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HomeMy WebLinkAboutBPMC Meeting - August 29, 1988 1‘ FILE COPY Bradley Lake PMC Page 1 of 6 August 29, 1988 Meeting Minutes . 0 ZL 7 a vo BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE August 29, 1988 Robert E. LeResche called the Bradley Lake Project Management Committee meeting to order at 4:45 p.m. in the Train- ing Room of Chugach Electric Association, to conduct the business of the Committee per the agenda. In attendance were the following: Designated Representative awn esignated Alternate _Representing Robert E. LeResche Brent N. Petrie Alaska Power Authority E. Paul Diener City of Seward James F. Palin Myles C. Yerkes Matanuska Electric Assoc., Inc. David L. Highers Tom Lovas Chugach Electric Assoc., Inc. Kent Wick Sam Mathews Homer Electric Assoc., Inc. Michael Kelly Robert Hansen Golden Valley Electric Assoc., Inc. John Cooley Municipal Light and Power See cermseeemernn a ee tt tmmeneenl ttt Bob Peirson City of Seward Thomas R. Stahr Municipal Light and Power Others Present Representing Donald L. Shira Alaska Power Authority David Eberle Alaska Power Authority Ron Saxton Golden Valley Electric Assoc., Inc. Carol Johnson Chugach Electric Assoc., Inc. Marnie Isaacs Alaska Power Authority Julie Becker Alaska Power Authority SS.4.Y Bradley Lake PMC Page 2 of 6 August 29, 1988 Meeting Minutes 6. FINANCE COMMITTEE REPORT The Committee discussed the relative worth of seeking independent advice with regard to the bond issuance. Mr. Saxton said that he felt that the utilities would benefit from such independent advice 1% of the time; however, the other 99% of the time, the advice of Mr. Grimes, Financial Advisor; Mr. Seagraves, lead underwriter; and Mr. Wohlforth, bond counsel, would be adequate. Selection of Finance Team to Visit Bond Rating and Insurance Agencies Mr. Saxton said that the PMC needs to decide what PMC costs to add to the bond issuance. Mr. LeResche clarified that while the Bradley Lake State appropriations equal one-half the amount of the projected Bradley Lake Project costs, the State of Alaska appropriations are not to cover one-half of the PMC costs. Mr. LeResche added that the cost for one rep- resentative from Chugach Electric Association, Inc., Golden Valley Electric Association, Inc., Municipal Light and Power, the City of Seward, Homer Electric Association, Inc., Matanuska Electric Association, Inc., and the Alaska Power Authority, to attend the September, 1988 meetings with investor rating agencies and bond insurance companies should ap- propriately be added to the total Bradley Lake Project costs. It was noted that the cost for this attendance might be capi- talized in a later bond issuance and reimbursed out of the available construction fund balance. The consensus was that the utilities would submit invoices to the Power Authority for attendance at the September, 1988 meetings for reimbursement from the available construction funds. Mr. Palin motioned, seconded by Mr. Kelly, that each purchasing utility and the Power Authority be authorized to send one person to attend the September, 1988 meetings, and that the PMC authorize the cost (to include airfare and out-of- pocket expenses, but not labor) for this person to be reimbursed as soon as possible. This motion passed unanimously. Mr. Kelly motioned, seconded by Mr. Wick, that Mr. Saxton accompany the Finance Team to New York as legal counsel for the PMC and that this cost be a PMC cost to be reimbursed by the Bradley Lake Project funds pro rata. This motion passed with no objection. It was noted that Messrs. Peirson, Wick, Palin, Highers, LeResche, Kelly, Saxton,and a representative of Municipal Light and Power would attend the September, 1988 meetings. Mr. Petrie said that he would send a meeting itinerary and hotel notice to each person attending the meetings in New York. Mr. Saxton asked that the schedule provide the ability for the cooperatives to meet with REA in Washington, D.C. on Friday, September 23, 1988. It was anticipated that the meetings with the rating agencies and bond insurance companies would occur September 19 or 20 through September 22, 1988. Mr. LeResche said that the Power Authority would reimburse the cost for Mr. Saxton’s participation at the September, 1988 meetings if it does not conflict with State statute. In the event that the Power Authority is not able to reimburse Mr. Saxton, the Committee’s consensus was that Mr. Kelly would bill each member according to their share of Bradley Lake power purchase. Discussion ensued regarding a potential conflict of interest for Mr. Saxton. Mr. Palin asked if any conflicts of interest ex- isted or could be created between Mr. Saxton’s role with regard to the PMC and as counsel to GVEA. Mr. Saxton said that he is working on behalf of the purchasing utilities and not the PMC as a whole and also for GVEA. Mr. Saxton also noted that he could conceivably have a conflict of interest, but that he would be precluded from representing GVEA if something came out of the Finance Team proceedings. The Committee clarified that Mr. Saxton’s