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HomeMy WebLinkAboutBPMC Meeting - May 17,1990 1FILE COPY ear BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE ao MAY 17, 1990 CALLED TO ORDER Chairman Kelly called the Bradley Lake Project Management Committee to order at 9:55 a.m in the Conference Room at the office of the Alaska Energy Authority to conduct the business of the Committee per the agenda and the public notice. ROLL CALL The roll call was taken and a quorum was established. In attendance were the following: Alaska Energy Authority Robert E. LeResche - Representative Brent Petrie - Alternate Chugach Electric Association David Highers - Representative Tom Lovas - Alternate City of Seward Absent Golden Valley Electric Association Michael Kelly - Representative Homer Electric Association Kent Wick - Representative Matanuska Electric Association Ken Ritchey - Representative Municipal Light and Power Myles Yerkes - Alternate Others Present: Don Shira, Alaska Energy Authority David Eberle - Alaska Energy Authority Ron Saxton - Purchasing Utilities Allan K. Yost - Rural Electrification Association John Cooley - Municipal Light & Power Marcey Rawitscher - Alaska Energy Authority DeAnna Scott - Alaska Energy Authority PUBLIC COMMENT There being no public comment, Chairman Kelly proceeded to agenda item 4. Page 2 of 8 MODIFICATION OF AGENDA The purchase of microwave equipment was added under item 7; under New Business, item b, Commercial Operation and How the Definition Applies; item c, Comprehensive Schedule of Dates, Deadlines, etc. for the Bradley project. APPROVAL OF MINUTES APRIL 6, 1990 It was motioned by Mr. Highers and seconded by Mr. Yerkes to approve the April 6, 1990 minutes as corrected. BOND FINANCE TEAM Mr. Petrie reported the Bond Finance Team will meet on May 15, 1990 and a full conference is scheduled for May 31, 1990 in Anchorage. Chairman Kelly recommended that all utility managers be present. Mr. Ritchey asked for clarification on who is on the Bond Finance Team. Chairman Kelly clarified it by naming the committee members as Mr. Highers, Mr. Kelly and Mr. Wick. TECHNICAL COORDINATING SUBCOMMITTEE REPORT Mr. Yerkes reported that the TCS met on April 24, 1990 and discussed the stability study that is currently being conducted by PTI. Mr. Yerkes noted that the generator testing has been completed and PTI is now working on the studies related to the design of the final system configuration to assure that the system can work without a new transmission line from Soldotna to Anchorage. The report should be complete by June/July. If the studies indicate that the system can work, the TCS will work with the Alaska Energy Authority (AEA) to procure the equipment. Due to the customizing of the equipment, it will not be ready until two years after the project is on line. Mr. Yerkes stated that it was assumed that the breaking resistor and electronic stabilizer would be installed before the project was commercially operable. According to a schedule that was put together by Stone and Webster Engineering Corporation (SWEC), it was questionable that the equipment would be installed and commercially operable before September 1991. This could pose a problem with start up as the equipment is needed for the project to be tested at full output during the testing and start-up. AEA is attempting to work with the existing vendors to get the equipment delivered to be installed and on line before start up. Mr. Yerkes reported that AEA had previously agreed to purchase a microwave down link to be installed at the Chugach Electric Association (CEA) Headquarters. CEA and the Department of Telecommunications (DIVCOM) would each purchase their own equipment. After meeting with the technical staff, it was determined that the purchasing of all equipment should be done by CEA because of conflicting purchasing requirements and regulations each party could end up with incompatible equipment. It was moved by Mr. LeResche and seconded by Mr. Yerkes that in order to insure the compatibility of DIVCQOM and CEA equipment, CEA be authorized to purchase the microwave equipment_and AEA would reimburse CEA directly for the equipment. Chairman Kelly asked if there was any discussion. Mr. Eberle noted that CEA was previously authorized $50,000 for their half of the system. The estimate for the purchase of all equipment would now be $83,000 and has recommended the budget amount be authorized at $90,000. The motion passed with Messrs. Ritchey, Highers, Wick, Kelly, Yerkes and LeResche voting yes and City of Seward representation absent. Page 3 of 8 Mr. Yerkes reported PTI had considerable difficulty in getting generator shaft information from General Electric (GE). This information is needed to complete the sub- synchronous resonance studies to confirm that series capacitors will work. Mr. Eberle has addressed this issue in a brief memo to all of the utilities. Mr. Lovas stated that at the IOC meeting this item came up in a discussion and that an AEG&T representative has been in contact with the GE Engineer Department. They were working with GE to attempt to obtain the machine data for at least the Frame Six machine and that maybe this would open the doors for the others. Mr. Lovas asked Mr. Wick if there was a status report and Mr. Wick answered by saying there was none. Mr. Yerkes asked for the utility manager’s to work with the technical staff and persuade GE to release the information. Chairman