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HomeMy WebLinkAboutBPMC May 8, 2014Da das 2 ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY BOARD MEETING gtd BPMC 05/8/14 Roll call from top to bottom ending with Chair Golden Valley Electric Association Homer Electric Association Matanuska Electric Association ‘City of Seward Municipal Light & Power Chugach Electric Association 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 xXxxx Xx, XXXX Bradley Lake Project Management Committee ALASKA ENERGY AUTHORITY Regular Meeting Bradley Lake Project Management Committee Notice is hereby given that the Bradley Lake Project Management Committee will hold a regular meeting on Thursday, Me 8, 2014 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#. The public is invited to attend. The State of Alaska (AEA) complies with Title II of the Americans with Disabilities Act « 1990. Disabled persons requiring special modifications to participate should contact AEA staff at (907) 771-3074 to mak arrangements. Attachments, History, Details Attachments Details BPMC Agenda-May8.pdf Department: Revision History Category: Created 5/5/2014 7:56:10 AM by tawebster Sub-Category: Modified 5/5/2014 7:58:48 AM by tawebster Location(s): Modified 5/6/2014 1:51:11 PM by tawebster Project/Regulation #: Publish Date: Archive Date: Events/Deadlines: Commerce, Community and Economic Development Public Notices Advisory Committee Meetinc Statewide 5/5/2014 5/9/2014 o? ATTENDANCE —- BPMC REGULAR MEETING, May 8, 2014 @ 10:00 am COMMITTEE MEMBERS ALTERNATE Brad Evans, Chairman CEA Burke Wick — Brad Janorschke, Vice Chairman HEA Harvey Ambrose "| Sara Fisher-Goad, Secretary/Treasurer AEA Bryan Carey i. Corey Borgeson GVEA Lynn Thompson oe Jim Trent MLP Richard Miller oa John Foutz SEW Jeff Estes P Evan Joe Griffith MEA Gary Kuhn eh David lease _~ Kirk Gibson, McDowell Rackner & v en “Row Wo\FF Gibson PC — Brian Bjorkquist, Dept of Law | AIDEA | AEA | AIDEAand AEAStaff | AIDEA | AEA | AIDEAandAEAStaff | AIDEA | AEA | —_AIDEA and AEA Staff “Webster, Tei | a Le Kil Warren Ker Langford ML EP N° pest | | t t t | | | Bradley Lake Project Management Committee Thursday, May 8, 2014 @ 10:00 A.M. **PLEASE WRITE LEGIBLY** NAME ORGANIZATION KiQ4 GIBSOr Wewoaall (adinee 4 Gilacod JI nea nda Shu H\) ATID A len O wens ADA BZoly De HbA taever Anmbysse ek BRITE SALLE. AcW bola CAG Ch : Rea 6 Wé e a, PB Brena, Bell F Clarks or Wr or Mz, por ; y ISCO Boo 6 uu S Kee waite mete eer Ap prrag” WE of byataeso £4 Lie LEMME AE EV Zl Ag ck. [Seldon fect Mle Kreger LEAL Poke Core _jok A Fog Cas AEA Bradley Lake BPMC Meeting May 8th, 2014 Operators Report Unit Statistics: Generation Unit 1 (MWhrs) Unit 2 (MWhrs) Total (MWhrs) April 2014 21,674 10,535 32,209 Hydraulics Avg. Lake Level (ft) Usage (ac ft) Fishwater (ac ft) April 2014 1,132 32,267 2,909 Lake Level — May 6 - 1,126.5’ Incidents and CEA callout: April 21 — CEA dispatcher notified the Bradley Operator that CEA SCADA was down. Operator standby. The system was restored in a few minutes. April 25 — CEA alarm, Domestic/Sanitary Water Tank Level High. Bradley Operator found a tank flush valve had failed. Replaced valve with warehouse stock. Inspections: Dam Inspections: May 2 — Access road to the dam was opened using plant snow removal equipment. Full inspection of all Dam Facilities allowed. No major items noted. One minor item - One level switch in the Fishwater Portal drain sump has failed. Manually pumped down sump and repair order issued to plant operators. Maintenance and Operation Activities: Accusonic flow meter repaired. New main circuit board and software installed under warranty by vendor. Brush and tree removal started on area between powerhouse and barge dock. April 28 — May 7 - Transmission line row clearing on Diamond Ridge and Soldotna structures from plant towards Bradley River. Crew of four from East Road Services. May 5 — IRIS POWER on site to complete commissioning of partial discharge monitors on both Bradley Lake Generators. Initial analysis indicates some minor insulation breakdown on Unit #2 phase A. Using this initial sampling, additional analysis will take place to trend generator data over time. Bradley Lake Operator Report Page 1 Plant Tour: April 25 — James Trent (ML&P General Manager) and Dan Chay (HEA Board) toured the Bradley Lake facility. They were accompanied by Brad Janorschke and Harvey Ambrose. The tour went well. Projects: Governor PLC Replacement - Factory Acceptance Testing occurred April 21-25 at the Emerson facility in Pittsburgh. The Emerson control logic and system testing was conducted by James Cote (EPS), Bob Day (HEA), Alan Owens (BLPP), Paul Parsons (BLPP). Two conference calls were conducted during the testing with Bryan Carey (AEA), representatives of the Bradley Project Utility participants, and Dave Burlingame (EPS). The factory testing demonstrated the ability of the Emerson hardware and software. The general consensus is that the Factory Testing was successful and the remainder of the testing will need to be conducted on site during commissioning and tuning of the control system. May 5-8 - A wiring technician from PCI-Skanska (Emerson’s installation engineer) was on site conducting pre-outage wiring check-out and drawing verification. The bulk of the review is being conducted to remove the gauges and switches that were made obsolete during the 2006 VA-Tech governor control installation. Governor wiring contract — On April 4" an Invitation to Bid (lump sum) was issued to six wiring contractors regarding the Emerson Governor PLC replacement. (NAES, Liberty Electric, Samson Electric, Kachemak Electric, EPC, and Alcan Electric). City Electric had already indicated they were not interested. No bids were returned. Four of the companies replied that they did not have time or manpower to bid on the project. Two contractors were still interested. The contact was re-bid as a T&M project to NAES and Kachemak Electric on May 6". The next phase is to compile a commissioning test plan utilizing the Emerson commissioning requirements and the 2006 governor installation as a base. Input from the Bradley Participants has been requested and will be incorporated into the final test plan. Penstock Dresser Coupling Inspection and Painting - This project is scheduled for the week of June 9". Extreme Access Inc. will be on site to conduct the inspection. The contractor will clean and inspect the couplings then apply a rust inhibitor and paint supplied by Sherwin Williams of Anchorage. Turbine Nozzle/Needle Valve Repair —The spare Nozzle at Bradley was pressure tested and stroked the week of April 28"" - May 2". Allindications are that the spare nozzle is fully functional and could be installed following discussion with the O&D committee on May 9th. Parts availability and lead times are being processed by Voith Hydro. Contract negotiations with NAES and railbelt system requirements are being factored to determine the best time to mobilize and conduct the spare nozzle installation and/or repair of the nozzle on unit #2. Bradley Lake Operator Report Page 2 2 Aa ese Se NE 10. 11. 12. 12. Dan CendoLP No longdWn a HLEP Bod J-copy oF recordin, BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE REGULAR MEETING AGENDA Thursday, May 8, 2014 10:00 a.m. — 11:30 a.m. Alaska Energy Authority’s Aspen Room 813 West Northern Lights Boulevard, Anchorage, AK CALL TO ORDER ROLL CALL (for Committee members) PUBLIC ROLL CALL (for all others present) AGENDA APPROVAL Muncckes PUBLIC COMMENT Discuss . Level of detail APPROVAL OF PRIOR MEETING MINUTES - March 21, 2014 NEW BUSINESS A. Report from counsel — Dispute resolution procedures & options under the bylaws B. Resolving the dispute between Utilities — Resolution 14-11 OPERATORS REPORT COMMITTEE REPORTS no report A. O&D — Evaluation of operator report of compliance to reliability standards dow put on ney} COMMITTEE ASSIGNMENTS- Comprencasion bud yet MEMBERS COMMENTS rp eens, plant NEXT MEETING DATE ADJOURNMENT To participate by teleconference, dial 1-800-315-6338 and use code 3074#. "\ nde Hen Dandous YW Minutes Bradley Lake BPMC Meeting May 8, 2014 Operators Report Unit Statistics: Generation Unit 1 (MWhrs) Unit 2 (MWhrs) Total (MWhrs) April 2014 21,674 10,535 32,209 Hydraulics Avg. Lake Level (ft) Usage (ac ft) Fishwater (ac ft) April 2014 1,132 32,267 2,909 Lake Level —- May 6 - 1,126.5’ Incidents and CEA callout: April 21 — CEA dispatcher notified the Bradley Operator that CEA SCADA was down. Operator standby. The system was restored in a few minutes. April 25 — CEA alarm, Domestic/Sanitary Water Tank Level High. Bradley Operator found a tank flush valve had failed. Replaced valve with warehouse stock. Inspections: Dam Inspections: May 2 - Access road to the dam was opened using plant snow removal equipment. Full inspection of all Dam Facilities allowed. No major items noted. One minor item - One level switch in the Fishwater Portal drain sump has failed. Manually pumped down sump and repair order issued to plant operators. Maintenance and Operation Activities: Accusonic flow meter repaired. New main circuit board and software installed under