role during the meetings with the investor rating agencies and bond insurance companies would be as a technical resource person with regard to the Power Sales Agreement (PSA), the Rural Electric Association (REA) review process, and the activities of the PMC. Mr. Kelly asked if it might not be appropriate for the members to bill for their own time to participate in the meetings with the rating agencies and bond insurance companies. Mr. Palin said that they should not bill for their time. No action was taken by the Committee to change the motion which provided solely for the reimbursement of travel and out-of-pocket ex- penses. Mr. LeResche had to leave the meeting at this time to meet his airline reservation. Bradley Lake PMC Page 3 of 6 August 29, 1988 Meeting Minutes Mr. Wick motioned, seconded by Mr. Palin, that Mr. Kelly be Acting Chairman Pro Tem. The motion passed without ob- jection. Discussion followed regarding consideration of Election of Officers at the next PMC meeting. The consensus was that it was appropriate to defer this issue until adoption of the by-laws. 5. APPROVAL OF MINUTES June 30, 1988 Mr. Kelly motioned, seconded by Mr. Wick, that the minutes of the June 30, 1988 meeting be approved. The motion passed with no objection approving adoption of the June 30, 1988 meeting minutes with no changes. 7. REVIEW OF PROJECT STATUS It was noted that Mr. Eberle had provided a review of the Bradley Lake Project status during the Finance Committee meet- ing, and that all individuals in attendance had attended that discussion. 8. DISCUSSION OF COST CONTROL AND CONSTRUCTION OVERSIGHT BY PMC Mr. Kelly said that he had asked that this item be added to the agenda and that he and several other purchasers had met with CFC and discussed cost contol. Mr. Kelly said that the intent of adding this item was to explore various options, in- cluding hiring someone to provide this oversight. Mr. Kelly elaborated that his two areas of concern were, 1) technical, i.e., will a better project result with greater involvement, and 2) can cost savings be realized. Mr. Petrie suggested that the charge of the Technical Coordinating Committee, a PMC subcommittee, be expanded to provide cost control and construction oversight to the PMC. Mr. Eberle suggested that this oversight mechanism is already in place with the TCC. Mr. Yerkes qualified that the TCC reviews technical aspects as opposed to providing management review. It was noted that "checks and balances" relationships are already in place with the Power Authority providing oversight of Stone and Webster Engineering Corporation (SWEC) and Bechtel, and Bechtel providing additional oversight of SWEC, through constructability reviews and administration of the construction contracts. Mr. Eberle said that the Power Authority has an internal Configuration Control Board and that the purpose of this Board is to provide project oversight by other employees of the Power Authority. Mr. Eberle added that this committee was originally composed of four members; however, two had left through attrition and not been replaced. Mr. Eberle said that he and Mr. Shira currently serve on the Configuration Control Board and that all project changes over $50,000 must go through this Board (i.e., change orders, changes in design, etc.). Mr. Petrie suggested that a member of the Bradley Lake PMC be appointed to serve on the Configuration Control Board. Mr. Petrie noted that the State Procurement Code might not allow for this representative to be a voting member; however, this individual’s suggestions would be considered. Mr. Highers motioned, seconded by Mr. Palin, that the TCC serve as the construction oversight and cost control mechanism, The motion passed with no objection. Mr. Highers motioned, seconded by Mr. Palin, that the TCC be directed to appoint a member of the TCC to serve on the- Power Authority Configuration Control Board to report any actions and identify any problems at each PMC meeting. The motion passed unanimously. Mr. Yerkes suggested that it would be beneficial if this person also participated in the Federal Energy Regulatory Commission, Board of Consultants, and Dispute’s Review Board meetings. The consensus was that the Power Authority would invite this person to these meetings if only for informational purposes; however, this person might elect not to attend due to time considerations and, alternatively, obtain verbal briefings from Mr. Eberle. Bradley Lake PMC Page 4 of 6 August 29, 1988 Meeting Minutes Mr. Diener expressed concern that due to the time involved, it might be appropriate for the PMC to pay the labor cost as- sociated with this person’s participation at these meetings. It was noted that the TCC will be meeting every two to three months and the Committee elected not to authorize reimbursement for this person’s participation at this time. Mr. Saxton referenced Section 31.a.ii of the PSA which provides that the purchasers shall determine whether and to what extent the costs incurred by the individual purchasers in conjunction with the PSA prior to the date of commercial opera- tion should be capitalized. 