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Home My WebLink AboutBPMC Meeting October 26, 1993 3& ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY 480 WEST TUDOR + ANCHORAGE, ALASKA 99503-6690 + (907) 561-8050 * FAX (907) 561-8998 MEMORANDUM 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: Dennis V. McCrohan Secretary Geac GA DATE: October 20, 1993 SUBJECT: Project Management Committee Notice of Meeting — October 26, 1993 The next meeting of the Bradley Lake Project Management Committee will be held Tuesday, October 26, 1993. The meeting will begin at 10:00 a.m. Training Room at Chugach Electric Association, Anchorage. To ensure the inclusion of all materials up for discussion, Committee packet will be sent out on Friday, October 22, 1993. DVM:b jf DOCBIJF253 cc: Vince Mottola, Fairbanks Municipal Utilities System Stanley E. Sieczkowski, Alaska Energy Authority Larry Wolf, Alaska Energy Authority David R. Eberle, Alaska Energy Authority Brent N. Petrie, Alaska Energy Authority DOCBIF253 in the the Management 10. 11. 12. 13 14. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING AGENDA October 26, 1993 Chugach Electric Association, Inc. Training Room 10:00 a.m. CALL TO ORDER ROLL CALL PUBLIC COMMENT AGENDA COMMENTS APPROVAL OF MEETING MINUTES - September 21, 1993 TECHNICAL COORDINATING SUBCOMMITTEE REPORT BUDGET SUBCOMMITTEE REPORT AGREEMENTS SUBCOMMITTEE REPORT OPERATION AND DISPATCH SUBCOMMITTEE REPORT REVIEW OF PROJECT STATUS OLD BUSINESS A. Spinning Reserves Update B. Bradley Scheduling vs. Spin Requirement Update Cc. Master Operating Agreement Update (sent out previously by Ron Saxton) D. HEA O&M Agreement -- Terms and Conditions E. Homer Electric Association/Alaska Energy Authority/Project Management Committee Duties NEW BUSINESS A. Approval of Legal Expenses and Other Payments COMMITTEE COMMENTS A. Next Meeting Date ADJOURNMENT DOCBIF253 Highers Burlingame Ritchey Sieczkowski Wolf Eberle Lovas Saxton Saxton McCrohan McCrohan Ritchey Highers ALASKA ENERGY AUTHORITY Public Notice Bradley Lake Project Management Committee October 26, 1993 Publication: October 20, 1993 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 October 26, 1993. For additional information, contact David L. Highers, Chairman, Chugach Electric Association, Inc., P.O. Box 196300, Anchorage, Alaska 99519-6300. /s/ Alaska Energy Authority Project Management Committee int AN VAY <O)BRADL Y LAKE PROJECT MANAGEMENT COMMITTEE DRAFT MEETING MINUTES September 21, 1993 1. CALL TO ORDER Chairman Highers called the Bradley Lake Hydroelectric Project Management Committee to order at 1:05 p.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 Dennis McCrohan, Designated Representative Chugach Electric Association David L. Highers, Designated Representative and Chairman Golden Valley Electric Association Marvin Riddle, Alternate 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 Tom Stahr, Designated Representative Others Present: Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt Bob Hufman, Alaska Electric Generation & Transmission Cooperative dburger/word/minutes/pmce/09-93 Bradley Lake Project Management Committee Meeting Minutes - September 21, 1993 Page 2 of 10 = Hutchens, Alaska Rural Electric Cooperative Association yearn: Chugach Electric Association ley, Chugach Electric Association wy \ye \\ Gene BS rjomad, Chugach Electric Association Tom Lovas, Chugach Electric Association Jim Hall, Matanuska Electric Association Tim McConnell, Municipal Light & Power Bob Price, Municipal Light & Power Dave Fair, Homer Electric Association Myles Yerkes, Homer Electric Association David R. Eberle, Alaska Energy Authority Stan Sieczkowski, Alaska Energy Authority Larry Wolf, Alaska Energy Authority Brian Walshe, Metzler & Associates Lee Burgess, Metzler & Associates Dan Beardsley, Alaska Industrial Development & Export Authority Brenda Fuglestad, Alaska Industrial Development & Export Authority Eva Carpenter, Alaska Industrial Development & Export Authority Denise Burger, Alaska Energy Authority 3: PUBLIC COMMENT There being no public comment, the meeting continued to the next item. 4. AGENDA COMMENTS Item 12.A., Approval of Synch-Check Relay Installation, was added to the Agenda 5. APPROVAL OF MEETING MINUTES Minutes of the August 17, 1993 meeting were approved with minor corrections. 6. TECHNICAL COORDINATING SUBCOMMITTEE REPORT Mr. Burlingame reported the TCS has scheduled a meeting to be held September 30, 1993. 7. BUDGET SUBCOMMITTEE REPORT Mr. Ritchey reported the Budget Subcommittee recently met and discussed several issues. The Subcommittee expects to receive billing from HEA for dburger/word/minutes/pmc/09-93 Bradley Lake Project Management Committee Meeting Minutes - September 21, 1993 Page 3 of 10 transmission line maintenance work. Mr. Ritchey explained there were three categories af, Fansmission line maintenance work: aerial patrol, ground patrol e d that most of the work would take place in the fourth quarter of 5 A has agreed to provide regular quarterly billing information, even e absence of work for a particular quarter. The Subcommittee also discussed the potential financial impact to the FY94 operating budget due to the assumption of the operation and maintenance of Bradley Lake by Homer Electric Association. The Subcommittee concluded that the impact could not be determined until those specific duties to be assumed by HEA were identified. Additionally, Mr. Ritchey pointed out that a FY94 budget would need to be developed for duties retained by the BPMC, when those specific items are identified. Mr. Ritchey advised the Committee that it was nearing time to begin the FY95 budget process. It was noted that, in the past, most of the budget work had been done by the Energy Authority, however, it was anticipated that HEA would provide future operation and maintenance cost information. Mr. Ritchey noted that AIDEA/AEA has offered assistance with necessary FY94 budget revisions and the development of the FY95 budget. The Budget Subcommittee anticipates a higher level of direct involvement with the Project budget process. Mr. Ritchey informed the BPMC that the Budget Subcommittee approved a proposal by Parisena Stromberg & Company to perform the FY93 O&M cost audit. A. Construction Cost Audit Presentation Mr. Ritchey introduced Brian Walshe and Lee Burgess of Metzler & Associates. Mr. Walshe distributed an outline report of Metzler & Associate's Bradley Lake construction cost audit findings to the Committee (Attachment 1). Mr. Walshe's presentation closely followed the contents of the outline. Expanding on AEA internal cost control, page 13 of the audit outline, Mr. Walshe noted the owner cost was about 6% of the total Project cost. The original owner cost was budgeted at $16.2 million, however, the final cost was projected to be $17.7 million. The difference, a 9% variance, was due, in part, to required additional services. Mr. Walshe added the variance was not alarming, however, Metzler & Associates maintained that deficiencies existed in the Energy Authority's management control process of its internal costs. Metzler & Associates found it difficult to define payroll charges and overhead expenses for the earlier years of the Project due to limitations of AKSAS (Alaska State Accounting System) and had to rely on budgets for dburger/word/minutes/pmc/09-93 Bradley Lake Project Management Committee Meeting Minutes - September 21, 1993 Page 4 of 10 information. Mssrs. Walshe and Burgess, noted these costs should have beengillocated ahead of time and a reporting process implemented to ( , which had not been done. Assuming the utilities would be NW a more active role in the project management of future construction projects, Mr. Burgess recommended the development of a good information project control system. Mr. McCrohan concurred, adding the utilities needed to determine how the future intertie projects were going to be handled (i.e., by what contracting approach) before a good management control system could be developed. The Committee discussed the possible benefits of the Energy Authority producing a project management critique on the construction of Bradley Lake. Mr. Burgess pointed out that what worked well for the Bradley Lake Project may not work as well for another project. Mr. Walshe noted the benefits of documentation and the effect of loosing personnel (and important information with them), adding that, such lessons could potentially be applied to any project. Returning to the 6% owner cost identified early by Mr. Walshe, Mr. McCrohan asked if the cost was reasonable. Mr. Walshe stated the 6% owner cost was not unreasonable, however, the owner costs could not be easily documented. Mr. McCrohan observed that the Bradley Lake Project owners costs were, in his experience, on the low side, especially when compared to other construction projects. Mr. Ritchey stated the Budget Subcommittee will review the recommendations made in the Metzler & Associates audit report and determine if any further action by the Subcommittee is necessary. Mr. Ritchey and Chairman Highers expressed the Committee's appreciation to Mssrs. Walshe and Burgess for their work. 8. AGREEMENTS SUBCOMMITTEE REPORT Mr. Sieczkowski deferred discussion of the pending agreements to Item 11. C., BPMC Control Over O&M Decisions and Agreements - Master Agreement. 9. OPERATION AND DISPATCH SUBCOMMITTEE REPORT Mr. Wolf reported that the Operations and Dispatch Subcommittee met on August 18, 1993. The Transient Stability Analysis Study by Stone & Webster Engineering Corporation (SWEC) was distributed to the Subcommittee. The study was requested to determine the operating limits of the Project below dburger/word/minutes/pmc/09-93 Bradley Lake Project Management Committee Meeting Minutes - September 21, 1993 Page 5 of 10 reservoir elevation 1080'. Essentially, the study indicated that two units should be run belowy/elevation 1080'. With two units operating there was no load _ restricts * report stated that one unit operation between 16 - 18 megawatts = “shoe avoided. \v Mr. Wolf reviewed a memorandum distributed to the Committee detailing the unit trips that occurred on August 18, 1993 (Attachment 2). Mr. Wolf stated that the trips were attributed to malfunctions in the cooling water system, adding that several factors contributed to the problem. Mr. Wolf explained that the main cause of the failure was a leak in a two inch valve in the closed loop system. The leaky valve caused the system to become saturated, ultimately resulting in the shut off of all cooling to the bearings and stator. The units tripped off line before any damage occurred. Mr. Wolf advised the Committee that the valve has been repaired and is functioning properly. Other minor deficiencies in the system are being reviewed by the design engineer (SWEC) and are expected to be corrected within the next few months. Additionally, Mr. Wolf stated sensors will be installed on the closed loop system to provide an advance warning. Mr. Stahr expressed some concer that the cooling water system was not unitized (i.e., the cooling water system malfunction tripped both units rather than only one unit), and questioned whether there were other common systems which could result in tripping both units. Mr. Wolf reported that the O&D Subcommittee approved the line loss table prepared and implemented by Chugach Electric Association. A study group has been formed to review the tables. Mr. Wolf stated that the Subcommittee discussed the addition of a synch-check relay and voted to recommend the Project Management Committee approve installation of the relay at a cost not to exceed $10,000 (to be paid from Project construction funds). Mr. Wolf informed the Committee the Project annual maintenance outage is scheduled October 2 - 20, 1993. It was expected that the concurrent outage of both units would be limited to two or three days early during the scheduled maintenance period. Because of the relatively high lake level, one unit will be available to operate during the outage period. Mr. Ritchey questioned why the yearly maintenance was scheduled now, suggesting that another time might be better (when the lake level was lower). It was noted that several factors dictated when the Project maintenance outage was scheduled (i.e., coordination of utility maintenance schedules, weather, and projected lake level). Mr. Wolf noted the O&D Subcommittee is continuing discussions on Homer Electric Association energy losses and SVC station service costs. dburger/word/minutes/pmc/09-93 Bradley Lake Project Management Committee Meeting Minutes - September 21, 1993 Page 6 of 10 10. REVIEW OF PROJECT STATUS x Mr. Eber rted that ABB is coordinating replacement of the SVC ze ea) jacitdrs with the Project maintenance outage in October. Mr. Eberle stated <8 is providing an extended five year warranty on those questionable capacitors not being replaced at this time. Mr. Eberle noted that ABB is performing system studies on the effect of the proposed Kenai transmission line to the SVC System. The ABB engineer performing the system studies will be in Anchorage on October 5, 1993 to discuss the preliminary results with the utilities and further define study requirements. 