warranty by vendor. Brush and tree removal started on area between powerhouse and barge dock. April 28 — May 7 - Transmission line row clearing on Diamond Ridge and Soldotna structures from plant towards Bradley River. Crew of four from East Road Services. May 5 — IRIS POWER on site to complete commissioning of partial discharge monitors on both Bradley Lake Generators. Initial analysis indicates some minor insulation breakdown on Unit #2 phase A. Using this initial sampling, additional analysis will take place to trend generator data over time. Bradley Lake Operator Report Page 1 Plant Tour: April 25 — James Trent (ML&P General Manager) and Dan Chay (HEA Board) toured the Bradley Lake facility. They were accompanied by Brad Janorschke and Harvey Ambrose. The tour went well. Projects: Governor PLC Replacement - Factory Acceptance Testing occurred April 21-25 at the Emerson facility in Pittsburgh. The Emerson control logic and system testing was conducted by James Cote (EPS), Bob Day (HEA), Alan Owens (BLPP), Paul Parsons (BLPP). Two conference calls were conducted during the testing with Bryan Carey (AEA), representatives of the Bradley Project Utility participants, and Dave Burlingame (EPS). The factory testing demonstrated the ability of the Emerson hardware and software. The general consensus is that the Factory Testing was successful and the remainder of the testing will need to be conducted on site during commissioning and tuning of the control system. May 5-8 — A wiring technician from PCI-Skanska (Emerson’s installation engineer) was on site conducting pre-outage wiring check-out and drawing verification. The bulk of the review is being conducted to remove the gauges and switches that were made obsolete during the 2006 VA-Tech governor control installation. Governor wiring contract — On April 4" an Invitation to Bid (lump sum) was issued to six wiring contractors regarding the Emerson Governor PLC replacement. (NAES, Liberty Electric, Samson Electric, Kachemak Electric, EPC, and Alcan Electric). City Electric had already indicated they were not interested. No bids were returned. Four of the companies replied that they did not have time or manpower to bid on the project. Two contractors were still interested. The contact was re-bid as a T&M project to NAES and Kachemak Electric on May 6”. The next phase is to compile a commissioning test plan utilizing the Emerson commissioning requirements and the 2006 governor installation as a base. Input from the Bradley Participants has been requested and will be incorporated into the final test plan. Penstock Dresser Coupling Inspection and Painting - This project is scheduled for the week of June 9"". Extreme Access Inc. will be on site to conduct the inspection. The contractor will clean and inspect the couplings then apply a rust inhibitor and paint supplied by Sherwin Williams of Anchorage. Turbine Nozzle/Needle Valve Repair —The spare Nozzle at Bradley was pressure tested and stroked the week of April 28" — May 2". All indications are that the spare nozzle is fully functional and could be installed following discussion with the O&D committee on May 9th. Parts availability and lead times are being processed by Voith Hydro. Contract negotiations with NAES and railbelt system requirements are being factored to determine the best time to mobilize and conduct the spare nozzle installation and/or repair of the nozzle on unit #2. Bradley Lake Operator Report Page 2 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING REGULAR MEETING Alaska Energy Authority, Anchorage, Alaska March 21, 2014 1. CALL TO ORDER Chair Evans called the regular meeting of the Bradley Lake Project Management Committee (BPMC) to order at 1:00 p.m. 2. COMMITTEE MEMBERS ROLL CALL Bradley Evans Chugach Electric Association (' Joe Griffith Matanuska Electric Associ Dan Kendall Anchorage Municipal Li Brad Janorschke Homer Electric Associ Cory Borgeson Golden Valley Electric Sara Fisher-Goad Alaska Energy Authority ( 30 Bryan Carey, Kelli Vee jorkquist (Department of Law); Brian Hickey, ert Day, Alan Owens (HEA); Jim Brooks (MEA); Richard. Alaska (RCA); Matt Cl Depositions); _ & e Smith (Regulatory Commission of rk cay Miranda Studstill (Accu-Type cKay-Highers (CEA); and Ron Woolf AGENDA COI NTS/MOTION FOR APPROVAL The agenda was approved as ‘amended. 6. APPROVAL OF PRIOR MEETING MINUTES - December 12 & 23, 2013 MOTION: Mr. Griffith made a motion to approve prior meeting minutes of December 12 & 23, 2013. Motion seconded by Mr. Kendall. The motion passed unanimously. Ie NEW BUSINESS A. FY15 Budget approval BPMC Minutes 3/21/14 Page | of 7 MOTION: Mr. Griffith made a motion to approve FY15 Budget. Motion seconded by Mr. Borgeson. Mr. Woolf gave a short summary of the budget changes and reported the Budget Subcommittee reviewed the 2015 BPMC proposed budget on March 6, 2014. Approval of the budget was recommended with the caveat for an operator's explanation to the BPMC of two Renewal & Contingency (R&C) budgeted items of the governor and the fish water screen debris removal. Mr. Woolf noted Schedule A shows all revenues were down from FY2014, and all expenses were down from FY2014 except for operations, which increased $801,832. Chair Evans requested an explanation for the 20% increase in@petations. Mr. Day explained HEA is only in charge of about 40% of the operation and on Schedule B HEA's increase in operations and maintena > Was 8%. Mr. Day noted most of the increases came in larger items that were embedded f pies. “wane $30,000 for loader tires, expenses related to guidance studies, expenses ‘felated to facility, summer maintenance work, and the $301,000 Static Var Compensator(SVC ) repair project. » Chair Evans asked if the $301,000 SVC repair e se is party of the total perations increase of $801,832. Mr. Miller stated the $301,000 SVC repair expense is part of the ‘Operations i increase of $801,832. Chair Evans asked if all 6f,the project work had been reviewed by the Operations & Dispatch (O&D) Committee. Mr.’ D y noted this budget was approved by the O&D Committee. Mr. Brooks concurred and noted the.O&D Committee reviewed this budget thoroughly and unanimously agreed to its; approval. Mr. Day commented a lot of the items with Whe increase were not ‘under the control of HEA. Chair Evans stated he did not mean to infer that! nd only wanted clarification as to what expenses were included. pe Mr. J anorschke directed the Ratemtice" s attention to the bottom of Schedule A-1 listing three i amounts that are not included in the 2015 proposed budget. These are recommendations from HEA based oithe approved reliability standards. Mr. Janorschke noted these items were in front of h O&D Committee, but the O&D Committee was awaiting direction from the BPMC. ChairEvans stated he does not believe the BPMC will resolve that issue and the O&D ommittee ‘should determine whether or not those line items are necessary because of the reliability standards. Chair Evans commented new people may be needed on the O&D Committee who can answer this question. He noted the budget needs to be approved before the end of March tol ‘the bond covenants. Mr. Janorschke advised these three line items are not included in t 15 proposed budget. Mr. Janorschke asked a number of questions regarding the management operator audit listed under Schedule B Bradley Lake Audit Fees; 1. Will this audit be going out for bid? 2. Who is managing the audit? 3. Will the audit include operation and dispatch? Chair Evans asked if the scope was provided with this budget item. Mr. Carey stated AEA has not developed a scope for the audit and it will be developed in conjunction with all of the utilities. BPMC Minutes 3/21/14 Page 2 of 7 Mr Janorschke requested a scope of work is provided for all future budgeted line items. Ms. Fisher-Goad believes this line item is related to the audit with respect to the resolution that was passed on an analysis of the operations before the 2018 automatic renewal and the intention was to develop an appropriate scope of work in conjunction with the BPMC. Mr. Janorschke requested the $100,000 be removed from the budget until the scope of work is defined and brought before the BPMC. Ms. Fisher-Goad asked if the request is to remove the operator audit outside of the FY15 budget. Mr. Janorschke agreed and stated the budget can be amended at the appropriate time. Chair Evans asked if Mr. Janorschke requests to remove allof the projects included in the budget that the scope is not fully defined. He suggested Mr. Janorschke consider more flexibility regarding this matter. Mr. Janorschke noted he understands the need for flexibility and he raised the question about the audit because he does not believe any of the Committee members had any discussions regarding the expectation of the scope Mr. Borgeson believes the Committee has discussed, this audityeven though the scope of work has not been defined. Mr. Borgeson noted he did not realize thiga audit was includedhi in the current budget and was going to request it be added to the budget{to oO ay. Mr. Borgeson believes Mr. Janorschke has invited this review ina way that would