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HomeMy WebLinkAboutBPMC Meeting May 13, 1993 3ATTACHMENT 1 WOHLFORTH, ARGETSINGER, JOHNSON & BRECHT “~ PETER ARGETSINGER A prormenione conmonanon TELEPHONE JULIUS J. RRECHT ATTORNEYS AT LAW (907) 276-6401 CYNTHIA L, CARTLEDGE eee a “ateryeed 900 WEST STH AVENUE, SUITE 600 TELECOPY HOMAS F. é SRADLETIE MEVEN ANCHORAGE, ALASKA 99501-2048 en See JAMES A. SARAFIN KENNETH E. VASSAR ERIC E. WOHLFORTH RECEIVED MEMORANDUM APR 15 1993 ALASKA ENERGY AUTHORITY, TO: Brent Petrie Director of Operations Alaska Energy Authority FROM: Thomas F. Klinkner DATE: April 13, 1993 SUBJECT: Payment of Cost of Accelerating Construction of Fritz Creek Transmission Line Segment from Proceeds of Power Revenue Bonds, First and Second Series (Bradley Lake Hydroelectric Project); Our File No. 3610.2024 You have asked that we advise the Alaska Energy Authority (the "Authority") concerning a proposal by the purchasers of power (the "Purchasers") from the Bradley Lake Hydroelectric Project (the "Project") to capitalize the costs of accelerating construction of the Fritz Creek transmission line segment (the "Fritz Creek Line") under Section 31 of the Agreement for the Purchase and Sale of Electric Power (the "Power Sales Agreement") among the Authority and the Purchasers. We conclude that the Authority may do so, with the requisite approval of the Purchasers under Section 31 of the Power Sales Agreement. Our answer involves the following analysis of the agreements between the parties and federal tax law. |. Background. We understand that an Amendment to Agreement for Sale of Transmission Capability dated March 7, 1989 obligates the Purchasers other than Homer Electric Association, Inc. ("HEA") to pay HEA $600,000 (the "Fritz Creek Payment") in exchange for HEA accelerating the construction of the Fritz Creek Line to transmit power from the Project. To capitalize the Fritz Creek Payment, the Purchasers propose that the Authority pay HEA $600,000 from amounts held under the Power Revenue Bond Resolution, adopted September 7, 1989 (the "Bond Resolution"), securing the Authority’s Power Revenue Bonds, First and Second Series (Bradley Lake Hydroelectric Project) (the "Bonds"), and that the Purchasers other than HEA BRADLEY LAKE HYDROELECTRIC PROJECT SUMMARY OF OF FINANCING COSTS THROUGH JUNE 30, 1993 Interest Expense Interest Revenue Issuance Costs At Bond Closing: Program Fee/Insurance Cost of issuance at Closing Underwriter's Discount Cost of issuance paid through Trustee Sub-total Reserve Funds Capital Reserve Fund Operating Reserve Fund Renewal & Contingency Reserve Fund Sub-total Bond Discount Bond Discount Bond Premium Sub-total Total Financing Costs Projected Financing Costs (January 1991) Favorable Variance FINCOST7.XLS, 4/1/93: 2:41 PM, Page 1 of 1 Variable Rate Power Revenue State Total Demand Bond Bonds Fund Costs 65,251,362 18,973,652 84,225,014 (96,571,980) (12,529,503) (109,101,483) 7,714,588 1,302,839 9,017,427 1,523,041 8,500 1,531,541 2,006,250 2,155,662 4,161,912 11,243,879 3,467,001 14,710,880 353,797 879,744 1,233,541 11,597,676 4,346,745 15,944,421 13,393,000 0 13,393,000 0 625,000 625,000 1,607,908 3,392,092 5,000,000 0 15,000,908 4,017,092 19,018,000 3,842,140 3,842,140 (179,533) (179,533) 0 3,662,607 3,662,607 (19,722,942) 29,454,408 4,017,092 13,748,559 15,249,000 1,500,441 @ LNSWHOVILY Memo to Brent Petrie Alaska Energy Authority April 13, 1993 Page 2 pay, as a portion of Annual Project Costs under the Power Sales Agreement, debt service on the Bonds allocable to this reimbursement. ll. Section 31 of the Power Sales Agreement. Section 31 (a) (ii) of the Power Sales Agreement provides for the capitalization of certain costs of the Purchasers as follows: (a) Promptly after the Committee is formed, and before the Authority first issues Bonds, the Purchaser members of the Committee shall determine by the affirmative vote of members whose Percentage Shares equal or exceed eighty percent (80%) of Project Capacity and of Annual Project Costs: * * * (ii) whether and to what extent the costs incurred by the individual Purchasers in conjunc- tion with this Agreement prior to the Date of Commercial Operation should be capitalized and reimbursed through issuance of additional Bonds, and whether and to what extent the costs of debt service on those additional Bonds should be added to Annual Project Costs and allocated among Purchasers either in accor- dance with their respective Percentage Shares or in some other manner. Section 31(b) of the Power Sales Agreement states that if the Purchasers provide the Authority with a determination under Section 31 (a)(ii), the Authority shall issue additional bonds in the requisite principal amount and include debt service on the additional bonds in Annual Project Costs, allocating that debt service among the Purchasers in the manner specified in such determination. The literal terms of Section 31 of the Power Sales Agreement do not apply to the present proposal of the Purchasers. The Purchasers’ proposal fails the condition in Section 31(a)(ii) that the Purchasers determine whether to capitalize costs before the Authority issued the Bonds. Similarly, the proposal provides for capitalization with amounts presently held under the Bond Resolution, rather than Memo to Brent Petrie Alaska Energy Authority April 13, 1993 Page 3 with the proceeds of additional bonds. Therefore, a Section 31(a)(ii) determination based upon the Purchasers’ proposal would not invoke the Section 31(b) obligation of the Authority to capitalize the Purchasers’ costs by issuing additional bonds. However, we see no reason why the Authority could not elect to waive the conditions in Section 31(a)(ii) and accept the Purchasers’ proposal, provided, (i) the capitalization of the Fritz Creek Payment would have no adverse effect on the security for the Bonds and is authorized under the Bond Resolution; (ii) the capitalization of the Fritz Creek Payment would have no adverse effect on the tax exemption of interest on the Bonds; and (iii) the Purchasers’ proposal is duly adopted by the Purchasers under Section 31(a) of the Power Sales Agreement. We next address each of these issues. Ill. Security of the Bonds. The funds held under the Bond Resolution that have been suggested as sources for the Fritz Creek Payment are the Renewal and Contingency Reserve Fund and the Construction Fund. Under Section 509 of the Bond Resolution, amounts in the Renewal and Contingency Reserve Fund are committed to payment of the costs of capital improvements to the Project, extraordinary operation and maintenance costs, and contingencies. Owners of the Bonds are entitled to the security provided by the restrictions on the used of amounts in this fund, and such amounts cannot be applied to the Fritz Creek Payment. Section 503 of the Bond Resolution provides that amounts in the Construc- tion Fund shall be applied to the Cost of Acquisition and Construction of the Project. The Bond Resolution defines "Cost of Acquisition and Construction" to include “all costs and expenses...of placing the Project...in operation." This definition further provides that "such costs shall include amounts required to be paid to any other party which are applied or to to be applied under agreement to the payment of Costs of Acquisition and Construction." The definition of "Project" in the Bond Resolution incorporates by reference the description of the Project in Exhibit C to the Power Sales Agreement. That description specifically excludes the Fritz Creek Line. However, the costs that are to be reimbursed with the Fritz Creek Payment were incurred to accelerate the construction of the FritZ Creek Line, which was necessary to place the Project in operation. Thus the definition of Cost of Acquisition and Construction appears to be broad enough to include the Fritz Creek Payment. Memo to Brent Petrie Alaska Energy Authority April 13, 1993 Page 4 The principal reason for a narrower interpretation of the definition of Cost of Acquisition and Construction would have been that a narrower interpretation was necessary to assure there were sufficient funds in the Construction Fund to bring the Project to commercial operation, at which time the Purchasers’ take-or- pay obligations under the Power Sales Agreement would commence under Section 2(b) of the Power Sales Agreement and became the principal security for the payment of debt service on the Bonds. Now that the Date of Commercial Operation has passed, making the Fritz Creek Payment from the Construction Fund would have a de minimis effect on Bondowner security. In our opinion it is a properly authorized payment from the Construction Fund. IV. Tax Exemption. No original proceeds of the Bonds were deposited in the Construction Fund under the Bond Resolution. The amounts in the Construction Fund consist of (i) moneys transferred from funds and accounts held under the Indenture securing the Authority’s Variable Rate Demand Bonds (Bradley Lake Hydroelectric Project) (the "1985 Bonds"), upon the retirement of all outstanding 1985 Bonds in 1990; and (ii) proceeds from the investment of such moneys. A portion of these moneys have become transferred proceeds of the Bonds under former Treas. Reg. §1.148- 4T(e). The Bonds were issued as tax-exempt private activity bonds for a facility for the local furnishing of electricity, under Section 142(f) of the Internal Revenue Code of 1986 (the "Code") as modified by the transition rule in section 645 of the Deficit Reduction Act of 1984 (See 1986 Tax Reform Act Blue Book, p. 1170). Section 142(a) of the Code provides that the Bonds qualify as tax-exempt private activity bonds if 95 percent or more of their net proceeds are used to provide a facility for the local furnishing of electricity. Section 150(a)(3) of the Code defines "net proceeds" of an issue as the proceeds of the issue reduced by amounts in a reasonably required reserve or replacement fund. The Code and Treasury Regulations no not specifically address whether "net proceeds" as defined in Section 150(a)(3) of the Code include transferred proceeds. The definitions of "proceeds" in former Treas Reg §1.148-8T(d)(2) and current Treas. Reg. §1.148-8(d)(2), which include transferred proceeds, apply be their terms only for purposes of arbitrage rebate, or arbitrage rebate and other arbitrage requirements relating to refundings, respectively. However, for purposes of this analysis, we will assume that expenditures of transferred proceeds of the Memo to Brent Petrie Alaska Energy Authority April 13, 1993 Page 5 Bonds must be taken into account in determining whether 95 percent or more of the net proceeds of the Bonds are used to provide an exempt facility in accor- dance with Section 142 of the Code. We will assume further that all of the moneys remaining in the Construction Fund under the Bond Resolution must be allocated to transferred proceeds of the Bonds. Section 645 of the Deficit Reduction Act of 1984 provides for the tax exemption of the Bonds notwithstanding the "two-county rule" in Section 142(f)(1) of the Code, if they were issued to finance the facility described in Section 645. This description is intended to identify the Project.'. Section 645 of the Deficit Reduction Act of 1984 does not define in detail the precise scope of the facility to which its terms apply. The only basis for determining the scope of the facility appears in Section 645(i), which states, "the facility was initially authorized by the Federal Government in 1962." The reference to federal approval in this statute has caused us to consider the scope of the facility that is made eligible for tax exempt financing under this provision to be determined by the FERC license for the Project. The description of the Project in the FERC license does not include the Fritz Creek Line. Thus the expenditure for the Fritz Creek Line may come only from the five percent of net proceeds of the Bonds that may be expended other than for exempt facility purposes. The Authority has determined that an additional $4,312,192 of proceeds could be expended for non-exempt facility purposes within the five percent of net proceeds limit of Section 142(a) of the Code. This amount is sufficient to provide for the $600,000 expenditure for the Fritz Creek Line. Section 57(a)(5)(A) of the Code identifies interest on a “specified private activity bond" as an item of tax preference subject to alternative minimum tax under Section 55 of the Code. However, Section 57(a)(5)(C)(iii) of the Code excludes ‘Section 645 provides in relevant part: ...facilities for the local furnishing of electric energy also shall include a facility that is part of a system providing service to the general populace-- (i) if the facility was initially authorized by the Federal Government in 1962; (ii) if the facility receives financing of at least 25 percent by an exempt person; (iii) if the electric energy generated by the facility is purchased by an electric cooperative qualified as a rural electric borrower under 7 U.S.C. §901 et. seq. and; (iv) if the facility is located in a noncontiguous State. Memo to Brent Petrie Alaska Energy Authority April 13, 1993 Page 6 from the term “private activity bond" for purposes of the alternative minimum tax any refunding bond if the refunded bond was issued before August 8, 1986. The 1986 Tax Reform Act Blue Book, at p. 443, states that "refunding bond" as used in Section 57(a)(5)(iii) of the Code refers to bonds issued exclusively to refund an issue of bonds. At the time the Bonds were issued, we determined that the Bonds were refunding bonds for this purpose because we understood that all original proceeds of the Bonds would be used either to refund the bonds issued for construction of the Project or for the ancillary purposes enumerated in Treas. Reg. § 1.103-15(b)(1) that would not cause those proceeds to be “excess proceeds" for purposes of Treas. Reg. §1.103-15(a). The proposed expenditure for the Fritz Creek Line would not come within the purposes listed in Treas. Reg. §1.103- 15(b)(1). However, this expenditure would be an expenditure