11. OLD BUSINESS A. Spinning Reserve Update Mr. Lovas reported the ASCC group working on the spinning reserve allocation methods met on August 19, 1993 with Mr. Bill Masters (professional consultant). Mr. Masters was supportive, however, cautioned the group regarding the existing system and the role of the participants relative to the system during the current technical evaluations. Mr. Lovas noted that Municipal Light & Power withdrew its earlier operating reserve allocation proposal and has submitted a new proposal. The new proposal is currently under review. Bradley Scheduling vs. Spin Requirement Update Mr. Saxton distributed a report titled, Railbelt Reserve Issues, Jurisdiction and Authority for Resolution (Attachment 3). Mr. Saxton noted that, although it was identified as a draft, the report was in its final form and ready for distribution. Mr. Saxton noted the report contained answers to some of the questions which have been identified, and recommendations on how to proceed. Mr. Saxton suggested that the Committee review the report and submit questions or comments for further discussion at the next scheduled meeting. BPMC Control Over O&M Decisions and Agreements - Master Operating Agreement Mr. Saxton reported that a meeting had been held with AIDEA/AEA to discuss the agreement. The meeting resulted in minor revisions to the dburger/word/minutes/pmce/09-93 Bradley Lake Project Management Committee Meeting Minutes - September 21, 1993 Page 7 of 10 Master Operating Agreement which are currently being incorporated. It wa ted that the Master Operating Agreement would be ready for eotisideration at the next Committee meeting. Mr. Saxton anticipated YD eating work on completion of the remaining agreements within the next few days. In response to inquiry by Mr. Story, Mr. Saxton stated no new drafts of the Master Operating Agreement had been issued since April 1993. Mr. Saxton explained development of the master agreement had been put on hold during the reorganization of the Energy Authority and had just recently been addressed again. Mr. Saxton expected to issue the current draft Master Operating Agreement shortly. O&M Contract Update Mr. Story reported Homer Electric Association has been working with Mr. McCrohan and AIDEA/AEA in an effort to complete the qualifications process for the Bradley Lake O&M contract. Mr. McCrohan distributed a copy of the AIDEA/AEA findings on the qualification of Homer Electric Association to operate and maintain the Bradley Lake Project (Attachment 4). Mr. McCrohan informed the Committee that, based on the State's criteria, HEA was qualified for the on-site operation and maintenance of the Project. Mr. McCrohan noted that, during the qualification process, AIDEA/AEA identified some areas needing additional development by HEA (i.e., training relative to hydroelectric facilities and procurement procedures). Additionally, insurance safeguards were identified as an issue for further discussion with the Committee. Mr. McCrohan anticipated that detailed negotiations for on-site labor and related support services would begin shortly. It was hoped that a contract could be presented to the Committee for review at the next scheduled meeting. Regarding the remaining support services historically provided by the Energy Authority (i.e., engineering, FERC license and permitting compliance), Mr. McCrohan stated a meeting would be held to determine who should perform those services: AIDEA/AEA, Homer Electric Association or the Bradley Lake Project Management Committee. Mr. McCrohan noted that AIDEA/AEA had developed a list of duties that could be delegated, however deferred the final determination to the BPMC. Mr. McCrohan added that, if the Committee assumed some of the duties, provisions to accommodate such an arrangement would have to be addressed. dburger/word/minutes/pmc/09-93 Bradley Lake Project Management Committee Meeting Minutes - September 21, 1993 Page 8 of 10 —— q\> \Y Chairman Highers clarified that the agreement for the operation and mainténance of Bradley Lake, negotiated between the Energy Authority er Electric Association, was subject to the review and approval ‘Cot the Bradley Lake Project Management Committee. Mr. McCrohan - did not anticipate that the operation and maintenance agreement and arrangements for the remaining services would be ready for review in advance of the next Committee meeting. BPMC Bylaws - Subcommittee Authority/Voting Procedures Reviewing the issue, Mr. Saxton stated that the Bylaws currently limit all decision making authority to the Committee, and that authority to make decisions cannot be delegated to special purpose subcommittees. Mr. Saxton noted that authority had been delegated by the Committee to the Budget Subcommittee to make minor budget decisions. At issue was the delegation of authority to the other operating subcommittees. The Committee has been considering revision of the Bylaws to permit delegation of authority to the special purpose subcommittees. ! Mr. Saxton noted that he had not yet received comments from all Committee members on the proposed resolution to amend the Bylaws (to allow the delegation of authority). Mr. Saxton stated that comments received from Mr. Stahr favored retaining the current Bylaw provision for authority (no delegation to the subcommittees). Mr. Ritchey commented that certain types or levels of actions were appropriately made by the Committee, however some smaller, lower level issues could be handled by the subcommittees. Mr. Ritchey pointed out that the Committee always had the right to review, revise or repeal any decision made by the subcommittees. Mr. Stahr stated that the authority delegated to the Budget Subcommittee was appropriate, even if it was in violation of the Bylaws. Mr. Stahr cautioned that, under the proposed resolution, a subcommittee comprised of three members could potentially make decisions not reflecting the majority of the Committee. Mr. Stahr objected to the proposed broader application of subcommittee authority, clarifying that he did not object to delegating authority on a specific case by case need. Mr. McCrohan noted what seemed to be contradictions between the Committee and subcommittee voting procedures. Mr. Saxton stated that the current delegation to the Budget Subcommittee may be in violation of the current Bylaws and that proposed changes to the Committee delegation of authority could be limited to delegations of authority to the subcommittees for specifically 1 BPMC Meeting Minutes, July 22, 1993, p. 6. BPMC Meeting Minutes, August 17, 1993, p. 5. dburger/word/minutes/pmc/09-93 Bradley Lake Project Management Committee Meeting Minutes - September 21, 1993 Page 9 of 10 defined cases. Mr. Saxton asked that other written comments be submitted to him for incorporation into a revised resolution for _gorisideration at the next Committee meeting. The revised resolution Will be distributed sufficiently in advance of the next meeting for review AWS “by the Committee. 12. NEW BUSINESS A. Approval of Committee Expenses Mr. Ritchey moved to approv ment of $18,612.03 for Committ legal expenses for the month of August 1993. Seconded by Mr. Story, the motion was a: ved by un roll v Action 93-179). B. Approval of Synch-Check Relay Mr moved the Committee a) ve in ion of the synch-check relay for the 115 kV lin a b t n to exceed $1 to be pai j mn: ion funds. Th motion, seconded by Ken Ritchey w: ved by unanimous roll vote (Action 93-180). 13. COMMUNICATIONS Mr. McCrohan introduced Ms. Brenda Fuglestad, Alaska Industrial Development and Export Authority. Ms. Fuglestad will be providing administrative support to the Committee for an interim period until the responsibility is permanently delegated. Mr. McCrohan informed the Committee that Mr. Stan Sieczkowski and Mr. Dave Eberle have accepted positions at AIDEA. Mr. McCrohan introduced Mr. Dan Beardsley and Ms. Eva Carpenter, also of AIDEA. Mr. Beardsley is responsible for contracts, procurement, rights-of-way and legal issues. Ms. Carpenter will assist with administrative duties related to the Bradley Lake Project. Chairman Highers, with the support of the Committee, expressed the Committee's appreciation for the service provided to the Committee by Ms. Denise Burger. Ms. Burger has been reassigned to the Department of Community and Regional Affairs under the recent reorganization of the Alaska Energy Authority. dburger/word/minutes/pmc/09-93 Bradley Lake Project Management Committee Meeting Minutes - September 21, 1993 Page 10 of 10 Abs Schedule Next Meeting sole October 26, 1993 AWS “00 a.m. Chugach Electric Association 14. ADJOURNMENT The meeting adjourned at 2:50 p.m. David L. Highers, Chairman Attest: Dennis V. McCrohan, Secretary dburger/word/minutes/pmc/09-93 ATTACHMENT 1 FINAL REPORT OF THE PEER-REVIEW AUDIT OF THE CONTRACT BIDDING, AWARD AND AUDITING PROCESS OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PRESENTATION TO BRADLEY LAKE PROJECT MANAGEMENT COMMITEE METZLER & ASSOCIATES SEPTEMBER 21, 1993 PRESENTATION TO BRADLEY LAKE PROJECT MANAGEMENT COMMITEE PRESENTATION OUTLINE I PROJECT OBJECTIVES AND SCOPE I PROJECT METHODOLOGY Il PROJECT SCHEDULE AND STATUS IV __ FINDINGS v RECOMMENDATIONS VI NEXT STEPS PROJECT OBJECTIVES AND SCOPE OBJECTIVES ¢ To provide a peer-review audit of the contract bidding, award and auditing process used by the Alaska Energy Authority during the construction of the Bradley Lake Hydroelectric Project. - Check on past procedures - Confirm the accuracy and completeness of project construction costs. DETAILED TASK DESCRIPTIONS Task 1.0 Review the Alaska Energy Authority construction contract audit process Task 2.0 Review a sample of the construction contract audits and/or audit summaries Task 3.0 Review the bid and award process Task 4.0 Review randomly-picked construction contracts, contract amounts and change orders Task 5.0 Review a sampling of construction invoices for accuracy Task 6.0 Examine the allocation of AEA man-hour charges to the project PROJECT METHODOLOGY e Approved Detailed Workplan e Interviews e Document Review e Draft Report Preparation e¢ Comment Resolution and Final Report Presentation PROJECT SCHEDULE AND STATUS Interviews, documentation review and fact finding occurred the week of February 1, 1993 on AEA's site offices Initial draft report issued to Budget Subcommittee on March 5, 1993 Final draft issued to Budget Subcommittee and AEA on April 5, 1993 Comments received from AEA and incorporated with final report issued on April 13, 1993 Final Presentation of report on September 21, 1993 FINDINGS The Project Approach And Organization Of Responsibilities Among The Contracts Was Reasonable. The AEA acted with commendable insight to attempt to apply to the Bradley Lake Project the lessons it learned from managing the Four-Dam Pool project. A decision to develop an internal audit capability to be applied as a management tool to the Bradley Lake project was made early in the project. The AEA also made a reasonable and appropriate decision to rely heavily on Bechtel and Stone & Webster for oversight of the construction and design management aspects of the project. FINDINGS The AEA Construction Contract Audit Process Implemented At Bradley Lake Was Generally Appropriate. M&A judges the frequency of internal audits performed to be adequate. The audit reviews performed or supervised by the AEA audit staff were sufficient in design and execution. The work papers have been retained and indicate sufficient definition of objectives and a proposed work plan. Further, evidence that the audit work was properly supervised and coordinated is also evident. The staff performing the audits themselves were sufficiently competent and experienced for the work performed. FINDINGS The Audits Conducted Or Supervised By The AEA Of The Bradley Lake Project Were Of Generally Sufficient Scope And Depth To Achieve The Audit Program Objectives. ¢ The audit process employed at Bradley Lake was appropriately laid out and even improved as time went on. The focus shifted from somewhat financial to contract compliance. e Later audits also began to focus on identifying ways to improve future practices, which is always a major objective of any audit program. FINDINGS The Contract Bid And Award Process Implemented At Bradley Lake Was Reasonable And Consistent With AEA Requirements And General Industry Practices. e The AEA procurement activities are governed by State regulations. e Reasonable procurement procedures existed and clearly defined the requirements for awarding contracts. These procedures describe responsibilities, approval levels, and decision-making requirements for different- sized contracts. e Evidence shows that these procedures were adequately complied with during the Bradley Lake Project. FINDINGS Overall, The Contract Change Order Process Was Found To Be Well Organized and Consistently Applied. This process was adequately substantiated by supporting documentation, and duly signed and executed by all necessary parties. The adequacy of the change order process employed on the Bradley Lake Project reflected, to a large degree, the level of detail and comprehensiveness of the cost control mechanisms employed by both Stone & Webster Engineering and Bechtel. On the Bradley Lake Project, M&A found both a close link between the cost control mechanisms and the scope change control process. 10 FINDINGS The Processing And Payment Of Construction Invoices Was Generally Acceptable And Reasonable. All the invoices sampled were in order and were well archived in a manner which demonstrated adequate control over the invoice processing cycle. All questions were easily answered and supporting documentation easily retrievable. 11 FINDINGS The Original Rationale And Assumptions Relied Upon By The AEA In Determining The Staff Size And Complement Of Personnel Appears To Be Reasonable And Appropriate. ¢ The original conclusions reached by the AEA in its lessons learned from the Four-Dam Pool project were sound. ¢ — In light of the lessons learned from the Four-Dam Pool project, the AEA would have had difficulty justifying why it had understaffed the Bradley Lake Project teams, if that had been the case. ¢ Given the complexity of the task before it, the AEA acted wisely in its approach to direct oversight. 12 FINDINGS The Project Cost Control Mechanism Employed By The Authority To Manage Its Own Internal Cost Was Deficient As A Management Tool The methodologies employed by the Authority to budget and control its own costs were found to be deficient in several aspects. It is clear even from the Authority's own Project Management Plan that the mechanisms employed by the Authority to manage its own costs did not achieve the standards implied by the Plan, The same practices would not have been acceptable to the Authority if they were employed by either its Design Engineer or its Construction Manager. 13 FINDINGS The Process Of Allocating Payroll Overhead And Office Indirect Costs To The Bradley Lake Project Was Disproportionate By Design. The allocation of overhead and indirect costs to the Bradley Lake Project appear somewhat arbitrary and lacking in consistent practice. Although the AEA maintained that the allocation of payroll overheads and office indirects to the Bradley Lake Project reflected an equitable distribution of these costs, M&A found that these costs were not allocated on a pro rata basis across all budgeted projects. M&A found that the Bradley Lake Project did bear a disproportionate share of the Authority's overhead and indirect costs. - The exact amount of this share could not be determined with the information that was provided by the AEA. - | The AEA did indicate in discussions that they felt additional supporting documentation could be developed to demonstrate the legitimacy of these charges, but would be time consuming to retrieve and so was not provided. 