HomeMy WebLinkAboutBPMC April 11, 2014 2Bradley Lake Project Management Committee
ALASKA ENERGY AUTHORITY
Special Meeting
Bradley Lake Project Management Committee
Notice is hereby given that the Bradley Lake Project Management Committee will hold a special meeting on Friday, April 11
at 3:00 p.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 Aspen 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 of
1990. Disabled persons requiring special modifications to participate should contact AEA staff at (907) 771-3074 to make
arrangements.
Attachments, History, Details
Attachments Details
Agenda-April 11.pdf Department:
Revision History Category:
Created 4/2/2014 11:21:25 AM by tawebster Sub-Category:
Modified 4/2/2014 11:21:25 AM by tawebster Location(s):
Modified 4/2/2014 11:22:16 AM by tawebster Project/Regulation #:
Publish Date:
Archive Date:
Events/Deadlines:
Commerce, Community and
Economic Development
Public Notices
Statewide
4/2/2014
4/12/2014
ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY
BO. U WV t 1, op sor
ist Second | First Second Jt | op
BPMC 04/1 1/14 First Second
Roll Call Roll call from top to bottom ending with Chair
Yes No |
Golden Valley Electric Association
Homer Electric Association
Matanuska Electric Association
NASD City of Seward
Alaska Energy Authority
Municipal Light & Power
NINN) NA YS Ly NN ‘Ie le 715 4m, Chugach Electric Association
First Second First Second First = First Second First Second
i
Roll call from top to bottom ending with Chair |
Yes T No Yes No Yes No | Yes No Yes No
Golden Valley Electric Association |
Homer Electric Association
Matanuska Electric Association |
City of Seward
Alaska Energy Authority
Municipal Light & Power
Chugach Electric Association T
| 4. |
Next Meeting: xxxx xxxx XX, XXXX
Bradley Lake Project Management Committee
Friday, April 11, 2014 @ 3:00 P.M.
**PLEASE WRITE LEGIBLY**
Ji Ra nsericns MEA
BERIME S 2 1Z, SCA
Bicle miller mepP
Dyed we"
Das A Fence : JME by
ZLLEN Ghar GVEA
Brad TF HEA
Doe. MEA
Brion LH, cy /\ CUUCACH
Lawl prsot CHU AC iL
Rf Aha LL tf
Math Clar bres Bc
ATTENDANCE — BPMC REGULAR MEETING, Apr 11, 2014 @ 3:00 pm
COMMITTEE MEMBERS ALTERNATE
Brad Evans, Chairman CEA Burke Wick
Brad Janorschke, Vice Chairman HEA Harvey Ambrose
Sara Fisher-Goad, Secretary/Treasurer AEA Bryan Carey
po2—Corey Borgeson GVEA Lynn Thompson
Daniel Kendall MLP Richard Miller
John Foutz SEW Jeff Estes
Evan Joe Griffith MEA Gary Kuhn
Public Members COUNSEL
Carr 2 Buckie Hel v_~ Kirk Gibson, McDowell Rackner &
Dayred Werke (rade) Gibson PC
/. Brian Bjorkquist, Dept of Law
AIDEA AEA AIDEA and AEA Staff = AIDEA AEA AIDEA and AEA Staff AIDEA AEA AIDEA and AEA Staff
Webster, Teri
KettiVeech—
BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE
DISPUTE RESOLUTION COMMITTEE
RESOLUTION NO. 14-09
FINDINGS OF COMMITTEE REGARDING POWER DELIVERY ISSUES
BACKGROUND:
The Bradley Lake Project Management Committee (BPMC) appointed a Dispute Resolution
Committee to address matters raised by Chugach Electric Association (Chugach) by letter dated
January 7, 2014. The Dispute Resolution Committee held three meetings at Alaska Energy
Authority (AEA) offices in Anchorage to address the issues raised by Chugach. Position papers
were presented by Homer Electric Association (HEA) and by counsel jointly representing
Chugach, Golden Valley Electric Association, Matanuska Electric Association, and Municipal
Light & Power (collectively “Designated Utilities”). AEA participated in the meetings. All of
these parties also had counsel present. Seward Electric participated in the Dispute Resolution
Committee without counsel.
Certain matters were referred by the Dispute Resolution Committee to the BPMC Operations and
Dispatch (O&D) Committee. The information provided by the O&D Committee in response has
been duly considered by the Dispute Resolution Committee and is incorporated into these
findings.
Having discharged its duties under the Agreement for the Wheeling of Electric Power and for
Related Services (“Services Agreement”), the BPMC Dispute Resolution Committee makes the
following findings:
WHEREAS, the BPMC has established a Dispute Resolution Committee to address
specific disputes related to the transmission of Bradley Lake power from Bradley Junction to
Quartz Creek as raised by both HEA and Chugach; and
WHEREAS, the BPMC O&D Committee has presented requested technical and
operational information to the Dispute Resolution Committee; and
WHEREAS, the BPMC Dispute Resolution Committee has considered the issues as
presented by both the Designated Utilities and HEA.
NOW THEREFORE, the BPMC Dispute Resolution Committee finds that:
1. The transmission of Bradley Lake power from Bradley Lake north to Quartz Creek from
Bradley Junction is currently the highest priority use of the existing Bradley Junction to
Soldotna and Soldotna to Quartz Creek transmission line segments.
2. All utilities receiving power from Bradley Lake have contracted for Chugach to dispatch
all Bradley Lake power.
3. The Soldotna-Quartz Creek transmission line segment formerly leased to Chugach by
HEA remains the only path to move Bradley Lake power from Soldotna to Quartz Creek
and this transmission line segment presently is not used for transmission to HEA's native
distribution load beyond Sterling substation.
4. The expiration of the lease between HEA and Chugach for the Soldotna-Quartz Creek
transmission line segment does not in any way alter the contractual relationship between
all parties that are signatory to the Services Agreement of the priority for transmission of
Bradley Lake power.
5. HEA has received compensation for use of the Soldotna-Quartz Creek transmission line
segment for the transmission of Bradley Lake power to all purchasers located north of
Soldotna under the Bradley Lake Agreements.
6. In the interest of reaching an equitable resolution among the Project Participants,
however, the BPMC should order that HEA is to receive payments from the other Project
Participants for the continuing use of HEA’s Soldotna-Quartz Creek transmission line
segment. The BPMC should require the amount of those payments to be in an equitable
amount given the differing positions among the Project Participants and the actual costs
of continuing use.
7. HEA’s alteration of the load-balancing area components and parameters necessary to
allow the priority transmission of Bradley Lake power have resulted in system
inefficiencies that have diminished the contractual priority for the delivery of Bradley
Lake power.
8. All parties should conform and conduct their actions to ensure that Bradley Lake power
retains its contractually-agreed-to priority along the designated transmission line
segments necessary to deliver that power and capacity to all purchasers.
9. The BPMC should act in a timely manner to require payments consistent with paragraph
6 above to be made to HEA for the use of its Soldotna-Quartz Creek transmission line.
Such payments should be required on a retroactive and moving forward basis effective
January 1, 2014.
These findings and resolutions conclude and dispose of the complaint filed by the Designated
Utilities and responded to by HEA and others concerning Bradley Lake power transmission.
Dated at Anchorage, Alaska, this 11 day of April, 2014.
Evan J. Griffith
Dispute Resolution Committee Chairman
Sara Fisher-Goad
Secretary
RESOLUTION 14-09 - FINDINGS OF COMMITTEE PAGE 2 OF 2
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
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,
BRENA, BELL & section 6(d) Services Agreement. And, Chugach is required to schedule Project energy based on the
ciarKson,P.c. | energy delivered to it at the Soldotna substation, section 8 Services Agreement, and may only assure
‘ancroracr.ak sso | deliveries of energy based on energy delivered to it at the Soldotna substation, section 8(g) Services
vax. (oorse2001 +| 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
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
BRENA, BELL & Transmission Agreement may be necessary, as well.
ciarkson,P.c. |'! The need for coordinated action to amend essential terms of the Bradley Lake Agreements is by
‘ancnonacear 9ss01, | design. Since the wheeling utilities had to undertake significant take-or-pay obligations to make the
vax (ornsez00: | 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
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:
[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” . . . “[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
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 & carkson,P.c. | '° PMC Bylaws at 23.
ancvoract ax sso. | |” PMC Bylaws at 23.
ee Gorkceson, | '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
21 Services Agreement at 1.
22? 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
ae
* SOLDOTNA
SOLDOTNA SEGMENT
~ \ rosin, om 4
OWNERSHIP BOUNDARIES
BRADLEY
JUNCTION
senor BRaoLey aN Lake
FRITZ CREEK SEGMENT
MAP KEY: AEA OR CEA HEA
ol ) HOMER me 5 TA ELECTRIC ee eee oe eR ASSOCIATION, ING. |sserus—] tert
wae S rN HEA TRANSMISSION ASSETS
Port cranaw
HOMER ELECTRIC ASSOCIATION, INC.
STATEMENT REGARDING DISPUTE RESOLUTION PROCEDURES
Homer Electric Association, Inc. (“HEA”) as a member of the Bradley Lake Project
Management Committee (“BPMC”), has participated in the adoption of certain dispute resolution
procedures pursuant to Section 10(b) of the Agreement for the Wheeling of Electric Power and
for Related Services (“Services Agreement”) and Section 14 of the Amendment to Agreement
for Sale of Transmission Capability (“Transmission Agreement”). The process for identifying
disputes to be treated with under the procedures is unclear, and HEA is unsure of the scope of the
issues that are intended to be addressed by the BPMC.
HEA recognizes the value of attempting to resolve issues informally, and is willing to
participate in the dispute resolution process in an effort to minimize unnecessary and
counterproductive strife. For the avoidance of doubt, however, by its participation in the dispute
resolution process, HEA does not thereby agree that the BPMC has the contractual authority to
resolve, or even consider, some or all of the issues identified by the participants in the process,
including those set forth in Resolution No. 2013-02, nor does HEA acknowledge that the
allegations in the resolution or which may be otherwise identified even give rise to bona fide
disputes. HEA reserves the right to have any dispute that may arise in the context of the BPMC
dispute process resolved by the appropriate judicial or regulatory authority.
STATEMENT OF DISPUTES
Services Agreement. Section 10(b) of the Services Agreement limits dispute resolution to
matters involving “performance under (the) Agreement.” HEA has identified certain disputes
that arise under the specific terms of the Services Agreement and they are as follows:
Services Agreement, Section 8 Performance Failures
Section 8(a)(i) requires the Dispatcher to “(dispatch) power generation at the Bradley Lake
Project in accordance with the requests of the Parties, ... and the applicable operating criteria or
guidelines adopted by the Project Management Committee.” The BPMC has adopted Allocation
and Scheduling Procedures (Procedures) for the Project as the applicable operating criteria or
guidelines. With respect to its obligations under Section 8(a)(i) and the Procedures the
Dispatcher has failed to perform as follows:
1. In violation of Sections 5(b), (c), (d), (e), (f), and (g) of the Procedures the Dispatcher
routinely utilizes energy from the Project to regulate Fire Island Wind (FIW) output.
2. The Project has spilled water in each of the past two years as a direct result of both action
and inaction on the part of the Dispatcher as follows:
a. Acting in violation of Section 5(h) of the Procedures, the Dispatcher used the Project
to load-follow its own system rather than dispatching the Project to prevent spill and
imminent spill conditions.
b. Acting in violation of Section 5(j) of the Procedures, the Dispatcher scheduled its
share of Project capacity to load-follow its own system rather than scheduling its
share to prevent spill and imminent spill conditions. Further, the Dispatcher failed to
mitigate the adverse effects on the Project in scheduling extensive outages in
performing maintenance and repairs on its transmission system.
c. In violation of Sections 5(j) of the Procedures the Dispatcher failed to notify
Participants of Capacity and Energy to be made available to them at no cost under
section 5(h) of the Procedures, as a result of its and other Participants’ inability or
refusal to take their fully allocated shares of energy during imminent and actual Spill
conditions, thus extending and exacerbating the amount of and the duration of spill
and imminent spill.
3. The Dispatcher is violating Section 5(g) of the Procedures by routinely loading Project
generation units to levels well in excess of its own share, and failing to provide an accounting
proving whether or not it has thereby effectively taken Project Capability belonging to other
Participants.
4. The Dispatcher is violating Section 5(g) of the Procedures by routinely loading Project units
to levels well in excess of its own share, to the extent that spin carried on Bradley at the time
is being used by the Dispatcher to provide real energy, and failing to provide an accounting
proving whether or not such loading has effectively taken Project Spin Capability belonging
to other Participants, thereby potentially leaving the system deficient in spin.
5. The Dispatcher is violating Section 5(b) of the Procedures by failing to publish the week-
ahead, hour by hour schedule of Bradley output.
Section 8(a)(iv) of the Services Agreement requires the Dispatcher to “(coordinate) with HEA in
order that the Dispatcher and HEA alike will minimize, to the extent reasonably practicable, any
potential conflicts between and among (A) HEA’s system operations, (B) Chugach’s system
operation, and (C) the dispatch of Project generation and the provision of services to the
Wheeling Utilities ...”
With respect to its obligations under Section 8(a)(iv) the Dispatcher, in violation of Sections
5(b), (c), (d), (e), (f), and (g) of the Procedures the Dispatcher continuously fails to adhere to
the wheeling schedule it provides to HEA.
STATEMENT
Page 2
Transmission Agreement. Section 14 of the Transmission Agreement provides for dispute
resolution of matters “under (the) Agreement.” HEA has identified certain disputes that arise
under the specific terms of the Transmission Agreement and they are as follows:
Transmission Agreement, Section 3(b) Performance Failures
Section 3(b) of the Transmission Agreement provides that HEA shall be compensated for line
losses resulting from the flow of Bradley Lake power over the Soldotna Segment and requires
the BPMC to determine the amount of line losses and the appropriate amounts and manner of
compensation.
With respect to their obligations under Section 3(b) of the Transmission Agreement the
Purchasers, through the BPMC, have failed to perform as follows:
1. The Purchasers through the BPMC have violated Section 3(b) of the Transmission
Agreement by failing to act upon HEA’s request of January, 2012 to review and correct Loss
Tables for the Soldotna Segment.
2. The Purchasers through the BPMC, despite repeated requests from HEA to the Project
Dispatcher, have refused to provide the technical calculations underlying the Loss tables for
the Soldotna Segment currently in use.
3. The Purchasers through the BPMC have failed to review and update Loss calculations for the
Soldotna Segment as required under Section 8(c) of the Procedures.
Dated at Kenai, Alaska, this 23 day of January, 2014.
Bradley P. Janorschke
General Manager
STATEMENT
Page 3
BPMC Investigation and Discussion Questions
O &D Committee January 22, 2014
SQ Line Rights and Obligations:
1.
2.
10.
11.
12.
13.
14.
15.
16.
17.
What is HEA’s current valuation of the Soldotna to Quartz Creek (SQ) transmission line?
What are the historical costs to maintain the SQ line?
As Chugach has been the dispatcher of the SQ line for the BL participants, if the LBA issue is
resolved would it make sense that the LBA could have either a foreign utility control or dual
control for dispatching the SQ line as long as the procedures are well defined?
Would it technically make sense for the SQ line to be defined outside the HEA LBA and still
accurately account for losses?
Has either foreign utility control or dual control for dispatching transmission assets ever
occurred in the Railbelt?
Could the SQ line be defined outside the HEA LBA and outside the Chugach LBA simultaneously?
Could an LBA be established just for the SQ line operation and assigned to either HEA or
Chugach for dispatch purposes?
What would the cost be to have HEA dispatch BL power over the SQ line?
What HEA distribution loads are connected to the SQ?
If HEA dispatched the SQ line would the approximate losses be similar to losses if CEA
dispatched the SQ line?
Why is ownership and control of the SQ line so important to HEA?
If BL participants were to continue to lease or own the SQ line and dispatch for the BL
participants could the line losses be well defined for the Sterling (ST) substation.
What is the distance from SOL substation to ST substation?
What is the distance from the SOL to Quartz Creek (QZ) substation?
Under normal operations are much of the losses due to the ST substation over a very short
portion of the SOL to QZ 115 kV transmission system?
Is the load at the ST substation revenue metered?
