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Copper Valley Electric Assoc.-Incoming Correspondence 1996
“ Q we COPPER VALLEY ELECTRIC ASSOCIATION, INC. P.O. BOX 45, GLENNALLEN, ALASKA 99588 (907) 822-3211 FAX 822-5586 ALDEZ (907) 835-4301 FAX 835-4328 ECE Ig ce’, Ovm Ss tes JUN 2 Mike loin June 25, 1996 Alask ? 1305 David Roeser is "ustrig) o Expor, t Authors omen Mr. Riley Snell, Executive Director Alaska Industrial Development and Export Authority Alaska Energy Authority 480 West Tudor Road Anchorage, Alaska 99503-6690 Dear Riley: Subsequent to our conversation, I talked to Dr. Robert Jacobsen, HAARP Program Manager. He has verified the information in this letter to be correct. Therefore, I feel comfortable sending it to you. If you have any questions, please give me a call. Yours truly, bispl Hiakew Clayton Hurless General Manager Enclosure w:\word\cdh\96-070jw.doc Serving the Copper River Basin and Valdez. Oe ‘COPPER VALLEY ELECTRIC ASSOCIATION, INC. P.O. Box 45, GLENNALLEN, ALASKA 99588 (907) 822-3211 FAX 822-5586 VALDEZ (907) 835-4301 FAX 835-4328 i EB ELVE sj) JUN 27 1996 Alaska Industria! Develo m June 19, 1996 and Export Authority Dr. Robert A. Jacobsen Ph.D HAARP Program Manager Advanced Power Technologies, Inc. 1250 Twenty-Fourth Street N.W. Washington, D C 20037 Dear Dr. Jacobsen: Robert, Mike, and I enjoyed the opportunity to learn of the current status and future plans for the HAARP project during our meeting on June 18. The amount and scope of the electric power requirements for the completed project were ‘of particular interest because of the effect on the feasibility and viability of the Sutton to Glennallen Transmission Line (SGL) project that Copper Valley Electric Association (CVEA) has been working on for the past four years. As we discussed at the meeting, I want to reiterate my understanding of the project characteristics to be certain that I correctly communicate with the Board of Directors and other interested parties. L. The general use or "housekeeping" power requirements for the project used for refrigeration to maintain the permafrost plus the heating, lighting, and control operation for transmitter shelters, control rooms, auxiliary power plant facilities, and offices will increase from the current 115 kw demand to between 1000 and 1500 kw demand. For planning purposes, it is reasonable to assume a load factor similar to a commercial office building. Most, if not all, of the buildings will maintain a controlled environment, i.e., heated and cooled as necessary to protect the sensitive control equipment on a year-round basis. 2: The basic project is scheduled to be completed over the next four years. It is anticipated that after completion the overall power requirement will continue to increase due to the addition of diagnostic equipment. The project life is projected to be 20 years. Serving the Copper River Basin and Valdez De: Robert A. Jacobsen June 19, 1996 Page 2 The project will be limited to five 10-day campaigns annually due to limits of the SO2 emissions of the on-site diesel generating plant. If the SGL is constructed and extended to the project site, it could expand the use of the facility by eliminating the on-site power plant and making it possible, if adequate funding could be obtained, to reach the ultimate goal of one campaign each month. The mode of electrical operation for the project has been designed to ameliorate the problems of the significant modulation inherent to the operation of the transmitters. It is our understanding the modified method would be composed of 5 mw of standby power that will be on approximately 12 hours each day for the duration of the campaign and approximately 5 mw of modulation power. We understand that the application of this modulated power will not be on time scales less than one cycle (16 ms). It is anticipated APTI will be in a position to execute the necessary agreements with CVEA for the upgrading of 16 miles of the existing single-phase 14.4 kv line to three-phase 14.4/24.9 kv by July 15, 1996. CVEA will have the project completed and operable by August 31, 1997. APTI will be able to waive most of the contractual boiler plate language normally required in contracts with the federal government with the exception of the requirements of The Equal Employment Opportunity Act, Vietnam Veterans Employment Act, the Americans with Disabilities Act, and the Age Discrimination Act. APTI will require CVEA to certify that it will comply with all state and federal laws, rules, and regulations that are applicable to the operation of electrical utilities. CVEA will certify that it will use Rural Utilities Service (RUS) approved standard work order accounting procedures to bill APTI for work on the line upgrading project. CVEA will build the project at cost and will not make any profit or margin but will include the standard work order overhead allocation to cover the administration and other project related expenses. APTI has provided CVEA a copy of a letter from the Department of the Navy that finds the provisions of the Davis-Bacon Act do not apply to the line upgrading project. APTI will contract separately for work to extend the facilities on the project site. CVEA will cooperate and assist APTI where possible to coordinate use of the same contractor to save the considerable mobilization and demobilization cost of bringing in a separate contractor. _ -Dr-Robert A. Jacobsen “June 19, 1996 Page 3 10. CVEA will bill APTI on a monthly basis for costs incurred. APTI will reimburse CVEA these costs within 30 days. I would appreciate your review of these understandings and correction of any misinterpretations I may have made of what was stated. We are looking forward to working with you on this project. Yours truly, eeu Clayton Hurless General Manager w:\word\cdh\96-067jw.doc ECGEIVE \ COPPER VALLEY ELECTRIC ASSOCIATIONpINCs25 =a ca Sac SeeaSSSEaTSSeOr eee aska jTdusiieiBevelopment — ne ay P.O. Box 45, GLENNALLEN, ALASKA 99838 and Export Authority (907) 822-3211 FAX 822-5586 VALDEZ (907) 835-4301 FAX 835-4328 March 29, 1996 Commissioner Mike Irwin Department of Community & Regional Affairs P.O. Box 112100 Juneau, Alaska 99811-2100 Dear Commissioner Irwin: We are in receipt of your letter of February 9 regarding the Sutton to Glennallen Intertie Project. In that letter, you established explicit conditions that Copper Valley Electric Association, Inc. (CVEA) must meet before you will complete project approval. These conditions are a significant departure from the charge given us by the working group and have significantly “raised the bar” the project must clear. By publicly asserting these explicit conditions, you have--perhaps unintentionally--rendered their achievement all but impossible. Let me explain. As you know, CVEA has been involved in diligent business negotiations with both Chugach Electric Association (Chugach) and Petro Star for some time. The goals of these negotiations were to achieve, in arms-length business transactions, two things which we believe are indeed critical to the economic feasibility of the intertie project: (1) the assured availability to CVEA of energy from the Railbelt area at a price that benefits both CVEA members and Railbelt ratepayers and (2) a contractual power supply agreement with Petro Star that benefits both the refiner and CVEA members and removes any incentive Petro Star might have to leave the CVEA system. We believe both of these goals can be met in prudent commercial transactions. Such transactions are common throughout the utility industry and, in this case, could be entered into for the mutual benefit of all parties. The entry of your directive into the mix of what until then had been equitable arms-length business negotiations based on pure economics has changed the entire balance and made equitable dealing impossible. In effect, the State’s edict has removed all incentive the other parties previously had to strike a mutually beneficial deal. Serving the Copper River Basin and Valdez Commissioner Irwin March 29, 1996 Page 2 Once Chugach learned that you have designated them a specific role in the project, the terms of our pending transaction changed totally. Chugach has acted as any prudent corporation