Any agreements the operating committces may have made regarding the "return“ or spin can only mean load shed of the entire amount of spin removed by virtue of an energy sale, To be effective this must take place before regular load shed is triggered. Return of the = in X seconds does not make this practice permitted under the contract, The simple fact is that the “selling” of spin is not permitted by the intertic operating agreement. : Paragraph B-2.2,3 was added to the agreement because at the time of drafting we were not sure as to the proper amount of operating and spinning reserve that would be required and it was anticipated that future review would be desirable. Certainly now is the time to do so and worth-while studies are underway; however we have not yet studied several very important aspects of this problem, such as the optimum distribution of spin between units or optimized the best mixes of inertia response, fast governor response, slow machine response and AGC response. I suggest none of this will substantially improve reliability until we restore contractually required spin to the system. CONCLUSION The first order of business is to restore thc contractual spin requirements to the system before we attempt to change the rules. No load shed in lieu of spin should be — until dynamic system studies have show it will perform as well as actual spin. The loading of spin (sale of spin) must be immediately discontinued. All economy energy sales should be covered by real spin at one end or the other or by both. The Alaska Intertie Agreement is the only contract between the intertie participants and is the only area for the solution of spin/loadshed concerns, I urge a —— forward approach to our mutual concerns in order to reach a necessary concensus resolution. Very truly yours, neo Tom Stahr, ML&P Xe: Ron Saxton Tim McConnell Ts-23 em 13°93 1/7! Sb M.E.R. Matanuska Electric Association, Inc. P.O. Box 2929 Palmer, Alaska 99645 Telephone: (907) 745-3231 Fax: (907) 745-9328 (WO) 745-9361 P.1/4 RECORD VOPY FILE NO PUD. 3-10 FTA 1/19/53 RECEIVED JAN 14 1993 ALASKA ENERGY AUTHORITY, MATANUSKA ELECTRIC ASSOCIATION, INC. Office of the General Manager P. O. Box 2929 Palmer, Alaska 99645 FAX: (907) 745-9368 FACSIMILE TRANSMISSION COVER SHEET pare_wfe —. PHONE: (907) 745-9212 TRANSMIT TO: Dees BLe ‘ FAX NO. S64 J5P¥ ee PHONE NO. SENDER: nh MATERIAL TO BE TRANSMITTED: Ladd Lapa pein eniX (INCLUDING COVER SHEET) NUMBER OF PAGES: + REMARKS: Ce. Runde 101.920814.89 a tb yy ad (ali cr hu Cu WolF V2 JAN 13 ’93 17:57 M.E.A. (987) 745-9361 P.274 « wt Berisena, Vhenbeg & Company Certified Public Accountants 3301 C Sweet, Suite 520 Anchorage, Alaska 99503 Tal. (907) 563-4547 FAX (907) 561-7683 December 1, 1992 AUDIT ENGAGEMENT LETTER Bradley Lake Project Management Committee Anchorage, Alaska We are pleased to confirm our understanding of the services we are to provide for Bradley Lake Project Management Committee for the year ended June 30, 1992, We will audit the balance sheet of Bradley Lake Project Management Committee as of June 30, 1992 and the related statements of operation and fund balance for the year then ended. Our audit will be performed and documented in accordance with generally accepted auditing standards and will include tests of accounting records and other procedures we consider necessary to enable us to express an unqualified opinion that your financial statements are fairly presented in conformity with generally accepted accounting principles consistently applied. If our audit opinion is other than unqualified, we will fully discuss the reasons with you in advance. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected customers, creditors, and banks. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our examination, we will also request certain written representations from the Bradley Lake Project Management Committee and the Alaska Energy Authority about the financial statements and related matters. An audit is based primarily on the selective testing of accounting records and related data; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. Because we will not perform a detailed examination of all transactions, there is a risk that material errors, irregularities, or illegal acts, including fraud or defalcations, may exist and not be detected by us. We will advise you, however, of any matters of that nature that come to our attention. P.3/4 AAN 13 °93 17:57 M.E.A. (987) 745-9361 Bradley Lake Project Management Committee December i, 1992 We understand that the Alaska Energy Authority will provide us with the basic information required for our audit and that they are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with the Bradley Lake Project Management Committee. This responsibility includes the maintenance of adequate controls, the selection and application of accounting principles, and the safeguarding of assets. We understand that the Alaska Energy Authority will prepare the schedules that we request and will locate any invoices selected by us for testing. They will also prepare such schedules and analyses as are determined necessary during the course of the audit. Our examination is not specifically designed and cannot be relied on to disclose material weaknesses in accounting controls. However, during the audit, if we become aware of such material weaknesses in internal accounting control or ways that we believe management practices can be improved, we will communicate them to you in a separate letter. Our firm is a member in good standing of the Private Companies Practice Section of the American Institute of Certified Public Accountants. This membership provides for a peer review program. Our first peer review was satisfactorily completed on August 29, 1990. We expect to begin our audit in December 1992 and to complete and issue our report no later than March 1993. Our fees for these services will be based on the actual time spent at our standard hourly rates, plus travel and other out~of~pocket costs such aS report reproduction typing, postage, etc. our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. Based on our preliminary estimates, the fee should approximate $15,000 for the audit. This estimate is based on anticipated cooperation and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. JAN 13 793 17:58 M.E.A. (987) 745-9361 P.474 ae Bradley Leke Project Management Committee December 1, 1992 We appreciate the opportunity to be of service to you and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, |Qermcee, MiigridiAaag & Corey : q- Parisena, Stromberg & Company RESPONSE; This letter correctly sets forth the understanding of Bradley Lake Project Management Committee. By: Title Date SENT BY: 1- 6-93 : 2:55PM ; CHUGACH ELECTRIC- AK ENERGY AUTHORITY:# 2/ 5 CHUGACH ELECTRIC” JAN 0 € 1393 ALASKA ENERGY AUTHORITY BES igaidi tite January 5, 1993 : TO: Bradley Lake PMC Members FROM: David L. Highers, Chairman SUBJECT: Fritz Creek Segment My staff has prepared a background paper on the Fritz Creek segment funding issue we discussed today. I will make the issue an agenda item for the PMC meeting of January 14, 1 am forwarding our paper on this topic for your consideration. I hope we can devise a Strategy to deal with this issue at the meeting. Attachment Distribution: Gurzini 5401 Minnesota Drive ¢ PO. Box 196300 « Anchorage, Alaska 99519-6300 Pnone 907 563-7494 © FAX 907 562-0027 SENT BY: 1- 6-93 ; 2:55PM ; CHUGACH ELECTRIC- AK ENERGY AUTHORITY;+# 3/ 5 CHUGACH ELECTRIC ASSOCIATION, INC. Anchorage, Alaska December 23, 1992 TO: Joe Griffith, Executive Manager, Finance & Plannin FROM: Thamas A. Lovas, Manager, Planning & Rates { ee SUBJECT: HEA Invoice of 12/11/92 - Fritz Creek Segment SUMMARY: The HEA claim to $600,000 over three years is valid under the terms of Bradley Lake Agreements, The costs were not capitalized as was contemplated by the Agreement for Transmission Capability. The BPMC should take action to authorize payment from available project funds (e.g., reserves) or authorize inclusion of the costs in the operations and maintenance budget. The intent of the Agreement was that the Project should cover the costs, not the individual utilities. The issue may be considered for an agenda item at the next BPMC meeting. BACKGROUND; The attached invoice from Homer Electric for the special provisions regarding the Fritz Creek segment of the Bradley Junction/Soldotna transmission lines correctly identifies a three-year, $200,000 per year payment to Homer. The basis for the charge was an agreement among the signatories (the Bradley Lake participant utilities but oot the Energy Authority) to the Amendment to Agreement for Transmission Capability to pay Homer the costs of accelerating the construction of the Fritz Creek segment. Homer had argued that the segment was not needed by their system until 1994, and that a cost would be incurred by the Homer ratepayers of early completion to accommodate the testing and commercial operation of Bradley Lake, Although the participants were not pleased, the agreement was struck and the language accommodating the payment (Section 12, attached) was added to the Amendment that was finally approved by REA in 1989. The essence of the agreement was that the participants in the Project (including Homer) would pay the acceleration costs which, since the increment was clearly due to the Project, would be included in the project capital cost. As the impact to the Homer ratepayers would occur in the initial three years, Homer was to receive quarterly payments from the project of $50,000 each. Since AEA was not a signatory, and the transmission facility was not specifically necessary to the construction by AEA, the Authority refused to accept 50/50 sharing of the acceleration under Section 13 of the power sales agreement. Instead, the participants agreed to consider the cost as an "additional" project cost that would be bondable and subject to payment by the power purchasers in accordance with Section 31. If the cost was not capitalized, the agreement called for the acceleration costs to be included in the operations and maintenance budget. SENT BY: 1- 6-93 ; 2:56PM : CHUGACH ELECTRIC- AK ENERGY ALTHORITY:# 4/ 5 Joe Griffith December 23, 1992 HEA Invoice of 12/11/92 - Fritz Creek Segment 2 HISTORY: Homer failed to submit a claim for the payment during the Bradley Lake bond sales. The consequence of this failure is that this amount did not get included in either of the bond sales. Subsequently, during the budget preparation, reviews and adoption by the BPMC, neither Homer nor the other participants recognized the liability for the acceleration cost previously anticipated to be paid by the Project. Homer has verbally contended that the Bradley Lake Budget Subcommittee was made aware of a claim of payment, but Ken Ritchey, the Subcommittee Chairman, Ron Saxton, and | have no recollection of it. The payments were not included in the cash flow analyses prepared by AEA and the Subcommittee nor were they included in the Project operations and maintenance budget. Regardless of past action (or inaction), however, a formal notice has been sent via invoice from Homer with a valid claim to the funds, and a method of payment needs to be developed. Because the amount was not included in the original bond sales, the only options are to pay it in the annual Project budget, "finance" it through the renewal and contingency fund (four year payback required) or consider a separate financing arrangement. ACTION REQUIRED: Section 12 clearly indicates that the Project Management Committee has jurisdiction over the payment alternatives, since the Parties agreed that the representatives to the PMC would clect either to capitalize the costs or include them in the operations and maintenance budget. Since the costs have not been previously considered, three potential avenues are available to deal with payment: 1) Determine the ability of the PMC to allocate a portion of the reserve funds (obtained from bond proceeds) to payment of the acceleration costs and, if feasible, direct AEA to make the quarterly payments. The costs would then, effectively, have been capitalized in the Project. The costs would be included in the Bradley Lake payments due from the utilities, but the reserve funds would need to be replenished after several years. 