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HomeMy WebLinkAboutBPMC Meeting Feb. 7,2014Bradley Lake Project Management Committee - Special meeting ALASKA ENERGY AUTHORITY Special Meeting of the Bradley Lake Project Management Committee Notice is hereby given that the Bradley Lake Project Management Committee will hold a special meeting on Friday, February 7 at 10:00 a.m. For additional information contact Teri Webster. 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 3074# Attachments, History, Details Attachments Details Agenda-Feb 7.pdf Department: Commerce, Community and Economic Development Revision History Category: Public Notices Created 2/3/2014 9:41:03 AM by tawebster Sub-Category: Advisory Committee Meetinc Modified 2/3/2014 9:41:03 AM by tawebster Location(s): Statewide Modified 2/3/2014 9:43:53 AM by tawebster Project/Regulation #: Publish Date: 2/3/2014 Archive Date: 2/8/2014 Events/Deadlines: ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY BOARD MEETING BPMC 2/7/14 Roll call from top to bottom ending with Chair Golden Valley Electric Association Homer Electric Association Matanuska Electric Association Fas City of Seward Alaska Energy Authority Municipal Light & Power ‘Chugach Electric Association First | Second Roll call from top to bottom ending with Chair Golden Valley Electric Association Homer Electric Association Matanuska Electric Association City of Seward Alaska Energy Authority Municipal Light & Power Chugach Electric Association Next Meeting: xxxx xxxx Xx, XXXx HCR 14 FORSB7 E23 House Joint Resolutic HJR 1 HJR 3 HJR 4 HJR 5 UNIF LEGIS M RULES FINANC RESOLV 6/14/2013 CONST. AM: EDUCAT ION FUNDIN G KELLER CONST AM: GAS REVENU E ENDOW MENT HAWKE RES, FUND R (H) RES — 1/16/20\13 JUD, FIN STATEH OOD/AN CSA/NAT IVE ALLOTM ENT MILLET LAND 1/16/2013 RES EDC, 1/16/2013 JUD, FIN TIO. (S)JUD = 2/28/2013 JUD ENGINE LEGIS RESOLV SALMON TARR E6 4/15/2013 FSH, RES Bradley Lake Project Management Committee Friday, February 7, 2014 @ 10:00 A.M. **PLEASE WRITE LEGIBLY** ORGANIZATION a eA a> 17 Sr n ioe BLA 3 HE VK CHOCALYL cu ao LARK CIZEAD POSITION STATEMENT OF HOMER ELECTRIC ASSOCIATION, INC. At its meeting of January 24, 2014, the Bradley Lake Project Management Committee (BPMC) asked interested parties to address three issues with respect to the matters raised in Resolution No. 2013-02: the scope of the BPMC’s authority, compensation to HEA for wheeling Bradley power and the effect of the termination of the transmission facilities lease between Homer Electric Association, Inc. (HEA) and Chugach Electric Association, Inc. (CEA). In Resolution No. 2013-02 the BPMC resolved that: the BPMC and not the Regulatory Commission of Alaska (RCA) has the authority to resolve HEA tariff issues relating to wheeling Bradley Lake power; HEA’s transmission and line loss tariff filings are harmful to the interests of the BPMC members; the BPMC intends to install CEA as the operator of the Soldotna to Quartz Creek (S/Q) Line, to request the RCA to reject the HEA tariff filings, and to take legal action to enforce the terms of the “Bradley Lake Agreements;”! and that the members of the BPMC would enter into good faith negotiations, apparently concerning some or all of the matters raised in the resolution. Summary of HEA’s Position HEA will not negotiate away its right to operate its electrical system or the right to be fairly compensated for providing wheeling services over its system. It is clear to HEA at this point that the opposing utilities are motivated in their actions solely by monetary considerations and they have little or no interest in arriving at a settlement where HEA’s interest of being fairly compensated is even acknowledged as legitimate. The opposing utilities are now demonstrating a lack of good faith by directing punitive action at HEA, including signaling an intention to remove HEA as the Bradley operator and engaging in a concerted refusal to consider any matters brought by HEA to the BPMC. Unless and until the opposing utilities (and the Alaska Energy Authority) are able to accept that HEA is operating and has the right to control its own load balancing area without the interference of others, and has the right and duty to its members to be fairly compensated for providing transmission services, little will be gained by further discussion. ' The resolution was not clear as to which agreements HEA is charged with violating, so a more precise response to that issue is not possible at this time. The Scope of the BPMC’s Authority The BPMC’s authority over HEA cannot extend beyond the authority HEA has conceded to the BPMC by contract. The Bradley Lake Power Sales Agreement (PSA) gives the BPMC only the responsibility for the management, operation, maintenance, and improvement of the Bradley Lake Hydroelectric Project (Project); to arrange for the scheduling, production, and dispatch of Project power; and to develop dispute resolution procedures. The PSA does not impose an obligation on HEA to allow a third party to control any point within its system and consequently gives the BPMC no power to do so. The suggestion has been made that HEA’s obligation to operate its system in accordance with Prudent Utility Practice (§10(c) of the PSA), might give rise to an obligation for HEA to operate its system to the commercial advantage of the other utilities to the financial detriment of its own members, or the right by the BPMC to somehow compel such operation. Even the broadest possible reading of the duty to operate in accordance with Prudent Utility Practices does not leave room for such a conclusion. Compensation for Wheeling Bradley Power For the past 23 years the members of HEA, to a greater or lesser extent, have been subsidizing the cost of wheeling Bradley power over the HEA system. The value of the current subsidy can be determined by looking at HEA’s transmission rate case. HEA’s members have no obligation to continue to subsidize the transmission costs of other utilities. No provision in any of the “Bradley Lake Contracts” speaks to the issue of compensation to HEA for wheeling Bradley power, thus the ultimate decision as to compensation will be made by the RCA or by a court. In either event HEA will be entitled to fair compensation for the use of its system. The RCA will apply the principle that the “cost-causer should be the cost payer” and the constitutional principle that a regulatory agency cannot require a utility to offer services at rates lower than cost plus a reasonable return. A court will either accept HEA’s published price or award “reasonable compensation.” The Purchasers under the Amendment to Agreement for Sale of Transmission Capability (Transmission Agreement) have no basis to claim special consideration for having purchased transmission capability on the Soldotna Segment. Given that CEA had leased and was dispatching a significant portion of the HEA transmission system at the time the Project was built, HEA was not in a position to offer wheeling services. In lieu of paying for wheeling across Position Statement of HEA Page 2 the Soldotna Segment, each utility agreed to pay for a pro rata share of the capability of the line equal to its respective MW share of Project Power. HEA has paid the balance of the cost of the Soldotna Segment. The payments by the other utilities were not a windfall to HEA, but represented a more than fair charge for the purchase of the acquired transmission capability. The revenue requirement calculation for HEA’s transmission tariff removes all costs associated with the Soldotna Segment. The Impact of the Bernice-Quartz Creek (B/Q) Lease Expiration Under the lease of Bernice Lake Substation to Quartz Creek Substation (B/Q) transmission facilities,” CEA operated a substantial portion of the HEA transmission system. HEA also delegated to CEA the right to operate the Soldotna Segment even though the Transmission Agreement called for HEA to operate the Segment. The expiration of both the B/Q lease and the HEA-CEA power sales agreement removed from CEA the right to operate any of HEA’s transmission facilities. The event also removed any right of access CEA may have had to HEA’s substations and rights of way and removed CEA’s right to transmit energy over the HEA facilities. HEA has sole ownership and control over the facilities and the facilities are free of any encumbrances other than a mortgage. No party has been able to produce any contract, deed, easement, tariff or other rule that constrains HEA in its use of the facilities. The B/Q facilities have merged into the HEA transmission system. Bradley power of other parties is being transmitted across the HEA transmission system solely at HEA’s sufferance, while the parties await a decision by the RCA regarding its jurisdiction over the wheeling of Bradley Lake power over HEA’s system. Ifthe RCA declines jurisdiction, given that the Superior Court does not have the statutory power to order interconnection (that power is given exclusively to the RCA), the Court would apply general principles of contract and property law in deciding whether or to what extent HEA has an obligation to wheel Bradley power in the absence of an agreement to do so. CEA no longer has the right to use the B/Q facilities to deliver power under the Agreement for the Wheeling of Electric Power and for Related Services (Services Agreement). CEA no longer enjoys the right to receive power at HEA’s Soldotna Substation, without having permission from ? The S/Q line was but one line segment included in the B/Q lease, thus the lease is more properly referred to as the “B/Q lease.” Position Statement of HEA Page 3 HEA to do so. Upon termination of both the B/Q lease and the HEA- CEA power purchase agreement, HEA began operating as an independent load balancing authority (LBA) and is now the transmission provider for power between Bradley Junction and Quartz Creek. The result is elimination of CEA’s right to dispatch electric power through HEA’s system. Under the terms of the Services Agreement, (§13(aa)), the Quartz Creek Substation becomes the new contract delivery point for Bradley Power delivered to CEA. Maintaining “Status Quo” The obligation for a party to maintain the “status quo” is very limited and of no applicability to the issues raised by the BPMC. The status quo as of January 1, 2014, was that the B/Q lease had terminated and HEA began operating its own generation and transmission system. Under the Services Agreement, pending resolution of a dispute each party is obligated to “continue to perform its obligations under (the) Agreement.” As noted above and shown in the attached compilation of relevant contract references, HEA’s obligations under the Services Agreement are few and unrelated to power transmission, regardless of how fervently the other members of the BPMC might wish otherwise. Further, no party has yet been able to articulate a legal basis for the existence of a bona fide dispute concerning whether CEA has or should have any legal right to operate any portion of the HEA transmission system. Nothing in the language of the agreement obligates HEA to ignore the present reality. HEA’s Complaints are Supported by Contract References and Need No Further Elucidation Pending a Response At the direction of the chair, HEA submitted to the BPMC a statement listing five issues concerning its dispute with the Dispatcher of Bradley power and three issues concerning the action or inaction of BPMC. Unlike the “disputes” raised in Resolution 2013-02 the statement of issues submitted by HEA alleged specific facts which could be either admitted or denied and cited the specific contractual provision applicable to the issue. To date there has been no response by either party against whom the complaint was directed and thus no reason for HEA to comment further. Position Statement of HEA Page 4 RELEVANT CONTRACT REFERENCES Power Sales Agreement Provisions BPMC’s Responsibilities §13(c) Committee Responsibilities. (i) “... the Committee shall be responsible for the management, operation, maintenance, and improvement of the Project... .” (ii) The Committee shall take the following actions (A) Arrange for the operation and maintenance of the Project, and the scheduling, production, and dispatch of Project Power; (H) Adopt procedures . . . for the resolution of disputes that may arise between or among the Purchasers and the Authority concerning the interpretation of this Agreement, the obligations created by this Agreement, or the performance of such obligations. The “Project” is defined as the “Bradley Lake Hydroelectric Project as defined in Exhibit C.” An excerpt from Exhibit C reads: The (Bradley Junction) switching station will connect to a 115 kV transmission line (not included in the Project) which will transmit power between Fritz Creek and Soldotna on the Kenai Peninsula. HEA’s Obligations §10(c) Operation and maintenance of Purchasers’ Systems. Each Purchaser covenants and agrees that it will operate and maintain its System in good repair, working order and condition, and in accordance with Prudent Utility Practice. §1(x) “Prudent Utility Practice” shall mean at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry at such time, or which, in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability, safety and reasonable expedition. Prudent Utility Practice is not intended to be the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. . . . In evaluating whether any matter conforms to Prudent Utility Practice, the parties shall take into account (i) the nature of the parties hereto under the laws of the State of Alaska and their statutory duties and responsibilities, and (ii) the objective of integrating Project Capacity with the generating resources of the Purchasers, including resources available under contract, to achieve optimum utilization of the resources and achieve effective and economical operation of each Purchaser’s System... . Position Statement of HEA Page 5 Services Agreement Provisions BPMC’s Authority §10(b) . . . The parties agree that any further procedures for dispute resolution under this Agreement shall be entrusted (if the Authority concurs) to good faith negotiation and adoption by the Project Management Committee... . §8(a)(i) (the Dispatcher’s duties shall include) Dispatching power generation at the Bradley Lake Project in accordance with the requests of the Parties, the availability of services under this Agreement, and the applicable operating criteria or guidelines adopted by the Project management Committee. HEA’s Obligations §8(c) ... Unless the Project Management Committee adopts and implements procedures to the contrary, each party shall be responsible for ensuring that it does not cause to be generated at the Bradley Lake Project any power to which that Party is not entitled by the terms of the Power Sales Agreement and the criteria, guidelines, and procedures adopted by the Project Management Committee. “Soldotna Substation” defined. §13(aa) Soldotna Substation. The Soldotna Substation owned and operated by Homer Electric Association, Inc., or any successor facility at which Bradley Lake Energy can be and is delivered to Chugach at Chugach’s metering point by a Wheeling Utility for services under this Agreement. (Emphasis supplied) §12(c) Performance Pending Resolution Of Disputes. Pending resolution of any dispute, each Party shall continue to perform its obligations under this Agreement . . . . All Parties shall be entitled to seek immediate judicial enforcement of this continued performance obligation notwithstanding the existence of a dispute. Application for such enforcement shall be made to the Superior Court for the State of