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Home My WebLink AboutBPMC May 17, 2013Alaska Energy Authority - Bradley Lake Project Management Committee ALASKA ENERGY AUTHORITY Regular Meeting Bradley Lake Project Management Committee Notice is hereby given that the Bradley Lake Project Management Committee will hold a regular meeting on Friday, May 17, 2013 at 9:00 a.m. For additional information contact Bryan Carey at 907-771-3065. This meeting will be conducted by electronic media pursuant to AS 44.62.310 at the following location: Alaska Energy Authority Board Conference Room, 813 West Northern Lights Boulevard, Anchorage, Alaska; a teleconference line has been set up for those unable to attend in person. Dial 1-800-315-6338, Enter Code 3065#. The public is invited to attend. The State of Alaska (AEA) complies with Title Il of the Americans with Disabilities Act of 1990. Disabled persons requiring special modifications to participate should contact AEA staff at (907) 771-3074 to make arrangements. Attachments, History, Details Attachments Details Agenda.pdf Department: Revision History Category: Created 5/8/2013 10:33:37 AM by tawebster Sub-Category: Modified 5/13/2013 10:31:07 AM by tawebster Location(s): Project/Regulation #: Publish Date: Archive Date: Events/Deadlines: Commerce, Community and Economic Development Public Notices Advisory Committee Meetinc Statewide 5/8/2013 5/18/2013 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING REGULAR MEETING Alaska Energy Authority, Anchorage, Alaska May 17, 2013 1. CALL TO ORDER Chair Evans called the regular meeting of the Bradley Lake Hydroelectric Project Management Committee (BPMC) to order at 9:00 a.m. 2. COMMITTEE MEMBERS ROLL CALL Brad Evans (Chair) Chugach Electric Association (CEA) Cory Borgeson Golden Valley Electric Association (GVEA) Bryan Carey Alaska Energy Authority (AEA) Joe Griffith Matanuska Electric Association (MEA) James Posey Anchorage Municipal Light & Power (ML&P) Harvey Ambrose Homer Electric Association (HEA) John Foutz City of Seward (SEW) 3. STAFF/PUBLIC ROLL CALL Sara Fisher-Goad, Kelli Veech, Nick Szymoniak, Gene Therriault, Jake Plancich, Teri Webster, and Sandie Hayes (AEA); Rick Baldwin, Alan Owens, Carrie Buckley, and Robert Day (HEA); Tom Hartnell and Ron Woolf (GVEA); Jeff Warner (ML&P); Burke Wick, Lee Thibert, and Brian Hickey (CEA); Denali Daniels, Don Zoerb, and Kaye Laughlin (MEA); TW Patch and Bernie Smith (Regulatory Commission of Alaska); David Burlingame (Electric Power Systems); Kirk Gibson (McDowell Rackner & Gibson); Brian Bjorkquist (Alaska Department of Law). 4. PUBLIC COMMENT There were no public comments. 5. AGENDA COMMENTS/MOTION FOR APPROVAL The agenda was amended. 7A — Annual Election of Committee Officers was postponed. 6. APPROVAL OF PRIOR MEETING MINUTES - March 21, 2013 The March 21, 2013 meeting minutes were approved as presented. 7. NEW BUSINESS 7A. Update on Battle Creek Diversion Project Mr. Carey gave a PowerPoint presentation entitled Battle Creek Diversion. This diversion dam is approximately 25 feet tall and 100 feet long at 1,700 feet elevation. Mr. Carey stated the diversion amount of water above the gauge is conservatively at .76 of the below glacier gage. Mr. Carey gave an update of the work that has been done. He has received comments from BPMC Minutes 5/17/2013 Page | of 4 U.S. Fish & Wildlife Services (USF&WS) and Alaska Department of Fish and Game (ADF&G) on the Battle Creek Diversion Project. He stated USF&WS and ADF&G have differing opinions as to the effects of turbidity, temperature and velocity. Mr. Posey asked who the predators are in the river. Mr. Carey stated Dolly Varden, eagles and bears. Mr. Carey stated National Marine Fisheries (NMFS) did not submit official comments, but were on the phone with USF&WS at the last meeting and agree with USF&WS' comments. Their main concern was habitat connectivity. They also mentioned target flows down at tidewater. Mr. Carey stated we do not want to have hard set compliance points that could result in violations, but rather have target flows that can vary a little bit. Mr. Posey asked if the target could be 60 and then adjusted up to 120 after five to 10 years. Mr. Carey stated he doesn't believe 60 would be approved. Chairman Evans asked Mr. Carey to explain the target flows. Mr. Griffith asked Mr. Carey how the agency comments of there not being enough information are going to be addressed. Mr. Carey stated there will be a comment response to USF&WS providing references and more information about their concerns. He stated some of USF&WS comments are impossible to address because there is no information or studies to address them. FERC staff is the adjudicator and will make the ultimate decision. Mr. Carey requested Ms. Laughlin give her impressions of the meeting with USF&WS and NMFS. Ms. Laughlin