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HomeMy WebLinkAboutBPMC Meeting - July 28, 1989 14 FILE COPY BRADLEY PMC (BRADJU28.CHP) Page 1 of 7 rns “pee LU ~~ BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE July 28, 1989 1. CALL TO ORDER Chairman Kelly called the Bradley Lake Project Management Committee to order at 9:00 a.m. in the Conference Room of Homer Electric Association in Homer, Alaska 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: Designated Representatives _ _..... Designated Alternates _—s Representing Brent N. Petrie Alaska Energy Authority Ken Ritchey* Myles Yerkes Matanuska Electric Association Dave Highers Tom Lovas Chugach Electric Association Michael Kelly Golden Valley Electric Association Thomas Stahr John Cooley Municipal Light and Power Kent Wick Sam Mathews Homer Electric Association Representatives Absent = Alternates Absent == Representing — Robert E. LeResche Alaska Energy Authority Robert Hansen Golden Valley Electric Association E. Paul Diener Daryl Schaefermeyer City of Seward Others Present ern e Presenting David Eberle Alaska Energy Authority Julie Becker Alaska Energy Authority Dave Hutchens Alaska Rural Electric Cooperative Association Ron Saxton Purchasing Utilities Carol Johnson Chugach Electric Association Bill Pinakiewicz Smith-Barney *It was noted that Mr. Ritchey had replaced Mr. Palin as the Matanuska Electric Association Representative to the PMC (reference July 26, 1989 letter from Mr. Ritchey, Acting General Manager, MEA, to Mr. Kelly reflecting this appointment). 3. PUBLIC COMMENT There being no public comment, Chairman Kelly proceeded to agenda item 4. BRADLEY PMC (BRADJU28.CHP) . Page 2 of 7 MEETING MINUTES 4. MODIFICATION OF AGENDA Agenda item 12.b., REA Approval Status, was expanded to include Other Approvals. Item 13(c)(iv), August 21, 1989 Meeting, was added. 5. APPROVAL OF MINUTES Stuchanga EML#P io EMUS, ‘The motion passed by acclamation, Mr. Petrie clarified that he had voted no on the PMC vote that a utility participant operate and maintain the Project after the initial two year warranty period and that the Official Statement reflect this (reference page 6 of June 8, 1989 meeting minutes), since this vote was regarding a specific recommendation on wording in the Official Statement and Consulting Engineer’s Report. 6. BOND FINANCE TEAM REPORT Mr. Petrie reported that the fourth draft of the Official Statement and Consulting Engineer’s Report had been reviewed and that revised drafts would be provided to all of the participants on August 1, 1989, prior to the Investors’ Tour. Mr. Petrie said that the Consulting Engineer’s Report will be included in the Official Statement as an appendix. Mr. Petrie noted that the Finance Team had approved language in the Official Statement whereby the Alaska Energy Authority would operate the Project at least during the first two years after commencement of commercial operation and may contract for the operation after that date with a qualified operator. The language also said that it is anticipated that a power purchaser meeting reasonable standards of experience and capability will operate the project after the warranty period and that CEA will provide scheduled dispatch. Mr. Petrie said that a statement of warranty, whereby the utilities warrant that the information provided in the Official Statement is true and correct as of the date provided, needs to be developed. Mr. Saxton said that this statement must be completed prior to August 21, 1989 and that he would work with Mr. Wohlforth, Bond Counsel, to develop this statement of warranty. It was noted that the PMC would vote at their August 21, 1989 meeting to approve the Bond Resolution and that any outstanding issues must be resolved and any opinion letters by the individual attorneys received prior to that date. 7, TECHNICAL COORDINATING SUBCOMMITTEE REPORT Mr. Yerkes reported that the Technical Coordinating Subcommittee (TCS) met in mid-July and reviewed the following two stability issues: 1) The Project is stable under criteria of stability developed by Stone and Webster Engineering Corporation (SWEC); however, the Woodward governor does not meet the strict contractual requirements. Conditional acceptance of the Woodward governing was recommended by the TCS. This item will continue to be monitored by the TCS . 2) The Scope of Services developed by SWEC for the stability work by PTI, as a subcontractor to SWEC, was reviewed and included a very preliminary schedule and budget. It was noted that the Scope of Services was all inclusive for design, procurement and start-up. Mr. Yerkes reported that he would work with Mr. Eberle to review the schedule and budget BRADLEY PMC (BRADJU28.CHP) Page 3 of 7 MEETING MINUTES for this Scope of Services. It was noted that FERC was not concerned with this stability issue being addressed as part of the overall project scope. Mr. Yerkes reported that the CEA proposal to install a dispatch RTU at the Project site at no cost to the Project is under review by the SCADA Subcommittee to the TCS. No formal action has been taken to date. Mr. Yerkes said that Mr. Eberle has been working with SWEC on the surge tank analysis and that he is also working with Mr. Eberle on this issue; the results of their review will be available in approximately 30 days. Mr. Yerkes concluded that no action of the PMC is required at this time relative to issues before the TCS. Discussion ensued regarding