9. TECHNICAL COORDINATING COMMITTEE REPORT Discussion of Draft Definitions of "Operations" and "Maintenance" Reference August 10, 1988 letter from Mr. LeResche to the PMC members and associated attachment, draft operation and maintenance definitions and responsibilities, as developed by the Technical Coordinating Subcommittee. Mr. Yerkes reviewed the definitions which describe primary long-term functions and responsibilities. Under these defini- tions, the Project Owner, Alaska Power Authority, would be responsible for ensuring compliance with FERC requirements, establishment of O & M standards, collection of revenues, and service of bond requirements. The Project Maintenance and Emergency Operator would be responsible for plant maintenance, site maintenance, transmission line maintenance and repair, scheduled inspections, maintaining on-site plant records and drawings, and on-site emergency operation of the power plant. The Remote Operator/(Project)Dispatcher/Scheduler would be responsible for the remote operation of the power plant, dispatching project power, monitoring all alarm functions, monitoring and control of all 115 kv line breakers, wheeling of project power, coordinating maintenance with on-site maintenance personnel, coordinating and maintaining power production schedules, and maintaining production and dispatching records. Mr. Yerkes noted that Exhibits 1 through 3 to the Definitions provide in detail the functions and responsibilities of the various entities, and that Exhibit 4 lists additional interim/short-term duties and responsibilities which would be undertaken by the Power Authority. Mr. Yerkes also noted that even if the definitions are adopted by the PMC as written, they are still subject to further review and modification by the PMC. Mr. Yerkes detailed the responsibilities which some members of the TCC felt should be performed by other entities. Mr. Yerkes noted that some of the Subcommittee members felt that item 1.9., Project Owner Responsibilities, reservoir model- ing, should be performed by Chugach Electric Association, Project Dispatcher. As such, item 3.1. Project Dispatcher Responsibilities, specifies provision of 24 hour control by Chugach Electric Association. Mr. Yerkes said that there had been controversy in the past as to which entity should perform hands-on operation of the Bradley Lake Project. The responsibilities as outlined in the Exhibits could provide that AEG&T or HEA provide emer- gency operation of the plant as requested by and coordinated through the project dispatcher (i.e., Chugach Electric As- sociation), and that the continued dispatch and operation be performed by the dispatcher, CEA. There was a great deal of discussion on Exhibit 4, Additional Interim/Short-Term Responsibilities of Owner. The Power Authority said that their position is that Power Authority employees provide for plant start-up, testing, and initial on-site O & M functions. Mr. Petrie said that the Power Authority is not convinced that it is appropriate to go with other than their own people during the warranty period of first two years of project operation. The Power Authority proposes they they perform these responsibilities and then transfer the personnel to the contractor responsible for on-site O & M. It was noted that Homer and Seward are both opposed to this proposal; they feel that the AEG&T should perform these respon- sibilities initially. Mr. Palin asked if the Power Authority will be responding to the (date-approx. 3 weeks ago) letter from Bob Husted of AEG&T. Mr. Wick said that the first step in resolution of the issue of who is responsible for initial on-site O & M func- tions is for the Power Authority to respond to this letter. This issue would then be brought back before the PMC for resolu- tion. Mr. Palin motioned, seconded by Mr. Highers, that the PMC accept the definitions and responsibilities (as revised July 12, 1988) as proposed by the TCC, subject to change in the future. Mr. Diener expressed concern that the passage of this mo- Bradley Lake PMC Page S of 6 August 29, 1988 Meeting Minutes tion would provide PMC sanction of Power Authority initial on-site operation, when in fact there had been no resolution of this issue. Mr. Wick motioned, seconded by Mr. Cooley, that the PMC table the definitions. The motion to table the definitions failed. Mr. Wick motioned, seconded by Mr. Diener, to amend the main motion that the PMC adopt the O & M definitions and responsibilities up to and including Exhibit 3, but that they delete Exhibit 4 until such time as the Power Authority and AEG&T further review Exhibit 4. Mr. Eberle pointed out that Mr. Wick wants the Power Authority to adopt Section 4.4 of Exhibit 4, development of technical standards. Mr. Palin motioned, seconded by Mr. Wick, to table the main motion and amendment to the main motion time certain to the next PMC meeting and for Mr. Wick to work with the Power Authority on Schedule 4 prior to that time. The motion passed to table the motion and amendment to the next PMC meet- ing. 10. DISCUSSION OF DRAFT