al viate fears about how the plant is being operated. Mr. Borgeson suggested the audit include financial review and provide the necessary due diligence and scrutiny. Mr. Borgeson: commented this audit line item is a commitment to performing thejaudit and the scope still needs to be defined. He remembers the Committee discussingyy is i f 1 Mr. Janorschke stated en is,fine with the audit and does not mean to sound defensive since no scope of work has been provided _ Janorschke wants to ensure the scope is encompassing and looksat all aspects. of the = Mr. danorschke believes HEA is doing an outstanding job and welcomes the audit. og Mr. Borgeson, offered GVEA take the lead role in this auditing procedure, if it is the will of the Committee, providing a roadmapyand proposal for the audit. He believes this will be a good and healthy process. Mr. Borgeson noted he has additional questions regarding the budget. He asked if the $100,000 audit is the cause of the administrative cost increase of $101,000 reflected on Item F in the summary. Ms. Fisher-Goad agreed. Mr. Borgeson asked why has the HEA annual operation and maintenance Item A in the summary, HEA annual operation and maintenance, increased so much from FY2013 actual to FY2105 budget. Mr. Owens reported he provided a breakdown of 2014 versus 2015 budgets for the Budget Subcommittee. There was a 6.5% increase in labor changes, of which 4% were contractual increases in the union budget. Contractual issues decreased 19%. Two issues the O&D Committee recommended were added. Mr. Owens advised $175,000 of the $800,000 of operating increase are requests from the O&D Committee, Dispatch Committee or HEA. The remainder includes the SVC upgrades and additions that AEA has included in the budget. BPMC Minutes 3/21/14 Page 3 of 7 Chair Evans commented he understood Mr. Borgeson's question was regarding the million dollars and not the $800,000. Mr. Owens stated there are no actual operating increases from 2014 to 2015. There was 2.5% increase in labor, 0% in maintenance, 0% in equipment and machinery, with the exception of the $30,000 for loader tires, 0% in control and dispatch, with the exception of a one-time addition recommended by the O&D Committee. Chair Evans commented it is difficult to analyze everything that is included in the rolled up FERC accounts from the budget table. Chair Evans recommended the Budget Committee reinvent this process and review the tables determining a more intuitively obvious way to present the information to the Committee. After that clarity is provided, the information can then be rolled into the FERC accounting requirements. Mr. Owens noted the O&D Committee and the Budget Subcommittee are provided much more detailed information regarding each project that the BPMC does not see. Mr. Owens agreed with Chair Eve ans. Ms. Fisher-Goad stated the FY2013 actual is lowerfhian FY2013 budget. She noted for this year, there is a lot of money budgeted for the overhead line maintenance, but there does not seem to be a lot of line maintenance activity occurring an ed if it is being pushed) off to next year. Mr. Owens noted the work was budgeted for 2013, but was not required and moved to 2014. The overhead line maintenance will begin in mid-May 2014. Ms. Fisher-Goad believes that helps answer Mr. Borgeson's question of low actuals versus hig requested budget and agreed a primer budget is a good idea. . Mr. Borgeson commented that explanationjanswered)part of his question. He stated he is still unsure why the actual varianéebetween 2013, budget and)2013 actual, was over $800,000. Mr. Borgeson noted he sees deferred Work in his review of the codes. Mr. Borgeson requested HEA provide the Committee a three-minute overview of what is involved in their operation of this plant, including how many full-time equivalents. and management structure. He believes this would be helpful to the Cx ommittee. Mr. Day gave a short Rs iev “describing HI Bradley Lake plant operations and structure. There are five operators and)Mr. Owens, who is the Plant Superintendent. Mr. Day provides about 50% ofjhis time to Bradley Lake aetivities and his supervisor, Harvey Ambrose, provides part of his timeito Bradley Lake activities. Mr. Owens noted there is money budgeted for engineering time and accounting time. Mr. Borgeson asked if there was delineation of fully burdened labor and direct labor costs. Mr. Janorschke asked if the Budget Subcommittee receives a breakdown of the operators’ time and hours allocated. Mr. Day noted he does not have the specifics of what is included in the breakdown provided to the Budget Subcommittee. Chair Evans believes the difficulty the Committee is having is not seeing the breakdown of direct and indirect costs and not having an explanation of why the amounts are larger or smaller compared to other years. Mr. Owens advised HEA presents a comprehensive budget spreadsheet to the Budget Subcommittee and the O&D, which does not carry forward to the BPMC. Chair Evans BPMC Minutes 3/21/14 Page 4 of 7 commented that is the problem and it takes time to build up the BPMC's understanding so these kinds of questions are addressed. Mr. Borgeson asked for HEA's labor, accounting and engineering, how much is Mr. Janorschke's salary cost allocated to those as part of this project. He asked the same question with respect to HEA's Board of Directors, insurance, office building and maintenance. Mr. Day stated he is not sure he can answer that because he sees the monthly bills and has not seen any time specifically from any of the categories Mr. Borgeson mentioned. Mr. Day stated HEA operates on a direct cost basis and if somebody works on a Bradley activity, then that cost accrues to the Bradley budget. There is no overhead applied to any of the HEA bills. Mr. Borgeson appreciated the clear answer and suggested there is no cost allocation methodology manual because there are no costs allocated. The costs are just direct. Mr. Janorschke requested the BPMC members communicate theifexpectations to their Budget Subcommittee representatives. Chair Evans believes part of the problem i is new people are involved and they do not have the experience to’get the answers. Mr. Miller commented he believes this budget presentation is similar to whathas been provided for the last 10 years. Mr. Owens stated the Budget Subcommittee received a full breakdown of HEA's categories, explanations and anany detailed documents and believes that information needs to be relayed to the BPMC. Mr. Borgeson commented he recognizes there will bemore cost, expense and time spent in order to provide the detail BPMC is'requesting and appreciates)HEA has provided the detailed information to the Budget Subcommittee. Mr) Borgeson requested reviewing the cost of changing how the budget is presented to the BP! ‘ Mr. Kendall noted Line F of ScheduleéByshows FY2014 YTD is $2.06 million and FY2104 budget is $4.8 million. He asked if there are’projects or maintenance that are not going forward. Mr. Owens stated there are severalprojects still ifyprocess, including $250,000 for fire protection upgrade and $800,000 for the Emerson, project. Mr. Day noted the FERC administrative fees, FERC 928, has a year-to-date of zero, but,the budget is $200,000. He commented there are many activities that occur at Bradley i in the spring and summer because winter tends to be the time for planning and contract negotiations. Mr. Kendall asked if there are currently any projects that are anticipated to be deferred until next year. Mr. Owens believes all the projects should be caught up this year and does not anticipate any project deferrals. A roll call vote was taken and the motion passed unanimously. MOTION: Mr. Griffith made a motion instructing the Budget Committee to conduct a review of the 2015 budget including the calculations and make up of the projected expenses and analysis of the costs to include how they are created and what process is used for approval, and to make recommendations on how this information is presented in a more efficient process. Motion seconded by Mr. Borgeson. The motion passed unanimously. BPMC Minutes 3/21/14 Page 5 of 7 B. Update on Unit #2 response and Operators Report Mr. Day advised the BPMC received an operators report as part of their packet. Mr. Day noted there is a chart from the new DCS appended to the back of the operators report. Chair Evans asked if this chart reflects an event in the system or was this the unloading. Mr. Owens advised this chart reflects after an event. Mr. Day explained the chart and noted it was included to show when the governor is working, it works well. Mr. Day noted there is a full report attached in the packet regarding a potential oil spill incident where HEA thought they had spilled 150 gallons of hydraulic@il in the Kachemak Bay last week. There was no spill but discovered a leak and all of the ol was captured in the dirty water sump. Mr. Day described the involved hardware. Mr. Janorschke asked what kind of metal is used for the bushings. Mr. Day stated the bushings are brass. , Mr. Kendall asked what is the service life of this hardware. Mr. Day stated hedoes not know and has been unable to determine the service life. Théyplant/went into service inl991. One needle was rebuilt in 2002 and anotheriin. 