would when handed an ace by the government--they have played it. Unfortunately, the new proposal Chugach has brought to the table is not remotely equitable nor in the best interest of our members. Negotiations with Petro Star have been equitable and fruitful; however, we are concerned that future negotiations could be adversely impacted if your conditions are seen as conditions precedent to project approval. Whatever the intent of your letter, its result has been to disturb two very promising private-sector negotiations. We believe that these conditions could well place us at the mercy of the other party as we continue to try to achieve a rational and mutually acceptable transaction. Commissioner Irwin, if you wish to achieve the best possible result for both Railbelt and Copper Valley consumers, we urge you to consider replacing your explicit February 9 directive with the following alternative. We urge you to follow another course of action: Only by these actions can you restore the level playing field to our business dealing with Railbelt utilities and our industrial customers. Only by these actions can you ensure that the most economically, rational business decisions impacting the intertie project are made. We propose that you: Le Replace your specific directives of February 9 with the more flexible goals contained in the working group’s recommendation. Specifically, agree that two conditions necessary for the economic viability of the intertie are: (1) assured availability to CVEA of energy from the Railbelt area at a price which benefits both CVEA members and Railbelt ratepayers and (2) a contractual power supply agreement with Petro Star that benefits both the refiner and CVEA members. 2s Negotiate in good faith with CVEA a Loan Agreement that works in these specific circumstances. We feel it would be fair and in keeping with the authorizing legislation to disburse the full principal amount of $35 million upon completion of the Agreement. The Agreement could contain provisions that make the uncommitted balance due and payable at some time certain if the intertie has not been approved before that specified date. This is a simple course of action. It returns the details of the business transactions to the parties at interest by removing the State’s edicts that have made normal negotiations impossible. It provides CVEA with the standing in business negotiations that any other corporation would have Commissioner Irwin March 29, 1996 Page 3 under the circumstances. And, most importantly, it allows the private sector to establish, in negotiations with one another, whether the intertie in fact makes economic sense in the real world. Alternatively, if you wish to assure that the Sutton to Glennallen Intertie Project is never constructed, we urge you to say so, and we can get on with our primary purpose of serving our region. Due to the seemingly interminable studies, review, restudies, re-reviews, and postponed decisions, we are at a stage where we cannot continue to delay power supply questions that become more critical to our region every day. We do need a clear decision regarding the intertie. Commissioner, CVEA requests your early attention to this matter and a clear decision as a result of that attention. It is impossible to progress in either direction under the present circumstances. We ask you to be decisive in one of two ways: either levelize the playing field in some manner similar to our suggestion and let the economics of the intertie play out in private sector negotiations or cancel the intertie project, for better or for worse, but once and for all. CVEA’s next Board of Directors meeting will be April 17. If possible, a response to this letter by that date would be helpful for CVEA in making a final decision on this project. Sincerely, Foe Raul Ro\\anel by Me. Paul Holland President, Board of Directors ce: Senate President Drue Pearce Speaker of the House Gail Phillips Senator Georgianna Lincoln Representative Gene Kubina Representative Irene Nicholia Senator Bert Sharp Senator Tim Kelly Representative Ramona Barnes City of Valdez Jim Ayers - Governor’s Chief of Staff Riley Snell - AIDEA »~ Roy Ewan - Ahtna Gary Brooks - IBEW Gene Bjornstad - Chugach Electric Association Jim Boltz - Petro Star PHA NU. 9U1400¢2940 r. ul Zh ha : COPPER VALLEY ELECTRIC ASSOCIATION, INC. (a? HInkK- 10790 PRL Lueic Vera JUNCNU P.O. BOx 45, GLENNALLEN, ALASKA 99588 (907) 822-3211 FAx 822-5586 VALDEZ (907) 835-4301 FAX 835-4328 March 7, 1996 RECEIVE} Commissioner Mike Irwin fol 22 4996 Department of Community and Regional Affairs P.O, Box 112100 COMMISSIONER'S OFFICE Juneau, Alaska 99811-2100 AQMMIINITW & REGIONAL AFFAIRS Dear Commissioner Irwin: I apologize for not having responded to your February 9 letter regarding the stipulations required prior to the Governor making a decision on the Sutton to Glennallen transmission line project. This project has becn under intense discussion by Copper Valley Electric Association’s (CVEA) Board of Directors, and as of this writing, the Board has not rendered a decision on how to proceed, The Board will be holding its next meeting on March 18 at which time I expect that they will provide Staff with direction on the project. T can relay to you that CVEA's Board is dismayed at what we believe is an obvious strategy by the Governor to make it impossible for CVEA to construct this project. It goes without saying that when you place one entity of a two-party negotiation at a disadvantage by mandating a predetermined conclusion, it completely destroys any reasonable negotiating position that entity may have. Tt is my understanding that you intend to declare the project not feasible on March 25 unless CVEA asks for an extension of time or produces some significant evidence of progress in the CVEA-Petro Star and -CVEA-Chugach negotiations. I will follow up on this letter-immediately after the March 18 board meeting with information concerning any decision that may have been made by CVEA’s Board. Yours truly, Cafe Dilahia Clayfon Hurless General Manager w:\word\cdh\96-022jw.doc MAR-15-96 FRI 16:12 Dera JUNEAU FAX NO. 9074652948 P. O1 “ Fy COPPER VALLEY ELECTRIC ASSOCIATION, INC. (ws P.O. BOx 45, GLENNALLEN, ALASKA 99588 (907) 822-3211 FAX 822-5586 VALDEZ (907) 835-4301 FAX 835-4328 March 7, 1996 Commissioner Mike Irwin fot 22 4996 Department of Community and Regional Affairs P.O. Box 112100 COMMISSIONER'S OFFICE Juneau, Alaska 99811-2100 AOMMIINITY & RECIONAI AFFAIRS Dear Commissioner Irwin: I apologize for not having responded to your February 9 letter regarding the stipulations required prior to the Governor making a decision on the Sutton to Glennallen transmission line project. This project has becn under intense discussion by Copper Valley Electric Association’s (CVEA) Board of Directors, and as of this writing, the Board has not rendered a decision on how to proceed, The Board will be holding its next meeting on March 18 at which time I expect that they will provide Staff with direction on the project. T can relay to you that CVEA’s Board is dismayed at what we believe is an obvious strategy by the Governor to make it impossible for CVEA to construct this project. It goes without saying that when you place one entity of a two-party negotiation at a disadvantage by mandating a predetermined conclusion, it completely destroys any reasonable negotiating position that entity may have. Tt is my understanding that you intend to declare the project not feasible on March 25 unless CVEA asks for an extension of time or produces some significant evidence of progress in the CVEA-Petro Star and -CVEA-Chugach negotiations. I will follow up on this letter.immediately after the March 18 board meeting with information concerning any decision that may have been made by CVEA’s Board. Yours truly, ey a Clayton Hurless General Manager w:\word\cdh\96-022jw.doc COPPER VALLEY ELECTRIC ASSOCIATION, INC. P.O. Box 45, GLENNALLEN, ALASKA 99588 (907) 822-3211 FAX 822-5586 VALDEZ (907) 835-4301 _Fax 835-4328 August 31, 1995 [D) EME Wil Ee dow Mr. William R. Snell, Executive Director Alaska industrit! Development Alaska Industrial Development & Export Authority and Export Authority 480 West Tudor Avenue te. OVA Anchorage, Alaska 