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HomeMy WebLinkAboutBPMC Meeting July 22, 1993 2ATER WYNNE aw HE W I I I Portland, Oregon 97201-6618 (503) 226-1191 DODSON Fax (503) 226-0079 & SKERRITT =CORL UGPY June 15, 1993 FILE NO RO 3-1. Bree ATTORNEYS AT LAW N VIA FACSIMILE AND U.S. MAIL Kenneth Ritchey Matanuska Electric Association, Inc. P.O. Box 2929 Palmer, AK 99645-2929 Dear Ken: Enclosed is a another statement from Perkins Coie for the labor consulting that Bill Bennett did for the Railbelt Utilities Group. | would appreciate you having this processed and paid directly. Please let me know if you have any questions. Sincerely, Kmold lL. Saytm ue Ronald L. Saxton Encl. cc: Bill Bennett, Perkins Coie dubia ° fll ee RLS\827der.ttr Seattle, Washington Washington, D.C San Francisca, California Affiliated offices in (206) 623-4711 (202) 785-0303 (415) 421-4143 Anchorage tairhanks VO. Lo Yo ee CG ou OUs use OF, b STEER : tie Wado ae ‘ @vul.vus Suite 1800 ATER WYNNE aoe HEWITT Poctland. Oregon 9720)-6618 (503) 226-1191 DODSON Fax (503) 226-0079 & SKERRITT fie ATTORNEYS AT LAW FACSIMILE TRANSMITTAL : Sat 7193 PRO B-i, 1 Bree NOTICE: This facsimile contains confidential information that is being transmitted to and is intended only for the use of the recipient named belcw Reading, disclosure, discussion, dissemination, distribution, or copying of this information by anyone cther chan the named recipient or his or her empicyees cer agents is strictly prohibited. Tf you have received this facsimile in error, please immediately destroy it and notify us by telepheone, (S03) 226-1191. DATE: Jun 993 TO: _Ken_ Ritchey lat ‘ tri c): aE _Matanuska, AK . a FAX NUMBER: 907/745-9368 OFFICE NUMBER: 07/745-323 FROM: _Ron Saxton DOCUMENT : : rki ‘oi PAGES (INCL. COVER) 3 USAGE TIME _ CLIENT NUMBER: aaa of. } ATER WYNNE wa HEWI Portland, Oregon 97201-6618 TT “ 1503) 226-1191 DODSON Fax (503) 226-0079 & SKERRITT ATTORNEYS AT LAW FILENO May 21, 1993 geienee a : | VIA FACSIMILE AND U.S. MAIL rie “Feed tens Kenneth Ritchey Matanuska Electric Association, Inc. P.O. Box 2929 Palmer, AK 99645-2929 Dear Ken: Enclosed is a statement for Bill Bennett’s services in April. You will remember that the RUG asked me to retain Bill’s services to provide us with an assessment of the Bradley Lake labor negotiations. | am forwarding it for you to arrange for payment. The most appropriate way to arrange for payment would be to present this bill (without the detailed explanation) for payment by the BPMC, together with any of my firm’s bills which are still outstanding. Payment would then be made through AEA. If you think this arrangement poses problems, you can consider having one of the utilities pay it directly and seek reimbursement from the others. | assume there will be an additional bill for his services in April. Please let me know if you have any questions. Sincerély, e Ronald L. Saxton Encl. RLS\827der.itr Seattle, Washington Washington, D.C. San Francisco, California Affiliated offices in (206) 623-4711 (202) 785-0303 (415) 421-4143 Anchorage. Fairbanks Fax (206) 467-8406 Fax (202) 785-8676 Fax (415) 989-1263 and Juneau, Alaska Suite 1800 ATER WYNNE esanprenme HEWITT Portland, Oregon 97201-6618 (503) 226-1191 DODSON Fax (503) 226-0079 & SKERRITT ATTORNEYS AT LAW July 13, 1993 Kenneth Ritchey Matanuska Electric Association, Inc. P.O. Box 2929 Palmer, AK 99645-2929 Re: Railbelt Utilities Group Dear Ken: Enclosed is our statement for June. As you can see, it is quite a bit higher than previous bills, and reflects the significant activity associated with the AEA reorganization, new interties and other RUG matters. In addition, at the direction of the RUG, I included the costs associated with the Alaska Intertie Agreement opinion requested by the I0C. Please let me know if there are any questions. Sincerely, Brat L, Sevlrn. (da Ronald L. Saxton Encls. Jute t bak, 7/2253 Ayo Seattle, Washington Washington, D.C. San Francisco, California Affihated ottives in (206) 623-4711 (202) 785-0303 (415) 421-4143 Anchorage tsithanks Fay (204) 447.2404 Fay S90) 786 CK r —— ATER WYNNE — HEWITT oa DODSON Fax (503) 226-0079 & SKERRITT ATTORNEYS AT LAW June 14, 1993 piraiad FRO S-0.) Bre Kenneth Ritchey Matanuska Electric Association, Inc. P.O. Box 2929 Palmer, AK 99645-2929 Re: Railbelt Utilities Group Dear Ken: Enclosed is our statement for May. I would appreciate you putting this through the PMC process. Please let me know if there are any questions. Sincerely, opal l. Saxby Ronald L. Saxton jlLnr Encls. RLS\dero66. ltr a aan Seattle, Washington Washington, D.C San Francisco, California JUN 17 1993 afitiated officesin (206) 623-4711 (202) 785-0303 (415) 421-4143 Anchorage. Fairbanks “a Suite 1800 ry ute ATER WYNNE 222 5.W. Columbia & SKERRITT ATTORNEYS AT LAW PIR Ww May 12, 1993 Fcc aeeecareael VIA FACSIMILE AND U.S. MAIL Kenneth Ritchey Matanuska Electric Association, Inc. P.O. Box 2929 Palmer, AK 99645-2929 Dear Ken: Enclosed is a statement for Bill Bennett’s services in March. You will remember that the RUG asked me to retain Bill’s services to provide us with an assessment of the Bradley Lake labor negotiations. | am forwarding it for you to arrange for payment. : The most appropriate way to arrange for payment would be to present this: bill (without the detailed explanation) for payment by the BPMC, together with any of my firm’s bills which are still outstanding. Payment would then be made through AEA. If you think this arrangement poses problems, you can consider having one of the utilities pay it directly and seek yeimbursement from the others. | assume there will be an additional bill for his services in April. Please let me know if you have any questions. Sincerely, () ES Amatd Dart pEUL Ronald L. Saxton Encl. cc: David Highers, Chugach Electric Association, Inc. (w/encl.) RLS\827der.!tr Seattle, Washington Washington, D.C San Francisco, California Affiliated offices in (206) 623-4711 (202) 785-0303 (415) 421-4143 Anchorage. Fairbanks Jae. 267 24K Fay 709) 795 eK 7K Fav (478) 080 1962 poet ineart Alacka DATE: TO: FROM: SUBJECT: Alaska Energy Authority MEMORANDUM AEA/UTIL/0012 July 1, 1993 David L. Highers, Chairman Bradley Lake Project Management Committee Chugach Electric Association P.O. Box 196300 Anchorage, Alaska 99519-6300 Brent N. Petrie, Secretary by WOK Bradley Lake Project Management Committee Alaska Energy Authority P.O. Box 190869 Anchorage, Alaska 99519-0869 Agenda Item for July 22, 1993 BPMC Meeting RECORD VOPY FILE NO, Ken Ritchey convened a meeting of the Bradley Lake Project Management Committee Budget Subcommittee on July 1, 1993. The Subcommittee proposes the attached resolution for consideration at the next scheduled meeting of the BPMC. Unless you have an objection, I will include it in the July 22, 1993 meeting packet for consideration under "Old Business". BNP:db ce: Ken Ritchey, Matanuska Electric Association Mary Ann Pease, Anchorage Municipal Light and Power Tom Lovas, Chugach Electric Association Stanley E. Sieczkowski, Alaska Energy Authority BRADLEY LAKE PROJECT MANAGEMENT CUMMITTEE RESOLUTION 93 - 11 DRAFT A RESOLUTION of the Bradley Lake Project Management Committee (BPMC) regarding the authority of the Budget Subcommittee to adjust budgets for annual Project costs as defined under Section 8 (a) (vii) of the Bradley