2003, which is about 11 to 12 years of life. Mr. Kendall asked if HEA has considered rebuilding one a year.as part of a systematic annual maintenance because it sounds like a 12-year rotations, Mr. Day noted they will consider that option, but he believes itwwould,be more cost effective to rebuild six needles one year and six needles the next year Because of the size and difficulty in mobilizing and demobilizing. The O&D Committee has approved the plan to rebuild the existing spare. An outage will be taken and the leaking needle willbe replaced with the rebuilt needle. Ms. Fisher“Goad thanked HEA for contacting,AEA regarding the non-environmental event. She believes this was a good opportunity to review reporting procedures and noted AEA will offer recommendations to the BPMC for improving those procedures regarding guidance from BPMC in non-emergency situations. 8. COMMITTEE ASSIGNMENTS A. Update from Dispute Resolution Committee Mr. Griffith reported most of the members of the Dispute Resolution Committee do not believe they are at an impasse on the issues. Mr. Griffith suggested he meet again with Mr. Borgeson and Mr. Janorschke in attempt to resolve the issues or to declare an impasse. Chair Evans reviewed committee assignments and believes the motion passed was a clear assignment to the Budget Committee. AEA is to review non-emergency reporting requirements and make recommendations to the BPMC. The O&D Committee is to meet and determine which issues they can answer regarding HEA recommendations to the approved reliability standards. Chair Evans requested the O&D Committee work with the operator, maintainers, and AEA to BPMC Minutes 3/21/14 Page 6 of 7 look at all of the issues discussed today, including Mr. Day's recommendation on repair, issues concerning reporting, and the request regarding the plan for drawing the lake down. 9. ADJOURNMENT There being no further business for the committee, the meeting adjourned at 2:26 p.m. BY: BradleyEvans,Chair ss” Evans, Chair Attest: SaraFisher-Goads—s—S Alaska Energy Authority, Secretary BPMC Minutes 3/21/14 Page 7 of 7 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE REGULAR MEETING AGENDA prises Thursday, May 8, 2014 maa as Y N 10. 11. 12. 12. 10:00 a.m. — 11:30 a.m. Alaska Energy Authority’s Aspen Room 813 West Northern Lights Boulevard, Anchorage, AK CALL TO ORDER ROLL CALL (for Committee members) PUBLIC ROLL CALL (for all others present) AGENDA APPROVAL PUBLIC COMMENT APPROVAL OF PRIOR MEETING MINUTES - March 21, 2014 NEW BUSINESS A. Report from counsel — Dispute resolution procedures & options under the bylaws B. Resolving the dispute between Utilities — Resolution 14-11 OPERATORS REPORT COMMITTEE REPORTS A. O&D — Evaluation of operator report of compliance to reliability standards COMMITTEE ASSIGNMENTS MEMBERS COMMENTS NEXT MEETING DATE ADJOURNMENT To participate by teleconference, dial 1-800-315-6338 and use code 3074#. McDowell Rackner & Gibson PC @ee0ee TO: BPMC Members FROM: Kirk Gibson DATE: May 5, 2014 RE: Dispute Resolution Procedures - Options Available to the BPMC This memorandum reviews the source of authority for the Bradley Lake Project Management Committee (BPMC) and outlines the options that the BPMC has regarding its dispute resolution procedures. Authority of the BPMC The BPMC is established pursuant to Section 13 of the Agreement for the Sale and Purchase of Power dated December 8, 1987 (Power Sales Agreement). Section 13(b) of the Power Sales Agreement provides that the Committee will adopt procedural rules governing the conduct of the BPMC. The procedural rules were to address, among other matters, dispute resolution, how the BPMC's procedural rules could be modified, and the applicable voting requirements for approval of matters to be decided by the BPMC to the extent the voting requirements for those matters were not otherwise specified in the Power Sales Agreement. The BPMC Bylaws were adopted by the BPMC in December 1993. The BPMC Bylaws state that the BPMC Bylaws set forth the procedural rules of the BPMC.' BPMC's Manner of Acting A vote taken in accordance with the BPMC Bylaws when a quorum is present shall be binding on the BPMC members. Section 5.10 of the BPMC Bylaws sets forth the procedural rules that specify the voting requirements that must be met to authorize an act by the BPMC. The BPMC actions can be taken by any reasonable voting method. Procedural Rule - Dispute Resolution Article 12 of the BPMC Bylaws provides that the BPMC shall perform its decision-making responsibilities consistent with the Power Sales Agreement and any duly adopted procedural rules. If the BPMC determines that it has the authority to determine a matter, 1 See Article 1 of the BPMC Bylaws. Phone: 503.595.3922 + Fax: 503.595.3928 - www.mcd-law.com 419 SW 11" Avenue Suite 400 + Portland, Oregon 97205 May 5, 2014 it shall decide the issue on the merits. In deciding any issue, the BPMC must follow the procedural rules the BPMC adopted in its Bylaws. In the Bylaws, the BPMC adopted procedural rules addressing arbitration and procedural rules addressing the manner the BPMC would otherwise act.? Section 5.10.6 of the BPMC Bylaws provides that the adoption of procedures for dispute resolution must have unanimous concurrence. Consequently, the BPMC has three choices when deciding to take action involving a dispute. The BPMC can: 1) follow the procedural rules governing arbitration procedures;? 2) adopt new dispute resolution procedures;* or 3) decide the manner pursuant to its established procedural rules set forth in Section 5.10 of the BPMC Bylaws. Any action or failure to act by the BPMC is subject to judicial review in accordance with Section 12.3 of the BPMC Bylaws. BPMC's Actions to Date — Next Steps After the issues concerning performance under the Service Agreement were raised, the BPMC met and unanimously decided to use a dispute resolution process that utilized discussions and negotiations, up to and including mediation.® Those discussions and mediation efforts were unsuccessful. The BPMC has recently deemed the discussions and mediation activities to be at an impasse. BPMC's Possible Next Steps The BPMC has the following options: 1. Adopt (unanimously) another set of dispute resolution procedures; . Follow the procedural rules governing arbitration procedures; or, 3. | Decide the manner pursuant to its established procedural rules set forth in Section 5.10 of the BPMC Bylaws. The BPMC could consider additional or a new set of dispute resolution procedures, but it is doubtful there will be unanimity on the BPMC for following such an approach. The BPMC could also consider the use of an arbitrator to resolve the issues. If the BPMC chooses to follow the path of employing arbitration, its arbitration procedures must follow the procedures set forth in Section 12.4 and 12.5 of the BPMC Bylaws. If the BPMC chooses to move forward and decide the issues of the dispute that were raised during its deliberations as a committee, 2 See Section 5.10 of the BPMC Bylaws. 3 See Section 12.4 and 12.5 of the BPMC Bylaws. 4 See Section 5.10.6 of the BPMC Bylaws. 5 Section 5.10.6 of the BPMC Bylaws requires that adoption of procedures for dispute resolution require the unanimous concurrence of all Committee members. Page 2 May 5, 2014 then the BPMC must follow the applicable voting requirements for approval of matters to be decided by the BPMC. These voting requirements are outlined in more detail below.® Special Voting Requirements There are two basic areas or groupings of issues that are addressed with specific voting requirements in the BPMC Bylaws. The two areas can be generally characterized by matters dealing with the Project itself and matters dealing with operational issues. Project and Power Sales Agreement Related Matters: In accordance with Section 5.10.5 of the BPMC Bylaws, the BPMC is required to have the affirmative vote of at least four representatives of the Purchasers whose percentage shares of Project capacity are greater than 51% plus the affirmative vote of AEA to act on the following Project-related matters.” a. Arranging for the operation and maintenance of the Project. b. Adoption of the budget for Annual Project Costs. c. Determining the actual Annual Project Costs after the conclusion of the fiscal year. d. Determining the appropriate amount of insurance for the Project. e. Adoption or amendment of procedural rules of the Committee (except for procedures for dispute resolution which require unanimous agreement). f. Adoption of maintenance schedules for the Project. g. The approval (or possible pre-approval) of consultants. Operational Matters: In accordance with Section 5.10.4 of the BPMC Bylaws, the BPMC is required to have the affirmative vote of at least four representatives of the Purchasers whose percentage shares of Project capacity are greater than 51% to act on the following operational matters. (i) Adoption of procedures for scheduling, production and dispatch of Project power. (ii) Selection among alternative work methods that do not involve AEA for funding Project Work. (iii) Establishment of procedures for use of each Purchaser's Water Allocation, except that AEA's affirmative vote shall be required for any water allocation decision which affects performance of AEA's obligation under its FERC license. 