99503 = & AT Ne Dear Riley: As you are aware, Copper Valley Electric Association (CVEA) is continuing to work with Petro Star to find a way to keep them on the system during construction or, in the alternative, to have them return to the system when the Sutton to Glennallen transmission line is completed. One of the items Petro Star has proposed for negotiation is for CVEA to agree to exchange the present Letter of Credit issued by the National Bank of Alaska (NBA) for a similar Letter of Credit that would be issued by their parent company, Arctic Slope Regional Corporation. Petro Star made this same request in early 1995, but CVEA's Board of Directors would not agree to the proposal because of the lack of firm information about Arctic Slope’s financial condition. In our conversation of August 30 you mentioned that you would consider Arctic Slope's Letter of Credit to be adequate security to support a long-term power sales agreement with Petro Star, and if requested, you could conduct a due diligence search through a company you do business. You would then provide CVEA with a recommendation as to the quality of a Letter of Credit from Arctic Slope. If the due diligence report and your recommendation are positive, I believe CVEA's Board of Directors would reconsider their March 1995 decision and accept such a Letter of Credit in lieu of the one from NBA. CVEA's positive response to Petro Star on this issue could be very heipful to bring the negotiation to a successful conclusion. CVEA, therefore, respectively requests AIDEA to conduct a due diligence examination of Arctic Slope Regional Corporation for the purpose of determining whether or not Arctic Slope’s financial condition is adequate to support a Letter of Credit in the amount of $300.000. CVEA will bear any cost associated with the report. We appreciate AIDEA's cooperation on this matter. Yours truly, J Claytsn Hurless General Manager w:\word\cdh\95-139jw.doc Serving the Copper River Basin and Valdez COPPER VALLEY ELECTRIC ASSOCIATION, INC. P.O. BOX 45 GLENNALLEN, ALASKA 99588-0045 Glennallen (907) 822-3211 Valdez (907) 835-4301 Telefax # (907) 822-5586 September 9, 1994 R.w. SK (| eA William R. Snell, Executive Director Cre. : Corés J Alaska Industrial Development & Export Authority 480 West Tudor Road Anchorage, Alaska 99503-6690 Copper Valley Electric Association, Inc. (CVEA) would like to begin discussions with the Alaska Industrial Development and Export Authority relative to the supplemental financing requirements of the proposed Sutton to Glennallen 138 kv intertie line in accordance with Chapter 18 AS. The supplemental financing would be used to fund the cost of the project above the $35 million, fifty year, zero-interest loan authorized and appropriated by Chapters 18 and 19 AS, to be administered by the Department of Community and Regional Affairs. While I am aware that you and members of your staff are quite familiar with CVEA's situation and the events leading up to the current circumstance, there may be some aspects we have not had the opportunity to discuss in as much detail as necessary. I had the enclosed information packet assembled to provide you with background information that may be helpful in arriving at a discussion starting point. We have produced substantial additional information over the past two and one-half years, but the enclosed summary will provide you a snapshot of where we started from and where we are now. We will be happy to provide any additional information you may require after you have had the opportunity to review what we have enclosed. We are looking forward to working with you on this extremely important project. Yours truly, Chg Maas Clayton Hurless General Manager d:\word\cdh\94-159jw.doc = AIDEA 106 SERVING MEMBER-OWNERS IN THE COPPER RIVER BASIN AND VALDEZ Ae s-¢' Mem COPPER VALLEY ELECTRIC ASSOCIATION, INC. P.O. Box 45, GLENNALLEN, ALASKA 99588 (907) 822-3211 FAX 822-5586 VALDEZ (907) 835-4301 Fax 835-4328 November 8, 1995 Alaska Industria! Development Mr. Dan Beardsley and Export Authority Alaska Energy Authority 480 West Tudor Anchorage, AK 99503 Subject: Pictures of Flooding Damage to Structure #386 Dear Dan: Enclosed are three pictures taken on September 21, 1995, of structure #386. They depict the flooding damage along the Transmission Line between Valdez and Glennallen. on the Lowe River. If you have any questions or comments, please do not hesitate to contact me. Sincerely, he a lig Michael E. Easley, PE. Manager of Engineering Services enclosure w:\word\let_mike\me95\90jcn - Serving the Copper River Basin and Valdez : TRO Vib COPPER VALLEY ELECTRIC oo ees INC. 20: Box 45, GLENNALLEN, ALASKA 99588 (907) 822-3211 Fax 822-5586 VALDEZ (907) 835-4301 FAX 835-4328 pd EE GEIVET ny) itt | i \\ h September 22, 1995 Mr. Dennis McCrohan Deputy Director of Energy Alaska Industrial Development of Export Authority 480 West Tudor Road Anchorage, Alaska 99503-6690 SUBJECT: — Copper Valley Intertie - Additional Written Comments Dear Dennis: The purpose of this letter is to provide additional comment about two issues, which I understand from discussions with Dave Gray, may not be properly addressed in the report to the interagency committee. At the risk of sounding like a broken phonograph, I am going to repeat my arguments concerning the unwillingness to attribute State financial assistance to the intertie and about the obvious economic development benefits of a long term infrastructure project over a short term, short-sighted band-aid fix (diesel case). STATE FINANCIAL ASSISTANCE The most significant difference between DCRA’s Feasibility and the Interim Final Report evaluation of the intertie case is the imputation of an interest rate on the $35 million loan. The State insists they are required by their guidelines to impute an interest rate. CVEA has argued unsuccessfully that it should not be imputed. The Legislature has authorized and appropriated the money for $35 million, zero interest, 50-year loan. The legislation was signed by then Governor Walter Hickel and in July of 1994 Edgar Blatchford, then Commissioner of the Department of Community and Regional Affairs found the project was feasible and financeable. From CVEA’s point of view, the public policy decision has been made and the Sutton to Glennallen transmission line (SGL) should receive the benefit of those legislative and administrative actions when compared to any other power supply alternative. 2n interboulad) COyi 2. a Serving the Copper River Basin and Valdez September 22, 1995 Page 2 HISTORY AND FUTURE OPPORTUNITIES Copper Valley Electric Association, Inc. has been engaged in a concerted effort since the mid- 1970's to identify a generating resource alternative to replace the two diesel plants currently being operated to provide its supplemental power requirement to the Solomon Gulch Hydro project. The relative short life expectancy of diesel engines (15-20 years), the potential volatility of diesel fuel prices, CVEA's inability to hedge the future against large fuel price increases, the inability to meet an unexpected large load requirement such as the proposed HAARP project or the Danish Pork Farm and the inability to achieve scheduling or dispatch efficiency of three isolated power plants has provided the basis for conclusion that adding a new isolated power generating plant, regardless of the fuel type, or upgrading the existing diesel plants simply does not solve CVEA's long term power supply and high rate problems. CVEA serves a large geographical area along approximately 245 miles of the Glenn, Richardson, and Edgerton Highways. The system begins at Caribou Creek on the West and extends to Glennallen. It starts in Valdez on the South and extends to Hogans Hill at Mile 156 on the Richardson Highway. From Gakona Junction it extends to Mile 12 on the Tok Cutoff and to Mile 18 on the Edgerton Highway from the junction of the Edgerton and Richardson. The potential to serve unserved areas or areas currently being served that are eligible for Power Cost Equalization (PCE) is substantial. The potential for future natural resource development is considered to be huge and increased use of the Wrangell St. Elias National Park is inevitable. The eventual extension