Lake Power Sales Agreement (PSA). WHEREAS the BPMC is authorized by the Bradley Lake Power Sales Agreement to adopt budgets for annual operating and maintenance (O&M) costs as defined under Section 8 (a) (vii) of the PSA for the operation of the Bradley Lake Hydroelectric Project and to make amendments to the budget from time to time; and WHEREAS the Budget Subcommittee of the BPMC is charged with researching and preparing the O&M budget and amendments thereto; and WHEREAS the Budget Subcommittee may meet on shorter notice and with more frequency than the BPMC; and WHEREAS the BPMC has determined that periodic minor O&M budget adjustments may be necessary for smooth and efficient operation of the project and BPMC; and NOW, THEREFORE BE IT RESOLVED that the BPMC authorizes the Budget Subcommittee to make budget adjustments within line items of the approved budget; and BE IT FURTHER RESOLVED that the BPMC further authorizes the Budget Subcommittee to increase the approved total O&M budget up to ten percent (10%) of the initially approved total amount when necessary to meet unforeseen operating expenditures; and BE IT FURTHER RESOLVED that nothing in the authorization changes duties and responsibilities of the parties established by the Bradley Lake Power Sales Agreement; and BE IT FURTHER RESOLVED that the Budget Subcommittee shall report such changes to the BPMC at the BPMC's next scheduled meeting. ADOPTED by the Bradley Lake Project Management Committee at a regular meeting of the Committee held July 22, 1993. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE BY: David L. Highers, Chairman ATTEST: Brent N. Petrie, Secretary DATE: dburger\word\minutes\pmc\res93-1 1 Alaska Energy Authority RECORL LOPV MEMORANDUM =e Beit 2193 3 Vv AEA/UTIL/0015 DATE: — July 13, 1993 TO: Bradley Lake Project Management Committee David L. Highers, Chugach Electric Association Norm Story, Homer Electric Association Ken Ritchey, Matanuska Electric Association Dave Calvert, City of Seward Tom Stahr, Anchorage Municipal Light & Power Mike Kelly, Golden Valley Electric Association Ron Saxton, Ater Wynne Hewitt Dodson & Skerritt FROM: Brent N. Petrie Ce Secretary SUBJECT: Project Management Committee Notice of Meeting - July 22, 1993 The next meeting of the Bradley Lake Project Management Committee will be held Thursday, July 22, 1993. The meeting will begin at 10:00 a.m. in the Training Room at Chugach Electric Association, Anchorage. The following items are enclosed for your information, review, and/or files: ° Agenda” - July 22, 1993 ° Draft Resolution 93-11 ° Draft Meeting Minutes - June 17, 1993 ° Approved Meeting Minutes - May 13, 1993 DB:BNP:db cc: Vince Mottola, Fairbanks Municipal Utilities System Ronald A. Garzini, Alaska Energy Authority Stanley E. Sieczkowski, Alaska Energy Authority Larry Wolf, Alaska Energy Authority David R. Eberle, Alaska Energy Authority Mr. Dave Calvert City of Seward 5th & Adams P.O. Box 167 Seward, Alaska 99664 Mr. David L. Highers Chugach Electric Association 5601 Minnesota Drive P.O. Box 196300 Anchorage, Alaska 99519-6300 Mr. Michael P. Kelly Golden Valley Electric Association 758 Illinois P.O. Box 1249 Fairbanks, Alaska 99707 Mr. Fred Arvidson Perkins Coie 1029 W. 3rd Avenue, Suite 300 Anchorage, Alaska 99501 Mr. James Hall Matanuska Electric Association 163 Industrial Way P.O. Box 2929 Palmer, Alaska 99645-2929 Mr. S.C. Mathews Homer Electric Association 3977 Lake Street Homer, Alaska 99603 Mr. Ron Saxton Ater Wynne Hewitt Dodson & Skerritt 225 S.W. Columbia, Suite 1800 Portland, OR 97201-6618 90Q1\D0068L(1) Distribution List ; Bradley Lake Hydroelectric Project | 4 Project Management Committee Meeting Distribution Notice July 13, 1993 Mr. Ken Ritchey Matanuska Electric Association 163 Industrial Way P.O. Box 2929 Palmer, Alaska 99645-2929 Mr. N. L. Story Homer Electric Association 3977 Lake Street Homer, Alaska 99603 Mr. Thomas R. Stahr Municipal Light and Power 1200 E. 1st Avenue Anchorage, Alaska 99501-1685 Mr. Eugene N. Bjornstad Chugach Electric Association 5601 Minnesota Drive P.O. Box 196300 Anchorage, Alaska 99519-6300 Mr. John Cooley Chugach Electric Association 5601 Minnesota Drive P.O. Box 196300 Anchorage, Alaska 99519-6300 Mr. Bob Hansen Golden Valley Electric Association 758 Illinois P.O. Box 71249 Fairbanks, Alaska 99707 Mr. Kurt Dzinich 4511 N. Riverside Drive Juneau, Alaska 99801 Mr. Robert Hufman Utilities Consulting Services 1018 Galena Street Fairbanks, Alaska 99709 Mr. David Burlingame Chugach Electric Association, Inc. P.O. Box 196300 Anchorage, Alaska 99519-6300 Mr. Tom Lovas Chugach Electric Association, Inc. P.O. Box 196300 Anchorage, Alaska 99519-6300 Mr. Vince Mottola Fairbanks Municipal Utilities System P.O. Box 72215 Fairbanks, Alaska 99707 Mr. Dave Fair Homer Electric Association 3977 Lake Street Homer, Alaska 99603 90Q1\DO068L(1) Distribution List Bradley Lake Hydroelectric Project _ : Project Management Committee Meeting Distribution Notice July 13, 1993 a Research Agency P.O. Box Y Juneau, Alaska 99811-3100 Mr. Hank Nikkels Anchorage Municipal Light & Power 1200 East Ist Street Anchorage, Alaska 99501 Mr. Bradley Evans Golden Valley Electric Association 758 Illinois P.O. Box 71249 Fairbanks, Alaska 99707 Mr. Mike Yerkes P.O. Box 36 Skwentna, Alaska 99667 10. 11. 12. 13. 14. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING AGENDA July 22, 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 - June 17, 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. BPMC Control Over O&M Decisions and Agreements Master Agreement D. Budget Subcommittee Authority - Resolution 93-11 NEW BUSINESS A. Nomination and Election of Officers B. Approval of Legal Expenses and Other Payments COMMUNICATIONS A. Schedule Next Meeting ADJOURNMENT Highers Burlingame Ritchey Sieczkowski Eberle Eberle Lovas Saxton Saxton Petrie Highers Ritchey BRADLEY —..KE PROJECT MANAGEMENT Cu.AMITTEE RESOLUTION 93 - 11 DRAFT A RESOLUTION of the Bradley Lake Project Management Committee (BPMC) regarding the authority of the Budget Subcommittee to adjust budgets for annual Project costs as defined under Section 8 (a) (vii) of the Bradley Lake Power Sales Agreement (PSA). WHEREAS the BPMC is authorized by the Bradley Lake Power Sales Agreement to adopt budgets for annual operating and maintenance (O&M) costs as defined under Section 8 (a) (vii) of the PSA for the operation of the Bradley Lake Hydroelectric Project and to make amendments to the budget from time to time; and WHEREAS the Budget Subcommittee of the BPMC is charged with researching and preparing the O&M budget and amendments thereto; and WHEREAS the Budget Subcommittee may meet on shorter notice and with more frequency than the BPMC; and WHEREAS the BPMC has determined that periodic minor O&M budget adjustments may be necessary for smooth and efficient operation of the project and BPMC; and NOW, THEREFORE BE IT RESOLVED that the BPMC authorizes the Budget Subcommittee to make budget adjustments within line items of the approved budget; and BE IT FURTHER RESOLVED that the BPMC further authorizes the Budget Subcommittee to increase the approved total O&M budget up to ten percent (10%) of the initially approved total amount when necessary to meet unforeseen operating expenditures; and BE IT FURTHER RESOLVED that nothing in the authorization changes duties and responsibilities of the parties established by the Bradley Lake Power Sales Agreement; and BE IT FURTHER RESOLVED that the Budget Subcommittee shall report such changes to the BPMC at the BPMC's next scheduled meeting. ADOPTED by the Bradley Lake Project Management Committee at a regular meeting of the Committee held July 22, 1993. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE BY: David L. Highers, Chairman ATTEST: Brent N. Petrie, Secretary DATE: dburger\word\minutes\pmc\res93-11 EY LAKE PROJECT MANAGEMENT COMMITTEE DRAFT MEETING MINUTES June 17, 1993 1. CALL TO ORDER Chairman Highers called the Bradley Lake Hydroelectric Project Management Committee to order at 10:10 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 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 Dave Calvert, Designated Representative Homer Electric Association Norm Story, Designated Representative Matanuska Electric Association Ken Ritchey, Designated Representative Municipal Light & Power Hank Nikkels, Alternate Representative Others Present: Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt Bob Hufman, Alaska Electric Generation & Transmission Cooperative David Burlingame, Chugach Electric Association dburger\word\minutes\pmc\06-93 BPMC Meeting Minutv. June 17, 1993 Page 2 of 9 John Cooley, Chugach Electric Association Ji den, Chugach Electric Association Ton ras Chugach Electric Association p> Bloomer, Chugach Electric Association Jim Hall, Matanuska Electric Association Mary Ann Pease, Municipal Light & Power Tim McConnell, Municipal Light & Power Bob Price, Municipal Light & Power Dave Fair, Homer Electric Association Ron Garzini, Alaska Energy Authority David R. Eberle, Alaska Energy Authority Eric Marchegiani, Alaska Energy Authority Stanley E. Sieczkowski, 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 The following items were added to the agenda: 12.B. Approval of FY94 Payment Obligation 12.C. Approval of Other Payments 5. APPROVAL OF MINUTES - May 13, 1993 The minutes of the May 13, 1993 Bradley Project Management Committee meeting were approved as submitted (Action 93-176). 6. TECHNICAL COORDINATING SUBCOMMITTEE REPORT Mr. Burlingame reported that the TCS had not met. The TCS expects to meet in July to review the results of the SVC system tests and to define the long term operating guidelines of the Project. 7. BUDGET SUBCOMMITTEE REPORT A. Bradley Lake Construction Cost Audit Update dburger\word\minutes\pmc\06-93 BPMC Meeting Minutv_ June 17, 1993 Page 3 of 9 Ww Mr. Ritchey expected the final report to be distributed in one week. The Bu Subcommittee will meet in two weeks to discuss the report. Plans a made for a representative of Metzler & Associates to present the ort to the BPMC. Bradley Lake O&M Cost Audit Update The FY92 O&M cost audit is being reviewed and the Subcommittee is awaiting clarification of some questions. Other Budget Subcommittee Issues: Mr. Ritchey noted that an error had been discovered in the approved FY94 O&M budget. Cost for the USGS stream gage program was included in the narrative, however, did not appear as a line item. Other budget line items will be adjusted to provide for the cost of the program ($110,000). The changes will not effect the budget total. Mr. Ritchey informed the Committee that the Budget Subcommittee was preparing a resolution formalizing the authority of the Subcommittee to make certain changes to the O&M budget. The resolution will be ready for consideration at the next BPMC meeting. Other items being discussed by the Subcommittee are the HEA Fritz Creek line costs and the CEA wheeling issue. Chairman Highers asked what impact the recent legislation affecting AEA would have on the Bradley O&M budget. Mr. Petrie recommended that the Committee wait until December or January, when new operation arrangements were expected to be in place, before altering the budget or utility payment schedule. Mr. Petrie added AEA was incurring unexpected costs related to preparation for the transfer of operation responsibilities and the on-site labor negotiations. Referring to a memorandum issued by AEA, Mr. Petrie stated AEA was requesting guidance from the Committee on the selection of an operation and maintenance contractor for Bradley Lake (Attachment 1). Mr. Petrie informed the Committee that a meeting of Four-Dam Pool, Bradley Lake and other utilities was scheduled for July 7, 1993 at AEA to discuss the transfer of tasks handle by AEA to the utilities. Mr. Kelly expressed concern over the continuing availability of Energy Authority staff to oversee the transition and recommended that the BPMC assert its authority as the contracting power. Acknowledging there had been several previous discussions on the BPMC authority to contract, Mr. Petrie stated AEA was dburger\word\minutes\pmc\06-93 BPMC Meeting Minutv. June 17, 1993 Page 4 of 9 . Ww 10. responsible for contracting Project operation and maintenance, however, the er Sales Agreement gave the BPMC the authority to approve the EMENTS SUBCOMMITTEE REPORT Mr. Sieczkowski reported the Agreements Subcommittee had not met since the last BPMC meeting. OPERATION & DISPATCH SUBCOMMITTEE REPORT Mr. Marchegiani reported the O&D Subcommittee met June 3, 1993. Under the direction of the Subcommittee, AEA has contracted SWEC to perform a two phase hydraulic transient stability analysis at a reservoir elevation below 1080". April and May reservoir inflows were reported to be higher than anticipated. It is speculated that the increased inflow is early snow melt due to the unusually warm Spring weather. If the increased flow continues, a water reallocation is expected about July 1. Removal of loose rock above the water line at the fish water bypass intake channel is complete. Mr. Marchegiani informed the Committee that material still remained below the water line. AEA is investigating methods and costs to remove the remaining material. Mr. Eberle stated that a recent sonar scan indicated debris around one of the trash racks installed during the winter, however unless a low reservoir level and high winds occur, the remaining debris is not expected to shift or cause additional problems. At a reservoir level low enough to potentially cause a problem, equipment can be brought in to remove the debris and remedy the problem. Maintenance will probably be delayed until next year or when a low enough reservoir occurs to facilitate the use of heavy equipment. Mr. Marchegiani reported that the Woodward governor modification and testing had been completed. Mr. Burlingame added the governor modification performed well, doubling the governor response rate. REVIEW OF PROJECT STATUS Mr. Eberle informed the Committee that the new breaker for Soldotna was expected to be delivered by mid-August. ABB has delayed the capacitor replacement to September or October and has proposed a reduced number of capacitors for replacement. AEA will either require an extended warranty or insist upon full replacement of the capacitors. In response to concerns raised by CEA, AEA is reviewing SVC protection controls with ABB, which may result in some dburger\word\minutes\pmc\06-93 BPMC Meeting Minute. June 17, 1993 Page 5 of 9 modifications. AEA has requested information from ABB on the cost of additional system studies, Mr. Eberle noted the AEA Board of Directors