HomeMy WebLinkAbout091914_AEA - Yerrick Creek Hydro - REF Round VIII
September 19, 2014
Alaska Energy Authority
AEA 15003 Renewable Energy Grant Application
813 West Northern Lights Blvd.
Anchorage, AK 99503
RE: Yerrick Creek Hydroelectric Project Phase IV Grant Application
AEA 15003 Renewable Energy Grant Application
Dear AEA:
Enclosed, on behalf of Upper Tanacross Energy, Inc. (UTE), in response to RFA AEA
15003 Renewable Energy Grant Application program, is an application requesting
funding for the Yerrick Creek Hydroelectric Project for Phase IV – Construction.
If you have any questions, please call either Glen Martin (Resource Assessment &
Permits) 360-385-1733 x122, Karl Wood (Grant Funds Administrator) 360-385-1733
x128, or Bob Grimm (President) 360-385-1733 x120.
Sincerely,
Glen D. Martin
Resource Assessment & Permits
Enc. (as stated)
Renewable Energy Fund Round VIII
Grant Application - Standard Form
Application Forms and Instructions
This instruction page and the following grant application constitutes the Grant Application Form for
Round VIII of the Renewable Energy Fund. A separate application form is available for projects
with a primary purpose of producing heat (see RFA section 1.5). This is the standard form for all
other projects, including projects that will produce heat and electricity. An electronic version of the
Request for Applications (RFA) and both application forms is available online at:
http://www.akenergyauthority.org/REFund8.html.
• If you need technical assistance filling out this application, please contact Shawn Calfa, the
Alaska Energy Authority Grants Administrator at (907) 771-3031 or at scalfa@aidea.org.
• If you are applying for grants for more than one project, provide separate application forms
for each project.
• Multiple phases for the same project may be submitted as one application.
• If you are applying for grant funding for more than one phase of a project, provide milestones
and grant budget for each phase of the project.
• In order to ensure that grants provide sufficient benefit to the public, AEA may limit
recommendations for grants to preliminary development phases in accordance with 3 ACC
107.605(1).
• If some work has already been completed on your project and you are requesting funding for
an advanced phase, submit information sufficient to demonstrate that the preceding phases
are completed and funding for an advanced phase is warranted.
• If you have additional information or reports you would like the Authority to consider in
reviewing your application, either provide an electronic version of the document with your
submission or reference a web link where it can be downloaded or reviewed.
• In the sections below, please enter responses in the spaces provided, often under the section
heading. You may add additional rows or space to the form to provide sufficient space for
the information, or attach additional sheets if needed.
REMINDER:
• Alaska Energy Authority is subject to the Public Records Act AS 40.25, and materials
submitted to the Authority may be subject to disclosure requirements under the act if no
statutory exemptions apply.
• All applications received will be posted on the Authority web site after final recommendations
are made to the legislature.
• In accordance with 333 (b) Applicants may request trade secrets or proprietary company data
be kept confidential subject to review and approval by the Authority. If you want information
is to be kept confidential the applicant must:
o Request the information be kept confidential.
o Clearly identify the information that is the trade secret or proprietary in their
application.
o Receive concurrence from the Authority that the information will be kept confidential.
If the Authority determines it is not confidential it will be treated as a public record in
accordance with AS 40.25 or returned to the applicant upon request.
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Grant Application - Standard Form
SECTION 1 – APPLICANT INFORMATION
Name (Name of utility, IPP, or government entity submitting proposal)
Upper Tanana Energy, LLC (UTE)
Type of Entity: Fiscal Year End:
Upper Tanana Energy (UTE) is a partnership
between the Native Village of Tanacross (NVT),
Tanacross Inc. (Tanacross), and Alaska Power
& Telephone (AP&T). The three entities have
executed a MOU supporting development of the
Yerrick Creek hydropower project through a
coordinated effort. UTE was incorporated in
September 2014.
Alaska Power & Telephone (AP&T) is the
current legally registered owner of Upper
Tanana Energy, LLC. AP&T is participating in
the AEA REF grant application as a co-
applicant.
The Native Village of Tanacross (NVT) is
considering joining UTE, LLC as a co-owner.
NVT is participating in the AEA REF grant
application as a co-applicant.
Tanacross, Inc. is considering joining UTE,
LLC as a co-owner. Tanacross, Inc. is serving
as a key supporter of the AEA REF grant
application.