2) Direct the Budget Subcommittee to include the payments in the Project operations and maintenance budget such that the quarterly payments would be made by AEA, but funded by the utilities through the Bradley Lake budget. The costs would be included in the Bradley Lake monthly payments from the utilities, presumably beginning in July and extending for a three-year period thereafter, 3) Authorize the parties to the Transmission Capability agreement to separately pay acceleration costs in addition to the operations and maintenance charges assessed by Homer to the participants under the terms of the Transmission Capability agreement. The costs would not then be included in the Bradley Lake payments of the utilities. SENT BY: 1- 6-93 + 2:56PM : CHUGACH ELECTRIC- aK ENERGY ALTHORITY:# 5/ 5 Joe Griffith December 23, 1992 HEA Invoice of 12/11/92 - Fritz Creek Segment 3 | have discussed these options with Ron Saxton, the BPMC attorney, and he agrees that these avenues are appropriate to consider. Please let me know if further information is required. Enclosure 3862.TAL/ts cc: Gene Bjornstad Mike Cunningham John Cooley Rick Freymiller Ron Saxton - Ater Wynne File, CRF, RF SENT BY: 1- 8-93 : 2:07PM : CHUGACH ELECTRIC- aK ENERGY AUTHORITY;# 2/ 3 January 8, 1993 TO: Mike Kelly, Golden Valley Electric Assn, FAX: 451-5633 Norman Story, Homer Electric Assn. FAX: 235-3323 Tom Stahr, Anchorage Municipal Light & Power FAX: 263-5204 Ken Ritchey, Matanuska Electric Assn, FAX: 745-9368 Paul Diener, Seward Electric Utility FAX; 224-3248 Bob Hufman, AEG&T FAX: 474-0549 FROM: _ David L. Highers RE; Bradley Lake Draw-dpwn Please review the attached memo fram Gene Bjornstad to me regarding water draw-down at Bradley, This is a significant action on short notice that will have an extreme financial impact. I plan on this being discussed at the PMC meeting on the 14th. If you have comments, please call or fax as soon as possible. Attachment cc: Ron Saxton FAX: 503/226-0079 5604 Minnesota Drive = P.O. Box 196300 » Ancnorage, Alaska 99549-4300 Phone 907-563-7494 » FAX 907-562-0027 SENT BY: 1- 8-93 : 2:07PM ; CHUGACH ELECTRIC+ AK ENERGY ALTHORITY:# 3/ 3 < CHUGACH ELECTRIC ASSOCIATION, INC. Anchorage, Alaska January 8, 1993 TO: David L. Highers, General Manager A FROM: Eugene N. Bjornstad, Executive tanipi/ oct Divisions SUBJECT: Bradley Lake Draw-down I was informed Thursday, January 7, 1993 by Dave Burlingame, our representative to the Technical Coordinating Committee, that Bradley Lake will have to be drawn down by May 1993 in order to perform debris cleaning work around the intakes to the fish water bypass system. This action is apparently necessary because of rocks and other debris partially blocking the inlet. This blockage prevents the project from releasing the FERC mandated amount of water for fish spawning. This draw-down could have a major impact financially and also on the maintenance schedule of our combined cycle generation units. I suspect it also could have a significant impact on the other railbelt utilities. This issue should be placed on the agenda for the next PMC meeting so that all General Managers can come prepared to get some response to unanswered questions and discuss AEA’s proposed plan of action. | believe it is appropriate that the AEA should address the following questions: 1 Why is it necessary to draw-down the lake levels to accomplish this cleaning? 2 Has an analysis of the situation been performed by an independent consultant? Are there othcr altcrnatives that have been fully explored? Se Will the clean-up actions be characterized as maintenance to be paid for by the participants? by the project designers? contractors? 4, Will the proposed plan prevent situation this from developing again? 5; How much is the cost estimate? 6. What happens if AEA does nothing? Ie What happens if AEA delays one or more years? 1 would recommend that other utilities be apprised of this situation ASAP. ATTACHMENT 3 ALASKA POWER ADMINISTRATION (APA) Eklutna Purchase Agreement dated August 2, 1989, with Chugach, MEA and ML&P sets out the terms and conditions to implemented if Congress authorizes the sale. The utilities would get undivided interests in the project equal to their current power purchases. Interconnection and Wheeling Agreement dated April 25, 1974, with Chugach. Term of 35 years. Allows Chugach to wheel over APA facilities to MEA. Interconnection and Wheeling Agreement dated xxx, with ML&P. Term xx. Allows ML&P to interconnect its system with APA facilities. Power Sales Contract 85-79AP 10004, dated October 13, 1979, with Chugach expires December 31, 1993. Take-or-pay contract for 9 MW and 45,900,000 kWh of firm power. Similar contracts have been in existence since 1954. Power Sales Contract 85-79AP 10005, dated October 13, 1979, with ML&P expires December 31, 1993. Take-or-pay contract for 16 MW and 81,600,000 kWh of firm power. Similar contracts have been in existence since 1954. Power Sales Contract 85-79AP 10006, dated October 13, 1979, with MEA expires December 31, 1993. Take-or-pay contract for 5 MW and 25,500,000 kWh of firm power. Similar contracts have been in existence since 1954. Dispatch Agreement dated September 1992 with ML&P, expires in 1997. Provides for ML&P to dispatch the Eklutna Power plant. Transmission ROW Agreement dated xx with Chugach grants Chugach the right to build a double circuit 230 KV line on Eklutna right of way. In return APA gets to use one of the circuits for Eklutna power deliveries into Anchorage. Transmission Maintenance Agreement dated xx, 1987?, with ML&P for maintenance of 115 KV circuit along Northern Light Blvd to Anchorage Substation. Transmission Maintenance Agreement dated xx, 1987?, with MEA for maintenance of 115 KV circuit from Palmer to Fossil Creek. ALASKA ENERGY AUTHORITY (AEA) Alaska Intertie Agreement with Chugach, FMUS, AEG&T, ML&P and GVEA dated December 23, 1985. May be terminated at any time upon mutual consent of all participants, participants may terminate participation after 4 years advance written notice. Agreement provides for interconnected operation among the participants including obligations and ' Draft only, not yet signed 3878.JSC Agreements Among Railbelt Utilities January 11, 1993 2 responsibilities. Also provides for the operation and maintenance of the intertie facilities between Douglas and Goldhill with GVEA operating the northern half and ML&P operating the southern half. Establishes an Operating Committee which currently has the following subcommittees: Machine/Ratings; SCADA/Metering/Communications; Dispatch; and, Reliability/Protection. Addendum No. 1 to which all participants must be signatories establishes reserve capacity and operating reserve responsibility. Transmission Lease Agreement dated xx, 1985? with MEA for lease of the 115 KV line between Teeland and Douglas for use as part of the intertie. Transmission Maintenance Agreement dated xx, 1985? with MEA for maintenance of the southern half of the Alaska Intertie transmission line and substation facilities at Douglas. Transmission Maintenance Agreement dated xx, 1985? with GVEA for maintenance of the northern half of the Alaska Intertie transmission line and substation facilities at Healy and Goldhill. Substation Maintenance Agreement dated xx, 1985? with Chugach for maintenance