Alaska, Anchorage District. Transmission Agreement Provisions BPMC’s Authority §3(b) . .. Operation; Line Losses. HEA shall be compensated for line losses, if any, resulting from power of the Purchasers flowing over the Soldotna Segment. The Project Management Committee will determine the amount of line losses and the appropriate amount and manner of compensation. HEA’s Obligations §3(a)(i) On the date of Commercial Operation, HEA shall sell and each Purchaser agrees to purchase a share of the capability of the Soldotna Segment in an amount (stated in megawatts) equal to that Purchaser’s Percentage Share (stated in megawatts) of the Project. §3(b) Operation: Line Losses. HEA shall operate the Purchaser’s Soldotna Segment capability as if it were part of HEA’s system and make the Purchaser’s Soldotna Position Statement of HEA Page 6 Segment transmission capability available for the use of the Purchaser to deliver energy and power in the manner directed by the Purchaser. §5 - DUTY TO OPERATE AND MAINTAIN. So long as HEA owns the Transmission Line, HEA will in good faith and at all times operate, maintain and repair the electrical facilities used to perform the services provided hereunder in accordance with Prudent Utility Practice in a manner consistent with HEA’s obligations under this Agreement. §18 (kk) Transmission Line. The transmission line, approximately 59.7 miles in length, to be constructed by HEA between the Fritz Creek Substation and the Soldotna Substation, and composed of the Soldotna Segment and the Fritz Creek Segment. Formula for calculating a Purchaser’s share of the Soldotna Segment: Attachment A — Computation of a Purchaser’s Prepaid Share of Construction Cost Pp = U x C 135 MW Where: Pp = Principal amount (in dollars) for which the Purchaser is directly responsible U =... the Purchaser’s actual MW share of the Project Cc = The Construction Cost Attached is a map of the HEA transmission system. Position Statement of HEA Page 7 NINILCHIK waster § ~, eailimuld NIKISKI CEA EXPIRED SOLDOTNA SOLDOTNA SEGMENT 66 BRADLEY x Wa ema “Sue OWNERSHIP BOUNDARIES MAP KEY: AEA OR CEA HEA " HOMER Ee FRA ELECTRIC Pee aoe owe ASSOCIATION, INC. fimscue—] fer’ HEA TRANSMISSION ASSETS BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: — (907)258-2001 DESIGNATED UTILITIES’! BRIEF ON DISPUTES WITH HOMER ELECTRIC ASSOCIATION, INC. I. INTRODUCTION The Bradley Lake Hydroelectric Project (“Project”) was made possible through the compromises among the Project participants? set forth in the Bradley Lake Agreements.* For whatever reasons, HEA is disregarding the controlling terms of the Bradley Lake Agreements and taking unilateral actions to gain operational control of the electrical facilities used to wheel Project energy north from the Soldotna substation that HEA had previously agreed would be operated by Chugach throughout the term of the Bradley Lake Agreements. HEA’s unilateral actions raise significant financial, safety, and reliability concerns as well as run the risk of unwinding the Bradley Lake Agreements and the Project. The Bradley Lake Project Management Committee (“PMC”) clearly has the authority as well as the obligation to act to address the disputes raised by HEA’s unilateral acts. To do so, the PMC must find (1) the PMC has the authority to address the underlying disputes, (2) Chugach is required to continue to operate, maintain, and repair the electrical facilities used to wheel Project energy from the Soldotna substation north under the terms of the Services ' The “designated utilities” are Chugach Electric Association, Inc. (“Chugach”), Municipality of Anchorage, d/b/a Municipal Light & Power (“ML&P”), Golden Valley Electric Association, Inc. (“GVEA”), and Matanuska Electric Association, Inc. (“MEA”). > The Project participants include Chugach, ML&P, GVEA, MEA, Homer Electric Association, Inc. (“HEA”), Alaska Power Authority (now the Alaska Energy Authority) (“Authority”), and the City of Seward d/b/a Seward Electric System (“Seward”). > The “Bradley Lake Agreements” include the Agreement for the Sale and Purchase of Electric Power, dated December 8, 1987 (“Power Sales Agreement”); the Agreement for the Sale of Transmission Capability, dated December 8, 1987, and the Amendment to Agreement for Sale of Transmission Capability, dated March 7, 1989 (“Transmission Agreement”); and the Agreement for the Wheeling of Electric Power and for Related Services, dated December 8, 1987 (“Services Agreement”). BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 1 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: (907)258-2001 Agreement, until it expires or is amended, and (3) HEA is compensated for its electrical facilities used to wheel Project energy under the terms of the Bradley Lake Agreements. II. THE BRADLEY LAKE AGREEMENTS REQUIRE CHUGACH TO OPERATE THE ELECTRICAL FACILITIES USED TO WHEEL PROJECT POWER FROM THE SOLDOTNA SUBSTATION NORTH Among the three Bradley Lake Agreements, the Services Agreement primarily governs Chugach’s wheeling, storage, and energy purchase services as well as its authority to dispatch, operate, repair, and maintain the electrical facilities used to provide those services from the Soldotna substation north.4 Since this dispute primarily concerns Chugach’s and HEA’s relative rights and responsibilities with regard to the portion of the transmission line from the Soldotna substation north to Quartz Creek (“S/Q Line”), the dispute is largely governed by the terms of the Services Agreement. Chugach has multiple responsibilities and duties under the Services Agreement, many of which are framed by the point at which it receives Project energy--the Soldotna substation.° * The Power Sales Agreement is a core underlying agreement and it concerns the overall terms and conditions associated with the sale of Project power. The Transmission Agreement concerns the Project participants’ contribution toward, and ownership of transmission capacity and other relative rights and responsibilities over that portion of the transmission line that runs from the Bradley Lake junction to the Soldotna substation. > Under the Services Agreement, Chugach is required to wheel Project energy delivered to it at the Soldotna substation, section 4(a) Services Agreement, for a rate based on the costs of providing the wheeling service from the Soldotna substation, section 4(d) Services Agreement. Chugach is required to store Project energy delivered to it at the Soldotna substation, section 5(a) Services Agreement. Chugach is required to purchase Project energy delivered to it at the Soldotna substation, section 6(a) Services Agreement, for a rate based on the cost of purchasing the energy at the Soldotna substation, section 6(d) Services Agreement. And, Chugach is required to schedule Project energy based on the energy delivered to it at the Soldotna substation, section 8 Services Agreement, and may only assure deliveries of energy based on energy delivered to it at the Soldotna substation, section 8(g) Services Agreement. Chugach’s performance of these responsibilities may be excused under a force majeure provision which defines a force majeure event based, in part, on energy delivered to it at the Soldotna substation, section 12(h) Services Agreement. Bradley Lake energy, direct transmission, and offsetting BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 2 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: (907)258-2001 With these responsibilities, the Services Agreement also provides Chugach with the authority necessary to ensure it can perform its responsibilities. Among the grants of authority to Chugach, HEA and all Project participants agreed that Chugach “wi// in good faith and at all times: . . . operate, maintain, and repair the electrical facilities used to perform the services provided” under the Services Agreement.® Through this language, HEA agreed that Chugach not only could but would be required to operate, maintain, and repair HEA’s electrical facilities, including the S/Q Line, used to perform the services under the Services Agreement from the Soldotna substation north. This agreement by HEA and other Project participants to require Chugach to operate, maintain, and repair the electrical facilities including the S/Q Line from the Soldotna substation north under the Services Agreement is (1) mandatory and not discretionary, using the word “will,” (2) continues through the entire 50-year term of the Services Agreement, using the words “at all times,” and (3) is not conditioned upon or limited by leasehold or other unrelated rights as between HEA and Chugach.’ This unconditional agreement by all the Project participants, including HEA, to permit and require Chugach to operate the electrical facilities north of the Soldotna substation should be enforced by the PMC. HEA’s arguments to the contrary have never been clearly articulated. HEA seems to flows are all defined, in part, based on energy “with a physical flow of energy north from the Soldotna substation,” section 13(g), (k) & (u) Services Agreement. ® Section 7 and 7(a) Services Agreement (emphasis added). 7 And, for the past 25 years, Chugach has operated, maintained, and repaired the electrical facilities including the S/Q Line used by Chugach in performing its services under the Services Agreement. That said, in fulfilling its responsibilities, Chugach had contracted with HEA to physically perform certain repairs and maintenance by separate agreement. BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 3 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: (907)258-2001 argue that the expiration of a lease between HEA and Chugach for certain electrical facilities (which included the S/Q Line and other electrical facilities) used to effect wholesale power sales from Chugach to HEA (“Lease”) has somehow resulted in the parallel expiration of Chugach’s rights and obligations under the Services Agreement 25 years before it expires. This is simply not the case.* The expiration of the Lease did not impact a single term of the Services Agreement. Chugach’s rights and obligations to operate the S/Q Line for wheeling Project energy are not contained in the Lease; they are primarily contained in the Services Agreement.’ HEA also seems to argue that the point of delivery for Project energy may simply be changed from the Soldotna substation to Quartz Creek. Such a change to the point of delivery under the Services Agreement would require the amendment of at least 13 provisions of the Services Agreement and raises several significant financial, safety, and reliability concerns.!° Such amendments are possible, but require coordinated action among the Project participants,!! which in the case of the Services Agreement is the “written consent of all Parties.”!? ’ The Lease was entered into two years before the Bradley Lake Agreements, was not one of the Bradley Lake Agreements, was not exempt from the regulatory oversight of the Regulatory Commission of Alaska (“RCA”), and was not incorporated by even a single reference into any of the Bradley Lake Agreements. ° HEA sometimes articulates that its ownership of the S/Q Line is relevant to who should be required to operate it. As the owner, HEA agreed that Chugach would be required to operate the S/Q Line under the terms of the Services Agreement. Simply because HEA is the owner does not mean it does not have to honor its agreement that Chugach will operate the S/Q Line. '0 Several coordinated amendments to related provisions of the Power Sales Agreement and the Transmission Agreement may be necessary, as well. '| The need for coordinated action to amend essential terms of the Bradley Lake Agreements is by design. Since the wheeling utilities had to undertake significant take-or-pay obligations to make the Project possible, every Project participant wanted to be assured that the deal could not be changed by the unilateral actions of a single Project participant. "2 Section 3(b) Services Agreement. BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 4 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: — (907)258-2001 Finally, HEA’s position today directly contradicts its position at the time the Bradley Lake Agreements were executed. Kent Wick, HEA’s former general manager, stated: [First of all, to make any amendments to any of [the Bradley Lake agreements], all of the parties have to agree to it — parties to whichever contract we might be amending. So no one party could take advantage of another.... The rates and so forth are hiding in various formulas, whether you’re talking about wheeling rates or the way that costs from the Bradley Lake project — and those formulas can only be changed if all the parties agree to it. No one party can do it unilaterally .... But I think the main thing is that there are specific formulas that have been negotiated and no one party can change those formulas. So I-I feel it was protected.!? Any reasonable reading of the Services Agreement requires Chugach to continue to operate, maintain, and repair the electrical facilities including the S/Q Line used for wheeling Project energy north of the Soldotna substation. All Project participants, including HEA, should be required to honor the terms of the Services Agreement until it expires or is amended. Ill. THE PMC HAS AUTHORITY TO RESOLVE THE DISPUTES The Power Sales Agreement initially creates and defines the PMC’s rights and obligations.'* Section 13(c) of the Power Sales Agreement provides that the PMC “shall be responsible for the management, operation, maintenance, and improvement” of the Project and that the PMC “shall take the following actions” . . . “[a]rrange for the operation and maintenance of the Project and the scheduling, production, and dispatch of Project power.”! '3 House Judiciary Committee meeting minutes, HB 356, H.J. 1330 (January 28, 1988), available at http://www. legis.state.ak.us/ftr/archives/1988/HJUD/90-HJUD-880128.mp3; see also Services Agreement at 6. '4 Power Sales Agreement at 22-26. 'S Section 13(c)(i) justified these broad grants of authority based on the “recognition that as take-or-pay purchasers of Project Capacity . . . the Purchasers have substantial long-term financial interests in, and service and planning responsibilities affected by, the Project.” These broad grants of authority are also consistent with the exemption of the Bradley Lake Agreements from the regulatory oversight of the RCA under AS 42.05.431(c). BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 5 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: — (907)258-2001 Further, Section 13(b) of the Power Sales Agreement provides that the PMC “shall adopt . . . procedural rules governing the conduct of the Committee’s affairs” including procedures for “dispute resolution.” Pursuant to this authority, the PMC unanimously adopted the Bradley Project Management Committee Bylaws (“PMC Bylaws”). Article 12 of the PMC Bylaws sets forth the “Procedures for Dispute Resolution,”!® and Article 12.2 gives the PMC the | authority to decide, on the merits, those issues the PMC determines are within its authority to consider.'? Further, Article 5.10.2 of the PMC Bylaws provides that “the act of a majority of votes taken during a meeting at any time when a quorum is present, shall be an act of the | Committee, and binding on the members.”!® Similarly, the Services Agreement provides that all disputes arising thereunder are 9 within the PMC’s authority to adopt procedures to resolve.'