of transferred proceeds, rather than original proceeds, of the Bonds. We do not believe that the requirement under Section 57(a)(5)(iii) that the proceeds of the Bonds be issued exclusively to refund an issue of bonds imposes any restriction on the expenditure of transferred proceeds of the Bonds. Therefore, an expenditure of $600,000 from transferred proceeds of the Bonds for the Fritz Creek Line would not cause interest on the Bonds to be subject to alternative minimum tax. V. Procedure. While Section 31 of the Power Sales Agreement does not obligate the Authority to accept the Purchasers’ proposal, Section 31 provides the basis for the Purchasers’ payment of debt service on the Bonds allocable to the Fritz Creek Payment. To establish the basis for this payment, the Purchasers’ proposal to make the Fritz Creek Payment from amounts held under the Bond Resolution and to apportion among the Purchasers responsibility for debt service on the Bonds allocable to that payment, should be adopted by the procedure established in Section 31(a). This procedure requires (i) action of Purchaser members of the Committee whose Percentage Shares equal or exceed 80% of project capacity and of annual project costs, (ii) determining that the Fritz Creek Payment should be capitalized and reimbursed from amounts held under the Bond Resolution, and (iii) determining that debt service on the Bonds allocable to the Fritz Creek Payment should be included in Annual Project Costs, and (iv) prescribing the manner in which that debt service should be allocated among the Purchasers. ATTACHMENT 3 BRADLEY LAKE HYDROELECTRIC PROJECT RECONCILIATION OF PROJECT COSTS (Estimate as of May 12, 1993) Construction Cost $314,500,000 Financing Cost $13,750,000 Total Project Cost $328,250,000 Less Section 31 Cost $2,255,000 (Includes Fritz Creek Costs) Net Dividable Project Cost $325,995,000 (50% State/50% Utility) Utility Share State Share Net Project Cost (50/50) $162,997,500 $162,997,500 Section 31 Costs $2,255,000 $0 Total Share $165,252,500 $162,997,500 Appropriations $0 $175,080,000 Bond Proceeds $165,260,000 $0 Surplus (Shortage) $7,500 $12,082,500 dburgeriexcellmiscel\CONCOST.XLS Page 1 5/12/93 4:45 PM Lae mre RECORD COPY ! FILE NO ee ree 3-1 min : Shz/9 Zz > Yes frowrt W/otle BY AGB 70 sTVer Jewhnw OF pert Ju Tene (Bt réexr tue )e ISSDE INV. 1 Bie Foe jp rAneé epepn-verr_._. Got SCHEOULE FRag~ + a? COP sF Revises Bvecer Fo #F, a per yee x A Be Stsa,r YEA Bit... Por yA*ueEnt A eS gr =a Cte ov Bilire For fpestod SHrorgors0- VRorter Sri 7 SVC Wonk Essent Ate Camarere = YUNA ensy prem S Lat We (a Few mina inc Remarie) — Chae yol yperacsraett AUG /serr. | 2. GoverniR Maps . contre —ywsratl Maellser Gwéienwir Sil wars o- May 2F — yen ye Faven / yas SIL Reneatier CacctrAn I — Awyrrrees in er "669 Je = arse water Fe BOR rr Cary — crusts f 4Sentemset ow yecgpn: won —Camrsers frre Toes ~ 4a Prt are— (217A ELenrve Leas $-— lyn Freorece Booger. f fare ot Wire CE 7 QUA A20~ é TET Conse Me = pe aggre, 78 LACES E Yhrisecd Cart: Sra £9 2Zre— ne _ Pibpnerer 4 s | Z?_ ACA eeT® feeyt CoST£ po ( Hens tates) — eae. Sys rm Smare 2 — 10. 11. 12. 13. 14. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING AGENDA May 13, 1993 Chugach Electric Association, Inc. Training Room 10:00 a.m. CALL TO ORDER 10:00 a.m. ROLL CALL PUBLIC COMMENT AGENDA COMMENTS APPROVAL OF MEETING MINUTES - March 3, 1993 March 30, 1993 April 16, 1993 TECHNICAL COORDINATING SUBCOMMITTEE REPORT BUDGET SUBCOMMITTEE REPORT A. Bradley Lake Construction Cost Audit Update B. Bradley Lake O&M Cost Audit Update AGREEMENTS SUBCOMMITTEE REPORT OPERATION AND DISPATCH SUBCOMMITTEE REPORT REVIEW OF PROJECT STATUS OLD BUSINESS A. Spinning Reserves/Under Frequency Load Shedding Update B. Bradley Scheduling vs. Spin Requirement Update Gc, Fritz Creek Segment Funding D; Fish Water Bypass Update E. BPMC Control Over O&M Decisions and Agreements Master Agreement NEW BUSINESS A. Operations Budget Contingency Fund Resolution B. Diamond Ridge Relaying Cost COMMUNICATIONS A. Schedule Next Meeting ADJOURNMENT Highers Burlingame Ritchey Sieczkowski Sieczkowski Eberle Lovas Saxton Eberle Eberle Saxton Saxton Eberle 10. 11. 12. 13. 14. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING AGENDA May 13, 1993 Chugach Electric Association, Inc. Training Room 10:00 a.m. CALL TO ORDER 10:00 a.m. ROLL CALL PUBLIC COMMENT AGENDA COMMENTS APPROVAL OF MEETING MINUTES - March 3, 1993 March 30, 1993 April 16, 1993 TECHNICAL COORDINATING SUBCOMMITTEE REPORT BUDGET SUBCOMMITTEE REPORT A. Bradley Lake Construction Cost Audit Update B. Bradley Lake O&M Cost Audit Update AGREEMENTS SUBCOMMITTEE REPORT OPERATION AND DISPATCH SUBCOMMITTEE REPORT REVIEW OF PROJECT STATUS OLD BUSINESS A Spinning Reserves/Under Frequency Load Shedding Update B. Bradley Scheduling vs. Spin Requirement Update Cc, Fritz Creek Segment Funding D Fish Water Bypass Update E BPMC Control Over O&M Decisions and Agreements Master Agreement NEW BUSINESS A. Operations Budget Contingency Fund Resolution B. Diamond Ridge Relaying Cost COMMUNICATIONS A. Schedule Next Meeting ADJOURNMENT Highers Burlingame Ritchey Sieczkowski Sieczkowski Eberle Lovas Saxton Eberle Eberle Saxton Saxton Eberle S ga Dp BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES March 3, 1993 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. ROLL CALL Alaska Energy Authority Brent N. Petrie, Designated Representative Chugach Electric Association David L. Highers, Designated Representative and Chairman Golden Valley Electric Association Mike Kelly, Designated Representative City of Seward Paul Diener, Designated Representative Homer Electric Association Dave Fair, Alternate Representative Matanuska Electric Association Ken Ritchey, Designated Representative Municipal Light & Power Tom Stahr, Designated Representative Others Present: Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt David Burlingame, Chugach Electric Association John Cooley, Chugach Electric Association BPMC Meeting Minutes March 3, 1993 Page 2 of 13 T vas, Chugach Electric Association , Matanuska Electric Association Dp ob Hufman, AEG&T Moe Aslam, Municipal Light & Power Bob Price, Municipal Light & Power Dave Calvert, City of Seward David R. Eberle, Alaska Energy Authority Stanley E. Sieczkowski, Alaska Energy Authority Denise Burger, Alaska Energy Authority Eric Wohlforth, Wohlforth, Argetsinger, Johnson & Brecht Tom Klinkner, Wohlforth, Argetsinger, Johnson & Brecht Jim Seagraves, Nuveen 3. PUBLIC COMMENT There being no public comment, the meeting continued to the next agenda item. 4. AGENDA COMMENTS The following items were added to the agenda: 11 E. Section 31 Costs 11 F. Agreements Discussion 12 C. Refinancing of Bradley Lake Bonds 5. APPROVAL OF MINUTES - January 14, 1993 The minutes of the January 14, 1993 Bradley PMC meeting were approved with minor corrections (Action 93-164). 6. TECHNICAL COORDINATING SUBCOMMITTEE REPORT Mr. Burlingame reported that the TCS had not met and noted that an update of the SVC testing would be included with the O&D Subcommittee report. Ts BUDGET SUBCOMMITTEE REPORT Bradl n, tion Cost Audit and FY92 Audi Mr. Ritchey reported that both audits were nearly completed. A draft report on the construction cost audit is expected from Metzler and Associates by mid- March. Copies of the audit will be distributed to AEA and members of the dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 3 of 13 —— Ss mittee. Final reports of both audits are expected by the end of se 94 Budget Noting that BPMC approval of the budget was required by April 1, 1993, Mr. Ritchey informed the Committee that the FY94 budget was very similar to the FY93 budget. It was anticipated that the FY94 budget would be ready for distribution to the BPMC members by mid-March. Mr. Ritchey recommended that the BPMC schedule a meeting or teleconference at the end of March to consider approval of the budget. Fish Studies Mr. Ritchey relayed the Subcommittee had discussed continuing funding of the Bradley River fisheries studies. AEA recommended a three year fisheries studies program. The studies, also supported by other State and Federal resource agencies, would determine how much water was actually needed for salmon spawning. It is anticipated the results may indicate that the current flow requirements (40 cfs winter and 100 cfs summer) are higher than necessary to ensure salmon egg incubation. The total cost of the three year studies program is expected to be $117,000. It was pointed out that a reduction of the minimum flow requirement could ultimately save the utilities as much as $2,500/day. Lower minimum flow requirements could reduce potential violations due to current monitoring difficulties (i.e., icing at the gage stations). Additionally, information gained by the studies could be used to support alternate monitoring methods. Mr. Ritchey noted that the Budget Subcommittee revised the FY93 budget to include an additional $4,600 for this year's studies and that additional funds would be added to the FY94 budget to continue the studies. 8. AGREEMENTS SUBCOMMITTEE REPORT Mr. Sieczkowski reported the Agreements Subcommittee held two teleconference meetings. Final revisions were made to the Soldotna Substation Agreement and Transmission Facilities Maintenance Agreement. Comments have not been received on the draft Daves Creek or Soldotna SVC Facilities Maintenance Agreements that were distributed in December. Agreements Discussion Mr. Saxton, referring to his memorandum dated March 2, 1993, recommended that the BPMC establish a master agreement designed to clearly define the role dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 4 of 13 and right he Committee to which all other agreements would be subject . Mr. Saxton explained that the master agreement would define Serve the rights of the BPMC without requiring the already completed agreements to be rewritten. Noting that AEA had only received Mr. Saxton's memorandum the day before, Mr. Petrie requested additional time to review the proposal before any action was taken by the Committee. In response to inquiry by Mr. Kelly, Mr. Saxton stated that the master agreement would recognize the BPMC as the central authority (rather than AEA). Mr. Lovas noted that there was no intent to change or create legal entities or relationships, but to reshape the agreements in order to be consistent. Chairman Highers deferred further discussion to Agenda Item 11 F., Agreements Discussion. 9. OPERATION & DISPATCH SUBCOMMITTEE REPORT Mr. Sieczkowski distributed a summary of the January 28, 1993 O&D Subcommittee meeting without additional comment (Attachment 2). Fish Water Bypass Update Mr. Eberle reported AEA anticipated removal of the estimated 40 - 60 cubic yards of material blocking the intake using hydraulic dredges through the ice. Proposals will be requested from three diving firms and the contract awarded by mid-March. Work is expected to begin March 22, 1993 and take about two weeks to complete. The total cost of the work is currently approximated at $125, 000. SVC Testing Mr. Burringame distributed a summary of SVC Testing (Attachment 3). Reporting that the SVC systems performed well during testing, Mr. Burlingame noted the only problem was with the capacitors. The SVC's have not been energized below zero degrees without experiencing capacitor problems. ABB is trying to determine if the problem is the capacitors or system harmonics. Testing of the SVC is expected to be completed by March 5, 1993. Mr. Burlingame reported two outages had occurred which fully tested the SVC system. While Bradley was operating at 115 megawatts, a 73 megawatt load trip islanded the Kenai, splitting the Kenai into two islands. The SVC operated at 64 hertz and the voltage remained solid until the Kenai blacked out. Mr. Burlingame noted that the present SVC configuration did not allow the Kenai to be picked up while black, however, the configuration was being changed. During the second outage, both Bradley Lake units were synchronized dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 5 of 13 on line tee sper. A synch-check relay closed the units in, causing a 90 er swing on the Kenai. The SVC dampened the severe voltage ne ut i its ceiling of 70 megavars for five seconds. Air Crash Accident 10. 