of Alaska Intertie substation facilities at Teeland. SCADA Agreement dated xx, 1985? with ML&P for reimbursement for capital facilities required to support being the southern operator for the Alaska Intertie. SCADA Agreement dated xx, 1985? with GVEA for reimbursement for capital facilities required to support being the northern operator for the Alaska Intertie. Bradley Lake Power Sales Agreement with Chugach, AEG&T, GVEA, ML&P and SES dated December 8, 1987 with a term of 50 years. Take-or-pay contract for the output of the Bradley Lake project. Establishes a Project Management Committee to oversee operation of the project. The PMC currently has the following subcommittees: Budget; Insurance; Agreements; Operations & Dispatch; and, Technical Coordination. Bradley Lake Dispatch Agreement dated February 19, 1992, with Chugach. Provides for Chugach to dispatch the Bradley Lake Project. ‘Transmission Maintenance Agreement dated xx, 1993 with HEA for maintenance of the Bradley Lake transmission facilities between the project and Bradley Junction. ‘Substation Maintenance Agreement dated xx, 1993 with Chugach for the maintenance of the SVC equipment at Daves Creek substation. ' Draft only, not yet signed 3878.JSC Agreements Among Railbelt Utilities January 11, 1993 3 ‘Substation Maintenance Agreement dated xx, 1993 with Chugach for the maintenance of the SVC equipment at Soldotna substation. Substation Facilities Agreement dated xx, 1992 with Chugach for installation of SVC equipment at Daves Creek Substation. ‘Substation Facilities Agreement dated xx, 1993 with Chugach and HEA for installation of SVC equipment at the Soldotna substation. ‘Transmission Interconnection Agreement dated xx, 1993 with HEA to allow Bradley Lake transmission lines to interconnect with the HEA system. Provides for operation of HEA facilities at Fritz Creek and Diamond Ridge substations. ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC. (AEG&T) Power Sales Agreement dated xx with HEA, expires xx. Provides that HEA purchase all of its electric capacity and energy requirements from AEG&T. Power Sales Agreement dated xx with MEA, expires xx. Provides that MEA purchase all of its electric capacity and energy requirements from AEG&T. HOMER ELECTRIC ASSOCIATION, INC. (HEA) Agreement for Sale of Transmission Capacity dated March 7, 1989, with AEG&T, Chugach, GVEA and ML&P with a term of 50 years. HEA agrees to sell the other Bradley Lake participants capacity on the transmission line between Bradley Junction and Soldotna to carry their Bradley Lake share. CHUGACH ELECTRIC ASSOCIATION, INC. (Chugach) Services Agreement dated December 8, 1987, with HEA, MEA, ML&P, GVEA, SES and AEG&T with a term of 50 years. Chugach agrees to deliver to the participant, its Bradley Lake energy which has been delivered to the Soldotna substation. Agreement for the Sale of Electric Power and Energy dated September 1985 with HEA and AEG&T, expires on January 1, 2014. Provides for the sale of 73 MW of capacity with appropriate reserves and at least 350,000 MWh of energy annually to AEG&T for HEA. Requires semi-annual planning meetings among the parties. . ' Draft only, not yet signed 3878.JSC Agreements Among Railbelt Utilities January 11, 1993 4 Homer Lease Agreement dated September 1985 with HEA, expires on January 1, 2014. Provides for the lease to Chugach of 69 KV and 115 KV transmission lines between Bernice Lake and Soldotna, of 115 KV transmission line between Quartz Creek and Soldotna, and the majority of the 115 KV portion of the Soldotna substation. Chugach will operate and maintain (minor repairs only) the leased facilities. Bradley Lake Scheduling Agreement dated September 29, 1992, with HEA and AEG&T with a term of three years, renewable. Chugach pays HEA/AEG&T $112,000 annually for the right to schedule when HEA receives its share of the Bradley Lake project. For scheduling purposes HEA/AEG&T’s Bradley Lake energy is commingled with Chugach’s Bradley Lake energy. Soldotna 1 System Use & Dispatch Agreement dated December 1991 with HEA and AEG&T with a term of 10 years. Chugach provides dispatch service to HEA for Soldotna 1 when HEA decides that the unit is needed for HEA. Chugach provides an economical source of fuel for the unit and in return can use the unit for any system use that Chugach has. Variable O&M plus a margin is paid for actual use of the unit. Chugach agrees to generate 322,000 MWh on the unit during the term of the agreement. The term is extended by three years if Chugach uses the unit extensively during the last three years of the agreement. Interconnection Agreement dated December 3, 1983 with ML&P, expires December 31, 2014. Provides for interconnected operation with ML&P, sharing of operating reserves, sale and purchase of emergency, maintenance, and economy energy. Is generally superseded by the Alaska Intertie Agreement except when the line to Fairbanks is open. Established an Administrative Committee which has not been functional. Net Billing Agreement dated December 16, 1987, with MEA and AEG&T. Provides that MEA/AEG&T’s share of the output of the Eklutna and Bradley Lake projects will be commingled with Chugach’s other energy resources for scheduling and rate making. MEA/AEG&T will make the Eklutna and Bradley Lake payments but Chugach will credit MEA/AEG&T the equivalent amount on the power invoice from Chugach. Modified Tripartite Power Sales Agreement dated April, 1989 with MEA/AEG&T, expires on December 31, 2014. Provides for the sale of MEA’s full requirements of electric capacity and energy to AEG&T. MEA/AEG&T may transition to a net requirements status after a five year notice period. Semi-annual planning meetings among the parties is required. Non-Firm Power Sales Agreement dated May 18, 1988, with GVEA, expires on the 20th anniversary. Provides that Chugach will sell and GVEA will purchase all of GVEA’s non-firm energy needs from Chugach when available. Non-firm energy is defined as all of GVEA’s load in excess of that produced by GVEA units. Established an Operating Committee to meet ' Draft only, not yet signed 3878.JSC Agreements Among Railbelt Utilities January 11, 1993 5 quarterly that has not been functional. Joint Use Agreement dated September 1984 with Seward with a term of 25 years. Provides for joint use of ROW between Daves Creek substation and Lawing. Net Billing Agreement dated June 7, 1991, with Seward. Provides that SES’s share of the output of the Bradley Lake project will be commingled with Chugach’s other energy resources for scheduling and rate