? Specifically, the Services Agreement provides: [T]he Parties shall also review performance under this Agreement, including difficulties encountered under the Agreement by any of the Parties and allegations (if any) of failure of any Party to perform the Agreement in good faith in accordance with its terms of intent. The Parties agree that any further procedures for dispute resolution under this Agreement shall be entrusted (if the Authority concurs) to good faith negotiation and adoption by the [PMC], with Chugach’s affirmative vote required for adoption of such procedures.”° Thus, under the Power Sales Agreement, the PMC Bylaws, and the Services Agreement, the PMC clearly has authority to resolve—on the merits by majority vote—the disputes arising | '© PMC Bylaws at 23. '7 PMC Bylaws at 23. 'S PMC Bylaws at 9 (emphasis added). '° Services Agreement at 17-18. 20 Services Agreement at 18. BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 6 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: (907)258-2001 from HEA’s unilateral actions. IV. HEA IS COMPENSATED HEA has been and is still being fairly compensated for the use of its electrical facilities for wheeling Project energy. All Project participants acknowledged the Project would produce “net economic benefits.”?! HEA is receiving every benefit it negotiated to receive or is entitled to receive under the Bradley Lake Agreements. HEA is not entitled to any additional compensation nor has it been able to point to a single term of the Bradley Lake Agreements that entitles it to recover additional compensation.” Under the Services Agreement, HEA contractually committed a portion of its transmission system to be used for the transmission of Project energy northward to the other Project participants.> For that use, HEA has and is continuing to recover all the considerable benefits under the Bradley Lake Agreements. DATED this 4" day of February, 2014. BRENA, BELL & CLARKSON, P.C. Counsel for the Designated Utilities By. /s/ Robin O. Brena Robin O. Brena, AK Bar No. 8410089 Anthony S. Guerriero, AK Bar No. 8509123 Matthew C. Clarkson, AK Bar No. 1111077 Brena, Bell & Clarkson, PC 810 N Street, Suite 100 Anchorage, Alaska 99501 Phone: 907-258-2000 Facsimile: 907-258-2001 rbrena@brenalaw.com aguerriero@brenalaw.com mclarkson@brenalaw.com *! Services Agreement at 1. >? The expiration of the Lease does mean that HEA is no longer entitled to recover its payments under that Lease. Those Lease payments, however, are not required to be made to HEA or consideration due HEA under the terms of the Bradley Lake Agreements. BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 7 of 7 lle OVE Ueto eerie 10. Sof TARA eee BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE SPECIAL MEETING AGENDA Friday, February 7, 2014 10:00 a.m. — 12 Noon Alaska Energy Authority’s Board Room 813 West Northern Lights Boulevard, Anchorage, AK CALL TO ORDER ROLL CALL (for Committee members) PUBLIC ROLL CALL (for all others present) APPROVAL OF PRIOR MINUTES - January 15, 2014 PUBLIC COMMENT AGENDA COMMENTS / MOTION FOR APPROVAL OLB Dusiness eit + SUM Many Bour ¢ Sse Ft NEW BUSINESS » COMPO ceQ AlscWSS) an A. Applicability of Resolution 2013-02 (HEA Tariff Filing) — Action item? oumittee Tegort B. Authority to decide issues — Action item C. Chugach's right and obligation to operate, maintain, and repair S-Q line — Action item D. Compensation for use of HEA facilities north of Soldotna substation E. Dispatching regimen, process, and procedures F. Additional dispute resolution procedures — Action item MEMBERS COMMENTS NEXT MEETING DATE ADJOURNMENT To participate by teleconference, dial 1-800-315-6338 and use code 3074#. RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2014-08 Compensation for Homer Electric WHEREAS, the BPMC has undertaken a dispute resolution process dealing with issues of the transmission of Bradley Lake power over part of the Homer transmission system; and WHEREAS, certain questions have arisen concerning compensation to Homer Electric Association for use of part of its tansmission system to transmit Bradley Lake power; and WHEREAS, the issue of compensation for wheeling of power and line losses is vested with the BPMC under the applicable contracts; NOW, THEREFORE, BE IT RESOLVED: Homer Electric shall submit its request for compensation for wheeling, line losses, or other services for which it seeks compensation for the transmission of Bradley Lake power to the BPMC with appropriate supporting technical, operational, and statistical information; BE IT FURTHER RESOLVED: The Bradley Lake O&D committee shall review and analyze all technical and operational components of Homer's compensation request and report its findings to the BPMC; BE IT FINALLY RESOLVED: The BPMC shall review Homer's compensation request in accordance with the terms of the applicable contracts and the findings of the O&D committee, and make all appropriate adjustments to compensation to Homer for the transmission of Bradley Lake power over part of Homer's transmission system. DATED at Anchorage, Alaska, this 7 day of February, 2014. 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LN Mote heer RHC have Bude. ty Cony, HALP. ist €2nd Aplocn Mecking & have not ma redhing resolve, OSD Conouttee 4b report es ae 10. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE SPECIAL MEETING AGENDA Friday, February 7, 2014 10:00 a.m. — 12 Noon Alaska Energy Authority’s Board Room 813 West Northern Lights Boulevard, Anchorage, AK CALL TO ORDER ROLL CALL (for Committee members) PUBLIC ROLL CALL (for all others present) APPROVAL OF PRIOR MINUTES - January 15, 2014 PUBLIC COMMENT AGENDA COMMENTS / MOTION FOR APPROVAL NEW BUSINESS A. Applicability of Resolution 2013-02 (HEA Tariff Filing) — Action item B. Authority to decide issues — Action item C. Chugach's right and obligation to operate, maintain, and repair S-Q line — Action item D. Compensation for use of HEA facilities north of Soldotna substation E. Dispatching regimen, process, and procedures F. Additional dispute resolution procedures — Action item MEMBERS COMMENTS NEXT MEETING DATE ADJOURNMENT To participate by teleconference, dial 1-800-315-6338 and use code 3074#. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING SPECIAL MEETING Alaska Energy Authority, Anchorage, Alaska January 15, 2014 1. CALL TO ORDER Chair Evans called the regular meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:00 a.m. 2. COMMITTEE MEMBERS ROLL CALL Bryan Carey Alaska Energy Authority (AEA) Dan Kendall Anchorage Municipal Light & Power (AML&P) Bradley Evans Chugach Electric Association (CEA) John Foutz City of Seward (SEW) Cory Borgeson Golden Valley Electric Association (GVEA) Brad Janorschke Homer Electric Association (HEA) Joe Griffith Matanuska Electric Association (MEA) 3. STAFF/PUBLIC ROLL CALL Burke Wick, Brian Hickey, Paul Johnson, Lee Thibert, Mark Johnson, and Paul Risse (CEA); Larry Jorgensen, Rick Baldwin, Robert Day, Harvey Ambrose, and Jim Patras (HEA); David Pease (MEA); Richard Miller and Jeff Warner (AML&P); Bernie Smith (Regulatory Commission.of.Alaska); Robin Brena (Brena, Bell & Clarkson); Robin Gould; Kirk Warren, and Teri Webster (AEA); Brian Bjorkquist (Department of Law); Kirk Gibson (McDowell Rackner & Gibson PC); Sunny Morrison and, Miranda Studstill (Accu-Type Depositions) 4. PUBLIC COMMENT There were no public comments. 5. AGENDA COMMENTS/MOTION FOR APPROVAL The agenda was approved. 6. NEW BUSINESS A. Issues related to Resolution 2013-02 (Homer Electric Tariff Filing) to include e The process(es) to be used to bring resolution to the matters at issue; ¢ Current status of the transmission of power from the Project; and ¢ Resolution of any issues involved in the transmission of power from the Project. BPMC Minutes 1/15/14 Page | of 8 Mr. Gibson commented this special meeting is to develop dispute settlement to handle the issues that are coming out of Resolution 2013-02 and the transmission of energy coming from Bradley Lake power. Mr. Gibson recommended the Committee follow this resolution process; 1) select a Chairman to oversee the dispute resolution process, 2) identify all the issues that need to be addressed, 3) determine the sources of the information to be gathered, 4) determine what analysis needs to be performed and who performs the analysis, and 5) determine the process of examining the claims and reaching a resolution. Mr. Gibson urged the Committee to work as a whole. Unanimity is required for the dispute resolution procedures. Mr. Borgeson asked what happens if there is not a unanimous decision. Mr. Gibson hopes that there would be a unanimous decision on resolution procedures because the bylaws require a unanimous decision. Chair Evans stated the Committee would keep working on the resolution procedures until a unanimous vote is reached. Chair Evans asked if there needs tovbe a unanimous decision to the resolution of any disputes. Mr. Gibson stated there does not need to be unanimous decision to the resolution of disputes, only for the resolution progedures. Chair Evans yielded the gavel to Mr. Gibson to proceed with number one of the process, election of the Chairman of this dispute resolution process. Mr. Gibson advised a new Chairman will be elected for any other dispute in the future. A roll call vote was taken. Mr. Griffith was»elected as Chairman of the Dispute Resolution Process. Chair Evans yielded the gavel to Mr. Griffith. Mr. Griffith thanked the Committee and looks forward to the challenge of resolving these issues. Mr. Borgeson suggested. Mr. Griffith work with legal counsel to develop a briefing schedule where members would have an expedited, short period of time to present to Mr. Griffith, as Chair, the legal issues, considerations, documents and fact finding issue. Mr. Borgeson believes it can begin today and recommends there béva three-day period for members to send Mr. Griffith all the issues that need to be discussed. Mr. Janorschke agreed with the recommendations of Mr. Borgeson and stated he would like to have the O&D Committee involved in contributing to the issues and providing their technical expertise. Mr. Griffith asked if the suggestion is to outline the issues today or to request the technical people to provide a scoping of the issues to Mr. Griffith by Friday. Mr. Janorschke prefers to let the technical people identify the issues and the BPMC can add to the issues and determine the priority of issues to make it manageable. Mr. Griffith asked if the intent of the body is to have a special meeting or meetings to address these issues, rather than include it on the currently scheduled next meeting date of January 27th. Chair Evans believes a separate schedule can be set for the dispute resolution process and does not have to run concurrent with the regular business meetings. Mr. Janorschke asked Mr. Gibson if these committee meeting are open to the public. Mr. Gibson believes the O&D Committee meetings are open to the public and believes these dispute resolution process special meetings would be open to the public, as well. Chair Evans asked if the dispute BPMC Minutes 1/15/14 Page 2 of 8 resolution process special meetings can be closed. Mr. Bjorkquist commented BPMC meetings are subject to the Open Meetings Act and he would be happy to work with BPMC counsel to see what parameters there are under both the Open Meetings Act and under the BPMC bylaws to answer that question with the intent of conducting closed meetings. Chair Evans asked if these would follow the executive session rules. Mr. Gibson stated he will research the answer with the help of Mr. Bjorkquist. Mr. Day requested the Dispute Resolution Committee to be real clear about how the O&D Committee should behave and if they will conform with the Open Meeting Act or not. The practice is to be open, but the O&D meetings are not publically noticed. Mr. Griffith asked what the criteria is for the O&D Committee and is it necessary to notice meetings. Mr. Bjorkquist stated he will research that question with BPMC counsel to provide the answer. Mr. Griffith stated he will include the expectations of the group inthe schedule. The identification of issues will not be determined at this meeting, but at a later date. The source information and analytical work will be assigned after the issues are determined. The O&D Committee volunteered to be the body that addresses the main issues. Mr. Griffith advised he will pass this information onto Mr. Jim Brooks, Chair of the O&D Committee. Chair Evans asked what process of negotiation will be followed. Mr. Griffith asked for input from the parties at odds. Unidentified member believes it would be appropriate for negotiations to begin within the BPMC and if progress cannot be made, the next step would. be to go to a mediator. Chair Evans commented much of the dispute involves everyone and not just the principals who have framed the problems. Mr. Gibson recommended the Committee needs to act asa whole whenever it can throughout this process. Mr. Griffith agreed. Mr. Kendall recommended the Committee members develop a list of issues at the meeting today. Mr. Borgeson,stated there are going to be-legal issues and factual issues. One of the questions is what does it cost Homer to provide the transmissiomto its line for the Bradley power. He does not believe the Committee will be able to reach agreement on the legal issues, including contract obligations, limitations and appropriate charges for power. Mr. Borgeson asked if the contract language included specification regarding a dispute resolution process through arbitration or mediation. Mr. Borgeson suggested the BPMC agree to allow a neutral party to make a final decision on anything the BPMC cannot agree on. Mr. Gibson advised there.is a dispute resolution process under the services agreement that states the BPMC will create dispute resolution procedures with the affirmative vote of Chugach required. Mr. Griffith asked Mr. Borgeson when the neutral party mediator would step in during the process. Mr. Borgeson stated if the Committee cannot come to a unanimous resolution, then the process should go to a mediator, and then lastly, to an arbitrator. Mr. Borgeson requested the Committee address the issues that can be resolved at the Committee level first within two to three weeks and then move to mediation and lastly, arbitration, if necessary. Mr. Foutz asked what is the neutral party's role in this part of the process. Mr. Gibson stated the Committee will outline what the neutral party should do when they are necessary, including fact finding BPMC Minutes 1/15/14 Page 3 of 8 or reviewing technical reports. The neutral party does not need to be involved in the identification of issues and information gathering steps of the process. Mr. Janorschke believes the issues can be identified within a week because most of the issues are already known and outlined. Mr. Griffith addressed number two in this process, identify all the issues that need to be addressed. Mr. Griffith requested a statement of all issues be given to him by this Friday from the parties, including information from the O&D Committee. The body agreed without objection. Mr. Griffith addressed number three and four in this process, 3) determine the sources of the information to be gathered, and 4) determine what analysismeeds to be performed and who performs the analysis. Chair Evans requested a Special Purpose Subcommittee be established to address steps three and four in this process. The Special Purpose Subcommittee,could be comprised of individuals from the O&D Committee and/or any assigned subject matter experts. The body agreed without objection. Mr. Griffith addressed number five in this process, determine the process of examining the claims and reaching a resolution. Mr. Griffith described the process where the Committee comes to