6 Reference should be made to the BPMC Bylaws for specific language governing voting requirements. 7 Only a sampling of the voting requirements for certain acting on the matters that potentially could be related to the issues in dispute are provided in this memo. Careful review of the issue and the voting requirements set forth in the BPMC Bylaws should be performed for each act of the BPMC. Page 3 May 5, 2014 Except as noted in (iii) above, the BPMC does not need any action by the Alaska Energy Authority (AEA) to act upon and/or resolve these operational matters. Other Matters: All matters, other than those identified in the BPMC Bylaws as having specific voting requirements®, are to be decided by the BPMC by simple majority vote.? An example of one such action is whether the BPMC has authority to act on a matter. The vote on that issue is a simple majority because there is no specific voting requirement set forth in the BPMC Bylaws. Acting on Disputes The BPMC has determined that it has the appropriate authority to resolve the disputes that have arisen generally under the Bradley Lake Agreements and specifically the Agreement for the Wheeling of Electric Power and for Related Services (Services Agreement). It appears that most of the issues that have been discussed by the BPMC Dispute Resolution Committee pertain to the parties’ performance under the Services Agreement would fall under the voting requirements related to Operational Matters set forth above. Any budgetary issues involved with a particular resolution determined by the BPMC may require a vote using the voting requirements ascribed to the Project and Power Sales Agreement related matters. Careful review of the issue and the voting requirements set forth in the BPMC Bylaws should be performed for each act of the BPMC. ® See BPMC Bylaws e.g., at Section 5.10.4, Section 5.10.5, Section 5.10.6, Section 5.10.7, Section 7.3, Section 7.4, and Section 12.4. ° See Section 5.10.2 of the BPMC Bylaws. Page 4 Il. Il. IV. BRADLEY LAKE HYDROELECTRIC PROJECT PROJECT MANAGEMENT COMMITTEE Resolution 14-11 RESOLUTION RESOLVING THE DISPUTED ISSUES BETWEEN THE DESIGNATED UTILITIES AND HOMER ELECTRIC ASSOCIATION, INC. Table of Contents SUMMARY 6. 5.cnsss1cnecsoencssuvesonscoxssosesonssevansssscssssssusvsonsssvetsnsussessrevestssecaSsseotasssacererersroserererosed 2 BACKGROUND I ssssrccessncezssesesesesosoreveusssvarevetessssssssoasasasccssesucssnseeseusussoncsstoestesacorsoesaconersseseted 3 ETE PARTIE SH POSITIONS ccescsevscsscrecarcccrseccsosscesesastucarstecssareevesesssssstseassassensereseravesraeeran 7 A. HEA’s Position a8 B:| The Designated Wtilities? Position\:....0.....-vs.csocseacssssvesssvecessececossnvassasteasereeseeeesseeneeeeasaeas 8 FINDINGS OF FACT AND CONCLUSIONS OF LAW..............scscssssssscssscsssseesssseosenees 10 A. The Disputed Issues Arise under the Bradley ake A GreemiGnts vc ccccorssessssssvessstrssssssorsesctbectseresenecossserevonseceescsnccesssscerescussevecessceneecsnesee 10 B. The BPMC Has Authority to Consider and Resolve Issues Arising Under the Bradley Lake Agreements..............ccscsessesesesseseseeseseteesesenees 10 C. The Bradley Lake Agreements Were Not Modified, Amended, or Terminated By the Expiration of the Lease and Chugach Is Still Entitled to Operate, Maintain, Repair, Dispatch, and Wheel Project Energy Over the S/O) Line rerececeascssessssrsssecosescssvesossrotecocesecsscroveresasscsecsucsassussusessvessesuesecssvsctecsees 13 D. HEA Will Be Permitted Some Additional Compensation for the Use of Its System Associated With the Transmission of Project Energy North of the Soldotna Substation...........cecessessseseeseseeeeseeeeseeeeeeeeees 15 IRES OLUTION ciseneassassexecevevssscesssscvocvassceresssurstevsustsesssusurstseusentoscoupuotensustessuccsesececengnocgnesesens 18 Resolution 14-11 Resolving Dispute between Utilities Page 1 of 18 BY THE BPMC: I. SUMMARY On February 7, 2014, we found that this Bradley Lake Project Management Committee (“BPMC’”) has authority to consider and decide on their merits the disputed issues between the Designated Utilities! and Homer Electric Association, Inc. (“HEA”), regarding the continuing effect of the Bradley Lake Agreements and bonding documents? after the expiration of the Lease* and whether HEA is entitled to any additional compensation for Chugach’s continued use of certain electrical facilities north of the Soldotna Substation for the purpose of wheeling energy from the Bradley Lake Hydroelectric Project (“Project”) under the terms of the Bradley Lake Agreements.* Our analysis in support of our finding on authority is contained herein. Now, after having provided all parties with the opportunity to fully advance evidence, and brief and argue their positions with regard to the disputed issues, we find that (1) the Bradley Lake Agreements were not modified, amended, or terminated by the expiration of the Lease; (2) the ' Chugach Electric Association, Inc. (“Chugach”), Golden Valley Electric Association, Inc. (“GVEA”), Matanuska Electric Association, Inc. (“MEA”), and the Municipality of Anchorage d/b/a Municipal Light & Power (“ML&P”). 2 The Bradley Lake Agreements include (1) the Agreement for the Sale and Purchase of Electric Power (“Power Sales Agreement”), (2) the Agreement for the Wheeling of Electric Power and for Related Services (“Services Agreement”), (3) 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 Sharing Agreement”) (hereinafter “Bradley Lake Agreements” or “Agreements”); and (4) Alaska Power Authority Power Revenue Bond Resolution (“Bond Resolution”). > Agreement for the Lease of Facilities, executed by and between Chugach and HEA in September 1985. 4 See Transcript of February 7, 2014, BPMC Meeting at 104:15-106:6. Resolution 14-11 Resolving Dispute between Utilities Page 2 of 18 Bradley Lake Agreements continue to provide Chugach with the contractual right and obligation to operate, maintain, repair, dispatch, and wheel Project energy over the electrical facilities owned by HEA from the Soldotna Substation north to the Quartz Creek Substation; and (3) HEA is being adequately compensated for Chugach’s continuing operation, maintenance, repair, dispatching, and wheeling of Project energy over the electrical facilities owned by HEA from the Soldotna Substation north to the Quartz Creek Substation but will receive additional compensation as a reasonable resolution of the disputes.> Il. BACKGROUND The Project was made possible through a series of integrated contracts referred to as the Bradley Lake Agreements and bonding covenants. Under the Bradley Lake Agreements, among other things, power is sold and transmitted from the Project across Project facilities to the Bradley Junction, where it then enters the transmission system of Alaska Electric and Energy Cooperative, Inc. (“AEEC”),° a wholly owned HEA asset. From Bradley Junction, Project energy flows north along AEEC’s transmission line running from Bradley Junction to the Soldotna Substation (“Soldotna Segment”). The transmission of Project energy across the Soldotna Segment is governed by the Transmission Sharing Agreement. Under the Transmission Sharing Agreement, Chugach, GVEA, ML&P, and MEA contributed to the cost of constructing the Soldotna Segment in exchange for secure transmission capacity on the Soldotna Segment. HEA raised other technical disputes regarding Chugach’s performance under the Bradley Lake Agreements in HEA’s Statement Regarding Dispute Resolution Procedures filed with the BPMC on January 23, 2014. Those disputes are not addressed in this Resolution and will be considered and resolved by the BPMC through a separate resolution. A single-member generation and transmission cooperative owned by HEA. Resolution 14-11 Resolving Dispute between Utilities Page 3 of 18 From the Soldotna Substation, Project energy then flows north through AEEC’s transmission line running from the Soldotna Substation to the Quartz Creek Substation (“S/Q Line”). For the past 25 years, Chugach has operated, maintained, repaired, dispatched, and wheeled Project energy north of the Soldotna Substation through certain electrical facilities, including the S/Q Line, pursuant to the Services Agreement,’ which continues in effect for another 25 years.