making. SES will make the Bradley Lake payments but Chugach will credit SES the equivalent amount on the power invoice from Chugach. Wholesale Power Agreement dated September 1984 with Seward, automatically renewed annually upon completion of the initial term of ten years. Chugach agrees to sell and Seward agrees to purchase electric power up to the maximum demand listed in the contract. ' Draft only, not yet signed 3878.JSC Bradley Lake PROJECT MANAGEMENT COMMITTEE MEETING 117 S RECORD LOPY (Iyate) FILE NO CEA _—_PRo sl min (Location) hatha PLEASE SIGN IN v No. NAME REPRESENTING 1 | Dowd L dhs CA. | 2 Gewe Z a, AW 3 LZ ihe GU EA 4 Kon fekfon Pace hating Ales E eK — Cugock LU &} Mier MLA MLS PR Mz. E72 SES 14 aw / Lente <9 | 15 | LES 16 08 HueMAN = Gh T Lane Ee ERLE Kon Gane i Wn 22 = ne 4 =, ecz 4 = 92Q2\IT9884 N 7 Koos K 1 ay pewhsée BuUeGER ARER- Alaska Energy Auwthordy b BRADLEY PMC VOTING CITY OF SEWARD MATANUSKA ELEC ASSOC \/ 14% CHUGACH ELEC ASSOC HOMER ELEC ASSOC MONILIGHT POWER so mo A= 4+ OVER 51% ALASKA ENERGY auTA zee” TA] OO O = MAJORITY MOTING METHOO A: YOUNG METHOO A: REQUIRING 4 YEAS W/ 51% OF UTILITIES, WITH NO APA VvoTE; 1) PROCEDURES FOR SCHEDUUNG, PROOUCTION ANO DISPATCH OF PROJECT POWER. 2) ESTABLISHMENT OF PROCEDURES FOR USE OF EACH PURCHASER'S WATER ALLOCATION (APA ASSENT REQUIRED FOR FERC UCENSE REQUIREMENTS). 3) SELECTION AMONG ALTERNATIVE METHOOS THAT (00 NOT INVOLVE APA FOR FUNDING REQUIRED PROJECT WORK. YOTING METHOO C: UNANIMOUS VOTE BY ALL (INCLUDING APA): ADOPTION OF PROCEDURES FOR DISPUTE RESOLU- TION. MAJORITY VOTE (INCLUDING APA). ELECTION OF OFFICERS. L 30% V 12% iAP la & YES NO ABS REQUIRING 4 YEAS W/ 51% OF UTIUTIES, AND APA (CONCURRENCE; 1) ARRANGING OPERATION ANO MAINTENANCE OF PROJECT. 2) ADOPTION OF BUOGET OF ANNUAL PROJECT costs. 3) ESTABUSHMENT OF FY ESTIMATED ANNUAL PAY- MENT OBLIGATION ANO SCHEDULE OF EACH PUR- CHASER. 4) DETERMINATION OF ANNUAL PROJECT COSTS: AFTER EACH FY. 5) EVALUATION OF NECESSITY FOR AND SCHEDUUNG OF REQUIRED PROJECT WORK, 6) DETERMINATION OF APPROPRIATE AMT. OF IN- SURANCE. 7) ADOPTION OF ADO'L MIN. FUNDING AMTS. FOR RENEWAL AND CONTINGENCY RESERVE FUND ABOVE THAT REQ. BY BOND RES. 8) SELECTION AMONG ALT. METHOOS THAT INVOLVE APA FOR FUNDING REQ. PROJECT WORK YES NO ASS VT) M0 GOLDEN VAL ELEC ASSOC \/ 17% VT] HCULUHL VOPY FILE NO PRo 3-1-1 mind ~DATE——--— ie f93 - YES NO Ass YES NO ABs 9) ADOPTION_OR AMENOMENT OF PROCE- DURAL COMMITTEE RULES (EXCEPT Dis- PUTE RES) 10) ADOPTION. OF PROJECT MAINTENANCE SCHEDULES. 11) DETERMINATION OF RULES, PROCE- (DURES ANO ACCOUNTS NECESSARY TO MANAGE PROJECT WHEN NO BONDS OUT- STANDING. 12) EVALUATION AND APPROVAL OF OPTION: AL PROJECT WORK AND COMPENSATION FOR SUCH WORK. 13) APPLICATION OF INSURANCE CLAIMS PROCEEDS NOT GOVERNED BY BOND RESOLUTION. 14) APPROVAL OF PROCEDURES ANO ANY WNOMOUAL UTIUTY AGREEMENTS RELATING TO ELECTRIC POWER RESERVES FOR PROJECT. 15) APPROVAL OF CONSULTANTS. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE DRAFT MEETING MINUTES November 20, 1992 1. CALL TO ORDER Chairman Highers called the Bradley Lake Hydroelectric Project Management Committee to order at 10:15 a.m. in the Training Room at Chugach Electric Association in Anchorage, Alaska to conduct the business of the Committee per the agenda and the public notice. 2. ROLL CALL Alaska Energy Authority Brent Petrie, Designated Representative Chugach Electric Association David L. Highers, Designated Representative and Chairman Golden Valley Electric Association Bradley Evans, Alternate Representative City of Seward Paul Diener, Designated Representative Homer Electric Association Norm Story, Designated Representative Matanuska Electric Association Ken Ritchey, Designated Representative Municipal Light & Power Hank Nikkels, Alternate Representative Tom Stahr, Designated Representative (11:45 a.m. arrival) Others Present: Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt David Burlingame, Chugach Electric Association John Cooley, Chugach Electric Association e:\dburger\word\minutes\pmc\I 1-92 DRAFT BPMC Meeting Minutes November 20, 1992 Page 2 of 10 Gene Bjornstad, Chugach Electric Association Bob Hufman, AEG&T Dave Fair, Homer Electric Association Tim McConnell, Municipal Light & Power Bob Price, Municipal Light & Power Ronald A. Garzini, Alaska Energy Authority David R. Eberle, Alaska Energy Authority Stanley E. Sieczkowski, Alaska Energy Authority Larry Wolf, Alaska Energy Authority Denise Burger, Alaska Energy Authority 3. PUBLIC COMMENT There being no public comment, the meeting continued to the next agenda item. 4. AGENDA COMMENTS Items 12 B, APPROVAL OF UTILITY AGREEMENTS, and 12 C, APPROVAL OF AMENDED ALLOCATION AND SCHEDULING PROCEDURES, were removed from the agenda. Item 12 E, BUDGET SUBCOMMITTEE AUTHORIZATION TO RETAIN AUDITOR, was added to the agenda. Item 12 F, CONSTRUCTION AUDIT, was added to the agenda later in the meeting. 5. APPROVAL OF MINUTES - October 9, 1992 Mr. Burlingame noted that the Kenai oscillation problem discussed under Item 6, TECHNICAL SUBCOMMITTEE REPORT, referred to the unstable Kenai oscillation problem (differentiating it from other oscillations in the system.) With the understanding that a footnote further defining the specific problem will be added by Mr. Burlingame, the minutes of the October 9, 1992 Bradley PMC were approved. 6. TECHNICAL COORDINATING SUBCOMMITTEE REPORT A summary of the November 19, 1992, TCS meeting was distributed to the PMC (Attachment 1). Mr. Burlingame reported that SVC testing was scheduled to begin December 3, 1992 at the Daves Creek Substation site and on January 14, 1993 at the Soldotna Substation site. The initial testing will involve basic energization and a general investigation of the system components. e:\dburger\word\minutes\pmc\1 1-92 DRAFT BPMC Meeting Minutes November 20, 1992 Page 3 of 10 The other major issue being addressed by the TCS is the unstable Kenai oscillation problem. Mr. Burlingame noted inconsistencies in the way Bradley Lake reacted to certain modes of governor changes and that a problem with the Woodward governor was identified during tests performed earlier this week. The problem is covered under the Woodward Governor warranty and is expected to be fixed before completion of the annual maintenance when Bradley returns on line November 28, 1992. Additional tests will be done at that time to verify that the problem has been resolved. Mr. Burlingame informed the Committee that CEA had developed a suitable short term solution to the unstable Kenai oscillation problem. The solution