as many resolutions as possible and then utilize)a neutral party to mediate the lack of resolution on any of the issues. If mediation fails, the Committee comes back together to discuss how to proceed, rather than going directly to an arbitrator. Chair Evans explained this:process is not a substitute forthe decision-making or the voting protocols the BPMC is held to under the agreements. Chair Evans stated he is willing to engage in mediation to try to get closure where everybody is happy withrthe result of the vote. Mr. Borgeson commented when he used the term mediation, he meant the parties would come to a unanimous decision and no rights are abrogated. Mr. Borgeson noted arbitration is different. Chair Evans disagreed and stated his concern isthe idea of consensus in mediation. Chair Evans believes there does not have to be a consensus vote as a result of mediation and wants to be clear the decision process does not have to bea consensus decision. Mr. Borgeson understands no agreement rights are being forfeited under this process, but one of the biggest issues to determine is which agreement we are operating under to come to this decision. Mr. Janorschke requested,the wording of number five to include; identify a process for examining claims and reaching resolution, up to and including mediation, which will not waive any of the party's rights. All parties agreed. Mr. Gibson noted mediation only works if everybody agrees and either likes what the deal was or can live with the deal. If a party does not like the deal or cannot live with the deal, mediation has failed. Chair Evans requested the record reflect the intent of mediation does not waive any currently existing voting rights. The body agreed to the amended language of number five. BPMC Minutes 1/15/14 Page 4 of 8 Mr. Gibson restated the procedures that will be used for the body to approve are as follows: 1) selection of a Chair for purposes of overseeing the dispute resolution, 2) identification of all the issues, 3) determination of what information needs to be gathered, 4) determination of what analysis needs to be performed, which will be completed by the O&D Special Purpose Committee, including any representatives from the organizations they feel are important to the process, 5) identification of a process for examining claims and reaching resolution, up to and including mediation, which will not waive any party's rights. A roll call vote was taken. The body agreed unanimously. Mr. Gibson noted he spoke with counsel for AEA and is confident they can develop a process the Committee can use to keep these issues in private consultation. He will report on that process as soon as possible. Mr. Griffith noted the next item of business is current,status of transmission of power from the project. Mr. Griffith asked Chugach, as the dispatcher, is power being delivered as requested. Chair Evans believes the requested power is being delivered. The dispute is about where custody transfer is and noted Chugach is seeking status quo until the dispute has been resolved. This disagreement is causing energy accounting issues between Chugach Electric and Homer Electric and some control area performance between the two areas. Mr. Griffith asked if Homer Electric refuses to;continue process as it has been, were the status no different than 31 December. Mr. Janorschke statedysome of the issues were heard yesterday at the RCA. He commented there.are operational people in the background who are suffering the consequences of these disagreements, including dispatchers»,Mr. Janorschke requested Mr. Day provide an update on the dispatching. Mr. Day agreed with most of what Chair Evans stated regarding the effort that is going into reconciling the various measuring points but stated he does not believe there is such a thing as status quo with Chugach encompassing the entire load balancing area (LBA). Mr. Day would like tofocus on what is done after this meeting to make the process go forward. He stated HEA has made every effort to ensure the Bradley. power is delivered. Mr. Day believes Chugach wants to maintain the ability to move Bradley power rapidly. He would suggest an agreement on the operational control points of the ports in Bradley junction and use the third-party loss table produced by EPS for the interim and at the end of this process when the legal representatives have spoken, then the appropriate compensation can be made. Chair Evans noted contract assignments and responsibilities are being waived and Chugach does not agree. Chair Evans stated the status quo is what was going on before the change at midnight on December 31st. He believes the implementation of dynamic scheduling will resolve the problem. Chair Evans believes the loss tables are similar, but not identical, to the ones used before. The issue is where the energy accounting point is and who generates the losses. Chair Evans thinks the dispute resolution process is the only way to solve these disagreements. Mr. Griffith stated his understanding is ultimately the responsibility for the performance of the project, delivery of the power and the definition of the transfer points rests with this body. Those issues could all go through the dispute resolution process just created or the body could vote to hold the operator of the plant to the former processes. Mr. Griffith asked for the will of the body. BPMC Minutes 1/15/14 Page 5 of 8 Mr. Janorschke stated some of these issues are being discussed at the Regulatory Commission of Alaska. Mr. Janorschke commented some participants may disagree, but he does not believe the BPMC has the authority to dictate any control efforts on HEA's system. Mr. Janorschke suggested this dispute resolution is expedited and to provide temporary relief, per Mr. Day's requests, to HEA and Chugach dispatchers, who are really paying the price for these disagreements. HEA's LBA has come as no surprise to anybody, since it has been discussed for three years now and have raised these issues. Mr. Kendall noted he is the new guy and commented the important issues he sees for AML&P is continued deliverability of power and reliable accounting for how it is delivered. There has been an interruption in the status quo on January Ist, and the financial responsibilities and operational responsibilities go along with that interruption, which creates/liabilities and costs for AML&P that are unknown at this point. They will request a full accounting/of the deliverability and costs that have been associated with this process. Mr. Kendall commented there should have been a resolution prior to the current situation and without that resolution, the status quo would have been a better operation than what we have today. ; Mr. Janorschke asked Mr. Kendall if he has noticed any deliverability problems since the change in status quo at the first of the year. He believes the status quo inthe industry is\changing every day because of continual evolvement, including upgrades in new metering equipment, Mr. Kendall commented change can occur with agreements of the parties. The current situation is confusing. Chair Evans noted the dispute is regarding the requirement for'status quo. He does not believe there are disputes over any of the infrastructure changes Mr. Janorschke listed. Chair Evans stated status quo is required when there is a.dispute. Mr. Borgeson asked Mr. Janorschkeif HEA is able to measure its losses as a result of CEA's operational issues HEA believes exist under the status quo. Mr. Borgeson asked if this is just a financial issue for HEA and its members. Mr. Borgeson stated if this is a measure of damages, he encourages'HEA tovallow the status quo go forward and the question how much HEA might be owed will gettesolved. Mr. Borgeson agreed with Mr»Kendall the status quo needs to be kept going until there is a resolution to this dispute. Mr. Borgeson does not fault HEA for this non-resolution at this point. Mr. Janorschke stated there is metering in place and it has been tested. HEA is measuring actual real time losses. Mr. Janorschke advised the dispatching of Bradley has not changed. Chugach continues to dispatch and they have that right through contracts and is not in dispute. Mr. Griffith asked if the custody point has changed. Chair Evans advised the custody point change is the dispute. Mr. Borgeson asked if the custody transfer point is part of the dispatching. Chair Evans stated the custody transfer point is part of the dispatching and both parties are trying to accommodate the losses between the disputed boundaries. Mr. Kendall asked if both HEA and CEA currently have access to the monitoring equipment and information is going into both dispatch centers. Chair Evans believes there is some access. Mr. Day stated the monitoring equipment has remained intact to a great degree. Mr. Kendall asked what does "to a great degree" mean. Mr. Day advised there could be dispute over some areas that have been BPMC Minutes 1/15/14 Page 6 of 8 disabled and they are internal to HEA's system. Mr. Kendall commented it is important for CEA to have all of the same information HEA has and if there is limited access, that is another issue. Mr. Janorschke reported HEA is trying to set up the LBA just like it is for everybody else. It is on the property line of the transmission system, no different than AML&P's, CEA's or GVEA's. The property line is the end of the ownership of that system. Chair Evans disagrees that is uniformly true across the system and stated there are occurrences in the system where people have LBA responsibility outside their direct ownership boundaries. Mr. Kendall stated his question was more about the status quo and if CEA still has full communication and information with what they had previously. Mr. Janorschke stated probably not into Soldotna. Mr. Day stated that question should be directed to Paul Johnson to see if there was anything missing. Chair Evans commented that is not a fair redirect and HEA isiot responsible for any changes Mr. Johnson could have made. Chair Evans believes that is a cloaked answer and would appreciate answers being more forthright. Mr. Foutz asked for a clarification regarding what Mr. Day noted was disabled. Mr. Day stated internal to HEA's system, there are controls over circuit breakers that are necessary tosthe function of that system. There is no reason for CEA to have control dver thse breakers and that,has been disabled. Mr. Foutz asked what the function of the breakers were béfore they were disabled! Mr. Day stated CEA was the dispatcher of the HEA systemyand therefore, needed control over that system. CEA is no longer the dispatcher of the HEA system), Mr. Foutz asked if those breakers were strictly so CEA could dispatch power to the HEA system. Mr. Day stated in,the event ofa disruption for those breakers, they could close them from theif @ispatch center, with actual Physical control of those circuit breakers. Mr. Foutz if HEA owned the breakers), Mr. Day agreedé Mr. Janorschke asked if GEA is getting all the information they need right now for Bradley. Chair Evans and Mr. Griffith both stated they,do not know, the answer. Mr. Griffith hopes CEA is getting adequate information,to define and send thépower to the requesting entities, including GVEA, AML&P, and CEA. Tf that is not happening, MraGriffith suggests having an emergency BPMC meeting to, determine the causes. Chair Evans noted there has been correspondence that characterizes the problems and does not believe new reports have to be written, adding work and slowing the process. Mr. Gibson does not believe any new work needs to be done. Mr. Griffith stated if the problems and issues come to him as a series of bullet points or one-linésenten¢es, then he can sort it out, compile the appropriate issues and throw out the issues that are not appropriate. Mr. Griffith expects all issues to be sent to him by the close of business on Tuesday, J anuary 21,2014. The next Board meeting was scheduled for Friday, January 24, 2014, at 10:00 a.m. Mr. Janorschke stated at the next meeting, there will have to be an agreement on which issues fall under the BPMC purview and which do not. Chair Evans believes that determination would be made behind closed doors and not at the BPMC meeting. Mr. Borgeson recommended developing a budget for this process to provide resource assistance to the Chair going forward, Mr. Gibson's time, a mediator, and other expenses. He believes developing a budget would be helpful in understanding the costs that may be incurred. Mr. Griffith stated he will BPMC Minutes 1/15/14 Page 7 of 8 develop a rough budget and send it around. He requested Mr. Borgeson develop a rough budget and send it around as well. Chair Evans reminded the Committee there is a regularly scheduled meeting on January 27th that has an entirely different agenda than the dispute meeting scheduled on January 24th. He advised members need to attend both meetings. Chair Evans will chair the meeting on January 27th and Mr. Griffith will chair the dispute meeting on January 24th. Te ADJOURNMENT There being no further business for the committee, the meetingadjourned. BY: Joe Griffith, Chair Attest: Sara Fisher-Goad Alaska Energy Authority, Secretary BPMC Minutes 1/15/14 Page 8 of 8 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: — (907)258-2001 DESIGNATED UTILITIES’! BRIEF ON DISPUTES WITH HOMER ELECTRIC ASSOCIATION, INC. I. INTRODUCTION The Bradley Lake Hydroelectric Project (“Project”) was made possible through the compromises among the Project participants? set forth in the Bradley Lake Agreements.* For whatever reasons, HEA is disregarding the controlling terms of the Bradley Lake Agreements and taking unilateral actions to gain operational control of the electrical facilities used to wheel Project energy north from the Soldotna substation that HEA had previously agreed would be operated by Chugach throughout the term of the Bradley Lake Agreements. HEA’s unilateral actions raise significant financial, safety, and reliability concerns as well as run the risk of unwinding the Bradley Lake Agreements and the Project. The Bradley Lake Project Management Committee (“PMC”) clearly has the authority as well as the obligation to act to address the disputes raised by HEA’s unilateral acts. To do so, the PMC must find (1) the PMC has the authority to address the underlying disputes, (2) Chugach is required to continue to operate, maintain, and repair the electrical facilities used to wheel Project energy from the Soldotna substation north under the terms of the Services ' The “designated utilities” are Chugach Electric Association, Inc. (“Chugach”), Municipality of Anchorage, d/b/a Municipal Light & Power (“ML&P”), Golden Valley Electric Association, Inc. (“GVEA”), and Matanuska Electric Association, Inc. (“MEA”). ? The Project participants include Chugach, ML&P, GVEA, MEA, Homer Electric Association, Inc. (“HEA”), Alaska Power Authority (now the Alaska Energy Authority) (“Authority”), and the City of Seward d/b/a Seward Electric System (“Seward”). > The “Bradley Lake Agreements” include the Agreement for the Sale and Purchase of Electric Power, dated December 8, 1987 (“Power Sales Agreement”); the Agreement for the Sale of Transmission Capability, dated December 8, 1987, and the Amendment to Agreement for Sale of Transmission Capability, dated March 7, 1989 (“Transmission Agreement”); and the Agreement for the Wheeling of Electric Power and for Related Services, dated December 8, 1987 (“Services Agreement”). BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 1 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX (907)258-2001 Agreement, until it expires or is amended, and (3) HEA is compensated for its electrical facilities used to wheel Project energy under the terms of the Bradley Lake Agreements. Il. THE BRADLEY LAKE AGREEMENTS REQUIRE CHUGACH TO OPERATE THE ELECTRICAL FACILITIES USED TO WHEEL PROJECT POWER FROM THE SOLDOTNA SUBSTATION NORTH Among the three Bradley Lake Agreements, the Services Agreement primarily governs Chugach’s wheeling, storage, and energy purchase services as well as its authority to dispatch, operate, repair, and maintain the electrical facilities used to provide those services from the Soldotna substation north.4 Since this dispute primarily concerns Chugach’s and HEA’s relative rights and responsibilities with regard to the portion of the transmission line from the Soldotna substation north to Quartz Creek (“S/Q Line”), the dispute is largely governed by the terms of the Services Agreement. Chugach has multiple responsibilities and duties under the Services Agreement, many of which are framed by the point at which it receives Project energy--the Soldotna substation.