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HomeMy WebLinkAboutBPMC Meeting - April 6, 1990 1FILE COPY BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE we APRIL 6, 1990 CALLED TO ORDER Chairman Kelly called the Bradley Lake Project Management Committee to order at 9:35 a.m in the Training Room of Chugach Electric Association 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 Brent Petrie - Alternate Chugach Electric Association David Highers - Representative Tom Lovas - Alternate City of Seward Everett Paul Diener - Representative Golden Valley Electric Association Michael Kelly - Representative Homer Electric Association Kent Wick - Representative Matanuska Electric Association Ken Ritchey - Representative Joined at 9:40 a.m. Municipal Light and Power Thomas Stahr - Representative Myles Yerkes - Alternate Others Present: Don Shira, Alaska Energy Authority David Eberle - Alaska Energy Authority Ron Saxton - Purchasing Utilities Joe Griffith - Chugach Electric Association Allan K. Yost - Rural Electrification Association John Cooley - Municipal Light & Power Dave Hutchens - Alaska Rural Electric Cooperative Association Marcey Rawitscher - Alaska Energy Authority DeAnna Scott - Alaska Energy Authority Julie Becker - Alaska Energy Authority PUBLIC COMMENT There being no public comment, Chairman Kelly proceeded to agenda item 4. MODIFICATION OF AGENDA HEA Line Loss issue was added under item 7, Technical Standards Subcommittee Report; HEA Transmission Prepayment Election was added under item 13, New Business; Commercial Operation was added to item 12, Old Business; The IBEW lawsuit was added under item 13. New Business section B. The modifications of the agenda were approved accordingly. APPROVAL OF MINUTES FEBRUARY 27, 1990 The following clarifications were made to the draft February 27, 1990 meeting minutes: Chairman Kelly noted two changes on page 2 of 6: item 1, the formula should read (cost of construction + acquisition) + 31 : 2 and it should also be noted that this identifies the utility debt service payment obligation. Also, have the minutes reflect that Ron Saxton represents the Purchasing Utilities. Mr. Petrie moved to strike the last phrase on page 2 of 6 under the Bond Finance Team Report which reads: "due to schedule conflicts by the Bond Finance Team members". The minutes of the February 27, 1990 meeting were approved with these modifications by acclamation. BOND FINANCE TEAM Mr. Petrie reported that on Wednesday, April 11, 1990, the underwriters, attorneys, including Mr. Saxton, and AEA staff are to meet in Seattle, WA. It was also noted that there was a significant change in the staff at First Southwest. Mike Johnson who was involved with the first bond issue will no longer be with First Southwest and they were assigning a new person to his role as Financial Advisor. AEA will meet Mr. Johnson’s replacement during the finance meeting and will decide if AEA wants to continue with this arrangement. Mr. Petrie also noted that there would be some discussion at the finance meeting about the REA/Homer/IBEW Lawsuit. It was noted that all members of the PMC are invited to attend this meeting but it is not necessary for the members to be present. The topics for discussion will primarily be tax law issues that are necessary to resolve for the completion bond issue. Chairman Kelly stated that the PMC utility members need to address at the beginning of the financing process whether or not the utilities intend to hire a financial advisor. Ms. Rawitscher noted that she would like to be advised as to what stage the utility members of the Finance team would like to get involved. Chairman Kelly recommended that Mr. Saxton attend the financial meetings on the utilities behalf and let the team know when they would need to address the financial consultant issue. Chairman Kelly asked when the second bond issue would take place. Ms. Rawitscher stated that November 1, 1990 is the last date when AEA would want to finance due to the volume cap, and the fact that the tax exemption essentially ends on that date. AEA is presently looking at July or August at the latest to do the second financing. TECHNICAL COORDINATING COMMITTEE REPORT Mr. Yerkes reported that the TSC did not meet since the last PMC meeting but they did have a meeting with the Configuration Control Board. The CCB approved two change orders in the total of $450,000 for additional Intake Channel Excavation. Mr Yerkes stated that the Transmission Line Change Order has changes totaling approximately $1.5 M (8-9% of the total contract price) due to no detail elevation plan survey. Chairman Kelly asked if any information was available on the stability issue, the deliverability of 40 to 50 MW on an interim basis and the status of the on going studies. Mr. Yerkes noted that the studies were on hold until the machine testing was completed in April 1990. It was also noted by Mr. Yerkes, that the Energy Authority was considering a change order of PTI’s contract to more clearly assess and define the operating output limitations during initial project operation. The other item Mr. Yerkes noted was that without the series capacitors, the only other remedy on the new line would be to increase the number of static var units. This however, would increase the price. A. HOMER ELECTRIC ASSOCIATION - LINE LOSS Mr. Wick stated that he felt the studies for the line loss should become a