BY-LAWS Mr. Highers motioned that this issue be tabled to the next PMC meeting. The motion died for lack of a second. Mr. Sax- ton said that he met with Mr. Petrie on the draft by-laws (reference Bradley Project Management Committee By-Laws dated August 5, 1988 and containing Mr. Saxton’s and Mr. Petrie’s proposed pages 5 and 6) and added that the draft by- laws are largely an edit of the Four Dam Pool Rules of Procedure. Mr. Saxton said that the issue of open meetings has been resolved; the State Attorney General’s Opinion is that the open meetings policy applies to meetings between the PMC and Power Authority Board of Directors due to the letter of intent language. Mr. Saxton noted that the budget process will be- come much more complex once project operation commences. Mr. Saxton said that there are two issues regarding the voting arrangement and that the draft by-laws are primarily a reflec- tion of the recommendations of Mr. Petrie and himself, with few of the voting arrangements stipulated by contract. The first issue is the notion of weighted voting and the PSA is essentially neutral on this, other than the issues in the PSA which require percentage share voting (i.e., Section 31.a.). The second issue according to Mr. Saxton is the Power Authority’s role in regard to voting. Mr. Saxton said that the issues relating to project financing and asset security clearly should provide for the Power Authority vote; however, the question is if allocation of costs and resources (i.e., water resources, schedul- ing) should have Power Authority voting participation. Mr. Saxton suggested that the PMC schedule a work session on the draft by-laws, since the rules of procedure will serve to govern the PMC. The consensus was to schedule a workshop to review the draft by-laws and a PMC meeting to address the O & M definitions. 12. COMMUNICATIONS Mr. Eberle said that the Southern Company Services, Inc. (SEI) stability studies appear to show a problem relative to over- all stability of the Kenai transmission system.. Mr. Eberle said that Mr. Dzinich, Senate Advisory Council, recommends that the PMC secure a second opinion on whether a potential problem exists and potential solutions, particularly since SEI isa CEA contractor and a second opinion would serve to mitigate any perceived bias. Mr. Eberle suggested that this second opinion scope of work be added to the Northeast (Palmer-Glennallen-Delta Junction) Intertie Study or Railbelt Alternative s Study in order to add an independent element of credibility to the study. Mr. Eberle noted that SWEC could not be utilized for this review due to their design involvement with the project. Mr. Yerkes suggested that the scope of the review be limited to an independent, technical review of the current SEI work. Mr. Eberle suggested that the Power Authority have preliminary discussions with the other contractors currently under contract and report back to the PMC with the preliminary amount which would be required to obtain this independent review. There was no objection to this. Mr. Petrie noted that six proposals had been received for the Palmer-Glennallen-Delta Junction Intertie and that the selected consultant could review the SEI study or that Bechtel, as part of its role on the overall Railbelt Intertie Study could review stability. The consensus of the PMC was for Mr. Eberle to weigh the member’s suggestions, proceed with prelimi- nary discussions with entities who could perform the independent review, and report back to the PMC. Mr. Palin said that the question as to why the stability study problem was not identified earlier needs to be answered, and commented that the Legislature will ask this same question. Mr. Petrie said that at the time this would have been addressed, the emphasis was on the proposed Susitna Hydroelectric Project, which would have located the major source of generation further north in the grid system. Mr. Lovas added that with the additional intertie south, you wouldn’t have seen the de- gree of stability problems you now see. The consensus was that a 1/2 hour presentation on this issue would be scheduled - a Bradley Lake PMC Page 6 of 6 August 29, 1988 Meeting Minutes for a future meeting to increase the understanding of the stability issue. Discussion followed that there might be FERC license and tax status implications to various solutions. OTHER BUSINESS Schedule Next Meeting Mr. Kelly noted issues to be addressed at the next PMC meeting; consideration of by-laws and Finance and Technical Coor- dinating Committee reports. Mr. Palin noted that the meeting would be preceded by a workshop to review the draft by- laws. There was discussion to elect officers at the next PMC meeting; however, the consensus was to defer election of officers until the by-laws are in place. The next meeting was scheduled to begin 10:00 a.m., September 27, 1988, at Chugach Electric Association’s Training Room, in Anchorage, Alaska. 13. ADJOURNMENT There being no further business and no public comment, the meeting adjourned at 6:40 p.m. ACTING CHAIRMAN | APPROVED AT PMC MEETING HELD , 1988.