° * The Power Sales Agreement is a core underlying agreement and it concerns the overall terms and conditions associated with the sale of Project power. The Transmission Agreement concerns the Project participants’ contribution toward, and ownership of transmission capacity and other relative rights and responsibilities over that portion of the transmission line that runs from the Bradley Lake junction to the Soldotna substation. > Under the Services Agreement, Chugach is required to wheel Project energy delivered to it at the Soldotna substation, section 4(a) Services Agreement, for a rate based on the costs of providing the wheeling service from the Soldotna substation, section 4(d) Services Agreement. Chugach is required to store Project energy delivered to it at the Soldotna substation, section 5(a) Services Agreement. Chugach is required to purchase Project energy delivered to it at the Soldotna substation, section 6(a) Services Agreement, for a rate based on the cost of purchasing the energy at the Soldotna substation, section 6(d) Services Agreement. And, Chugach is required to schedule Project energy based on the energy delivered to it at the Soldotna substation, section 8 Services Agreement, and may only assure deliveries of energy based on energy delivered to it at the Soldotna substation, section 8(g) Services Agreement. Chugach’s performance of these responsibilities may be excused under a force majeure provision which defines a force majeure event based, in part, on energy delivered to it at the Soldotna substation, section 12(h) Services Agreement. Bradley Lake energy, direct transmission, and offsetting BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 2 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: — (907)258-2001 With these responsibilities, the Services Agreement also provides Chugach with the authority necessary to ensure it can perform its responsibilities. Among the grants of authority to Chugach, HEA and all Project participants agreed that Chugach “will in good faith and at all times: . . . operate, maintain, and repair the electrical facilities used to perform the services provided” under the Services Agreement.° Through this language, HEA agreed that Chugach not only could but would be required to operate, maintain, and repair HEA’s electrical facilities, including the S/Q Line, used to perform the services under the Services Agreement from the Soldotna substation north. This agreement by HEA and other Project participants to require Chugach to operate, maintain, and repair the electrical facilities including the S/Q Line from the Soldotna substation north under the Services Agreement is (1) mandatory and not discretionary, using the word “will,” (2) continues through the entire 50-year term of the Services Agreement, using the words “at all times,” and (3) is not conditioned upon or limited by leasehold or other unrelated rights as between HEA and Chugach.’ This unconditional agreement by all the Project participants, including HEA, to permit and require Chugach to operate the electrical facilities north of the Soldotna substation should be enforced by the PMC. HEA’s arguments to the contrary have never been clearly articulated. HEA seems to flows are all defined, in part, based on energy “with a physical flow of energy north from the Soldotna substation,” section 13(g), (k) & (u) Services Agreement. ® Section 7 and 7(a) Services Agreement (emphasis added). 7 And, for the past 25 years, Chugach has operated, maintained, and repaired the electrical facilities including the S/Q Line used by Chugach in performing its services under the Services Agreement. That said, in fulfilling its responsibilities, Chugach had contracted with HEA to physically perform certain repairs and maintenance by separate agreement. BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 3 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: (907)258-2001 argue that the expiration of a lease between HEA and Chugach for certain electrical facilities (which included the S/Q Line and other electrical facilities) used to effect wholesale power sales from Chugach to HEA (“Lease”) has somehow resulted in the parallel expiration of Chugach’s rights and obligations under the Services Agreement 25 years before it expires. This is simply not the case. The expiration of the Lease did not impact a single term of the Services Agreement. Chugach’s rights and obligations to operate the S/Q Line for wheeling Project energy are not contained in the Lease; they are primarily contained in the Services Agreement.’ HEA also seems to argue that the point of delivery for Project energy may simply be changed from the Soldotna substation to Quartz Creek. Such a change to the point of delivery under the Services Agreement would require the amendment of at least 13 provisions of the Services Agreement and raises several significant financial, safety, and reliability concerns.!° Such amendments are possible, but require coordinated action among the Project participants,'! which in the case of the Services Agreement is the “written consent of all Parties.”!* * The Lease was entered into two years before the Bradley Lake Agreements, was not one of the Bradley Lake Agreements, was not exempt from the regulatory oversight of the Regulatory Commission of Alaska (“RCA”), and was not incorporated by even a single reference into any of the Bradley Lake Agreements. ° HEA sometimes articulates that its ownership of the S/Q Line is relevant to who should be required to operate it. As the owner, HEA agreed that Chugach would be required to operate the S/Q Line under the terms of the Services Agreement. Simply because HEA is the owner does not mean it does not have to honor its agreement that Chugach will operate the S/Q Line. '0 Several coordinated amendments to related provisions of the Power Sales Agreement and the Transmission Agreement may be necessary, as well. '! The need for coordinated action to amend essential terms of the Bradley Lake Agreements is by design. Since the wheeling utilities had to undertake significant take-or-pay obligations to make the Project possible, every Project participant wanted to be assured that the deal could not be changed by the unilateral actions of a single Project participant. ". Section 3(b) Services Agreement. BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 4 of 7 Finally, HEA’s position today directly contradicts its position at the time the Bradley Lake Agreements were executed. Kent Wick, HEA’s former general manager, stated: [F]irst of all, to make any amendments to any of [the Bradley Lake agreements], all of the parties have to agree to it — parties to whichever contract we might be amending. So no one party could take advantage of another... . The rates and so forth are hiding in various formulas, whether you’re talking about wheeling rates or the way that costs from the Bradley Lake project — and those formulas can only be changed if all the parties agree to it. No one party can do it unilaterally .... But I think the main thing is that there are specific formulas that have been negotiated and no one party can change those formulas. So I-I feel it was protected.!? Any reasonable reading of the Services Agreement requires Chugach to continue to operate, maintain, and repair the electrical facilities including the S/Q Line used for wheeling Project energy north of the Soldotna substation. All Project participants, including HEA, should be required to honor the terms of the Services Agreement until it expires or is amended. Ill. THE PMC HAS AUTHORITY TO RESOLVE THE DISPUTES The Power Sales Agreement initially creates and defines the PMC’s rights and obligations.'* Section 13(c) of the Power Sales Agreement provides that the PMC “shall be responsible for the management, operation, maintenance, and improvement” of the Project and that the PMC “shall take the following actions” . . . “[aJ]rrange for the operation and maintenance of the Project and the scheduling, production, and dispatch of Project power.”! '3 House Judiciary Committee meeting minutes, HB 356, H.J. 1330 (January 28, 1988), available at http://www. legis.state.ak.us/ftr/archives/1988/HJUD/90-HJUD-880128.mp3; see also Services Agreement at 6. prena,seue | | Power Sales Agreement at 22-26. ciarkson,P.c. | '° Section 13(c)(i) justified these broad grants of authority based on the “recognition that as take-or-pay ‘anenonace ax sso. | purchasers of Project Capacity . . . the Purchasers have substantial long-term financial interests in, and ao eoeaen | Service and planning responsibilities affected by, the Project.” These broad grants of authority are also consistent with the exemption of the Bradley Lake Agreements from the regulatory oversight of the RCA under AS 42.05.431(c). BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 5 of 7 Further, Section 13(b) of the Power Sales Agreement provides that the PMC “shall adopt . . . procedural rules governing the conduct of the Committee’s affairs” including procedures for “dispute resolution.” Pursuant to this authority, the PMC unanimously adopted the Bradley Project Management Committee Bylaws (“PMC Bylaws”). Article 12 of the PMC Bylaws sets forth the “Procedures for Dispute Resolution,”!® and Article 12.2 gives the PMC the authority to decide, on the merits, those issues the PMC determines are within its authority to consider.'? Further, Article 5.10.2 of the PMC Bylaws provides that “the act of a majority of votes taken during a meeting at any time when a quorum is present, shall be an act of the Committee, and binding on the members.”'® Similarly, the Services Agreement provides that all disputes arising thereunder are within the PMC’s authority to adopt procedures to resolve.'? Specifically, the Services Agreement provides: [T]he Parties shall also review performance under this Agreement, including difficulties encountered under the Agreement by any of the Parties and allegations (if any) of failure of any Party to perform the Agreement in good faith in accordance with its terms of intent. The Parties agree that any further procedures for dispute resolution under this Agreement shall be entrusted (if the Authority concurs) to good faith negotiation and adoption by the [PMC], with Chugach’s affirmative vote required for adoption of such procedures.”° Thus, under the Power Sales Agreement, the PMC Bylaws, and the Services Agreement, the PMC clearly has authority to resolve—on the merits by majority vote—the disputes arising BRENA, BELL & ciarson,P.c. | © PMC Bylaws at 23. ‘jncworacear 90801. |!” PMC Bylaws at 23. ee oso. |’ PMC Bylaws at 9 (emphasis added). '° Services Agreement at 17-18. 20 Services Agreement at 18. BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 6 of 7 BRENA, BELL & CLARKSON, P.C. 810 N STREET, SUITE 100 ANCHORAGE, AK 99501 PHONE: (907)258-2000 FAX: (907)258-2001 from HEA’s unilateral actions. IV. HEA IS COMPENSATED HEA has been and is still being fairly compensated for the use of its electrical facilities for wheeling Project energy. All Project participants acknowledged the Project would produce “net economic benefits.”?! HEA is receiving every benefit it negotiated to receive or is entitled to receive under the Bradley Lake Agreements. HEA is not entitled to any additional compensation nor has it been able to point to a single term of the Bradley Lake Agreements 22 that entitles it to recover additional compensation.” Under the Services Agreement, HEA contractually committed a portion of its transmission system to be used for the transmission of Project energy northward to the other Project participants.” For that use, HEA has and is continuing to recover all the considerable benefits under the Bradley Lake Agreements. DATED this 4" day of February, 2014. BRENA, BELL & CLARKSON, P.C. Counsel for the Designated Utilities By. /s/ Robin O. Brena Robin O. Brena, AK Bar No. 8410089 Anthony S. Guerriero, AK Bar No. 8509123 Matthew C. Clarkson, AK Bar No. 1111077 Brena, Bell & Clarkson, PC 810 N Street, Suite 100 Anchorage, Alaska 99501 Phone: 907-258-2000 Facsimile: 907-258-2001 rbrena@brenalaw.com aguerriero@brenalaw.com mclarkson@brenalaw.com 2! Services Agreement at 1. 2 The expiration of the Lease does mean that HEA is no longer entitled to recover its payments under that Lease. Those Lease payments, however, are not required to be made to HEA or consideration due HEA under the terms of the Bradley Lake Agreements. BRIEF ON BRADLEY LAKE DISPUTES February 4, 2014 Page 7 of 7 POSITION STATEMENT OF HOMER ELECTRIC ASSOCIATION, INC. At its meeting of January 24, 2014, the Bradley Lake Project Management Committee (BPMC) asked interested parties to address three issues with respect to the matters raised in Resolution No. 2013-02: the scope of the BPMC’s authority, compensation to HEA for wheeling Bradley power and the effect of the termination of the transmission facilities lease between Homer Electric Association, Inc. (HEA) and Chugach Electric Association, Inc. (CEA). In Resolution No. 2013-02 the BPMC resolved that: the BPMC and not the Regulatory Commission of Alaska (RCA) has the authority to resolve HEA tariff issues relating to wheeling Bradley Lake power; HEA’s transmission and line loss tariff filings are harmful to the interests of the BPMC members; the BPMC intends to install CEA as the operator of the Soldotna to Quartz Creek (S/Q) Line, to request the RCA to reject the HEA tariff filings, and to take legal action to enforce the terms of the “Bradley Lake Agreements;”! and that the members of the BPMC would enter into good faith negotiations, apparently concerning some or all of the matters raised in the resolution. Summary of HEA’s Position HEA will not negotiate away its right to operate its electrical system or the right to be fairly compensated for providing wheeling services over its system. It is clear to HEA at this point that the opposing utilities are motivated in their actions solely by monetary considerations and they have little or no interest in arriving at a settlement where HEA’s interest of being fairly compensated is even acknowledged as legitimate. The opposing utilities are now demonstrating a lack of good faith by directing punitive action at HEA, including signaling an intention to remove HEA as the Bradley operator and engaging in a concerted refusal to consider any matters brought by HEA to the BPMC. Unless and until the opposing utilities (and the Alaska Energy Authority) are able to accept that HEA is operating and has the right to control its own load balancing area without the interference of others, and has the right and duty to its members