project cost and not the responsibility of Homer Electric. Mr. Shira stated that this issue came up while working on the draft Scheduling and Dispatching Agreement and is an issue that needs to be addressed before power delivery. Mr. Petrie stated this is an issue where the cost should be borne by the signatory parties to the Homer Transmission Agreement and AEA is not convinced it is a project cost. Chugach offered their engineering services to perform the load flow studies to determine the line losses with Homer Electric paying for the cost of these studies which will be basically labor cost. INSURANCE SUBCOMMITTEE REPORT The Insurance Subcommittee met and reviewed the draft of the Stone and Webster Risk Management Report. Mr. Saxton stated that according to the report, the project was extremely well built and basically, would withstand nearly any kind of hazard. According to the report, under most events the project would be able to operate without having had any significant damage. Mr. Hitchcock, with the State Division of Risk Management, is currently reviewing the draft and as soon as it is final, will be using the final report to obtain bids for the cost of insurance. Tentatively, the property insurance coverage appears to be less expensive then previously reported. The Boiler and Machinery insurance on the other hand may be more expensive than previously stated. This is not due so much to risk, as to the use of more expensive and sophisticated equipment than other hydro facilities. Mr. Saxton stated that the final report from Stone and Webster should be received in about a month and the Division of Risk Managements new estimates for the cost of various term options. The committee will then consider the alternatives of purchasing insurance vs. self-insuring or a combination of the two and bring their findings back to the PMC with recommendations. BUDGET SUBCOMMITTEE REPORT The Budget Subcommittee met on April 4, 1990. Ken Ritchey was designated Chairman of the committee. Mr. Ritchey reported that the Budget Subcommittee met and one of the issues that came up was the potential need for a PMC approved budget prepared by April 1, 1990, if commercial operation were to start by May 1, 1991. Mr. Saxton emphasized that there would be no debt service payment due if commercial operation was to start before July 1 and that the only cost for that two month period would be operation and maintenance cost. Mr. Saxton further stated that the PMC maybe free to pre-collect some debt service. By doing so, the utilities could effectively pay a 12 month debt service collected over a 14 month period. Mr. Ritchey referred to the cash flow sheet. Mr. Ritchey reported that the Budget Committee has two goals. The first being to have equal payments and second, to keep the payments to a minimum in the early years of operation. Mr. Stahr has a concern that if payments were collected early it would have an impact to all of the utilities that operate on a calendar basis as opposed to a fiscal year basis. Chairman Kelly stated that this is something the committee needs to address and also restated the PMC’s sie to back load whatever cost possible to help reduce the initial rate shock. Mr. Ritchey then discussed the Draft Bradley Lake Annual FY O&M Budget. Mr. Ritchey stated the FERC account numbers 132, 174 and 186 are the reserve accounts. These accounts are currently funded and there would be nothing specific going into these accounts until such time that there was a payment made from the account which would then initiate the need to replenish the account. FERC account numbers 535, 541, 920, and 928 are predominantly labor cost for AEA. Mr. Ritchey noted that this raised an issue which could be difficult to resolve in the budget committee and centers around what the Power Sales Agreement says about specific AEA overhead to be paid. Another major issue was the Chugach cost under Load Dispatch at $150,000 which required some additional discussion. Chugach did, 10. however, provide the committee with some additional information and that has now been resolved. Homer Inspection costs in account 571 at $60,000. The committee received a proposal from HEA, and the committee asked HEA to go back and take another look at certain items. The number of towers that could be inspected per day and the hourly rate they had used as an overhead rate. Another item was the issue was the paying double time to ride in helicopters. Mr. Stahr asked the question if any consideration was given to having the economic dispatch system financed with the bonds up front instead of amortizing it over a period of time that would cost the utilities. Mr. Petrie stated that AEA would need to know a little more about the proposed dispatch system before AEA could give a yes or no answer. Mr. Ritchey continued with the budget discussion noting that the insurance cost were based on the numbers that the Insurance Subcommittee reported. The FERC expenses are the on-going studies all of which are basically required. Mr. Petrie noted that the official statement for the bonds had estimated $3.8 million for the annual operating budget and the committee has been able to decrease that cost to $2.7 million to date. Mr. Petrie also noted that the committee has deferred the renewal and replacement cost item. This has not been included because AEA would not start funding a R&R account until five years from start