11. Reporting on the February 20, 1993 South Central Air plane crash at the Bradley Lake Project, Mr. Sieczkowski informed the Committee that the air craft experienced difficulty upon takeoff from the Project airstrip. Larry Wolf, John Zidalis and his wife Gail, and their grandson were in the plane. The plane clipped the fence at the end of the runway and crashed, nose down, into the tidal flats. The pilot, Larry, John and Gail received multiple injuries, however all are recovering. The grandson was uninjured. Anticipated recovery time for both Larry and John is expected to be about two months. Mr. Sieczkowski noted that Richard Turner has assumed John Zidalis's responsibilities at the Project site and Dave Eberle is filling in for Larry Wolf. The cause of the accident is currently being investigated by the FAA and NTSB. REVIEW OF PROJECT STATUS Mr. Eberle reported that problems with the Bradley Lake governors (AGC) are being worked on. ABB is investigating the problem with the SVC capacitors. ABB suspects the problem may be caused by a manufacturing defect and expects that, when identified, the faulty capacitors will be replaced. Eight proposals have been accepted by AEA for the contaminated soil cleanup work. Bids are expected from the proposers by mid-March. Mr. Eberle noted that the capacitance rating of the existing CEA breaker at the Soldotna Substation was not high enough and that AEA was purchasing a new breaker to replace it. Installation of the new breaker is expected to be completed by the end of July 1993. IB r Negotiation Mr. Sieczkowski reported the IBEW made an initial proposal to AEA to which AEA provided a counter proposal. The negotiations broke down and the IBEW issued a complaint of unfair labor practice. AEA is preparing another counter proposal and will be meeting with the IBEW on March 22, 1993. OLD BUSINESS dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 6 of 13 ost wo Reserve/Under Frequency Load Shedding Update r. Lovas reported that the Intertie Operating Committee had received a load shedding schedule recommendation. The proposal included recommendations for additional work and investigation by the ASCC Reliability Criteria Committee (or some other group). The current proposed load shedding schedule is subject to action on or before March 19, 1993. If approved, the new schedule will go into effect within 60 days. The ASCC is focusing on defining various aspects of spin and spinning resources (i.e., quality, character, distribution and location of spinning resources). The Reliability Criteria Committee is currently compiling utility input regarding the spinning reserve and operating reserve issues. Bradley Scheduling vs. Spin Requirement Mr. Saxton stated that, with the exception of AML&P, neither the utilities or AEA had submitted any comments regarding spin requirements. Mr. Lovas noted that CEA had agreed to carry additional spin on behalf of SES and MEA (and HEA) to cover the portion attributable to each utility until February 1, 1993. It was clarified that CEA was no longer covering that portion of spin. Mr. Stahr stated that the utilities still had a spin obligation and recommended that the BPMC consider whether AEA had a spin obligation. Mr. Saxton pointed out that both issues needed to be addressed, stating that the only binding spin requirement was in the Intertie Operating Agreement. Mr. Lovas stated that the RCC was investigating system technical requirements and representative shares of the utilities, but it had not discussed the issue of AEA spin obligation. In response to Mr. Kelly, Mr. Lovas confirmed that the issue of utility spin obligations and share proportions ( allocation of spin responsibilities) could be addressed by the RCC. However, Mr. Lovas felt that determining any AEA spin obligation was beyond the authority of the RCC. Mr. Kelly cautioned against allowing the issue to be dropped. Mr. Saxton stated it was his understanding from a previous BPMC meeting that the utilities were to submit written comments on the spin requirements to him. Mr. Stahr observed that, at some point, the utilities were going to have to find a consensus solution, rather than a solution favorable to an individual utility. Mr. Kelly suggested that the dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 7 of 13 Wy Cc. D. E. uti review the AML&P comments and either agree with them or their own comments. Mr. Petrie stated AEA will provide comments on the spin requirement issue to Mr. Saxton. Mr. Stahr will distribute AML&P's previous comments to the utilities for reference and recommended that all utility responses be forwarded to Mr. Saxton. Mr. Petrie, acting as Chairman, directed the utilities to submit responses to Mr. Saxton no later than March 30, 1993.! Additionally, Mr. Kelly recommended that the utilities send each other a copy of their response. Fritz Creek Segment Funding Mr. Petrie reported the Energy Authority bond counsel and accountant were researching methods to restructure money within the bond issue to cover HEA's acceleration cost for the Fritz Creek transmission line segment. Mr. Petrie stated that AEA expected to be able to make a recommendation to the Committee at its next meeting. Mr. Saxton requested that AEA forward its findings to him. Mr. Petrie confirmed that the information and resulting recommendations would be forwarded. Mr. Saxton asked if HEA had developed any alternative proposals in case AEA's efforts were unsuccessful. Reiterating HEA's position presented by Mr. Story at the January 14, 1993 BPMC meeting, Mr. Fair stated it (funding of the Fritz Creek line costs) was not HEA's problem. Mr. Fair noted that it was an obligation of the Project and that three financing options had been provided in the Transmission Agreement. Mr. Fair stated that HEA was not responsible to independently resolve the problem. Fish Water Bypass Update This item was previously discussed under Item 10, Review of Project Status. Section 31 Costs This item refers to funding of the Fritz Creek Segment previously discussed under Item 11 C. Agreements Discussion | In the temporary absence of the Committee Chairman and in the absence of the Vice Chairman, the Committee Secretary, Mr. Brent Petrie, served as Acting Chairman. dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 8 of 13 AY) of List of Agreements r. Saxton stated that no comments had been received on the list of railbelt agreements distributed at the last Committee meeting. Mr. Petrie directed the utilities to submit revisions of the list to Tom Lovas. Master Agreement The Committee continued discussion of the master agreement concept started under Item 8., Agreements Subcommittee Report, Agreements Discussion. Mr. Saxton stated that his memorandum outlined the least intrusive way to accomplish transfer of the BPMC to the central role without throwing away the work already done on the agreements. Mr. Petrie reiterated his earlier request for more time to review the proposal, stating that AEA was not prepared to vote on the recommendation. AEA wanted, however, to pursue closure of the current agreements. Mr. Petrie stated that if the agreements could not be signed, AEA would need to develop an interim memorandum of understanding with HEA. Mr. Saxton stated, according to the Power Sales Agreement, the BPMC was given the authority to operate and maintain the Project. Mr. Saxton further stated, at question was the right of AEA to independently contract with the utilities. Mr. Saxton explained that his recommendation ensured that both the BPMC and AEA agreed, adding that neither had the right to act independently. Mr. Saxton clarified that the proposed master agreement would relate to both past and future agreements (excluding power sales, services and transmission agreements). Mr. Fair expressed concern over the potential delay of completing the Substation Maintenance Agreement. Mr. Fair noted that HEA had a temporary Transmission Maintenance Agreement but no Substation Maintenance Agreement. Mr. Sieczkowski and Mr. Fair agreed that, a temporary substation agreement was needed in the absence of a final agreement. Mr. Saxton contended that the creation of a master agreement would not produce any more substantial delays, citing the process had already taken about one year.2 Mr. Fair requested direction from the Committee on whether HEA should delay signing the current agreements. Mr. Stahr recommended that the established process continue and all agreements be done the same way and all modified the 2 Chairman Highers returned to the meeting. dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 9 of 13 sage. It was the understanding of Mssrs. Petrie and Fair that the rs of Agreements Subcommittee were ready to approve the anes W agreements for signature. Mr. Saxton disagreed, stating his understanding was that the members of the Subcommittee had not reached a consensus favorable to signing the present agreements. Mr. Sieczkowski stated that prior to Mr. Saxton's memorandum, all final comments had been incorporated and the agreements were recommended for signature and, in fact, were ready to sign. In response to Mr. Kelly, Mr. Saxton stated that the BPMC had the ability to contract directly, however, that it would result in disadvantages as well as advantages. Mr. Fair commented that he did not disagree with the proposed master agreement and even supported the concept. Noting that HEA now had SVC equipment installed at its substations, Mr. Fair added that any further delay finalizing the agreements created a practical problem for HEA. Mr. Saxton pointed out that, even though the agreements were ready to sign, the agreements and resulting budgets needed to be approved by the BPMC. Mr. Saxton stated that the development of a master agreement could be accomplished within two or three days and would not cause a significant delay. Mr. Kelly asked what would happen if the Energy Authority ceased to exist and how that would affect the Project under the proposed master agreement. Mr. Saxton explained that the agreements would be composed of three parties: the BPMC, the Energy Authority, and the individual utility, and to accommodate for loss of the Energy Authority would be more complex than the current proposed master agreement. Mr. Eberle suggested that the Committee execute the current pending agreements with a provision that the agreements be subject to the proposed master agreement. Mr. Kelly concurred, recommending that a clause be included in the pending agreements recognizing the authority of the master agreement and that the master agreement address the possible disappearance of the Energy Authority or a change in BPMC policy. Mr. Saxton proposed CEA, HEA and ABA sign a letter of agreement subjecting all utility operating agreements to a master agreement which would allow the current process to continue and pending agreements to be signed. Mssrs. Petrie, Fair and Highers preferred that a clause be included in the pending agreements rather than a separate letter agreement. In accordance with the consensus of the dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 10 of 13 ittee, Mr. Saxton will draft and distribute the clause to the utilities a few days. 12. ys BUSINESS A. Revised Scheduling & Allocation Procedures Mr. Sieczkowski reported that the Operation & Dispatch Subcommittee recommended adoption of the revised Scheduling & Allocation Procedures. Mr. Kelly moved to approve the revised procedures. Seconded by Mr. Petrie, the revised Scheduling & Allocation Procedures were ved by unanimous role vi er minor corrections were noted (Action 93-165). B. Operations Fund Contingency Resolution Mr. Saxton deferred discussion of this item to the next regular Committee meeting. Cc. Refinancing Bradley Lake Bonds Chairman Highers noted a memorandum regarding possible refinancing had been sent to the Committee by Mr. Petrie (Attachment 4). Mr. Petrie informed the Committee that AEA had received three bond refunding proposals, noting that two were later withdrawn. The remaining proposal, submitted by Nuveen, specifically addressed the portion of the bond funds allocable to AML&P and the City of Seward. Mr. Petrie noted that, due to anticipated changes in the tax laws, there was only a limited amount of time to complete the bond refunding transaction. Addressing the Committee, Mr. Seagraves explained that private activity bonds cannot be typically advance refunded, however under the current tax law, the portion of the bond funds attributable to municipal entities (i.e., AML&P and Seward) could be refunded. Referring to the Nuveen proposal, Mr. Seagraves noted a calculated savings of $3,000,000 (under present market conditions). Mr. Wohlforth relayed that treasury regulations amended last year allowed portions of bond fundings to be allocated for different purposes. The regulations also state that governmental purpose (not private) bonds may be advance refunded. Therefore, those portions of the Bradley dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 11 of 13 boric qualified as government purpose were eligible for refunding. code er, the regulation that allows advance refunding of the bond will py 2» end with new treasury regulations effective July 1, 1993. Mr. Wohlforth stated his firm was confident that the municipal portions of the Bradley bonds could be refunded under the current regulations and would survive any Treasury scrutiny. Mr. Kelly asked if the bond refunding could be insured against a later (retroactive) determination of tax liability. Mr. Wohlforth explained the bond insurer does not insure for legal risk (only economic). Mr. Wohlforth stated that any potential problem would become evident prior to the bond closing and expressed confidence in the tax analysis. Mr. Seagraves, citing the Daily Bond Buyer, stated that the only post closing, retroactive tax liability decisions occurred in obvious fraudulent cases. Mr. Klinkner stated that the tax analysis was innovative and within the law, however, the law was expected to change to disallow this type of transaction. Mr. Lovas questioned whether the analysis addressed the receipt of the savings produced by the refunding by private participants. It was Mr. Wohlforth's belief that the effect of the refunding would not influence any tax liability determination. Chairman Highers stated that investigations by CEA indicated a lack of consensus regarding the interpretation of current Treasury regulations. Mr. Seagraves noted that, as a general rule, a three percent savings guideline is applied when evaluating the cost effectiveness of refunding. It was clarified that all expenses related to the bond sale could be capitalized. In response to inquiry by Mr. Lovas, Mr. Seagraves indicated that a simultaneous series of bonds could be issued to provide for additional project costs (i.e., HEA acceleration costs for the Fritz Creek transmission line). Mr. Seagraves estimated that the preliminary bond sale efforts would cost approximately $15,000 and that the majority of the associated costs would not be incurred until the final decision is made just before the sale. It was noted that the utilities must first unanimously agree to the bond sale. Mr. Petrie informed the Committee that a letter of intent to issue bonds was required by the State sixty days in advance of the sale. Mr. Petrie anticipated minimal legal costs associated with the preliminary effort. Chairman Highers expressed reservations committing to the bond sale. Mr. Stahr noted that what he estimated to be an annual saving of dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 12 of 13 ost might not provide sufficient incentive to take even a small risk. trie recommended that the Committee approve only the preliminary work and defer the final decision. Mr. Wohlforth noted that the next opportunity to refinance (after July 1, 1993) was not until 1999, when the bonds were callable. Mr. Seagraves