to be fairly compensated for providing transmission services, little will be gained by further discussion. ' The resolution was not clear as to which agreements HEA is charged with violating, so a more precise response to that issue is not possible at this time. The Scope of the BPMC’s Authority The BPMC’s authority over HEA cannot extend beyond the authority HEA has conceded to the BPMC by contract. The Bradley Lake Power Sales Agreement (PSA) gives the BPMC only the responsibility for the management, operation, maintenance, and improvement of the Bradley Lake Hydroelectric Project (Project); to arrange for the scheduling, production, and dispatch of Project power; and to develop dispute resolution procedures. The PSA does not impose an obligation on HEA to allow a third party to control any point within its system and consequently gives the BPMC no power to do so. The suggestion has been made that HEA’s obligation to operate its system in accordance with Prudent Utility Practice (§10(c) of the PSA), might give rise to an obligation for HEA to operate its system to the commercial advantage of the other utilities to the financial detriment of its own members, or the right by the BPMC to somehow compel such operation. Even the broadest possible reading of the duty to operate in accordance with Prudent Utility Practices does not leave room for such a conclusion. Compensation for Wheeling Bradley Power For the past 23 years the members of HEA, to a greater or lesser extent, have been subsidizing the cost of wheeling Bradley power over the HEA system. The value of the current subsidy can be determined by looking at HEA’s transmission rate case. HEA’s members have no obligation to continue to subsidize the transmission costs of other utilities. No provision in any of the “Bradley Lake Contracts” speaks to the issue of compensation to HEA for wheeling Bradley power, thus the ultimate decision as to compensation will be made by the RCA or by a court. In either event HEA will be entitled to fair compensation for the use of its system. The RCA will apply the principle that the “cost-causer should be the cost payer” and the constitutional principle that a regulatory agency cannot require a utility to offer services at rates lower than cost plus a reasonable return. A court will either accept HEA’s published price or award “reasonable compensation.” The Purchasers under the Amendment to Agreement for Sale of Transmission Capability (Transmission Agreement) have no basis to claim special consideration for having purchased transmission capability on the Soldotna Segment. Given that CEA had leased and was dispatching a significant portion of the HEA transmission system at the time the Project was built, HEA was not in a position to offer wheeling services. In lieu of paying for wheeling across Position Statement of HEA Page 2 the Soldotna Segment, each utility agreed to pay for a pro rata share of the capability of the line equal to its respective MW share of Project Power. HEA has paid the balance of the cost of the Soldotna Segment. The payments by the other utilities were not a windfall to HEA, but represented a more than fair charge for the purchase of the acquired transmission capability. The revenue requirement calculation for HEA’s transmission tariff removes all costs associated with the Soldotna Segment. The Impact of the Bernice-Quartz Creek (B/Q) Lease Expiration Under the lease of Bernice Lake Substation to Quartz Creek Substation (B/Q) transmission facilities,” CEA operated a substantial portion of the HEA transmission system. HEA also delegated to CEA the right to operate the Soldotna Segment even though the Transmission Agreement called for HEA to operate the Segment. The expiration of both the B/Q lease and the HEA-CEA power sales agreement removed from CEA the right to operate any of HEA’s transmission facilities. The event also removed any right of access CEA may have had to HEA’s substations and rights of way and removed CEA’s right to transmit energy over the HEA facilities. HEA has sole ownership and control over the facilities and the facilities are free of any encumbrances other than a mortgage. No party has been able to produce any contract, deed, easement, tariff or other rule that constrains HEA in its use of the facilities. The B/Q facilities have merged into the HEA transmission system. Bradley power of other parties is being transmitted across the HEA transmission system solely at HEA’s sufferance, while the parties await a decision by the RCA regarding its jurisdiction over the wheeling of Bradley Lake power over HEA’s system. If the RCA declines jurisdiction, given that the Superior Court does not have the statutory power to order interconnection (that power is given exclusively to the RCA), the Court would apply general principles of contract and property law in deciding whether or to what extent HEA has an obligation to wheel Bradley power in the absence of an agreement to do so. CEA no longer has the right to use the B/Q facilities to deliver power under the Agreement for the Wheeling of Electric Power and for Related Services (Services Agreement). CEA no longer enjoys the right to receive power at HEA’s Soldotna Substation, without having permission from * The S/Q line was but one line segment included in the B/Q lease, thus the lease is more properly referred to as the “B/Q lease.” Position Statement of HEA Page 3 HEA to do so. Upon termination of both the B/Q lease and the HEA- CEA power purchase agreement, HEA began operating as an independent load balancing authority (LBA) and is now the transmission provider for power between Bradley Junction and Quartz Creek. The result is elimination of CEA’s right to dispatch electric power through HEA’s system. Under the terms of the Services Agreement, (§13(aa)), the Quartz Creek Substation becomes the new contract delivery point for Bradley Power delivered to CEA. Maintaining “Status Quo” The obligation for a party to maintain the “status quo” is very limited and of no applicability to the issues raised by the BPMC. The status quo as of January 1, 2014, was that the B/Q lease had terminated and HEA began operating its own generation and transmission system. Under the Services Agreement, pending resolution of a dispute each party is obligated to “continue to perform its obligations under (the) Agreement.” As noted above and shown in the attached compilation of relevant contract references, HEA’s obligations under the Services Agreement are few and unrelated to power transmission, regardless of how fervently the other members of the BPMC might wish otherwise. Further, no party has yet been able to articulate a legal basis for the existence of a bona fide dispute concerning whether CEA has or should have any legal right to operate any portion of the HEA transmission system. Nothing in the language of the agreement obligates HEA to ignore the present reality. HEA’s Complaints are Supported by Contract References and Need No Further Elucidation Pending a Response At the direction of the chair, HEA submitted to the BPMC a statement listing five issues concerning its dispute with the Dispatcher of Bradley power and three issues concerning the action or inaction of BPMC. Unlike the “disputes” raised in Resolution 2013-02 the statement of issues submitted by HEA alleged specific facts which could be either admitted or denied and cited the specific contractual provision applicable to the issue. To date there has been no response by either party against whom the complaint was directed and thus no reason for HEA to comment further. Position Statement of HEA Page 4 RELEVANT CONTRACT REFERENCES Power Sales Agreement Provisions BPMC’s Responsibilities §13(c) Committee Responsibilities. (i) “the Committee shall be responsible for the management, operation, maintenance, and improvement of the Project... .” (ii) The Committee shall take the following actions (A) Arrange for the operation and maintenance of the Project, and the scheduling, production, and dispatch of Project Power; (H) Adopt procedures . . . for the resolution of disputes that may arise between or among the Purchasers and the Authority concerning the interpretation of this Agreement, the obligations created by this Agreement, or the performance of such obligations. The “Project” is defined as the “Bradley Lake Hydroelectric Project as defined in Exhibit C.” An excerpt from Exhibit C reads: The (Bradley Junction) switching station will connect to a 115 kV transmission line (not included in the Project) which will transmit power between Fritz Creek and Soldotna on the Kenai Peninsula. HEA’s Obligations §10(c) Operation and maintenance of Purchasers’ Systems. Each Purchaser covenants and agrees that it will operate and maintain its System in good repair, working order and condition, and in accordance with Prudent Utility Practice. §1(x) “Prudent Utility Practice” shall mean at a particular time any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry at such time, or which, in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability, safety and reasonable expedition. Prudent Utility Practice is not intended to be the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. . . . In evaluating whether any matter conforms to Prudent Utility Practice, the parties shall take into account (i) the nature of the parties hereto under the laws of the State of Alaska and their statutory duties and responsibilities, and (ii) the objective of integrating Project Capacity with the generating resources of the Purchasers, including resources available under contract, to achieve optimum utilization of the resources and achieve effective and economical operation of each Purchaser’s System... . Position Statement of HEA Page 5 Services Agreement Provisions BPMC’s Authority §10(b) . . . The parties agree that any further procedures for dispute resolution under this Agreement shall be entrusted (if the Authority concurs) to good faith negotiation and adoption by the Project Management Committee. . . . §8(a)(i) (the Dispatcher’s duties shall include) Dispatching power generation at the Bradley Lake Project in accordance with the requests of the Parties, the availability of services under this Agreement, and the applicable operating criteria or guidelines adopted by the Project management Committee. HEA’s Obligations §8(c) ... Unless the Project Management Committee adopts and implements procedures to the contrary, each party shall be responsible for ensuring that it does not cause to be generated at the Bradley Lake Project any power to which that Party is not entitled by the terms of the Power Sales Agreement and the criteria, guidelines, and procedures adopted by the Project Management Committee. “Soldotna Substation” defined. §13(aa) Soldotna Substation. The Soldotna Substation owned and operated by Homer Electric Association, Inc., or any successor facility at which Bradley Lake Energy can be and is delivered to Chugach at Chugach’s metering point by a Wheeling Utility for services under this Agreement. (Emphasis supplied) §12(c) Performance Pending Resolution Of Disputes. Pending resolution of any dispute, each Party shall continue to perform its obligations under this Agreement . . . . All Parties shall be entitled to seek immediate judicial enforcement of this continued performance obligation notwithstanding the existence of a dispute. Application for such enforcement shall be made to the Superior Court for the State of Alaska, Anchorage District. Transmission Agreement Provisions BPMC’s Authority §3(b) . .. Operation; Line Losses. HEA shall be compensated for line losses, if any, resulting from power of the Purchasers flowing over the Soldotna Segment. The Project Management Committee will determine the amount of line losses and the appropriate amount and manner of compensation. HEA’s Obligations §3(a)(i) On the date of Commercial Operation, HEA shall sell and each Purchaser agrees to purchase a share of the capability of the Soldotna Segment in an amount (stated in megawatts) equal to that Purchaser’s Percentage Share (stated in megawatts) of the Project. §3(b) Operation; Line Losses. HEA shall operate the Purchaser’s Soldotna Segment capability as if it were part of HEA’s system and make the Purchaser’s Soldotna Position Statement of HEA Page 6 Segment transmission capability available for the use of the Purchaser to deliver energy and power in the manner directed by the Purchaser. §5 - DUTY TO OPERATE AND MAINTAIN. So long as HEA owns the Transmission Line, HEA will in good faith and at all times operate, maintain and repair the electrical facilities used to perform the services provided hereunder in accordance with Prudent Utility Practice in a manner consistent with HEA’s obligations under this Agreement. §18 (kk) Transmission Line. The transmission line, approximately 59.7 miles in length, to be constructed by HEA between the Fritz Creek Substation and the Soldotna Substation, and composed of the Soldotna Segment and the Fritz Creek Segment. Formula for calculating a Purchaser’s share of the Soldotna Segment: Attachment A — Computation of a Purchaser’s Prepaid Share of Construction Cost Pp = U x € 135 MW Where: Pp = Principal amount (in dollars) for which the Purchaser is directly responsible U =... the Purchaser’s actual MW share of the Project Cc = The Construction Cost Attached is a map of the HEA transmission system. Position Statement of HEA Page 7 hi ia > \ ‘ay \ Pe KENAI >) f YO OUNRTZ CHEK 2H WES aay CN Hila cen J hb. aes, en el | SOLDOTNA seu | Swe | el ce SOLDOTNA SEGMENT Po ne xe ce I. S = * i ¥ & OWNERSHIP BOUNDARIES AEA BRADLEY (/ JUNCTION i ei alls ue <\_ FRITZ CREEK SEGMENT MAP KEY: AEA OR CEA HEA HOMER a ABA ELECTRIC aS ae r] aon ww oar . ASSOCIATION, INC. [omen wr Toft HEA TRANSMISSION ASSETS RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2014-08 Compensation for Homer Electric WHEREAS, the BPMC has undertaken a dispute resolution process dealing with issues of the transmission of Bradley Lake power over part of the Homer transmission system; and WHEREAS, certain questions have arisen concerning compensation to Homer Electric Association for use of part of its ttansmission system to transmit Bradley Lake power; and WHEREAS, the issue of compensation for wheeling of power and line losses is vested with the BPMC under the applicable contracts; NOW, THEREFORE, BE IT RESOLVED: Homer Electric shall submit its request for compensation for wheeling, line losses, or other services for which it seeks compensation for the transmission of Bradley Lake power to the BPMC with appropriate supporting technical, operational, and statistical information; BE IT FURTHER RESOLVED: The Bradley Lake O&D committee shall review and analyze all technical and operational components of Homer's compensation request and report its findings to the BPMC; BE IT FINALLY RESOLVED: The BPMC shall review Homer's compensation request in accordance with the terms of the applicable contracts and the findings of the O&D committee, and make all appropriate adjustments to compensation to Homer for the transmission of Bradley Lake power over part of Homer's transmission system. DATED at Anchorage, Alaska, this 7" day of February, 2014. Chair Secretary BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING SPECIAL MEETING Alaska Energy Authority, Anchorage, Alaska January 15, 2014 1. CALL TO ORDER Chair Evans called the regular meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:00 a.m. 2. COMMITTEE MEMBERS ROLL CALL Bryan Carey Alaska Energy Authority (AEA) Dan Kendall Anchorage Municipal Light & Power (AML&P) Bradley Evans Chugach Electric Association (CEA) John Foutz City of Seward (SEW) Cory Borgeson Golden Valley Electric Association (GVEA) Brad Janorschke Homer Electric Association (HEA) Joe Griffith Matanuska Electric ASsociation (MEA) Se STAFF/PUBLIC ROLL CALL Burke Wick, Brian Hickey, Paul Johnson, Lee Thibert, Mark Johnson, and Paul Risse (CEA); Larry Jorgensen, Rick Baldwin, Robert Day, Harvey Ambrose, and Jim Patras (HEA); David Pease (MEA); Richard Miller and Jeff Warner (AML&P); Bernie Smith (Regulatory Commission.of Alaska); Robin Brena (Brena, Bell & Clarkson); Robin Gould; Kirk Warren, and Teri Webster (AEA); Brian Bjorkquist (Department of Law); Kirk Gibson (McDowell Rackner & Gibson PC); Sunny Morrison and, Miranda Studstill (Accu-Type Depositions) 4. PUBLIC COMMENT There were no public comments. 