stated they needed more information to justify their decision. She believes they want the project. Mr. Ambrose asked if these three agencies are looking for some minimum continuous fish water flow release. Mr. Carey stated all the agencies will want some type of flow, but it is not clear how much the release would be. Mr. Carey stated the amendment application has not been submitted and will take about one year after the submittal date to get the amendment. He said the amendment application could be submitted in either July and allow FERC to request more studies or be submitted in October with some possible studies completed. Either case, Mr. Carey does not believe construction would occur next summer. Chair Evans asked if the amendment application will be submitted without full resolution of all the issues with the stakeholders. Mr. Carey stated full concurrence will not be reached because some of the issues, such as turbidity, cannot be proven. Mr. Posey suggested gathering as much data as possible this summer and submitting the amended application in October because there is no way construction could happen next summer. Chair Evans asked Mr. Carey if there are fatal flaws in terms of the feedback for this project. Mr. Carey doesn't believe so. He stated the agencies are advisory to FERC and are not mandatory because there are no federal lands involved. Mr. Posey asked how the flushing is allowed for every year. Mr. Carey stated there will be bed load gravel built up behind the dam and the sluice gate will be opened up once or twice a year to flush all the gravel out from behind the dam. He stated it would probably be done during a rain storm to have very high flows occurring at that point. Mr. Carey stated the estimated construction cost as of December 2012 was $52.3M which is 80 percent design cost estimate. The conservative estimate of produced energy is 35,200 MWhrs. 7B. Economic Analysis of Battle Creek Diversion Project Mr. Carey requested Mr. Szymoniak review the economic analysis of Battle Creek diversion project slides. BPMC Minutes 5/17/2013 Page 2 of 4 Mr. Szymoniak presented rate analysis comparing different interest rates and flow rates. He stated the fixed cost constitute most of the project’s power cost and would remain the same during the life of the project. He also did a rate comparison on natural gas generation which shows the cost of natural gas power increasing each year with inflation while Battle Creek power remains stable. Mr. Posey asked what would be the implications of a one year slip in the project on the total cost estimate. Mr. Carey responded stating in another two months the independent cost estimate of the project will be at the 95 percent level. It was agreed to wait until this data is collected and submit the FERC licensing amendment in the fall. Once the license is obtained then they can review the costs again to determine if the project moves forward. 7C. Next Steps for Transmission Planning Ms. Fisher-Goad and Mr. Szymoniak gave a presentation on the next steps for transmission planning. She stated they have been working on Railbelt-wide transmission planning. The first year of funding for the unconstrained Bradley Lake plan was requested in the Governor's budget during last legislative session, but wasn't included in the final version of the capital budget. Mr. Szymoniak explained the slides regarding potential rate impacts with transmission upgrades and the benefit/cost analysis based on four assumptions: the full cost is recovered through rates; the full cost is funded with commercial loans; the cost is shared proportionally by all utilities; annual operating costs are two percent of capital costs. Mr. Szymoniak stated that all project costs and benefits were reported in a May 9, 2013 EPS report by Mr. Burlingame. Ms. Fisher-Goad stated AEA gives the Legislature and the administration an analysis detailing the impacts of rates to constituents and rate payers for particular amounts of funding provided for transmission upgrades. Chair Evans requested a discussion regarding the concerns about the reliability standards that were used for planning purposes. Ms. Fisher-Goad stated this was an initial presentation and will be refined to be presented this summer to the Regulatory Commission. Chair Evans requested an update on the transmission upgrade and rate impacts. He also requested a discussion on concerns regarding the potential significant operational changes on the Kenai Peninsula between Homer, Chugach, and the Bradley Lake Project. The assumptions ascribe the benefits and cost of the project to the kilowatt hours sold within the Railbelt system. The slide shows the cost spread over the total Railbelt load. Chair Evans asked to explain why there is a 300% spread between the estimated low savings and the estimated high savings. Mr. Burlingame