approved the final Project b df $314,500,000 at its May meeting. Documents are being er 11. OLD BUSINESS A. Spinning Reserve / Under Frequency Load Shedding Update Mr. Lovas reported institution of the under frequency load shedding schedule was delayed until the end of June. Revisions proposed by GVEA are currently under review. The relays are in place and ready to set. The Alaska Systems Coordinating Council Reliability Criteria Committee (ASCC - RCC) is reviewing final comments on the spinning reserve proposals. The Committee expects to finalize a recommendation in the near future. B. Bradley Scheduling vs. Spin Requirement Update Mr. Saxton distributed a summary chart of the spinning reserve issue comments submitted from the utilities (Attachment 2). Noting the summary included several issues other than Bradley spin, Mr. Kelly recommended that the focus be narrowed to Bradley spin. Mr. Kelly pointed out that several of the issues were presently being addressed by the ASCC. Mr. Lovas stated the ASCC-RCC could handle the system response and technical questions, however, not the related legal issues (i.e., responsibility for spinning reserve). Mr. Saxton will work with the RCC (specifically, Chairman Tom Lovas) to delineate the technical and legal issues. Mr. Lovas and Mr. Saxton will report back to the BPMC. Cc. BPMC Control Over O&M Decisions and Agreements - Master Agreement Mr. Saxton reported that no further activity had occurred on the master operating agreement due to questions created by the legislated changes at AEA, however, the State Attorney General's office is currently reviewing the draft master operating agreement. Mr. Saxton stated that he and Mr. Sieczkowski were in accord on the basic substance of the agreement and the BPMC contractual relationship in the agreement. Mr. Sieczkowski informed the Committee that he would be meeting with the Assistant Attorney General this afternoon to discuss final comments on the draft agreement. Mr. Kelly expressed concern over the handling dburger\word\minutes\pmc\06-93 BPMC Meeting Minute. June 17, 1993 Page 6 of 9 p> of contracting an operator for Bradley Lake - specifically, if the master o g agreement provided contracting authority to the BPMC. 2 ‘on responded that the issue was taken care of by the proposed ster operating agreement. Mr. Saxton requested direction from the BPMC on proceeding with the development of the master operating agreement, recognizing that the Committee may prefer to wait until other issues related to the transition of AEA are resolved. Referring to AEA's letter requesting direction from the BPMC on the selection of an operator for Bradley Lake, Mr. Garzini stated AEA would, most likely, be responsive to the BPMC's choice. Expressing the need to provide Alaska Industrial Development and Export Authority (AIDBA) information and a schedule on the transfer of project O&M responsibilities to the utilities, Mr. Garzini asked the utilities to submit suggestions. Mr. Garzini added that, more than ever, it was necessary for the utilities to work together in order to accomplish all that needed to be done. Mr. Garzini reiterated that AEA would be responsive to the BPMC. Mr. Saxton advocated completion of the master operating agreement, stating that completion of the remaining agreements had been put on hold while the master operating agreement concept was developed. Mr. Saxton explained that completing the master operating agreement would enable completion of the remaining agreements. Additionally, only minor changes to the already completed agreements were needed in order to fit into the framework of the master operating agreement. Mr. Garzini recommended that the BPMC select an operator. Mr. Garzini stated that approval was expected by the Attorney General's office for a sole source contract, adding that prompt action was needed by the utilities. Mr. Saxton stated that remaining agreement issues, including the master operating agreement could be resolved in a one or two day meeting of the Agreements Subcommittee. Mr. Story stated HEA would have an O&M proposal ready to submit to AEA and the Bradley PMC within two weeks. Noting that the introduction of the proposed master operating agreement had delayed the completion of the three remaining HEA agreements, and recognizing the need to expedite the agreements process, Mr. Story moved that the PMC authorize Ron Saxton and Stan Sieczkowski to complete the master operating agreement. The motion, seconded by Mr. Ritchey, was approved by unanimous roll call vote (Action 93-177). dburger\word\minutes\pmc\06-93 BPMC Meeting Minutv. June 17, 1993 Page 7 of 9 Mr,Story moved that the BPMC direct AEA to work solely with Homer Electric/A ssociation to complete its proposal for the onsite operation and tenance of the Bradley Lake Hydroelectric Project, in accordance with existing project agreements.! Mr. Kelly asked if the issue of sole source procurement of the Bradley Lake operation and maintenance contract had been resolved. Mr. Garzini stated, because it was not a typical procurement situation (i.e. the BPMC would actually be paying for the contract), AEA could likely participate in a contract selected by the BPMC. Mr. Garzini added that a formal legal opinion on the procurement issue was requested by AEA. Related to the contracting issue, Mr. Saxton stated that, according to the Power Sales Agreement, the BPMC has the authority to chose the project operator and AEA has the authority to veto the choice. Continuing, Mr. Saxton stated it was his opinion that both AEA and the BPMC had authority to contract and to veto the other's selection. Mr. Saxton added that the language of the proposed master operating agreement allows the State to contract with the operator and requires the approval of the BPMC. Mr. Kelly recommended that the BPMC consider HEA's forthcoming proposal while AEA obtained a legal opinion on State procurement requirements. Mr. Garzini stated that, because of the State's responsibility to the FERC license and bond requirements, AEA should be the contracting authority and that the contract be subject to the approval of the BPMC. Mr. Garzini requested that, if the BPMC develops a contract with an operator, the FERC license, the bond holders and State's interests be protected. Mr. Kelly strongly preferred the BPMC as the contractor, acknowledging the need to maintain AEA's interest. Mr. Garzini later offered an additional alternative, stating that AEA could contract with the BPMC, which in turn, would contract with the project operator. Mr. Story recognized AEA's obligations and its right to veto a contract as well as its technical ability to assist with the development of an operation and maintenance contract proposal. It is HEA's intent to work with AEA to bring a two part proposal to the BPMC which would identify the required services (Part 1) and the technical contract and budget (Part 2). Mr. Story explained that HEA was in the process of working with AEA and had not set up a structure to negotiate a contract with the BPMC. The issue of which entity, the BPMC or ABA, would ultimately be the contractor did not affect the development of the operation and maintenance proposal. Mr. Story clarified the intent of ! Mr. Story's original motion did not contain the word solely. Mr. Story later added the word to clarify the intent of the motion. dburger\word\minute: s\pmc\06-93 BPMC Meeting Minute. June 17, 1993 Page 8 of 9 p> his motion was for the BPMC to direct AEA to work solely with HEA to e HEA's contract proposal for the operation and maintenance of co! ae e. The propriety of HEA's request for exclusive assistance m AEA was questioned. In an effort to expedite the process of completing HEA's operation and maintenance proposal, Mr. Kelly recommended the motion be amended as follows: The BPMC requests AEA assist HEA with the aration of an operation and maintenance roposal for presentation at the next Bradley PMC meeting. Both Mr. Story and Mr. Ritchey accepted the amended motion. Prior to the vote, Chairman Highers clarified that the motion was not intended to be interpreted as exclusive. Mr. Garzini stated that AEA was available to any BPMC member who requested help. The amended motion was approved by unanimous roll call vote (Action 93-178). 