5: AGENDA COMMENTS/MOTION FOR APPROVAL The agenda was approved. 6. NEW BUSINESS A. Issues related to Resolution 2013-02 (Homer Electric Tariff Filing) to include e The process(es) to be used to bring resolution to the matters at issue; ¢ Current status of the transmission of power from the Project; and ¢ Resolution of any issues involved in the transmission of power from the Project. BPMC Minutes 1/15/14 Page 1 of 8 Mr. Gibson commented this special meeting is to develop dispute settlement to handle the issues that are coming out of Resolution 2013-02 and the transmission of energy coming from Bradley Lake power. Mr. Gibson recommended the Committee follow this resolution process; 1) select a Chairman to oversee the dispute resolution process, 2) identify all the issues that need to be addressed, 3) determine the sources of the information to be gathered, 4) determine what analysis needs to be performed and who performs the analysis, and 5) determine the process of examining the claims and reaching a resolution. Mr. Gibson urged the Committee to work as a whole. Unanimity is required for the dispute resolution procedures. Mr. Borgeson asked what happens if there is not a unanimous decision. Mr. Gibson hopes that there would be a unanimous decision on resolution procedures because the bylaws require a unanimous decision. Chair Evans stated the Committee would keep working on the resolution procedures until a unanimous vote is reached. Chair Evans asked if there needs tobe a unanimous decision to the resolution of any disputes. Mr. Gibson stated there does not need to be unanimous decision to the resolution of disputes, only for the resolution procédures. Chair Evans yielded the gavel to Mr. Gibson to proceed with number one of the process, election of the Chairman of this dispute resolution process. Mr. Gibson aig a new Chairman will be elected for any other dispute in the future. : A roll call vote was taken. Mr. Griffith wasyelected as Chairman of the Dispute Resolution Process. Chair Evans yielded the gavel to Mr. Griffith. Mr. Griffith thanked the‘Committee and looks forward to the challenge of resolving these issues. Mr. Borgeson suggested. Mr. Griffith work with legal counsel to develop a briefing schedule where members would have an expedited, short period of time to present to Mr. Griffith, as Chair, the legal issues, considerations, documents and fact finding issue. Mr. Borgeson believes it can begin today and recommends there bea three-day period for members to send Mr. Griffith all the issues that need to be discussed. Mr. Janorschke agreed with the recommendations of Mr. Borgeson and stated he would like to have the O&D Committee involved in contributing to the issues and providing their technical expertise. Mr. Griffith asked ifthe suggestion is to outline the issues today or to request the technical people to provide a scoping of theissues.to Mr. Griffith by Friday. Mr. Janorschke prefers to let the technical people identify the issues and the BPMC can add to the issues and determine the priority of issues to make it manageable. Mr. Griffith asked if the intent of the body is to have a special meeting or meetings to address these issues, rather than include it on the currently scheduled next meeting date of January 27th. Chair Evans believes a separate schedule can be set for the dispute resolution process and does not have to run concurrent with the regular business meetings. Mr. Janorschke asked Mr. Gibson if these committee meeting are open to the public. Mr. Gibson believes the O&D Committee meetings are open to the public and believes these dispute resolution process special meetings would be open to the public, as well. Chair Evans asked if the dispute BPMC Minutes 1/15/14 Page 2 of 8 resolution process special meetings can be closed. Mr. Bjorkquist commented BPMC meetings are subject to the Open Meetings Act and he would be happy to work with BPMC counsel to see what parameters there are under both the Open Meetings Act and under the BPMC bylaws to answer that question with the intent of conducting closed meetings. Chair Evans asked if these would follow the executive session rules. Mr. Gibson stated he will research the answer with the help of Mr. Bjorkquist. Mr. Day requested the Dispute Resolution Committee to be real clear about how the O&D Committee should behave and if they will conform with the Open Meeting Act or not. The practice is to be open, but the O&D meetings are not publically noticed. Mr. Griffith asked what the criteria is for the O&D Committee and is it necessary to notice meetings. Mr. Bjorkquist stated he will research that question with BPMC counsel to provide the answer. Mr. Griffith stated he will include the expectations of the group imthe schedule. The identification of issues will not be determined at this meeting, but at a later date. The)source information and analytical work will be assigned after the issues are determined. The O&D Committee volunteered to be the body that addresses the main issues. Mr. Griffith advised he will pass this information onto Mr. Jim Brooks, Chair of the O&D Committee. Chair Evans asked what process of négotiation will be followed. Mr. Griffith asked for input from the parties at odds. Unidentified member believes it would be appropriate for negotiations to begin within the BPMC and if progress cannot be made, the next step would. be to go to a mediator. Chair Evans commented much of the dispute involves everyone and not just the principals who have framed the problems. Mr. Gibson recommended the Committee needs to act asia whole whenever it can throughout this process. Mr. Griffith agreed. Mr. Kendall recommended the Committee members develop a list of issues at the meeting today. Mr. Borgeson:stated there are going to be\legal issues and factual issues. One of the questions is what does it cost Homer to provide the transmissiomto its line for the Bradley power. He does not believe the Committee will be able to reachsagreement on the legal issues, including contract obligations, limitations and appropriate charges forpower. Mr. Borgeson asked if the contract language included specification regarding a dispute resolution process through arbitration or mediation. Mr. Borgeson suggested the BPMC agree to allow a neutral party to make a final decision on anything the BPMC cannot agree on. Mr. Gibson advised there.is a dispute resolution process under the services agreement that states the BPMC will create dispute resolution procedures with the affirmative vote of Chugach required. Mr. Griffith asked Mr. Borgeson when the neutral party mediator would step in during the process. Mr. Borgeson stated if the Committee cannot come to a unanimous resolution, then the process should go to a mediator, and then lastly, to an arbitrator. Mr. Borgeson requested the Committee address the issues that can be resolved at the Committee level first within two to three weeks and then move to mediation and lastly, arbitration, if necessary. Mr. Foutz asked what is the neutral party's role in this part of the process. Mr. Gibson stated the Committee will outline what the neutral party should do when they are necessary, including fact finding BPMC Minutes 1/15/14 Page 3 of 8 or reviewing technical reports. The neutral party does not need to be involved in the identification of issues and information gathering steps of the process. Mr. Janorschke believes the issues can be identified within a week because most of the issues are already known and outlined. Mr. Griffith addressed number two in this process, identify all the issues that need to be addressed. Mr. Griffith requested a statement of all issues be given to him by this Friday from the parties, including information from the O&D Committee. The body agreed without objection. Mr. Griffith addressed number three and four in this process, 3) determine the sources of the information to be gathered, and 4) determine what analysisneeds to be performed and who performs the analysis. Chair Evans requested a Special Purpose Subcommittee be established to address steps three and four in this process. The Special Purpose Subeommittee,could be comprised of individuals from the O&D Committee and/or any assigned subject matter experts. The body agreed without objection. Mr. Griffith addressed number five in this process, determine the process of examining the claims and reaching a resolution. Mr. Griffith described the process where the Committee comes to as many resolutions as possible and then utilizeja neutral party to mediate the lack of resolution on any of the issues. If mediation fails, the Committee comes back together to discuss how to proceed, rather than going directly to an arbitrator. Chair Evans explained thisyprocess is not a substitute forthe decision-making or the voting protocols the BPMC is held to under the agreements. Chair Evans stated he is willing to engage in mediation to try to get closure where everybody is happy withthe result of the vote. Mr. Borgeson commented when he used the term mediation, he meant the parties would come to a unanimous decision and no rights are abrogated. Mr. Borgeson noted arbitration is different. Chair Evans disagreed and stated his concern is'the idea of consensus in mediation. Chair Evans believes there does not have to bea consensus vote as a result of mediation and wants to be clear the decision process does not have to be a consensus decision. Mr. Borgeson understands no agreement rights are being forfeited under this process, but one of the biggest issues to determine is which agreement we are operating under to come to this decision. Mr. Janorschke requested,the wording of number five to include; identify a process for examining claims and reaching resolution, up to and including mediation, which will not waive any of the party's rights. All parties agreed. Mr. Gibson noted mediation only works if everybody agrees and either likes what the deal was or can live with the deal. If a party does not like the deal or cannot live with the deal, mediation has failed. Chair Evans requested the record reflect the intent of mediation does not waive any currently existing voting rights. The body agreed to the amended language of number five. BPMC Minutes 1/15/14 Page 4 of 8 Mr. Gibson restated the procedures that will be used for the body to approve are as follows: 1) selection of a Chair for purposes of overseeing the dispute resolution, 2) identification of all the issues, 3) determination of what information needs to be gathered, 4) determination of what analysis needs to be performed, which will be completed by the O&D Special Purpose Committee, including any representatives from the organizations they feel are important to the process, 5) identification of a process for examining claims and reaching resolution, up to and including mediation, which will not waive any party's rights. A roll call vote was taken. The body agreed unanimously. Mr. Gibson noted he spoke with counsel for AEA and is confident they can develop a process the Committee can use to keep these issues in private consultation. He will report on that process as soon as possible. Mr. Griffith noted the next item of business is curreftstatus of transmission of power from the project. Mr. Griffith asked Chugach, as the dispatcher, is‘power being delivered.as requested. Chair Evans believes the requested power is being delivered. The dispute is about where custody transfer is and noted Chugach is seeking status quo until the dispute has been resolved. This disagreement is causing energy accounting issues between Chugach Electric and Homer Electric and some control area performance between the two areas. Mr. Griffith asked if Homer Electric refuses to;continue process as it has been, were the status no different than 31 December. Mr. Janorschke stated)some of the issues were heard yesterday at the RCA. He commented there.are operational people in the background who are suffering the consequences of these disagreements, including dispatchers»Mr. Janorschke requested Mr. Day provide an update on the dispatching. Mr. Day agreed with most of what Chair Evans stated regarding the effort that is going into reconciling the various measuring points but stated he does not believe there is such a thing as status quowith Chugach encompassing the entire load balancing area (LBA). Mr. Day would Jiké tosfocus on what is done after this meeting to make the process go forward. He stated HEA has‘made every effort to ensure the Bradley power is delivered. Mr. Day believes Chugach wants to maintain the ability to move Bradley power rapidly. He would suggest an agreement on the operational control points of the ports in Bradley junction and use the third-party loss table produced by EPS for the interim and at the end of this process when the legal representatives havespoken, then the appropriate compensation can be made. Chair Evans noted contract assignments and responsibilities are being waived and Chugach does not agree. Chair Evans stated the status quo is what was going on before the change at midnight on December 31st. He believes the implementation of dynamic scheduling will resolve the problem. Chair Evans believes the loss tables are similar, but not identical, to the ones used before. The issue is where the energy accounting point is and who generates the losses. Chair Evans thinks the dispute resolution process is the only way to solve these disagreements. Mr. Griffith stated his understanding is ultimately the responsibility for the performance of the project, delivery of the power and the definition of the transfer points rests with this body. Those issues could all go through the dispute resolution process just created or the body could vote to hold the operator of the plant to the former processes. Mr. Griffith asked for the will of the body. BPMC Minutes 1/15/14 Page 5 of 8 Mr. Janorschke stated some of these issues are being discussed at the Regulatory Commission of Alaska. Mr. Janorschke commented some participants may disagree, but he does not believe the BPMC has the authority to dictate any control efforts on HEA's system. Mr. Janorschke suggested this dispute resolution is expedited and to provide temporary relief, per Mr. Day's requests, to HEA and Chugach dispatchers, who are really paying the price for these disagreements. HEA's LBA has come as no surprise to anybody, since it has been discussed for three years now and have raised these issues. Mr. Kendall noted he is the new guy and commented the important issues he sees for AML&P is continued deliverability of power and reliable accounting for how it is delivered. There has been an interruption in the status quo on January Ist, and the financial responsibilities and operational responsibilities go along with that interruption, which creates/iabilities and costs for AML&P that are unknown at this point. They will request a full accounting/of the deliverability