of the transmission system to Cordova, Chistochina, Slana, and Tok to provide the opportunity to eliminate PCE payments to those areas, and further economic development opportunities are dependent on having an adequate supply of competitively priced power available. The availability of an adequate supply of competitively priced power is dependent on construction of the SGL. Otherwise this entire area of the State will be relegated forever to high cost power generated by isolated generating plants. RELATIVE ECONOMICS The near term economic feasibility of the SGL is no different than the economics of other large infrastructure projects. Essentially all major additions to an electrical system whether they are for generation, transmission, or distribution will have marginal economic feasibility in the early years of operation. It is only when we look to the long term that we can determine the resource alternative which will work to the best advantage of the area being served. Isolated generating plants are inherently inefficient. The benefits of integration and interconnection have been demonstrated for many years all over the world. Interconnection to a larger integrated system has always been the first choice of utilities who are searching for ways to become more efficient and to make certain they have adequate resources to serve unexpected load growth. To continue to rely on an isolated generating system, if there is a better alternative, that is planned to serve a very conservative load forecast with only enough reserve capacity to meet emergency requirements, is shortsighted at best, particularly in an area of the State that has been and will continue to be burdened by extraordinary high electric rates. September 22, 1995 Page 3 It is CVEA’s position that the only viable long term solution to our power supply and high rate problems are to construct and operate the SGL. The project has significant advantages over any other resource alternative such as becoming immune from future inflation after completion of construction. Utilities use a standard life cycle of 50 years for a transmission line for comparative analysis and amortization. A well maintained transmission line constructed to current standards will have essentially an unlimited real life span. The SGL will provide a significant margin of reserve capacity to serve long term economic development of not only CVEA’s service territory but also provide the opportunity for extension to other areas of the State that are being served by isolated generating units. It will provide access to a power supply that is protected from the volatility in fuel prices by long term contracts that have limiting provisions to prevent uncontrolled fuel cost escalation due to an international upset. The project also provides a means of future transportation for a significant block of power from CVEA’s area to the Railbelt, should one become available, i.e. the utilization of waste heat from the proposed gas liquefaction plant in Valdez. WHERE WE ARE Chugach and CVEA have been working for some time developing a joint action plan that will significantly benefit CVEA's ratepayers in the short term and provide long term benefits to both CVEA and the Railbelt Systems. The plan is in the process of formulation and negotiation. Both Chugach and CVEA Boards of Directors have passed resolutions directing their management to proceed on the development of the necessary agreements to effect the transaction. That process is progressing satisfactorily with every indication that it will be successfully consummated. If we are successful, our agreement will result in a long term power supply at near Railbelt prices being provided to the Copper Valley and Valdez regions of the State. Yours truly, ; Clayton Hurless General Manager w:\word\cdh\95-147nh.doc . Tarte File COPPER VALLEY ELECTRIC ASSOCIATION, INC. P.O. Box 45, GLENNALLEN, ALASKA 99588 (907) 822-3211 FAX 822-5586 VALDEZ (907) 835-4301 FAX 835-4328 D)ECEIY eM) NM eee WU Alaska Industriz! £ + and Expert t September 22, 1995 Mr. Dennis McCrohan Deputy Director of Energy Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage, Alaska 99503-6690 Dear Dennis: In ongoing discussions with CH2M Hill, we have learned there are some concerns with respect to diesel expansion cases included in DCRA’s Copper Valley Intertie Study and CVEA’s Interim Final Report, specifically the observation has been made that the two cases are quite different in their basic assumptions, and accordingly, we would like to respond to that statement. The two cases are in fact, similar in that both provide CVEA’s supplemental power requirements with diesel fired generation yet they are very different in approach. The DCRA diesel expansion case represents a continuation of the existing mode of operation. The basic assumption is that new units are added to replace existing worn out units and that manpower requirements are increased as load increases require that the Valdez diesel plant be manned for 24-hour a day operation. (The current generation scheme calls for 12-hour a day operation.) On the contrary, the CVEA diesel expansion case represents an aggressive approach to expansion which is highly dependent on efficient utilization of SCADA controlled operation and dispatch and, in addition, repowering and refurbishment of existing units. Presently, CVEA has minimal SCADA control of its generation resources. ~ Serving the Copper River Basin and Valdez September 22, 1995 Page 2 The CVEA case was borne out of a desire by our Board of Directors to take a hard look at whether a minimal cost diesel expansion case could compete with the SGL integrated case. The integrated case, as discussed in the Interim Final Report, is an alternative SGL case whereby Chugach Electric Association absorbs the cost of developing the SGL and recovers that cost through sales to all wholesale and retail customers. As you are aware, the Interim Final Report clearly concluded that the least cost power supply alternative is the SGL integrated case, and on that basis our Board of Directors has elected to pursue that alternative. In examining the differences between the DCRA and CVEA cases, certain specific issues concerning the CVEA case would lend further explanation as to the basic approach taken, as well as explain the resultant different economics of the two cases. Please understand that although CVEA’s management staff and John Heberling, of RW Beck, believe the plan presented is achievable, detailed analysis of the technical aspects of the case have not been fully explored and subjected to the same scrutiny and review that has been given the DCRA case. For example, manpower requirements represent the most significant difference between the DCRA and CVEA cases. DCRA assumes three operators will be added to the Valdez diesel plant at the time 24-hour operation is necessitated by load growth. In the case of CVEA’s SCADA controlled expansion case, it is assumed that up to five operator positions can be reduced by employing new remote controlled technology. CVEA has not conducted a detailed study of manpower requirements for this scenario and it is conceivable that such a study could conclude our estimate of a reduction of five positions is overly optimistic. Additionally, CVEA’s plans for personnel reduction involve eliminating positions as attrition and retirement of existing personnel create opportunities to do so, and as such, immediate reductions may not occur. Finally, plans for reorganization of plant personnel are subject to the approval of the Board of Directors and any such plans would necessarily have to fit within the Association’s goals for managing our workforce. Such a reduction in force could prove very difficult, from the Board’s perspective, if CVEA were to continue to supply all of its power requirements from diesel sources. Another major difference between the two cases is the planning horizon. The DCRA case looked out 20 years with regard to specific costs then projected those results out through the end of a 50-year period. On the contrary, the CVEA case had only a 20-year planning horizon and as a result, CVEA’s study does not take into consideration several items which conceivably