12. NEW BUSINESS A. Operations Budget Contingency Fund Resolution Mr. Petrie reported that the Budget Subcommittee was working on a resolution delegating authority to the Budget Subcommittee and expected to have it ready by the next BPMC meeting. Approval of FY94 Payment Obligation The FY94 utility payment schedule and cash flow was distributed to the Committee. Mr. Ritchey noted that the BPMC had previously acted upon the FY94 budget, however had not approved the FY94 utility payment schedule (Attachment 3). Mr. Ritchey advised the Committee that the fund balance (Cash Flow, line 8) may actually be higher than shown, in which case the utility payment amount could be reduced in the future. AEA is reviewing the figures. Mr. Ritchey moved to approve the FY94 utility payment schedule. Seconded by Mr. Kelly, the motion was approved by unanimous roll call vote ( Action 93-179). Approval of Other Payments Mr. Kelly moved to approve payments of approximately $3,600 to Bill Bennett for legal assistance associated with the Bradley Lake labor negotiations and $6,215.90 to Ron Saxton for legal counsel. Seconded by Mr. Ritchey, the motion was approved by unanimous roll call vote (Action 93-180). dburger\word\minutes\pme\06-93 BPMC Meeting Minute. June 17, 1993 Page 9 of 9 13. |. COMMUNICATIONS 0 Next Meeting Thursday, July 22, 1993 10:00 a.m. Chugach Electric Association 14. ADJOURNMENT The meeting adjourned at 12:30 p.m. David L. Highers, Chairman Attest: dceennsgeeiaainaidiindiae Brent N. Petrie, Secretary dburger\word\minutes\pmc\06-93 ATTACHMENT 1 State of Alaska DS Walter J. Hickel, Governor Alaska Energy Authority A Public Corporation June 16, 1993 Bradley Lake Project Management Committee Members SUBJECT: Bradley Lake Hydroelectric Project Operation and Maintenance Dear PMC Members: The legislature adopted HCS CSSB106 that legislates the transfer of the Alaska Energy Ampere and programs to the Department of mee and Regional Affairs and the Alaska Industrial Development and Export Authority (AIDEA). The apparent intent is to downsize the existing Alaska Energy Authority and contract services to the maximum extent possible. In pursuit of previous discussions with the Bradley Lake Project Management Committee (PMC) participants, it is the intent of the AEA to solicit proposals for the on-site operation and maintenance of the Bradley Lake Hydroelectric project. The options are to advertise for proposals and do an evaluation and award or to negotiate an Operation and Maintenance contract with a qualified contractor specified by the PMC. AEA hereby requests the Bradley Lake PMC to provide direction for soliciting proposals for the on-site spurenees and maintenance or to provide us with the Committee's recommendation for an on-site operator in accordance with the existing Bradley Lake project agreements. A formal scope of work for the Operations and Maintenance contract can be developed by AEA. After negotiation of the contract with the AEA and approval of the contractor by the PMC, the contract will be sent to the AEA Board for consideration and action. Sincerely, Can Ronald A. Garzi Executive Director RAG:SES:ds ce: Riley Snell, AIDEA PO. Box 190869 701 East Tudor Road = Anchorage. Alaska 99519-0869 (907) 561-7877 Fax: (907) 561-8584 93Q2/MA4798(1) Page | ISSUE CHUGACH GVEA MATANUSKA | ML&P | GENERAL CONCERNS Railbelt Reserve Issues Lack of contractual links between the Bradley PSA and AIA has made incorporation of Bradley into the Railbelt system more difficult. SILOS 2 second delay should be accepted. Loads should be restored using spinning reserve of other utilities following a disturbance, as long as firm loads haven’t been interrupted. Extra spinning reserve at times will prevent SILOS. Supports ASCC efforts. IOC contractual responsibilities may dictate development of reliability criteria by 10C--HEA doesn’t support duplicative efforts. How should load shed in lieu of spin be treated? Concerned about practices which reduce railbelt reserves below contractually required levels; deteriorated reliability; inequities in burden of supplying spinning reserves. No load shed in lieu of spin should be permitted until studies show it will perform as well as actual spin. Load shed in lieu of spin program must satisfy basic contractual requirements, based on results. 2 LN3WHOVLLY QUALITY OF SPIN All spin shouldn’t be treated equally. Generators should be connected to AGC in order to count spin from that unit as part of a utility’s operating reserve. Indirect AGC shouldn’t be allowed for the spin to be fully counted as operating reserve. Supports a performance factor system for spinning reserves such that slow responding reserves do not count the full amount towards operating reserve or, in the alterative, a limit on the amount of slow responding reserves | such as hydro. cuucacn | eves |_—_tomer _|_MATANUSKA Quality will determine the amount of system frequency decline during the loss of system generation or facilities and amount of customer loads shed during disturbances. Cannot support relaxed spin standards unless supported by reasonable analysis. Is the unit under AGC control? How fast can the unit respond? SYSTEM RESPONSE DIFFERENCES SELLING OF SPIN CHUGACH Should be compared with PSS/E runs using the actual loadflow and generator loading from just prior to the system disturbance. Reviews should be after every major system disturbance or when requested by IOC member. Should not be allowed unless the reserve is backed up by a load shed scheme or the sale can be interrupted in a time frame to prevent first stage load shed. ee HOMER ee Spinning reserves loaded with “economy energy sales” results in reduced system spinning reserves and may reduce system reliability. Practice may not be equitable to all involved utilities. Should be curtailed or limited to improve overall system reliability. Selling spin isn’t permitted in the AIA. Economy energy sales should be covered by real spin at one end or the other or by both. Spin sold in nonexistent. —____ ISSUE cuucach | cvea | omer | maranuska | Muar | LOCATION OF Location and Affects the ability of SPINNING distribution of spinning the system to respond RESERVES reserve by geography, to disturbances. Must interconnections, and considered: (1) is the unit should not be total required system specified by the IOC, reserves and criteria unless