of commercial operation. OPERATION AND DISPATCH SUBCOMMITTEE REPORT The Operation and Dispatch Subcommittee met on March 28, 1990. Mr. Shira stated the results of the Stone and Webster model run reflected the utilities hourly usage output of the project. What SWEC has come up with is the basic utilities requirement. There is a potential for some spill during an average flow year. In addition, SWEC will be running a more conservative case that will indicate if each utility could meet their requirements with only 80% of the average flow. Mr. Shira stated the committee is getting close to an agreement to submit to the PMC and the attorneys for review. An issue arose on how they were going to allocate the spill and each utilities water supply. With much concern about the accountability of the reservoir water levels, evaporation and which utility water is being spilled, the committee agreed to allocate the spill and each utility’s water supply on a power basis. Mr. Shira requested a smaller working committee group to complete the draft agreement. Chairman Kelly addressed this and a spokesman from each utility was appointed. ML&P: John Cooley GVEA: Marvin Riddle 11. HEA: Sam Mathews CEA: Tom Lovas Mr. Shira asked for direction from the PMC as to the process that should be taken once a draft agreement was reached. After much discussion, it was agreed that the scheduling of Dispatch Sub-Committee would make a presentation to the PMC. Chairman Kelly requested Mr. Saxton is to work with the members of the committee and a copy of the agreement is to be given to him prior to the presentation. The sub-committee’s next meeting is scheduled for April 18, 1990. REVIEW OF PROJECT STATUS Mr. Eberle gave an update on the status of construction. At the end of March 1990, the project was 65% complete compared to 64% as planned. General/Civil Contract: The concrete liner in the vertical shaft has been completed. In the lower power tunnel, the contractor has started the concrete and 1,600 ft has been completed. The line operation is going slow and 1 1/2 months have been lost due to personnel problems. Work has resumed on the intake, dam site and the diversion gate structures. Work will begin on the spillway later this month. The gates to the gate shaft will be shipped from Germany by the middle of next month. Filling of the reservoir will begin by the middle of this summer which would allow water up of the tunnel by the end of this year. All embedments have been completed in the powerhouse that relate to the turbine generator and the concrete work. Later this month they will begin to install the bearings to the turbine stacking the generator stator in May. The transformers have passed testing and are now in route to the project. Transmission Line: The contractor has completed driving pilings and is now working on the rock anchors on the Bradley Lake side. The contractor will start pouring the concrete this month and will have poured all concrete by the end of May. The first shipment of towers are setting on a barge off the Bear Cove and will be off loaded next week. All of the towers will be in by May and the contractor will be bringing a sky crane in June to set the towers Middle Fork and Nuka Diversion: Construction bids were opened and the lowest bidder was Wilder Construction. Their total bid was $1.7 million while the engineer’s estimate was $3.0 million. The Energy Authority has issued a Notice of Intent to Award. No protests have been received and do not anticipate any. The Notice to Proceed should be able to be awarded next week and this work is to be completed by October. Mr. Eberle noted that in terms of the overall project completion, the critical item is how fast the general/civil contractor can complete the concrete liner especially since he is currently behind schedule. Another issue relates to the geology of the tunnel. SWEC has identified a number of open joints in the rock. They are concerned about the potential leakage from the tunnel. SWEC has come up with a very extensive, multi-staged 12. 13. grouting program to seal off these joints. The contractor’s preliminary indication is that it cannot be completed concurrently with the concrete liner and would have to come back and do it as a separate operation after the liner is completed. If this is the case, it could take an additional five months working three shifts. Adding five months to the critical path, would pushed back the completion date to October 15, 1991. Mr. Eberle stated that he is not sure that the extensive program SWEC is suggesting is really necessary. He has asked them to review the program with the FERC Board of Consultants and ask the question "Is it needed for safety?" If the grouting is not required for safety, a reduced grouting program may be more appropriate; or alternatively the project could be put in operation and monitored for leakage. If leakage was substantial, the grouting could be accomplished when the project is shutdown during low reservoir periods. The cost associated with SWEC’s initial program could be in the area of $1 to $2 million, if we extend the five months plus the contractor’s overhead. A response from SWEC is due to the Energy Authority by the end of this month. To date, the FERC Board has not looked at whether or not this program is necessary. However, whatever the findings by FERC Board determines, the CCB will be informed and have a chance to