14 RECOMMENDATIONS Evaluate And Document The Allocation Methodology For Indirect And Other Overhead Amounts. M&A is unable to verify the allocation methodology described by the AEA to charge indirect and other overhead charges to projects. From the information provided in response to data requests, there are a number of outstanding concerns. The Authority should provide documentation of this methodology in a format that could be substantiated by independent review. - The Authority has indicated that additional information could be made available and subject to review, but this process might be time-consuming. - It is the recommendation of M&A that this effort would merit the time to perform it. 15 RECOMMENDATIONS Develop An Internal Project Management And Cost Control Capability. The Authority will have to develop an internal project management and cost control capability regardless of what role it feels is appropriate for itself on future projects. Even if its role will be to contract out direct engineering and construction management as it did on Bradley Lake, improved controls are still required. If its role will be one of even more active oversight and management, then it will naturally need improved systems and controls. 16 RECOMMENDATIONS Develop Project Management Procedures Or Guidelines To Be Used On Major Capital Projects. While the project management approach, systems, and procedures used to manage the Bradley Lake engineering and construction were sound, for the most part they all were based on proprietary systems or procedures of either Stone & Webster or Bechtel. The Authority should develop guidelines to be used on projects that define project requirements. If it is to become as active in the role of project management then these organization and mission questions must be addressed. 17 RECOMMENDATIONS Develop A Project Critique And Lessons Learned Document For The Bradley Lake Hydroelectric Project. ¢ The Authority should supplement existing project documentation with a Project Critique for the Bradley Lake project. ¢ This critique would not be a straightforward chronology of project events, such as the Project Construction Historical Report, but would instead review the management processes and approach employed to identify lessons to be applied to future Energy Authority projects. e This critique would offer the same benefits that the Bradley Lake Management Plan provided in 1984: it gathered together the lessons learned from the Four- Dam Pool project in order to apply them to Bradley Lake. e The use of such project critiques is a common practice among advanced utilities. 18 RECOMMENDATIONS Develop A Bradley Lake Operating Committee Review Manual And Program. e As part of the transition of the Bradley Lake project to operations mode, some form of Bradley Lake Operating Committee Review Program should be developed to govern future activities. ¢ This program or manual should address operational concerns and decision making as well as the specific concerns identified in this review. 19 NEXT STEPS e Review recommendations e Identify any appropriate changes resulting from new status of AEA e Implementation of approved recommendations 20 DATE: TO: THRU: FROM: SUBJECT: ATTACHMENT 2 Alaska Energy Authority MEMORANDUM AEA/UTIL/0026 September 21, 1993 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 Electrig Association Stanley E. Sieczkowski Director Facilities Operation and Engineering it ad ] 3 Larry Wol oe, Lay Senior Ofer4tions Engineet Bradley Lake Hydroelectric Project August 18, 1993 Unit Trips - Update It has been determined by the AEA operators, and confirmed by SWEC on-site inspections, that a 2" make-up valve to the closed loop cooling water system was leaking and caused that system to become saturated. This caused the pressure on the suction side of the cooling water circulating pump to increase beyond normal operating pressure. The increase in the pump suction pressure caused the pressure regulating valve to close completely. Being in the automatic operating mode, all cooling water flow to the turbine/generator bearing sumps and the generator stator air coolers stopped. Both units therefore tripped on bearing over temp before any unit damage occurred. The valve has been repaired and the cooling water system is operating properly. In order to prevent this occurrence in the future, a pressure sensor, or flow meter with monitored operating limits, will be placed in the closed loop cooling system. This sensor will then alarm when pressure begins to climb beyond normal operation limits, allowing our operators to respond and prevent a trip condition. SWEC is completing a report on their system study and the on-site investigation The report will recommend the most appropriate modification to the cooling system. AEA will then initiate the proper modifications to the cooling system. Other factors related to the raw water side and closed loop side of the cooling water system that SWEC is investigating are: the increase in cooling water sump temperature beyond design limits by approximately 10 °F due to the unusually warm summer weather; the raw water side flow rates due to more head losses than anticipated; the removal of a vacuum break valve in the raw water cooling loop system which should reduce system head losses; and higher temperatures experienced in the cooling water sump. ATTACHMENT 3 G/D!I9IS —_DReF Fr RAILBELT RESERVE ISSUES Ae Sener JURISDICTION AND AUTHORITY FOR RESOLUTION 7ER RS. 4)ai/s Introduction: Over the course of several months, the Railbelt utilities have been discussing the interpretation of their reserve obligations under various contracts. Of particular concern is the appropriate forum for resolving the Railbelt reserve issues, since some issues require technical expertise, while other issues present policy considerations or questions of contractual intent. Railbelt reserve issues have been considered by the Bradley Lake PMC, the Railbelt Utilities Group (RUG), which has no formal responsibilities for reserve issues, and the Intertie Operating Committee (IOC), established under the Alaska Intertie Agreement (AIA). In addition to the Bradley Lake PMC, the IOC, and the RUG, the Alaska Systems Coordinating Council (ASCC) has been involved and could continue to be involved in evaluating the ramifications of alternative courses of action or suggesting possible solutions to the Railbelt reserve issues. However, the ASCC is a purely advisory group, with non-mandatory participation. Issues: The Railbelt reserve issues stem from the application of the Alaska Intertie Agreement (AIA) to the operation of the Railbelt electric system in the absence of a power pooling agree- ment. The issues are complicated by the existence of separately owned, but jointly operated, generating facilities. Three critical areas emerge from an analysis of Railbelt reserve issues: * The status of the Alaska Energy Authority as a "Particip- ating Utility" under the terms of the AIA and the consequences of that characterization. * The obligations of the Railbelt utilities to provide reserves, and the character of those reserves, under the terms of the AIA. * The role and the authority of the Intertie Operating Committee, under the AIA, to ascertain or determine project characteristics, to interpret, modify, or enforce the provisions of the AIA, or to undertake revisions to the AIA. To resolve these issues, it is first necessary to determine the appropriate forum for addressing these issues and then to do so within the framework of established agreements. Provisions of Existing Legal Agreements: Answers to several key Railbelt reserve questions can be found within the terms of existing agreements, which in turn provide the forum and framework RLS\IOCRES. pp for resolution of the issue. Given the broad latitude Addendum No. 1 gives to the IOC on reserve issues, and the deference given the AIA in the Bradley Lake Agreement, the majority of issues under discussion should be resolved by the IOC under the AIA. iL Is AFA a "Utility Participant" under the AIA? Section 4.1.1 of the AIA provides that the AEA "will become a Utility Participant at such time as it sells power to a party that is not a Participant and is connected to the Participants’ interconnected system." AEA’‘s sale of Bradley Lake Power to Seward, Homer and Matanuska, who are not AIA participants, makes AEA a Utility Participant under the AIA. As a Utility Participant, AEA has a Reserve Capacity Obligation and an Operating Reserve Obligation. 2). How_is a Utility Participant’s Reserve Capacity Obligation determined? Addendum No. 1 to the AIA establishes the basis for determin- ing the reserve obligation of each Utility Participant. The initial Reserve Capacity Obligation (RCO) of each Utility Partici- pant was set at an amount equal to thirty (30) percent of the projected Annual System Demand of the Utility Participant. The RCO can be adjusted from time to time by the IOC. 3}. How _is a Utility Participant’s Operating Reserve Obligation determined? In addition to the RCO, each Utility Participant has an Operating Reserve Obligation (ORO). Addendum No. 1 to the AIA establishes a Total ORO, which shall be equal to "150 percent of the largest generating unit contingency in operation on the interconnected systems of the Utility Participants." Each Utility Participant’s ORO is based on a formula set out in Section B-2.3.1 of Addendum No. 1. The AIA does not expressly provide the IOC with the authority to modify this formula. OROs can be modified or adjusted by the IOC from time to time. (Section B-2.1.2 of Addendum No. 1). 4. How much of a Utility Participant’s Operating Reserve Obliga- tion must be Spinning and Non-Spinning Reserves? Section B-2.2.1.1 provides that the "Spinning Reserve portion of the total Intertie System shall not be less than an amount equivalent to 100 percent of the Declared Capability of the largest generating unit contingency in operation on the interconnected systems of the Utility Participants." The Declared Capability of a Utility Participant is determined by that Participant (§ B- 2.2.1.1), but the Declared Capability of a generating unit cannot exceed the published capability of that unit (Exhibit A, Definition z RLS\IOCRES . pp No. 10) and is subject to verification by the IOC for reserve purposes. The balance of the Total ORO can be maintained with Non- u Spinning Reserves. Section B-2.4.1 provides that "System Spinning Reserves shall be calculated at any given instant as the difference between the sum of the net capability of all generating units on line in the respective system and the integrated System Demand of the system involved." S Can load shed be used in lieu of Spinning Reserves? Section B-2.4.2 provides that a "Utility Participant’s Spinning Reserve may be satisfied by an automatically controlled load shedding program. The load shedding program shall assure that controlled load can be dropped to meet the requirements of Spinning Reserve and in such a manner as to maintain system stability and not cause objectionable system conditions or cascading effects in other Utility Participants’ systems. The Operating Committee shall review and approve the Utility Participant’s~load shedding program that will be used to satisfy its Spinning Reserve requirements." 6. How should "quality of spin" and "system response" issues be resolved? The IOC has a great deal of authority concerning reserve issues. Section B-2.4.2 requires the IOC to review and approve load shedding programs to assure system stability and section B- 2.4.4 requires the IOC to utilize prudent utility practices in assessing effective utilization of capacity, transmission limita- tions, and local area requirements. In the course of these duties, it would be appropriate for the IOC to discuss and develop criteria for assessing the reliability of various spinning reserve and system reliability issues and options. Independent of the provisions of the AIA, the ASCC could address, and has, in fact, been considering, these issues. ‘ats Who determines reserve requirements? The AIA delegates authority to the IOC on a number of reserve- related issues. The IOC can establish criteria for automatic load shedding and review and approve a Utility’s load shedding programs (§§ B-3.2.3, B-2.4.2), adjust Reserve Capacity Obligations (§ A- 1.1.2), determine Accredited Capability for each Utility Partici- pant (§ A-1.1.3), determine, adjust, or modify each Utility Participants’ Operating Reserve Obligations (§§ B-2.1.2, B-2.3.1), modify or change Total ORO, Spinning and Non-Spinning Reserve ratios, and criteria for generating unit capability for Operating Reserves (§ B-2.2.3), and establish procedures to assure that Operating Reserves are available on the systems of the Utilities at all times (§ B-2.4.3). 3 RLS\IOCRES. pp If the IOC members are dissatisfied with capacity or operating reserve obligations or criteria for the Railbelt, the IOC is an appropriate forum to resolve those differences. 8. How should a jointly-owned generating unit be treated for the purpose of determining reserve obligations? The AIA does not specifically address jointly-owned generating units. In the absence of IOC direction, it would be reasonable to assign each utility a percentage of the generating unit based on its ownership interest for reserve purposes. 