could result in cost increases in future years. September 22, 1995 Page 3 First, the life cycle of a diesel unit is approximately 20 years compared to a 50-year life cycle (much longer in reality) for the intertie. The CVEA study does not account for capacity additions (new diesels) beyond the 20-year period. Accordingly, comparing the CVEA 20-year case to the DCRA 50-year case is like comparing apples and oranges. In order to make any meaningful comparison, the CVEA case would necessarily have to be put on a comparable basis with respect to capacity additions and the planning horizon. Likewise, from a labor standpoint, as the life cycle of the diesels in CVEA’s study matures, and as load requirements increase, it is conceivable additional maintenance, including labor, on the units will be required. This is expected to occur in the last ten years of their life cycle and has not been provided for in CVEA’s diesel case. Another issue which has not been addressed on the CVEA’s diesel case is whether or not this particular investment can be successfully financed. CWVEA is a Rural Utilities Service (RUS) financed cooperative and as such is subject to technical and financial requirements of that federal agency. No effort has been made, to date, to seek financing from RUS for the CVEA diesel case. Should RUS financing be unavailable, then the cost of this alternative would be significantly increased. In addition, RUS may choose to impose additional personnel requirements conditional to providing financing for a SCADA controlled diesel plant. To summarize the discussion, I would like to re-state the point made earlier that although CVEA management is of the opinion the diesel case as outlined in the Interim Final Report might be achievable, this scenario has not received the refined study necessary prior to proceeding with such a project. As has been pointed out in this letter, such refined study could well lead to an alteration of some of the basic assumptions, particularly with respect to manpower requirements. Dennis, there is one final point with regard to CVEA making substantial future investment in diesel facilities, and that is that I sense extreme reluctance on the part of our Board to make this type of investment, which as you well know may foreclose other future power supply opportunities. Thank you for the opportunity to provide these comments. If I can provide additional information about our position on this issue, please call me. Yours truly, { Clayton Hurless General Manager w:\word\cdh\95-146nh.doc COPPER VALLEY ELECTRIC ASSOCIATION, INC. P. O. Box 45, GLENNALLEN, ALASKA 99588 (907) 822-3211 Fax 822-5586 VALDEZ (907) 835-4301 FAX 835-4328 May 19, 1995 EGELVE|]) 4 9 Mr. Riley Snell, Executive Director Mat 2 2 1995 Alaska Industrial Development And Export Authority Alaska Industri al Development 480 West Tudor Road and Export Authority Anchorage, AK 99503 Dear Mr. Snell: Copper Valley Electric Association, Inc. (CVEA) is providing you with an encapsulated version of the past few years’ history and research of its mission to provide central station electrical service at the least possible cost consistent with sound business practices. I hope that the information is relevant in your mission to evaluate the Sutton to Glennallen transmission line project. If I or my staff can be of any assistance or if we can provide you with further information, please do not hesitate to call me at (907) 822-3211. Yours truly, Mayr Bla ba, Clayton Hurless General Manager Attachment Serving the Copper River Basin and Valdez XC — DVM - he 95/44 | rld fr oS Cotvacts COPPER VALLEY ELECTRIC ASSOCIATION, INC. P.O.BOX 45 GLENNALLEN, ALASKA 99588-0045 Glennallen (907) 822-3211 Valdez (907) 835-4301 Telefax # (907) 822-55 i = i Kally it | | Z NAG an | J July 27, 1994 z AUR US ioe Riley Snell, Executive Director Alaska Industrial Developmen: and Export Authority 480 West Tudor Road Anchorage, Alaska 99501-2341 Dear Riley: Enclosed is a copy of the revised economic analysis on the proposed Sutton to Glennallen transmission line. The indicated results on pages three and four show a dramatic change in the comparative net present values and the benefit to cost ratio of the various alternatives when looking at it from the perspective of the utility. It is O.K. with us if you circulate this document to your key staff and board members. If you have any questions or comments, please give me a call; or if | am not available, you can talk with Robert Wilkinson. Yours truly, Ctatqiunl2 for Clayton Hurless General Manager Enclosure :\word\cdh\94-129jw AIDEA 109 SERVING MEMBER-OWNERS IN THE COPPER RIVER BASIN AND VALDEZ July 20, 1994 Mr. Robert A. Wilkinson Manager, Administration and Finance Copper Valley Electric Association P.O. Box 45 Glennallen, Alaska 99588 Dear Robert: Subject: Transmittal of Revised Economic Analysis Results Sutton - Glennallen Intertie We have completed the revised economic analysis regarding the Sutton to Glennallen Intertie. This letter provides a brief explanation of the methodology employed in the revised arialysis, identifies the principal assumptions and presents the results. Most of the assumptions included in this letter were forwarded to you in my letter of July 17, 1994 with some minor adjustments and clarifications as we discussed in our telephone conversation yesterday. The revised economic analysis was performed, for the most part, using the assumptions and methodology established for the economic analysis included in the Intertie feasibility study. A primary difference is that the revised economic analysis was performed from the perspective of CVEA and not from the perspective of the State. Certain costs that were not included in the feasibility study economic analysis because they represented costs paid by Alaskans to Alaskans are included in the revised analysis since these costs are obligations of CVEA. An example of a previously excluded cost is the payment to the State by CVEA for power generated at the Solomon Gulch project using water from Allison Lake. Assumptions The following list provides the basic assumptions of the revised economic analysis. Unless indicated, the assumptions used in the feasibility study (as shown in Section X.C., page X-3 of the feasibility study report) remain the same for the revised analysis. Some of the assumptions included in the following list are the same as those used in the feasibility study and are included here simply for restatement. 1. Future CVEA power requirements correspond to the medium-high load forecast scenario. 2. Real, inflation-free escalation in fuel costs will be at the low fuel cost escalation rate of 0.44% per year. This is the same fuel cost escalation rate used for the low case in the feasibility study economic analysis. (Note that Item 7, page X-4 of 2101 Fourth Avenue, Suite 600 Seattle, WA 98121-2375 Phone (206) 441-7500 Fax (206) 441-4964 ® AIDEA 110 Mr. Robert A. Wilkinson July 20, 1994 Page 2 10. 11. the feasibility study report indicates the low fuel escalation rate to be 0.66%. The correct escalation rate is 0.44%). Estimated future annual costs are discounted to year end 1993 using an inflation free discount rate of 4.5%, the same discount rate as used in the feasibility study economic analysis. General inflation is 3.5% annually, the same inflation rate as used in the feasibility study economic analysis. The Intertie will become operational in 1999, the same on-line year as developed in the feasibility study. The Intertie will be financed with a 50-year $35,000,000, zero interest State loan and a $12,604,000 35-year, 5.0% interest rate loan from REA. The 5.0% interest rate is in nominal terms including inflation. In an inflation-free analysis assuming 3.5% annual inflation, the annual interest rate of the REA loan becomes 1.45%. State loan principal payments of $700,000 annually are discounted by the assumed annual inflation rate to adjust these nominal dollar payments to 1993 cost levels for the economic analysis. For the Allison Lake Case, power generated at the Solomon Gulch Project from Allison Lake water is priced at 6.4 cents per KWh in 1993 dollars. The debt service component of this rate, 4.0 cents per KWh in nominal dollars, is discounted