* There is no provision in the Services Agreement that refers to the Lease or that suggests the expiration of the Lease will impact the rights and obligations of any party to the Services Agreement or any of the Bradley Lake Agreements. The Lease was associated with Chugach’s wholesale power sales to HEA, and the Lease expired on January 1, 2014.9 HEA believes that, when the Lease expired on January 1, 2014, Chugach lost the right and the obligation to operate and maintain the electrical facilities north of the Soldotna Substation owned by HEA (including the S/Q Line). The Designated Utilities disagree. The Designated Utilities believe that, despite the expiration of the Lease, the Services Agreement provides Chugach with the right and the obligation to operate and maintain all electrical facilities north of the Soldotna Substation used to wheel Project energy (including the S/Q Line). On December 12, 2013, the BPMC passed Resolution 2013-02, preliminarily finding that the disputed issues are within the BPMC’s authority to resolve and beginning the dispute resolution process by appointing a Dispute Resolution Committee to address the disputed issues raised by HEA and the Designated Utilities. The Dispute Resolution Committee scheduled and held five 7 See Services Agreement at 7-8. 8 See Services Agreement at 3, 28-29. ° See Lease at 2. Resolution 14-11 Resolving Dispute between Utilities Page 4 of 18 meetings at the offices of the Alaska Energy Authority (“AEA”) to address the issues identified in BPMC Resolution 2013-02.'° On January 24, 2014, the Dispute Resolution Committee asked all interested parties to file briefs addressing three issues: (1) whether the BPMC has the authority to address the underlying disputed issues; (2) whether Chugach has the right and obligation to continue operating, maintaining, and repairing the electrical facilities used to wheel Project energy from the Soldotna Substation north under the terms of the Services Agreement; and (3) whether HEA is entitled to any additional compensation for Chugach’s continuing use of certain of HEA’s electrical facilities north of the Soldotna Substation used for wheeling Project energy. On January 27, 2014, the BPMC passed Resolution 2014-02 requiring that “[a]ll Project participants shall act in good faith to maintain the status quo and permit Chugach to continue to dispatch, operate, maintain, and repair, the S/Q Line under the terms of the Services Agreement and the other Bradley Lake Agreements during the pendency of the dispute.” On February 4, 2014, the Designated Utilities'! and HEA” both filed briefs addressing the issues identified in Resolution 2013-02. On February 7, 2014, based upon consideration of the arguments presented by both the Designated Utilities and HEA, the BPMC found that it has authority to consider and decide the disputed issues on their merits.'* The supporting analysis for the BPMC’s decision on authority is detailed below. On April 11, 2014, the Dispute Resolution Committee made specific findings regarding the disputed issues in Resolution 14-09. Those findings have been considered by the 10 Those meetings were held on the following dates: January 24, 2014; January 27, 2014; February 7, 2014; April 11, 2014; and April 17, 2014. Designated Utilities’ Brief on Disputes with Homer Electric Association, Inc. (“Designated Utilities’ Br.”). 11 !2. Position Statement of Homer Electric Association, Inc. (“HEA’s Br.”). '3. See Transcript of February 7, 2014, BPMC Meeting at 104:15-106:6. Resolution 14-11 Resolving Dispute between Utilities Page 5 of 18 BPMC and are incorporated into the findings in this Resolution. On April 17, 2014, the Dispute Resolution Committee passed Resolution 14-10 declaring that the parties had reached an impasse and recommended that the BPMC move forward with formal dispute-resolution procedures. On April 17, 2014, the BPMC approved the Dispute Resolution Committee’s Resolutions 14-09 and 14-10. Now, in accordance with the dispute-resolution obligations under the Services Agreement and the BPMC’s Bylaws, the BPMC has determined to decide the disputed issues on their merits.'4 '4 Certain matters were referred to the Bradley Lake Operations and Dispatch Committee (“O&D Committee”). The technical and operational information provided by the O&D Committee in response has been duly considered by the BPMC and is incorporated into this Resolution. Resolution 14-11 Resolving Dispute between Utilities Page 6 of 18 Ill. THE PARTIES’ POSITIONS A. HEA’s Position. HEA asserts that the BPMC does not have the authority to consider or decide the disputed issues on their merits.'° HEA further asserts that the BPMC’s authority derives from the Power Sales Agreement and that the Power Sales Agreement does not give the BPMC authority to resolve the underlying disputed issues.'® Specifically, HEA argues that the BPMC does not have the authority to consider or resolve the issue of compensation to HEA for wheeling Bradley power.'” HEA argues that “[n]o provision in any of the [Bradley Lake Agreements] speaks to” the compensation issue.'* Instead, HEA states that the ultimate decision regarding compensation will be made by the Regulatory Commission of Alaska (“RCA”) or by a court.!? Moreover, HEA’s position is that Chugach’s right to access and transmit Project energy over HEA’s facilities arose entirely from the Lease, not the Bradley Lake Agreements.”? HEA asserts that the “expiration of both the [Lease] and the HEA-[Chugach] power sales agreement” terminated Chugach’s right to receive power at HEA’s Soldotna Substation and to operate any of HEA’s transmission facilities.2' HEA explains that upon the expiration of the Lease, HEA began operating as an independent load-balancing authority and assumed the responsibility of providing 'S See HEA’s Br. at 2. 16 See HEA’s Br. at 2. '7 See HEA’s Br. at 2. '8 HEA’s Br. at 2. '9 HEA’s Br. at 2. 20 See HEA’s Br. at 3. 21 HEA’s Br. at 3. Resolution 14-11 Resolving Dispute between Utilities Page 7 of 18 transmission services between Bradley Junction and Quartz Creek.”” Finally, HEA argues that the Services Agreement does not require HEA to maintain the December 31, 2013, status quo.° B. The Designated Utilities’ Position. The Designated Utilities assert that the disputed issues arise out of the Bradley Lake Agreements, and the status quo must be maintained until the disputes are resolved. 74 The Designated Utilities argue that the BPMC has the authority to consider and decide the disputed issues on their merits. Specifically, the Designated Utilities argue that the Power Sales Agreement creates and defines the BPMC’s broad rights and obligations with respect to the management, operation, and improvement of the Project, and the Power Sales Agreement requires the BPMC to adopt procedures for resolving disputes that arise under the Bradley Lake Agreements.?> The Designated Utilities assert that, pursuant to the Power Sales Agreement, the BPMC adopted the Bradley Project Management Committee Bylaws (“Bylaws”), which contain specific procedures for dispute resolution.?° The Designated Utilities further argue that the Bylaws’ dispute-resolution procedures give the BPMC the authority to decide, on their merits in accordance with Article 12 and Section 5.10 of the Bylaws by majority vote, those issues the BPMC determines are within its authority to consider.?” The Designated Utilities point out that the Services Agreement similarly provides that all disputes arising thereunder are subject to resolution in a manner consistent with 22 See HEA’s Br. at 4. 23. See HEA’s Br. at 4. 4 See Designated Utilities’ Br. at 1-7; see also Tr. 67:18-24 (Feb. 7, 2014, Dispute Resolution Committee Meeting). 25 See Designated Utilities’ Br. at 6. 26 See Designated Utilities’ Br. at 6. 27 See Designated Utilities’ Br. at 6. Resolution 14-11 Resolving Dispute between Utilities Page 8 of 18 the BPMC’s adopted dispute-resolution procedures.7® The Designated Utilities, therefore, conclude that pursuant to the Power Sales Agreement, the Bylaws, and the Services Agreement, the BPMC has the authority to (1) determine whether it has authority to consider the disputed issues, and (2) to resolve, on their merits by a majority vote, those issues the BPMC determines are within its authority to resolve.” Moreover, the Designated Utilities argue that the Services Agreement and the Lease are unrelated agreements and that the termination of the Lease did not terminate Chugach’s rights and obligations under the Services Agreement to operate, maintain, and repair the electrical facilities north of the Soldotna Substation, including the S/Q Line, for wheeling Project energy.*° The Designated Utilities assert that Chugach’s rights and obligations with regard to the S/Q Line are governed by the Services Agreement, not the Lease.*! Further, the Designated Utilities assert that HEA has been and is still being fairly compensated for the use of its facilities to wheel Project energy north as a part of the “net economic benefits” all Project Participants recognized and receive under the Bradley Lake Agreements.*” 28 See Designated Utilities’ Br. at 6. °° See Designated Utilities’ Br. at 6-7. 30 See Designated Utilities’ Br. at 2-5. 31 See Designated Utilities’ Br. at 2-5. 