What is the range of losses for the SOL to ST portion of the transmission line?
O&D 1/22/14
Page 1 of 4
18.
19.
20.
What is the range of losses over the same SQ transmission line?
Since the SQ line is orders of magnitude longer than the SOL to ST line section, would it be more
appropriate to measure the line losses attributable to the ST load by comparing metering at SOL
and ST substations rather than comparing line losses from the metering between SOL and QZ?
Which would be more accurate?
Status Quo obligations
1.
2.
8
Do BL deliveries need to be defined according to specific transmission line sections?
Does ownership of equipment needed for BL deliveries have to be explicitly defined by entity; if
so why?
Can BL transfers be defined by contract path or must they be explicitly point-to-point?
Do BL assets need better definition in the BL agreements? Specifically what?
Has the BPMC management responsibility and authority been accepted by HEA and other
Railbelt utilities prior to 2014?
Do the BL Agreements define a dispute resolutions process?
Is there successor facility language in the BL agreements; if so what is the interpretation of such
language?
Is there a difference in the BL wholesale customers and others in the BL Agreements?
Are the Wholesale and other participants treated equally in the BL agreements? If not please
explain the differences.
Load Balancing Area
1
2.
Does HEA support dynamic dispatching?
ls HEA aware of the method of Chugach dispatching of BL power post-2013, whereby Chugach is
load following and frequency matching the HEA load?
Does Chugach load following and regulation of BL power cause concerns?
How does load following affect HEA’s gas dispatching by running under firm scheduling
compared to dynamic dispatching?
Is HEA in favor of dynamic scheduling of BL power?
IF the LBA is defined who would need to agree to it?
If there is a dispute in LBA boundaries? If so, how is it best resolved?
O&D 1/22/14
Page 2 of 4
10.
11,
12.
13.
14.
15.
16.
Would HEA consider the LBA to be defined at SOL substation if the BL participants agreed to
resolve technical issues, like upgrading metering, etc.
Would HEA agree to the LBA boundary at SOL substation; if so under what circumstances or
technical configuration?
If the losses on the SQ line are solved, what other barrier would prevent HEA from defining the
LBA at SOL substation?
What needs to be done to define islanded operation and what are the issues?
What are the issues about communications and telemetry of the BL power with regard to LBA’s?
Are these communications and telemetry issues financial or technical or both?
Is energy accounting and losses solved by defining the LBA boundaries; if not what else is
needed?
Are VAR rights and obligations an issue of immediate dispute or simply a discussion issue?
Should the Diamond Ridge breaker require dual/single/joint operational control?
Bradley Agreements Requirements
1.
Losses
Who has jurisdiction of the SQ line from a regulatory perspective?
Is the Soldotna or Nikiski generation unit considered the Soldotna 1 unit? Who determines this
status? How is this relevant to the BL Agreements?
Are the 19 parts of the BL agreement to be read in whole or can anyone pick and choose the
parts as they see fit?
Can you define custody transfers as part of the BL Agreements; how does this matter?
Do you agree with the loss analysis as presented in the PSS/E modeling spreadsheet?
Can loss issues or disagreements be resolved by making new loss tables for the SQ line based on
an agreed loss analysis?
Documentation
at.
2.
Does the BL Power Sales Agreement require revisions to bring it into current practices?
Do BL current Operating Procedures require modification or updates?
Compensation
as While operating in an HEA load-following mode, how should losses be accounted for and
compensated?
O&D 1/22/14
Page 3 of 4
2. Should HEA and Chugach operate in a TLB mode to a BL schedule; if so how would the losses be
addressed?
3. Should HEA and Chugach operate to a dynamic BL schedule; if so how would the losses be
addressed?
4. How should spill and ponding issues be addressed in either scenario above?
5. How should excess capacity be defined and addressed for equitable compensation?
6. How should spill be defined and addressed in the future for equitable compensation.
7. Should BL be used to load-follow or to maximize participants shares, or to address maintenance
issues (like lake level adjustments), and if so how?
8. Are there any other compensation issues?
O&D 1/22/14
Page 4 of 4
BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING
DRAFT SPECIAL MEETING
Alaska Energy Authority, Anchorage, Alaska
January 24, 2014
1. CALL TO ORDER
Dispute Resolution Process Chair Griffith called the special meeting of the Bradley Lake
Hydroelectric Project Management Committee to order at 10:04 a.m.
2. COMMITTEE MEMBERS ROLL CALL
Cory Borgeson Golden Valley Electric Association (GVEA)
Sara Fisher-Goad Alaska Energy Authority (AEA)
Brad Evans Chugach Electric Association (CEA)
Joe Griffith Matanuska Electric Association (MEA)
Dan Kendall Anchorage Municipal Light & Power (ML&P)
John Foutz City of Seward (SEW)
Brad Janorschke Homer Electric Association (HEA)
3. STAFF/PUBLIC ROLL CALL
Bryan Carey, Kirk Warren, Teri Webster (AEA); Brian Bjorkquist (Department of Law); Kirk
Gibson (McDowell Rackner & Gibson PC); Brian Hickey, Lee Thibert, Burke Wick, Mark
Johnson, Paul Risse (CEA); Rick Baldwin, Robert Day, Harvey Ambrose, Alan Owens (HEA);
David Pease (MEA); Lou Agi, Richard Miller, Jeff Warner, Ken Langford (ML&P); Bernie
Smith (Regulatory Commission of Alaska (RCA)); Matt Clarkson, Robin Brena (Brena Bell &
Clarkson); Sunny Morrison, Miranda Studstill (Accu-Type Depositions)
4. PUBLIC COMMENT
There were no public comments.
5. AGENDA COMMENTS/MOTION FOR APPROVAL
The agenda was approved as presented.
6. NEW BUSINESS
A. BPMC Counsel addressing legalities of the dispute resolution process
Mr. Gibson took the Committee through the BPMC dispute resolution authority, the adoption of the
dispute resolution procedures, the resolution of the issues, explanation of AEA's role, an overview of
the subjects at issue and how they fit with the power service agreement (PSA) or do not fit with the
PSA, and the use of executive session.
BPMC Minutes 1/24/14 Page | of 10
Chair Griffith asked if the wish of the body is to invite AEA to participate. Mr. Evans believes AEA
should participate in those areas in which they need an invitation.
A discussion occurred and it was agreed upon that AEA should be able to be at the table as a member
of the Committee. Mr. Gibson stated if the Committee is acting as a whole, AEA is part of the
Committee. If there is negotiation with the services agreement or the transmission sharing agreement,
AEA is not a party. AEA could offer advice and opinion, but they do not vote.
Chair Griffith asked AEA if they accept the invitation to the table. Ms. Fisher-Goad stated AEA
accepts the invitation. She believes the role of AEA is to help facilitate where necessary in the process.
AEA has rights to ensure the asset owned by AEA is managed appropriately and is serving the public
purpose at the highest level.
Mr. Bjorkquist noted there are some issues that might arise that affect the bond resolution in the power
sales agreement and when those surface, AEA will step in as appropriate. He believes AEA's position
is to help on issues AEA is not a party to.
Mr. Janorschke stated he saw the list yesterday of some of the issues the Operations & Dispatch (O&D)
Committee compiled. He noted some of the issues fall within the purview of BPMC and some of them
do not. Mr. Janorschke recommended the list of issues will have to be sorted as we move forward.
Chair Griffith does not anticipate reviewing that list in huge detail, but it is a factor because the O&D
Committee has developed the list.
Mr. Evans asked for clarification if AEA can go into executive session without distributing the
information publically. Mr. Bjorkquist does not see any problems to go into executive session with
appropriate issues and stated he:is available to assist Mr. Gibson as he leads the group in to executive
session.
B. Homer Electric Association (HEA) presentation of its grievances
Chair Griffith noted HEA has provided a written.document of its grievances.
Mr. Janorschke requested Mr. Ambrose review the grievances with the Committee.
Mr. Ambrose reviewed the document entitled Homer Electric Association, Inc., Statement Regarding
Dispute Resolution Procedures. (see attached)
Mr. Evans asked if the transmission agreement and services agreement are referring to the same
document agreement. Mr. Ambrose advised they are two separate agreements. The services agreement
is the agreement for wheeling of electric power and related services. The transmission agreement is the
agreement for sale of transmission capability.
Mr. Gibson stated when the transmission agreement is referred to, it is really an amendment to the
agreement. Mr. Ambrose agreed.
Mr. Ambrose noted there is another agreement addressed that is a procedural connection entitled
Bradley Lake Hydro Electric Project Allocation and Scheduling Procedures, as revised by the Bradley
Lake Project Management Committee on March 3, 1993.
Mr. Ambrose believes HEA has stated its grievances clearly and have documented the portions of
agreements that apply to the complaint. Mr. Ambrose requested the Committee provide questions or
objection regarding HEA's grievances in writing for review. Mr. Ambrose noted he can attempt to
BPMC Minutes 1/24/14 Page 2 of 10
answer some questions here, but cannot guarantee the answer will be completely accurate without time
to prepare the answer. Mr. Ambrose believes these issues are important and have financial
consequences on HEA, as well as other participants, and they need to be resolved.
Mr. Borgeson requested clarification regarding reference to the Soldotna segment and is that the same
as the Quartz Creek (SQ) Line. Mr. Ambrose noted they are not the same. The Soldotna segment is
defined in the transmission agreement or the amendment to the agreement for the sale of transmission
capability. The Soldotna segment begins at Bradley Junction and proceeds north to HEA Soldotna
substation outside of Soldotna. The Quartz Creek section begins at the same Soldotna substation and
travels east to CEA's Quartz Creek Substation.
Chair Griffith asked for the mileage of the SQ Line. Mr. Day stated it is 32 miles long. Mr. Janorschke
believes the line is longer than 32 miles. Mr. Griffith believes the line is between 30 to 40 miles long.
Chair Griffith asked where is Sterling Substation with Tespect to the Soldotna Substation. Mr. Ambrose
stated Sterling Substation is approximately 10 miles east of Soldotna Substation, just north of the
highway on Swanson River road.
Mr. Gibson reported HEA's document states "the Services Agreement limits dispute resolution to
matters involving performance under the Agreement." Mr. Gibson requested clarification from HEA's
counsel regarding Section 10(a), discussing the consultation at meetings and the parties shall apprise
one another of any planned changes to their systems, including power purchases or sales that might
affect the demand for services and for the availability of services under the agreement. Mr. Gibson
asked if HEA believes that would be in line with performing under the agreement as to make those
comments to the Committee about changes in the HEA system in this case. Mr. Gibson stated this does
not have to be addressed at this meeting and it is more of a legal issue. Mr. Gibson believes HEA's
review of the words "performance under the agreement" is a little narrow and HEA could broaden that.
Mr. Gibson directed HEA's attention to the transmission services agreement under Section 3(b), the
operation and line losses, which is in the purview of the Committee, and to Section 5, the duty to
operate and maintain, which requires that atvall times, HEA will operate, maintain and repair the
facilities used to perform.the services provided under and in accordance with the prudent utility
practices in a manner consistent with HEA's obligations under this agreement. Mr. Gibson noted
"prudent utility practices" is defined in the power sales agreement. Mr. Gibson believes that is broad
enough to be included in the scope of this review. Mr. Gibson does not want HEA to limit their
disputes, if they have additional disputes.
Mr. Ambrose stated he is not an attorney and the word "performance" may have been a poor choice.
Mr. Ambrose explained performance is the activities of the parties to the agreement with respect to
whether or not those actions are or are not in conformity with the agreement signed.
Mr. Gibson noted HEA used the word that was in the agreement and does not want HEA to limit the
definition, unless they want to. Mr. Ambrose believes the dispute resolution is limited to disputes that
arise with respect to whether or not the various parties have complied with the assigned and agreed to
agreement obligations.
Mr. Evans commented the O&D Committee is currently addressing the list of issues, questions and
subject matter. He recommended letting the O&D Committee complete their evaluation and then come
back to the Committee with their report and resolutions. Mr. Evans requested clarification on the
dispute because these issues identified sound like operational issues. He believed the highest level
dispute was regarding control of the SQ Line and how it was committed to in the services agreement,
BPMC Minutes 1/24/14 Page 3 of 10
what happens with the lease agreement, which is not included in this list of grievances, and what the
costs are going to be. Mr. Evans stated he is confused about what the purpose of this effort is if the
highest level dispute is not being discussed. He believes when that dispute is settled, a lot of these
technical issues will evaporate or have a clear solution.
Mr. Janorschke stated he was not expecting this Committee to provide comments or extensive
feedback. The O&D Committee went through their process and Mr. Janorschke received the list on
Wednesday. (attached) He expressed his concern regarding how many of those issues fall within the
purview of this Committee and how many do not. Mr. Janorschke wanted to provide HEA's
perspective to the Committee and reference specific items within agreements HEA feels support their
position. Mr. Janorschke agrees with Mr. Evans regarding the dispute on the SQ Line and there is a
disagreement on how that dispute will get resolved because HEA does not believe that dispute falls
under the purview of this Committee.
Mr. Borgeson stated this frames one of the first disputes of what falls under the purview of this
Committee. He believes this Committee was convened originally oyer the issues with the SQ Line and
the current issues they are bringing rightfully to this Committee should be considered and has
broadened the scope of what Mr. Borgeson thought would be part of the dispute.
Mr. Kendall commented today's meeting was to collect the grievances. HEA's items were technical in
nature. Mr. Kendall stated CEA mentioned other bigger»broader issues that address the services
agreements. Mr. Kendall asked if both HEA items and CEA items are to be added to this list for
discussion.
Mr. Gibson advised if there is a jurisdictional dispute of whether a grievance comes under the purview
of the Committee, it may be best.the Committee consider the methods to preserve everyone's rights, so
they can be discussed without someone feeling that they are giving up rights or positions. Mr. Gibson
recommends the Committee consider executive sessions and/or entering into some kind of Rule 408
compromise for the purpose of these discussions. Mr. Gibson stated it would be best to reach a
resolution.
Chair Griffith asked Mr,Gibson to,explain Rule408. Mr. Gibson explained Rule 408 is a rule of
evidence in the state of Alaska that is quite broad and allows compromise discussions and settlement
discussions to not be used as evidence in any other proceedings. Mr. Gibson advised his explanation is
simplistic and everyone should rely on their attorneys for clarification.
Mr. Ambrose commented HEA had the same question as Mr. Evans regarding what is it we are going
to be discussing. The question was directed to Chair Griffith and Chair Griffith instructed HEA to add
any laments they had. Mr. Ambrose stated that is why the scope has been broadened.
Mr. Evans noted there is still a dispute about what the Dispute Resolution Committee can consider.
Chair Griffith asked HEA if there is anything else on their list of complaints. Mr. Janorschke stated he
does not believe so.
Mr. Gibson gave an outline of the BPMC bylaws for a situation where there is a question regarding
authority stated in Section 12.2, "The Committee shall first make a finding as to its authority. If the
Committee determines that it has the authority to consider the matter, it shall decide the issue on its
merits. If the Committee determines that it does not have the authority to consider the matter, the
matter will be subject to immediate judicial resolution. If the court determines that the Committee, in
fact, had the authority to consider the matter, then the matter will be remanded for Committee action."
BPMC Minutes 1/24/14 Page 4 of 10
Mr. Gibson stated it would behoove the Committee to make a determination of authority and that does
not have to happen at this meeting, but prior to any actions.
Chair Griffith asked Mr. Gibson if a finding could be as simple as saying, "We believe the BPMC has
authority to deal with this issue." Mr. Gibson concurred.
Chair Griffith agreed with Mr. Evans that the listed HEA laments are O&D Committee issues and if the
O&D Committee has made recommendations on any of that list, they would have been operational
issues and would have been resolved. Chair Griffith asked Mr. Janorschke if the listed HEA issues
were resolved, would HEA no longer have any concerns. Mr. Janorschke believes HEA has had these
discussions with the O&D in the past and the issued have not been addressed or resolved, which is why
these issues have been elevated to this Committee.
Chair Griffith asked if that is a failing of the O&D Committee or is it a Bradley PMC issue. Mr. Day
stated he does not want to speak for the Committee, but believes the O&D Committee feels very unsure
of interpreting contractual actions that have been brought forth in these issues.