9. Should Utility Participants be allowed to make non-firm sales of their Spinning Reserves? Nothing in the AIA precludes Utility Participants from making non-firm sales of Spinning Reserves, provided the non-firm sales can be discontinued quickly enough to insure system reliability. (§B-2.4.2) 10. If a Utility Participant sells firm or non-firm power, should the selling or the purchasing utility be required to provide reserves for that sale? This is an issue that must be resolved on a contractual basis between the selling and the purchasing utility. Interconnected utilities should seek a consistent approach. Jurisdiction and Authority for Resolution: Only the IOC has contractual responsibility for resolving issues related to reserve obligations in the Railbelt. However, the IOC has tended to focus on the technical expertise of the Railbelt utilities and has been unsuccessful in resolving some of the fundamental policy questions inherent in this debate. Thus, it may be appropriate to convene the Railbelt Utility Managers to resolve these policy questions. In addition, resolution of certain technical questions may depend on the resolution of closely-related policy issues. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE Although the majority of the Railbelt reserve issues are contractu- ally reserved for the IOC, there are certain limited issues for resolution by the BPMC. * Declare Project capability * Establish criteria for the allocation of capacity and energy * Establish criteria for Participant Project scheduling RAILBELT UTILITY MANAGERS -- POLICY ISSUES The following issues arise under the AIA, but have not successfully 4 RLS\IOCRES . pp been resolved on a technical level by the existing IOC members. These policy issues require the immediate attention of the Railbelt utility managers. * Address AEA’s status as a “Utility Participant" under the AIA. * Determine the acceptability of selling spinning reserves under AIA and IOC operating criteria. * Discuss and consider possible amendments or modifications to the technical and/or procedural provisions of the AIA. * Clarify the status of the investigation into "quality" and "system response" criteria for reserves. (Currently being discussed by ASCC.) * Affirm or, if necessary, recommend modification to, ASCC planning and operating criteria for interconnected utilities. INTERTIE OPERATING COMMITTEE -- TECHNICAL ISSUES The following issues are assigned to the IOC by the provisions of Addendum No. 1. The relevant contract provision is cited. * Determine each Utility Participant’s Reserve Capacity Obligation. (B-2.1.2) * Determine each Utility Participant’s Operating Reserve Obligation. (B-2.1.2) * Establish criteria for the approval of programs to provide load shed in lieu of spin (SILOS). (B-2.4.2) * Determine the spinning and non-spinning portions of each Utility Participant’s Operating Reserve Obligations. (B- 2 4:58) * Determine the availability of each Utility Participant’s Operating Reserves. (B-2.4.3) * Establish criteria for assessing the capability of a generating unit used to provide Operating Reserves. (B- 2.232) any. 3) * Determine each Utility Participant's Accredited Capabili- ty. (A-1.1.3) * Establish criteria for system response when Spinning Reserves are sold. (B-2.4.3) * Establish criteria for determining the reserve require- ments of jointly-owned generating units. (B-2.1.2) Summary and Recommendations The range of issues outlined above is extensive and potentially contentious among the Railbelt utilities. Issues that the IOC has been unable to resolve are identified above and should immediately be considered by the Railbelt utility managers. Simultaneously, the IOC should begin the task of establishing the various technical criteria, definitions, and requirements it is charged with developing under the AIA. The establishment of objective, agreed- 5 RLS\IOCRES . pp upon criteria for accrediting generating resources, determining reserve obligations, assessing generating capability, etc. could allow many of these issues to be resolved on a more objective, less political basis, thus insuring that adequate reserve capability is provided in the Railbelt. 6 RLS\IOCRES. pp It. September 15, 1993 ALASKA ENERGY AUTHORITY ATTACHMENT 4 QUALIFICATION TO OPERATE HOMER ELECTRIC ASSOCIATION, INC. BRADLEY LAKE HYDROELECTRIC PROJECT SUMMARY As required by AS 44.83.080, AS 44.83.396 and 3 AAC 94.160, the Alaska Energy Authority (AEA) finds that Homer Electric Association, Inc., (HEA) is a qualified utility for the purpose of operating and maintaining the Bradley Lake Hydroelectric Project. APPLICATION REQUIREMENTS On July 22, 1993, HEA submitted the "Bradley Lake O&M Services Application" to AEA and the Bradley Lake Project Management Committee (PMC). On August 19, 1993, HEA submitted to AEA a copy of HEA Resolution #93-44 authorizing the application. The application and resolution in compliance with the corresponding numbered subsections of 3 AAC 94.160(c), contained the following items: (1) Appendix A, Certificate of Public Convenience and Necessity No. 32 _ granted to Homer Electric Association, Inc. (2) Articles of Incorporation of Homer Electric Association, Inc. and Certificates of Amendment of Articles of Incorporation of Homer Electric Association, Inc., dated March 24, 1954 and July 8, 1975. AEA has confirmed that HEA is an active Alaska corporation. (3) HEA Resolution #93-44. (4) HEA Representative for the Application: David L. Fair Executive Manager, Engineering and Operations Homer Electric Association, Inc. 3977 Lake Street Homer, Alaska 99603 (5) HEA Board of Directors & Offices: Hugh R. Chumley, President J. Michael Pate, Vice President David R. Carey, Secretary-Treasurer Fred L. Braun, Deputy Secretary Ken Lancaster, Jr., Director Sue C. Carter, Director George Jackinsky, Director Robert B. Turkington, Director Ruth D. Fitzpatrick, Director General Manager: Norman L. Story After (6) HEA Organization Chart dated 2/16/93, a proposed Bradley Lake O&M Organization Chart dated June 16, 1993, O&M Project Manager Position Description, HEA Contract Engineer Qualifications Statement, HEA and MEA Personnel Qualification Statements and a listing of Technical Consultants and Legal Advisors, and letters from Matanuska Electric Association, Inc. (MEA) and Alaska Electric Generation and Transmission, Inc. (AEG&T) committing support services to facilitate, enhance and support HEA's operations staff. (7) REA Form 7 Financial and Statistical Report for the month ending December 31, 1992, dated March 16, 1993. (8) "Modified Bradley Lake FY 94 Budget." review of these documents by AEA, the following supplementary information from HEA was provided: III. 1. General description of operations for Item 7 was provided by HEA. 2. Item 8, the "Modified Bradley Lake FY 94 Budget" was provided to meet the requirement of an estimate of the annual costs to operate, maintain, and replace equipment on the power project. AEA finds for the purpose of the proposal the submission is adequate. However, a more precise budget proposal based upon . terms and conditions will be required as agreed by AEA for negotiating an O&M contract. AEA EVALUATION There is more than one electric utility served by the power project besides HEA that may be available to operate the project. Pursuant to 3 AAC 94.160(e) and (f), AEA has the discretion to request proposals or accept applications from each electric utility, and to require additional information, conduct an investigation, receive written comment, and consider information from public meetings. As specified in the Service Agreement for the Bradley Lake Project, HEA is an appropriate utility to operate the project. The utilities served by the project have agreed in their July 22, 1993 meeting, in accordance with the Power Sales Agreement, to receive the application of HEA as an operator for the project. As a result of that agreement by the potential qualified operators, AEA has reviewed the application of HEA on its merits. AEA has requested additional information from HEA in order to examine current operating practices, safety and capital improvement records, ability to adequately attract and retain qualified staff to operate the project, current technical staff to support the project, licensing and permitting qualifications, financial capability, organizational stability, and capability to operate the project economically. AEA has reviewed the following additional documents provided by HEA: HEA Bylaws Information Guide - Safety Accreditation Program Status of Environmental Program Management Directives 411 - 415 relating to Outages Construction Work Plan for 1993 - 1994 Audited Form 7 Year Ending December 31, 1990 Audited Form 7 Year Ending December 31, 1991 Audited Form 7 Year Ending December 31, 1992 HEA Financial Statements December 31, 1991 and 1990 HEA Financial Statements December 31, 1992 and 1991 Annual Report to APUC for year ended December 31, 1991 Annual Report to APUC for year ended December 31, 1992 Soldotna #1 Operator Training Program HEA 1992 Budget HEA 1993 Budget Draft Revised Purchasing Procedures Listing of All Insurance Claims Previous 5 Years Listing of All Litigation Previous 5 Years Letter dated July 13, 1993 from IBEW to HEA HEA Letter dated September 2, 1993 on O&M of instrumentation and Control Equipment at the Plant and Filing Proposal APUC No. 32 HEA Service Area effective May 12, 1989 Bradley Lake O&M Services Application Resolution #93-44 dated August 10, 1993 Sample Time and Equipment Sheets Sample Accounting Reports In addition to the above documents, AEA staff inspected the HEA Facilities in Homer and interviewed HEA personnel. HEA staff have visited the project numerous times and the AEA offices in Anchorage. HEA staff appear to be fully aware of the required operation and maintenance duties. IV. FINDINGS: AEA finds that HEA is qualified to provide operation and maintenance and related administrative services for the Bradley Lake Hydroelectric Project. These findings are premised on the information from HEA listed in sections II and III which has been evaluated by AEA, the proximity of HEA administrative and operational facilities to the project, and the concurrence of the other purchasing utilities evidenced by the Service Agreement and PMC action. The findings require the following contingent actions to be undertaken by AEA and HEA: 1. From the review of financial documents, HEA appears to be a financially sound organization. It does not, however, have significant cash or financial reserves to independently withstand the liability of a catastrophic loss resulting from operator negligence. Agreements for the project must have adequate Risk Management and insurance safeguards to assure restoration of the project in the event of catastrophic loss occurring as a result of the operator's actions. This issue will be addressed separately by AEA and the utilities in discussions regarding transfer of AEA duties. 2. AEA did not find any significant financial anomalies indicating the HEA is not qualified to operate the project. Based on annual reports and AEA staff interviews, HEA has had minor accounting and invoicing problems. HEA has made significant progress in resolving those problems. The procedures to assure prompt accounting are in place at HEA. HEA must emphasize implementation to assure that invoicing and financial records are timely and . accurate. AEA will monitor HEA's performance in this area. 3. Operational and training procedures relating to the existing HEA plant are acceptable but ‘limited to current HEA activities. Appropriate operating and training procedures relating to the hydroelectric plant must be _ provided. AEA will audit the development of these procedures assuring completion by March 31, 1993. 4. HEA's proposed procurement policy contains provisions relating to procuring goods and services from local vendors for current facilities. The policy needs to be revised to encompass goods and services for the hydroelectric project and attendant facilities. AEA will audit the development of these procedures and assure completion by March 31, 1993. Additional technical, management, administrative, and accounting services related to the Bradley Lake Project, may also be incorporated into the O&M contract. However, assignment of these services to HEA requires discussion with the PMC team directed to negotiate the AEA transition. In addition, a further demonstration of qualifications will be required by HEA. V. AEA PROPOSED ACTION: AEA proposes to enter into negotiations with HEA for operation of the Bradley Lake Hydroelectric Project. Those negotiations will entail: 1. An Interim Agreement with HEA to provide economical direct labor services to AEA for operation of the facility. This agreement will require appropriate auditing of invoicing and financial record preparation, and establishment of HEA operating and training procedures for the hydroelectric plant. All terms and conditions of the Master Operating Agreement will be incorporated. 2. Costs and terms for a five year operating agreement, effective start date of the agreement, and provisions for extension. 3. Additional duties and obligations delegated to the operator will be discussed with HEA after the PMC reviews the proposed duties. DATED THIS g day of September, 1993. ROMe Char. DENNIS V.. McCROHAN, P.E. Deputy Director (Energy) Alaska Energy Authority BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE APPROVED MEETING MINUTES August 17, 1993 1; CALL TO ORDER Chairman Highers called the Bradley Lake Hydroelectric Project Management Committee to order at 10:05 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 Dennis McCrohan, 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 Tom Stahr, Designated Representative Others Present: Ron Saxton, Ater, Wynne, Hewitt, Dodson & Skerritt Bob Hufman, Alaska Electric Generation & Transmission Cooperative dburger/word/minutes/pmc/08-93 Bradley Lake Project Management Committee Meeting Minutes - August 17, 1993 Page 2 of 6 David Burlingame, Chugach Electric Association Dan Bloomer, Chugach Electric Association Gene Bjornstad, Chugach Electric Association Tom Lovas, Chugach Electric Association Bradley Evans, Golden Valley Electric Association Jim Hall, Matanuska Electric Association Tim McConnell, Municipal Light & Power Bob Price, Municipal Light & Power Myles Yerkes, Homer Electric Association Brent Petrie, Alaska Energy Authority David R. Eberle, Alaska Energy Authority Larry Wolf, Alaska Energy Authority Denise Burger, Alaska Energy Authority a PUBLIC COMMENT There being no public comment, the meeting continued to the next item. 4. AGENDA COMMENTS No changes were made to the agenda at this time. 55 APPROVAL OF MEETING MINUTES Minutes of the July 22, 1993 meeting were approved as submitted. 