cautioned that, as in any bond sale, market conditions were subject to change. Addressing tax liability, Mr. Wohlforth stated that if the proposed refunding received an unfavorable tax determination, it would not effect the previous bonds. Mr. Seagraves added that application of a retroactive tax was highly unlikely, however, if, in a hypothetical extreme case, it did occur, the bond holders would sue. Mr. Seagraves explained that the burden became the bond holders and that the utilities were only obligated to pay the debt service originally agreed to. Mr. Seagraves informed the Committee that the bonds had close by July 1, 1993 and that preparation for the bond sale should by complete by June 1, 1993. If the notice of intent to issue bonds was given within the next few days, Mr. Seagraves stated the bond sale could take place as early as the first week of May, or any time favorable between then and July 1, 1993. Mr. Stahr stated that AML&P counsel was conservative and hesitant to proceed without an IRS opinion, however, AML&P would agree to proceed with limited preliminary steps. Mr. Kelly motioned that AEA ive n to the Legislature of intent to issue bond. The moti nd he following role call vote: City of Seward Yes vi ka Electric A ‘atin Y, h ic Association Ye Homer Electric Association Yes Golden Valley Electric Association Yes Anchorage Municipal Light & Power Abstain En Authorii Y Action 93-1 Mr. Kelly motioned that the BPMC reimburse costs incurred to investigate the Bradley Lake bond refunding not to exceed $25,000.3 3 Costs include AEA bond counsel and AML&P legal counsel. dburger\word\minutes\pmc\03-93 BPMC Meeting Minutes March 3, 1993 Page 13 of 13 13. | COMMUNICATIONS A. Schedule Next Meeting March 30, 1993 9:00 a.m. via Teleconference The teleconference will address approval of the budget and the Bradley bond refunding. Mr. Burlingame noted that the Committee would need to meet in April to discuss release of the 90 mig interim operating restriction. Mr. Stahr Stahr motioned that th Dispatch Subcommit hi increase the project ou 120 megaw rt r min riate level onl onsen. f the Subcommittee. The motion nd Mr. Kell wa Vi i 1 vote (Action 93-1 Mr. Ritchey requested approval of attorney legal expenses for the month of January 1993. Mr. Kelly —_ = Committee approve the expenses. Secon Mr. hey, th w TOV n: us rol vote (Action 93-169). 14. ADJOURNMENT With no further business before the Committee, the meeting adjourned at 1:05 p.m. David L. Highers, Chairman Attest: oa Brent N. Petrie, Secretary dburger\word\minutes\pmc\03-93 ov bass ede 6460 YVUId ALEK WINE ATTACHMENT 1 ATER WYNNE ne HEWITT Portland, Oregon 97201-6618 (503) 226-1198 DODSON Fax (303) 226-0079 & SKERRITT ATTORNEYS AT LAW FACSIMILE TRANSMITTAL 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. DATE: 16) 2.19) ee TO: ee ee — ee Ee CITY/STATE: ES FAX NUMBER: OFFICE NUMBER: FROM: -Ron Saxton 0 DOCUMENT : Memo _re: Master Operating Agreement Outline _ PAGES (INCL. COVER) 6 USAGE TIME CLIENT NUMBER: _53844-0000 Fax_No, Office No. Dave Highers, Tom Lovas, CRA, Anchorage, AK 907/562-0027 907/563-7494 Ken Ritchey, MBA, Palmer, AK 907/745-9368 907/745-3231 Paul Diener, City of Seward, Seward, AK 907/224-3248 907/224-3331 Norm Story, HBA, Homer, AK 907/235-3313 907/235-8167 Mike Kelly, GVEA, Fairbanks, AK 907/451-5633 907/452-1151 Tom Stahr, ML&P, Anchorage, AK 907/263-5204 907/263-5201 Ro: D Brent Petrie, tan Sieczkowski;.~BA, Anchorage ——907/561-8584 907/561~7877 Ris BPMC. fax 03/02/93 11:01 G50" 226 0079 ATER WYNNE 007/007 ATER WYNNE BPMC March 2, 1993 Page 5 6. Payment, Accounts, Records and Audits, Extraordinary Maintenance, Insurance, Indemnity, Uncontrollable Forces and other "boiler plate" provisions would be part of the Master Operating Agreement. 7. Listing of ABA Major Equipment (Exhibit B). The exhibit to the Master Operating Agreement would contain a similar list of equipment. f 8B ake P O&M A ts. The following is a list of agreements between AEA and individual Bradley Lake participants which could be included in a "Master Operating Agreement". l. Dispatch Agreement between AEA and CEA. x Maintenance Agreement between AEA and Maintenance Contractor. 3. Transmission Facilities Maintenance Agreement between AEA and AEG&T. 4. Facilities Interconnected Dispatch Agreement between AEA and HEA. SF Communications Equipment Agreement between AEA and DIVCOM. 6. Static VAR Compensator Systems at Daves Creek and Soldotna Maintenance Agreement between AEA and CEA, 7. Operating Agreement with Bradley Lake contract operator. Distribution: Paul Diener, Seward Ken Ritchey, MEA Dave Highers, CEA Norm Story, HEA Mike Kelly, GVEA Tom Stahr, ML&P Ron Garzini, AEA Brent Petrie, AEA Stan Sieczkowski, AEA LGINS4igh.doo 03/02/93 =11:00 350% 226 0079 ATER WYNNE 008/007 ATER WYNNE BPMC March 2, 1993 Page 4 b. Budget Preparation. Unless otherwise agreed, all contractors will be subject to the same requirements regarding budget submission and subsequent approval process by the BPMC (and AEA). c. Invoice and Payment. Standard procedures for invoices and payments of contractor costs will be included in the Master Operating Agreement. d. Dispute Resolution. Consistent with BPMC description above. e. Insurance. The base agreement would contain guidelines but leave details to each contractor's exhibit. £. In F eure. Same for all contractors. 6. Contractor Exhibit. Each Contractor for the Project would execute a detailed exhibit with AEA and be obligated to the terms and conditions affecting Contractors included in the Master Operating Agreement. The specific duties relating to the work performed by the Contractor would be contained in the exhibit. All exhibits would be subject to BPMC approval prior to execution or amendment. An Example (Outline) of the contents of an exhibit based upon the current AEA-Chugach O&M Agreement for Daves Creek follows: 1. Parties to Exhibit. AEA and Chugach. ia Definitions. The exhibit would contain definitions specifically related to the exhibit (Party, SVC, SVC Facilities). 3. Term of Exhibit. Separate Term and Termination provision. as Maintenance of Facilities. Similar to existing O&M Agreement. 5. Maintenance Plan, Schedule and Budget. Section would only include provisions that are unique to the exhibit. 03/02/93 11:00 507 226 0079 ATER WYNNE @o05/007 ATER WYNNE BPMC March 2, 1993 Page 3 be included in separate exhibits to the agreement and executed by the AEA and the individual contractor. 3. Term. The term of the Master Operating Agreement would extend until the Bradley Lake Power Sales Agreement terminates. Each of the exhibits signed by AEA and a Contractor would state the term of the exhibit based upon the particular circumstances. 4. Righ Obli s. a. Exhibit Approval. BPMC approval would be required before any exhibit (or amendment thereto) detailing the duties of a contractor is executed by the AEA. b. Budget Approval. All plans and budgets would be submitted to the AEA and the BPMC for approval. The AEA and the individual contractor would be responsible for the preparation of the initial submission of plans and budgets. C. AEA Rights. The relationships of the BPMC and the AEA would continue as provided in the Power Sales Agreement. (The limitations on BPMC actions consistent with AEA's legal responsibilities and obligations as a State agency and FERC licensee would be preserved.) Specific procedural requirements (time for approval, payment of obligations, contractor performance) would be included in the Master Operating Agreement with the right of the AEA to proceed in the event of disagreement. d. Dispute Resolution. All disputes would be subject to mediation for a limited period prior to invoking arbitration or litigation. The BPMC would be responsible for setting up mediation and would be a stated party to any mediation or arbitration. e. BPMC Status. The BPMC would sign the Agreement acting on behalf of all the Parties to the Power Sales Agreement. It would continue to act as a non-incorporated body without any separate legal status. 5. ntr ions. a. di a xr. Unless otherwise agreed, each of the contractors signing an exhibit will act as an independent contractor. RLS deren @oo03 008 u3-02/93 12:32 503 226 0079 ATER WYNNE _ =——_— — ATER WYNNE BPMC March 2, 1993 Page 2 purchasers of Bradley Lake power a direct participatory role in the management of the Project. The BPMC is "responsible for the management, Operation, maintenance, and improvement of the Project" to the extent such responsibilities are consistent with AEA's ownership of the Project. That responsibility can be handled through direct BPMC participation in contract administration, or by making the BPMC the contracting entity for Bradley Lake activities. In either case, the AEA, as a State agency, owner and holder of the FERC license, must retain control of matters affecting its obligations under State law and the FERC license. The existing contracts between AEA and its O&M contractors place the BPMC only in a budget review mode, after AEA and the contractor have reviewed and agreed to the essentials for the following year. The issues that count most to BPMC members are schedule and cost. If the BPMC is involved after the fact, the matters most important to them have already been decided. PROPOSAL The easiest way to remedy the lack of BPMC involvement is to revise the format of the contracts to make the BPMC's role central in the planning and budgeting process. The AEA would continue its role as contractor, but would use the BPMC (or a subcommittee) to review the schedules, plans and budgets submitted by the contractor. For all matters excepting those where AEA's legal responsibilities are paramount, the BPMC's decision would control. The advantage of this type of revision is that it would require the least change in BPMC/AEA relationships. The following is an outline of the key terms of such an Operating Master Agreement: a7 f of a L P A 2: ‘. i Parties. AEA, BPMC (acting on behalf of the Bradley Lake Power Sales Agreement Parties) and Contractors for O&M of the Bradley Lake Project and related transmission and communication facilities. 2. Nature of Agreement. All Bradley Lake subcontracting would be subject to the same planning and budgetary provisions as provided in the basic agreement. Specific responsibilities would RLSMiiderem ; 002/006 03/02/93 11:31 SOX 276 0079 ATER WYNNE = See eee ATER WYNNE Suite 1800 222 SW. Cohumbia HEWITT Portland, Oregon 97201-6618 (503) 226-1191 DODSON Fax (503) 226-0079 & SKERRITT ATTORNEYS AT LAW VIA FACSIMILE MEMORANDUM TO; BPMC FROM: Ron Saxton and Tom Lovas DATE: March 2, 1993 RE: Bradley Lake Project Management Committee Master Operating Agreement Outline - Alternatives For Bradley Lake BPMC Involvement In Project Management Consistent with the Project Power Sales Agreement rc t e . At the last BPMC meeting, Ron was given the assignment to develop a proposal for clarifying the role of the BPMC in the various Bradley operating agreements. The assignment was to draft these agreements in a way that recognized the BPMC's role in decisions about operating matters. Tom Lovas assisted Ron in the development of the following proposal. In gummary, our proposel is to keep the individual agreements between the AEA and each contractor, but to make all such agreements subject to terms in a Master Operating Agreement to which the BPMC is a party. This approach provides protection of the BPMC concerns, while still allowing individual arrangements between AEA and individual contractors. BACKGROUND The Bradley Project Management Committee was established in the Bradley Lake Project Power Sales Agreement to provide the RLS 8demem Seattle, Washington Washington, DC. San Francisca, California Affiliated offices tn (206) 623-4711 (202) 785-0303 (415) 421-4143 Anchorage, Fairbanks Fax (206) 467-8406 Pax (202) 783-8676 Fax (415) 989-1263 and Juneau, Alaska — 001/008 vo Ueeds ii:d1 503 226 0079 ATER WYNNE SS eo = ATER WYNNE coun 222 5.W. Cohumbis HEWITT Portland, Oregon 97201-6618 (503) 226-1191 DODSON Fax (503) 226-0079 ATTORNEYS AT LAW FACSIMILE TRANSMITTAL 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. DATE: a SS TO: SEE BELOW Ss CITY/STATE: ON ————————————————————————— FAX NUMBER: OFFICE NUMBER: FROM: SS ——————————————————— DOCUMENT : Memo re: Master Operating Agreement Outline _ PAGES (INCL. COVER)_6 | USAGE TIME CLIENT NUMBER: _53844-0000 Fax No. Office No. Dave Highers, Tom Lovas, CEA, Anchorage, AK 907/562-0027 907/563-7494 Ken Ritchey, MEA, Palmer, AK 907/745-9368 907/745-3231 Paul Diener, City of Seward, Seward, AK 907/224-3248 907/224-3331 Norm Story, HEA, Homer, AK 907/235-3313 907/235-8167 Mike Kelly, GVEA, Fairbanks, AK 907/451-5633 907/452-1151 Tom Stahr, ML&P, Anchorage, AK 907/263-5204 907/263-5201 Ron irent Petrie, tan Sieczkowski; ABA, Anchorage —— 907/561-8584 907/561~7877 RLS\ BPMC. fax ATTACHMENT 2 BRADLEY LAKE OPERATION AND DISPATCH SUBCOMMITTEE SUMMARY OF MEETING JANUARY 28, 1993 CORRESPONDENCE Bradley Draw-down, January 8, 1993 Update on Fish Water Bypass Intake Obstruction, January 19, 1993 OPERATIONS Participant subcommittee voting rights were discussed by the Subcommittee. It was noted that questions regarding voting rights had been previously raised at the BPMC level and that Mr. Saxton was investigating the issue. The Chairman will request Mr. Saxton provide written procedural guidelines for the subcommittees. It was reported that a second dive inspection of the fish water bypass intake area disclosed approximately 40 yards of material covering the intake. Because the size of the material is small (generally under 6 inches), the debris could potentially be vacuumed from the intake area. The work will be done in April at a proposed reservoir elevation of 1108' with minimal impact to the scheduling utilities. A reservoir draw-down to the 1068' level would not be required. The utilities will be requested to use an additional 9,000 acre feet of water over current schedule in order to reach the 1108' reservoir level by April 1, 1993. Responsibility for the remaining DECnet installation work was discussed by the