Chair Griffith asked if these issues are contractual actions or are they operating procedures. Chair
Griffith noted Mr. Day does not have to answer and will defer to HEA's manager.
Mr. Borgeson commented this list of issues could go back tothe O&D Committee to be considered and
they could provide a formal responses)Mr. Borgeson stated these issues have been brought before this
convened Dispute Resolution Committee and recommends considering these items with advice from
the O&D and come to a final resolution so the process does not drag on.
Chair Griffith noted confusion regarding HEA's title of Statement Regarding Dispute Resolution
Procedures. Chair Griffith asked if this document is really,a statement of HEA's disputes. Mr.
Janorschke agreed. Chair Griffith asked HEA what is the solution from their viewpoint. Mr.
Janorschke believes it goes back to the discussion last week to include the process of providing these
issues to this Committee, bringing the supporting back-up material at the appropriate time to the
Committee, informing or educating all the voting participants of what HEA feels has not been
addressed; hearing any counter positions, and resulting in a position or decision from this Committee.
Chair Griffith stated he sees two issues as HEA has described; the Statement Regarding Dispute
Resolution and secondly, the breadth of responsibility of the BPMC to adjudicate the issues that other
parties believe are out there beyond what is written in this Statement Regarding Dispute Resolution
document. Chair Griffith asked if anyone disagrees with that view. No disagreements were voiced.
Chair Griffith asked Mr. Gibson what the procedure is on how the Committee would make a finding
and is it simply a motion with a vote of 51% carries. Mr. Gibson requested he consult the bylaws to
provide his answer.
Chair Griffith believes additional issues are resident in Resolution 2013-02 (Homer Tariff filing),
among other documents. Chair Griffith noted Mr. Gibson reviewed the Rule 408 process and he
requests further discussion on that process.
Mr. Evans thinks the O&D Committee believes there are some technical matters the O0&D Committee
would have difficulty proposing solutions because the problem stems from contractual interpretations.
The contracts that the disputes are residing in are the collection of agreements that everybody
negotiated for the Bradley Lake project. Mr. Evans noted there is a dispute about the longevity of those
agreements and who has purview over them. He believes these issues are being elevated to an area that
was not addressed in the presentation. He does not agree with everything that was said in the
BPMC Minutes 1/24/14 Page 5 of 10
presentation, but does not object to the scope of the disagreement being expanded into operational
matters. He does not believe the operational matters can be solved unless there are settlements on
contractual matters. He believes the most grief is being caused by the transmission service agreement
and the impact of the events to that service agreement. He disagrees the events have been transpiring
for years because the events just happened 24 days ago. He challenges the notion that these issues have
been ongoing for years.
Mr. Evans noted if everyone agreed that was the problem, the dispute resolution could begin.
However, there is a higher level dispute that the BPMC does not have a role in the transmission
services agreement. He noted the word "role" may not be the correct legal term. He framed the dispute
as, does the BPMC have a role in settling the problems that have arisen in the transmission services
agreement as certain changes have been made in the relationship between the participants.
Mr. Evans stated CEA does not believe there has been.a deliberative process. He suggested settling the
highest level grievance first regarding BPMC's role.in dispute resolution.
Mr. Kendall asked a process question of Mr. Gibson for this point in the process if the Committee
needs to act on what it is going to review. Mr. Gibson stated it is up to the Committee and what has
been adopted are the dispute resolution procedures», Mr. Gibson suggests the\Committee is at number
two, identification of all issues. It is fair enough to discuss the issues and then ask for written reports,
but there is no legal requirement forhe,process. Once the issues are gathered, a discussion needs to
occur describing the basis of the issues. The question as to the purview of the Committee will then be
addressed. Mr. Gibson added that the membersiof this Committee are the same people, except for
AEA, that are involved in the agreements. The same people are here and if there is a chance to resolve
the contractual and operational.issues, then it should be done here. This is the place to talk about the
problems and to see iffanything can be done.
Mr. Kendall stated one of the issues is how to resolve the loss tables. He requested Mr. Warner address
that issue. The other issuesregarding dispatching do not seem to have a simple answer for discussion.
Mr. Kendall asked if these issues shouldbe addressed one at a time at this point. Chair Griffith
explained he wants full.understanding and ability to discuss a few other issues before the issues are
addressed.
MOTION: Mr. Borgeson made a motion to agree these discussions, comments and testimony
under this Committee are considered settlement discussions pursuant to Rule 408 and will not be
admissible as evidence in any other judicial proceeding or regulatory proceeding, except to the
extent they are designated and identified during the deliberative process. Motion seconded by
Mr. Evans.
Mr. Borgeson advised any discussions this Committee undertakes during the course of its review
of the disputes will follow Rule 408.
Mr. Janorschke asked if the motion covers the discussions only in executive session or
discussions also in open session. Mr. Borgeson stated the motion covers all discussions, open,
closed, executive.
Mr. Gibson agreed all discussions should be covered by Rule 408, but the Committee might want
to consider going into executive session for procedural reasons.
BPMC Minutes 1/24/14 Page 6 of 10
Mr. Baldwin stated HEA does not want the issues listed in the Statement Regarding Dispute
Resolution Procedures document to be a subject of Rule 408. Mr. Baldwin understands as a
prerequisite for going into Superior Court, there needs to be some action or inaction by the
Committee first over the matters that the Committee has jurisdiction. Mr. Baldwin requested the
fact that issues have been raised and how those issues were resolved would not be a subject of
Rule 408. Mr. Baldwin asked if his request made sense. Chair Griffith stated it did not make
sense to him, but he will defer to counsel.
Mr. Gibson asked Mr. Baldwin to restate his request. Mr. Baldwin gave the example of the line
loss issue. HEA has raised as a dispute the existence of a line loss issue and claim that HEA is
not being fairly compensate for line loss. At some point,there might be a resolution by the
Committee of that issue and it might be unfavorable toHEA. Atthat point, HEA might chose to
go to Superior Court with that issue. If the entire proceeding is subject to Rule 408, then there
would be no way to present to the Superior Court that HEA has exhausted its contractual
remedies before going into Superior Court. If; however, the actual actions of the Committees
were not subject to Rule 408, then HEA could prove that it had exhausted its contractual
remedies. Mr. Baldwin asked how broad is the Rule 408 exemption and does it.extend just to
discussions or does it extend to actiomby the Committee,
Mr. Borgeson noted his intent was Rule 408 would relate to discussions and testimony that
occurs in this Committee. Findings of the Committee would be published. Chair Griffith
believes Committee actions,would be published. Mr. Borgeson said a statement could be made
that these findings are not subject.to Rule 408,
Chair Griffith asked if Mr, Gibson concurs. Mr, Gibson agreed and commented the fact that
someone raised the dispute and the resolution of that dispute are the issues that can be taken to
court, but all:the discussions and negotiations is under Rule 408. Mr. Gibson suggested restating
the motion.
Mr. Agi asked in the event of an appealby HEA, how would HEA sustain the reasonableness of
the findings without access to the evidence. Mr. Gibson stated the findings would be made in the
conclusion and resolution and would not say how they were reached. Mr. Agi would like to say
how the findings were reached and if they were supported by adequate evidence.
Mr. Borgeson stated he understands there are no admissions in Rule 408 discussions. The
statements or positions made in discussion or in resolution cannot be used against the party in a
proceeding in another jurisdiction. All testimony and evidence would have to be presented again
in a court proceeding.
Chair Griffith asked if everyone understood Rule 408. Mr. Brena believes the Committee wants
to be careful not to confuse settlement discussions with the deliberative process before the
Committee. The Committee's resolution and ultimate vote and the basis for that vote would be
reviewable by a court, but settlement discussions and frank conversations do not need to be
reviewable by the court. Mr. Brena expressed his concern the Committee is beginning to merge
the two concepts, so the deliberative process before the Committee is starting to go behind closed
BPMC Minutes 1/24/14 Page 7 of 10
doors. Mr. Brena suggested Mr. Borgeson's motion be focused on settlement discussions. Mr.
Brena suggested the formal deliberative process of the Committee's action and the basis for the
Committee's action has to be public, so that it can be reviewable by the court.
Mr. Evans stated there was a question regarding who is Mr. Brena representing. Chair Griffith
noted Mr. Brena is representing all the utilities, except for HEA, SEW, and AEA.
Chair Griffith asked if Mr. Gibson has any remarks regarding Mr. Brena's advice. Mr. Gibson
commented the Committee needs to ensure the deliberative process is not confused with the
settlement process.
Chair Griffith asked if the motion on the floors needs to be altered regarding implementing Rule
408. Mr. Gibson does not believe the motion needs to-be altered, Chair Griffith asked if he was
correct in understanding the Rule 408 process doesnot preclude this. body from coming to some
set of conclusions, finding facts, and ordering anaction, then if a party,disagrees with the action,
the party can then go to Superior Court. Mr. Gibson noted the challenge is in the deliberative
process.
The motion stands with no objection.
Mr. Kendall requested the issues before the Committee be listed. Chair Griffith noted the issues
before the Committee include, 1) the Statement Regarding Dispute Resolution Procedures
brought forth by HEA, 2) whether or not this process is within the purview of the BPMC, and 3)
whether or not this issue goes back to a tariff filing which is before the RCA, brought forth by
Mr. Evans.
Mr. Evans clarified there is a grey issue regarding the tariff and costs which has been briefly
discussed. Mr. Evans believes ithe BPMC clearly has jurisdiction in administrating and resolving
issues within the collection of agreements takento move the project forward. Mr. Evans
recommended resolving the larger dispute of whether BPMC has a role and jurisdiction in this
dispute process. This has to be decided)before the other issues can be addressed. With regard to
the loss tables, Mr. Evans stated.a technical solution cannot solve a contractual problem.
Mr. Borgeson suggested all the issues be presented first and then the decision can be made
whether or not the BPMC has jurisdiction over the issues. Mr. Borgeson thought the O&D
Committee was going to present their issues next on the agenda. After that presentation, Mr.
Borgeson wants to ensure GVEA's dispute is included in what the O&D has brought forward.
Mr. Borgeson stated GVEA has a dispute over the appropriate compensation to pay HEA for use
of the SQ Line or any other lines the Bradley power crosses. Mr. Borgeson requested the
Committee address that issue.
Chair Griffith asked if compensation is one of the topics that should be before the O&D Committee or
is it an issue the members around the table have to discuss. Mr. Borgeson noted compensation is
addressed as number one on the list; how should losses be accounted for and compensated. Mr.
Borgeson believes the issue is more than just losses and includes the amount of compensation due for
the use of SQ Line and any other lines.
BPMC Minutes 1/24/14 Page 8 of 10
Mr. Kendall requested clarification on the tariff filing because HEA has other transmission lines that
are not directly related to the BPMC contracts. Mr. Kendall requested using a different definition for
the issue, other than tariff filing, from CEA's presentation because it is becoming an operational
question, rather than a tariff question. Chair Griffith commented that was a good point, but the crux of
the current dispute goes back to a letter that four of the members of the BPMC submitted on the 7th of
January identifying several things that had to happen and a tariff filing by HEA that brought forth the
amount charged for the line and line losses. Chair Griffith does not know how to separate those and
believes compensation is probably the bottom line issue to address in determining the right amount to
charge. He noted HEA had never articulated the charge amount outside of the filing and the filing
indicated an amount which was 10 or 11 times more than what has been paid in the last 25 years.
Mr. Evans responded to Mr. Kendall and explained HEA is certainly right to file a tariff for the use of
their transmission system in the normal practice of business, but the dispute refers to how that tariff
filing applies to the Bradley Lake energy and the agreements and commitments that were everlasting
for the projects. The dispute is whether or not those commitments that were originally made are still in
place because another contract expired.
Chair Griffith requested Mr. Evans articulate the three dispute issues as he understands them. Mr.
Evans stated one issue is the impact to the transmission services agreement (TSA) as it was prior to the
expiration of other contracts. There is.a control issue overthe SQ Line, as far as the duties and
responsibilities that are embedded in the TSA. Mr. Evans stated he does know if there any other issues
on the capacity sharing side. The rate or compensation issue was created because another contract
expired and how does that impact the commitments made under the three-plus agreements of Bradley
Lake.
Mr. Gibson asked if operational issues would be included in the list of 3 issues. Mr. Evans noted the
TSA drives what happens to these issues. Mr. Gibson requested clarification of the 3 issues. Mr.
Evans said the impact to the TSA and control of the SQ Line may be one in the same issue or there
could be a way to separate those and compensation is another issue.
Chair Griffith requested the disputing parties prepare a point-of-view paper, no more than seven pages
in length, presenting the arguments regarding the issues and be provided by the close of business on
February 4th, 2014. The papers will be discussed at the next meeting on February 7th, 2014.
Chair Griffith advised he is sending the operational questions back to the O&D Committee for their
position and not from members of this group. Mr. Kendall commented those issues need to be kept on
this Committee's list because those issues will come back to this Committee. Mr. Evans believes it is
fair for the O&D Committee to respond by saying they cannot provide a technical solution because
contractual guidance has not-been given. Chair Griffith agreed.
Ms. Fisher-Goad agreed and suggested the O&D Committee specifically state what guidance they need
that is limiting their ability to provide the answers in order for the BPMC to clearly address the
guidance request. Chair Griffith agreed and noted he will provide those comments to the O&D
Committee.
Chair Griffith listed the issues as follows; 1) jurisdiction of the BPMC, 2) impact of the expiration of
the lease on the Bradley Lake services agreement, and 3) appropriate compensation for the use of the
SQ Line. Chair Griffith asked Mr. Kendall if he had other issues to include. Mr. Kendall stated HEA's
Statement Regarding Dispute Resolution Procedures can remain on the list, even though they are more
technical in nature.
BPMC Minutes 1/24/14 Page 9 of 10
Mr. Janorschke asked if these three issues are pretty much the same issues before the Regulatory
Commission. Chair Griffith stated the issues are probably the same. Mr. Janorschke asked if the
expectation is to come back and summarize what has already been presented before the Regulatory
Commission. Chair Griffith agreed that is a fair assessment, but it has to be completed in no more than
seven pages.
Mr. Janorschke suggested the issue wording to include the cost of wheeling Bradley energy across the
HEA system, rather than focusing strictly on the SQ Line. Chair Griffith requested HEA address that
issue in their paper.
Cc. O&D Committee analysis and findings
Tabled until the next meeting.
D. Come to a resolution regarding concerns presented by HEA
None presented.
Ts MEMBERS COMMENTS
The next meeting was scheduled for Friday, February 7th, 2014, at 10:00 a.m.
8. ADJOURNMENT
There being no further business for the committee, the meeting adjourned at 11:58 a.m.
BY:
Joe Griffith, Chair
Attest:
Sara Fisher-Goad
Alaska Energy Authority, Secretary
BPMC Minutes 1/24/14 Page 10 of 10
BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE MEETING
REGULAR MEETING
Alaska Energy Authority, Anchorage, Alaska
January 27, 2014
i CALL TO ORDER
Chairman Evans called the regular meeting of the Bradley LakesHydroelectric Project
Management Committee to order at 1:31 p.m.
2. COMMITTEE MEMBERS ROLL CALL
Cory Borgeson Golden Valley Electric Association (GVEA)
Bryan Carey Alaska Energy Authority (AEA)
Bradley Evans Chugach Electric Association (CEA)
Joe Griffith Matanuska Electric Association (MEA)
Richard Miller Anchorage Municipal Light & Power (ML&P)
John Foutz City of Seward (SEW)
Brad Janorschke Homer Electric Association (HEA)
3. STAFF/PUBLIC ROLL CALL
Kirk Warren, Kelli Veech, Teri Webster (AEA); Brian Bjorkquist (Department of Law); Kirk
Gibson (McDowell Rackner & Gibson PC); Brian Hickey, Burke Wick, Mark Johnson, Paul
Risse (CEA); Robert Day, Harvey Ambrose, Alan Owens (HEA); Jim Brooks (MEA); Lou Agi,
Jeff Warner(ML&P); Bernie Smith (Regulatory Commission of Alaska); Matt Clarkson, Robin
Brena (Brena Bell & Clarkson); Ron Woolf (GVEA); Sunny Morrison, Miranda Studstill (Accu-
Type Depositions);
4. PUBLIC COMMENT
There were no public comments.