6. TECHNICAL COORDINATING SUBCOMMITTEE REPORT Mr. Burlingame stated the TCS had not met. However, Mr. Burlingame reported that ABB has begun studies to determine system stability limits with the addition of the Southern intertie. The generation and dispatch cases are the same as the previous study done for the existing line. 7. BUDGET SUBCOMMITTEE REPORT Mr. Ritchey reported the Budget Subcommittee had met and discussed the financial impacts of transferring the operation and maintenance of Bradley Lake to Homer Electric Association. The Subcommittee concluded that a determination could not be made until responsibility for all of the various duties was negotiated between HEA and ABA. dburger/word/minutes/pmc/08-93 Bradley Lake Project Management Committee Meeting Minutes - August 17, 1993 Page 3 of 6 Mr. Ritchey noted a retroactive drop in the CEA wheeling rate, from $.023 to $.022, for fiscal year 1993. A. Construction Cost Audit The final construction cost audit report by Metzler & Associates has been distributed to the Budget Subcommittee members and will be discussed at the next Subcommittee meeting. As an outcome of the audit, Mr. Ritchey noted the utilities may want to consider a pre- construction audit before beginning work on the new interties. Mr. Ritchey stated that, if scheduling permitted, Brian Walshe of Metzler & Associates would give a presentation on the audit at the September BPMC meeting. B. O&M Cost Audit No new information was reported on the O&M cost audit. 8. AGREEMENTS SUBCOMMITTEE REPORT Mr. Saxton reported the Agreements Subcommittee was awaiting a determination regarding the Master Operating Agreement and had not met. It was noted that the following agreements are not yet completed: Master Operating Agreement, HEA Transmission Line Maintenance Agreement, HEA Interconnect Agreement, Soldotna Substation Agreement, Daves Creek and Soldotna SVC Maintenance Agreements. Mr. Eberle added an interim letter agreement had been signed for continued CEA maintenance of the SVC substations. Mr. Hufman reported that the site operators IBEW labor negotiations were on hold pending the outcome of the O&M contract with Homer Electric Association. 9. OPERATION AND DISPATCH SUBCOMMITTEE REPORT Mr. Eberle reported the O&D Subcommittee had not met since the last BPMC meeting, however a meeting is scheduled tomorrow. dburger/word/minutes/pme/08-93 Bradley Lake Project Management Committee Meeting Minutes - August 17, 1993 Page 4 of 6 10. 11. REVIEW OF PROJECT STATUS Mr. Eberle reported the contaminated soil clean-up contract work has been completed. The Project airstrip has been resurfaced with clean, crushed gravel. OLD BUSINESS A. Spinning Reserve/Under Frequency Load Shed Update Mr. Lovas reported the IOC has implemented the new load shedding schedule. This item is now completed and will be deleted from future Committee meeting agendas. The ASCC is continuing to work on the allocation of spinning reserves. Bradley Scheduling vs. Spin Requirement Update Mr. Saxton reported that he and Mr. Lovas had met and formulated an initial draft of the issues. It was expected that the document would be ready for distribution in the near future. BPMC Control Over O&M Decisions and Agreements - Master Operating Agreement Mr. Saxton noted that completion of the Master Operating Agreement was placed on hold while issues related to the transition of AEA were resolved. Final comments on the Master Operating Agreement are expected from AIDEA the first week September. Mr. Saxton anticipated the Master Operating Agreement could be ready for signature by the September BPMC meeting. Once the Master Operating Agreement is in place, Mr. Saxton expected quick completion of the remaining agreements. In response to inquiry from Mr. McConnell, Mr. Saxton explained the Homer O&M Agreement would ultimately be subject to the Master Operating Agreement, but that its development was separate from the other agreements. O&M Contract Update Mr. Story reported HEA had met with the utilities to discuss questions and concerns regarding HEA's proposed operation and maintenance of the Project. HEA has submitted a draft contract to AEA and will be meeting with AEA and AIDEA later today to discuss the remaining process and schedule. dburger/word/minutes/pmc/08-93 Bradley Lake Project Management Committee Meeting Minutes - August 17, 1993 Page 5 of 6 Mr. McCrohan relayed the following timetable for the transfer of Bradley Lake operations and maintenance from the Energy Authority to the utilities: c Review HEA's application and determine HEA's qualification by the first week of September 1993 Identify list of duties to be retained by AEA and duties to be transferred (and to whom they will be transferred) by the second week of September 1993 ° Detailed budget discussions to begin the first week of October E. BPMC Bylaws - Subcommittee Authority/Voting Procedures Mr. Saxton distributed a list of duties assigned to the various subcommittees, noting the information was requested at the last Committee meeting (Attachment 1). Mr. Saxton distributed a draft resolution to amend the Bradley Lake Project Management Committee Bylaws (Attachment 2). Mr. Saxton explained that, under the current Committee Bylaws, special purpose committees (i.e., subcommittees) were limited to an advisory role and had no authority to take final actions. The proposed resolution would amend the Bylaws to allow the Committee to delegate decision making duties to the subcommittees on authorized matters. The proposed amendment establishes subcommittee voting procedures by majority vote of the subcommittee members. Additionally, under the amendment, the power to modify or reject any decisions made by the subcommittees is retained by the Committee. Mr. Saxton explained the purpose for amending the Bylaws was to establish a means to delegate decision making authority to the subcommittees. Mr. Saxton added that Committee delegations to the subcommittees needed to be clearly recorded, but how the Committee and subcommittees communicate and the voting procedures used by the subcommittees were policy issues that should be determined by the BPMC. Methods of voting at the subcommittee level, reporting of subcommittee actions, and review of subcommittee actions by the Committee were generally discussed. Chairman Highers requested that the utilities submit written comments to Mr. Saxton on the proposed dburger/word/minutes/pmc/08-93 Bradley Lake Project Management Committee Meeting Minutes - August 17, 1993 Page 6 of 6 resolution to amend the Bylaws (Action 93-177). Mr. Saxton will provide a final resolution for consideration at the next Committee meeting. 12. NEW BUSINESS A. Approval of Committee Expenses Mr. Ritchey mov TOV! nt of $24,1 for Committee legal expenses for the month of July 1993. Seconded by Mr. Calvert, the motion was approved by unanimous roll call v Action 93-178). 13. . COMMUNICATIONS A. Schedule Next Meeting Tuesday, September 21, 1993 1:00 p.m. Chugach Electric Association 14. ADJOURNMENT The meeting adjourned at 10:40 a.m. Attest: U on Wed V Me CHA on Dennis V. McCrohan, Secretary dburger/word/minutes/pmc/08-93 TO: FROM: DATE: RE: MEMORANDUM Ron Saxton Liz Westby August 16, 1993 Duties Assigned to the Bradley Lake Project Management Committee Subcommittees The following tasks were assigned to BPMC Subcommittees (as referenced in the BPMC meeting minutes): AGREEMENTS SUSCOMT ( Action Items: Update Allocation and Scheduling Agreement Exhibits C and D. (Minutes 1/13/92, p. 3) Work on Maintenance and Right of Way Agreements with Homer. (Minutes 1/13/92, p. 3) Advisory items: Review Dispatch Agreement. (Minutes 11/19/91, p. 3) Review and follow-up on: - Allocation and Scheduling Agreement Exhibit A : Dispatch Agreement - Transmission Facility Maintenance - Facilities Interconnected Dispatch : Communications MOU - SVCS Draft Agreement - Daves Creek Substation - Soldotna Substation (Minutes 3/26/92, p. 4) All utility agreements should be presented to the PMC concurrently (even though some are ready). (Minutes 7/23/92) BubGeT (AND FINANCE) SUBCOMMITTEE____ Action Items: Develop draft definitions of Project (construction) costs versus utility costs. (Minutes 7/28/89, p. 4) Establish uniform accounting procedures for utility cost reimbursement. (Minutes 7/28/89, p. 4) Prepare FY93 budget. (Minutes 11/19/91, p. 2) Hire an auditor to perform an O&M cost audit, subject to budgetary constraints. (Minutes 11/20/92, p. 10) Hire a consultant to perform the Bradley Lake construction cost audit. (Minutes 11/20/92, p. 10) . Advisory items: Review issues: - cash flow timing; : budget revisions subsequent to budget adoption; : reserve accounting; AEA staffing and overhead costs; transmission costs; : environmental studies costs; - Intertie budget component. (Minutes 2/27/90, p. 3-4) HEA Transmission Line Maintenance; AEA Costs; CEA Software; Dispatching labor costs. (Minutes 5/17/90, p. 4-5) Review of CEA and HEA Wheeling Agreement costs, and insurance. (Minutes 5/17/90, p. 6) Address the sinking fund payment that SWEC came up with for the scheduled maintenance and replacement of equipment. (Minutes 7/17/90, p. 8) Look at Homer Electric O&M expenses for the transmission line. (Minutes 7/2/91, p. 3) -2- Analysis and discussion of (1) payments to the trustee to eliminate the cashflow problem, and (2) timing of payments. (Minutes 7/2/91, p.4) Review final project construction budget and provide comments to AEA prior to 5/20/93. (Minutes 5/13/93, p. 7) Manage budget line items. A 10% increase in the overall budget will need BPMC approval. (Minutes 1/14/93, p. 13) OPERATING AND DISPATCH AGREEMENT SUBCOMMITTEE Action items: Engage services of a consultant to assist with drafting language for the Allocation and Scheduling Agreement. (Minutes 5/4/89, p. 6) Draft Bradley Lake Allocation and Scheduling Agreement. (Minutes 10/19/89, p. 5). Revise Scheduling & Allocation Procedures. (Minutes 3/3/93, p. 10) Develop agreements: - Dispatch Agreement between AEA and CEA - Maintenance Agreement between AEA and Maintenance Contractor - Transmission Facilities Maintenance Agreement between AEA and HEA : Participants Allocation & Scheduling Agreement - Substation Maintenance Agreement between AEA and HEA - Joint Operations Agreement between CEA and HEA - Communications Equipment Agreement between AEA and Division of Telecommunications - Soldotna #1 Dispatch Agreement between CEA and AEG&T (Minutes 7/28/89, p. 4) Develop a method for tracking and accounting for costs associated with dispatching during generation tests from Bradley Lake. (Minutes 6/6/91, p. 2) Develop procedures to allow the Bradley participants to readily note or record Chugach's service needs for Kenai area combustion turbine versus those conditions of providing combustion turbine to support the operation of Bradley Lake. (Minutes 7/2/91, p. 3) Work on the problem of cleaning intakes. (Minutes 1/14/93, p. 6) Advisory items: Review of draft Dispatch Agreement. Work on 2 issues: (1) spinning reserve, and (2) losses on the Homer transmission system. (Minutes 2/27/90, p. 4) Review results of SWEC model on spill allocation. (Minutes 4/6/90, p. 5) Review comments on Dispatch Agreement and reservoir model. (Minutes 11/19/91, p. 3) Review of SCADA communications problem. (Minutes 3/26/92, p. 5) Discuss load restoration procedures, loss and billing procedures. (Minutes 6/6/91, p. 4) Subcommittee informed PMC of new procedures regarding single unit operation. (Minutes 7/23/92, p. 4-5) With help from the TCS, investigate frequency oscillations associated with islanding of the Bradley system. (Minutes 7/23/92, p. 13) TECHNICAL COORDINATING SUBCOMMITTEE Action items: Develop draft operation and maintenance definitions and responsibilities. (Minutes 8/29/88, p. 4) Provide an opinion on test period power agreement, interim operational period. (Minutes 7/17/90, p. 7) -4- Approve SCADA point list. (Minutes 9/21/90, p. 2) Develop operating scenarios with 80 MW and 90 MW caps. (Minutes 6/6/91, p. 7) Set the operating criteria for Bradley based on Homer Electric and Seward being subject to no more than stage two load shedding for any single contingency event, using interim operating criteria until such time as the final operating conditions are adopted by the PMC. (Minutes 7/2/91, p. 3) Expansion of Bradley Lake Operating Conditions, interim operating levels. (Minutes 4/28/92, Attachment A, p. 2) Identify proposed long-term solutions to islanding problem. (Minutes 7/23/92, p. 13) Advisory items: Meet with SEI regarding their assessment of reliability of the Bradley Junction to Fritz Creek transmission line. (Minutes 1/20/89, p. 2) Review bids for SCADA system. (Minutes 3/3/89, p. 2) Make presentation to PMC regarding proposed PTI 115 kV additions. (Minutes 4/6/89, p. 2) Review scope of work for system stability studies prepared by SWEC and proposal from PTI to complete additional stability work. (Minutes 6/8/89, p. 3) Review of software program DECNET. (Minutes 6/8/89, p. 3) Review and presentation of Load Acceptance Analysis report prepared by SWEC. (Minutes 1/18/90, p. 2) Study of microwave link between Divcom and CEA main headquarters. (Minutes 1/18/90, p. 8) Review, approve SWEC's recommendation on the installation of the braking resistor, installation of digital stabilizers on the units, installation of one SVS at the Daves Creek side and in Soldotna. (Minutes, 11/28/90, p. 2) -5- Review how the project should be operated under different scenarios and define certain operation constraints. (Minutes 11/28/90, p.2 ) Review overfrequency tripping for Cooper Lake to try and control the frequency during times of high Kenai energy export. (Minutes 3/5/91, p. 2) Determine the maximum Kenai import (i.e. minimum Bradley Lake operating limit without a gas turbine on-line, assuming that any single contingency event will not result in more than a reasonable loss of load (and define "reasonable"). (Minutes 3/5/91, p. 3) Review of PTI study of operating restraints for the testing and commissioning phase. (Minutes 6/6/91, p. 2) Work with SWEC to gather all operating restrictions and recommendations relating to Bradley Lake within the past 2-3 years into one document for reference. (Minutes 6/6/91, p. 3) Oversee SWEC sponsored tests and other utility required tests. (Minutes 8/23/91, p. 3) Review Bradley Lake Operating Manuals. (Minutes 8/23/91, p. 3) Review of PTI Bradley Lake/Kenai Operating Guidelines. (Minutes 11/19/91, p. 2) Review of Bradley Lake Dispatcher Guidelines Summary. (Minutes 1/13/92, p. 4) Report on results of exciter tests. (Minutes 2/28/92, p. 2) With help from the Operations and Dispatch Subcommittee, investigate frequency oscillations associated with islanding of the Bradley system. (Minutes 7/23/92, p. 13) ATTACHMENT 2 DRAFT 08/16/93 11:29am BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 93- A RESOLUTION AMENDING ARTICLE 6.2 OF THE BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS WHEREAS, the Agreement for the Sale and Purchase of Electric Power of the Bradley Lake Hydroelectric Project § 13(b) allows the Bradley Lake Project Management Committee (Committee) to adopt procedural rules governing the conduct of the Committee’s affairs; WHEREAS, the Committee adopted Bylaws which specify the manner in which the Committee will act and section 6.2 states that the Committee may not delegate its decision-making duties to any special purpose committee; WHEREAS, the Committee finds it necessary to amend its Bylaws to allow the special purpose committees to make decisions when properly instructed and authorized by the Committee. NOW, THEREFORE BE IT RESOLVED that the Committee hereby amends section 6.2 of the Bylaws as follows: 6.2 Powers. The Committee may delegate its decision-making duties to a special purpose committee. 