annually at the assumed rate of general inflation. For the Intertie Case, the cost of wheeling power over CEA and MEA transmission lines is estimated to be 0.2 cents per KWh in 1993 dollars. The cost of power purchased from the Anchorage area utilities for transmission to CVEA is priced at the economy energy rates as shown in Table IX-5, page IX- 10 of the feasibility study report, plus an additional 1.0 cents per KWh margin. In accordance with these estimated costs, the total purchased power rate for 1999, the first year of Intertie operation is estimated to be 3.59 cents per KWh in 1993 dollars. The estimated capital costs of the resource alternatives other than the Intertie are to be financed with 5% REA loans. As previously mentioned, this relates to a 1.45% annual interest rate in an inflation-free analysis. AIDEA 111 Mr. Robert A. Wilkinson July 20, 1994 Page 3 Results The economic analysis calculates the cumulative net present value of the comparable annual costs over the economic lifetime of the Intertie (50 years) for each of the resource scenarios. The cumulative net present value is provided in 1993 dollars. The difference between the cumulative net present value for each of the resource scenarios when compared to the All Diesel (Base) Case represents the relative savings (or costs) provided by the particular resource scenario. Although this analysis may seem to be an academic exercise, the results can be described in terms that should be easier to understand. ‘The savings, as shown in the following table, represent the amount that CVEA is estimated to save, expressed in constant 1993 dollars, over the 50 year analysis period by implementing a particular resource scenario. For example, if the Intertie were to be constructed and loads were to grow as forecasted, it is estimated that CVEA would save $18,554,000 in 1993 dollars over the next 50 years when compared to the costs of continued diesel generation. Presenting the results in 1993 dollars simply removes the uncertainty of inflation from the analysis and presents the results in terms of today’s purchasing power of the dollar. The results of the revised economic analysis for the medium-high load growth scenario are presented in the following table. Table 1 Revised Economic Analysis Results Medium-High Load Growth Scenario and Low Fuel Cost Escalation Cumulative Savings Over NPV (1) Base Case (2) _ Benefit/Cost Resource Scenario ($000) ($000) Ratio (3) All Diesel Case $ = 71,233 - 1.00 Intertie Case 52,679 $ 18,554 1.35 Allison Lake 67,576 3,657 1.05 Silver Lake - Option A 60,694 10,539 1.17 Valdez Coal Project 69,719 . 1514 1.02 (1) Cumulative net present value (NPV) of comparable annual costs over the 50-year economic lifetime of the Intertie expressed in 1993 dollars. (2) Cumulative NPV of the particular resource scenario subtracted from the cumulative NPV of the All Diesel Case. (3) Cumulative NPV of the All Diesel Case divided by the cumulative NPV of the particular resource scenario. AIDEA 112 Mr. Robert A. Wilkinson July 20, 1994 Page 4 As indicated in Assumption 8., above, the cost of power generated at the Solomon Gulch project using Allison Lake water is 6.4 cents per KWh. If there were no cost to the additional generation at Solomon Gulch resulting from the development of the Allison Lake project, the cumulative NPV of the Allison Lake scenario would be $58,567,000 which is still significantly higher than the Intertie scenario. Although it is not reasonable to assume that there would be no cost to this additional generation, the case was run to provide an understanding as to how much of the total cost of the Allison Lake scenario is represented by the Solomon Gulch cost. An additional sensitivity case was run using the low load forecast while maintaining all of the other assumptions as defined for the revised economic analysis. The results of this low load growth case are shown in the following table. Table 2 Revised Economic Analysis Results _ Low Load Growth Scenario and _ Low Fuel Cost Escalation Cumulative Savings Over NPV (1) Base Case (2) _ Benefit/Cost Resource Scenario ($000) ($000) Ratio (3) All Diesel Case $ 37,288 - 1.00 Intertie Case 28,773 $ 8515 1.30 Allison Lake 46,169 (8,881) 0.81 (1) Cumulative net present value (NPV) of comparable annual costs over the 50-year economic lifetime of the Intertie expressed in 1993 dollars. (2) Cumulative NPV of the particular resource scenario subtracted from the cumulative NPV of the All Diesel Case. (3) Cumulative NPV of the All Diesel Case divided by the cumulative NPV of the particular resource scenario. The economic analysis does not address the affects of any particular resource scenario on the cost of power to CVEA’s member-customers. Although savings are actually calculated on an annual basis, the potential reduction in rates charged for electric service has not been estimated. The economic analysis is used to evaluate long-term costs and benefits that may be realized with a particular resource scenario. A cost of power and revenue requirement analysis would be needed to determine what impact the resource scenario could have on electric rates. AIDEA 113 Mr. Robert A. Wilkinson July 20, 1994 Page 5 I appreciate the opportunity to have assisted you and CVEA in its further evaluation of the Intertie. If you have any questions or comments concerning this analysis or we can be of further assistance please call me at 206-727-4418. Sincerely, R.W. BECK L. Heberling Executive Engineer JLH: c: WS-3945-AA1-AX AIDEA 114 3] Fb COPPER VALLEY ELECTRIC ASSOCIATION, INC. P.O.BOX 45 GLENNALLEN, ALASKA 99588-0045 Glennallen (907) 822-3211 . Wie Valdez B35-2 VI Telefax # ECE y IE APR 1 1994 Alaska Industrial Development March 31, 1994 and Export Authority Mr. Riley Snell, Executive Director O pom atyp~ Alaska Industrial Development and Export Authority 480 West Tudor Road _ pies Anchorage, Alaska 99503-6690 Cbd Dear Riley: Enclosed are the corrected spreadsheets on the cost comparisons of the resource options I sent to you on March 24. The inflation rate on the cost of purchase power was erroneously calculated and has been corrected on the enclosed sheets. Sorry for any inconvenience this error may have caused. Give me a call if you have any questions. Yours truly, Clayton Hurless General Manager c:\wp\cdh\94-053.jw AIDEA 138 SERVING MEMBER-OWNERS IN THE COPPER RIVER BASIN AND VALDEZ Revised table from page 2 of March 22, 1994, letter as a result of changed resource outputs. /BECK | GVEA | 2010 | meow] Ym 2000 MEDIUM HIGH Diesel Allison Lake Intertie (nonfirm) Intertie (firm) _Intertie (nonfirm) ie (fir C:\WPDOCS\CDH\REVTABLE AIDEA 139 (Aox) Ty NqIyXg SUMCOMP.XLS FILE: SUMCOMP. MARCH 26, 1994 MEDIUM HIGH LOAI |EDIUM FUEL YEAR 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 SUPPLEMENTARY KWH REQUIRED 42,799 46,574 50,386 54,000 57,516 61,012 61,622 30 62,842 63,459 64,084 64,717 65,359 66,007 66,665 67,317 67,972 68,631 69,295 5 UNIT COST OF POWER----- ALL VALUES EXPRESSED IN LINES 6,7,8 &9 ARE IN $ KWH 6 DIESEL EXP. COST OF POWER $0.1496 $0.1450 $0.1420 $0.1399 $0.1366 $0.1341 $0.1395 $0.1410 $0.1425 $0.1433 $0.1419 $0.1436 $0.1451 $0.1464 $0.1481 $0.1499 $0.1519 $0.1520 $0.1523 $0.1528 7 ALLISON LAKE POWER COST $0.1383 $0.1264 $0.2064 $0.1957 $0.1872 $0.1802 $0.1768 $0.1766 $0.1764 $0.1755 $0.1724 $0.1723 $0.1716 $0.1716 $0.1714 $0.1771 $0.1715 $0.1716 $0.1697 $0.1682 8 INTERTIE-- NON-FIRM---NON-INTEG. $0.1137 $0.1077 $0.1028 $0.0988 $0.0957 $0.0934 $0.0914 $0.0921 $0.0927 $0.0927 $0.0904 $0.0912 $0.0915 $0.0923 $0.0931 $0.0941 $0.0952 $0.0963 $0.0975 $0.0988 9 INTERTIE--FIRM-INTEGRATED $0.0748 $0.0747 $0.0749 $0.0753 $0.0761 $0.0770 $0.0781 $0.0799 $0.0817 $0.0828 $0.0817 $0.0838 $0.0874 $0.0919 $0.0943 $0.0968 $0.0994 $0.1021 $0.0895 $0.0853 11 ANNUAL POWER COST-----ALL VALUES EXPRESSED IN LINES 12,13,14 & 15 ARE IN $ ANNUALLY (000) 12 DIESEL CASE (L3 x L6) $5,834 $6,206 $6,614 $7,049 $7,376 $7,713 $8,511 $8,689 $8,868 $9,005 $9,005 $9,202 $9,390 $9,569 $9,776 $9,993 $10,225 $10,332 $10,453 $10,588 13° ALLISON LAKE (L3 x L7) $5,394 $5,410 $9,613 $9,861 $10,109 $10,364 $10,787 $10,882 $10,977 $11,029 $10,940 $11,042 $11,105 $11,216 $11,314 $11,809 $11,545 $11,664 $11,647 $11,655 14 INTERTIE-NON-INTEG, (L3 