reserves are for "pooling" reserves pooled. Only reserves equitable between physically connected utilities; and (2) weak with the interconnected transmission interties system should count erode reliability and toward spinning limit the ability to reserves. economically schedule generation. The resulting unbalanced generation during disturbances opens interties to island sections. Doesn’t directly relate to reserves, but to load/resource scheduling in the “island” areas. The IOC should establish a reliability standard by region, if appropriate. The IOC must consider the ability of the system to respond and develop operational criteria to provide such reliability. Transmission limitations should be considered. ISSUE cuucach | cvea | omer | maranuska | Muar | OPERATING If SILOS is disabled RESERVE due to controller CRITERIA unreliability, the owner of the controller should be obligated to supply the amount of reserves disabled while the controller is fixed. Controller reliability criteria standards should be determined by the Relaying/Reliability subcommittee of the 1oc. Supports normal treatment of reserve obligations-- exceptions to be justified, approved. Can’t support relaxing current spinning reserve limitations. BPMC doesn’t have proper authority to limit reserve scheduling--it’s an IOC issue. Must restore contractually required spin to the system. The AIA is the only contract ] between the intertie participants and is the only area for the resolution of spin/loadshed concerns. How should spin requirements be handled when shares are allocated? Which criteria--size of generation units, amount of load, kWh sales, historical reliability, number of units on-line should be used to allocated required spin, and in what combination? Criteria necessary regarding modification or avoidance of reserve requirements. May be appropriate in certain circumstances. Spinning Reserve can’t be changed by the IOC. Operation can lower the amount, but in no case can it increase it. SILO must be enabled for the utility to count SILOS for operating reserves. Should develop a pooling mechanism to ensure that the amount of on- line operating reserves always exceed the minimum required. Bradley is slow. How should slower units be counted when calculating required spin? Bradley units are slow to respond. How should spin that responds more slowly than normal be counted when calculating required spin? The ASCC is the proper forum to develop the operating reserve criteria. FORMULA STUDIES AEA RESERVE OBLIGATION? Additional studies needed to determine the maximum amount of hydro spin that will prevent first stage load shed. Doesn't believe AEA has a reserve obligation. Current allocation formula is fair and equitable. The "penalty" for utilities with large generators is justified due to (1) loss of larger machine creates larger disturbances; and (2) utilities put on larger machines due to efficiency, with little consideration for reliability penalties. Could support modifications to formula to accommodate two concerns. Should study optimum distribution of spin between units or best mixes of inertia response, fast governor response, slow machine response and AGC response. ISSUE CHUGACH HOMER MATANUSKA ENTITLEMENT Water usage should be Is the owner entitled TO SPIN necessary in order to whenever a unit is tap spinning reserve on line, or should a capability. minimum amount of energy be scheduled? Who should pay for energy required and who can claim spin if Bradley is operated as a synchronous condenser? BUTILPAY.XLS ALASKAENERGY AUTHORITY |_| BRADLEY LAKE UTILITY PAYMENTS et fet —t Power purchasers | ____] Share July | August | September | October_| November January | Fe March April May | June FY Total | Chugach Electric Association | 30.40% | $352,637 | $352,637 | $352,637 | $352,637 $352,637 | $352,637 | $352,637 | $352,637 | $352,637 | $352,637 | $4,231,647 Municipality of Anchorage | —_| 25.90% | $300,438 | $300,438 | $300,438 | $300,438 $300,438 | $300,438 | $300,438 | $300,438 | $300,438 | $3,605,252 Alaska Electric Generation & | ‘Transmission Cooperative, Inc. (acting on — behalf of Homer Electric Association, - Inc.-12.0% and Matanuska Electric r Association, Inc.-13.8%) 25.80% | $299,278 | $299,278 $299,278 $299,278 | $299,278 | $299,278 | $299,278 | $299,278 Golden Valley Electric association, Inc.| 16.90% | $196,038 | $196,038 | $196,038 | $196,038 | $196,038 $196,038 | $196,038 | $196,038 | $196,038 | $196,038 | $196,038 City of Seward Z 1.00% | $11,600 | $11,600 $11,600] $11,600] $11,600 $11,600 |" $11,600 | $11,600] $11,600 | $11,600] $11,600 Total t fn 100.00%| $1,159,991 |$1,159,991 | $1,159,991 |$1,159,991 |$1,159,991 {$1,159,991 {$1,159,991 |$1,159,991 |$1,159,991 | $1,159,991 |$1,159,991 |$1,159,991 | Page! £ LNGHHOWLIY NOTE: FY-94 cash flow cell B-9 ($496,000) is the $910,000 excess of operating funds FY-92 less $494,000 utilized on the FY-93 cash flow plus $80,000 estimated excess from FY-93 operating funds. x BRADLEY LAKE PROJECT CASII FLOW FY Tol 1,159,991 1,139,991 1,159,991 1,139,991 1,159,991 1,139,991 1,159,991 13,919,891 219,333 134,002 215,437 134,002 216,835 159,833 2,624,846 940,656 1,005,989 944,534 1,005,989 943,136 934, 1,000,156 11,791,045 | - 1,312,300 |" 2.6237 5,381,621 10,763,2__ o ° o 6,503 £1,906 ° o 6,700,623 13,470,147 219,335 mia 715,437 3: 2,707,215 o o o 670,811 o o 72,384 Oo} o 107,376 ° o OST o Qi, 61435) G5 pas ees 333,000 |" 333,000 333, = 249,608 10,164 | 71,599 1,766 4774171 2,818,710 | 3,824,699 [4.767.855 |S, BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE APPROVED MEETING MINUTES May 13, 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 Gene Bjornstad, Chugach Electric Association dburger\word\minutes\pmc\05-93 BPMC Meeting Minutes May 13, 1993 Page 2 of 9 John Cooley, Chugach Electric Association Tom Lovas, Chugach Electric Association Dan Bloomer, Chugach Electric Association Jim Hall, Matanuska Electric Association Moe Aslam, Municipal Light & Power Tim McConnell, Municipal Light & Power Bob Price, Municipal Light & Power Dave Calvert, City of Seward Dave Fair, Homer Electric Association David R. Eberle, Alaska Energy Authority Stanley E. Sieczkowski, 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 No changes were made to the agenda at this time. 5. APPROVAL OF MINUTES - March 3, 1993 March 30, 1993 April 16, 1993 The minutes of the March 3, 1993 Bradley Project Management Committee meeting, March 30, 1993 Teleconference and April 16, 1993 Teleconference were approved as submitted (Action 93-172). 