review. OLD BUSINESS A. DATE OF COMMERCIAL OPERATION According to Mr. Eberle, the earliest optimistic date for commercial operation is May 1, 1991. But in his opinion, will probably be around July 1, 1991. B. DISCUSSION OF TEST PERIOD POWER SALES AGREEMENT The draft of the Test Period PSA was distributed prior to the meeting. Ms. Rawitscher stated that she did not feel that the PSA could be amended because of the Bond Resolution. Mr. Saxton stressed the need for a schedule or process where the technical committee could look over the draft agreement, and make appropriate comments and then give it to the bond lawyers for their comments. Mr. Stahr stated that he was concerned with the definition of commercial operation and did not know how far the PMC could go with this agreement without affecting the utilities rights under the original PSA. Chairman Kelly noted his concerns with the test period. After considerable discussion, Chairman Kelly asked for _a_ motioned to table the Test Period Power Sales Agreement until the next meeting. It was moved by Mr. Stahr_ and seconded by Mr. Petrie. Chairman Kelly asked if there were any objections; none were expressed. NEW BUSINESS A. PREPAYMENT ELECTION-HOMER TRANSMISSION AGREEMENT Mr. Saxton noted that the prepayment election had to be made no later than June 29, 1990. The Homer agreement says that by within one year of the effective date of the Homer Agreement, each of the utilities will inform HEA if they intend to prepay or to pay on an on- going basis their share of the construction. ML&P has already stated that they would be prepaying their fees to HEA. Mr. Saxton recommended that each utility decide their election within the next 90 days. IBEW LAWSUIT Mr. Saxton stated that the IBEW has filed suit on March 30, 1990 in Federal Court against, REA, HEA and IRBY to enjoin construction of the line segment that was awarded IRBY and for financial damages. The AEA and the purchasing utilities are most affected by this suit but are not named as parties of this suit as it stands. Mr. Saxton stated that the committee needs to address the issue either working through the current defendant, AEA or as purchasing utilities to move for some kind of dismissal. Mr. Saxton asked Mr. Wick to give a little more background to the suit. Mr. Wick stated that this suit was originally presented to Homer Electric by the IBEW back in October or November 1989 in the same format in which it was filed. At that time, the IBEW asked Homer to join in as plaintiffs. The HEA Board of Directors reviewed the contents and decided at that time, it was not wise to join the suit. It was not until Monday, April 2, 1990 that they were informed by Rick Baldwin, HEA’s attorney about the filing of the suit. The suit is almost exclusively aimed at REA. The only part HEA and IRBY are named in it is as parties to the contract. The IBEW has requested that HEA, if possible, remain a silent party since it is not directly against HEA. Mr. Wick presented a scenario for completing the transmission line if the court enjoins the contract. The material is owned by HEA and the alternatives would be to either re-bid the construction or HEA to do the work by force account. Mr. Wick’s preference would be force account. Mr. Petrie asked what HEA planned to do about the lawsuit. Mr. Wick’s reply was to remain a silent partner and as much as possible to stay out of it. Mr. Saxton pointed out that Mr. Belluzzo expects the PMC to basically defend the lawsuit especially as it pertains to the injunction. Chairman Kelly stated his concern about the lawsuit if it delays the completion of the line that is needed to deliver project power. Chairman Kelly stated that Mr. Saxton has suggested that the PMC support AEA in the requesting the immediate dismissal of the lawsuit and offer to assist AEA through Mr. Saxton by some other means in that effort. Mr. Stahr moved and Mr. Petrie seconded it for discussion. Mr. Saxton stressed again that in order for the financing not to be affected, the lawsuit had to go away within the next 60 to 90 days. The overtone of the lawsuit by itself could affect the financing in a way that would cost the purchasing utilities money; but, if an injunction were issued it would be a disaster. Mr. Petrie stated that the injunction would cause serious questions about the delivery of power. AEA’s counter argument would be to complete the project 14. 15. to Bradley Junction and declare it commercial operable and then the problem would be with the purchasing utilities. The first motion was modified to read: that the purchasing utilities support the AEA in requesting immediate dismissal of the lawsuit and offer their support in the form of Mr. Saxton’s services and the purchasing utilities would pay for such services. The motion passed unanimously with Messrs. Ritchey, Highers, Kelly, Stahr, Petrie, Diener voting yes and Mr. Wick abstaining. C. SCHEDULE NEXT MEETING May 17, 1990 Chugach Electric Association 9:30 a.m. COMMUNICATIONS Mr. Petrie introduced DeAnna Scott, Don Shira’s Administrative Assistant, who will be keeping the Bradley Lake minutes in the future. Chairman Kelly welcomed Ms. Scott and complimented Ms. Becker for her assistance to the PMC during her tenure with the Authority. ADJOURNMENT There being no further businegs before the Committee, the Committee adjourned by acclamation at 1235 p.m. Approved by PMC at meeting held May 17, 1990.