x L8) $4,434 $4,609 $4,788 $4,978 $5,168 $5,372 $5,576 $5,675 $5,769 $5,825 $5,737 $5,844 $5,922 $6,033 $6,145 $6,273 $6,409 $6,546 $6,692 $6,846 15_INTERTIE-INTEGRATED (L3 x L9) $2,917 $3,197 $3,488 $3,794 $4,109 $4,429 $4,765 $4,924 $5,084 $5,203 $5,185 $5,520 $5,712 $5,908 $6,127 $6,348 $6,580 $6,822 $7,075 46) SE . " “4s 1 i 52 f SNS waa SN 4: oy eet pipe nj) Slain ae 2 a2 ag 17 ANNUAL SAVINGS-----NON-INTEGRATED INTERTIE--- ALL VALUES EXPRESSED IN $'s ANNUALLY (000) 18 INTERTIE TO DIESEL (L12-L14) $1,400 $1,596 $1,826 $2,071 $2,209 $2,341 $2,935 $3,013 $3,099 $3,180 $3,268 $3,358 $3,469 $3,536 $3,630 $3,720 $3,817 $3,786 $3,761 $3,742 19 _INTERTIE TO ALLISON LAKE (L13-L14) $959 $800 $4,825 $4,882 $4,941 $4,992 $5,210 $5,207 $5,209 $5,203 $5,204 $5,197 $5,184 $5,183 $5,168 $5,536 $5,136 $5,118 $4,955 $4,809 PEG Seat, 21 ANNUAL SAVINGS------INTEGRATED INTERTIE----ALL VALUES EXPRESSED IN $'s. ANNUALLY (000) 22 “INTERTIE TO DEISEL (L12-L15) $2,917 $3,009 $3,125 $3,255 $3,267 $3,284 $3,746 $3,765 $3,784 $3,802 $3,820 $3,832 $3,870 $3,856 $3,868 $3,867 $3,877 $3,752 $3,631 $3,513 23 INTERTIE TO ALLISON LAKE (L13-L15) $2,476 $2,213 $6,124 $6,066 $5,999 $5,936 $6,022 $5,959 $5,893 $5,825 $5,756 $5,671 $5,585 $5,503 $5,406 $5,683 $5,197 $5,084 $4,825 $4,580 MEDIUM LOW LOAD--MEDIUM FUEL 25 YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 26 SUPPLEMENTARY KWH REQUIRED 36909 37543 38188 38898 39639 40282 40900 41509 42118 42729 43347 43972 44605 45246 45895 46553 47207 47865 48529 49197 Be A 3 i PE eer ee carts a ay WINE lea 2 TERE ECHR SHE LTS A 4 " 4 he 085 5 3 6 rhe EUR bis: apse SS rs Se ries oc 9 BNE Pan 28 UNIT COST OF POWER----ALL VALUES EXPRESSED IN $'s KWH 29 DEISEL EXPANSION CASE $0.1550 $0.1577 = $0.1611 $0.1615 $0.1619 $0.1627 $0.1747 $0.1755 = $0.1762 $0.1760 = $0.1725 = $0.1736 = $0.1745 »— $0.1749 0.1759 0.1772 $0.1786 = $0.1773-- $0.1763 — $0.1757 30 ALLISON LAKE CASE $0.1431 $0.1366 = $0.2398 += $0.2370 = $0.2342 $0.2320 $0.2337 $0.2317 $0.2298 += $0.2269 = $0.2207 $0.2190 0.2165 = $0.2149 —- $0.2131 —- $0.2117 $0.2103 $0.2089 += $0.2048 += $0.2009 31 INTERTIE-CL OR NF-NON INTEGRATED $0.1182 $0.1177 $0.1172 $0.1167 $0.1163 $0.1162 $0.1161 $0.1162 $0.1162 $0.1153 $0.1110 $0.1114 = $0,1109 $0.1112 $0.1115 = $0,1121 $0.1127 $0.1135 © $0.1142 -$0.1153 32 _INTERTIE--FIRM---INTEGRATED $0.0759 —_$0.0771 $0.0784 $0.0826 $0.0876 $0.0888 $0.0909 $0.0929 $0.0797 $0.0841 $0.0858 $0.0875 $0.0882 $0.0856 ie $0.1002 $0.0810 $0.0952 $0.0977 $0.1028 $0.1055 34 ANNUAL COST OF POWER--ALL VALUES EXPRESSED IN $'s ANNUALLY (000) 35 DIESEL CASE (L26xL29) $5,721 $5,921 $6,152 $6,282 $6,418 $6,554 $7,145 $7,285 $7,421 $7,520 $7,477 $7,634 $7,784 $7,914 $8,073 $8,249 $8,431 $8,486 $8,556 $8,644 36 ALLISON LAKE (L26xL30) $5,282 $5,128 $9,157 $9,219 $9,283 $9,345 $9,558 $9,618 $9,679 $9,695 $9,567 $9,630 $9,657 $9,723 $9,780 $9,855 $9,928 $9,999 $9,939 $9,884 37 INTERTIE-NON INTEGRATED (L26xL31) $4,363 $4,419 $4,476 $4,539 $4,610 $4,681 $4,748 $4,823 $4,894 $4,927 $4,812 $4,898 $4,947 $5,031 $5,117 $5,219 $5,320 $5,433 $5,542 $5,672 38 INTERTIE INTEGRATED (L26xL32) $2,801 $2,895 $2,994 $3,100 $3,327 $4,264 $4,113 $4,432 $3,852 40 ANNUAL SAVINGS---NON INTEGRATED INTERTIE---ALL VALUES EXPRESED IN $'s ANNUALLY (000) 41° INTERTIE TO DIESEL (L35-L37) $1,358 $1,502 $1,676 $1,743 $1,808 $1,873 $2,397 $2,461 $2,527 $2,594 $2,666 $2,735 $2,837 $2,882 $2,956 $3,031 $3,111 $3,054 $3,014 $2,971 42 _INTERTIE TO ALLISON LAKE (L36-L37) $919 $710 $4,682 $4,679 $4,673 $4,665 $4,810 $4,794 $4,785 $4,769 $4,755 $4,731 $4,710 $4,692 $4,663 $4,637 $4,607 $4,566 $4,397 $4,211 44 ANNUAL SAVINGS---INTEGRATED INTERTIE---ALL VALUES EXPRESSED IN $'s ANNUALLY (000) 45 INTERTIE TO DIESEL (L35-L38) $2,920 $3,026 $3,158 $3,182 $3,207 $3,227 $3,706 $3,723 $3,736 $3,752 $3,767 $3,782 $3,823 $3,801 $3,809 $3,817 $3,819 $3,690 $3,567 $3,454 46 INTERTIE TO ALLISON LAKE (L36-L38) $2,480 $2,234 $6,164 $6,119 $6,073 $6,018 $6,119 $6,056 $5,993 $5,927 $5,856 $5,778 $5,696 $5,611 $5,517 $5,423 $5,316 $5,203 $4,950 $4,693 vadiv Ovl (Aca) pyqnuxa Zeorvousun FNFINFMH.XLS SUTTON TO GLENNALLEN 138 KV INTERTIE---POWER COST ANALYSIS--NON-INTEGRATED CAPACITY LEASE OR ECONOMY ENERGY VS INTEGRATED FIRM ENERGY JANUARY,21, 1994 REVISED 3/28/94 ASSUMPTIONS INFLATION ADJUSTED 102.75% ANN. PAY. 50 YEAR, ZERO INT. LOAN $35.0 MILLION $700,000 35 YEAR, 6.00% LOAN $1 MILLION $1,183,207 TOTAL COST OF LINE $52.1 MILLION $1,883,207 POWER COST CL/NF 1998's (KWH)* POWER COST--FIRM1998 (KWH) ** $0.035 CAPACITY LEASE OR ECONOMY ENERGY--INCLUDES 1 MILL KWH FOR WHEELING TO MEA $0,056 INTEGRATED INTO RAILBELT SYSTEM --INCLUDES 1 MILL KWH FOR WHEELING TO MEA YEAR 1998 1999 2000 2001 2002 2003 2004 2005 CASE 1A-- NON-FIRM--MEDIUM HIGH LOAD-- (NOT INTEGRATED) POWER COST (KWH) $0.0350 $0.0360 $0.0370 $0.0380 $0.0390 $0.0401 $0.0412 $0.0423 ‘SUPPL. KWH REQ. 38,999,000 42,779,000 46,574,000 50,386,000 54,000,000 57,516,000 61,012,000 61,622,000 DEPRECIATION INFLAT. $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 ANNUAL INTEREST RATE $1,029,265 $1,020,029 $1,010,238 $999,860 $988,859 $977,198 $964,638 $951,736 SUBTOTAL DEBT SERVICE 0% $2,072,353 $2,063,117 $2,053,326 $2,042,948 $2,031,947 $2,020,286 $2,007,926 $1,994,824 DEBT SERVICE COST KWH 0.0531 0.0482 0.0441 0.0405 0.0376 0.0351 0.0329 0.0324 LINE O&M EXPENSE 2.75% $263,412 $270,656 $278,099 $285,747 $293,605 $301,679 $309,975 $318,499 STANDBY LABOR DIESEL 2.75% $229,054 $235,353 $241,625 $248,475 $255,308 $262,329 $269,544 $276,956 DIESEL PLANT O&M 2.75% $114,527 $117,676 $120,913 $124,238 $127,654 $131,165 $134,772 $138,478 SUBTOTAL LINE OP. COST $2,679,346 $2,686,802 $2,694,163 $2,701,408 $2,708,514 $2,715,459 $2,722,216 $2,728,757 LINE OP. COST KWH 0.0687 0.0628 0.0578 0.0536 0.0502 0.0472 0.0446 0.0443 RESIOUAL INTEREST DIESEL O% $147,000 $137,000 $128,000 $119,000 $111,000 $105,000 $98,000 $92,000 RES. DEPRECIATION DIESEL 0% $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 SUB-TOTAL COST LESS P.C. $3,070,346 $3,067,802 $3,066,163 $3,064,408 $3,063,514 $3,064,459 $3,064,216 $3,064,757 COST, LESS POWER COST KWH 0.0787 0.0717 0.0658 0.0608 0.0567 0.0533 0.0502 0.0497 POWER COST 2.75% $1,364,965 $1,538,440 $1,720,978 $1,913,037 $2,106,634 $2,305,504 $2,512,895 $2,607,814 TOTAL COST OF POWER $4,435,311 $4,606,242 $4,787,140 $4,977,445 $5,170,148 $5,369,963 $5,577,111 $5,672,571 COST OF POWER KWH 0.1137 0.1077 0.1028 0.0988 0.0957 0.0934 0.0914 0.0921 CASE 2A-- FIRM--MEDIUM HIGH LOAD--( INTEGRATED) (COST OF POWER (KWH) COST OF SUPP. POWER STANDBY LABOR DIESEL DIESEL PLANT O&M RESIDUAL INTEREST DIESEL RES. DEPRECIATION DIESEL TOTAL POWER COST TOTAL COST KWH *** ANNUAL SAVINGS TOTAL SAVINGS FOR STUDY PERIOD BASED ON ML&P MID CASE (ML&P LETTER FEB. 94) + 1 MILL FOR WHEELING (MEA LETTER)--** BASED ON_ INFORMATION PROVIDED BY CHUGACH vadlv bl $0.0560 $2,183,944 $229,054 $114,527 $147,000 $244,000 $2,918,525 0.0748 $0.0575 $2,461,504 $235,353 $117,676 $137,000 $244,000 93,195,533 0.0747 2.75% 2.75% 2.75% 0% O% $1,516,786 $12,066,250 $1,410,709 $0.0591 $2,753,564 $241,825 $120,913 $128,000 $244,000 $3,488,302 0.0749 $1,298,638 $0.0607 $3,060,860 $248,475 $124,238 $119,000 $244,000 $3,796,573 0.0753 $1,180,872 $0.0624 $3,370,615 $255,308 $127,654 $111,000 $244,000 $4,108,577 0.0761 $1,061,571 $0.0641 $3,688,806 $262,329 $131,165 $105,000 $244,000 $4,431,300 0.0770 $938,662 $0.0659 $4,020,632 $269,544 $134,772 $98,000 $244,000 $4,766,947 0.0781 $810,164 $0.0677 $4,172,503 $276,956 $138,478 $92,000 $244,000 $4,923,937 0.0799 $748,635 (DECEMBER 1993) 2006 $0.0435 62,230,000 $1,043,088 $937,848 $1,980,936 0.0318 $327,258 $284,572 $142,286 $2,735,052 0.0440 $85,000 $244,000 $3,064,052 0.0492 $2,705,967 $5,770,019 0.0927 $0.0696 $4,329,547 $284,572 $142,286 $85,000 $244,000 $5,085,405 0.0817 $684,614 2007 $0.0447 62,842,000 $1,043,088 $923,126 $1,966,214 0.0313 $336,258 $292,398 $146,199 $2,741,068 0.0436 $80,000 $195,000 $3,016,068 0.0480 $2,807,725 $5,823,793 0.0927 $0.0715 $4,492,359 $292,398 $146,199 $80,000 $195,000 $5,205,956 0.0828 $617,837 2008 $0.0459 63,459,000 $1,043,088 $907,521 $1,950,609 0.0307 $345,505 $300,439 $150,219 $2,746,772 0.0433 $75,000 $2,821,772 0.0445 $2,913,262 $5,735,034 0.0904 $0.0735 $4,661,220 $300,439 $150,219 $75,000 $5,186,878 0.0817 $548,156 2009 $0.0472 64,084,000 $1,043,088 $890,980 $1,934,068 0.0302 $355,006 $308,701 $154,350 $2,752,125 0.0429 $70,000 $2,822,125 0.0440 $3,022,658 $5,844,984 0.0912 $0.0755 $4,836,573 $308,701 $154,350 $70,000 $5,369,625 0.0838 $475,359 * **SAVINGS COMPARING CASE 1 TO CASE 2. 