Subcommittee. AEA recommended that the DECnet be installed and maintained by the utilities using it. GVEA and AML&P will discuss AEA's recommendation. It was noted that, ultimately, the issue may need to be re-addressed by the TCS and that any additional expenses to complete the task would need to be approved by the BPMC. ACTION ITEMS Transient Stability Analysis Study: The Subcommittee approved recommendation of a transient stability analysis study to be done by Stone & Webster Engineering Corporation for an amount not to exceed $10,000. The study is needed in order to determine potential transient effects in the tunnel in the event of a sudden needle closure at a reservoir elevation below 1080'. ATTACHMENT 3 CHUGACH ELECTRIC ASSOCIATION. INC. Anchorage, Alaska March 3, 1993 TO: Bradley Lake Project Management Committee FROM: David W. Burlingame, Manager, Power el SUBJECT: Bradley Lake SVC Testing On February 22, 1993 while setting up the system to perform testing for the SVCs, the Kenai peninsula suffered an outage to approximately 60% of the HEA consumers for approximately 1-1/2 minutes and 12,000 Chugach and Golden Valley consumers for 3 minutes. The following is a synopsis of the outage and the follow-up performed since the event: Bradley Lake was operating at 115 MW Bernice Lake unit 3 was on-line at 23 MW Exports as measured at Daves Creek were 68 MW and 73 MW at Quartz Creek. Quartz Creek breaker to Anchorage tripped on a power swing above 80 MW, islanding the Kenai. This relay was originally set to protect the Kenai for an overexport condition. Immediately following the Kenai separation, the Bernice Lake 115/69 KV transformer was tripped by the transformer differentials, islanding the Bernice Lake Power Plant and Golden Valley and Chugach shed consumer load at 59.3 Hz. Bradley Lake islanded by itself, one unit was placed in deflector by Chugach SCADA upon detection of islanding. Chugach and GVEA restored their consumers but CEA but did not realize the system was separated in three places. The Dispatcher was in contact with the Bradley power plant and the operator did not mention his frequency of 64 Hz. Approximately 4 minutes later, both Bradley Lake units tripped on overfregquency, blacking out the Kenai. Bernice Lake stayed on-line since it was separated from the rest of the Kenai and no service interruptions were experienced by Tesoro or other industrials. Following blackout of the Kenai, HEA load was picked up by closing in from Anchorage. It was 5 minutes before a Bradley Lake unit was synchronized to the system. The overcurrent relay at Quartz Creek has been reset and will no longer trip for power swings. A Chugach SCADA change was made to place a unit in deflector after checking for a gas turbine status and also to block the Bradley units from raise pulses after the needles are fully open. There is still a problem of not having a reliable, fast response frequency source on the Kenai for Bradley Lake, should Bradley become islanded from Bernice. We are working with the AEA to install a frequency source into our SCADA computer via microwave to eliminate this problem. Bradley Lake has been tested up to its full power output of 115 MW. The SVC systems have performed very well, although some problems have been experienced with Bradley Lake. On March 2, 1993 the Bradley units were allowed to synchronize onto the system by a synch-check relay while on an overspeed condition @nits were at 61.25 Hz). The closing caused a large power swing and voltage oscillations on the Kenai. AEA is investigating the problem. The only remaining tests are the Kenai islanding and possible staged fault tests. Testing should be completed by March 6, 1993. ATTACHMENT 4 State of Alaska DN Walter J. Hickel, Governor Alaska Energy Authority A Public Corporation MEMORANDUM VIA FAX AND REGULAR MAIL TO: Bradley Lake Project Management Committee Mr. Ron Saxton, Ater Wynne Hewitt Dodson and Skerritt Mr. Jim Seagraves, John Nuveen & Company Mr. Eric Wohlforth, Wohlforth Argetsinger Johnson & Brecht FROM: Brent N. Petrie i NM. ( ten Alaska Energy Authority SUBJECT: Partial Refunding of Bradley Lake Bonds DATE: February 24, 1993 Attached is an information item on the possibility of refinancing a limited portion of the outstanding Bradley Lake bonds. Bradley Lake Project Management Committee Chairman Dave Highers has agreed to place this item on the agenda for March 3. We can discuss it further at that time but will need an agreement from the BPMC on whether or not to proceed soon since these bonds can be refunded only until June 30, 1993. There is also a risk that any investment of time would be lost if interest rates move up half a point from where they are today (February 24, 1993). See you on March 3. BP:tg Attachment as stated Distribution: Mr. David Highers, Chairman, BPMC, Chugach Electric Association Mr. Norm Story, Vice Chair BPMC, Homer Electric Association Mr. Ken Ritchey, Matanuska Electric Association Mr. Paul Diener, City of Seward Mr. Michael Kelly, Golden Valley Electric Association Mr. Thomas Stahr, Municipal Light and Power PO. Box 190869 701 EastTudor Road Anchorage, Alaska 99519-0869 (907) 561-7877 Fax: (907) 561-8584 Refunding of Bradley Lake Bonds Information Item Over the last several months, the Energy Authority has received three proposals from underwriting firms for refunding a portion of the Bradley Lake bonds. The first two proposals were submitted to us by Merrill Lynch and by Dean Witter in Fall 1992. Both proposals were quickly withdrawn, however, once the firms discovered that the Bradley Lake bonds are "private activity" bonds which are not normally eligible for advance refunding. The most recent proposal is from Nuveen and is based on certain "multi-purpose allocation rules" that expire July 1, 1993. Nuveen believes, and Eric Wohlforth agrees, that these rules allow the Authority to refund Bradley Lake bonds that are properly allocable to Anchorage ML&P and Seward, that roughly $28 million in callable bonds can be so allocated, and that all savings realized from the refunding would be melded under terms of the power purchase contracts to reduce costs to all purchasers. The most recent estimates provided by Nuveen (2/24/93) are as follows: Net savings in debt service would be about $120,000 per year. Total net savings over the life of the bonds would be 3.6 million. The present value of savings over the life of the bonds would be $1.8 million. The present value of savings as a percent of the bonds being refunded would be 6.5%. This assumes of course that interest rates at the time of refunding are the same as they were on 2/24/93. All of these savings are projected as net of financing costs including underwriter’s discount and issuance expenses. If interest rates increased by about 50 basis points from the levels reached on 2/24/93, no savings would be realized. The Authority has also heard that a refunding proposal has been prepared by Smith Barney and presented to Chugach. However, we have not yet seen it. In order for the Authority to proceed with one of these refunding plans, authorization from the Bradley PMC will be necessary. Expenses would be incurred by Authority staff, bond counsel, and financial advisor that would have to be paid directly by the utilities if the refunding is prepared but not implemented due to future increases in interest rates. If the refunding occurs, the expenses would still have to be paid by the utilities but can presumably be capitalized. In addition, according to Nuveen’s lawyer, a certificate of agreement by the Bradley PMC (to the effect that the refunding will not create an increased burden or obligation) will be necessary in accordance with Section 11 of the Power Sales Agreement. Prepared 2/24/93 DRE ab ‘Bh ADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES March 30, 1993 1. CALL TO ORDER Vice Chairman Story called the Bradley Lake Hydroelectric Project Management Committee to order at 9:05 a.m. via teleconference, to conduct the business of the Committee per the agenda and the public notice. 2. ROLL CALL Alaska Energy Authority Brent N. Petrie, Designated Representative Chugach Electric Association Eugene Bjornstad, Alternate Representative Golden Valley Electric Association Mike Kelly, Designated 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 Tom Stahr, Designated Representative Others Present: Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt Tom Lovas, Chugach Electric Association Joe Griffith, Chugach Electric Association dburger\word\minutes\pmc\03-93-2 BPMC Teleconference Meeting Minutes March 30, 1993 Page 2 of 5 Ronald a. Garzini, Alaska Energy Authority Dayid\R. Eberle, Alaska Energy Authority Imes, Alaska Energy Authority poet Burger, Alaska Energy Authority 3. PUBLIC COMMENT There were no public comments. 4. AGENDA COMMENTS No changes were made to the agenda. 5. OLD BUSINESS A. Bradley Bond Refunding Update A memorandum summarizing Bradley bond refunding costs was faxed to the Committee members (Attachment 1). Mr. Petrie reported AEA met with its financial advisor and bond counsel, the bond underwriters, Mr. Saxton and a utility representative, Mary Ann Pease of AML&P, via teleconference the preceding week. It was the consensus of the attorneys that the proposed Bradley bond refunding was "defendable before the IRS" and that it would be prudent to proceed with the refunding. Mr. Petrie stated some opinions still remain to be written and will be distributed upon completion. Mr. Petrie noted that, in today's market, the present value savings of the bond refunding proposal would be about 4%, or $1.3 million. Citing the minimal savings, Mr. Petrie stated AEA would not recommend the refunding proposal under the current market conditions. It was, however, the consensus of those participating in the bond refunding discussion that AEA and the purchasing utilities should continue preparations for the refunding with the intent of being ready to take advantage of optimal market conditions when they occur. Mr. Petrie informed the Committee that, of the $25,000 authorized by the Committee on March 3, 1993 to proceed with the initial refunding steps, $13,600 had been spent. Additional costs through May 1, 1993 are estimated to be $41,500. Trading, travel, underwriting, rating costs, etc. will be incurred after May 1. Mr. Saxton dburger\word\minutes\pmc\03-93-2 BPMC Teleconference Meeting Minutes March 30, 1993 Page 3 of 5 clarified that the refunding costs could be capitalized. Mr. Petrie eqthat, if the bond sale was not completed, the costs would be absorbed by the Committee. Mr. Bjornstad inquired if AML&P had made any determination regarding the refunding. Mr. Stahr reported that the Municipality's bond counsel was reviewing the proposal made by Mr. Eric Wohlforth, AEA bond counsel. Mr. Stahr could not predict when the Municipality would make its decision and reminded the Committee that the Municipality's bond counsel was not likely to support the refunding without substantial savings (well over $100,000). Mr. Bjornstad asked what the minimal savings requirement was in order to make the refunding effort worth while. Mr. Petrie stated that, generally, a 3% savings was considered worth while, however, because of additional administrative costs associated with the refunding, a higher return of savings was needed. AEA would recommend proceeding with the bond refunding at a 5% savings. Mr. Petrie estimated a cost to AEA of $30,000/year to administer the refunding. Mr. Stahr requested a minimal savings of $130,000 as qualification to proceed with the refunding. Mr. Story recommended postponing a decision until AML&P finished evaluating the proposal. Mr. Petrie stated that, in order to proceed with the refunding, a decision was needed by the middle of April, otherwise closure could not be made by June 30. Mr. Petrie suggested that the utilities update their financial information (form to be provided by AEA) while waiting for AML&P's decision. The information would be needed for a document review meeting scheduled April 13, 1993. It was the consensus of the Committee that continuing with the refunding would require a minimum savings of $130,000 and the approval of AML&P, and that, in the meantime, the Committee members would update the necessary financial information. In response to Mr. Stahr's question regarding the need for an engineer's report, Mr. Saxton stated that, according to Jim Seagraves, an engineer's report was not necessary. dburger\word\minutes\pmc\03-93-2 BPMC Teleconference Meeting Minutes March 30, 1993 Page 4 of 5 6. NEW BUSINESS A. ye Approval of Bradley Lake FY94 O&M Budget Referring to the budget materials previously distributed by AEA (Attachment 2), Mr. Ritchey noted that the budget summary on page one included debt service for the year. Mr. Ritchey explained that the total included both the debt service and operations costs (subtotaled). Previously, only operations costs were presented to the BPMC. It was noted that the operations budget (pages two and three) was broken down by categories of the power sales agreement. Mr. Ritchey stated that, although the budget was presented in a different format, the contents of the budget remained very similar to previous budgets. Pages four, five and six provide a comparison of the budget proposed by AEA and the Budget Subcommittee's recommended budget. Mr. Ritchey pointed out that $417,244 for AEA administrative overhead costs were not included in the budget recommended by the Subcommittee. Mr. Ritchey explained that the Subcommittee's budget recommendation was made without the participation of AEA. Mr. Ri mov BPM' mmii recommended total budget of $15,678,212! (which excludes AEA ministrative overhead costs). The motion nded b Mr. Diener, fail he following roll vote:2 City of Seward Yes Electric Association yi ne Chugach Electric Association es Homer Electric Association Yes Iden V: Electric Association Ye: ne Municipal Light & Power es Alaska Energy Authority Oo Mr. Garzini objected to the proposed budget, stating it would adversely affect the operation of the Project. Mr. Garzini informed the Committee that AEA would file the alternate IZ. ' Corrected from $15,678,213. 