6. TECHNICAL COORDINATING SUBCOMMITTEE REPORT Mr. Burlingame reported that the TCS had not met. 7. BUDGET SUBCOMMITTEE REPORT A. Bradley Lake Construction Cost Audit Update Mr. Ritchey reported final comments were being forwarded to Metzler & Associates. The final audit report is anticipated in the near future. dburger\word\minutes\pmc\05-93 BPMC Meeting Minutes May 13, 1993 Page 3 of 9 Bradley Lake O&M Cost Audit Update Parisena Stromberg & Company has completed the 1992 O&M cost audit. Following initial review by the Budget Subcommittee, the report will be distributed to the Bradley PMC. 8. AGREEMENTS SUBCOMMITTEE REPORT Mr. Sieczkowski reported that AEA had received and was reviewing the proposed paragraph subjecting the agreements to a master operating agreement for inclusion in the remaining agreements. Additionally, AEA has received and is reviewing the proposed master operating agreement. Mr. Sieczkowski expected the Agreements Subcommittee to meet to discuss these issues in the near future. Noting the discussion at the March 3, 1993 BPMC meeting regarding the role of AEA and the BPMC (i.e., the ability of the BPMC to contract), Mr. Kelly asked if the current proposed agreements reflected the BPMC as the contracting authority. Mr. Saxton explained that he and Mr. Lovas had drafted a master operating agreement. The concept was discussed with AEA and its attorney, but AEA had not responded further. Mr. Saxton explained the emphasis had been directed toward completing the agreements in progress for a limited term, with the inclusion of a means to incorporate them under the anticipated master operating agreement. In view of the recent legislation affecting the Alaska Energy Authority, Mr. Garzini recommended the BPMC delay further action on the issue for at least two weeks. Mr. Garzini reiterated AEA's ultimate intention to transfer the operation and maintenance of Bradley Lake to the utilities, however added, some time was needed to fully study the legislation and to form a plan. Citing intentions to include the utilities in the planning, Mr. Garzini noted numerous options were possible (i.e., joint action agency, etc.). Mr. Garzini informed the Committee that the Energy Authority Board of Directors will dissolve 90 days after the legislation is signed. AEA and the responsibility for the operation and maintenance of the State's hydroelectric facilities will be transferred to the Alaska Industrial Development and Export Authority (AIDEA) Board. The rural programs and services provided by AEA will be transferred to the Department of Community and Regional Affairs (DCRA). Grants to build the approved interties will be issued by the Department of Administration (DOA). Noting DOA's inexperience, Mr. Garzini suggested AEA may be able to assist the utilities dburger\word\minutes\pmc\05-93 BPMC Meeting Minutes May 13, 1993 Page 4 of 9 10. with financing. Summarizing the effect of the legislation, Mr. Garzini stated that "AEA had been wounded badly, but was not dead." AEA can no longer acquire projects, however Mr. Garzini believed AEA could still finance projects. The change will have no effect on AEA's agreements. Expressing concern over the uncertain effects of the legislation, Mr. Kelly suggested that the utilities may have an opportunity for a role in shaping the outcome. Mr. Garzini added his concern over the integration of an exempt agency (AEA) with a classified agency (DCRA) and the potential loss of qualified personnel. It was noted that AEA's programs had been fully budgeted for the next fiscal year. Mr. Garzini expressed preference for the establishment of a utility joint action agency and recommended that the utilities pursue the possibility. In response to questions by Mr. Ritchey, Mr. Saxton explained the Energy Authority would continue to exist, however, some of its programs and loans will be transferred, and it no longer has the ability to construct and acquire projects. Mr. Kelly recommended that the Bradley PMC strongly assert its position to operate Bradley Lake. OPERATION & DISPATCH SUBCOMMITTEE REPORT Mr. Sieczkowski reported the Operation & Dispatch Subcommittee held a teleconference meeting on March 12, 1993. Based on the current lake level, a 115 megawatt interim operating guideline was approved by the Subcommittee for scheduling purposes. The Subcommittee recommended a transient stability analysis by Stone & Webster Engineering to determine operating conditions below the 1080! reservoir elevation level. Mr. Sieczkowski noted the SVC systems were in operation and that installation of the Woodward governor modifications was expected the week of May 24, 1993. REVIEW OF PROJECT STATUS Mr. Eberle reported work on the Static Var Compensator Systems was complete with the exception of a few punch list items. Replacement of the capacitors by ABB is anticipated by August or September. Mr. Eberle confirmed installation of the governor modifications was scheduled May 24, 1993 with testing to immediately follow. The soil remediation contract was awarded in early April for $660,000. The soil burner is on site and nearly finished processing the soil. Part two of the contract, crushing and spreading the aggregate on the runway, is expected to be completed by mid-June. Mr. Stahr asked if recovery of the spill cleanup cost was being dburger\word\minutes\pmc\05-93 BPMC Meeting Minutes May 13, 1993 Page 5 of 9 11. pursued. Mr. Eberle stated cost recovery was being investigated, however, was not expected. Mr. Eberle explained that the POL facility was constructed by the contractor for his own use under Phase I of the Bradley Project in 1986. At AEA's request, the contractor left the POL facility in an as is/where is condition for continued use, making it AEA's responsibility. The deterioration of the POL facility liner was not discovered until later during removal of the facility. Mr. Eberle informed the BPMC that a revised final project construction budget would be presented to the Energy Authority Board of Directors on May 20, 1993 for approval. The budget was increased by approximately $2,000,000 to cover unanticipated costs, including the fish water bypass work, utility power costs to support testing, the contaminated soil cleanup, and the proposed capitalization of the Fritz Creek Transmission Line. Mr. Burlingame advised the BPMC that ABB was in the process of reorganizing and was reassigning staff who had worked on the SVC Systems. Mr. Burlingame recommended that any studies required to add a second transmission line be requested before the engineers familiar with the project were no longer available. Mr. Eberle concurred, stating, however, that it was not a construction expense, but that the construction contract could be used to facilitate the studies. Mr. Eberle will discuss the scope of work with Dave Burlingame and obtain an estimate from ABB. Mr. Kelly recommended that a determination be made on whether the studies could be considered a project cost, otherwise, the studies could be funded as one of the first costs against the interties. OLD BUSINESS A. Spinning Reserve / Under Frequency Load Shedding Update Mr. Lovas reported the utilities expected to implement the new load shedding schedule adopted by the Intertie Operating Committee (IOC) by June 1, 1993. The Alaska Systems Coordinating Council Reliability Criteria Committee (ASCC-RCC) has developed a position statement. The RCC is also discussing proposed spin allocation methodologies, including generation and load relationships, performance factors on generating units, sales levels, and load weighting of units. The RCC has agreed upon four characteristics required for a workable allocation methodology: 1) incentives to improve unit reliability; 2) recognition of liability imposed by size of generating units; 3) recognition of a utility's need to use the reserve; and 4) application to present and future operating considerations. dburger\word\minutes\pmc\05-93 BPMC Meeting Minutes May 13, 1993 Page 6 of 9 Bradley Scheduling vs. Spin Requirement Update Mr. Saxton noted he had received comments from Homer Electric Association