said they are working on production cost savings analysis which comes in at about $80 million a year. He believed the estimated savings will be between $120 million and $150 million a year, but the analysis has not been completed. Mr. Griffith asked what criteria was used in the planning study. Mr. Burlingame stated they tried to mimic the reliability criteria that each of the utilities use to plan their own transmission systems. Chair Evans asked if this same reliability criteria was used to identify the projects to start with. Mr. Burlingame stated the criteria they used was to have no loss of an interconnective resource resulting in a loss of firm customer from the bulk transmission system. Chair Evans inquired about what structure would be used to finance the proposed transmission upgrade. Ms. Fisher-Goad stated the financing question has been a long-term Railbelt issue. BPMC Minutes 5/17/2013 Page 3 of 4 She believes it is important for the utility companies to agree these are the project upgrades that need to go forward before the financing question is taken to the Legislature. Chair Evans stated the capital costs are too large to bear even if all the utilities created a unified Railbelt system. Ms. Fisher-Goad stated AEA has bonding authority for conduits and projects they own. She stated the Legislature and administration has looked favorably upon low interest financing for energy projects. She believes AEA and the state of Alaska have been very creative in support projects that are good for the region. Mr. Ambrose commented it would not be accurate to say the benefits of the Railbelt upgrades are unilateral across the utility companies. He believes the upgrades need to be done, but would be difficult to sell the cost to his members because they are necessary for the Railbelt, but not necessary for Homer. Chair Evans appreciated the presentation and the members input, but there is clearly no unified response to being a unified system. He does not believe the utilities have to merge, but need to find a way for the utilities to give the reliability group a greater role. Chair Evans believes it is incumbent upon this committee to endorse the planning criteria that has been used for these studies. He recommends drafting a resolution for the next meeting. Chair Evans requested the Chair of the Bradley O&D, through Mr. Griffith, provide an update on the technical operations concerning issues on the Static Var Compensator, the power plant, and the energy accounting. 8. OPERATORS REPORT Mr. Owens gave his presentation on the operators report. Prudent maintenance on the dam will be occurring in the next three months. The fish screens will need to be cleaned and requires no net change to the budget. Mr. Day gave an update on the phone, internet, and intranet installation. Mr. Griffith requested an update on the cyber security of the Bradley system. Mr. Day stated the DCS system is isolated from any external network. No external access is allowed. The waterfall isolation system has been approved in the budget and will be installed. 9. | ADJOURNMENT There being no further business for the committee, the meeting adjourned at 11:44 a.m. Alaska Energy Authority, Seefetary BPMC Minutes 5/17/2013 Page 4 of 4 5/17/2013 Battle Creek Diversion INE eat ale Authority I Map of Battle Creek | free es ee Nye Ne Diversion Location 5/17/2013 5/17/2013 Battle Creek Work = 2010 & 2011 Fisheries studies * 2012 Wildlife survey * 2012 Cultural * 2012 Nine boreholes diversion & canal route = 2012 Engineering to 80% = 2012 Engineering cost estimate * 2012 Draft Bradley License Amendment ADF&G Comments on Draft Amendment « Believes turbidity, temperature, and velocity changes could be beneficial « Would like to see some in-stream flow into the existing channel « Flushing flows « Post project tidewater flows of 80-120 cfs » Ensure canal not a barrier to wildlife crossing | USF&WS Comments of Draft Amendment « Fisheries —Timing & abundance * Channel Maintenance flows « Turbidity, temperature, & velocity « Barrier to wildlife migration » Habitat connectivity « 2012 Letter mentioned post project tidewater flows near existing flows (@mmm ENERGY AUTHORITY Schedule « Estimate 1 year from amendment application. Could be less with agency concurrence. Two possible schedules. = Agency meeting June & file in July. Gather additional data after file. = Agency meeting Oct followed by filing. Possible some issues cleared. 6/17/2013. 