5. AGENDA COMMENTS/MOTION FOR APPROVAL
The agenda was approved as amended.
6. OLD BUSINESS
A. Telemetry of Bradley Lake into Chugach Load Balancing Area (Res. 2014-01)
MOTION: Mr. Griffith made a motion to approve Resolution 2014-01. Motion seconded by Mr.
Foutz.
Mr. Miller asked if this item is under the dispute resolution issue. Mr. Griffith does not believe so.
Chair Evans stated he did not see there was a dispute with the resolution, but supposes it could become
one.
BPMC Minutes 1/27/14 Page | of 12
Mr. Janorschke stated HEA's opinion is the BPMC does not have authority within the HEA system to
dictate where the points are. Mr. Janorschke stated HEA will not abide with what is listed in this
resolution. He noted the Committee heard HEA's discussion in front of the Regulatory Commission
and so he will not restate the argument.
Mr. Griffith asked Mr. Janorschke why HEA objects to this resolution. Mr. Janorschke believes there
is a much easier way to monitor and measure the system. It is at Bradley Junction and at Quartz. Mr.
Day stated these are the ownership boundaries of the system and the points which should be measured.
He said neither load balancing authority is supposed to be a burden on the other. The metering points
should be agreed upon and use joint points to meter.
Mr. Borgeson requested a description of Resolution 2014-014 Mr. Hickey explained there are at least
two ways to telemeter load balancing areas between Chugach ; and Homer. The one the wheeling
utilities in Chugach have proposed here takes the assetsthat aréunder the Bradley agreement,
transmission services and transmission capability and sharing agreement, and includes them and the
two static var compensators (SVC) in the same load balancing areas, as well as the power plant. This
reduces the loss issue that HEA has by probably 80%. It maintains the facilities under the contracts
within one load balancing area and it maintains all of the Bradley assets in one load balancing area.
Mr. Foutz asked for the definition of telemetering. Mr. Hickey explained it 1s ametering point. There
is no disagreement about the magnitude of the losses.. What generators try to generate the losses
depends on where the meters are read. Telemetry i is the actual communications path to a meter that
reads that meter.
Mr. Borgeson asked if this was the way the,metering was conducted into the Chugach load balancing
area as of December 31,2013%Chair Evans stated this is what is leftof it after Homer would take the
balance of the facilities and put it in their load balancing area. "It is a division between the Homer
system and the Bradley Lake system. :
Mr. Borgeson asked if this Was also referring to the,controls at the meters. Chair Evans noted it is not
necessarily refetting to the controls and that,would normally be associated with a breaker. Mr.
Borgeson asked HEA why they so strongly object to this. Mr. Ambrose commented the assets in
discusSion belong to HEA)HEA wants to operate the assets because they have a right to do so. Mr.
Ambrose disagreed with Mr. Hickey that there is an agreement on losses. There is no agreement on
losses. Mr. Ambrose stated there are losses that have historically occurred on portions of the HEA
system for whichthere has never been compensation. Changing the telemetering location will not
solve the problem completely, but it would greatly reduce the differences of opinion about losses and
what is called "inadvertent" interchange of power. Mr. Ambrose believes the appropriate metering
points are Bradley Junction and Quartz Creek. Mr. Ambrose stated this proposal has never been tested
and HEA does not recognize it and does not intend to.
Mr. Brena commented the hand-off of power under the Bradley Lake agreement occurs at the Soldotna
Substation and CEA's right to wheel and operate the system from the Soldotna Substation north is set
forth in the services agreement and in multiple places. The disagreement began when the wholesale
power arrangement lease with CEA expired and HEA has taken the position that expiration unilaterally
changed the services agreement. Mr. Brena advised the wholesale power lease was not part of the
Bradley Lake agreements. Under the Bradley Lake agreements, CEA has the right to wheel, operate,
maintain and repair the SQ Line. This resolution maintains the parties' relative rights to each other
under the services agreement to the SQ Line until the issue of whether or not the services agreement
has expired because of the expiration of the lease can be addressed by the parties. Right now, CEA and
BPMC Minutes 1/27/14 Page 2 of 12
HEA are both trying to operate the same segment of transmission line, which create many safety and
reliability issues. Under the terms of the Bradley Lake agreements, when there is a dispute, the status
quo position is maintained until the dispute is resolved. That is not what is occurring now, which raises
safety and reliability issues. Mr. Brena believes this resolution should be passed.
The motion passed, with AEA abstaining and HEA voting no.
Mr. Griffith requested explanation for the abstention of AEA. Mr. Carey believes this is a utility matter
with the differences with the metering from one place to another. Mr. Carey does not believe AEA
needs to have input over the metering position.
Mr. Griffith asked Mr. Carey how AEA would view this issue if Something happens where Bradley
Lake power cannot be delivered over that segment. Mr. Carey commented AEA definitely wants the
Bradley Lake power to continue going over the segment. and has confidence in the utilities to make sure
power continues over that segment.
Mr. Borgeson stated he also questions AEA's abstention and requests;,through the Chair, legal counsel's
opinion whether a party to this Committee has a right to abstain under the rules of order. Mr. Gibson
noted with respect to the Bradley Lake Project Management Committee bylaws, this is an adoption of
procedures for scheduling production or dispatch ofjproject power. The affirmative action of AEA is
not required and AEA's abstention is within their BPMC rights.
Mr. Griffith asked if they could have saidnothing, as opposed to abstaining. Mr. Gibson agreed. Mr.
Borgeson asked if AEA is deemed to have voted with the majority due to their abstention. Mr.
Janorschke asked if that question matters. Chair Evans stated it may be good to get their position
correct. Mr. Bjorkquist believes that is an esoteric question. Abstaining is not voting one way or the
other. Mr. Gibson noted the bylaws address if a representative is at the meeting, they are assumed to
have assented to thematter, unless they indicate,dissent and it isrecorded at the time. Mr. Gibson
believes it is in AEA's rights to be present and abstain, without being affirmative. He does not believe
abstentions are counted one way or the other under the bylaws and will verify that at a break.
Mr. Janorschke suggested Mr. Griffith add this issue to HEA's list of disputes.
Mr. Griffith asked counselif it is possible to add this issue to the list of disputes or if that timeframe has
been closed. Mr. Gibson advised this dispute can be added and should go to the Dispute Committee.
Mr. Janorschke noted HEA will dispute whether this issue belongs under the purview of the BPMC and
the issue will then go to the next step in dispute.
B. Status report on Power House Controls Upgrade Project
Chair Evans asked if the original project includes replacing the governor. Mr. Carey stated the original
project took place in 2006. About a year ago, the digital control system was upgraded to Emerson. The
new project is not changing any of the hardware, such as relays. Mr. Carey reported VA Tech looked
at the system about a year ago and they indicated the equipment and software was no longer supported
by VA Tech, which means some of the controls will have to be replaced this year or next year.
Chair Evans asked if replacement of some of the controls was part of the original scope reported to the
BPMC. Chair Evans did not recall the scope to include requiring replacement of the governor. Mr.
Carey noted he is not qualified to respond to some of the details and exact scope of work in terms of the
governor versus the digital control system. Mr. Carey stated the question becomes a matter of when the
work is completed, this year, next year or in two years.
BPMC Minutes 1/27/14 Page 3 of 12
Chair Evans stated CEA has a control system that is over 20 years old and the one in question is seven
years old. CEA has the same original governor, which is 30-plus years old and it is not true that
governors and control systems have to be replaced every seven years. Mr. Griffith commented it took
10 years to define what needed to go into that system and it took another couple of years to install the
system.
Chair Evans requested an explanation of the intent of the original scope, the original budget, and what
was done to preserve the functionality of the existing governor. Chair Evans noted the first he heard
VA Tech was unsupportable was a month ago and inquired why this was not known before the project
was started. Chair Evans commented this was supposed to be just a simple conversion to DCS
technology. Chair Evans noted he is not questioning the integaity of trying to make the system work,
but is questioning the process. ‘
Mr. Griffith noted he shares the same concerns as ChairEvans. \He recommended auditing the control
system situation. Mr. Griffith stated 10 years and $12 million was)spent getting this system to work by
2006, and seven years later it is not working. Chair Evans advised hewants to be very careful to ensure
the Committee is fully engaged and fully understands the situation, because this sounds like a repeat of
the same situation and there is room for communication improvement between the owner and the
BPMC. .
Mr. Janorschke commented if an auditof Bradley is going'to occur, it should occur within the O&D
Committee. He noted it is the responsibility of the O&D Committee and the BPMC to operate and
recommend improvements. Chair Evans askedhif his comments are regarding the governor project.
Mr. Janorschke stated the governor project,is tied tohis comments. He believes the issues are not with
the state and it is the O&D,Gommittee who should provide recommendations to the BPMC.
Chair Evans stated he‘will again ask the O&D Conimittee to use their expertise to review this issue and
determine the path forward with aDCS. Mr. Janorschke requested the background of the discussion
information be brought to the BPMC. Chair Evans agreed.
Mr. Borgeson)believes he is hearing that some of the members of the group are losing confidence in the
project operator and the decisions they are making. Mr. Borgeson requested an explanation and more
background of either an audit or a review. He noted it is very important to learn from what is occurring
now. Mr. Borgeson asked if the decision today has to be delayed. Chair Evans does not believe there
was a decisionto be made today, rather a commitment from members to get engaged and achieve that
comfort level. Chair Evans noted there is resident expertise from the past project and wants to ensure
Mr. Owens has the benefit of that expertise. Mr. Owens understands there is expertise available from
the past project.
Mr. Janorschke stated his concern regarding Mr. Borgeson's comments of the operator's lack of
performance. Mr. Janorschke requested documentation on the operator's lack of performance because
all the actions flow through AEA, as the owner, the BPMC, the O&D Committee, and the Budget
Finance Committee. Mr. Janorschke requested written support of Mr. Borgeson's comments to give
basis for his opinion. Mr. Borgeson stated he may have spoken too forcefully, but thinks he is hearing
that some of the members are expressing a lack of confidence in the project operator, but maybe the
lack of confidence is in the entire process. Mr. Borgeson does not have any particular item of interest.
He believes a review or audit should be welcomed by everybody. Mr. Borgeson appreciated Mr.
Janorschke's invitation to go and see how the project is operating and Mr. Borgeson regrets he has not
been there yet.
BPMC Minutes 1/27/14 Page 4 of 12
Mr. Owens commented he understands the concern and the effort. Mr. Owens provided a synopsis of
what has been completed from 2012 through December 2013, including a budget analysis. He
requested members read through this information and can email with any questions.
Chair Evans encouraged Mr. Owens to continue discussions with the O&D Committee and technical
people. The issue is to ensure we return to the original performance functionality with no
diminishment.
Mr. Griffith requested the state provide the statement of work that went out on the current contract to
the BPMC. Mr. Carey noted the different projects in the past with Bradley have been procured by
HEA. The state has not been going through its own procurement process and will need to receive the
statements of work from HEA before providing those to the BRMC. Chair Evans asked if AEA
reviews the statements of work. Mr. Carey noted the procurements are not normally reviewed.
Cc. Kenai Outage November 22, 2013
Chair Evans noted there was a question about Bradley's response to the Kenai outage. He previously
requested more investigation and was hopeful the O&D Committee, operators, and technical people
would better define how Bradley reacted to that loss of load. Mr. Janorschke stated he is prepared to
give a synopsis of the response. Chair Evans stated)the highlights have been reported and was hoping
the details could be taken to the next level.
Chair Evans wants to know more detail regarding when the unit tripped and when the unit went back
on. Mr. Day inquired who the Chair is asking)to provide thatinformation. Chair Evans is directing the
request to the O&D Committee to determine the specifics and asked if it was the status of the governor
that would not respond. Mr..Day noted there was a failure of Unit One a week ago, which was a
governor failure. He stated those failures will,continue to happen because the electronics that constitute
the brain of the VA Tech governor is no longersupported and iftis not working. There is no one who
knows how to fix it. Ne
Mr. Griffith asked if the plamis to'send»the entire issue to the O&D Committee or should the Technical
Coordinating Committee (TCC) be reconvened to address this dynamic issue, because something has to
be done if the governor is.failing. Mr. Owens noted the decision was made a year ago what to do about
it. VA Tech was asked for bids and Emerson was asked for bids and the bids were received. Mr.
Griffith commented that Emerson stated they had to go to Russia to find the person to complete the
work, which was of concern.
Chair Evans directed the O&D Committee to discuss and recommend to the BPMC whether or not the
TCC group convene towork collaboratively with the O&D Committee on this issue.
Te NEW BUSINESS
A. Budget Amendment
MOTION: Mr. Griffith made a motion to amend the FY 2014 RNC budget to increase the
replacement of electromechanical relays to $410,000 and to reduce the interest earnings by
$717,000. Motion seconded by Mr. Janorschke.
Mr. Woolf explained the interest earnings have decreased by $717,000 and this is a 32% decrease from
what was originally budgeted, because this budget was prepared two years ago for the interest earnings
and it is quite a bit less than what was projected. Mr. Owens noted the requested budget amount for
2014 was $410,000. Ms. Veech explained the Renewal & Contingency (R&C) budget, per the bond
resolution, includes the payback of the expenses that have to be done over four years. This is the
BPMC Minutes 1/27/14 Page 5 of 12
current year's payback. Mr. Griffith asked if each of the numbers are the four-year payoff for the
expense that is 1.8 and $410,000. Chair Evans agreed.
Mr. Foutz asked if any funds need to be added to this budget to continue the fish water screening
process, since the fish water screening funds are being postponed at this time. Mr. Owens provided a
brief update on the project based on discussions with the state and the dispatcher. The current volume
in the lake is 448,000 acre-feet. In order to proceed with this project, the lake has to be reduced in the
next 80 days by 211,000 acre-feet or 187,000 megawatt hours, which he does not believe is feasible to
do. Mr. Wick does not believe it is feasible and there is a three-week outage scheduled beginning
February 27.
Mr. Owens stated there are two recommendations to put forward to the Committee. The first
recommendation is to proceed with this project at all cost and push it through. He noted the lake level
has not reduced at all in the last nine days and has increased half,a foot. Mr. Owens stated if temporary
pumps are put in place, this project could be pushed.off for a year and still make the FERC
requirements of fish water flow. Mr. Owens stated clearly for the record there are some inherent risks
if North Fork weather patterns are different or if there is not as much snow accumulation, there is a risk
the permit will be violated. Based on the last 12 months of data, he believes, the project could be
pushed back, understanding the inherent risks.
Chair Evans asked what was the understanding with FER€ on fish water release the last time this issue
was addressed in 1997. Mr. Owens advised the 40 CFS winter-months minimum was maintained
through this project. He advised the lake can be.drained and still maintain the 40 CFS minimum. Chair
Evans asked if there was any reason to handle the process differently than in 1997. Mr. Owens stated
there is no reason to handlesthe process differently. Theébudgetary estimate number to put forth in
2015 is $657,707 to drain the lake.and proceed with’this project.
The motion passed unanimously.
B. HEA January 17, 2014 Proposed Resolutions
1. Operators Report on the’Repair of Fish Water Release System and Resolution
2014-03 - Repair of Fish Water Release System
Chair Evans noted this Item 7,B.1. has been removed from the agenda with no objection.
2. Resolution 2014-04 - Update Loss Factors
MOTION: Mr. Janorschke made a motion to approve Resolution 2014-04. Motion seconded by
Mr. Griffith.
Mr. Ambrose stated back in January of 2012, and prior to that time, HEA contracted with EPS to
perform a loss study on HEA's system and the results of that study indicated the compensation for
losses for the export of Bradley energy were insufficient to cover the actual losses occurring as a result
of that export. On January 19th, HEA brought a request before this Committee to take up the issue to
review the EPS study and revise the loss calculations currently in use. Mr. Ambrose noted that review
has not occurred by the BPMC. He advised HEA has tested the EPS studies by direct metering and
find the studies to be accurate.
Mr. Ambrose believes it is within the power, authority and duty of this Committee to update loss tables
when there is a reason to believe the ones currently used are not correct. Mr. Ambrose reported the
losses are costing HEA members money and HEA believes the Committee should move to accept EPS'
work or contract with someone else to study the losses.