6.2.1 Authorization. Special purpose committees may only act upon Committee matters when authorized to do so by the Committee. 6.2.1 Voting Requirements. Decisions made by a special purpose committee shall be by affirmative vote of a majority of the members of a special purpose committee. 6.2.2 Decisions Reviewable. The Committee may affirm, modify or reject any decision of a special purpose committee. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE By: Chairman BY: Secretary DATE: BPMC ACTION SUMMARY LOG DATE 7/22/93 7/22/93 7122193 7/22/93 7/22/93 7/22/93 7/22/93 8/17/93 8/17/93 9/21/93 9/21/93 PAGE 10 ITEM 11D 12 A 12 B 12.C 12D 12 E 12 E lL E 12 A 12 A 12 B ACTION 93- 170 93- 171 93- 172 93- 173 93- 174 93- 175 93- 176 93- 177 93- 178 93- 179 93- 180 TYPE MOTION MOTION MOTION MOTION MOTION MOTION MOTION DIRECTIVE MOTION MOTION MOTION RESOLUTION STATUS TABLED APPROVED APPROVED APPROVED APPROVED APPROVED APPROVED APPROVED APPROVED APPROVED Revised 10/6/93 11:01:15 AM DESCRIPTION UNTIL NEXT MEETING, AMENDMENT OF BYLAWS TO CLARIFY DELEGATION OF POWER TO SUBCOMMITTEES ELECTION OF OFFICERS; CURRENT OFFICERS RETAINED: HIGHERS, STORY, MCCROHAN, RITCHEY COMMITTEE LEGAL EXPENSES FOR MAY AND JUNE 1993; $17,602.62 AND 23,345.03 ACCEPT HEA APPLICATION FOR THE OPERATION AND MAINTENANCE OF BRADLEY LAKE REIMBURSMENT OF UTILITY SVC TESTING COSTS INTERIM LETTER AGREEMENT (CEA AND AEA) FOR SVC MAINTENANCE SOUTHERN INTERTIE STUDIES TO BE PERFORMED BY ABB; N.T.E. $100,000 AS PROJECT COST COMMITTEE TO PROVIDE WRITTEN COMMENTS TO MR. SAXTON ON PROPOSED RESOLUTION TO AMEND BYLAWS - SUBCOMMITTEE AUTHORITY COMMITTEE LEGAL EXPENSES FOR JULY 1993; $24,104.06 COMMITTEE LEGAL EXPENSES FOR AUGUST 1993; $18,612.03 INSTALLATION OF SYNCH-CHECK RELAY NOT TO EXCEED $10,000 AS CONSTRUCTION COST Page 15 ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY 480 WEST TUDOR » ANCHORAGE, ALASKA 99503-6690 + (907) 561-8050 + FAX (907) 561-8998 October 22, 1993 Mr. David L. Highers Chairman Chugach Electric Association P.O. Box 196300 Anchorage, AK 99519-6300 Subject: Draft HEA/AEA 0&M Agreement Dear Mr. Highers: Attached is a copy of the most recent draft of the O&M Agreement between HEA and AEA. The PMC should note the following: e The general responsibilities reflect my October 22, 1993 duties proposal to Mr. Ron Saxton which will be distributed at the meeting. e The term is for five years with one year extensions thereafter. e The Master Operating Agreement Master Provisions, Section 7, are incorporated. ® Detailed AEA/HEA budget discussions will commence the week of October 25, 1993. Neither HEA nor AEA legal counsel have reviewed this latest draft. Also, HEA has expressed some concern that subsequent AEA and PMC Budget Subcommittee discussions may impact some parts of the Agreement; AEA shares this concern. I will discuss budget preparation procedures with Mr. Ken Ritchey. Please let me know if you have any questions. Very truly yours, RM Cas — Dennis V. McCrohan, P.E. Deputy Director (Energy) DVM:ec ec: R. Snell, AIDEA 1/1 R. Saxton, AWHD&S 1/1 E. Wohlforth, WAJ&B 1/1 J. Baldwin, Dept. of Law 1/1 Third Draft OPERATION & MAINTENANCE AGREEMENT FOR BRADLEY LAKE PROJECT BETWEEN: HOMER ELECTRIC ASSOCIATION, INC. AND ALASKA ENERGY AUTHORITY October 22, 1993 Section 1 Met eee lonas 8. Ws, oo go Me tso we, rs) ss Section 2 TOlM WE BOTOOMONE::..-. 6 2's 0 wie ee 8 Section 3 Qualified Utility Status ........ Section 4 Operator's General Responsibilities ... Section 5 Acéounting “and Records... .. ws . * « Section 6 eee 4 oe ee ee Se alee 8 Section 7 extraordinary Cost6 . « . 6s «<6 «© «"% Section 8 Emergency Expenditures ......... Section 9 Disbursement of Funds. ......... Section 10 - Access to Operator's Facilities ALAC Section 11 - Use of Project Living Quarters. .... Section 12 - Insurance .......... . 2 Section 13 - Dispute Resolution. ..... 3 Section 14 - Notices, Time and Holidays Computation, Designated Representatives See elie 6 is 3 Section 15 - Remedies Cumulative ....... — Section 16 - Availability of Information ... Section 17 - Termination ....... 2 «+e -«-« Section 18 - Force Majeure ...... Section 19 - Third Party Beneficiaries .... Section 20 - Assignment of Contract ...... 7 Section 21 - Exhibits. ......-.+-+-e«-+«-+e-s. Section, 22. - Multiple Copies: . <« « «4. 4. 6 « »= « « -« Section 23 - Entire Agreement; Priority of Power Sales TABLE OF CONTENTS Agreement. 2.45.2 = © 6 WW wsts's « @ © Sis @ 1 12 13 ES 14 14 14 15 £5 16 16 17 18 18 18 19 19 OPERATION & MAINTENANCE AGREEMENT FOR BRADLEY LAKE PROJECT THIS AGREEMENT dated this day of , 1993...is entered into by the HOMER ELECTRIC ASSOCIATION, INC. (HEA) ("Operator") and the ALASKA ENERGY AUTHORITY ("Authority"). WITNESSETH WHEREAS, the Authority is a public corporation of the State of Alaska duly created, organized, and existing pursuant to AS 44.83, and authorized by law to sell electric power generated by the Bradley Lake Project ("Project"); WHEREAS, the Authority is authorized under AS 44.83.396 to enter into agreements for the operation and maintenance of power projects owned by the Authority with a "qualified utility"; WHEREAS, the BPMC is authorized under its Bylaws adopted pursuant to the terms of the Bradley Lake Project Power Sales Agreement, to approve agreements for the operation and maintenance of Project facilities; WHEREAS, the Operator has been identified in the "Bradley Lake Hydroelectric Project Agreement for the Wheeling of Electric Power and Related Services" (Services Agreement) dated June 29, 1989 by the participating utilities as one of the two appropriate entities to operate and maintain the Project (the other being the Alaska Electric Generation and Transmission Cooperative, Inc.); 1 - OPERATION & MAINTENANCE AGREEMENT WHEREAS, the Operator is both a qualified utility within the meaning of AS 44.83.425(5) and is authorized to operate and maintain a power project acquired or constructed by the Authority; and WHEREAS, the Operator has agreed to operate and maintain the Project in accordance with the terms and conditions of this Agreement; NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: Section 1 - Definitions. For purposes of this Agreement, the following definitions apply: (a) "Act" or references to AS 44.83, means Title 44, Chapter 83 of the Alaska Statutes (1989), as amended. (b) "“Agreement" means this Agreement. (c) "Authority" means the Alaska Energy Authority as established by the Act, and any successor agency thereto and, unless the context otherwise requires, such officers and agents of the Authority that may be delegated responsibilities and duties under this Agreement. (d) "BPMC" means the Bradley Lake Project Management Committee as established under the December 8, 1987 Power Sales Agreement and operating under the Bylaws adopted on October 19, 1988. 2 - OPERATION & MAINTENANCE AGREEMENT (e) (f) (g) (h) (i) (3) "Contract Year" means, except for the first and last Contract Years, the twelve month period starting July 1 of a calendar year through and including June 30 of the next succeeding calendar year. The first Contract Year shall be the period commencing with the effective date of this Agreement and extending through and including the succeeding June 30. The last Contract Year shall be the period commencing after the last full (i.e., twelve - month) Contract Year and ending on the expiration of this Agreement. "Dispatch" means to schedule daily and remotely monitor and control the voltage, frequency, and real and reactive power flow through the Project. "Dispatch Agreement" means the Agreement for the Dispatch of Electric Power and for Related Services between Chugach Electric Association, Inc. and the Alaska Energy Authority dated February 19, 1992. "Division of Risk Management" means an office which is part of the State Department of Administration and which is established pursuant to AS 44.21.020. "FERC" means the Federal Energy Regulatory Commission, an agency of the United States Department of Energy, or its successor agency. "Master Operating Agreement" means the Master Operating Agreement between the Authority and the BPMC dated p 1993. 3 - OPERATION & MAINTENANCE AGREEMENT Qk) (1) (m) (n) (0) (Pp) (q) "O&M" means operation and maintenance of the Project and includes the duties set forth in Section 4 of this Agreement. "Operation and Maintenance Standards" means the Plant Operation and Maintenance Manual, and equipment installation, operation, and maintenance manuals. "Operator" means Homer Electric Association, Inc. (HEA) or its assignee. "Party" or "Parties" means the signatories to this Agreement. "Power" or "Electric Power" means electric energy or electric capacity, or both, except where the context requires a distinction, in which case electric energy is expressed in kilowatt hours, and electric capacity is expressed in kilowatts. "Power Sales Agreement" means the Bradley Lake Power Sales Agreement, dated December 8, 1987, among the Authority; the Municipality of Anchorage (dba Municipal Light and Power (ML&P)); the City of Seward (dba Seward Electric System (SES)); the Chugach Electric Association, Inc. (Chugach); the Golden Valley Electric Association, Inc. (GVEA); the Alaska Electric Generation and Transmission Cooperative, Inc. (AEG&T), the Matanuska Electric Association, Inc. (MEA); and the Homer Electric Association, Inc. (HEA). "Project" means the Bradley Lake power generation facility and the associated transmission and substation facilities described in Exhibit A. 4 - OPERATION & MAINTENANCE AGREEMENT (r) "Project O&M Budget" means the budget for the operation and maintenance of the Project as adopted and amended pursuant to this Agreement. "Purchaser" means any of the parties to the Power Sales Agreement as listed in Section 1(p), above. Section 2 - Term of Agreement. (a) (b) (c) This Agreement shall take effect upon execution by the authorized representatives of all Parties. The term of this Agreement shall be five (5) years from the date on which it takes effect and shall continue from year to year thereafter, except upon written notice to terminate. Notice of termination shall be given one (1) year in advance, effective on July 1 of the next Contract Year; provided, however, if the Authority reasonably determines termination is necessary to avoid substantial damage to the Project or endanger public health or safety, this Agreement may be terminated in accordance with subsection (c). In the event the Authority reasonably determines that the Operator's performance of its obligations under this Agreement, without immediate remedial actions, could cause substantial damage to the Project or endanger public health or safety, the Authority shall promptly notify the Operator and shall identify the areas where performance must be remedied. The Operator shall submit to the Authority a plan for remedial action to correct its performance within twenty-four (24) hours of such notice. The Authority or its designee shall have the right to temporarily take over the duties of the Operator until a remedial action plan 5 - OPERATION & MAINTENANCE AGREEMENT reasonably satisfactory to the Authority is agreed to by the Operator. If the Parties fail to agree to a remedial action plan within thirty (30) days, the Authority may terminate this Agreement. Section 3 - Qualified Utility Status. The Authority has determined that the Operator is a qualified utility within the meaning of AS 44.83.425(5) and has met all the requirements thereof. Section 4 - Operator's General Responsibilities. (a) (b) The Operator shall be responsible for: (1) monitoring and providing all operations except as performed by the Project Dispatcher, as generally required by the Dispatch Agreement; (2) performing or providing for all maintenance and repair of the Project, to the extent such operations, maintenance and repair are authorized by the Project O&M Budget, or as otherwise funded in accordance with this Agreement. The operation, maintenance, and repair of the Project shall be consistent with the project schedules as provided by the project dispatcher and shall be conducted in a manner to minimize, or correct any failures of facilities or equipment. Schedule changes to accommodate maintenance activities shall be coordinated and scheduled with the Project dispatcher in cooperation with the Purchasers. 