oe suggested that Mr. Lovas draft a joint letter for the utility managers of GVEA, ML&P, CEA and HEA signature to request this information. Mr. Yerkes further stated that PTI has proposed to conduct a harmonic analysis on the Kenai. This is needed to specify the static var unit design. The change order amount is an increase of $50,000. CEA has already started sampling and storing information and the TCS has agreed to have PTI look at the numbers to complete the data work. However, the TCS felt that the number and level of studies by PTI are not needed to the extent they proposed. AEA is to discuss with PTI the level of studies that are to be conducted. CEA will be working with HEA to determine the line losses that will occur on HEA’s system. HEA will be responsible for paying the salary cost associated with this work. Mr. Yerkes also reported that the Configuration Control Board (CCB) reviewed a change order to the project that will result in a $500,000 increase to implement modified tunnel grouting changes. Mr. Yerkes explained that the grouting is not a safety issue and it is being done for economic reasons. The single stage grouting will give us 90% benefit of the two stage plan. The grouting is to close up the fracture zones and control exfiltration of water. It is not 100% certain that this will stop the leakage. We may find some after commercial operation. The TCS and the CCB will be monitoring this. INSURANCE SUBCOMMITTEE REPORT The Insurance Subcommittee reported that they are still waiting to receive the final Risk Assessment Report from Stone and Webster Engineering Corporation. It is due to the Alaska Energy Authority by May 31, 1990. a. SELF INSURANCE - EXISTING INTERTIES Due to the fact that the Co-ops are not able to participate in a self-insurance program, Mr. Saxton suggested that the IOC members rescind Amendment No. 1 to operate under self-insurance and amend it with a new amendment to exclude the Co-ops. The Municipalities and State have the option to operate under a self-insurance program. AEA and the utilities will revise Amendment No. 1 and circulate for approval. Page 4 of 8 BUDGET SUBCOMMITTEE REPORT Mr. Ritchey handed out a Bradley O&M Budget Status Report dated May 17, 1990 that was formulated by the Budget Subcommittee. Mr. Ritchey reported that the Budget Subcommittee has made progress but there were a couple of issues that the subcommittee has not taken a position on. These are: * HEA Transmission Line Maintenance Mr. Ritchey reported that this is still an issue and the subcommittee has not fully addressed this as yet. AEA Cost The main issue involves a discrepancy to the interpretation of the Power Sales Agreement (PSA). Namely, is AEA entitled to charge Personnel Administrative Cost to the project. Mr. Ritchey also reported that there is still some question as to the split between of AEA labor charge between O&M and construction. The AEA has agreed to take another look at this issue. Mr. Ritchey noted that the subcommittee recommended that the utilities reserve the right to audit AEA costs charged to Bradley O&M at any time. Mr. Ritchey reported on AEA’s methodology of distributing overhead costs, and direct labor charges for various personnel. The administrative personnel cost would include portions of Administrative staff (i.e., Bob and Brent) and all of the non-personnel and personnel cost would be distributed and allocated to Bradley based on its percentage of direct labor charges. Mr. Ritchey noted that although it resulted in a number that looks very reasonable, this could change if AEA’s overall agency budget for other programs is reduced. Accordingly, the subcommittee has reserved the right to look at the methodology if a major event takes place that could adversely affect the O&M budget. CEA Software and Dispatching Labor Cost Mr. Ritchey reported that there is also disagreement among the committee members on this issue. Chairman Kelly stated that ML&P’s point is that the servicing agreement is covered in the dispatching, so services should be zero. Mr. Lovas stated that CEA revised the number to what they understood to be the terms of the Transmission Services Agreement. Mr. Lovas stated that the software and the additional time is still shown and is bound up in the Scheduling and Allocation Agreement and the Dispatch Agreement of the project, which is apparently the issue. Chairman Kelly asked if there were any questions before the PMC revisited the two major issues. The Administrative Cost of $300,000 for which Mr. Ritchey proposed three possible solutions: a) do not pay; b) we pay; c) we pay, but cap. And the second issue of whether the $150,000 CEA cost should be included in dispatching or is included in the Services Agreement. Page 5 of 8 Relating to the first issue, Chairman Kelly asked for Mr. Saxton to give a legal point of view. Mr. Saxton stated that the AEA Administrative Overhead is a provision the PMC has talked about several times. Specific administrative and general expenses of the authority such as cost of ae inspections and investigations are allowable and must be included in the O&M budget. Mr. Saxton noted that AEA believes the language was broader. Mr. Gotan stated that generally the lawyers to date have shared his view that the language was narrow. Mr. Saxton stated that at the time the PSA was negotiated it was basically assumed that the legislature would continue funding the Principal Administrative positions of AEA