BPMC Minutes 1/27/14 Page 6 of 12
Chair Evans asked if this is the same as the losses that have been raised in the Dispute Resolution
Special Committee. Mr. Ambrose stated he believes they are the same. Chair Evans asked if this issue
is currently in front of the Dispute Resolution Committee. Mr. Ambrose agreed. Chair Evans asked if
the Dispute Resolution Committee has taken an action on this item. Mr. Janorschke stated this
resolution was in place before introduction to the Dispute Resolution Committee. Chair Evans asked if
this resolution should be tabled until the Dispute Resolution Committee issues its findings and
direction. Mr. Ambrose believes if the BPMC ordered to change the loss tables, the dispute with the
Dispute Resolution Committee would be resolved.
Chair Evans noted he has not seen enough information to make an informed decision. Chair Evans
advised he will be voting against this resolution until he sees the supporting information. Mr. Ambrose
reminded Chair Evans the studies were performed over twovyears ago and the loss tables being used
were found to be inaccurate, which had nothing to do with a disparity of the transfer points.
Chair Evans asked if that was the opinion of everyone on the O&D,Committee and asked if this issue
had been brought in front of the O&D Committees Mr. Ambrose stated the issue was before the O&D
Committee quite some time ago and then brought to the BPMC's attention in January of 2012. The
study was conducted in 2011. Mr. Ambrose noted HEA wanted the loss calculations to be reviewed by
the BPMC and HEA is still waiting for a response to.that. This,has nothing todo with the current
disagreement over where energy is transferred.
Mr. Janorschke asked if the O&D Committee has provided their opinion of the EPS study. Mr.
Ambrose stated he has no knowledge of that. Mr. Day stated the O&D Committee met last week and
discussed some of these loss equations and. he felt like CEA's presentation seemed to indicate a
validation of the EPS study,with their own independentengineering work. Mr. Day advised the issue
he had in 2012 was hewas unable to obtain the loss‘table CEA was using at the time and nobody could
provide any information about where it came from, where it existed or how it was being used, and that
is when the issue was brought forward to redo the loss tables.
Mr. Griffith asked why this issuesvas relevant a year,or two ago. Mr. Day commented the
methodology that CEA utilized when they were dispatching the entire Kenai was the use of 10 meter
points to meter the wholesale sales to HEA. This was complicated by the fact that HEA operated
generatiomequipment on the Kenai for CEA. Because of the aggregation of those 10 meter points,
Bradley losses through HEA’s system were through those meters and in those numbers. On the
wholesale bill from CEA was a line item entitled Non-HEA Bradley Losses, which were supposedly
attributable to the non-HEA portion of Bradley that was traversing the HEA system, but being captured
by these 10 meters. Mr. Day reported he has not been able to discover the methodology by which that
number is calculated.
Mr. Griffith asked if CEA was taking the output of Nikiski at that time as part of their generation. Mr.
Day stated CEA was making up the losses inadequately, but Nikiski has nothing to do with this issue.
The losses occurred from the wheeling utilities' activities in moving Bradley power across the HEA
system. Mr. Griffith asked who made up the losses that HEA did not get compensated for. Mr. Day
noted the losses were generated back before they separated. Mr. Ambrose noted to the degree that the
loss tables would be inaccurate and there were more losses created by the export of Bradley energy than
were accounted for in the tables, which would show up on the meters as HEA demand, as opposed to
losses. HEA then paid for the losses created by the export of Bradley energy through their wholesale
power bill.
BPMC Minutes 1/27/14 Page 7 of 12
Mr. Griffith noted the assumption is the calculations CEA was using to define the losses was inaccurate
and that HEA's numbers are better. Mr. Ambrose believes EPS' numbers are better. Mr. Griffith asked
if the EPS numbers have been provided. He does not recall seeing the numbers. Mr. Ambrose stated
the EPS numbers have been provided. Chair Evans does not believe the line characteristics have
changed and it sounds like the calculation did not accurately reflect what was left over on the meters
and there should have been more losses allocated to the people wheeling the Bradley power. Mr. Day
stated there should have been a higher credit.
Chair Evans would like to resolve this issue and it is his understanding the O&D Committee is working
on this issue and expects them to address it. Chair Evans requested an update from the O&D
Committee, either through the Dispute Resolution Committee.or through the BPMC process.
MOTION: Mr. Griffith made a motion to table Resolution 2014-04. Motion seconded by Mr.
Janorschke. The motion passed unanimously.
MOTION: Mr. Griffith made a motion the O&D»Committee review Resolution 2014-04 to
identify the real amount of loss, determine what the loss tables should be, and provide a written
report with these recommendations at the February BPMC meeting. Motion seconded by Mr.
Foutz.
Mr. Foutz requested the EPS study be redistributed ‘to members.
The motion passed unanimously.
3. Resolution 2014-05 - Legal Counsel Correspondence Distribution
MOTION: Mr. Janorschke made a motion to approve Resolution 2014-05. There was no second.
Motion fails with no second.
4. Resolution 2014-06 - Committee member's invitation to all discussion
meetings regarding Bradley Lake project issues
MOTION: Mr.Janorschke made a motion to approve Resolution 2014-06. There was no second.
Mr. Foutz asked if this resolution can be discussed without a second. Chair Evans said the resolution
cannot be discussed without,a second, Mr. Gibson advised there needs to be a second to discuss the
resolution under Robert's Rules. Mr. Gibson stated this is in a sense a resolution to change the bylaws
under Section 5.11.5.
Motion fails with no second.
5. Resolution 2014-07 - Project Dispatcher to follow prescribed schedule
MOTION: Mr. Janorschke made a motion to approve Resolution 2014-07. There was no second.
Motion fails with no second.
Cc. Resolution 2014-08 - BPMC requiring compliance with Section 12.C of the services
agreement, Section 13 of the power sales agreement, and BPMC Resolution 2013-02.
MOTION: Mr. Griffith made a motion to approve Resolution 2014-07. Motion seconded by Mr.
Borgeson.
Mr. Griffith noted the necessity of this resolution is due to the operator not complying with the
agreements as they are written in at least three documents. This resolution is requesting the operator
abide by the agreements.
BPMC Minutes 1/27/14 Page 8 of 12
Mr. Janorschke recognized most of this has been discussed in front of the Regulatory Commission and
there are differences of opinion on those obligations. He does not believe HEA has done anything to
detrimentally impact the flow of Bradley power to non-Bradley participants and requested any
information to the contrary be provided.
Mr. Griffith does not believe this resolution states what Mr. Janorschke described. Mr. Griffith
believes this resolution is stating noncompliance to the sections identified in the signed agreements.
Mr. Griffith does not believe two people can dispatch the same segment of line.
Chair Evans asked if it is HEA's position that the transmission services agreement is no longer in effect.
Mr. Janorschke stated HEA's position is not all parts of the services agreement apply to HEA, only the
portions of it that HEA has agreed to and do not assume others! responsibilities under that agreement.
Chair Evans asked if it is HEA's position that unless theyare named in the transmission services
agreement, HEA has no obligation for all the other activity in theagreement. Mr. Janorschke stated he
does not understand where the Chair's question is going. Mr. Janorschke gave an example if CEA
agrees to provide a service, it is not HEA's responsibility to make sure'CEA has what they need to
provide that service and obligation.
Chair Evans asked if HEA agrees the transmission services agreement is in effect, but HEA just does
not agree with CEA about what that means. Mr. Janorschke gave no response. Chair Evans asked if
HEA would agree there has been no event that terminates the transmission services agreement. Mr.
Janorschke asked Mr. Ambrose if he had a comment. ChairEvans wanted Mr. Janorschke's response
before Mr. Ambrose's response. Mr. Janorschke'stated he has to think about his answer.
Chair Evans asked Mr. Janorschke what event took place that terminated the transmission services
agreement. Mr. Janorschke gaveno response. Mr. Griffith reminded the Committee on page 30 of the
services agreement, Mr. Turkington signed as President of Homer Electric without any exceptions to
the services agreement.
Mr. Borgeson stated Golden Valley willsupport this,resolution with the understanding that there is
metering in place, soto the extent that HEA is. suffering any losses or anything occurs in which there is
additional power losses that HEA could have, thatthey are metered and can be understood so HEA can
be compensated. GVEA believes this\resolution is appropriate because of the services agreement that
states if thereis a dispute between the parties, the parties will act at a standstill and keep everything the
way it was untilthe dispute is resolved. The expeditious process in place for the dispute resolution
process will get this resolved fairly soon.
Mr. Janorschke commented there is no status quo and HEA cannot undo the fact they have new
generation and the fact the transmission agreement and power agreement have expired. Mr. Janorschke
still disagrees the BPMC has any authority to dictate terms and conditions on HEA's system. He noted
HEA has no desire to constrain anyone's abilities to access Bradley power.
Chair Evans asked Mr. Janorschke if there is any middle ground as far as some configuration and
understanding in operating this system that would allow both parties to move forward. Mr. Janorschke
stated there is no middle ground today.
Chair Evans believes there is a way to facilitate part of what HEA is asking for and part of what the
BPMC is asking for that there would be a middle ground which reflects changes in other agreements
outside the Bradley participant agreements and the agreements that constitute that group of agreements
and also accommodate some of the changes that have happened on the Kenai Peninsula between CEA
and HEA.
BPMC Minutes 1/27/14 Page 9 of 12
Mr. Foutz responded to Mr. Janorschke's previous request regarding parties inform him if there was any
detriment to the flow of Bradley power to anyone. Mr. Foutz stated he was concerned the November
22nd outages may have been a possible detrimental occurrence. Mr. Janorschke stated he can assure
HEA had done absolutely nothing to their system in November that sources back to the outage. HEA
was still under the transmission lease agreement with CEA and CEA was continuing to dispatch the
HEA system.
Motion carries with HEA opposed.
8. OPERATORS REPORT
Chair Evans noted the next agenda item is the operators reportand requested an update from the
dispatch group. Chair Evans asked if this operators report had gone before the O&D Committee. Mr.
Day stated this report has not gone before the O&D Committee. Mr. Ambrose explained the operators
report is in response to Resolution 2013-03 which directed the operator provide a report to the BPMC.
Mr. Ambrose noted he requested Mr. Day complete'this report per those specific directions and that is
why the report is being presented to the BPMC now and not to the O&D Committee. Chair Evans
commented there are a lot of people on the BPMC that do not have the technical background from this
direction and they rely on the people on the O&D Committee to help explaimthe positions taken. Chair
Evans believes it is unfair to those members who maybe do not fully understand, what Mr. Day is going
to report on and it seems as if this wasyvetted, when it actually was not. Mr. Janorschke requested Mr.
Day provide a brief overview today and the,operator will take it to the O&D Committee and get a
report from them next month.
Mr. Day noted one of the biggest requirements in theIntertie Management Committee Reliability
Standards in Section F is‘the requirement that any interfa¢e.to the transmission provider be done
through switch construction with metering and)switching. He believes MEA is faced with this
requirement as they interface through the Eklutna transmission line.
Mr. Day directed the Committee to the bulleted items on the second to the last page of the report which
provides a summary. He noted,there are Various reporting functions required of an independent power
produceror an owner that Bradley would constitute and he is looking for the project dispatcher to start
complying with those reports as the information is available. Mr. Day advised a budget item will be
added for preliminary engineering to begin the projects the standards require. The project will prepare
a spin burden according to the transmission, providers' requirements. There are a number of studies that
need to be completed to minimize the impact of Bradley, including a voltage collapse problem utilizing
control of a breakerat Diamond Ridge.
Mr. Day advised there is,a 45-day full spin backup requirement when the governor is replaced. He
noted there are a number of.items in the standards that request cooperation, common metering points,
and standard points of interface, which has been discussed at great lengths today. This becomes a
problem because the project is in violation of the standards by assuming to pick load balancing points
that are not agreed to and are not common metering points.
Mr. Griffith noted he looks forward to the O&D Committee's forthcoming assessment of this treatise.
Mr. Borgeson expressed his appreciation for HEA's summary of the issues and believes they will have
to be brought to the IMC Committee. Mr. Borgeson noted AEA adopted the standards as well.
Mr. Janorschke stated the operator is more than content to deliver whatever standards the Committee
wants from the project and wants to make the Committee aware of the impact of the resolution from a
BPMC Minutes 1/27/14 Page 10 of 12
fiscal standpoint. He requested actions be taken as promptly as possible as we proceed with this
process.
Chair Evans suggested before the Committee starts spending any money, the Committee clearly
understands HEA's opinion about the reliability standards and the impact.
Mr. Borgeson noted any fiscal cost would require a budget adjustment in advance.
Chair Evans asked if the delay on the fish water bypass was new information to the O&D Committee.
Mr. Carey noted as of last Thursday, this could move forward, but in order to meet the schedule there
would have to be a release of approximately 120,000 megawatt hours or acre-feet. This has all
occurred just during the last couple of days.
Chair Evans asked if there were any other scheduling matters from the O&D Committee. No other
matters were voiced.
Mr. Day commented his report was only the first half of the operators report. He noted Mr. Owens had
additional information. Mr. Owens explained in,September 2013, the budget was proposed to the O&D
Committee on how to proceed with the Emerson replacement of the governor system. The O&D
Committee unanimously approved to go forward with the Emerson replacement of the governor
system. HEA, as the operator, issued a PO and entered into a’contract to replace the governor based on
the decision of the O&D Committee..Mr. Owens askedifthis Committee is requesting HEA go back to
the O&D Committee again and get permission to replace the governor or to continue with the contracts
in place. Chair Evans does not believe anyonestated to stop, cease and desist. He noted the concern is
ensuring the end product is as good as the previous)product. Chair Evans stated another level of
concern was this project grew into areas unanticipated from where it originally started.
Chair Evans asked if the system is\stuck in any. mode. Mr. Owens reported all the needle modes are
available and have been available. Mr. Owens noted the VA Tech governor is still operating as it has
operated for the past sevenyears. Chair Evans apologized for misunderstanding the issue. Mr. Owens
recommended members read the operators report, especially the final five pages, to clearly understand
the documentation that is available. Mr. Owens stated. the O&D Committee has been briefed on the
replacement and the O&D Committee has agreed'to go forward. Mr. Owens noted there is an O&D
Committee meeting on Thursday and this issue will again be addressed. Mr. Owens requested any
specific questions from members be forwarded to him via his email, which is listed on the back of the
operators report:
9: COMMITTEE ASSIGNMENTS
Chair Evans stated the O0&D Committee is assigned to evaluate Mr. Day's operators report on bringing
the project into compliance.and the reliability standards adopted. Mr. Owens added for budgeting for
FY 2015, the O&D Committee needs to go forward with their analysis of the standards. If there are
budget items, the operator needs to get involved in 2015 to complete those standards. Chair Evans
commented the Chair of the O&D Committee is present and believes he noted that comment.
Chair Evans stated the O&D Committee is assigned the loss factor issue, including current operations,
what is driving the need for change, and understanding the issue. Chair Evans requested the Chair of
the O&D Committee communicate to the BPMC any problems regarding the clarity of the assignment.
Chair Evans stated the O&D Committee is assigned further discussion on the Kenai outage to engage
the technical coordinating people from respective members. Chair Evans recommended the same
group of people decide the testing plan of the governor replacement to assure the functionality of the
BPMC Minutes 1/27/14 Page 11 of 12
previous governor was preserved. Chair Evans believes it would be a benefit to the O&D Committee to
hear how the testing plan was executed previously.
10. ADJOURNMENT
The next meeting date was set for March 3rd, 2014, at 10:00 a.m., in the AEA boardroom.
There being no further business for the committee, the meeting adjourned at 3:30 p.m.
BY:
Bradley Evans, Chair
Attest:
Sara Fisher-Goad
Alaska Energy Authority, Secretary
BPMC Minutes 1/27/14 Page 12 of 12
BRADLEY LAKE PROJECT MANAGEMENT DISPUTE RESOLUTION COMMITTEE
SPECIAL MEETING
Alaska Energy Authority, Anchorage, Alaska
February 7, 2014
1. CALL TO ORDER
Dispute Resolution Process Chair Joe Griffith called the specialameeting of the Bradley Lake
Hydroelectric Project Management Committee to order at 10;02 a.m.