[*UTE currently has: an Alaska Business
License #1009335; an Alaska Certificate of
Organization #10022902; and an EIN #47-
1593084]
December 2014
Tax ID #47-1593084
Tax Status: ☒ For-profit ☐ Non-profit ☐ Government (check one)
Date of last financial statement audit: April, 2014 (Available in AP&T Annual Report)
Mailing Address: Physical Address:
Jason Custer [Same]
136 Misty Marie Lane
Ketchikan, AK 99901
Telephone: Fax: Email:
907-225-1950 x 29 907-225-6450 Jason.c@aptalaska.com
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1.1 APPLICANT POINT OF CONTACT / GRANTS MANAGER
Name: Title:
Jason Custer -- Business Development Director, Alaska Power & Telephone
Mailing Address:
Jason Custer
136 Misty Marie Lane
Ketchikan, AK 99901
Telephone: Fax: Email:
907-225-1950 x 29 907-225-6450 Jason.c@aptalaska.com
1.1.1 APPLICANT ALTERNATE POINTS OF CONTACT
Name Telephone: Fax: Email:
Jeff Weltzin 907-590-1304 jefferyweltzin@gmail.com
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1.2 APPLICANT MINIMUM REQUIREMENTS
Please check as appropriate. If you do not to meet the minimum applicant requirements, your
application will be rejected.
1.2.1 As an Applicant, we are: (put an X in the appropriate box)
☒ An electric utility holding a certificate of public convenience and necessity under AS 42.05, or
☒ An independent power producer in accordance with 3 AAC 107.695 (a) (1), or
☐ A local government, or
☒ A governmental entity (which includes tribal councils and housing authorities)
1.2 APPLICANT MINIMUM REQUIREMENTS (continued)
Please check as appropriate.
☒ 1.2.2 Attached to this application is formal approval and endorsement for the project by the
applicant’s board of directors, executive management, or other governing authority. If the
applicant is a collaborative grouping, a formal approval from each participant’s governing
authority is necessary. (Indicate by checking the box)
☒ 1.2.3 As an applicant, we have administrative and financial management systems and follow
procurement standards that comply with the standards set forth in the grant agreement (Section
3 of the RFA). (Indicate by checking the box)
☒ 1.2.4 If awarded the grant, we can comply with all terms and conditions of the award as
identified in the Standard Grant Agreement template at
http://www.akenergyauthority.org/REFund8.html. (Any exceptions should be clearly noted and
submitted with the application.) (Indicate by checking the box)
☒ 1.2.5 We intend to own and operate any project that may be constructed with grant funds for
the benefit of the general public. If no please describe the nature of the project and who will
be the primary beneficiaries. (Indicate yes by checking the box)
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SECTION 2 – PROJECT SUMMARY
This section is intended to be no more than a 2-3 page overview of your project.
2.1 Project Title – (Provide a 4 to 7 word title for your project). Type in space below.
Yerrick Creek Hydropower Project: Construction
2.2 Project Location –
Include the physical location of your project and name(s) of the community or communities that will
benefit from your project in the subsections below.
2.2.1 Location of Project – Latitude and longitude, street address, or community name.
Latitude and longitude coordinates may be obtained from Google Maps by finding you project’s
location on the map and then right clicking with the mouse and selecting “What is here? The
coordinates will be displayed in the Google search window above the map in a format as follows:
61.195676.-149.898663. If you would like assistance obtaining this information please contact AEA
at 907-771-3031.
Google Maps coordinates: 63.379197.-143.602086
2.2.2 Community benefiting – Name(s) of the community or communities that will be the
beneficiaries of the project.
The project will benefit the interconnected communities of the Upper Tanana region, including Tok,
Tanacross, Tetlin, and Dot Lake. The most recently available AEA PCE report identifies $0.50 kWh
pricing for this service region, with an average PCE payment of $0.28 per eligible kilowatt hour.1 If
the Slana-Chistochina-Mentasta grid becomes connected to Tok in the future, these communities will
also benefit from the presence of the Yerrick Creek hydropower project. Similarly, if Northway,
Northway Junction, and Northway Village also become connected to Tok, they will benefit from this
project. All of these communities are served by APC, and are currently 100% dependent on diesel-
fired generation. The most recently available AEA PCE report identifies $0.69 / kwh pricing for these
service regions, with an average PCE Payment of $0.47 per eligible kilowatt hour2.