Project response times and the benefits of a surge tank. Mr. Stahr characterized the Project as being marginally stable under low generation scenarios in the isolated condition and expressed the concern at what point the Project becomes unstable. Mr. Eberle noted that the Bradley Lake Project response times have been known since the feasibility studies during 1983-1984. Mr. Stahr said that he brought up his concerns regarding the response times to SWEC two years ago, prior to execution of the Power Sales Agreement. Mr. Stahr stated his assumption relative to the contracted agreement (i.e., PSA) was that the Bradley Lake Project could operate isolated to serve normal, commercial load and would not need to be operated in parallel with some other machine with more rapid response. Mr. Eberle questioned the basis of this assumption noting that all of the SWEC studies and recommendations to date had shown that at least one other generator (i.e., gas turbine) be operated with the system. Mr. Stahr said that the Eklutna Project can respond to normal utility loads; however, that he did not know what the actual response times were. Mr. Eberle said that a surge tank with a Pelton unit will not help in response times of under one second, which is in the range of concern. Mr. Yerkes said that any improvement in response time affects the stability and economics and; therefore, should be explored. Chairman Kelly summarized that the PMC needs to look at the surge tank scenario, the islanded capability for load following and the stability for less than 3/4 load situation. Chairman Kelly suggested that PTI address this issue with the PMC after PTI has had an opportunity to evaluate this issue (i.e., in October of 1989). 8. INSURANCE SUBCOMMITTEE REPORT Mr. Saxton reported that he did not have a group report, as the Insurance Subcommittee had not met since the last PMC meeting. b. Report on Pooled Insurance Coverage Mr. Saxton said that he would report on this issue at the next meeting; however, it appeared that there were no major obstacles to pursuing pooled insurance coverage. Risk Assessment Mr. Petrie said that the State Division of Risk Management believes that the insurors would feel that the risk assessment report were more credible if it were completed by an entity not associated with the project to date (i.e., SWEC, Bechtel). Mr. Petrie said that a brief written report should be developed by SWEC regarding expected paper losses based on the current design. Mr. Petrie suggested that a separate party be engaged to do a subsequent report after construction is substantially complete. ‘ BRADLEY PMC (BRADJU28.CHP) 5 Page 4 of 7 MEETING MINUTES $ 9. BUDGET AND FINANCE SUBCOMMITTEE REPORT Mr. Saxton reported that the Budget and Finance Subcommittee had resolved issues required prior to the bond financing and that other issues had been deferred until after the bond financing. Chairman Kelly charged the Budget and Finance Subcommittee with: 1) developing draft definitions of construction costs versus utility costs versus costs to be shared equally, and 2) establishing uniform accounting procedures for cost identifica- tion and later recovery by the utilities. 10. OPERATING AND DISPATCH AGREEMENT SUBCOMMITTEE REPORT Mr. Cooley distributed copies of the July 26, 1989 memorandum from Mr. Shira to the Bradley PMC regarding the minutes of the July 7, 1989 Operating and Dispatch Agreement Subcommittee meeting. Mr. Cooley reported that the Subcommittee met with Don Gregg and discussed the operating needs of each utility. Mr. Gregg will formulate ways to address these concerns in the draft Participants Allocation and Scheduling Agreement to be available in late August of 1989. It was noted that all of the issues identified have been discussed and that Mr. Gregg will explore various alternatives. Mr. Cooley said that the Subcommittee is on schedule relative to the completion dates for the agreements being developed by members of this Subcommittee and that draft copies of the agreements will be distributed to the members, as they become available. Mr. Saxton asked to be added to the distribution list for these draft agreements. 11. REVIEW OF PROJECT STATUS @ Mr. Eberle reported that the dam fill is 90% placed, with 14 feet remaining. It is anticipated that the dam fill will be completed next week; subsequently, the concrete face will be placed. Mr. Eberle said that work on the tunnel has progressed through the second tunnel fault zone and 2,500 feet are remaining. It is anticipated that the lower tunnel will be completed by the end of August. 75% of the concrete work for the powerhouse has been completed. Surveying on the transmission line has commenced and the foundations will be started in September of 1989. The construction contractor is scheduled to complete the transmission line by the end of 1990. Mr. Eberle said that there are no major problems or concerns with the construction, aside from the penstock welding. SWEC has developed criteria for acceptance/rejection of the welding defects and the Alaska Energy Authority has retained an independent expert to review this issue. 