and the utilities were to pay for the incremental people or duties added to AEA due to Bradley Lake coming on-line. Mr. Saxton concluded saying the PMC could decide that the language is broader and is willing to pay something for it. Or, alternatively, if the PMC is going to take the hard line position, the PMC has a decent argument. Chairman Kelly asked Mr. LeResche if his legal assessment was different from Mr. Saxton. Mr. LeResche responded that his legal assessment is much broader than Mr. Saxton and it should be done on an equitable basis. The PSA does not restrict the Energy Authority to be compensated just for safety inspections. If it is fair that certain amounts are to be paid for supervision on the other projects, it should also be paid for Bradley. After an extensive discussion on this subject, Mr. Highers suggested that each utility speak to their attorney to determine what was meant when this was negotiated. Chairman Kelly stressed that there are two sides to this issue, the business side and then the legal side. Chairman Kelly then asked Mr. Saxton to explain the contractual side and legal side of the CEA issue. Mr Saxton responded that the CEA services agreement defines a lot of services CEA is willing to provide. Although it provides a method of payment for these services and the kind of services to be provided, it does not say what is or is not to be included. There is now disagreement whether the payment for the services CEA provides included the dispatch and scheduling services or if CEA is entitled to charge for those as something outside of the agreement. Mr. Saxton noted that to date, all of the parties involved have not been contacted to discuss what they intended. It is clear that some of the parties involved expected this to be clearly a CEA payment obligation and that they are not entitled to more money. This issue will have to be looked into more deeply before more information can be given. Mr. Yerkes stated that ML&P was the one that raised this issue. He noted that the only agreement that governs this service is the Transmission Services Agreement and in that agreement it says that Chugach will dispatch the project. Mr. Lovas stated that a review of the original estimate of dispatching cost, that was provided by the production staff at CEA, included time for a dispatcher as well as for management personnel. The dispatcher time identified in the Transmission Services Agreement was removed from the budget allocation. CEA is providing the dispatch and the wheeling services and those costs of the dispatching would flow back into the total wheeling cost for the energy transmission. What we are talking about as far as what is in the budget, are those costs that are associated with the implementation of the Scheduling and Allocation Agreement. The dispatch service would come under the contract between the AEA and CEA for the dispatch of the project itself. The software is associated with the scheduling and allocation requirements that are coming under the participants allocation scheduling. It was CEA’s interpretation that it 10. 11. Page 6 of 8 was our dispatcher which provides the wheeling services that would be on the premises. CEA is talking about the schedule or allocation of the energy and physical operation of the plant itself. Chairman Kelly directed CEA to talk with Mr. Redmond in regards to this subject to get further information on this subject. Chairman Kelly stated that there is a business side to the issues. By granting CEA the dispatch were they to forfeit money? Mr. Ritchey stated that the subcommittee could look at this to determine the amount. The PMC could then look at the two to see if that is a reasonable amount. OPERATION AND DISPATCH SUBCOMMITTEE REPORT Mr. Shira reported that the subcommittee met on April 16, 1990 to continue the refinements on the last draft of the agreement. A copy was sent to Mr. Saxton for his review and comments. Mr. Shira and Mr. Hubbard spoke with Mr. Saxton and some of his staff and received direction on where the subcommittee should go with this. Mr. Saxton stated that one of the questions he had was whether a contract should be between the parties which then would require unanimous agreement to change it or a PMC action adopting procedures for the operating and dispatching requiring votes by the PMC on changes. The latter has some important policy implications. If only procedures are adopted, it takes away your right as one party to institute a change. Making it a PMC action is a lot easier to put together and gives me a great level of comfort to change things if you find out that they are not working. Mr. Cooley stated that La agreement got started because the sales contract said that it would be decided by the F Mr. Shira stated that one of the problems that the Operations and Dispatch committee is running into is that we are not sure how the utilities want to utilize the project. The subcommittee has a fair understanding but things are going to change as we go along. This might change from year to year. If it is decided to go back and change the agreement every year because we do not quite agree with the way things have been done in the past, it is going to be a lengthy process trying to revise it all the time. Mr. Saxton’s suggestion is to try to come up with something that the subcommittee could use as it goes through a consensus or by the direction of the PMC rather than having to go back and amend the