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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