6 - OPERATION & MAINTENANCE AGREEMENT (c) The Operator shall operate, maintain, and repair the Project in accordance with the Operation and Maintenance Standards. In addition the Operator shall use and update by mutual agreement the Automatic Maintenance Management System. The Operation and Maintenance Standards shall be maintained at the Project site. Any revisions to the Operation and Maintenance Standards shall be effective within a period of time after notice having due regard to the nature of the revisions requested and necessary project budget revisions. (d) The Operator shall provide all material, labor, engineering and other technical support, subcontract management, and training to operate, maintain, and repair the Project, and all tools, equipment, spare parts, materials, and supplies needed to perform work under this Agreement in accordance with the Operation and Maintenance Standards and written directives by the Authority. (e) In addition to the preceding responsibilities, and those set forth in the Operation and Maintenance Standards, the Operator's duties shall include, but are not limited to, the following specific responsibilities unless directed otherwise: (1) comply with all federal and state agency requirements relating to the Project, except for those requirements which the Operator can in good faith contest. In case of a contest, the operator shall promptly notify the Authority; (2) provide security and access in accordance with a mutually agreed plan; 7 - OPERATION & MAINTENANCE AGREEMENT (3) read, maintain, and operate all Project metering devices, record such readings, and maintain or forward data, forms, relevant graphs, and/or magnetic tapes as required by the Authority; (4) make annual recommendations to the Authority for: (i) operation, maintenance, repair, replacement, and modification of Project facilities; (11) installation additional protective relaying, instrumentation, control systems, or other apparatus as necessary to maintain or improve the Project and interconnected system reliability, integrity, efficiency, and safety; (SEL) a five (5) year schedule of estimated equipment modifications, replacements, additions, and disposals; (5) prepare monthly and year-end operating and financial statements, in a form acceptable to the Authority relating to the performance of this Agreement; (6) provide qualified personnel with the ability to perform the duties assigned to the Operator hereunder, including but not limited to the Operator's obligations under this Section 4; (7) annually prepare and conduct a training program approved by the Authority; 8 - OPERATION & MAINTENANCE AGREEMENT (8) following a protective relay or alarm action, and upon observation or notification, interpret the cause, identify corrective measures, and take corrective action as the situation warrants. The Operator shall document any such actions within ten (10) days of their accomplishment; (9) take reasonable measures to protect equipment, personnel, and the general public from hazards arising from equipment failure such as electrical faults, vandalism, and mechanical failure and repair and report damaged facilities to the Authority, to the BPMC on behalf of the Authority and any appropriate law enforcement authority, as soon as possible following each occurrence; (10) record the operating characteristics of the power plant equipment and machinery as required; (11) maintain the Project living quarters, including expenses for utility services, as a cost of operation and maintenance. (12) update, keep and make available to the Authority the required Project documents, as-built drawings, and other records, including records to meet FERC license requirements and records required by any project related insurance agreements; (13) perform water and power operation studies as required to integrate power from the Project into the Purchasers' systems with due regard for the capability 9 - OPERATION & MAINTENANCE AGREEMENT limits of the Project, planned water reserves, and Purchasers' power needs; [OPEN] (14) arrange for and administer project related subcontracts or agency agreements; (15) conduct all technical, operation, and maintenance inspections of the Project in accordance with the FERC license for the Project, and other permits or agency requirements, and submit inspection and other reports to the appropriate entities; fand RE Coven | (16) support the Project by coordinating related technical and operating activities with the Purchasers. —-6REN- Section 5 - Accounting and Records. In keeping any books of account required by Section 4, the Operator shall, to the extent that different rules are not prescribed by this Agreement or federal and state laws, follow the system of accounts prescribed for public utilities and licensees by FERC. Upon reasonable notice, the Operator and its contractors or subcontractors shall allow the Authority, BPMC, or their authorized representatives to audit books of account for the Project O&M and the supporting documents of the Operator and its contractors or subcontractors related to the Project O&M for a period of three (3) years following the close of a Contract Year. The audit shall be performed in such a manner that will not unreasonably interfere with the Operator's duties under this Agreement. 10 - OPERATION & MAINTENANCE AGREEMENT Section 6 - Budget. (a) (b) (c) After the effective date of this Agreement, and in accordance with schedules provided by the Authority, the Operator shall prepare and submit each year to the Authority a draft O&M budget for the Project for the following Contract Year. The draft O&M budget shall be based upon prudent estimates and anticipated O&M requirements and expenditures, and reflect appropriate accounting and budgetary principles for utilities. The draft budget shall be prepared in a format and schedule directed by the Authority. The Operator shall perform its duties in a manner consistent with the Project O&M Budget except as provided in Sections 7 and 8 below. If the Operator makes a determination during any Contract Year that it cannot operate within its Project O&M Budget, the Operator shall report such finding to the Authority and shall submit a revised budget for the Authority's review and approval. In the event a revised budget is not approved and the Operator determines that it cannot perform its obligations under this Agreement, the Operator may terminate this Agreement upon 90 days notice to the Authority. Section 7 - Extraordinary Costs. (a) Extraordinary costs are costs for operations, maintenance, repair or equipment replacement which were not anticipated to materialize in the Contract Year, and not provided for in the Project O&M Budget. 11 - OPERATION & MAINTENANCE AGREEMENT (b) (c) If the Operator learns of an event or other contingency which involves an extraordinary cost, the Operator shall promptly notify the Authority of the circumstances and request authorization to make such expenditures. If required by the Authority, the Operator shall develop a scope, schedule, budget and proposed plan of work as soon as practicable. The Authority shall respond in writing to the Operator's request as soon as practicable after the receipt of the plan. Upon approval by the Authority, the Operator shall perform such work consistent with the plan. The Operator shall not incur any extraordinary costs without the written approval of the Authority except as provided in Section 8 below. Section 8 - Emergency Expenditures. (a) (b) An emergency is an unforeseen combination of circumstances or the resulting state that requires immediate action to protect or preserve the Project, Project personnel, or public health and safety. The Operator shall take such actions as it reasonably believes are necessary in an emergency. If, in the reasonable judgment of the Operator, the emergency requires the Operator to incur costs prior to obtaining written approval from the Authority, the Operator shall notify the Authority of the emergency as promptly as practicable with due regard to the emergency. 12 - OPERATION & MAINTENANCE AGREEMENT Section 9 - Disbursement of Funds. (a) (b) (c) (d) The ordinary costs of performing under this Agreement shall be initially paid by the Operator. The Operator shall prepare an invoice identifying the actual costs incurred in a format mutually agreeable to the Authority and Operator. The invoice shall be furnished to the Authority by the fifteenth (15) of the month following the month in which the costs are incurred. All such invoices shall be subject to audit and approval by the Authority, such approval shall not be unreasonably be withheld. Subject to the availability of funds, the Authority shall reimburse the Operator for all costs under this Agreement. Any amounts owed by the Authority to the Operator shall be paid by the Authority within thirty (30) days of receipt of a bill from the Operator. Any amounts not paid within thirty (30) days shall accrue simple interest at the legal rate of interest at the time payment was due, and shall continue until paid by the Authority. Section 10 - Access to Operator's Facilities. Authority and BPMC personnel or agents shall be granted reasonable access to the Project and the Project owned equipment and facilities on the Operator's premises upon reasonable notice and subject to security measures, for the purpose of inspection and testing. 13 - OPERATION & MAINTENANCE AGREEMENT Section 11 - Use of Project Living Quarters. (a) (b) The Operator may house its employees (and their immediate families) who are required to live on-site in performance of the Operator's duties under this Agreement in living quarters at the Project at no cost. No additional living quarters other than those approved by the Authority will be made available at the Project. The Operator shall schedule occupation of the Project living quarters in an efficient manner. The Operator shall include in such scheduling, quarters for visiting employees of the Operator, subcontractors, the Authority, and the BPMC as needed and available. On-site operations and maintenance personnel shall have priority in the use of permanent residences at the Project. Section 12 - Insurance. The insurance as required by the Master Operating Agreement Provision 7, shall be as set forth in Exhibit C. Section 13 - Dispute Resolution. Pending resolution of a disputed matter, the Parties will continue performance of their respective obligations pursuant to this Agreement. If the Parties cannot reach timely mutual agreement on any matter in the administration of this Agreement, the Operator shall, to the extent necessary for its continued performance, make a determination of such matter without prejudice to the rights of the other Parties. Such determination 14 - OPERATION & MAINTENANCE AGREEMENT shall not constitute a waiver of any other remedy belonging to either party. Section 14 - Notices, Time and Holidays Computation, Designated Representatives. (a) Any notice required to be given to any Party by this Agreement shall be effective when it is received by such Party. In computing any period of time from such notice, the period shall commence at 12:01 p.m. on the date of receipt of such notice. Notice to Operator required by this Agreement shall be in writing directed to the General Manager of Homer Electric Association, Inc., 3977 Lake Street, Homer, Alaska 99603. (b) If the date for making any payment or performing any act is a day on which banking institutions are closed in the place where payment is to be made or a legal holiday, payment may be made or the act performed on the next succeeding day which is neither a legal holiday nor a day when banking institutions are closed. (c) Each Party shall designate a representative to act for it in matters not requiring formal action by its governing bodies. Either Party may at any time change its designated representative by giving written notice to the other Party. Section 15 - Remedies Cumulative. No remedy conferred upon or reserved to the Parties under this Agreement is intended to be exclusive of any other remedy or remedies existing at law or equity. 15 - OPERATION & MAINTENANCE AGREEMENT Section 16 - Availability of Information. The Parties shall make available to each other, for inspection and copying during business hours, all books, records, plans and other information relating to any calculation or determination to be made under this Agreement. Section 17 - Termination. (a) (b) Not less than 75 days prior to the date of any scheduled termination of this Agreement the parties shall meet for the purpose of discussing arrangements necessary for the orderly takeover of the duties of the Operator by the Authority. At of before the meeting the Operator shall submit to the Authority a takeover plan which sets forth the actions which in the opinion of the Operator are reasonably required to accomplish the takeover, and any budget amendments necessary to accomplish the plan. The Authority shall review and either approve or modify the plan and budget. The Operator shall perform in accordance with the approved plan, subject to any budgetary constraints. The Authority shall secure funding for and pay any extraordinary costs reasonably incurred by the Operator in performing its duties hereunder, including close-out and demobilization costs. Following termination of this Agreement for any cause, the Authority shall have the right and a reasonable amount of time, not to exceed six (6) months, to arrange disposition of Project-owned equipment on the Operator's premises. 16 - OPERATION & MAINTENANCE AGREEMENT Section 18 - Force Majeure. (a) No parties to the Agreement shall be liable to other Parties LOL, or be considered to be in breach of or default under this Agreement on account of, any delay in performance or any delay or failure to deliver, receive or accept delivery of energy due to any of the following events: (1) (2) Any cause or condition beyond such Party's reasonable control which such Party is unable to overcome by the exercise of reasonable diligence (including but not limited to: fire, flood, earthquake, volcanic activity, wind, drought and other acts of the elements; court order and act of civil, military or governmental authority; strike, lockout and other labor dispute excluding those disputes wrongfully caused by the Operator; riot, insurrection, sabotage and war; breakdown of or damage to facilities or equipment; electrical disturbance originating in or transmitted through such Party's electric system or any electric system with which such Party's system is inter- connected; and, act or omission of any person or entity other than such Party, or Party's contractors or suppliers of any tier or anyone acting on behalf of such Party); or Any action taken by such Party which is, in the sole judgment of such Party, necessary or prudent to protect the operation, performance, integrity, reliability or stability of the Project or of such Party's electric system or any electric system with which such Party's electric system is interconnected, whether such actions occur automatically or manually. 