does not prevent load shedding, however, it does prevent the unstable oscillation problem. Mr. Burlingame stated that the solution was acceptable for the short term, but it was not the recommended long term solution. Referring to the TCS meeting summary, Mr. Ritchey asked for clarification on the $70,000 cost to modify the Woodward governor. Mr. Burlingame explained that the $70,000 was for the development of a long term solution to the unstable Kenai oscillation problem. Mr. Burlingame further explained that this was not a warranty issue, rather an enhancement to the capabilities of the governor. It was confirmed that the governor met all specifications to which it was designed and that SWEC's design of the system met or exceeded L.E.E.E. and industry standards. Mr. Burlingame stated that Bradley Lake was the first hydroelectric project with a digital control scheme to use deflectors and that the "anticipatory control" system logic now being developed by Woodward Governor would also be a first. It was noted that Woodward Governor was absorbing approximately one half of the development cost of the new control system logic. Mr. Burlingame stated that none of the tests or studies done to date have accurately predicted the stable power oscillations experienced at Bradley Lake (because of the governor characteristics.) In tests done this past week, the deflectors were shown to be much more effective at frequency control than previously indicated. SWEC and PTI will be using the new test data to further refine the Bradley Lake model. BUDGET SUBCOMMITTEE REPORT A. Bradley Lake Construction Cost Review (and Bradley Lake Annual Operations & Maintenance Audit) Annual Operations and Maintenance Cost Audit e:\dburger\word\minutes\pmc\! 1-92 BPMC Meeting Minutes November 20, 1992 Page 4 of 10 Mr. Ritchey reported that the Budget Subcommittee had retained a firm (Parisena & Stromberg) to perform an audit of Bradley Lake Project operation and maintenance (O&M) costs. Mr. Ritchey noted today's request by AEA for approval of the audit by the PMC and recognized AEA's concern over not being notified in advance of the audit. Mr. Ritchey stated that funds for the audit had been included in the Bradley O&M budget. Therefore, the Budget Subcommittee assumed it already had the authority to proceed with the O&M audit. Mr. Saxton also pointed out the provision for an independent annual audit of Bradley O&M costs (to be completed by December 1) contained in the Committee bylaws approved in 1988. Construction Cost Audit Mr. Ritchey informed the PMC that the Budget Subcommittee had received only four proposals to do the Bradley Lake construction cost audit, however, none of the proposals within the previously approved $15,000 amount were adequate.! Mr. Ritchey stated that an additional $20,000 was required in order to obtain sufficient audit information. Mr. Ritchey recommended that the PMC consider amending the previously approved $15,000 for the construction cost audit to $35,000. This item was added to the agenda under NEW BUSINESS, 12F, Construction Audit. Mr. Petrie questioned whether the expenditure of these funds by the Bradley PMC was subject to State procurement regulations. It was Mr. Saxton's understanding that the funds held by the Trustee were not considered State funds, rather they belonged to the Committee and were not subject to State procurement code. Mr. Saxton will confirm whether the expenditure of these funds by the PMC is, or is not, subject to the State procurement code. FY94 Operation and Maintenance Budget Mr. Ritchey proposed the following schedule for the development and approval of the FY94 Operations and Maintenance Budget: ! The previously approved funds to which Mr. Ritchey referred are actually $20,000 (as contained in the BPMC meeting minutes of July 23, 1992.) Therefore, the increase to the $35,000 total amount requested is actually $15,000. It should also be noted that these funds were approved as a construction cost item (not an FY93 O&M Budget item.) e:\dburger\word\minutes\pme\1 1-92 DRAFT BPMC Meeting Minutes November 20, 1992 Page 5 of 10 December 15, 1992 AEA, CEA, HEA and legal counsel budget items submitted to the Subcommittee January 1993 Subcommittee approval of budget February 1993 Submittal of Subcommittee budget recommendation to PMC March 1993 Approval of budget by PMC FY92 O&M Budget Surplus Mr. Ritchey stated that the PMC had received notification, in the form of a letter from AEA dated November 20, 1992, of an FY92 O&M budget surplus of $910,411 (Attachment 2). Mr. Ritchey relayed that the Budget Subcommittee needed some time to consider the options regarding use of these funds (i.e. carry forward to FY94 or return to purchasing utilities.) The Budget Subcommittee will make its recommendation to the PMC at the January meeting. B. FY93 Budget, AEA Administrative Costs - Update Mr. Saxton reported to the Committee that, since the last PMC meeting, Bob LeResche has given his deposition to the Alaska Energy Authority and the utilities have served AEA with requests for admissions and interrogatories. Mr. Saxton noted that a letter from the Energy Authority, addressed to Ken Ritchey, dated November 20, 1992, regarding this issue had been distributed to the utilities prior to the meeting (Attachment 3). Mr. Petrie requested that the letter be included as part of the permanent record. Regarding the AEA administrative cost issue, Mr. Garzini reiterated his desire to work with the PMC to resolve the issue, suggesting a meeting between the utility managers and AEA. Mr. Garzini noted that he had not been a part of the initial discussions of the subject, or the conflict that developed early on between the Bradley PMC and AEA (while under Mr. Bussell.) Mr. Garzini stated that the lawsuit and concurrent audits of AEA caused a conflict for the Energy Authority. Mr. Garzini explained that it was the Energy Authority's policy to be open in the exchange of information, but that, because of the lawsuit, AEA felt it necessary to have its lawyers present when the PMC lawyers and auditors are investigating the Energy Authority. In response to Mr. Garzini's comments, Mr. Saxton e:\dburger\word\minutes\pme\1 1-92 DRAFT BPMC Meeting Minutes November 20, 1992 Page 6 of 10 stated that he hoped there was never any time that AEA (Mr. Garzini) did not feel welcome to have its own attorney present. 