2. COMMITTEE MEMBERS ROLL CALL
Brad Evans Chugach Electric Association (CEA)
Cory Borgeson Golden Valley Electric Association (GVEA)
Sara Fisher-Goad Alaska Energy Authority (AEA)
Gary Kuhn Matanuska Electric Association (MEA)
Dan Kendall Anchorage Municipal Light & Power (ML&P)
John Foutz City of Seward (SEW)
Brad Janorschke Homer Electric Association (HEA)
3. STAFF/PUBLIC ROLL CALL
Bryan Carey, Kirk Warren, Teri Webster (AEA); Brian Bjorkquist (Department of Law); Kirk
Gibson (McDowell Rackner & Gibson PC); Lee Thibert, Burke Wick, Mark Johnson, Paul
Risse, Brian Hickey (CEA); Robert Day, Alan Owens, Rick Baldwin, Harvey Ambrose, Mike
Tracy (HEA); Jim Brooks, David Pease (MEA); Lou Agi (ML&P); Bernie Smith (Regulatory
Commission of Alaska (RCA)); Matt Clarkson, Robin Brena (Brena Bell & Clarkson); Sunny
Morrison, Miranda Studstill (Accu-Type Depositions); Dave Burlingame (Electric Power
Systems).
4. APPROVAL OF PRIOR MINUTES - January 15, 2014
The minutes were approved as amended.
5s PUBLIC COMMENT
There were no public comments.
6. AGENDA COMMENTS/MOTION FOR APPROVAL
The agenda was approved as amended.
Mr. Kendall requested if he could provide comments on behalf of ML&P before the meeting
discussions began. He noted there have been a lot of prior events relating to the Bradley Lake
agreements, which are leading a path to the court system. Mr. Kendall does not believe that is
the best alternative and thinks the courts system path would take considerable time, effort,
BPMC Minutes 2/7/14 Page 1 of 19
money, and the judge may not know about electric utilities and come up with a really odd
outcome.
Mr. Kendall proposed having more informal discussions on these issues. He stated the informal
discussions could take place at ML&P and sandwiches would be provided. He believes there is a
solution that can be discussed outside of this process in a more informal setting. Mr. Kendall
noted this process is certainly allowed by the rules. He added the Legislature is closely watching
the actions of the utilities and suggested a more informal meeting to talk about these issues.
iI OLD BUSINESS
Chair Griffith invited Mr. Borgeson to give an update on the discussions they had with HEA in
attempt to resolve the issues. Mr. Borgeson reported they met with HEA in late November when
it was realized this dispute would be difficult to resolve. A proposal was submitted by HEA in
May of 2013 to lease the line for a specified dollaramount and otherspecified conditions. This
proposal is no longer available. Mr. Borgeson explained he and Chair Griffith expressed interest
in leasing or purchasing the line. GVEA and MEA initiated this discussion with HEA and
intentionally left CEA out of these discussions.
Mr. Janorschke stated HEA met with Chair Griffith and Mr. Borgeson in November and in
December. He noted the proposal that wasamade in May has become less attractive and one
reason is the recent experience of transmission line outages, which impacted HEA significantly
when trying to sell steam power to GVEA and CEA:
Mr. Kendall asked if there is currently a two-week outage omthe Soldotna Quartz (SQ) Line.
Mr. Day advised there is a three-week outage scheduled on the SQ Line to begin February 27th.
This is to address safety issues by replacing insulators and correcting clearance problems.
Chair Griffith noted for the record, this is the third time Committee members have met with
HEA in efforts to define.the issues.and proceed with the process. Chair Griffith requested
counsél's opinions on what happens next if this Committee comes to a total impasse regarding
this process, Mr. Gibson advised the BRMC gave the gavel to this Dispute Resolution
Committee and. if no compromise or dispute resolution is reached, the Dispute Resolution
Committee would. give the gavel back to the BPMC with a report stating there was no ability to
compromise. The BRMC would then move forward as a whole.
Chair Griffith made a ruling and requested the Operators & Dispatch (O&D) Committee provide
their report, next HEA provide their position, and then the disputing utilities provide their
position.
O & D Committee report
Mr. Brooks, Chairman of the Bradley Lake O&D Committee, advised the O&D has been
addressing some of these issues even before the first of the year in anticipation of pending
problems. He noted this effort was mostly driven by Mr. Day. The O&D has categorized the list
of concerns as technical issues and non-technical issues. The O&D has attempted to focus on the
technical issues. Mr. Brooks stated the O&D does not believe they can resolve the many
different aspects of the non-technical issues, some of which include contractual disputes.
BPMC Minutes 2/7/14 Page 2 of 19
Mr. Brooks stated the summary of the O&D report of the technical issues have been identified
and include dispatch, loss compensation, and the ability to transmit power from the project into
the participating authorities. The O&D does not have any hard resolution for any of the
technical issues because new information is still being gathered. The O&D does not necessarily
see any technological impasse on any particular issue, but it is a matter of defining the technical
solution and then getting all the parties to agree.
Mr. Kendall commented the O&D Committee's report was a general summary of the last
meeting. Mr. Kendall asked if Mr. Brooks is saying the issues cannot be resolvable at the O&D
Committee. Mr. Brooks disagreed, and noted the O&D Committee needs more time to arrive at
any fair conclusions. Mr. Brooks believes the O&D Committee can have specific solutions to
present at the next meeting of the Dispute Resolution Committee.
Mr. Kendall requested the O&D Committee provide to the Dispute Resolution Committee a one
or two-page report noting the date the O&D Committee met, what issues were discussed, what
was resolved or not resolved because the Dispute Resolution Committee.is looking to the O&D
Committee for guidance on the issues. Mr. Kendall requested the O&D articulate which issues
can be addressed by the O&D and which issues cannot be addressed by the O&D. Mr. Brooks
stated he will provide something to the body through the Chair. Mr. Kendall commented he had
expected that type of O&D report at thismeeting.
Mr. Brooks believes there is a technical resolution for all of the technical issues, but the specifics
have not yet been crafted. He noted dynamic dispatching appears to be something that would
solve a lot of the concerns, buthe does not know exactly what that looks like today.
Ms. Fisher-Goad stated the O&D report from January 22nd listed investigation and discussion
questions. She understood the O&D was supposed to come back to the BPMC with their list of
specific questions, including guidanceon whether the issue is under a Bradley Lake agreement
or if the issue is under a side agreement, and guidance on how to operate the system, which is
missing because the agreements have deficiencies. Chair Griffith disagreed, but accepts that is
Ms. Fisher-Goad's point of view.
Chair Griffith believes the O&D Committee's viewpoint is they need more time to dig into the
technical issues and figure them out.
Mr. Foutz asked if the O&D Committee need an answer or a decision by the BPMC on some of
the technical issues to help bring those to some sort of conclusion or finality. Mr. Brooks
believes the technical issues stand on their own merit. He stated some of the contract issues may
modify the technical solution. Mr. Brooks believes there needs to be a unified solution on all of
the issues because if a technical solution is implemented and then a contract issue changes the
way power is delivered or how it is dispatched, then that technical solution may no longer be
applicable.
Mr. Janorschke requested the O&D Committee review the statement regarding dispute resolution
procedures that HEA submitted at the last meeting, which identifies three clear issues HEA
believes is within BPMC's area of responsibility and provide recommendations on how to solve
or address those issues.
BPMC Minutes 2/7/14 Page 3 of 19
Chair Griffith expressed his appreciation to Ms. Fisher-Goad and Mr. Kendall for their
comments and noted it may be possible to provide more clear definition to the O&D Committee
today after all the items are completed.
Ms. Fisher-Goad commented there seems to be a circular argument where the O&D Committee
is trying to make decisions with respect to the operation of the system following agreements that
are not giving clear direction. There are disputes and issues in front of the RCA. She believes
the O&D will be "stuck" until specific issues are addressed and resolved. Chair Griffith agreed.
Mr. Borgeson asked what issues Ms. Fisher-Goad believes the O&D Committee should address.
Ms. Fisher-Goad requested the O&D Committee provide a list of specific disputes that need
clarity in order to begin discussions about possible solutions. This would include the issues
about who is controlling the system in order for the project power to go north.
Ms. Fisher-Goad noted she shares Mr. Kendall's concerns with respect to others watching these
proceedings and what is being communicated by not being able to havesome type of
advancement in the discussion of these disputes.
Mr. Wick reported one of the questions that arose often was he calculation of losses. He does
not believe there will be any problem calculating or agreeing on losses over any given segment
of line. The question is regarding where the delivery points are and how those losses are going
to be treated. Will the losses be treated as a segment loss or an.average system loss for the
delivering utility? The O&D Committee cannot answer the question on how to treat the losses
until the overarching questionof where the delivery points are is answered.
Mr. Brooks noted Mr. Wick articulated the situation nicely. He commented the O&D
Committee is being asked,to solve technical questions on a system that is undefined because of
the debate in the non-technical arena.
Chair Griffith commented the Committee will try,to be more specific and precise in the
challenges placed before the O&D Committee in the future. Chair Griffith stated he will speak
with the Chair of BPMC to assist in providing clarity.
Mr. Janorschke asked if he was correct in understanding the O&D Committee basically saying
there is not much disagreement on the actual losses, especially by line segment, but it is more a
matter of if the losses will be measured from Soldotna or Quartz Creek. Mr. Wick agreed and
explained prior to December 31, the power was delivered to Soldotna Substation. It then entered
Chugach's system and the losses were calculated as a system loss. It was averaged over
Chugach's system. It did not segment out the segment from Quartz Creek to Soldotna. If the
metering point is moved to Quartz Creek, is that segment treated separately? Is it counted as part
of Homer's system? Does it still reside in Chugach's system? Those answers affect how to
calculate the contract losses and how they will be paid for. The actual loss over any segment can
be technically calculated. The old agreements did not necessarily pay exact losses for any one
segment to any one utility that was being impacted.
Homer Electric position
BPMC Minutes 2/7/14 Page 4 of 19
Mr. Janorschke stated he will present the highlights of HEA's position paper (attached). He
explained the three main issues within Resolution 2013-02 include the scope of BPMC's
authority, the wheeling compensation, and the impact of the termination of the transmission
lease. Mr. Janorschke stated this is an HEA system asset and any attempts to separate the SQ
Line from HEA system is failing to recognize the fact that power flows through the majority of
HEA system. The losses can and will be measured. Mr. Janorschke noted HEA has not at any
point tried to limit anybody's access to that line.
Mr. Janorschke believes the scope of the BPMC's authority is limited strictly over the Operations
& Maintenance (O&M) of the project and HEA's transmission system is not part of the project.
This argument was brought before the RCA as an issue regarding tariffs. Mr. Janorschke
directed the Committee's attention to the last sentence of the first paragraph on page four, which
shows the terms of the service agreement under Section‘13, definitions, making Soldotna or a
successor facility the delivery point. Quartz Creek is the successorfacility.
Mr. Janorschke does not believe the BPMC has ‘authority to dictate tariffs on HEA's system and
the operation of HEA's system. He noted HEA is more than willing and has provided
information to CEA so they can monitor the HEA system and see breaker indications. He does
not believe CEA's purview includes physically controlling the HEA system.
Mr. Janorschke stated Bradley Lake uses a significant portion of the HEA system and
historically, the O&D has recognized that. When,the Diamond,Ridge Substation was improved,
HEA was going to open up the west loop and move the transformer. He noted the O&D
Committee stated HEA couldinot do that because it would.impact the reliability of Bradley Lake.
As a result, funds were provided to, build a shoe flyaround theloop so it would not have to be
opened.
Mr. Janorschke noted the tariff that is;currently in front of the RCA has to do with the power
going across the HEA system, excluding the Soldotna,segment. He agreed the proposed tariff
rates seem high, compared to zero, but believes they are still lower than any of the other
wheeling tariffs in existence.on the Railbelt today.
Mr. Borgeson asked for HEA's position onthe services agreement they signed wherein CEA
would provide services and dispatch of the lines for Bradley Lake power during the course of the
50 years of the services agreement. Mr. Janorschke believes HEA is bound only to the
obligations they agreed to in the services agreement. He noted when the contract was developed,
CEA was dispatching the majority of HEA's system because HEA did not have a dispatch
facility.
Mr. Borgeson asked specifically about the agreement that CEA would be responsible for the
services and dispatch of the Bradley Lake lines. He stated GVEA understands there has to be
services and costs of getting the power from Bradley north into GVEA's system. Mr. Borgeson
explained GVEA signed a services agreement stating they will pay Chugach to provide the
services and now HEA disputes CEA's obligation under the services agreement and wants
GVEA to pay HEA for the same services GVEA has agreed to pay Chugach for under the same
services agreement. He requested clarity.
BPMC Minutes 2/7/14 Page 5 of 19
Mr. Janorschke commented he does not believe HEA has ever stated they want to dispatch
Bradley Lake. Mr. Borgeson asked why HEA is proposing GVEA pay for dispatch services
under HEA's tariff. Mr. Janorschke stated the tariff is for dispatch services and wheeling on the
transmission side of HEA's system. He noted HEA has not received adequate compensation for
using their system since the project came online over 20 years ago. Mr. Janorschke added CEA
does not have authority to use HEA's system to dispatch power and in order to do that, CEA has
to work with HEA's dispatchers and local dispatching authority (LDA). This is impacting HEA's
entire system.
Mr. Borgeson commented whether this was a good deal or a bad.deal, it was the deal agreed to
under the original obligations. He believes there were benefits HEA received when they signed
the agreement.
Mr. Janorschke requested if anyone could pinpoint the language inthe services agreement that
puts the obligation on HEA. Mr. Day explained part of open access tariffs pays for the cost of
dispatching services so power can flow, lines aré not overloaded and there is coordination of
outages. He believes the services agreement says CEA will accept Bradley,power and move it to
the other utilities. The hole exists in that what CEAvused to pay to lease the facilities at HEA
was in that part of the cost and part of the tariff, but now that CEA no longer leases those
facilities from HEA, those costs shouldno longer be accruing to the wheeling utilities. The costs
still exist and now HEA has taken over those,costs. Mr. Day, believes there should be a shifting
of costs and losses, which becomes a technical question. Bradley is a very significant resource
on the HEA system. Mr. Day noted HEA's relative size is 80 megawatts and Bradley Lake is
120 megawatts. Bradleyis very,large compared to HEA, which causes problems and that is the
reason HEA is before‘the Committee with these issues.
Mr. Kuhn asked Mr. Janorschke what are the successor facilities to the Soldotna Substation and
how does it work. Mr. Janorschke explained the successor facility is Quartz Creek, which is the
edge of HEA's system.and where all the metering points exist today. He suspects this was
intended back when the agreementiwas originally signed, even though he was not present when
the agreement was signed. Mr. Janorschke noted it was known the wholesale power contracts,
the transmission lease agreement with CEA for the SQ Line, and the SVC maintenance
agreement all were to expire at the end of 2013. He believes those who signed the agreements
knew it would be apotentially different world in 2014.
Mr. Kuhn asked how HEA provides the voltage support to its transmission segments from the
perspective of the Bradley power delivery. Mr. Day noted the first component is the Bradley
SVC that was installed at Soldotna, which is a major voltage support. The second component is
supporting the voltage with HEA's Excitation rotating equipment as part of the system voltage
control. Mr. Day noted he needs to verify the records, but believes there were issues with limited
transmission capability of the power north without the SVC at Soldotna.
Mr. Burlingame stated he will add to Mr. Day's comments. The SVCs were an afterthought and
were added to increase the transient stability and not the steady state transfer of power. Chair
Griffith agreed. Mr. Burlingame noted the steady state transfer of power was a byproduct of the
transient stability increase, which is why both SVCs actually have a reservation of more transient
stability in the SVC control module.
BPMC Minutes 2/7/14 Page 6 of 19
Mr. Pease believes that issue was initially addressed in the transmission agreement under Section
2B where HEA was supposed to take measures to provide voltage support along that segment of
line.
Mr. Kendall requested clarification on the reconciliation HEA has with the BPMC agreements
that did not expire compared to the HEA's list of agreements that did expire on December 31,
2013. Mr. Kendall commented it seems HEA anticipated there would be a series of negotiations
relating to HEA trading their own electrical generation and no longer purchasing power from
CEA, because this discussion started seven years ago when notice had to be given to CEA.