5/17/2013 Cost & Energy 4 ‘= December 2012 Construction Cost Estimate (80%) $52.3M « July 2013 Independent Construction Cost Estimate (95%) = Mean of four years gage data 35,200 ac-ft * Conservative 35,200 MWhrs Mh Battle Creek Rate Calculation = Costs based on R&M 80% cost estimate (December 18, 2012) [Capital Costs (Smillions) $52.3 « Financing assume 100% Operating Costs (Sthousands) $100 commercial grade debt Gabt reaii (years) 30 « First comparison Start Year 2016 = Interest rates : . Years of Debt Reserve Fund 1 * Environmental flow requirements 5/17/2013, TT Annual Generation AEA expects there will be a Avivial minimum in-stream flow Envi ; . requirement at the diversion nviromental Generation dam. Flow (cfs) (MWhs) AM Interest Rates and Flow Rates = Environmental iow rate Year 1 Rates (Nominal Dollars) * Dictates the annual generation ; associated with the project Enviromental Flow Rate (cfs) » Yet to be determined « Interest rate * 30 year debt = Will depend on funding source, recipient, and market conditions Interest Rate » Year 1 rates = Wholesale cost ($/kWh) « In 2016 dollars 5/17/2013 Interest Rates and Free Capital Amounts = Amore important measure is 30 Year Ave (Real Dollars) the average of future “real” . ie Enviromental Flow Rate (cfs) » Power cost from project remains almost constant despite ongoing inflation, result is a decline in the real power cost Or, said another way- Interest Rate » Adjusted for inflation Battle Creek Power Cost*: Different Flow Rates Real 2013 Dollars Nominal Dollars *Assumes 5% interest rate on debt 5/17/2013 . Rate Comparison: Natural Gas Generation « Gas Price Projection Gas Price ($/Mcf) $6.50 * Increasing at 4% per year (1.5% above Gas Price Increase 4.0% inflation) Heat Rate (Btu/kWh) 8,000 = Heat Rate: 8,000 Btu/kWh Non-Fuel Cost ($/kWh) $0.03 = Current system average 10,770 = Base Case: $6.50 * Offsetting new, high-efficiency units = Non-Fuel Cost: $0.03 per kWh » Battle Creek is dispatchable = Could displace firm power/capacity 1 Battle Creek Power Cost: Natural Gas Comparison Real 2013 Dollars Nominal Dollars $0.24 a2 $0.24 " $0.22 = 22 7 $0.20 Zs . 9g ie = $0.18 R 4 £ sos 5 S $0.14 % $0.08 ea Seas & $0.06 > Enviromental Flow Range (0-30 cfs) } 2 wn «wn $0.06 Oe =~~Natural Gas Budget = Engineering stop at 95%. Believe have sufficient funds to * Do limited studies « File amendment * Additional data requests « Possible need for funds in 2014 to finish bid documents. Decision Points = Proceed forward or stop work now? » Submit amendment summer or fall? 5/17/2013 Transmission Upgrade: Rate Impact = Transmission system upgrades benefits entire CAPEX Railbelt system (Smillions) - di Phase 1: Unconstraining Bradley $420.4 . i ap aes Phase 2: Rest of Railbelt $388.6 * The State has not provided Total Cost $809.0 funding for first stage of project * Costs from May 9, 2013 EPS Presentations This presentation is for discussion purposes and not an fen boston, * Analysis of impact on rates of transmission upgrades ee Transmission Upgrade: Costs Base assumptions « Full capital cost recovered CAPEX ($millions) through rates OPEX (2% OPEX) Interest Rate = Annual operating costs are 2% of capital costs Bond Term (Years) « Entirely funded with commercial Output (GWhs) rates Inflation « Costs shared proportionally by all utilities 5/17/2013 . 10 5/17/2013 Transmission Upgrades: Benefits Base assumptions « The annual cost savings from 5; transmission upgrades will lower rates Annual Savings « Range of annual savings has been - (Smillions) estimated by EPS (May 9, 2013) Low Savings $50.0 * Low savings: $50 million High Savings $150.0 * High savings: $150 million » Estimates are being refined by AEA/EPS » Savings shared proportionally by all utilities Impact on Railbelt Rates: Net Effect « Annual costs and savings are spread = Net Rate Savings (Costs) ($/kWh) across all Railbelt kWh’s $50 MM $150 MM « Majority of upgrade costs are fixed Savings Savings while savings increase with inflation Year 1 (Nominal) ($0,006) $0.019 = Larger savings over time Year 1 ($2013) ($0.005) $0.016 « $50 million savings 10 Yr Ave ($2013) ($0.004) $0.017 » Rate increase in early years 25 Yr Ave ($2013) ($0.002) $0.019 * Savings in long term 50 Yr Ave ($2013) $0,002 _—$0.023 = $150 million savings *($2013) means adjusted for inflaiton to today's dollars * Significant savings immediately oe ‘ 6/17/2013. Impact on Rates: Nominal vs. Real Nominal Dollars Real Dollars (2013) $0.05 $0,045 $0.050 [= Phase 2 Costs: Rest of Railbelt | sa.010 $0.045 | Phase 1 Costs: Unconstraining Bradiey [eae res ay $0.035 soos nus! Sevings- Low s bitin cwuweiceniwieticecransiceiedassesecsss - —— & $0.030 $0.035 soto Phase 2 Costs: Rest of Ralibelt 7 $0.030 Phase 1 Costs: Unconstraining Bradley $0.025 $0.020 inal Savings - High . & $0.020 i nual Savings - Low $0.015 — $0.015 3 $0.010 kWh (Nominal) kWh (Real $0.010 $0.05 $0.005 $0.000 $0.000 1 3 5 7 9 21 43 15 17 19 21 23 25 27 29 31 33 35 1 3 S 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 Project Year Project Year * When annual savings exceed costs — positive impact on rates * $50 million annual savings - long term positive impact on rates $150 million annual savings - immediate and significant impact on rates AKEnergyAuthority.org 12