17 - OPERATION & MAINTENANCE AGREEMENT (b) In the event of any delay excused under this section, the time for performance thereby delayed shall be extended by a period of time reasonably necessary to compensate for such delay. No cost adjustment will be allowed, only time extensions as appropriate. Nothing contained in this paragraph shall require any Party to settle any strike, lockout or other labor dispute. Each party shall give the other Parties prompt written notice of any delay which the Party giving notice considers to be an excusable delay of its performance. Section 19 - Third Party Beneficiaries. This Agreement gives no rights or benefits to anyone other than the Operator and the Authority and has no third party beneficiaries. Section 20 - Assignment of Contract HEA assignment of its rights and responsibilities under this agreement shall be subject to the approval of the Authority and BPMC. HEA expects to request approval to assign its rights and responsibilities under this Agreement to AEG&T. Approval of such assignment request is subject to a finding by the Authority that AEG&T is a qualified operator. Section 21 - Exhibits. The following exhibits attached hereto are incorporated by reference herein: 18 - OPERATION & MAINTENANCE AGREEMENT Exhibit A - Project Facility Description; Exhibit B - Project Specific Federal and State Agency Requirements; Exhibit C - Insurance and Indemnification; and Exhibit D - Section 7 of the Master Operating Agreement Section 22 - Multiple Copies. This Agreement shall be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Section 23 - Entire Agreement; Priority of Power Sales Agreement. This Agreement in its entirety including the Exhibits and the Power Sales Agreement represent the entire Agreement of the Operator and the Authority. Nothing in this Agreement is intended to alter the rights and obligations of the Authority and the Purchaser(s) under the Power Sales Agreement. In the event the terms of this Agreement and the Power Sales Agreement are found to be in conflict, the terms of the Power Sales Agreement shall. govern. Any amendments to this Agreement shall be in writing. 19 - OPERATION & MAINTENANCE AGREEMENT IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed the day and year first above written. HOMER ELECTRIC ASSOCIATION, INC. By. Title Date (SEAL) ATTEST: ALASKA ENERGY AUTHORITY By Title Date (SEAL) ATTEST: APPROVED: Assistant Attorney General 20 - OPERATION & MAINTENANCE AGREEMENT EXHIBIT "A" - BRADLEY LAKE PROJECT FACILITY DESCRIPTION EXHIBIT "B" - BRADLEY LAKE PROJECT SPECIFIC FEDERAL AND STATE AGENCY REQUIREMENTS EXHIBIT "C" INSURANCE ils Contractor to purchase/maintain insurance for duration of agreement, plus one year following final payment. as Specified limits are minimum levels. If the policy contains higher limits, contracting agency is entitled to coverage of higher limits. 2. Certificate of insurance must be furnished to contracting agency. e Must provide for 30-day prior notice to the contracting agency of cancellation, reduction in liability. ® Failure to furnish constitutes material breach and grounds for termination. Types of Insurance Worker's Compensation: Contractor responsible for subcontractors. Coverage must include statutory coverage for states where employees are engaging in work and employer's liability protection not less than $100,000 per person, $100,000 per occurrence. Where applicable, coverage for all federal acts must also be included. Comprehensive of Commercial General Liability Insurance: Covers all operations of contractor providing insurance for bodily injury and property damage liability including coverage for: Premises and Operations Products and Completed Operations Broad Form Damage; and Personal Liability Comprehensive Policy: Minimum combined single limit of liability is $300,000 per occurrence, $300,000 aggregate for bodily injury, property damage and personal injury. Commercial Policy: Minimum limits of liability are $300,000 per occupance (combined single limit) for bodily injury and property damage, $300,000 per occurrence for personal injury, $300,000 aggregate for products-completed operations, and $300,000 general aggregate. Comprehensive Automobile Liability Insurance: Covers all owned, hired, and non-owned vehicles with coverage limits not less than $100,000 per occurrence bodily injury and $50,000 property damage. Professional Liability Insurance: Covers all negligent errors, omissions which the contractor, subcontractor or their employees make in the performance of the agreement which results in financial loss to the contracting agency. Minimum Limits: Combined Single Limit Contract Amount Occurrent and Annual Aggregate Under $100,000 $100,000 $100,000 to $499,999 $250,000 $500,000 to $999,999 $500,000 $1,000,000 and up NEGOTIABLE Contracting agency reserves right to implement an Owner Controlled Insurance Program with option of obtaining Professional Liability Insurance, contractor isn't required to carry Professional Liability Insurance. EXHIBIT C Page 2 of 2 EXHIBIT "D" DRAFT 10/19/93 1:00pm Section 7. Master Contract Provisions. All Contracts shall include the following general provisions, together with specific provisions applicable to that Contract, and shall follow substantially the form set forth in this section. (a) Independent Contractor. Unless otherwise agreed to by the Parties, each Contractor entering into a Contract shall perform solely as an independent contractor. (b) nual Planning and Budget. The Authority shall prepare, or cause the Contractor to prepare, the initial plans and budgets to be submitted to the BPMC for the operation or maintenance service in the Annual Project Budget. (c) Subcontracting. A Contractor may subcontract work on the operation or maintenance of the Project or Project Related Facilities, with the written approval of the Authority and the BPMC, which shail not be unreasonably withheld. (d) Invoices. A Contractor shall submit complete written invoices to the Authority for payment. Invoices shall include supporting documentation as required by Exhibit A. (¢) Payment and Dispute Resolution. The Authority shail expeditiously arrange for payment of all invoices, and shall work with the Contractor to promptly resolve any disputed billings. (£) Accounts, Records, and Audits. In keeping records for work performed under a Contract, the Contractor shall utilize the accounting system required of public utilities and licensees by the Federal Energy Regulatory Commission for electric plants. Contractors shall make their records available as required. The Contractor shall retain copies of all invoices, payroll records, and other supporting documents sufficient for an audit of all expenditures, for three (3) years following the close of eath Fiscal Year. A Contractor will furnish the Authority with operatin and financial statements related to work performed under a Contract as may be reasonably requested by the Authority. If receipt of those statements is unreasonably delayed, the Authority may, with its own staff or agents, perform all work necessary to collect the data reasonably necessary, but only at such times and in such a manner as will not unreasonably interfere with Contractor’s operations under a Contract. 5S - MASTER MAINTENANCE AND OPERATING AGREEMENT DRAFT 10/19/93 1:00pm (g) Insurance. During the term of the Contract, the Contractor shall purchase and maintain insurance covering injury to persons or property suffered by the Authority or a third party, as a result of errors or omissions or operations by a Contractor or by its subcontractor which arise both out of and during the course of the Contract. The Contractor shall require all subcontractors providing services directly or indirectly under a Contract to provide the same insurance as required cf the Contractor. Coverage shall also provide protection agairst injuries to all employees of the Contractor and the employees of any subcontractor engaged in work under a Contract. Copies of all required insurance policies shall be furnished to the Authority prior to beginning work under a Contract. These policies will show evidence of coverage and provide for ninety (90) days notice of written cancellation, non-renewal for material change in the coverage. The Contractor shall purchase insurance adequate to cover its operations performed in connection with the work under the Contract. Specifically, each Contractor shall maintain Worker’s Compensation Insurance and Comprehensive General Liability Insurance, including Comprehensive General Liability Broad Form Insurance, Automobile Liability Insurance, Owned Aircraft Insurance (where applicable), and Owned Watercraft (where applicable), in amounts acceptable to the Authority and consistent with the Power Sales Agreement. (h) Indemnity. The Authority, to the extent permitted by applicable law and subject to the availability of funds, and each Contractor (as "Indemnitor") agrees to and shall indemnify and defend the other, its officers, employees, and agents (as "Indennitee") for tort liability for all claims for damages and injuries of any character or nature whatsoever arising from the sole negligence of the Indemnitor, including its office, employees or agents in relation to performance under this Agreement. Indemnitor agrees to assume the defense thereof and to pay all expenses (including attorney’s fees) connected therewith. For purposes of this section, "sole negligence" shall include acts or omissions of the Indemnitor, its officers, employees, or agents, or any combination thereof, and situations where such acts or omissions, in combination with the negligence of third parties combines to cause injury or damage to persons or property. It shall not include situations where the acts or omissions of the Indemnitor, its officers, employees, or agents combines with the negligence of Indemnitee to cause such injury, which situations shall be governed by the provisions of the subsection below relating to concurrent negligence. 6 - MASTER MAINTENANCE AND OPERATING AGREEMENT DRAFT 10/19/93 1:00pm Each party agrees that liability (including costs of defense and attorney’s fees) for claims arising from the concurrent negligence of both Parties shall be apportioned according to the respective percentage of fault attributable to each Party as determined by agreement or by the trier of fact. (i) Amendments. Any amendment or modification to a Contract must be in writing and signed by the Contractor, the Authority and approved by the BPMC. (3) Conduct in Accord with Applicable Law. The Contractor and the Authority agree that at all times during the term of a Contract, they shall conduct themselves in accord with all applicable laws and permits, and they will undertake no action contrary to such laws or permits. The iaws of the State of Alaska shall govern this interpretation and application of the Contract and the actions of the parties thereunder. (x) PDrudent Utility Practices for the purposes of this Agreement, shall have the meaning provided in Section 1(x) of the Power Sales Agreement. (1) Contract Hours and Safety Standards. All Contracts are subject to all applicable provisions-of state and federal law s concerning work hours and safety standards. (m) Equal Employment Opportunity. All Contracts are subject to all applicable provisions of state and federal law concerning Equal Employment Opportunity. (n) Exclusivity of Contract. All terms and provisions agreed to between the Authority and any Contractor will be incorporated into a written Contract setting forth the:full intent of the parties. (c) Notice and Communication. Any notice or demand involving a claim of default, breach cf a Contract, or notice of a dispute shall be sent to the appropriate party by registered or certified mail. Notice to the Authority shall be addressed to: the Executive Director, Alaska Energy Authority, 701 E. Tudor Road, Anchorage, Alaska $9503. (p) Section Headings. The section headings of a Contract are for convenience only, and do not purport to, and shall not be deemed to, define, limit or extend the scope or intent of the section to which they pertain. 7 - MASTER MAINTENANCE AND OPERATING AGREEMENT DRAFT 10/19/93 1:00pm (q) Severability. In the event that any provision of a Contract shall be finally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Contract shall be unaffected by such adjudication and all the remaining provisions of the Contract shall remain in full force and effect as if such provision so adjudicated to be invalid had not been included herein. (xr) Successors and Assigns. A Contract shall be binding upon and inure to the benefit of the successors, legal representatives or assigns of the Contractor and the Authority. However, a Contractor may not assign a Contract or any party thereof without the written consent of the Authority and the BeMC. If the Authority discontinues its current legal existence, its obligations under a Contract will automatically be assigned to the BPMC, without the need for consent by the Contractor, unless the rights, powers and duties of the Authority are transferred to a successor entity with substantially the same expertise within the meaning of Prudent Utility Dractices, powers and duties as the Authority. (s) Waiver Not Continuing. Any waiver at any time by any party to a Contract of its rights wi ith respect to any default of the other party hereto, or with respect to any cther matter arising in connection with that Contract, shail not be considered a waiver with respect to any subsequent default, right or matter. Any delay short of the statutory period of limitations in asserting cr enforcing any right shall not be deemed a waiver of such right. (t) Third Party Beneficiaries. The BPMC, as representative cf the Purchasers, is a third party beneficiary of this Contract, with, the legal right to enforce the provisions hereof. Cl @ - MASTER MAINTENANCE AND OPERATING AGREEMENT