Mr. Janorschke noted HEA recognized, as he suspects many of the other utilities did too, that
there was going to be an issue coming up at the end of 2013 with HEA's addition of a new
generation and creation of a dispatch center with a wheeling tariff. Mr. Janorschke stated this is
no surprise to anybody on the Railbelt and HEA has been talking about the new generation and
dispatch for three years. HEA has been talking about the wheeling tariff for at least a year now
in an attempt to head off what has become the current situation. Proposals were made in 2011 or
2012 trying to make sure HEA's new generation had the least impact on the deliverability of
Bradley power off the Peninsula.
Chair Griffith restated the question of what did HEA do to notify the parties seven years ago.
Mr. Janorschke believes HEA gave CEA notification three years ago they were not going to
extend the wholesale power agreement.
Mr. Kendall stated the BPMG.oversees the movement of Bradley Lake power from Kenai to
Anchorage and north. Mr. Kendall asked if the BPMC received a proposal stating HEA will take
the place of CEA on the Kenai. Mr. Janorschke stated he does not believe the BPMC has the
authority to tell HEA what.HEA can do on the Kenai. Mr. Janorschke stated the BPMC
responsibilities are limited tothe Bradley Project, which stops at Bradley Junction.
Mr. Kendall commented he would like to know if those types of discussions took place at the
BPMC level. Mr. Janorschke stated that discussion did take place at the BPMC level and
requests for solutions were proposed to each participant on the BPMC. Mr. Janorschke believes
HEA's originalproposal would have alleviated many of the current disputes, but the response
from BPMC was "we appreciate it, but we are not ready for that." Mr. Janorschke believes MEA
was the only one who responded in writing and noted these issues deserve some additional
discussion at a later date.
Mr. Gibson understands HEA believes they have been subsidizing the BPMC power flows
through HEA's system. Mr. Gibson stated the approximate cost for the lines in December was
$250,000 and under the HEA tariff, the cost for the lines will be about $2.9 million. Mr. Gibson
asked if that is the amount of subsidization that has been occurring and if it is, how much is the
new generation adding to the $2.9 million in the system cost.
Mr. Janorschke believes the $240,000 was for the Bernice to Soldotna to Quartz (BQ) Line and
did not include the rest of HEA's system. There are no new generation costs included, but
dispatching costs are included.
BPMC Minutes 2/7/14 Page 7 of 19
Mr. Gibson asked if the delivery points change the general amount of losses from Bradley up to
Quartz Creek. Mr. Janorschke noted where the losses are measured does not change the loss
amount. The largest driver in the losses right now is how the units are dispatched.
Mr. Thibert understood HEA to state no generation costs were included in their tariff. He asked
if the Tl and T2 rates do include a portion of generation. Mr. Janorschke commented Mr.
Thibert was correct that there is a small component for voltage support included in the tariff.
Mr. Day noted definitely voltage support from the rotating equipment is a portion included in the
tariff, but he does not know about T1/T2 rates to answer whether or not they are included.
Mr. Pease addressed HEA's request for anybody to show them in the agreement the obligation
that Bradley Lake power has a priority to move north fromSoldotna to University. He directed
attention to the services agreement under the last "whereas" on page one, which reads, "under the
circumstance, participation in a project where all the parties can reasonably be achieved only if
some alternative solution to the problem of transmitting or otherwiseutilizing project power
devised by the parties, such alternative arrangement to be terminated if and when adequate
alternate transmission facilities are constructed." Alternate transmission facilities are defined in
the agreement as something other than what is covered by the agreement.
Mr. Pease directed attention to the services agreement Section 2B, Non-exclusivity of Services,
at the end, which reads, "provide that no other agreement shall have the effect of reducing a
priority access to services enjoyed by Bradley Lake energy under this agreement." He noted
another area for consideration is Section 8A, IV, talks.about coordination between CEA and
HEA with respect to dispatching Bradley Lake power, the.dispatch of project generation, and
provisional services to the wheeling utilities.
Ms. Fisher-Goad expressed her concern that Mr. Day mentioned the burden of transmitting
Bradley power through HEA's systemmShe asked for him to provide further explanation of how
the asset that has been on the system for a long time has become a burden. Mr. Day explained
before January 1, 2014, CEA dispatched the system and dealt with losses in a very generic way.
HEA has an ongoing investigation with CEA as to how they compensated HEA for the
measurement of wholesale power because it included Bradley losses. There was a calculation in
the wholesale bill where CEA gave credit to HEA for a certain portion of energy that was
attributed to the wheeling utilities of Bradley losses on the HEA system.
Ms. Fisher-Goad clarified she is asking if it is technically burdensome for HEA to deal with
Bradley power on the system: Mr. Day stated it is not technically burdensome and their issue is
how to apportion the calculated losses. Ms. Fisher-Goad asked if she is correct in understanding
the reason for the tariff is that there is significant burden for HEA to be able to deal with Bradley
power on the system. Mr. Day stated that is correct.
Ms. Fisher-Goad asked if HEA's burden also impacts how they feel about operating the project.
Ms. Fisher-Goad expressed her concern that HEA is very focused on its own generation and its
own transmission system. She asked if the BPMC should have a concern with respect to HEA
operating the project. Ms. Fisher-Goad noted this is an asset that is supposed to service the
entire Railbelt. She believes the Committee and the utilities are expected to cooperate in order to
get the power to all the utilities subject to the power sales agreement.
BPMC Minutes 2/7/14 Page 8 of 19
Mr. Janorschke believes HEA's intent is that the Bradley power has a large impact on the HEA
system and not that it is a burden to the HEA system. He noted all the non-HEA power produced
at Bradley has to go through HEA system and go to Anchorage, as opposed to utilizing those
electrons to serve HEA native load. Mr. Janorschke stated it is not a burden, but it has a large
impact on HEA's system. He believes if a large portion of the HEA system is going to be used,
then the cost should be shared. Mr. Janorschke noted HEA has never said they intend to restrict
the flow of Bradley power to the Peninsula.
Mr. Janorschke believes that any concerns Ms. Fisher-Goad has about the O&M at Bradley goes
beyond the issues currently before the Committee. There is an entirely separate group
maintaining the O&M at Bradley. Mr. Janorschke asked Chair Griffith to please voice any
concerns regarding operation and maintenance at the plant’ Mr. Janorschke asked how many
people from the Committee have actually been to the plant in the last two years. He believes the
crew is fantastic.
Ms. Fisher-Goad commented she understands the focus of HEA's technical team is on the new
generation and their transmission system. She wants to ensure there is focus with respect to the
project operating appropriately. She expressed her concern that the Railbelt system is less and
less of a Railbelt system when utilities are not working,as part of a team to provide service and
delivery of power to the entire Railbelt.
Mr. Baldwin responded to the comments about the services agreement made by Mr. Pease. Mr.
Baldwin believes Mr. Pease accurately read the provisions, but thinks the interpretation of those
provisions is overstated as faras any argument that CEA or others might have an ability to
impose CEA's duties onto HEA under the contract“ He noted with respect to the alternative
solution, the parties were looking for an alternative solution to transmitting Bradley power so
that everyone could get their Bradley power when the project was built. The word "alternative"
implies there is more than one solution»Mr. Baldwin believes an alternative solution to CEA
providing the services over HEA's system is HEA providing the services of its system as the
owner of its system.
Mr. Baldwin responded to the comments.regarding Section Two and priority access to the
services enjoyed by Bradley Lake energy under this agreement. He noted nothing in the
agreement requires HEA to give people a bargain on their wheeling rates in order to qualify as
providing priority access to services. Mr. Baldwin argues the services agreement does not even
apply to HEA, as far as the dispatcher's duties are concerned.
Mr. Baldwin responded to the comments about Section 8A4 delineating dispatcher's duty. CEA
has the duty to coordinate with HEA in order to minimize potential conflicts between HEA
system operations, CEA system operations and the dispatch of project generation. HEA is
definitely trying to cooperate and coordinate with CEA. Mr. Baldwin does not believe when one
is asked to surrender one's own property and property rights, one can be accused of not
cooperating by refusing to surrender those rights to a third-party when there is clearly an
alternate available and if there is no obligation on the part of the owner of those rights.
Mr. Baldwin explained HEA has offered a typical alternative offered by typical utilities to people
passing energy over their systems and that is to offer a tariff that is cost-based. He stated it
BPMC Minutes 2/7/14 Page 9 of 19
seems like there is some denial that HEA is actually incurring these transmission costs and some
wish on the part of the other utilities to have HEA continue to provide transmission over its
system at a bargain rate, even though we are in a new world. This is a new contractual system
that has to be recognized.
Mr. Baldwin stated the parties understood at the time the services agreement was signed this
lease was going to terminate. He believes CEA was certainly aware the lease was going to
terminate. The lease was honored and the lease terminated. There was a bargain rate for a long
time and there is no longer a bargain rate. All HEA is asking for at this point is to be fairly
compensated, as any other utility would.
Utilities position
Mr. Brena expressed his appreciation for being able to appear telephonically from Washington,
D.C. Mr. Brena stated his viewpoint, quoting from the services agreement, that all parties,
including HEA, agree that HEA "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." He
believes the contract is clear that HEA agreed CEA will operate the lines necessary to wheel
Bradley Lake power from the Soldotna Substation north.
Mr. Brena stated footnote five in the brief prepared for this meeting today (attached) details all
the places in the services agreement where it is very specific that virtually all of CEA's rights and
obligations to wheel power are defined in terms of receiving the power at the Soldotna
Substation. Mr. Brena doesnot believe this case is about HEA's ability to generate or manage
their own system. He-believes it is about their.agreement thatCEA can operate the SQ Line
from wheeling the Bradley Lake power, which GEA has operated for 25 years.
Mr. Brena commented HEA has two arguments to contradict the plain language of the services
agreement. The first.is that a lease that is not one of the Bradley Lake agreements has expired.
The expired lease had to.do with the wholesale power sales that CEA was making to HEA. He
noted all parties were aware of the least at the time the Bradley Lake agreements were entered
into and the’services agreement is a 50-year lease. Mr. Brena does not believe there is a single
term or condition in the services agreement,that changes one bit as a result of the expiration of
that lease. The dispute is whether or not the expiration of the lease impacted any of the Bradley
Lake agreements.
If the original makers had intended for the services agreement to only run 25 years and all the
other Bradley agreements to operate for 50 years, the could have stated that. The agreements
were made long-term on purpose because they were interrelated agreements associated with
undertaking take-or-pay obligations by everybody to fund through bonding an asset project that
benefitted everybody. Mr. Brena noted the expired lease included the SQ Lines, the electrical
facilities north of the Soldotna Substation, as well as for other facilities. The lease does not say
anything about Bradley Lake or Bradley Lake power.
Mr. Brena noted on page five of his brief, former HEA general manager points out that the entire
structure of the Bradley Lake agreements prevents any one party from taking advantage of the
others and that all parties have to agree to any amendments to the Bradley Lake agreements. The
BPMC Minutes 2/7/14 Page 10 of 19
rates are hemmed in specific negotiated formulas and cannot be changed by any one party. Mr.
Brena believes HEA is unhappy with the compensation they are receiving under the Bradley
Lake agreements and in the middle of the deal are trying to reprice the SQ Line from a little over
$200,000 to almost $3 million.
Mr. Brena believes the other argument presented by HEA has to do with the definition of the
successor facilities to the Soldotna Substation, which he noted HEA's counsel stated he does not
remember what it meant. Mr. Brena stated a CEA employee gave uncontested testimony to the
RCA about what the phrase meant and noted it was a reference to if the southern intertie got built
and it replaced the Soldotna Substation with some other substation. Mr. Brena commented even
if a broader definition is used, it does not mean HEA has a unilateral right to disconnect the
breaker at the Soldotna Substation and move them to Quartz Creek and unilaterally move that
point in the contract.
There are 13 specific amendments that are necessary to make that change to the document and an
amendment to the services agreement requires a unanimous consent to all the parties. Mr. Brena
noted the idea the successor facility language in the contract somehow permits HEA to take
unilateral acts to change the point at which CEA receives power or its grant of authority by HEA
to operate the SQ Line is simply not credible. Mr. Brena believes the unilateral acts of HEA to
file a tariff to try and bypass the BPMC@aand the entire Bradley Lake process and its efforts to
reprice this deal in the middle of the deal is not in good faith,
Mr. Brena requested the Committee rule today on theissue of the BPMC's authority. He noted
the power sales agreement andthe services agreement both anticipate very broad authority by the
BPMC. He explains this on page six of the brief. The power sales agreement says the BPMC is
responsible for the management, operation, maintenance, and improvements of the project and
shall also arrange for scheduling and dispatch of project power. The services agreement entrusts
the BPMC to establish procedures necessary to resolve disputes.
Mr. Brena cited Article 12 of the BPMC bylaws which provides if the authority of the BPMC to
act is challenged, the BPMC will rule on its authority and if it has authority, it will rule on the
dispute. This is not discretionary. It is amandatory valuation. Mr. Brena agreed with earlier
comments regarding taking every potential avenue to work this out because the courts and
litigation is not amefficient way to resolve these issues. He noted all the Bradley Lake
participants went to the Legislature and requested the series of contracts be exempt from
regulatory oversight andthe BPMC will work through its own issues.
Mr. Brena stated the issue is whether CEA or HEA has the right under the services agreement
and the Bradley Lake agreements to operate the facilities north of the Soldotna Substation,
including the SQ Line. Mr. Brena believes it is clearly within the Committee's authority to act
on these issues and in the absence of acting, there only other place to go is the Superior Court
and the Legislature trusts the specialized experience and expertise of the industry to address
these conflicts and questions. He encouraged the Committee to take every opportunity to try and
negotiate a reasonable resolution.
Mr. Brena commented on the issue of whether or not HEA is entitled to additional compensation.
He stated he does not know anybody that would not like to redo a deal after they entered into it
BPMC Minutes 2/7/14 Page 11 of 19
and to get more from the parts that are disadvantaged to them. Everyone agreed the Bradley
Lake agreement brought net benefits to every project participant. There is no failure of
consideration. There is no failure to compensation. Everyone got the benefit of the project and
everyone agreed that CEA would operate the SQ Line and if that changed, it would take a
unanimous consent of all parties. Everyone agreed on the exact formula that would determine
the cost and compensation for all the parties involved. There is nothing in the Bradley Lake
agreements that has changed. HEA and all of the project participants are getting exactly the deal
they benefitted from and it is not permitted to reprice in the middle of the deal by 1,100%.
Mr. Brena stated there are safety and reliability issues to the distribution and dispatch of Bradley
Lake power raised by these disputes. The Committee has asked HEA twice now to maintain the
status quo regarding the Bradley Lake agreements until such time as the issues can be addressed
and negotiated in good faith between the parties. HEA is continuing to change locks, change out
breakers and impact CEA's ability to operate the facility. Mr. Brena commented there cannot be
a high-power transmission line in place with people not agreeing whohas physical control of it,
how it is going to be scheduled or how it is going to be dispatched.
Mr. Brena reported under HEA's tariff, the Bradley Lake power does not have,any priority. The
entire structure of the Bradley Lake agreement was to give the Bradley Lake power specifically
negotiated priorities over the entire system, so it could be delivered to the utilities that needed it.
He believes HEA does not only want physical control and 1,100% more than they are entitled to
under the agreement, but they want to determine'the Bradley Lake power priority status. Mr.
Brena stated one of the footnotes included in the briefsubmitted by HEA to the RCA was that
HEA had no obligation to agree Bradley Lake power could.be wielded over their facilities at all.
That is not the deal any of the project participants signed up for.
Mr. Baldwin requested a few minutes for rebuttal. Chair Griffith noted he does not want a long
rebuttal. The issues have been stated and he intends for the Committee to vote on the questions
pretty quickly.
Mr. Foutz stated he does not oppose a brief rebuttal, but this is the time for questions for the
disputing utilities' point of view. Chair Griffith requested Mr. Baldwin be brief in his rebuttal.
Mr. Baldwin believed the comment made that HEA is guilty of bad faith because of its position
is outrageous. He believes that is an insult and it should not stand. Mr. Baldwin advised HEA's
position is that it intends to honor the contracts. He noted the contracts were written without
having any specific provision to deal with the specific contingency of the lease terminating. Mr.