32. See Designated Utilities’ Br. at 7. Resolution 14-11 Resolving Dispute between Utilities Page 9 of 18 IV. FINDINGS OF FACT AND CONCLUSIONS OF LAW A. The Disputed Issues Arise Under the Bradley Lake Agreements. The BPMC finds that the disputed issues between the Designated Utilities and HEA are essentially a disagreement over Chugach’s and HEA’s relative rights and obligations with regard to electrical facilities owned by HEA and operated by Chugach to dispatch and wheel Project energy under the Services Agreement. The BPMC finds that this dispute is governed by the terms of the Services Agreement and the Bradley Lake Agreements. Further, the BPMC finds that there exists a dispute as to whether HEA is entitled to any additional compensation for the use of HEA’s electrical facilities north of the Soldotna Substation for wheeling Project energy. The BPMC finds that this dispute is also governed by the terms of the Services Agreement and the other Bradley Lake Agreements. B. The BPMC Has Authority to Consider and Resolve Issues Arising Under the Bradley Lake Agreements. Upon consideration of the Bradley Lake Agreements, the Bylaws, and the arguments put forth by both the Designated Utilities and HEA, the BPMC finds that it has authority to consider and resolve the disputed issues on their merits by a majority vote.*> The BPMC finds that the disputed issues between the Designated Utilities and HEA concern Chugach’s continuing contractual rights and obligations to operate, maintain, repair, dispatch and wheel Project energy over the electrical facilities north of the Soldotna Substation and are within the BPMC’s authority to address and resolve under both the Power Sales Agreement and the Services Agreement. 33 If the resolution of such a dispute also involves an amendment to any of the Bradley Lake Agreements, then such an amendment would also have to be made consistent with the language for amendment of the Bradley Lake Agreements. Resolution 14-11 Resolving Dispute between Utilities Page 10 of 18 The Power Sales Agreement and the Services Agreement place a broad range of rights and obligations upon the BPMC.** Section 13(c) of the Power Sales Agreement requires the BPMC to oversee the “management, operation, maintenance, and improvement” of the Project and requires the BPMC to “[a]rrange for the operation and maintenance of the Project, and the scheduling, production, and dispatch of Project power.” This language requires the BPMC to address operation and management issues as well as issues associated with the scheduling and dispatch of power. The current disputes between the Designated Utilities and HEA concern each of these areas of the BPMC’s authority. Further, Section 13(b) requires the BPMC to adopt “procedural rules” for “dispute resolution.” Similarly, Section 10(b) of the Services Agreement expressly incorporates and designates the BPMC as the entity responsible for resolving disputes under the Services Agreement. Specifically, the Services Agreement provides: At the meetings referred to in Section 10(a), the 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 or 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 [BPMC], with Chugach’s affirmative vote required for adoption of such procedures.*> This language requires the BPMC to address difficulties encountered with, and the failure of any Party to perform in accordance with, the terms of the Services Agreement. The current disputes between the Designated Utilities and HEA concern each of these areas of the BPMC’s authority. 34 See Power Sales Agreement at 19-23; see also Services Agreement at 18. 35 Services Agreement at 18. Resolution 14-11 Resolving Dispute between Utilities Page 11 of 18 The BPMC’s authority over the issues in dispute between the Designated Utilities and HEA is also consistent with the exemption of the Bradley Lake Agreements from any regulatory oversight under AS 42.05.431(c). Absent such an exemption, the rights and responsibilities of utilities over electrical facilities and rates would be resolved by the RCA. In the case of the Bradley Lake Agreements, however, the Legislature exempted all such matters from the RCA and permitted them to be addressed and resolved by the industry through the specialized experience and expertise of the BPMC. This ruling on the authority of the BPMC is required under Article 12 of the Bylaws entitled “Procedures for Dispute Resolution.” Article 12.2 of the Bylaws states that “in the event the authority of the [BPMC] to act is at issue, the [BPMC] shall first make a finding as to its authority.” Once such a finding is made, the BPMC has the authority to decide, on their merits, those issues the BPMC determines are within its authority to consider. Finally, with regard to these particular disputes, Article 5.10.2 of the 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 [BPMC], and binding on the members.”?° The BPMC, therefore, concludes that (1) the disputed issues between the Designated Utilities and HEA arise under the Bradley Lake Agreements; and (2) the Power Sales Agreement, the Services Agreement, and the Bylaws provide the BPMC with the authority and the responsibility to resolve the disputed issues between the Designated Utilities and HEA. Cc. The Bradley Lake Agreements Were Not Modified, Amended, or Terminated by the Expiration of the Lease, and Chugach Is Still Entitled to Operate, Maintain, Repair, Dispatch, and Wheel Project Energy Over the S/Q Line. 36 Emphasis added. Resolution 14-11 Resolving Dispute between Utilities Page 12 of 18 Upon consideration of the Bradley Lake Agreements and the evidence and arguments put forth by both the Designated Utilities and HEA, the BPMC finds that Project energy enjoys priority status for transmission services from the Project north to the Project Participants. The expiration of the Lease did not modify, amend, or terminate the Services Agreement or the priority status that Project energy enjoys thereunder. Instead, transmission services across the S/Q Line continue to be governed by the Services Agreement. The Services Agreement requires Chugach to operate, maintain, repair, dispatch and wheel Project energy over the electrical facilities from the Soldotna Substation north.*” And, the Services Agreement requires Chugach to perform those 38 services for 50 years.”* The shorter term of the Lease is never mentioned in the Services Agreement.*° Significantly, the Services Agreement does not limit Chugach’s rights or obligations to operate, maintain, repair, dispatch and wheel Project energy over HEA’s facilities north of the Soldotna substation to the term of the Lease. Instead, the Services Agreement requires Chugach to exercise such rights and obligations throughout the 50-year term of the Services Agreement without any qualification or limitation relating to the Lease. Notably, the Services Agreement was executed two years afier the Lease.*” Thus, if the parties had intended that the expiration of the Lease would terminate Chugach’s rights and obligations under the Services 37 See Services Agreement at 2 (“At the request of any Wheeling Utility, Chugach will provide wheeling, storage, and energy purchase services to such Utility for that Utility’s Bradley Lake Energy in accordance with the provisions of this Agreement.”); see also Services Agreement at 7-8 (“Chugach will in good faith and at all times: . . . operate, maintain, and repair the electrical facilities used to perform the services provided hereunder... .”). 38. See Services Agreement at 3, 28-29. 39 The Lease expired on January 1, 2014. See Lease at 2. 40 The Lease was approved by the Commission in Order U-85-013(3), June 4, 1985. The Services Agreement was executed on Dec. 8, 1987. Services Agreement at 1. Resolution 14-11 Resolving Dispute between Utilities Page 13 of 18 Agreement, they would have expressly qualified or limited those rights and obligations to the term of the Lease. Further, such a limitation would not be reasonable to imply, given the Services Agreement’s express requirement that Chugach operate, maintain, repair, dispatch and wheel Project energy over HEA’s facilities north of the Soldotna substation for 50 years, the length of time the bonds would be outstanding. Finally, GVEA, MEA, and ML&P were not parties to the Lease between Homer and Chugach and, thus, expiration of the Lease could not be deemed to affect GVEA’s, MEA’s, and ML&P’s rights under the Services Agreement. Additionally, the Services Agreement can only be amended, renegotiated, or terminated at an earlier date by unanimous agreement.*! As such, the Chugach delivery point for Project energy may only be changed from the Soldotna Substation to the Quartz Creek Substation as a “successor facility” through the “written consent of all Parties.”*? HEA’s attempts to unilaterally terminate, amend, or renegotiate the Services Agreement through its Tariff Filings and actions impeding Chugach’s ability to operate, maintain, repair, dispatch and wheel Project energy over the S/Q Line are improper. The BPMC, therefore, concludes that the expiration of the Lease, which was neither referenced in nor related to the Bradley Lake Agreements, does not affect the continuing rights and obligations under the Services Agreement or the priority status Project energy enjoys thereunder. Instead, HEA must act in good faith to honor its commitments under the Services Agreement and allow Chugach to continue operating, maintaining, repairing, dispatching, and wheeling Project energy over HEA’s facilities north of the Soldotna Substation. 