12. OLD BUSINESS a. Homer Transmission Line Status Mr. Wick reported that the HEA Board of Directors accepted Irby as the contractor for the Bradley Junction to Soldotna portion of the transmission line. Negotiations are currently underway to revise the Irby proposal to account for delay changes, loss settlement, etc. This work is scheduled for 1990-1991. Mr. Wick said that REA has provided verbal indication that they will approve these 26 miles of the transmission line and that they will allow 13 miles south by force account. Mr. Wick said that HEA wants to build the 13 mile portion by the middle of 1990. A five mile segment using force account will have to be built concurrently with the Irby segment; however, @ no major problems are anticipated. BRADLEY PMC (BRADJU28.CHP) Page 5 of 7 MEETING MINUTES b. REA Approval Status and Other Approvals Mr. Saxton reported that the requisite REA approvals have been received. At this time, the only missing approvals are the individual CFC approvals and Bank of Cooperatives approval for CEA. It was noted that these approvals should be forwarded to Mr. Saxton prior to August 21, 1989. Mr. Saxton noted that an agenda item for the August 21, 1989 PMC meeting is Ratification of Previous Actions of the Committee. This action would declare that the current Committee of purchasers has metamorphosed into the entity in the Power Sales Agreement due to receipt of these approvals. c. Retention of Utility Counsel Chairman Kelly noted that Mr. Saxton had been asked to serve the utilities, as distinct from the PMC (i.e., which includes the AEA). Mr. Petrie said that PMC counsel should represent the group. Chairman Kelly said that the legal representation of the PMC utilities was an ad hoc situation. It was noted that Mr. Saxton was to send a disclosure letter for each of the general managers to sign, acknowledging that he is not a municipal attorney or individual attorney in his services to the PMC utilities. Mr. Saxton noted that distinct from his services to the utilities of the PMC, he needs authorization to represent the entire PMC in rendering the legal opinion regarding ratification of previous actions of the Committee. It was noted that his services to the entire PMC was for the — purpose of i issuing | this opinion, which will say that the Committee has organized aaa Mr. Wick asked that a copy of this opinion be provided to the HEA attorney for consultation. It was noted that this opinion will be distributed to the members and that the members will have an opportunity for further review through their own distribution of this opinion to their legal counsel, as they desire. 13. a. Power Sales Agreement Section 31: Utility Costs to be Capitalized It was noted that there are two categories of expenses; individual expenses such as travel, and Committee expenses, such as time of the general managers, meeting expenses, consulting costs, etc., as well as the issue of whether these costs are construction costs or Committee costs, etc. A list of costs incurred and anticipated by the representatives and for which they expect to be reimbursed from the bond issuance, needs to be developed for consideration at the August 21, 1989 meeting. Mr. Saxton noted that Section 31 costs will be repaid 100% by the utilities and that capitalized costs require the affirmative vote of members whose percentage shares equal or exceed 80% of Project capacity. It was noted that normal, construction contracts are paid for 50% from bond funds and 50% from grant funds. The following generic areas were identified as areas for which the utilities should quantify their estimated costs from inception through commercial operation: 1) PSA negotiating fees 2) Travel 3) General Manager wages 4) Consultants BRADLEY PMC (BRADJU28.CHP) Page 6 of 7 MEETING MINUTES 5) Legal expenses It was noted that after these costs are quantified, the PMC must identify which costs are acceptable construction costs, which costs are costs to be capitalized, and which are other costs. The consensus was for Mr. Saxton to convene a telephone meeting of the Budget and Finance Subcommittee and provide direction to the members as to what type of information is required. It was noted that back-up information would not be required at this time. It was further noted that the number developed at this time for disclosure purposes could later be refined and that the funds to reimburse appropriate costs would come from the second bond issuance. A draft resolution regarding capitalization of costs was distributed to the members and action on this resolution was deferred to the August 21, 1989 meeting. b. Representative to Four Dam Pool Technical Standards Committee Mr. Petrie noted that there was an opportunity to monitor and learn from the Four Dam Pool Technical Standards Committee (TSC) relevant to the 300 + technical standards being developed for the Four Dam Pool facilities, some of which will apply to the Bradley Lake Project. Mr. Petrie noted that the TSC is currently commenting on these standards and that the comments will be consolidated by Mr. Zidalis, a contractor to the Four Dam Pool. c. Schedule Next Meeting The next meeting of the Bradley Lake Project Management Committee was scheduled for August 21, 1989, to begin at 9:00 a.m. in the Conference Room of Chugach Electric Association. 14. COMMUNICATIONS Chairman Kelly noted that when the PMC meeting adjourned, the utilities would meet with a representative of Smith-Bar- ney. It was also noted that a site visit had been scheduled for the participants to view the Bradley site in the afternoon. 15. ADJOURNMENT Chairman Kelly * +.’ BRADLEY PMC(BRADJU28.CHP) Page 7 of 7 ‘ MEETING MINUTES ATTEST: Siw MVE Alaska Energy Authority, Secretary Approved at PMC Meeting held_¥/Z (_, 1989.