2 As established by the Committee Bylaws, adoption of a budget requires approval of AEA and four utilities with a combined project share of 51%. dburger\word\minutes\pmc\03-93-2 BPMC Teleconference Meeting Minutes March 30, 1993 Page 5 of 5 budget, which includes AEA administrative overhead costs, with face. Copies of the budget will be forwarded to the Fitie ge 7. A. Schedule Next Meeting Thursday, May 13, 1993 10:00 a.m. Chugach Electric Association 8. ADJOURNMENT The meeting adjourned at 9:45 a.m. David L. Highers, Chairman Attest: Brent N. Petrie, Secretary dburger\word\minutes\pmc\03-93-2 ao ‘Bh ADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING MINUTES April 16, 1993 1, CALL TO ORDER Vice Chairman Story called the Bradley Lake Hydroelectric Project Management Committee to order at 10:15 a.m. via teleconference, to conduct the business of the Committee per the agenda and the public notice. Chairman Highers directed the remainder of the meeting after telecommunications were reestablished. 2. ROLL CALL Alaska Energy Authority Ronald A. Garzini, Alternate Representative Chugach Electric Association David L. Highers, Designated Representative Golden Valley Electric Association Mike Kelly, Designated Representative City of Seward Absent Homer Electric Association Norm Story, Designated Representative Matanuska Electric Association Ken Ritchey, Designated Representative Municipal Light & Power Tom Stahr, Designated Representative Others Present: Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt Stanley E. Sieczkowski, Alaska Energy Authority dburger\word\minutes\pmc\03-93-2 BPMC Teleconference Meeting Minutes April 16, 1993 Page 2 of 3 Dick Emerman, Alaska Energy Authority Glori@\Manni, Alaska Energy Authority ene urger, Alaska Energy Authority ye ic Wohlforth, Wohlforth, Argetsinger, Johnson & Brecht Jim Seagraves, Nuveen Charles E. McKee 35 PUBLIC COMMENT harles E. McKee Mr. McKee, public member, spoke to the Committee regarding currency and financing of Railbelt Intertie and Bradley Lake Bonds. Mr. McKee referred the Committee to his case on file at the Ombudsman's office and requested the Committee acknowledge his copyright to the original treasury seal. 4. AGENDA COMMENTS No change was made to the agenda. 5. OLD BUSINESS A. Bradley Bond Refunding Update Mr. Emerman noted there were two issues to consider regarding the proposed refunding: (1) the legality of the refunding, and (2) the ultimate savings to the utilities. Mr. Stahr advised the Committee that, because of unresolved legal issues, bond counsel of the Municipality of Anchorage recommended against Municipal Light & Power's participation in the bond refunding. Chairman Highers stated that Chugach Electric Association supported Municipal Light & Power's decision and polled the remaining utilities. Homer Electric Association, Golden Valley Electric Association and Matanuska Electric Association also supported the decision not to proceed with the refunding. The City of Seward was not present at the meeting. Chairman Highers invited additional comment. Hearing no comments, the Chairman declared the issue closed. dburger\word\minutes\pmc\03-93-2 BPMC Teleconference Meeting Minutes April 16, 1993 Page 3 of 3 6. COMMUNICATIONS A. Setied fe Next Meeting Venn Thursday, May 13, 1993 10:00 a.m. Chugach Electric Association a. ADJOURNMENT With no further business before the Committee, the meeting adjourned at 10:30 a.m. David L. Highers, Chairman Attest: Ronald A. Garzini, Alternate Representative dburger\word\minutes\pmc\03-93-2 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE APPROVED MEETING MINUTES January 14, 1993 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 Ronald A. Garzini, Alternate Representative Chugach Electric Association David L. Highers, Designated Representative and Chairman Golden Valley Electric Association Mike Kelly, Designated 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 Tom Stahr, Designated Representative Others Present: Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt David Burlingame, Chugach Electric Association John Cooley, Chugach Electric Association e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 2 of 13 Gene Bjornstad, Chugach Electric Association Tom Lovas, Chugach Electric Association Bob Hufman, AEG&T Dave Fair, Homer Electric Association Mike Yerkes, Homer Electric Association Doug Hall, Municipal Light & Power Moe Aslam, Municipal Light & Power Tim McConnell, Municipal Light & Power Bob Price, Municipal Light & Power Dave Calvert, City of Seward 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 Item 12. E, Authority Over Budget Revisions, was added to the agenda. 5, APPROVAL OF MINUTES - October 9, 1992 The minutes of the November 20, 1992 Bradley PMC were approved as submitted (Action 93-161)!. 6. TECHNICAL COORDINATING SUBCOMMITTEE REPORT Mr. Burlingame reported that the TCS had not met since the November Bradley PMC meeting. Mr. Burlingame noted that modifications had been made to the Woodward governor as a result of testing performed in November, and that efforts to resolve the unstable Kenai oscillation problem were in progress. 7. BUDGET SUBCOMMITTEE REPORT Mr. Ritchey informed the BPMC that the Budget Subcommittee would be requesting authorization to make changes to the Bradley O&M budget that were 1 To facilitate record keeping, commencing with calendar year 1993, the secretary will assign sequential numbers to all actions taken by the Bradley PMC in accordance with the Committee Bylaws (Article 14.1). e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 3 of 13 within ten percent of the budget (agenda item 12. E). Changes over ten percent of the budget would be brought before the Bradley PMC. The Budget Subcommittee is currently reviewing the proposed FY94 Bradley O&M Budget. The Subcommittee will be meeting again at the end of February and expects to have a budget ready to present to the Bradley PMC by the March meeting. The BPMC was reminded that the budget needed to be completed and adopted by the first of April. Mr. Ritchey noted that the Bradley PMC had been informed of an O&M budget surplus of $910,411 at the November 20, 1992 meeting. Mr. Ritchey explained that this amount included approximately $450,000 carried forward from FY92 to FY93. To avoid large swings in the utility payments from year to year, the Subcommittee plans to carry the remaining estimated $450,000 into FY94. Mr. Ritchey noted a letter sent by Ron Saxton to Ron Garzini requesting information regarding use of Bradley bond funds. In question is whether a portion of the remaining construction funds could be transferred to Section 31 to cover the HEA Fritz Creek transmission line construction cost. HEA's Fritz Creek transmission line construction costs are considered to be a utility expense and meet the criteria for use of Section 31 funds, however Section 31 funds have been depleted. Mr. Saxton noted that redirecting construction funds to Section 31 funds would not impact the financial obligation of the utilities or the Energy Authority. Mr. Garzini has forwarded the request to Eric Wohlforth, AEA bond counsel, for review and advisement. A. Bradley Lake Construction Cost Review To clarify any previous misunderstanding, Mr. Ritchey noted that the construction cost audit had been approved as a construction cost item and was not an O&M cost. Pending successful completion of reference checks, Metzler & Associates has been tentatively selected by the Subcommittee to perform the construction cost audit. Mr. Ritchey anticipated Metzler & Associates would begin the audit shortly after confirmation. B. FY93 Budget, AEA Administrative Costs Update No comments were made regarding this issue. Cc. Bradley Lake O&M Cost Audit Update e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 4 of 13 Mr. Ritchey reported that the O&M audit being performed by Parisena & Stromberg was more than half way complete. The Budget Subcommittee expects an audit report by February 2, 1993. 8. AGREEMENTS SUBCOMMITTEE REPORT Mr. Sieczkowski reported that changes to the Soldotna Substation Agreement (with HEA) were made at the December 11, 1992 Agreements Subcommittee teleconference meeting. Offering the assistance of the Bradley PMC, Chairman Highers asked if anything could be done to expedite the agreement negotiation process. Mr. Sieczkowski stated that the Subcommittee's comments had been incorporated and that no other issues remained to be resolved. Changes to the Transmission Line Maintenance Agreement made by the Subcommittee at a December 21, 1992 teleconference meeting have been incorporated. Additionally, new drafts of the Daves Creek and Soldotna SVC Facilities Maintenance Agreements were distributed for review on December 18, 1992. Comments are expected from the utilities by January 29, 1993. OPERATION & DISPATCH SUBCOMMITTEE REPORT A summary of the Operation & Dispatch Subcommittee meeting of January 7, 1993 was distributed to the PMC (Attachment 1). Mr. Wolf reported that the Subcommittee reviewed an operations report presented by AEA. Beginning with January 1993 information, the report (a summary of project generation statistics, reservoir hydrology data, and operations and maintenance events) will be distributed as an attachment to the Subcommittee meeting minutes. DECnet programming was discussed at the meeting. AEA requested AML&P and GVEA develop and implement their own DECnet programming. Updating his report given at the November 20, 1992 BPMC meeting on the progress of the annual maintenance, Mr. Wolf stated that no additional problems were discovered during completion of the maintenance work. However, due to insufficient time during the annual maintenance to repair a transformer nitrogen leak, a one day outage would be needed to perform the repair. Reservoir Draw-down Mr. Wolf reported on the blockage of the Bradley Lake fish water bypass intakes. Early in November, reduced flow was noted through one of the fish e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 5 of 13 water bypass valves. Suspecting a blockage, the operators unsuccessfully tried to clear the intake with a back flow of compressed air. During a visual inspection of the area on November 17, 1992, Mr. Wolf noted erosion of overburden and loose fill from the bank above the intakes and suspected that the material was migrating into the intake area. AEA contracted a diver to inspect the intakes on November 19, 1992, however, due to uncooperative weather conditions, the dive was not made until December 8, 1992. The diver reported finding large, smooth rocks, debris and silt. Discrepancies in the diver's report with known information raised some question as to the accuracy of this assessment. Mr. Wolf explained that there were no large, smooth rocks in the area, and stated that the diver's inspection was hindered by inability to see due to the high level of glacial silt in the water. Because of the discrepancies in the initial dive inspection report, AEA is arranging for a second dive inspection by another dive company utilizing hard hat (rather than scuba) gear. If the material causing the blockage can be easily removed, the divers will attempt to clear the intake area. Assessing the currently available information, Mr. Wolf stated that any remaining loose material above the intake area should be removed and the intakes cleaned and modified to avoid a repeat of the problem. In order to minimize the risk of damaging the intakes, Mr. Wolf anticipated that the reservoir would need to be lowered to 1068' to clean and modify the intakes. A request for an engineering proposal to provide a design for modification of the intakes and contract specifications for the removal of the overburden and cleaning and modification work was made to Stone & Webster Engineering the first week of January. The O&D Subcommittee was informed of the situation and discussed associated problems of operating the project at a reservoir level under 1080' at its January 7, 1993 meeting. Mr. Wolf stated that unknown tunnel transient effects could cause a problem when operating the project below 1080' and recommended a transient analysis study be performed. Mr. Wolf explained that, according to the design engineer, a sudden needle closure below this level could cause a vacuum and subsequent tunnel failure. Mr. Wolf noted that, barring a needle closure, the project is capable of generating 105 to 109 megawatts between the 1068' and 1080' reservoir level. Additional reservoir storage capacity between 1068' and 1080' is 18,734 acre-feet. In lieu of successful clearing of the intakes by the divers, Mr. Wolf outlined three options to clear and modify the intakes: Option I: At the current reservoir level, either on the ice or on floats, utilize a clam to clear the debris. The work would be done in 70' of water and includes a high risk of damaging the intakes. Modification of e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 6 of 13 the intakes would have to be done by divers. High repair costs are anticipated for this method. Option I: At a reservoir elevation of 1090', access the intake area from the adjacent bank using a hoe or clam. The work would be done in approximately 20' of water. Risk of damaging the intakes would be less, however, modification of the intakes would still have to be done by divers. Anticipated repair costs would be less than Option I. Option II: Lower the reservoir to 1068' to facilitate use of on-site equipment and perform work under dry conditions. Repair costs would be lower, however impact to the utilities schedule would be the highest. Mr. Wolf explained that the fish water bypass was a FERC license requirement. A water release of 40 cfs is required November through April and 100 cfs June through September. Under present conditions (at a reservoir elevation of 1136') the maximum obtainable release is 86 cfs. Release from the blocked intake is limited to a flow of 7 cfs. Mr. Wolf noted that favorable weather conditions could provide the necessary flow to meet the