agreement each time the committee wants to make a change Mr. Yerkes suggested that the utilities should take this back to their attorneys and let them take a look at it. Mr. Shira reported that the subcommittee has scheduled a meeting with Mr. Saxton on May 21, 1990 and will have a draft to the PMC for the next meeting. Mr. Saxton is to discuss this with the attorneys. REVIEW OF PROJECT STATUS Mr. Eberle gave an update on the status of construction. At the end of April 1990, the project was 67% complete. He noted that the General/Civil contractor is having problems with the tunnel liner and that early completion is no longer expected. They are continuing to work on the intake structure and the spillway. The Powerhouse contractor is in the process of installing the SF6 switch gear and substation and is beginning to assemble the bearing units for the turbines. The transformers arrived this week, two of which have already been set and the third will be set by the end of the day. The transmission line second shipment of towers arrived and the contractor will begin erecting them in the latter part of June. He is still projecting to be completed in September. Overall the project completion is now scheduled for September 1991. Mr. Eberle noted that at the upcoming Finance Meeting, a preliminary revised budget of $312.5 million will be reviewed which includes $1.4 million for Section 31 costs. Page 7 of 8 12. OLD BUSINESS A. DISCUSSION OF TEST PERIOD POWER SALES AGREEMENT Mr. Saxton stated that at the last meeting there was a question as to whether an agreement was needed to set out who gets the power and who pays for it. A second issue was the need for a test period and what constitutes the tests. These issues need to be addressed. Chairman Kelly stated that in view of the non-early completion is an agreement of this type needed? It was noted that the PMC however, still has the question of what is an appropriate operational test period and the length of the period to satisfy the PMC before the engineer makes his certification. Chairman Kelly asked if Operations and Dispatch Subcommittee could look into this along with the dispatch allocation agreement. Mr. Yerkes stated the TCS does not feel that an agreement is needed. Chairman Kelly suggested to make the agreement a dead issue if there was no objection. There was considerable discussion regarding an operational test period before the project is declared commercially operable. Mr. Wick suggested that the utilities need to work with the engineer to find out what kind of test he plans to conduct and if at that time the PMC feels that more testing is needed, then the PMC would need to discuss it. Mr. Lovas stated that a statement would be needed from the TCS indicating what the utilities are expecting. If the utilities have specific standards for acceptability for operation the TCS needs to get that information to AEA. Chairman Kelly stated that the utilities are willing to risk legitimate capitalized interest if that is what it takes to get a good project because in the end, the utilities are paying for it. Chairman Kelly further asked the TCS to develop a list of what the utilities feel is a reasonable test. Mr. LeResche stated that the project would be tested in excess of the industry standard before declaring it commercially operable and that a separate operational test period should not be necessary. Chairman Kelly asked Mr. LeResche if AEA would have SWEC prepare a description of what is included in the test period and the PMC will then address the issue further. IBEW LAWSUIT Mr. Saxton reported the Judge denied the preliminary injunction on Tuesday, May 8, 1990 and on May 14, 1990, the IBEW decided to withdraw their complaint. Chairman Kelly noted that Mr. LeResche’s depositions really helped the utilities not to get into a difficult situation. Chairman Kelly thanked Mr. LeResche for his help. 13. NEW BUSINESS A. FINANCIAL ADVISOR Chairman Kelly asked that if the utilities desired to hire a financial consultant this would be the time to start thinking about it. Mr. LeResche pointed out that a financial advisor would now be needed less, due to the fact, that this is the second issuance and the PMC, along with AEA, has gone through this before. 14. 15. Page 8 of 8 B. COMMERCIAL OPERATION AND HOW THE DEFINITION APPLIES Mr. LeResche stated that Commercial Operation is declared when the engineer certifies that 90 MW can be delivered from Bradley Lake to Bradley Junction. Mr. Wick question if SWEC was eligible to be the independent Engineer. Mr. LeResche stated that an ‘independent’ engineer is not required and that the assumption was that SWEC is the engineer. C. COMPREHENSIVE SCHEDULE INCLUDING DATES Mr. Lovas requested that the PMC be given a master schedule of key dates; including financing dates, budget dates; timing of various commitments in terms of the PSA, tieing it to the key dates (i.e., expectations of start-up and updates, etc.). Mr. Petrie stated that AEA would be able to put this together for the PMC. D. SCHEDULE NEXT MEETING JUNE 26, 1990 Chugach Electric Association 9:30 a.m. COMMUNICATIONS Mr. Wick announced his resignation as General Manager of Homer Electric as of November 1990. He will however, continue to serve in his position on the PMC until that time. ADJOURNMENT There being no further business before the Committee, the Committee adjourned by acclamation at 1:10 p.m. Approved by PMC at meeting held July 17, 1990.