8. AGREEMENTS SUBCOMMITTEE REPORT Mr. Sieczkowski reported that the Soldotna Substation Agreement with HEA had again been revised. Mr. Sieczkowski informed the PMC that both the Soldotna Substation Agreement and Transmission Line Maintenance Agreement were now ready for signature and consideration by the Agreements Subcommittee. A meeting is anticipated the week of December 7, 1992. Mr. Story apologized for HEA's contribution to the slow process in developing these agreements. Mr. Story explained that HEA had concerns over the expensive equipment being transferred to its responsibility for operations and maintenance. While no major equipment problems were anticipated, Mr. Story stated that, should a major equipment failure occur, HEA would like to bring the matter back to the PMC. Mr. Sieczkowski further explained that the new SVC equipment located within the existing HEA substation would be transferred to HEA ownership and the remainder of the new construction (outside the substation) will remain under AEA ownership. 9, OPERATION & DISPATCH SUBCOMMITTEE REPORT A summary of the Operation & Dispatch Subcommittee meeting of November 6, 1992 was distributed to the PMC (Attachment 4). Mr. Sieczkowski noted that the Subcommittee had approved recommendation of an amendment to Section 5 (b), Hourly Schedules of the Allocation and Scheduling Procedures. Amendments to Sections 5 (g), (i), and (j) and Section 7 (c) of the Allocation and Scheduling Procedures were also approved, however further minor clarification was needed prior to forwarding to the PMC. Mr. Sieczkowski stated that the proposed amendments would be distributed to the PMC in the next meeting packet for review and consideration at the next meeting. It was noted that HEA had presented documentation to the O&D Subcommittee regarding line losses and that discussion of HEA's losses would continue at the next Subcommittee meeting. In response to inquiry by Mr. Ritchey, Mr. Sieczkowski explained that the original energy allocations were based on certain expectations of inflow. The inflow expectations were based on historical data developed by the USGS. The inflow for the month of September was a new historical low, 21% of average. Likewise, the October inflow was only 40% of average, necessitating a reallocation of project energy resulting in an 87,000 megawatt hour reduction. Mr. Wolf noted that other hydroelectric projects around the state were also experiencing low water years. e:\dburger\word\minutes\pmc\1 1-92 DRAFT BPMC Meeting Minutes November 20, 1992 Page 7 of 10 10. REVIEW OF PROJECT STATUS Mr. Eberle reported that the SVC contract is expected to be completed by mid- March (including testing.) Mr. Eberle informed the PMC that the Bradley Lake Hydroelectric Project was currently 97% complete and that once SVC testing was done, the project would meet or exceed 98% completion. Mr. Eberle explained that when 98% project completion was attained, the bond trustee must be notified, which in turn would make any surplus construction funds available to the State. Mr. Eberle reported that the Contaminated Soil Clean-up Contract pre-bid meeting had been held at the project site in October. Proposals for the soil clean-up are due in January. It was noted that contract requirements have been expanded to require a usable end product - crushed aggregate, for runway and road maintenance. Mr. Story asked if financial responsibility for the soil clean-up had been determined. Mr. Eberle informed the Committee that AEA was proceeding with the clean-up while investigating responsibility. Mr. Eberle stated that determining responsibility was complicated by the one year shut down of the project. It was explained that AEA assumed responsibility for the project at that time, including the POL facility owned by the site preparation contractor. By doing so, AEA unknowingly assumed responsibility for any spills that might have occurred. Also unknown at the time, the POL facility liner was not adequate for the life of the project. Mr. Eberle stated AEA would most likely be responsible for the clean-up (estimated at $750,000). Mr. Eberle noted that the material was only lightly contaminated and that the Department of Environmental Conservation was currently reassessing contaminated sites around the State. AEA is investigating the possibility that remedial action may not be required at the Bradley Project site. Bradley Lake Project Annual Maintenance: Mr. Wolf reported that the project was shut down for annual maintenance on November 18, 1992. Inspection revealed a small amount of tunnel patch grout. Slight additional scoring of the needles was noted with minor leakage on Unit 2 and no leakage on Unit 1. If the sloughing of loose grout continues, at some point in the distant future, the needle cones and seats may need to be replaced. Mr. Wolf stated that a few loose bolts were discovered in the runner chamber, but that no major problems were expected. It was noted that maintenance work will continue through the Thanksgiving holiday with the project scheduled to go back on line Saturday, November 28, 1992. e:\dburger\word\minutes\pmc\1 1-92 DRAFT BPMC Meeting Minutes November 20, 1992 Page 8 of 10 Mr. Wolf noted that Bradley was experiencing loss of pressure in the fish water bypass system, indicating a potential blockage in one of the intakes. A dive team will be inspecting the intakes on Monday, November 23, 1992. Mr. Sieczkowski informed the PMC that the Bradley Lake operators were now represented by the IBEW. The IBEW submitted a contract containing 29 proposals for AEA consideration. A meeting to discuss the proposals with the IBEW has been scheduled December 7 and 8, 1992. Mr. Sieczkowski noted that HEA had previously offered Bob Hufman's assistance with contract negotiations, which AEA has accepted. Mr. Garzini informed the Committee that Mr. Hufman would be providing his assistance as a representative of HEA, at HEA's expense, and not as an AEA board member. Mr. Hufman will not deliberate with the AEA board during involvement with these negotiations. Mr. Bjornstad expressed concern over potential repercussions that the AEA contract settlement might have on other utility contracts. Mr. Garzini assured the PMC that AEA was aware of the effects its settlement could have, further stating that it was AEA's goal not to affect other utility/union contracts. 