FERC requirement, however, if the requirement was not met, FERC could fine the project up to $10,000/day. Ultimately, the license could be revoked. The Committee elected to discuss agenda item 12. C., Reservoir Draw-down. Chairman Highers initiated the discussion stating that the draw-down would greatly impact CEA's maintenance schedule. Mr. Stahr questioned use of underwater camera equipment to evaluate the situation. Mr. Wolf explained that a camera would not be useful because the glacial silt prevented visibility. It was noted that sonar equipment could be effective under these conditions. Mr. Garzini recommended that the Operation & Dispatch Subcommittee continue to work on the problem until the technical options are defined. If differences develop which cannot be resolved at the Subcommittee level, Mr. Garzini suggested that a special Bradley PMC meeting be called at that time. Mr. Bjornstad reiterated that the problem particularly impacted CEA's maintenance schedule. Mr. Bjornstad requested an immediate second dive inspection and notification of the results to the utilities, stating that this information was critical to CEA's planning. Mr. Stahr asked if enough water could be pumped over the spillway to meet the FERC requirements. Mr. Wolf explained because the 100 cfs was measured down stream of the dam, some greater amount had to be released at the dam in e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 7 of 13 10. order to meet the requirement. Mr. Stahr expressed the need for an expedient assessment of the problem and requested that AEA keep the utilities informed of changes to the availability of Bradley generation. Warranty coverage of the problem and the possibility of design error were questioned. Mr. Eberle stated that assessment of those issues at this time would be premature because the cause of the problem was unknown. No determination had been made as to how the cost was to be handled (i.e. operation, or construction, or warranty). Chairman Highers concurred with Mr. Garzini's recommendation that the O&D Subcommittee continue to handle the problem. Mr. Wolf noted that the Energy Authority needed to be informed of the utilities' maintenance schedules in order to facilitate planning the maintenance needs of Bradley Lake. Chairman Highers added that maintenance at Bradley Lake should be a coordinated effort between the utilities and AEA to meet the utilities' needs as well. Referring to the January 7, 1993 O&D Subcommittee meeting, Mr. Wolf stated that revisions to the Allocation & Scheduling Procedures had been approved for recommendation to the BPMC. The revised procedures will be forwarded to the general managers in advance of the next Bradley PMC meeting. An additional item of discussion at the Subcommittee has been HEA line losses. Mr. Wolf stated that HEA was in the process of developing their loss numbers for further discussion at the next Subcommittee meeting. Mr. Lovas noted that, in the past, CEA had provided those numbers to HEA. Mr. Burlingame clarified that the "line loss" being discussed was the difference between the total sum of retail kilowatt hours sold by HEA and the total wholesale megawatt hours purchased. REVIEW OF PROJECT STATUS Mr. Eberle reported that AEA had received ten contaminated soil clean-up technical proposals which are currently being reviewed. Price proposals are expected in February. AEA is continuing efforts to obtain a clean-up waiver from the Alaska Department of Environmental Conservation. Mr. Eberle reported that the capacitor bank of the second harmonic filter failed during on-line testing of the Daves Creek Substation Static Var Compensator System (SVC) in December. Initially, the problem was suspected to be a possible harmonics condition that the system was not designed for. However, after studying the problem, ABB concluded the system could handle the harmonics. Subsequent study and inspection of the capacitor bank by ABB identified a combination of several problems which resulted in the failure: use e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 8 of 13 11. 12. of wrong size fuses, improper attachment of the spring ejectors on the fuse links, and mis-manufactured (under sized) capacitors. ABB will be replacing the majority of the capacitor bank at the Daves Creek Substation. All fuses will be checked and modifications made to the spring ejectors. ABB also plans to modify the alarm and protection system. In spite of the additional work, ABB expects to be able to maintain its schedule and have the system on line by mid- March. Mr. Eberle noted that a contract was being issued to Woodward Governor to resolve the unstable frequency oscillation problem. Design, testing and implementation of the system modifications is expected to be completed by the end of June. OLD BUSINESS A. Spinning Reserves/Under Frequency Load Shedding Update Tom Lovas reported that the Alaska Systems Coordinating Council (ASCC) Reliability Criteria Committee met with its consultant, Bill Masters, in December. The Intertie Operating Committee (IOC) has received a proposed load shedding schedule (based on current conditions, including Bradley Lake) from its Reliability Criteria Subcommittee. The recommendation includes implementation of a specific load shedding schedule which includes requirements for load shed in lieu of spin. Mr. Lovas stated that the schedule will accommodate the current operating conditions and improve the reliability of the interconnected system. Questions regarding character of the spin, resources of the spin, and the location of the spin remain to be resolved by the IOC. B. Bradley Scheduling vs. Spin Requirement Update Referring to the November 20, 1992 BPMC meeting, Chairman Highers noted his request that the utilities provide written comments on the spin requirement issue to Mr. Saxton. Chairman Highers urged the utilities to submit written comments as soon as possible, noting that AML&P had already submitted comments. NEW BUSINESS A. Approval of Committee Expenses e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 9 of 13 Mr. Ritchey distributed a chart of Ater Wynne legal fees and expenses encompassing August 1992 to January 1993. Mr. Ritchey explained that the August and September expenses were included on the chart because they had not been paid (although they had previously been approved). Mr. Ritchey noted that the expenses were well above the budget line item approved for FY93. Mr. Kelly motioned to approve the ee expenses for payment. The motion, seconded by Mr. Ritch the following roll call vote (Action 93-162): ity of Sew Y Electric A: iation Yi Chugach Electric Association Yes Homer Electric Association _________Yes Golden V: ic A: iation Y Municipal Light & Power Yi Alaska Energy Authority No Mr. Garzini stated his objection to administering payment of legal bills to cover the AEA administrative cost law suit. Mr. Saxton stated that the money paying for the legal expenses was not AEA's money, explaining that the money was only handled by AEA as a result of the technical provisions of the Power Sales Agreement. Mr. Garzini objected to the payment of legal expenses for what he considered an unnecessary law suit. In response to questioning by Chairman Highers, Mr. Garzini stated that the Energy Authority would administer the payment of legal expenses approved by the Committee. Directing his comments to Mr. Garzini, Mr. Kelly recalled the history behind the AEA administrative cost issue. After negotiating with Mr. Bussell, the Committee felt that there was too large a difference to resolve through continued negotiation. The Committee was also concerned that the issue would return every year. It was the consensus of the utilities that the best course was to seek a legal determination in order to put the issue to rest. Mr. Kelly acknowledged Mr. Garzini's desire to work directly with the utilities to resolve the issue, however, stated that changing the present course of action would be difficult. Mr. Garzini expressed hope that future problems could be resolved either technically or through the managerial process. Mr. Garzini added that his ultimate goal was for the utilities to play a greater role in the management of the project. B. Fritz Creek Segment Funding e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 10 of 13 Chairman Highers noted the January 8, 1993 memorandum prepared by Tom Lovas which was previously distributed to the utilities (Attachment 2). Mr. Story stated that repayment of HEA's Fritz Creek transmission line construction costs had been left unresolved. HEA recently invoiced the utilities for the line costs, however, HEA was receptive to other options of payment (i.e. capitalization of costs). Mr. Saxton, referring to his earlier comments on the possible restructuring of the remaining unused bond funds, stated that the Fritz Creek costs met Section 31 qualifications. Mr. Lovas commented that it was unfortunate that the costs had not been submitted under Section 31 prior to bond issue. Mr. Lovas noted that Item 12 of the Transmission Agreement clearly expressed the intent to include the Fritz Creek costs under Section 31. Additionally, in lieu of qualification as a Section 31 cost, Item 12 outlines a mechanism to treat the transmission line cost as a project operation expense during the first 3 years of operation. Mr. Lovas suggested the transmission line could be paid for as a Section 13 (project construction) cost, or, paid for by HEA through a bond issue (to be paid back by the utilities). Mr. Lovas recommended that HEA submit a reimbursement plan to the Bradley PMC. Mr. Story objected to the burden being placed on HEA and requested additional discussion or suggestions. Mr. Kelly suggested that HEA self-finance the cost and the utilities repay HEA by the same terms as if it had been submitted under Section 31. Repayment of the cost as a project operation expense in this manner would have minimal impact on the utilities. Mr. Lovas reiterated that the first step was to determine if bond funds could be used to cover HEA's Fritz Creek transmission line costs. If bond funds cannot be used, Mr. Lovas stated that HEA would then need to provide the BPMC with a mechanism for repayment which would least impact the utilities' cash flow. Mr. Garzini informed the Committee that AEA was already investigating a variety of options and was willing to assist in resolving the problem. Chairman Highers requested that HEA and AEA work together to find an acceptable method of repayment of HEA‘s cost. Bradley Draw-down This item was discussed earlier under Item 9, Operation & Dispatch Subcommittee Report. BPMC Control Over O&M Decisions and Agreements Mr. Saxton introduced three issues for discussion: (1) control over O&M, (2) identification of appropriate parties to various agreements; e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 11 of 13 and (3) the relationship of the multiple agreements and contracts that have been issued. Control tT O&M Referring to the Power Sales Agreement, Mr. Saxton stated that Section 13 created the Project Management Committee, Section 13 (b) established Committee rules, and Section 13 (c) outlined Committee responsibilities. Paraphrasing Section 13 (c) (i), Mr. Saxton stated, "Subject to certain non-delegable rights, the PMC shall be responsible for the management, operation, maintenance and improvement of the project, in recognition that as take-or-pay purchasers of project capacity the purchasers have substantial long term interest..." Additionally, Mr. Saxton stated the Agreement established the Committee's responsibilities as follows: "The Committee is responsible to arrange for the operation and maintenance of the project, and the scheduling, production, and dispatch of project power." In order to accomplish this, the utilities agreed that AEA would become the initial project operator. Mr. Saxton pointed out that the contract clearly stated the Committee was ultimately responsible for operation of the project. Identification of Appropriate Parties to Various Agreemen Mr. Saxton stated that agreements had been prepared under the authority of AEA with an approval signature of the BPMC, however, the BPMC could retain authority as the principal signer with an approval signature of AEA. Mr. Saxton stated that either case worked, but the ultimate responsibility belonged to the BPMC. It was noted that differences on which way the authority was viewed was causing difficulties in the agreements process. ionship of Multiple Agreement in A list of agreements prepared by Tom Lovas (Attachment 3) was distributed to the Committee. Mr. Saxton recommended that the agreements be catalogued and, preferably, reviewed to determine their effect on each other (i.e. potential conflicts). Chairman Highers requested that the utilities review the list to ensure the inclusion of all agreements and submit any changes to Tom Lovas. Mr. Yerkes asked if the BPMC could contract legally. Mr. Saxton could not provide an answer without further investigation, however e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 12 of 13 stated that the BPMC could contract in joint venture or partnership. Mr. Saxton noted that the same result could be obtained if AEA contracted with the recognition that it was the BPMC who made the decision. Mr. Saxton expressed concern about the introduction by AEA of a potential additional step to the Committee's decision making process wherein AEA assumes that its approval of a decision is required before the decision is carried out. (Mr. Saxton referred to AEA's objection to administering payment of approved Committee legal fees.) Mr. Garzini reiterated his desire for the utilities to control more of the operation and maintenance of the Bradley Lake (and Four Dam Pool) Project(s). However, in addition to ownership of the project, AEA has an obligation to FERC and a bond obligation which must be fulfilled. Mr. Garzini stated that beyond these requirements, all other issues were open to the management of the Committee. Mr. Kelly noted that AEA's responsibilities had been protected by the