2010 $0.0485 64,717,000 $1,043,088 $873,446 $1,916,534 0.0296 $364,769 $317,190 $158,595 $2,757,088 0.0426 $26,000 $2,783,088 0.0430 $3,136,667 $5,919,755 0.0915 $0.0775 $5,018,667 $317,190 $158,595 $26,000 $5,520,452 0.0853 $399,303 2011 2012 $0.0498 $0.0512 65,359,000 66,007,000 $1,043,088 $1,043,088 $854,861 $835,160 $1,897,949 $1,878,248 0.0290 0.0285 $374,800 $385,107 $325,913 $334,876 $162,956 $167,438 $2,761,618 $2,765,668 0.0423 0.0419 $18,000 $3,000 $2,779,618 $2,768,668 0.0425 0.0419 $3,254,897 $3,377,565 $6,034,515 $6,146,233 0.0923 0.0931 $0.0797 $5,207,835 $325,913 $162,956 $18,000 $5,714,705 0.0874 $319,811 $0.0819 $5,404,103 $334,876 $167,438 $3,000 $5,909,417 0.0895 $236,816 2013 $0.0526 66,665,000 $1,043,088 $814,277 $1,857,365 0.0279 $395,697 $344,085 $172,042 $2,769,189 0.0415 $2,769,189 0.0415 $3,505,043 $6,274,233 0.0941 $0.0841 $5,608,069 $344,085 $172,042 $6,124,196 0.0919 $150,036 2014 2015 $0.0540 90.0555 67,317,000 67,972,000 $1,043,088 $1,043,088 $792,142 $768,678 $1,835,230 $1,811,766 0.0273 0.0267 $406,579 $417,760 $353,547 $363,270 $176,774 $181,635 $2,772,129 $2,774,430 0.0412 0.0408 $2,772,129 $2,774,430 ” 0.0412 0.0408 $3,636,655 $3,773,021 $6,408,784 $6,547,451 0.0952 0.0963 $0.0864 $5,818,648 $353,547 $176,774 $0.0888 $6,036,833 $363,270 $181,635 $6,348,968 0.0943 $6,581,738 0.0968 $59,616 ($34,287) 2016 $0.0570 68,631,000 $1,043,088 $743,806 $1,786,894 0.0260 $429,248 $373,259 $186,630 $2,776,031 0.0404 $2,776,031 0.0404 $3,914,365 $6,690,396 0.0975 $0.0913 $6,262,984 $373,259 $186,630 $6,822,673 0.0994 ($132,477) 17) $0.0586 69,295,000 $1,043,088 $727,442 $1,770,530 0.0256) $441,053 $383,524 $191,762 $2,786,869 0.0402) $2,786,869 0.0402 $4,060,923 $6,847,791 0.0988 $0.0938 $6,497,476 24 62 $7,072,762 0.1021 ($224,971) FNFINFML.XLS ne ‘ . - SUTTON TO GLENNALLEN 138 KV INTERTIE---POWER COST ANALYSIS--NON-INTEGRATED CAPACITY LEASE OR ECONOMY VS INTEGRATED FIRM 2 > JANUARY,21, 1994 REVISED 3/28/94 3 > ASSUMPTIONS 4 INFLATION ADJUSTED 102.75% ANN. PAY. 5 50 YEAR, ZERO INT. LOAN $35.0 MILLION $700,000 6 35 YEAR, 6.00% LOAN $17.1 MILLION $1,183,207 7 TOTAL COST OF LINE $52.1 MILLION $1,883,207 8 POWER COST CL/NF 1998$ (KWH)* 0.035 CAPACITY LEASE OR ECONOMY ENERGY--INCLUDES 1 MILL KWH FOR WHEELING TO MEA 9 POWER COST FIRM 1998$ (KWH)** $0.056 INTEGRATED INTO RAILBELT SYSTEM --INCLUDES 1 MILL KWH FOR WHEELING TO MEA 10 YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 217 SRR | n 12 CASE 1A--CAPACITY LEASE OR NON-FIRM--MEDIUM LOW LOAD-- (NOT INTEGRATED) 13. POWER COST (KWH) $0.0350 $0.0360 0.0370 $0.0380 0.0390 ~- $0.0401 0.0412 $0.0423 0.0435, $0.0447 0.0459 $0.0472 0.0485 $0.0498 0.0512 $0.0526 0.0540 $0.0555 0.0570 $0.0586 14 SUPPLEMENTAL KWH REQ. INFLAT. 36,909,000 37,543,000 38,188,000 38,898,000 39,639,000 40,282,000 40,900,000 41,509,000 42,118,000 42,729,000 43,347,000 43,972,000 44,605,000 45,246,000 45,895,000 46,553,000 47,207,000 47,865,000 48,529,000 49,197,000 15 DEPRECIATION RATE $1,043,086 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 $1,043,088 16 ANNUAL INTEREST $1,029,265 $1,020,029 $1,010,238 $999,860 $988,859 $977,198 $964,838 $951,736 $937,848 $923,126 $907,521 $890,980 $873,446 $854,861 $835,160 $814,277 $792,142 $768,678 $743,806 727442| 17 SUBTOTAL DEBT SERVICE 0% $2,072,353 $2,063,117 $2,053,326 $2,042,948 $2,031,947 $2,020,286 $2,007,926 $1,994,824 $1,980,936 $1,966,214 $1,950,609 $1,934,068 $1,916,534 $1,897,949 $1,878,248 $1,857,365 $1,835,230 $1,811,766 $1,786,894 $1,770,530 18 DEBT SERVICE COST KWH 0.0561 0.0550 0.0538 0.0525 0.0513 0.0502 0.0491 0.0481 0.0470 0.0460 0.0450 0.0440 0.0430 0.0419 0.0409 « 0.0399 0.0389 0.0379 0.0368 0.0360 19 LINE O&M EXPENSE 2.75% $263,412 $270,656 $278,099 $285,747 $293,605 $301,679 $309,975 $318,499 $327,258 $336,258 $345,505 $355,006 $364,769 $374,800 $385,107 $395,697 $406,579 $417,760 $429,248 $441,053 20 STANDBY LABOR DIESEL 2.75% $229,054 $235,353 $241,825 $248,475 $255,308 $262,329 $269,544 $276,956 $284,572 $292,398 $300,439 $308,701 $317,190 $325,913 $334,876 $344,085 $353,547 $363,270 $373,259 $383,524 21° DIESEL PLANT O&M 2.75% $114,527 $117,676 $120,913 $124,238 $127,654 $131,165 $134,772 $138,478 $142,286 $146,199 $150,219 $154,350 $158,595 $162,956 $167,438 $172,042 $176,774 $181,635 $186,630 $191,762 22 SUBTOTAL LINE OP. COST $2,679,346 $2,686,802 $2,694,163 $2,701,408 $2,708,514 $2,715,459 $2,722,216 $2,728,757 $2,735,052 $2,741,068 $2,746,772 $2,752,125 $2,757,088 $2,761,618 $2,765,668 $2,769,189 $2,772,129 $2,774,430 $2,776,031 $2,786,869 23 «LINE OP. COST KWH 0.0726 0.0716 0.0705 0.0694 0.0683 0.0674 0.0666 0.0657 0.0649 0.0642 0.0634 0.0626 0.0618 0.0610 0.0603 0.0595 0.0587 0.0580 0.0572 0.0566 24 RESIDUAL INTEREST DIESEL 0% $147,000 $137,000 $128,000 $119,000 $111,000 $105,000 $98,000 $92,000 $85,000 $80,000 $75,000 $70,000 $26,000 $18,000 $3,000 25 RES. DEPRECIATION DIESEL 0% $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $195,000 26 SUB-TOTAL COST LESS P.C. $3,070,346 $3,067,802 $3,066,163 $3,064,408 $3,063,514 $3,064,459 $3,064,216 $3,064,757 $3,064,052 $3,016,068 $2,821,772 $2,822,125 $2,783,088 $2,779,618 $2,768,668 $2,769,189 $2,772,129 $2,774,430 $2,776,031 $2,786,869 27. ~=COST, LESS POWER COST KWH 0.0832 0.0817 0.0803 0.0788 0.0773 0.0761 0.0749 0.0738 0.0727 0.0706 0.0651 0.0642 0.0624 0.0614 0.0603 0.0595 * 0.0587 0.0580 0.0572 0.0566 28 POWER COST 2.75% $1,291,815 $1,350,140 $1,411,103 $1,476,865 $1,546,387 $1,614,687 $1,684,544 $1,756,641 $1,831,430 $1,909,094 $1,989,965 $2,074,170 $2,161,890 $2,253,264 $2,348,438 $2,447,615 $2,550,256 $2,656,912 $2,767,849 $2,883,112 29 TOTAL COST OF POWER $4,362,161 $4,417,942 $4,477,265 $4,541,273 $4,609,901 $4,679,145 $4,748,760 $4,821,399 $4,895,483 $4,925,162 $4,811,737 $4,896,296 $4,944,978 $5,032,882 $5,117,106 $5,216,805 $5,322,385 $5,431,343 $5,543,880 $5,669,980 30 COST OF POWER KWH 0.1182 0.1177 0.1172 0.1167 0.1163 0.1162 0.1161 0.1162 0.1162 0.1153 0.1110 0.1114 0.1109 0.1112 0.1115 0.1121 0.1127 0.1135 0.1142 0.1153 CASE 2A-- FIRM--MEDIUM LOW LOAD--( INTEGRATED) POWER COST (KWH) $0.0560 0.0575 0.0591 0.0607 0.0624 0.0641 0.0659 0.0677 0.0696 0.0715 0.0735 0.0755 0.0775 0.0797 0.0819 0.0841 0.0864 0.0888 0.0913 0.0938) COST OF SUPP. POWER 2.75% $2,066,904 $2,160,224 $2,257,764 $2,362,984 $2,474,218 $2,583,498 $2,695,270 $2,810,626 $2,930,289 $3,054,550 $3,183,944 $3,318,672 $3,459,024 $3,605,222 $3,757,500 $3,916,185 $4,080,409 $4,251,060 $4,428,558 $4 419978 ‘STANDBY LABOR DIESEL 2.75% $229,054 $235,353 $241,825 $248,475 $255,308 $262,329 $269,544 $276,956 $284,572 $292,398 $300,439 $308,701 $317,190 $325,913 $334,876 $344,085 $353,547 $363,270 $373,259 524 DIESEL PLANT O&M 2.75% $114,527 $117,676 $120,913 $124,238 $127,654 $131,165 $134,772 $138,478 $142,286 $146,199 $150,219 $154,350 $158,595 $162,956 $167,438 $172,042 $176,774 $181,635 $186,630 762 RESIDUAL INTEREST DIESEL 0% $147,000 $137,000 $128,000 $119,000 $111,000 $105,000 $98,000 $92,000 $85,000 $80,000 $75,000 $70,000 $26,000 $18,000 $3,000 RES. DEPRECIATION DIESEL 0% $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $244,000 $195,000 TOTAL POWER COST $2,801,485 $2,894,254 $2,992,502 $3,098,697 $3,212,181 $3,325,993 $3,441,586 $3,562,060 $3,686,147 $3,768,147 $3,709,602 $3,851,724 $3,960,809 $4,112,092 $4,262,814 $4,432,312 $4,610,730 $4,795,964 $4,988,447 $5,188,265 TOTAL COST KWH 0.0771 0.0784 0.0797 0.0810 0.0826 0.0841 0.0858 0.0875 0.0882 0.0856 0.0876 0.0888 0.0909 0.0929 0.0952 0.0977 0.1002 0.1028 0.1055 *** ANNUAL SAVINGS $1,560,676 TOTAL SAVINGS FOR STUDY PERIOD $21,770,074 *BASED ON ML&P MID CASE + 1 MILL FOR WHEELING (ML&P) LETTER FEBRARY 1994--** BASED ON_INFORMATION PROVIDED BY CHUGACH (DECEMBER 1993) $1,523,689 $1,484,763 $1,442,576 $1,397,720 $1,353,153 $1,307,175 $1,259,338 $1,209,336 $1,157,015 $1,102,135 $1,044,572 $984,169 $920,791 $854,292 $784,493 $711,655 $635,378 $555,433 $481,716 ***SAVINGS COMPARING CASE 1_TO CASE 2 a mH > > 2: iS. 2 aS > R n o < —