11. OLD BUSINESS A. Spinning Reserves/Under Frequency Load Shedding Update John Cooley reported that the Intertie Operating Committee (IOC) load shed study was very close to completion. The Reliability Criteria Subcommittee postponed some meetings due to outage problems, but expected to meet November 25, 1992. B. Bradley Scheduling vs. Spin Requirements Mr. Saxton noted that, at the last Bradley PMC meeting, he had been asked to look into the spinning reserve requirement issue. Referring to a memorandum he prepared on the subject and previously distributed to the utilities, Mr. Saxton stated it was his conclusion that the spinning reserve requirement issue was ultimately governed by the Alaska Intertie Operating Agreement. Chairman Highers, citing the indefinable maze of issues related to the Intertie Operating Agreement, suggested that the utilities consider rewriting the agreement. Chairman Highers recommended that, to begin the process, the utilities provide written comments to Mr. Saxton. Additionally, Mr. Saxton recommended that the utilities meet to discuss the issue as early as possible. Mr. Saxton further stated that the utilities needed to clearly define and agree upon the questions before answers could be determined. Mr. Evans stated that Golden Valley would support a e:\dburger\word\minutes\pmc\1 1-92 DRAFT BPMC Meeting Minutes November 20, 1992 Page 9 of 10 special meeting to deal with this issue. Mr. Burlingame brought attention to the fact that the system is currently operating under a number of interpretive agreements that expire at the end of December 1992. Chairman Highers noted that the procedures affected by these agreements may have to continue until the issue of spinning reserve requirement can be resolved. General agreement was expressed by the utilities to meet and discuss the issue as soon as possible. 12. NEW BUSINESS A. Approval of Committee Expenses No expenses were submitted. Approval of Utility Agreements Deleted from the agenda. Approval of Allocation & Scheduling Procedures, Section 5 Deleted from the agenda. Approval of Exhibit B, Allocation & Scheduling Procedures Mr. Sieczkowski stated that the Operations & Dispatch Subcommittee had recommended Exhibit B of the Allocation and Scheduling Procedures to the Bradley PMC for approval. It was noted that Exhibit B had been distributed to the Bradley PMC at the October 9, 1992 meeting for review. Mr. Story motioned, seconded by Mr. Evans that the Bradley PMC approve Exhibit B of the Allocation and Scheduling Procedures. The motion passed by unanimous roll call vote. Authorization of Budget Subcommittee to Retain Auditor (for Fiscal Year 1992 Bradley O&M Audit) Mr. Petrie motioned the Budget Subcommittee be authorized to retain audit services for an amount up to $15,000. Mr. Ritchey seconded the motion, however, suggested that the motion be worded to accommodate future fiscal year audits as well. After the need for such approval was questioned by Chairman Highers (citing Bradley PMC bylaw provision for an annual O&M cost audit), Mr. Petrie explained that, because AEA had not been notified of the O&M audit, unnecessary confusion over the audit had occurred. AEA assumed when auditors arrived November 5, 1992 e:\dburger\word\minutes\pme\1 1-92 DRAFT BPMC Meeting Minutes November 20, Page 10 of 10 1992 from Parisena & Stromberg they had been selected for, and were in fact there to perform, the Bradley Lake construction cost audit. Mr. Petrie hoped this type of confusion could be prevented in the future. Noting AEA's concern, Mr. Story stated that communication between the Budget Subcommittee and AEA was needed prior to the commencement of further audits, to which Mr. Ritchey agreed. Mr. Petrie requested that the Bradley PMC be informed of plans and communications regarding future audits undertaken by the Budget Subcommittee. With the approval of Mr. Petrie and Mr. Ritchey, the motion was revised as follows: On an annual basis, the Budget Subcommittee has the authority to hire an auditor to perform the Bradley O&M cost audit subject to budgetary constraints. The motion was approved by unanimous roll call vote. Construction Audit Mr. Ritchey motioned the Budget Subcommittee be authorized to hire a consultant to perform the Bradley Lake construction cost audit at an amount not to exceed $35,000.2 The motion, seconded by Norm Story was approved by unanimous roll call vote. 13. . COMMUNICATIONS A. Schedule Next Meeting Thursday, January 14, 1993 10:00 a.m. CEA Training Room 14. ADJOURNMENT With no further business or communications before the Committee, the meeting adjourned at 11:50 a.m. David L. Highers, Chairman Attest: Brent N. Petrie, Secretary 2 The $35,000 request was noted to be an increase of $20,000 from the amount approved at the July 23, 1992 Bradley PMC meeting. However, the amount previously approved was $20,000, resulting in an actual increase of $15,000. e:\dburger\word\minutes\pmc\1 1-92 SPMC MEETING - JANUA, .4, 1993 Mr. Everett P. Diener City of Seward Sth & Adams P.O. Box 167 Seward, Alaska 99664 Mr. David L. Highers Chugach Electric Association 560I Minnesota Drive P.O. Box 196300 Anchorage, Alaska 99519-6300 Mr. Michael P. Kelly Golden Valley Electric Association 758 Illinois P.O. Box 1249 Fairbanks, Alaska 99707 Mr. Fred Arvidson Perkins Coie 1029 W. 3rd Avenue, Suite 300 Anchorage, Alaska 99501 Mr. James Hall Matanuska Electric Association 163 Industrial Way P.O. Box 2929 Palmer, Alaska 99645-2929 Mr. S.C. Mathews Homer Electric Association 3977 Lake Street Homer, Alaska 99603 Mr. Ron Saxton Ater Wynne Dobson & Skerritt 225 S.W. Columbia, Suite 1800 Portland, OR 97201-6618 90Q1\D0068L(1) DISTRIBUTED 3/92 Mr. Ken Ritchey Matanuska Electric Association 163 Industrial Way P.O. Box 2929 Palmer, Alaska 99645-2929 Mr. N. L. Story Homer Electric Association 3977 Lake Street Homer, Alaska 99603 Mr. Thomas R. Stahr Municipal Light and Power 1200 E. 1st Avenue Anchorage, Alaska 99501-1685 Mr. Eugene N. Bjornstad Chugach Electric Association 560I Minnesota Drive P.O. Box 196300 Anchorage, Alaska 99519-6300 Mr. John Cooley Chugach Electric Association 5601 Minnesota Drive P.O. Box 196300 Anchorage, Alaska 99519-6300 Mr. Bob Hansen Golden Valley Electric Association 758 Illinois P.O. Box71249 Fairbanks, Alaska 99707 Mr. Kurt Dzinich 4511 N. Riverside Drive Juneau, Alaska 99801 Mr. Robert Hufman Utilities Consulting Services 1018 Galena Street Fairbanks, Alaska 99709 Mr. David Burlingame Chugach Electric Association, Inc. P.O. Box 196300 Anchorage, Alaska 99519-6300 Mr. Tom Lovas Chugach Electric Association, Inc. P.O. Box 196300 Anchorage, Alaska 99519-6300 90Q1D0068L(1) Legaative Research Agency P.O. Box Y Juneau, Alaska 99811-3100 Mr. Hank Nikkels Anchorage Municipal Light & Power 1200 East Ist Street Anchorage, Alaska 99501 Mr. Bob Orr Golden Valley Electric Association 758 Illinois P.O. Box 1249 Fairbanks, Alaska 99707