inclusion of veto rights. Referring to the Power Sales Agreement, Item 13 (b), Mr. Saxton confirmed that AEA had certain non-delegable rights and that in these matters the utilities and AEA had to agree. Mr. Saxton stated, in order to avoid potential problems, it was necessary to clarify who was responsible for contract commitments made by ABA prior to execution of a contract. Mr. Garzini suggested that the BPMC wait until after the Alaska Energy Authority's strategic plan was presented to its Board of Directors on January 22, 1993 before taking any action on the issue. Pending the response of the Board of Directors to the plan, Mr. Garzini hoped to call a meeting of all the utilities (Four Dam Pool and Bradley Lake) to begin discussing the transfer of responsibility. Mr. Saxton stated that the Agreements Subcommittee could not finalize some of the agreements now being worked on without guidance on the authoritative roles of the BPMC and AEA. Mr. Kelly recommended that the Agreements Subcommittee be informed that the BPMC wished to retain the power that was intended by the Power Sales Agreement, noting that, in some respects, AEA's participation was absolute within the BPMC. Chairman Highers expressed the concurrence of the Committee, requesting that it be noted in the minutes. Responding to inquiry by Mr. Lovas, Mr. Kelly confirmed that the existing agreements should be re-opened to "reformulate the participants." It was clarified that the substance of the agreements would not change. Mr. Lovas e:\dburger\word\minutes\pmc\01-93 BPMC Meeting Minutes January 14, 1993 Page 13 of 13 introduced the concept of one master Bradley Lake operational procedure agreement designed to incorporate all operational issues (rather than the present series of agreements). Mr. Story expressed concern over the potential for further delays to the completion of present draft agreements. Authority Over Budget Revisions Mr. Ritchey moved that the Bradley PMC grant authority to the Budget Subcommittee to manage budget line items. However, if the Subcommittee anticipates an increase to the approved overall operating budget of more than ten percent, the Subcommittee would seek BPMC approval. The FY93 operating budget is $2,699,928. Therefore any budget changes greater than $269,993 would require approval of the Bradley PMC. Mr. Ritchey noted that the request was, in part, inspired by the need to pay the BPMC legal bills which had exceeded the budgeted line item amount. Mr. Ritchey explained that the Subcommittee wanted to establish a means by which it could make adjustments to the budget (within limitations). It was clarified that the ten percent limit referred to cumulative budget changes. The motion, ni lly, was approved by a unanimous role call vote (Action 93-163). 13. |. COMMUNICATIONS A. Schedule Next Meeting March 11, 1993 10:00 a.m. CEA Training Room 14. ADJOURNMENT With no further business or communications before the Committee, the meeting adjqurned at 12:25 p Attest: e:\dburger\word\minutes\pmc\01-93 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 Subcommittee 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 SENT BY 1- 8-93 : 2:U7PY, CHLGACH ELECTRIC- AK ENERGY ALTHORITY:+ 1- 3 C ATTACHMENT 2 hugach ELECTRIC ASSOCIATION, INC. 5601 Minnesota Orive Anchorage Alaska 90613-4000 FACSIMILE TRANSMITTAL SHEET Phone: 907-563-7404 : 1/8/93 4 2 2 | “Tad Stan Sieczkowski, Dir. Facilities Ops. & Eng. 2 z AEA LOCATION: = Anch, FAX NO.: 561-8584 FROM: Dave [lighers SUBJECT: Bradley Draw-down | COMMENTS/MESSAGE: TOTAL NUMBER OF PAGMS TRANSMITTING: ____— 3. (Inchadex Cover Sheet) IF TRANSMISSION IS INCOMPLETH, PLEAS CALL: (907) 762-4633 TIME/DATE OF TRANSMISSION: BY: ALAN OR JC MACHINE TYPE: DEX 740 OR CANON R50 CHUGACH FAX NO: (907) 562-0027 xcNi BY 1- 8-93 : 2:07PM : CHLGACH ELECTRIC- aK ENERGY ALTHORITY:= 2/ January 8, 1993 TO: Mike Kelly, Golden Valley Electric Assn. Norman Story, Homer Electric Assn. Tom Stahr, Anchorage Municipal Light & Power Ken Ritchey, Matanuska Electric Assn. Paul Diener, Seward Electric Utility Bob Hufman, AEG&T FROM: David L. Highers RE; Bradley Lake Draw-dpwa 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, pleuse call or fax as soon as possible. Attachment ce: Ron Saxton FAX: 503/226-0079 FAX: 451-5633 FAX: 235-3323 FAX: 263-5204 FAX: 745-9368 FAX: 224-3248 FAX: 474-0549 5601 Minnesota Drive # P.O. Box 196300 * Ancnorage, Alaska 99549-4300 Phone 907-563-7494 # FAX 907-562-0027 3 SENT BY 1- 8-93 : 2:07P™ : CHLGACH ELFCTRIC- AK ENERGY ALTHORITY:+ 3, CHUGACH ELECTRIC ASSOCIATION, INC. Anchorage, Alaska January 8, 1993 TO: David L. Highers, General Manager A FROM: Eugene N. Bjornstad, Executive Manager; Operating 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. | 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 AFA 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 cxplored? 3. 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? 5s How much is the cost estimate? 6. What happens if AEA does nothing? Ts What happens if AEA delays one or more years? 1 would recommend that other utilities be apprised of this situation ASAP, a 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. | 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 DATE: TO: FROM: SUBJECT: Alaska Energy Authority MEMORANDUM April 1, 1993 Bradley Lake Hydroelectric Project Project Management Committee Ercenive Decne UO ve Director Alaska Energy Authority Diamond Ridge Relaying Homer Electric Association Billing Attached is a letter dated January 4, 1993 from Homer Electric Association (HEA), which outlines their costs associated with the installation of the Diamond Ridge transfer trip relays. The total installed cost is $107,115.45. This work was required as part of the protective relaying for Bradley Lake and, as such, is an appropriate project cost. Although the work was discussed and recommended by the Technical Coordination Committee, our records do not reflect any formal action having been taken by the PMC. Construction funds for this work were included as part of the project budget for Utility Support Cost. HEA's previous billings for this work contained several errors which have now been corrected. Accordingly, it is recommended that the PMC approve payment in the final amount of $107,115.45 for this work. DE:RAG;jd Attachments as stated. 93Q1\D4567(1) Homer Electric Association, Inc. CORPORATE OFFICE Central Peninsula Service Center 3977 Lake Street 280 Airport Way Homer, Alaska 99603-7680 Pouch 5280 Phone (907) 235 8167 Kenai. Alaska 99611-5280 FAX (907) 235 3333 Phone (907) 283.5831 FAX (907) 283-7122 January 4,1993 RECEIVED HAN 1998 jaske Energy Authcrit, Dave Eberle N 4 Alaska Energy Authority 701 East Tudor Road P.O. Box 190869 Anchorage, AK 99519-0869 Re: Bradley Relaying at Diamond Ridge Billing of 9/30/91 Letter of 3/23/92 Dear Dave: In accordance with your request, we gave the following breakdown of the costs for the billing of 9/30/91. In addition, at your request we again reviewed the billing and made some further modifications to the relay portion of the billing. The following is a recap of the original breakdown and modifications in my letter of March 23,1992 and the additional modifications for the relaying portion. These represent the final amounts we desire to collect for the work done, and this letter supersedes the letter of March 23,1992. For the first item, the RTU adjusted costs, we will adjust to the maximum amount approved by the Project Management Committee. Amount approved by PMC $31,000.00 Less prior payment ($29,570.00) Balance Due $ 1,430.00 The second item billed was for 1/2 the cost of the telephone switch that was anticipated to be used by the project for interrogating the relaying and microwave sites. You have advised that your research has revealed that this item was never approved by the TCS with some other items in 1988. It had been our previous understanding that this had been submitted by Tom Small and approved. If this is not the case, we stand corrected, and will drop this portion of the billing. The third item was related to installation of the Transmission Line Transfer Trip relaying system to match those installed at Bradley and Soldotna. The basic relays and tone gear was furnished to Homer Electric by the project. However, we had to purchase the panels and remaining equipment necessary for a Dave Eberle January 4,1993 Page 2 complete installation. The bill has been adjusted to reflect that two invoices were received after:the bill was rendered, and some items were discovered to be related to SCADA rather than the relaying. in the total being different than the original bill. Labor (including HEA Eng. and Inst'l) $36, Overhead $24, Equipment and Transportation $ 5, Material: Transfer Trip Relaying and tone gear. Furnished by Project $ Relay Modems and Telco PBX eq. $1, Control Panel Fabrication including equipment mounting $18, Satellite Clock $ 7, SEL-Metering and Cabling $ 5, Synchrocloser Unit and Relay $ 6, Total Material $40, Total Installed Cost $107, If you need further information, please advise. scm/js CC: RF - SCM Fair Story Sincerely yours, HOMER ELECTRIC ASSOCIATION, In addition, we have adjusted the amount of overhead charged to be consistent with the ratio used for the remaining transmission line work which was done for this project and for which the other participants have paid. 270.07 765.20 543.93 0.00 995.00 967.00 147.00 777.25 650.00 536.25 115.45 J.C. Mottin, S. C. Matthews Major Projects Engineer These adjustments result INC. Inve ORD: 2 OF . Alaska Energy Authority MENT MUST BE SURMITTED WITH INVOICE. RGENG NOTICE TO PUBLISHER AUST GE IN TRIPLICATE SHOWING ADVERT a 3., CBRTIFIEO AFFIDAVIT OF PUBLICATION | r 3 FORM) WITH ATTACHED COPY OF A) Ao- O8-9202 4/28/93 P.O. Box 190869 Anchorage, AK Fax: 561-8584 99519-0869 ONCE — 3/4/93 Anchorage Daiiy News P.O. Box 149001 AK_ 99524-9001 2T9-817TO sineaten We noueLe Lees MUST Om PROLTED We rTe EerTIRETY Anchorage. DRA MATED ie RTE Fax: _ ee Internal AHA Accounting: 81072020. Charge To | Type of Advertisement: 2 Legal 2 Classitied See ERRekSeRO CE senaing via fax on 4/28/93 . PLEASE DO Soe SUPLrCATE THIS GATGENAL Waan LP ARRTVEG- 0K: REGULAR-MALE Use the 100" advertising agreement on the following ad: ALASKA ENERGY AUTHORITY STATE OF ALASKA NOTICE Notice t# hereby given thac the Bradley Lake eting to conduct the affaira of th Alaska. The meeting will commence i information, contact David L. High Box 196300, Anchorag. AK 99519. © Diepiey roject Management Committee will hold a Committee at Chugach Electric Association in 10:00 a.m-., om May 13. 1993. For » Chairman, Chugach Electric Association, Inc. Alaska Energy Authority, Secretary Project Management Committee paan 1 or| TOTAL OF pases ALL PAGES S$ PUBLISHER TRANSMISSION REPORT THIS DOCUMENT WAS SENT (REDUCED SAMPLE ABOVE) **K COUNT ** # 2 #7 SEND 20K REMOTE STATION I. D. 907 2798170 START TIME DURATION 13:41 [ 1°30" TOTAL 0:01'30" 2 #PAGES COMMENT 4-28-93 XEROX TELECOPIER 7020 STATE OF ALASKA ADVERTISING : ORDER SEE BOTTOM FOR INVOICE ADDRESS IN iE MUST BE IN TRIPLICATE SHOWING ADVE ING OF |NO., CERTIFIED AFFIDAVIT OF PUBLICATIO:s \- ART 2 OF THIS FORM) WITH ATTACHED COPY OF ADVERTISE- A0- 08-9202 MENT MUST BE SUBMITTED WITH INVOICE. NOTICE TO PUBLISHER ADVERTISING ORDER NO. Alaska Energy Authority P.O. Box 190869 Anchorage, AK 99519-0869 Fax: 561-8584 zown AGENCY CONTACT DATE OF A.O. Irene Tomory 4/28/93 PHONE (907) 261-7240 DATES ADVERTISEMENT REQUIRED: Anchorage Daily News P.O. Box 149001 Anchorage, AK 99514-9001 Fax: 279-8170 zwmzrwH—-rwcv oa ONCE - 5/4/93 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Internal AEA Accounting: Charge To 81072020. Type of Advertisement: x6t Legal O Display O Classified Cl Other (Specify): the fol See poe following . ending via fax on NOTICE P.O. Box 196300, Anchorag, AK 99519. Alaska Energy Authority, Secretary Project Management Committee 4/28/93 NOT DUPLICATE THIS ORIGINAL WHEN IT ARRIVES VIA REGULAR MAIL. . PLEASE DO PRDESUSIEK ADSIEK BALK WMH A KBR CK BABAK MX AUS KAK LOMKT BEAK AWBUK ExAK AWK Use the 100" advertising agreement on the following ad: ALASKA ENERGY AUTHORITY STATE OF ALASKA Notice is hereby given that the Bradley Lake Project Management Committee will hold a regular meeting to conduct the affairs of the Committee at Chugach Electric Association in Anchorage, Alaska. The meeting will commence at 10:00 a.m., on May 13, 1993. For additional information, contact David L. Highers, Chairman, Chugach Electric Association, Inc. SEND INVOICE IN TRIPLICATE TO PAGE 1 OF| TOTAL OF PAGES| ALL PAGES $ REF | TYPE NUMBER AMOUNT DATE COMMENTS 1 VEN FIN AMOUNT sY cc PGM Lc ACCT FY bag REQUISITIONED BY: Irene Tomory, Admin. Coordinator DIVISION APPROVAL 02-901 (Rev. 6-85) PUBLISHER STATE OF ALASKA ADVERTISING ORDER NO. ADVERTISING , ORDER A0- 08-9202 AGENCY CONTACT DATE OF AO. F Alaska Energy Authority Irene Tomory | 4/28/93 R P.0. Box 190869 PHONE O| Anchorage, AK 99519-0869 (907) _261-72h0 Fax: 561-8584 DATES ADVERTISEMENT REQUIRED: T ONCE - 5/4/93 ©| Anchorage Daily News f | P.O. Box 149001 B Anchorage, AK 99514-9001 t Fax: 279-8170 SPECIAL INSTRUCTIONS: s Internal AEA Accounting: Charge To 7 81072020. AFFIDAVIT OF PUBLICATION UNITED STATES OF AMERICA STATEOR i it ss DIVISION. BEFORE ME, THE UNDERSIGNED, A NOTARY PUBLIC THIS DAY PERSONALLY APPEARED ____EEC WHO, BEING FIRST DULY SWORN, ACCORDING TO LAW, SAYS THAT HE/SHE IS THE OF PUBLISHED AT___ CIN SAID DIVISION AND STATE OF AND THAT THE ADVERTISEMENT, OF WHICH THE ANNEXED IS A TRUE COPY, WAS PUBLISHED IN SAID PUBLICATION ON THE ______ DAY OF 19; AND THEREAFTER FOR ____ CONSECUTIVE DAYS, THE LAST PUBLICATION APPEARING ON THE DAY OF 19 , AND THAT THE RATE CHARGED THEREON IS NOT IN EXCESS OF THE RATE CHARGED PRIVATE INDIVIDUALS. SUBSCRIBED AND SWORN TO BEFORE ME THIS DAY OF 30\_. REMINDER— INVOICE MUST BE IN TRIPLICATE AND MUST REFERENCE THE ADVERTISING ORDER NUMBER. A CERTIFIED COPY OF THIS AFFIDAVIT OF PUBLICATION MUST BE SUBMITTED WITH THE INVOICE. NOTARY PUBLIC FOR STATE OF MY COMMISSION EXPIRES ATTACH PROOF OF PUBLICATION HERE. 02-901 (Rev. 6-85) PUBLISHER