41 See Services Agreement at 3-4. See Services Agreement at 3. As the Designated Utilities point out, at least ten sections of the Services Agreement would have to be amended in order to effectuate such a change in delivery point. See Designated Utilities’ Br. at 2, n.5. Resolution 14-11 Resolving Dispute between Utilities Page 14 of 18 D. HEA Will Be Permitted Some Additional Compensation for the Use of Its System Associated With the Transmission of Project Energy North of the Soldotna Substation. The BPMC finds that the parties to the Services Agreement and the Transmission Sharing Agreement anticipated that the Project would produce “net economic benefits” for all the parties, including HEA.*? Specifically, all parties received the benefit of being able to purchase cheap power from the Project. Further, HEA received contribution from the other Project Participants to build the Soldotna Segment.*4 HEA was designated as the operator of the Project and receives compensation for its services provided as such. HEA’s system is more reliable as a result of having the Project located on the southern edge of HEA’s system. HEA receives the ongoing benefit of Chugach operating and dispatching Project energy at less than Chugach’s actual costs of providing such services. And, HEA is benefited as a result of its right to pay for the scheduled dispatch of its Project power on an energy-delivered basis as opposed to an energy- reserved basis. The BPMC finds that, in exchange for those benefits, HEA committed its system to be used for the transmission of Project energy to the Project Participants in accordance with the Bradley Lake Agreements. Thus, HEA is adequately compensated under the Bradley Lake Agreements for the use of HEA’s system and is entitled to no additional compensation. Nonetheless, in the interest of reaching a resolution among the Project Participants, the BPMC orders that HEA is to receive additional payments from the other Project Participants for the continuing use of HEA’s facilities north of the Soldotna Substation throughout the term of the Services Agreement. While HEA is not entitled to any additional compensation under the controlling Bradley Lake Agreements, the BPMC holds that permitting HEA some additional 43 Services Agreement at 1; Transmission Sharing Agreement at 1. 44 Transmission Sharing Agreement at 2-3. Resolution 14-11 Resolving Dispute between Utilities Page 15 of 18 compensation would be the most efficient and reasonable resolution of the disputes. Such a resolution, while providing HEA with additional compensation, preserves the structure and terms of the Bradley Lake Agreements by maintaining and continuing Chugach’s responsibility and obligation to operate, maintain, repair, dispatch, and wheel Project energy over HEA’s facilities north of the Soldotna Substation. Such a resolution also provides the most efficient continuing means to dispatch Project energy to the Project Participants. The amount of additional compensation shall consist of both a fixed and a variable component. The fixed component is to be an amount of Three Hundred Thousand Dollars ($300,000) per year, which provides additional compensation to HEA to resolve the disputes concerning the Project Participants’ continuing use of HEA’s transmission facilities from the Soldotna Substation north under the Bradley Lake Agreements. The variable component is to consist of reasonable costs incurred by Chugach in fulfilling its responsibilities under the Services Agreement to maintain and repair HEA’s transmission system from the Soldotna Substation north when such maintenance is performed by or through HEA’s own efforts. Chugach has the continuing obligation under the Services Agreement to authorize and approve all such variable maintenance costs. Such fixed and variable amounts are consistent with the maximum compensation HEA has recovered historically from Chugach through the formula elements set forth in the Bradley Lake Agreements and represent a reasonable remedy under the circumstances of these disputes. These fixed and variable payments are effective and required from January 1, 2014, until the expiration of the Services Agreement. Resolution 14-11 Resolving Dispute between Utilities Page 16 of 18 Vv. RESOLUTION THE BPMC FURTHER RESOLVES: 1. As discussed in the body of this Resolution, the BPMC has the jurisdiction and obligation to resolve the disputes at issue. 2. As discussed in the body of this Resolution, the expiration of the Lease had no effect on the operation of the Services Agreement. 3. As discussed in the body of this Resolution, Chugach will continue to operate in accordance with the rights and obligations agreed to in the Services Agreement. Accordingly, Chugach will continue to operate, maintain, repair, dispatch, and wheel Project energy over HEA’s facilities north of the Soldotna Substation in accordance with the terms of the Services Agreement. 4. As discussed in the body of this Resolution, HEA is violating BPMC Resolution 14-02 by not maintaining the status quo while this dispute is being resolved by the BPMC. 5. HEA shall take all reasonable steps to provide Chugach with the information and physical capability (where HEA cooperation is needed) to continue to perform its responsibilities in the same manner as Chugach did prior to January 1, 2014. 6. HEA shall act in good faith to provide such cooperation as Chugach may from time to time request to allow Chugach to fulfill its responsibilities to operate, maintain, repair, dispatch, and wheel Project energy over HEA’s facilities north of the Soldotna Substation under the Services Agreement, as those responsibilities have been clarified in the body of this Resolution. Ts HEA shall amend its tariff filings designated TA355-32 and TA356-32 (“HEA’s Tariff Filings”) with the RCA to expressly provide that HEA’s Tariff Filings shall not apply to any and all services or rates covered by the Bradley Lake Agreements, as those services and rates have been interpreted and more fully identified in the body of this Resolution. Additionally, such amendment shall specifically and expressly provide that (a) HEA’s Tariff Filings shall not apply Resolution 14-11 Resolving Dispute between Utilities Page 17 of 18 to any services associated with the transmission of Project energy; (b) HEA’s Tariff Filings shall not affect the priority status that Project energy currently enjoys under the Bradley Lake Agreements; and (c) HEA’s Tariff Filings shall not apply to or require compensation for the use of HEA’s facilities associated with the transmission of Project energy. HEA shall file such an amendment to its Tariff Filings in accordance with this Resolution of the BPMC within 15 days from the date of this Resolution. 8. HEA is to submit its request for variable component cost recovery to the BPMC in accordance with terms announced in section IV.D. of this Resolution within 15 days from the date of this Resolution. 9. Chugach is to submit appropriate payments to HEA, consistent with compensation terms announced in section IV.D. of this Resolution, within 30 days of the date of this Resolution. 10. All parties are entitled to seek immediate judicial enforcement of the terms of this Resolution before the Superior Court for the State of Alaska, Anchorage District. DATED AND EFFECTIVE this day of , 2014. By. Bradley Evans BPMC Chair Sara Fisher-Goad Secretary Resolution 14-11 Resolving Dispute between Utilities Page 18 of 18 DISPUTED ISSUES The Designated Parties assert and HEA denies the truth or accuracy of the following propositions: 1 HEA does not have the legal right to recover transmission-related costs for wheeling Bradley Lake energy though a tariffed rate filed with the Regulatory Commission of Alaska (RCA). The RCA does not have jurisdiction to approve a tariffed rate which allows HEA to recover its costs of wheeling Bradley Lake energy. HEA did not have the legal right to remove from the Soldotna Substation the CEA meter used to measure the Bradley Lake power flow to that substation. The term "Soldotna Substation" as used in the Services Agreement, means the physical facility by that name located in Soldotna, Alaska unless and until changed by an amendment to the Services Agreement. HEA has a legal and/or contractual duty to permit CEA physical access to certain areas within its Soldotna Substation to enable Chugach to maintain a metering point for and to receive delivery of Bradley Lake power. HEA has a legal and/or contractual duty to permit CEA physical access to its Soldotna Substation and the transmission lines between the Soldotna and Quartz Creek Substations to enable Chugach to transmit Bradley Lake power from HEA’s Soldotna Substation to CEA’s Quartz Creek Substation. HEA has a legal and/or contractual duty to permit CEA physical access to its Soldotna Substation and the transmission lines between the Soldotna and Quartz Creek Substations to enable Chugach operate, maintain and repair the facilities. The legal and contractual rights and duties referred to in the above list arise under and by virtue of one or more of the Bradley Lake Agreements and AS 42.05.431(c).