and Chugach Electric Association in addition to earlier comments received from Municipal Light & Power. Golden Valley Electric Association, Matanuska Electric Association and Alaska Energy Authority will be forwarding comments to Mr. Saxton. Fritz Creek Segment Funding Mr. Eberle reported that AEA had been advised by Eric Wohlforth, AEA bond counsel, that the Fritz Creek costs could be funded as a Section 31 cost, upon approval of the purchasers (Attachment 1). Approval of the increased project budget by the AEA Board of Directors was also needed. Referring to Mr. Wohlforth's April 13, 1993 letter, Mr. Story clarified that HEA intended to share the cost with the other purchasers and did not expect to be exempted. Mr. Kelly moved that the $600,000 Fritz Creek transmission line segment acceleration cost be treated as a Section 31 cost, subject to AEA Board approval of the increased project construction budget, to be paid by all purchasing utilities according to percentage shares, including Homer Electric Association. The motion, seconded by Mr. Stahr, was approved by unanimous role call vote (Action 93-173). Fish Water Bypass Update Mr. Eberle reported the diving contractor began work on March 25, 1993. Due to adverse ice and weather conditions, the work took longer than expected. The contractor was able to clear sufficient material out of the way to install a vertical trash rack over each intake, preventing subsequent obstructions. However, because of the difficult working conditions, the contractor was not able to remove the material from the intake area without incurring significant additional expense. Mr. Eberle explained the remaining submerged material could be removed this summer using a crane, if the reservoir level drops low enough (which is not expected), or the material could be removed by divers from a barge. A cost of $50,000 is anticipated to remove the material by crane or $150,000 if divers and barge are required. Either case, however, was estimated to be more economical than continuing the operation under the conditions encountered in March. Mr. Eberle reported the intakes are presently clear and operating at required output. With the right combination of adverse events, the intakes could, again, become obstructed, however, it is not expected to be an immediate problem. dburger\word\minutes\pmc\05-93 BPMC Meeting Minutes May 13, 1993 Page 7 of 9 Mr. Eberle noted the remaining underwater work could wait until next summer, in anticipation of a reservoir level low enough to utilize a crane. AEA will be soliciting bid prices for the remaining underwater work. Mr. Eberle explained the source of the debris was rock excavated from the gate shaft and used as fill for access to the upstream face of the spillway. Considerable loose rock remained above the water line in the vicinity of the intake channel which also needed to be cleared. It was estimated that this would cost approximately $50,000. The total cost to resolve the problem and prevent future problems could reach $400,000. Mr. Eberle stated that it was AEA's position that, considering the nature and source of the rock debris, the cost of the fish water bypass repair work should be considered a construction cost, rather than an O&M cost. Mr. Kelly expressed concern regarding the availability of funds to cover the additional construction expenses (i.e., POL facility and fish water bypass repairs). Mr. Eberle stated the proposed revised project budget included these additional costs. The necessary funds and an additional construction contingency would be committed from the excess project construction funds by the AEA Board of Directors before the funds were reclaimed by the State. Mr. Saxton cautioned that some of the "extra" money may actually be bond money which would need to be returned to the investors, explaining that too many bonds may have been issued relative to the construction cost. Mr. Eberle distributed a summary of the financing costs and a reconciliation of project costs to the Committee (Attachments 2 and 3). The construction cost of $314,500,000 noted on the top line of Reconciliation of Project Costs (Estimate as of May 12, 1993) represents the revised project construction budget (assuming approval by the AEA Board of Directors) and includes the POL facility and fish water bypass repair costs, additional utility SVC testing costs, Fritz Creek transmission line segment costs (as Section 31) and approximately $650,000 - $700,000 in unallocated contingency. Based upon the final construction budget of $314,5000,000, $12,082,500 would be returned to the State general fund, with virtually all bond proceeds having been expended. The Budget Subcommittee will review the final project construction budget and provide any comments to AEA prior to consideration by the AEA Board of Directors on May 20, 1993. dburger\word\minutes\pmc\05-93 BPMC Meeting Minutes May 13, 1993 Page 8 of 9 E. BPMC Control Over O&M Decisions and Agreements - Master Agreement Mr. Saxton noted Mr. Garzini's recommendation to postpone action related to the master agreement until plans for the operation and maintenance of Bradley Lake could be developed. Mr. Saxton requested to be kept informed of the direction AEA was taking regarding the master agreement. 12. NEW BUSINESS A. Operations Budget Contingency Fund Resolution Discussion of this item was deferred to the next Committee meeting. B. Diamond Ridge Relaying Costs Mr. Eberle noted that a memorandum had been distributed in the BPMC meeting packet outlining the Diamond Ridge relaying cost. Mr. Eberle explained that the cost had been approved by the Technical Coordinating Subcommittee (TCS) but, due to an oversight, had not been formally presented to the BPMC for approval. Funds for the cost were included in the original project construction budget. Mr. Story motioned that 107,115.4: roved nstruction cost for Diamond Ridge layin ni Mr. Kell motion in: 1 call vote (Action 93-174). Cc, Approval of Legal Expenses (added to the agenda) Mr. Ritchey noted the BPMC had incurred $45,803.76 legal expenses for February, March and April 1993. Mr. Ritchey moved that the 45,803.76 | xpen: Vi The motion nded b Mr. Story, was approved by unanimous roll call vote (Action 93-175). 13. . COMMUNICATIONS Mr. Sieczkowski noted that since Bob Hufman's accident, John Sorrel of Homer Electric Association was assisting with the Bradley Lake labor negotiations. Mr. Sieczkowski advised the Committee that progress was slow. dburger\word\minutes\pmc\05-93 BPMC Meeting Minutes May 13, 1993 Page 9 of 9 A. Schedule Next Meeting Thursday, June 17, 1993 10:00 a.m. Chugach Electric Association 14. ADJOURNMENT The meeting gdjourned at 11:30 a.m. Attest: dburger\word\minutes\pmc\05-93 ATTACHMENT 1 WOHLFORTH, ARGETSINGER, JOHNSON & BRECHT ~ PETER ARGCTRIND ER: A PROFESSIONAL CORPORATION FECERONe JULIUS J. BRECHT ATTORNEYS AT LAW (907) 276-6401 CYNTHIA L. CARTLEDGE ROBERT M. JOHNSON 900 WEST STH AVENUE, SUITE 600 TELECOPY THOMAS F. KLINKNER (907) 276-5093 BRAOLEY E. MEYEN ANCHORAGE, ALASKA 99501-2048 JAMES A. SARAFIN KENNETH E VASSAR ERIC E. WOHLFORTH RECEIVED MEMORANDUM APR 151993 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 2 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. Hl. rity of th n 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