and costs that have been associated with this process. Mr. Kendall commented there should have been a resolution prior to the current situation and without that resolution, the status quo would have been a better operation than what we have today. Mr. Janorschke asked Mr. Kendall if he has noticed any deliverability problems since the change in status quo at the first of the year. He believes the status quo inthe industry is\changing every day commented change can occur with agreements of the parties. The current situation is confusing. Chair Evans noted the dispute is regarding the requirement for)status quo. He does not believe there are disputes over any of the infrastructure changes Mr. Janorschke listed. Chair Evans stated status quo is required when there is a.dispute. Mr. Borgeson asked Mr. Janorschkeif HEA is able to measure its losses as a result of CEA's operational issues HEA believes exist under the status quo. Mr. Borgeson asked if this is just a financial issue for HEA and its members. Mr. Borgeson stated if this is a measure of damages, he encourages’HEA tovallow the status quo go forward and the question how much HEA might be owed will getresolved. Mr. Borgeson agreed with Mr»Kendall the status quo needs to be kept going until there is a resolution to this dispute. Mr. Borgeson does not fault HEA for this non-resolution at this point. Mr. Janorschke stated there is metering in place and it has been tested. HEA is measuring actual real time losses. Mr. Janorschke advised the dispatching of Bradley has not changed. Chugach continues to dispatch and they have that right through contracts and is not in dispute. Mr. Griffith asked if the custody point has changed. Chair Evans advised the custody point change is the dispute. Mr. Borgeson asked if the custody transfer point is part of the dispatching. Chair Evans stated the custody transfer point is part of the dispatching and both parties are trying to accommodate the losses between the disputed boundaries. Mr. Kendall asked if both HEA and CEA currently have access to the monitoring equipment and information is going into both dispatch centers. Chair Evans believes there is some access. Mr. Day stated the monitoring equipment has remained intact to a great degree. Mr. Kendall asked what does "to a great degree" mean. Mr. Day advised there could be dispute over some areas that have been BPMC Minutes 1/15/14 Page 6 of 8 disabled and they are internal to HEA's system. Mr. Kendall commented it is important for CEA to have all of the same information HEA has and if there is limited access, that is another issue. Mr. Janorschke reported HEA is trying to set up the LBA just like it is for everybody else. It is on the property line of the transmission system, no different than AML&P's, CEA's or GVEA's. The property line is the end of the ownership of that system. Chair Evans disagrees that is uniformly true across the system and stated there are occurrences in the system where people have LBA responsibility outside their direct ownership boundaries. Mr. Kendall stated his question was more about the status quo and if CEA still has full communication and information with what they had previously. Mr. Janorschke stated probably not into Soldotna. Mr. Day stated that question should be directed to Paul Johnson to see if there was anything missing. Chair Evans commented that is not a fair redirect and HEA i ponsible for any changes Mr. Johnson could have made. Chair Evans believes that is a cloaked answer ax would appreciate answers being more forthright. S Mr. Foutz asked for a clarification regarding what Mr. Day noted was disabled. Mr. Day stated internal to HEA's system, there are controls over circuit bréakers that are necessary tothe function of that system. There is no reason for CEA to have control over thdse breakers and thathas been disabled. Mr. Foutz asked what the function of the breakers were béfore they were disabled. Mr. Day stated CEA was the dispatcher of the HEA ‘system and therefore, needed control over that system. CEA is no longer the dispatcher of the HEA system», Mr. Foutz asked if those breakers were strictly so CEA could dispatch power to the HEA system. Mr. ‘Day statedii in,the event of.a disruption for those breakers, they could close them from theifldispatch center, with actual Physical ‘control of those circuit breakers. Mr. Foutz if HEA owned, the breakers), Mr. Day a; aged ’ Mr. Janorschke ated " CEA is get formation they need right now for Bradley. Chair Evans and Mr. Griffith both stated theysdo not know, the answer. Mr. Griffith hopes CEA is getting adequate informatiOn,to define and send the\power to the requesting entities, including GVEA, AML&P, and CEA. If that is not happening, eorrttith suggests having an emergency BPMC meeting to, determine the causes. Chair Evans noted there has beén correspondence that characterizes the problems and does not believe new reports have to be written, adding work and slowing the process. Mr. Gibson does not believe any new work needs to be. done. Mr. Griffith stated if the problems and issues come to him as a series of bullet points or one-linésenten¢es, then he can sort it out, compile the appropriate issues and throw out the issues that are not appropriate. Mr. Griffith expects all issues to be sent to him by the close of business on Tuesday, January 21, 2014. The next Board meeting was scheduled for Friday, January 24, 2014, at 10:00 a.m. Mr. Janorschke stated at the next meeting, there will have to be an agreement on which issues fall under the BPMC purview and which do not. Chair Evans believes that determination would be made behind closed doors and not at the BPMC meeting. Mr. Borgeson recommended developing a budget for this process to provide resource assistance to the Chair going forward, Mr. Gibson's time, a mediator, and other expenses. He believes developing a budget would be helpful in understanding the costs that may be incurred. Mr. Griffith stated he will BPMC Minutes 1/15/14 Page 7 of 8 develop a rough budget and send it around. He requested Mr. Borgeson develop a rough budget and send it around as well. Chair Evans reminded the Committee there is a regularly scheduled meeting on January 27th that has an entirely different agenda than the dispute meeting scheduled on January 24th. He advised members need to attend both meetings. Chair Evans will chair the meeting on January 27th and Mr. Griffith will chair the dispute meeting on January 24th. Te ADJOURNMENT There being no further business for the committee, the meetingadjourned. BY: Joe Griffith, Chair Attest: Sara Fisher-Goad Alaska Energy Authority, Secretary BPMC Minutes 1/15/14 Page 8 of 8 CHECKLIST FOR BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETINGS Meeting Date/Time: fe | “] UVM Meeting Location: Task CONFIRMED/DATE Secure Meeting Date with Bryan Carey *3065 MAKE SURE IT’S NOT A STATE HOLIDAY Secure Meeting Date with Chairman, Brad Evans (call his Exec Assistant, Connie Owens @ 762-4747) Secure meeting room for use (block out 30 minutes prior to meeting to allow for set-up time Send email “SAVE THE DATE” to all Committee members, in Outllook Contacts “BPMC” with meeting date/time/location (ask for documents to be emailed for packet inclusion — including action items with their motions. Need five for quorum. ww ~ ~ il Schedule a teleconference line with GCI (1-800-770-2121) provide them with a reference project (BPMC) and code (your | phone extension number) 20704 Draft Agenda for Bryan Carey’s review. an After Bryan approves, Send Draft Agenda by email to Chairman for review and approval, Brad_evans@chugachelectric.com always cc: Connie Owens connie_owens@chugachelectric.com — . Post to the State of Alaska’s Online Notice System 5 business days prior to the meeting. Attach agenda. Gather documents from members. They rarely have any. One week prior to meeting, email packet to members (big group BPMC) including all attachments (teleconference information /agenda /draft of previous meeting minutes/motions/general handouts) (SEND IN PDF FORMAT!) Print 5 extra copies of the full packet of information and bring to the meeting for those who did not bring their copy ALSO BRING TO THE MEETING: State Calendar, List of Reps, Sign in Sheet, Bylaws, and Minutes in final form from the last meeting for Chair’s signature if they are approved! TEST RECORDING EQUIPMENT BEFORE the meeting. Following the meeting: Make sure you disconnect the phone! Stop recording. Have Chair and Bryan C. sign approved minutes. Send a pdf of the signed minutes to the committee members. Type up a draft of the meeting minutes.& send it to B Carey for review and any other speaker for review. After their edits, prepare a final draft for the next meeting. Bradley Lake Project Management Committee - Special meeting - Alaska Online Public... Page 1 of 1 STATUS: Active Bradley Lake Project Management Committee - Special meeting ALASKA ENERGY AUTHORITY Special Meeting of the Bradley Lake Project Management Committee Notice is hereby given that the Bradley Lake Project Management Committee will hold a special meeting on Friday, February 7 at 10:00 a.m. For additional information contact Teri Webster. 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 3074#. Attachments, History, Details Attachments Details None . Commerce Community and DepercTient Economic Development Revision History Category: Public Notices Crested 2/3/2014 9:41:03 AM by pea sce Meeting tawebster : Modified 2/3/2014 9:43:53 AM by [Details} Project/Regulation #: tawebster Publish Date: 2/3/2014 Archive Date: 2/8/2014 Events/Deadlines: http://aws.state.ak.us/OnlinePublicNotices/Notices/View.aspx?id=171046 2/3/2014 Representative Brad Evans Chairman Brad Janorschke Vice Chairman Sara Fisher-Goad Secretary/Treasurer Cory Borgeson Daniel W Kendall John Foutz Evan “Joe” Griffith Kirk Gibson Revised Date: BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE List of Representatives Alternate Burke Wick Harvey Ambrose Bryan Carey Lynn Thompson Richard Miller Jeff Estes Gary Kuhn 2/4/2014 Utility Chugach Electric Association 5601 Electron Drive Anchorage, Alaska 99518 Connie Owens ph: 762-4747 Brad_Evans@chugachelectric.com Burke_Wick@chugachelectric.com Homer Electric Association 3977 Lake Street Homer, Alaska 99603 Phone: 907- 283-2312 bjanorschke@homerelectric.com hambrose@homerelectric.com Alaska Energy Authority 813 West Northern Light Blvd Anchorage, Alaska 99503 Teri Webster Ph: 771-3074 sfishergoad@aidea.org bcarey@aidea.or Golden Valley Electric Association P.O. Box 71249 Fairbanks, Alaska 99707-1249 Susan Redlin Ph: 907-458-5721 cbhorgeson@qvea.com Ithompson@gvea.com Anchorage Municipal Light & Power 1200 E. First Avenue Anchorage, Alaska 99501 Linda Davidovic Ph: 263-5201 kendallDW @muni.org MillerRE@muni.org City of Seward P.O. Box 167 (234 Fourth Avenue) Seward, Alaska 99664 Phone: 224-4071 Fax: 224-4085 jfoutz@cityofseward.net jestes@cityofseward.net Matanuska Electric Association P.O. Box 2929 (163 Industrial Way) Palmer, Alaska 99645-2929 Dawn Baham Ph: 907-761-9285 joe.griffith@matanuska.com gary.kuhn@matanuska.com McDowell Rackner & Gibson PC 419 SW 11th Street, Suite 400 Portland, Oregon 97205 Ph:(503) 290-3626 Fax:(503) 595-3928 Kirk@mcd-law.com ATTENDANCE - BPWC Special Meeting, Feb. 7, 2014 @ 10:00 am COMMITTEE MEMBERS ALTERNATE L’ Brad Evans, Chairman CEA a Burke Wick _/ Brad Janorschke, Vice Chairman (HEA = _-Harvey Ambrose plore / Bryan Carey, Secretary/Treasurer AEA Sara Fisher-Goad 4 Corey Borgeson GVEA Lynn Thompson Dan Kendall _MLP Richard Miller "John Foutz SEW Jeff Estes Yi Evan Joe Griffith MEA — | Gary Kuhn _~. Kirk Gibson, McDowell Rackner & Gibson PC _~ Brian Bjorkquist, Dept of Law coy aEASENE 11 oe | AIDEA | AEA | AIDEA and AEA Staff | AIDEA | AIDEA and AEA Staff | AIDEA | AEA | AIDEAand AEAStaff | Webster, Teri __ | L 7 fo | | [Be b Day _ iL | a as - | - | 1 } | __t | Bernie. ee — ae eee ee rrrteraiaes = | hee Llaibect gps Bick Paldudin [ | Nreevey Awbrose 7 | an aX e De <a | | | | | | a | — — — | | { | Ron Brene : Allen Owens - | Bian pheksy ease teestt je — a L ee ee -—- ee oe } | | [ T Vn £ M Ce Weey ae RESOLUTION OF THE BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE RESOLUTION NO. 2014-08 Compensation for Homer Electric WHEREAS, the BPMC has undertaken a dispute resolution process dealing with issues of the transmission of Bradley Lake power over part of the Homer transmission system; and WHEREAS, certain questions have arisen concerning compensation to Homer Electric Association for use of part of its transmission system to transmit Bradley Lake power; and WHEREAS, the issue of compensation for wheeling of power and line losses is vested with the BPMC under the applicable contracts; NOW, THEREFORE, BEIT RESOLVED: Homer Electric shall submit its request for compensation for wheeling, line losses, or other services for which it seeks compensation for the transmission of Bradley Lake power to the BPMC with appropriate supporting technical, operational, and statistical information; BE IT FURTHER RESOLVED: The Bradley Lake O&D committee shall review and analyze all technical and operational components of Homer's compensation request and report its findings to the BPMC; BE IT FINALLY RESOLVED: The BPMC shall review Homer's compensation request in accordance with the terms of the applicable contracts and the findings of the O&D committee, and make all appropriate adjustments to compensation to Homer for the transmission of Bradley Lake power over part of Homer's transmission system. DATED at Anchorage, Alaska, this 7" day of February, 2014. Chair Secretary SSS SSeS 10. BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE SPECIAL MEETING AGENDA Friday, February 7, 2014 10:00 a.m. — 12 Noon Alaska Energy Authority’s Board Room 813 West Northern Lights Boulevard, Anchorage, AK CALL TO ORDER ROLL CALL (for Committee members) PUBLIC ROLL CALL (for all others present) APPROVAL OF PRIOR MINUTES - January 15, 2014 PUBLIC COMMENT AGENDA COMMENTS / MOTION FOR APPROVAL NEW BUSINESS A. Applicability of Resolution 2013-02 (HEA Tariff Filing) — Action item (Res. 2014-08) B. Authority to decide issues — Action item C. Chugach's right and obligation to operate, maintain, and repair S-Q line — Action item D. Compensation for use of HEA facilities north of Soldotna substation E. Dispatching regimen, process, and procedures F. Additional dispute resolution procedures — Action item (Res. 2014-09) MEMBERS COMMENTS NEXT MEETING DATE ADJOURNMENT To participate by teleconference, dial 1-800-315-6338 and use code 3074#. Teri Webster From: Dawn M. Baham <Dawn.Baham@mea.coop> Sent: Wednesday, February 05, 2014 9:26 AM To: Teri Webster Subject: Agenda for BPMC dispute resolution committee Hi Teri: Below is from Joe for the agenda. Please send to me in draft before sending to the rest of the committee (I'll forward to Joe for his approval). The briefs to come will be part of the action item list and utility briefs under Resolution 2013-XX. O&D committee under technical issues. Joe will draft 2013-YY this afternoon and I'll forward to you. action items: 03 -Resolution 2013-02 applicability (resolution 2013-XX) --PMC authority to decide issues --Chugach right and obligation to operate, maintain and repair S-Q line -Technical issues --compensation for use of HEA facilities north of Soldotna substation --dispatching regimen/process/procedures -Additional dispute resolution procedures (resolution 2013-YY) 6 Thank you, Dawn Dawn Baham Executive Assistant to the General Manager Matanuska Electric Association, Inc. (907) 761-9285 - Direct Line (907) 761-9212 - General Manager's Office (907) 761-9368 - Fax Dawn.Baham@mea.coop