Baldwin stated the negotiators at the time can be faulted or accept the fact they intended to let the
lease terminate and for the then available alternatives to be put into place.
Mr. Baldwin stated HEA takes the position they will vigorously defend the existing contracts and
are not asking for any additions to those contracts. He noted there is no agreement by HEA that
CEA may do the O&M on the Soldotna segment. The section that has been quoted is a duty to
operate and maintain the system on behalf of CEA in accordance with prudent utility practice.
The same language is in HEA's transmission contract where HEA undertakes in good faith and at
all times to operate, maintain and repair the electrical facilities and to perform the services here
under.
BPMC Minutes 2/7/14 Page 12 of 19
Mr. Baldwin commented on the definition of a successor facility, which clearly indicates that the
negotiators of the contract anticipated a time in the future when there may be a need for a
successor facility for CEA to take power. Mr. Baldwin commented on the point made that the
contracts do not provide for HEA to receive any compensation for wheeling power. He agreed
and stated that is because there is not a provision in the contract to deal with that contingency.
The fact there is not a provision in the contract to deal with the contingency does not thereby
allow people to say the contingency was never contemplated or to ignore the fact that this has, in
fact, occurred. He stated there are no rights under any of the contracts that provide other utilities
with rights to HEA's system and should have been negotiated into the contracts if they were
going to be there.
Mr. Baldwin stated the comment the utilities have potentially no right to Bradley Lake power
under HEA's tariff is nonsense. That is the reason the tariff was.created. He added that without
the tariff, he agrees that statement is true, but with the tariff, he believes it is an untrue statement.
Mr. Brena stated HEA's brief says, "the opposing utilities are now demonstrating a lack of good
faith by directing punitive action at HEA." With regard to the successor substation, he believes
there is no reasonable interpretation and the partiesexpectations at the time that HEA would
change the breakers from Soldotna Substation to Quartz Creek unilaterally and without
unanimous consent of the parties.
Mr. Brena noted HEA has asserted they do not have an obligation to transfer the power. He
agreed with Mr. Baldwin that under the tariff, HEA would have an obligation to transfer power.
Mr. Brena stated HEA included in their brief they did nothhave to file the tariff and they did not
have to wheel power at all. Mr. Brena does not believe it wasjever the deal to be completely
dependent going forward to get power based on HEA's decision on whether to file a tariff.
Mr. Brena clarified he did not say/HEA.was not compensated. HEA is being compensated.
They are receiving the benefit of the deal they struck. They got the benefit of cheap power from
Bradley Lake. They got the benefit of all the utilities helping them build out the Soldotna
segment of their system. They got huge benefits from the Bradley Lake power by having this
huge power source in the middle of theirservice area. The fact HEA does not get an additional
payment specifically linked to transmissionover the SQ Line should come as no surprise to
anybody.
Mr. Agi asked if Mr. Brena recalled that AEA started surfacing affirmatively a concern earlier
today whether HEA or any,of the issues being discussed today is threatening the benefits of the
deliverability of the Bradley project. Mr. Brena noted he recalled the concern. Mr. Agi asked if
Mr. Brena has reviewed any materials that purports to impose a monetary limit or a formula on
wheeling for Bradley power. Mr. Brena advised the agreements have specific formulas for how
people are going to be compensated for their participation as operators in the agreement. HEA
has a formula with regard to the Soldotna segment and CEA has a formula with regard to
facilities from the Soldotna Substation north. Mr. Brena does not believe the contract included a
specific payment to HEA for CEA's control, operation and maintenance of the SQ Line, but
believe it is still with the formulas in the contract agreed to by HEA at the time.
BPMC Minutes 2/7/14 Page 13 of 19
Mr. Agi asked if there is a formulated limitation to what CEA may charge for wheeling across
the SQ Line? Mr. Brena noted the formula is locked into the contract. The inputs into the
formula are subject to RCA review and approval for their reasonableness. Mr. Agi asked if CEA
could raise their wheeling rates. Mr. Brena noted anybody can negotiate any change they want,
but it requires cooperation and unanimous consent by everybody. It cannot be a unilateral
decision. Mr. Brena believes people have been understating the significance of this dispute for
the reliability of power. There are two different operators with two different sets of priorities.
He noted HEA's mechanism moving forward is the Bradley Lake agreements apply to
everything, but that 40-mile SQ Line, and if people do not like what HEA decides, they can take
it to the Commission. Mr. Brena believes when there are overlapping operators with locks being
changed based on unilateral interpretation and there is a refusal to maintain the status quo at
physical facilities during a dispute, this creates substantialsafety and reliability risk.
Chair Griffith brought the question before the Committee today; does the BPMC have authority
to decide these issues that are before the BPMC? -Chair Griffith requested to hear points of view,
if there were any.
Ms. Fisher-Goad requested counsel for the BPMC, Mr. Gibson, provide perspective on whether
the BPMC has authority. Mr. Gibson believes the BPMC does have the authority. to address the
issues. The issues involve scheduling, production and dispatch of the project power and
interpretation of the obligations of the powersales agreement and the associated agreements that
involve it.
Mr. Bjorkquist stated he disagrees with Mr. Gibson's opinion regarding the dispute over the SQ
Line and whether the services agreement applies to'that or not», The SQ Line is not part of the
Bradley Lake Project. It is outside of the Bradley Lake Project and so all of the BPMC authority
with respect to the project has no application to the disputes on the SQ Line. The reason the
BPMC is involved with this is under theservices agreement saying, "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 with
Chugach's affirmative vote required for adoption of such procedures."
Mr. Bjorkquist advised under the services agreement, the role that the BPMC has is to adopt
procedures for the parties to deal with dispute resolution. The parties to the services agreement
are the utilities here at the table. AEA is not a party to the services agreement and it is not a
project asset. The BPMC cannot dictate solutions to how to resolve the SQ Line disputes under
the services agreement.
Mr. Bjorkquist pointed out what that means in context of what Mr. Kendall mentioned earlier on,
the idea of trying to move forward with some informal conversations and that the utilities might
be able to work together and solve something. Mr. Bjorkquist believes the question that should
be asked is; can the utilities here resolve and implement a solution to every dispute that there is?
The answer to that is obviously yes.
Mr. Bjorkquist noted the one advantage the utilities have in this context is all of the agreements
we are dealing with are exempt from RCA jurisdiction. The utilities have the capability of
coming up with any solution that makes sense, amending those agreements and implementing
BPMC Minutes 2/7/14 Page 14 of 19
that solution, regardless of what the RCA might otherwise deal with or say about that. Mr.
Bjorkquist believes having an informal conversation between the utilities trying to come up with
a solution that makes sense for everybody is certainly a viable option.
Mr. Gibson commented he realizes these disputes do not come under the power sales agreement
and are not project oriented, but there is the power to set up some dispute procedures to solve
these problems under the services agreement.
Mr. Brena noted all the project assets are not down at the hydro. There are breakers that are
owned by the project through the system. He believes the power sales agreement is not limited
to the project and also includes the scheduling, production and dispatch of project power. Mr.
Brena concludes the BPMC has authority under the power,sales agreement and agreed with the
analysis regarding the services agreement. These are already integrated agreements. Mr. Brena
commented the only other choice to the BPMC taking authority is turning these issues and
resolutions over the Superior Courts. He noted this was exempted out of the regulatory
authorities so the BPMC would have the opportunity to address the issues.
Mr. Bjorkquist stated the scheduling, production and dispatch of project power in the power sales
agreement is not the transmission or wheeling. That is.a different topic and is the topic in
dispute with the services agreementand.the Soldotna to Quartz Creek Line.
Mr. Brena added the scheduling, production and.dispatch of project power is not a reference to
the project. It is a reference to the project power, which is also a defined term which flows all
the way through the systemyas does the scheduling.
Mr. Kendall noted the question seems to be whether the BPMC actually has some authority over
the SQ Line, since the SQ Line is tied up in the BPMC agreements. Mr. Kendall asked if the
BPMC can move operator or ownership of that line from one utility to another, which seems to
be happening unilaterally. Mr. Gibson believes the authority of the BPMC is found only within
the foursquares of the power sales agreement.
Mr. Kendall. asked if the BPMC has authority over the SQ Line within the power sales
agreement. Mr. Gibson does not believe BPMC could take the line and give it to someone. He
believes the BPMC can enforce obligations and responsibilities that have been agreed to.
Mr. Kendall commented the utilities have agreed that CEA would be the operator, even though
CEA had an existing lease at the time with HEA and is obligated to come to some agreement
over the use of that line with HEA. Mr. Kendall noted the SQ Line cannot be separated from the
discussion because CEA was already designated an operator.
Mr. Kendall asked if the SQ Line is part of the project because the utilities had designated an
operator and HEA agreed. Mr. Borgeson believes the SQ Line is part of the project because it
has been agreed that Bradley power has to get all the way pass Quartz Creek Soldotna Line to get
to the utilities' service territories. Mr. Borgeson believes HEA agreed to this when they signed
the services agreement.
Mr. Borgeson believes this dispute is proffered before this Committee and will make a motion or
a resolution to that end when the Chair is ready. He believes the BPMC has the authority to
BPMC Minutes 2/7/14 Page 15 of 19
enforce the agreement with HEA. The line is going to be maintained by CEA and available for
Bradley power to come across the system.
Mr. Kendall asked a follow-up question. He stated the next segment of the delivery of Bradley
power north is the line that goes from Quartz Creek to University Station. He asked if CEA was
also bound by the same BPMC agreement, so they cannot go to the RCA and ask for a raise in
tariff as HEA is doing. Mr. Gibson noted CEA did come to the BPMC with a formulaic
approach and asked this Committee to change the rate. The Committee agreed to change the
rate. Mr. Gibson stated CEA is bound by these documents and have honored the documents on
the flow of power north.
Mr. Kendall asked if he understood correctly that CEA was given a rate increase for their
segment at some point in the past. Mr. Gibson agreed that between five or seven years ago, CEA
came to the Committee as a whole and brokered and compromised.an arrangement that has been
honored ever since.
Mr. Janorschke added to the comment Mr. Bjorkquist made earlier that the SQ Line is not part of
the project, because the project is clearly defined as the generation facility, the transmission line
up to Bradley Junction where it terminates and the SVC project. Those are the pieces of assets
that are part of the project and do fall within the purview of the BPMC. Mr. Janorschke
disagreed with Mr. Borgeson that the BPMGE has authority over this issue.
Mr. Janorschke stated he heard a comment that CEA,.as the dispatcher, has been operating and
maintaining the SQ Line. He clarified CEA has been dispatching over it prior to this year, but
HEA has been the one ‘maintaining the line. The line is an HEA asset. The agreement was CEA
would pay for the maintenance if it was an ordinary expense and HEA would pay for the
maintenance if it was a capitalized improvement. HEA has been maintaining the facility all the
way to Quartz.
Mr. Kendall asked if the maintenance was part of the cooperative BPMC project. Mr.
Janorschke stated that was through an agreement HEA made with CEA, which is separate from
the project. Mr. Day believes the distinction between minor and major maintenance was under
the lease agreement. Mr. Evans noted on ahigher level, if a party has an obligation to make
something happen, it does not mean that party has to put on boots and go do it. The party has to
arrange for it to happen. He stated Mr. Thibert would have the specifics.
Mr. Thibert advised the leaseagreement gave the responsibility of maintenance to CEA and it
defined two terms of minor maintenance and major maintenance. A series of meetings were held
and it was determined that any unit that could be capitalized would be considered major
maintenance. As per the contract, HEA had the right to either perform the major maintenance
themselves or have CEA perform the major maintenance.
Mr. Thibert noted over the years, CEA did a lot of the up-front maintenance and the right-of-way
clearing. It became cheaper for HEA to do the maintenance because of location in the later
years. HEA would bill CEA and this was built into the formula for the Bradley Lake wheeling
rate. Mr. Thibert explained capital costs were also built into the wheeling rate. Where there has
been a rate change, it was because CEA's costs had increased. Cost increases have been
BPMC Minutes 2/7/14 Page 16 of 19
approved by the Commission and then once they are approved, the cost changes are inserted into
the formula.
Mr. Thibert reported CEA began with a ramp-in rate, where they were only moving costs across
starting at 10% and the percentage increased each year for 15 years, not to exceed the cap of
90%. The current costs are at the 90% cap. Mr. Thibert noted CEA will never get 100%
reimbursement.
Mr. Kendall requested counsel explain the bylaws relating to the Committee's authority and if a
decision has to be made unanimously. He does not believe a unanimous decision will be made
today. Mr. Gibson stated Section 12.2 says, "if the Committee determines that it has the
authority to consider a matter, it shall decide the issue on the merits." Section 5.10 has specific
rules about the Committee voting for scheduling, production and dispatch of power and a
decision needs four voting members that equal greater than 51% of the Bradley Lake allocation.
If the Committee is voting on changing the dispute resolutions, the vote must be unanimous. Mr.
Gibson advised he would look to the bylaws to,determine the manner of voting for each specific
area and if it is not specifically listed in the bylaws, the vote becomes by majority of the present
quorum.
Mr. Kendall asked what would be the voting application today. Mr. Gibson stated voting for
adoption of procedures for scheduling would.take 51%. Mr.Gibson would have to review the
bylaws to determine the voting procedure for theissue of how the contract should be interpreted.
Mr. Baldwin commented.CEA.has the right to dispatch the Bradley plant, which is clearly a huge
economic advantage for CEA and would justify CEA only charging 90% of its transmission
costs. Mr. Baldwin noted the irony of the position of at least four people at the table that HEA
should be contributing its transmission facilities and receive no compensation. Mr. Baldwin
cited Section 13A.C.2.A which explains. the Committee's responsibilities to arrange for the
operation, maintenance, scheduling, production and dispatch of the project power, but
conspicuously excludes transmission. Mr. Baldwin noted the BPMC has no authority under the
power sales agreement to address transmission issues of Bradley power.
Mr. Brena believes one of the issues before the Committee is how many votes are needed to rule
on the authority of the Committee. The provision in the bylaws that controls this issue is Article
5.1.10 stating the actof a majority of votes taken in any meeting when a quorum is present shall
be the act of the Committee and binding on the members.
Mr. Brena commented the bylaws provide for a unanimous consent required on issues of process,
not on issues of substantive determinations of authority. He noted the Bradley Lake agreements
give a majority vote the opportunity to change the bylaws. Article 5.10.2 explains voting on the
Committee's authority. He believes this Committee has an obligation to vote on whether the
Committee has authority over these issues.
Mr. Gibson agreed the Committee has an obligation to decide on the Committee's authority and a
majority vote to pass would be appropriate. He corrected Mr. Brena's statements regarding the
manner of acting stating it is except for those matters which expressly require alternative voting
procedures, the act of the majority of the votes during a meeting will be the act of the
BPMC Minutes 2/7/14 Page 17 of 19
Committee. Mr. Gibson gave the clarification regarding changing the bylaws, which Article
5.10 requires the unanimous vote for dispute resolution procedures. He agreed with Mr. Brena
and does not believe obligations under the services agreement are procedural issues.
8. NEW BUSINESS
A. Applicability of Resolution 2013-02 (HEA Tariff Filing) - Action Item
MOTION: Mr. Borgeson made a motion that the BPMC has the authority and
responsibility to determine the resolution of the issues before us. Further, that this body
should immediately adjourn before the other business and«meet informally in an attempt to
resolve the issues. Additionally, the O&D Committee should report to this body at the
direction of the Chairman. Motion seconded by Mr.Kuhn:
Mr. Janorschke expressed his appreciation for Mr, Borgeson's willingness to continue to move
forward on these issues, but he believes there is wide sweep of issues;some of which fall with
the purview of the BPMC and some of them do not, and unless those are identified and
separated, he will vote against the motion.
The motion passed with HEA opposed and AEA abstained.
9. NEXT MEETING DATE
The informal lunch meeting was scheduled for February, 20th, 2014, at 12:30 p.m. at the offices
of Anchorage Municipal Light & Power.
10. ADJOURNMENT
There being no.further business for the Committee, the meeting adjourned at 12:52 p.m.
BY:
Joe Griffith, Chair BPMC Dispute Resolution Committee
Attest:
Sara Fisher-Goad
Alaska Energy Authority, Secretary
BPMC Minutes 2/7/14 Page 18 of 19