2.3 PROJECT TYPE
Put X in boxes as appropriate
2.3.1 Renewable Resource Type
☐ Wind ☐ Biomass or Biofuels (excluding heat-only)
☒ Hydro, Including Run of River ☐ Hydrokinetic
☐ Geothermal, Excluding Heat Pumps ☐ Transmission of Renewable Energy
☐ Solar Photovoltaic ☐ Storage of Renewable
1 Source: http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
2 Source: http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
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☐ Other (Describe) ☐ Small Natural Gas
2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply)
Pre-Construction Construction
☐ Reconnaissance ☐ Final Design and Permitting
☐ Feasibility and Conceptual Design ☒ Construction
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2.4 PROJECT DESCRIPTION
Provide a brief one paragraph description of the proposed project.
The 1.5 MW Yerrick Creek hydropower will provide 4.9 aGWH of affordable, renewable energy to
Tok and surrounding communities in the upper Tanana region (Tok, Tanacross, Tetlin, Dot Creek),
which are currently dependent upon 100% diesel-fired generation of electricity, and pay energy costs
of $0.50 / kWh (before PCE).3 Total project cost is estimated at $19m, per a detailed cost estimate
update performed by AP&T in September of 2014. Applicants are requesting $8,000,000 through the
AEA REF Round VIII program for Phase IV – Construction; it is estimated that this level of funding
support by the State of Alaska will result in a project which produces clean energy for half of the cost
of diesel-fired generation of electricity. The Yerrick Creek hydropower project will displace
approximately 40% of the region’s diesel-fired generation of electricity with clean, renewable
hydropower from a local, low-impact source, helping to support the State of Alaska’s goal of 50%
renewable energy by 2025. The project will eliminate use of 375,000 gallons of diesel fuel per year
for a 50+ year operating life, avoiding a total of 18,750,000 gallons of diesel fuel. Tanacross Inc.,
the Native Village of Tanacross, and AP&T signed a Memorandum of Understanding expressing
willingness to work cooperatively on the Yerrick Creek project in August of 2014 (enclosed in
Appendix). The three entities established a new partnership named Upper Tanana Energy to develop,
own, and operate the project as an independent power producer (IPP). The composition of UTE is
described in Section 1, “Type of Entity,” above. UTE will sell energy to Alaska Power Company –
the incumbent utility for the Tok region, and a subsidiary of Alaska Power & Telephone (AP&T) –
under a power sales agreement transaction regulated by the Regulatory Commission of Alaska (RCA).
As a UTE project partner, AP&T is agreeable to this arrangement, and will finalize PPA terms after
financing terms and conditions are complete. Yerrick Creek is located on private and State lands and
has received a non-jurisdictional determination from the Federal Energy Regulatory Commission
(FERC), making it possible to develop this low-impact hydropower project in a timely fashion
without undergoing lengthy federal permitting processes through FERC. Construction is anticipated
to be complete by 2017. Project partners anticipate that all remaining permitting, power sales
agreement, and other pre-construction activities will be complete by the 2015 construction season,
making REF VIII construction phase funding timely and appropriate. Unlike other communities in
Alaska, Tok and surrounding communities of the upper Tanana region have not yet had the
opportunity to transition from 100% diesel-fired generation to an energy mix including renewables.
If the Slana-Chistochina-Mentasta grid becomes connected to Tok in the future, these communities
will also benefit. Similarly, if Northway, Northway Junction, and Northway Village also become
connected to Tok, they will benefit from this project. Due to current 100% dependency on diesel-
fired generation, the State of Alaska would experience significant Power Cost Equalization
subsidization savings. State PCE statistics indicate the 58.2% of total kWh sold in FY13 are PCE-
eligible kWh; if this ratio holds true, the State of Alaska would realize significant PCE subsidization
savings, with approximately 41.8% of cost-savings being realized by current ratepayers.4
AEA Econometric Workbook results are provided below:
3 Source: Most recently available AEA PCE report:
http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
4 Source: Most recently available AEA PCE report:
http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
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A 50 year period of analysis was used. The project’s lifespan will be 100 years, so these numbers could
reasonably be doubled.
2.5 PROJECT BENEFIT
Briefly discuss the financial and public benefits that will result from this project, (such as reduced
fuel costs, lower energy costs, local jobs created, etc.)
Replaces approximately 40% of diesel-fired generation of electricity in the Tok and
Upper Tanana Region with clean, renewable hydropower.
If the Slana-Chistochina-Mentasta grid becomes connected to Tok in the future, these
communities will also benefit. Similarly, if Northway, Northway Junction, and
Northway Village also become connected to Tok, they will benefit from this project.
All these communities are served by APC and are currently 100% dependent upon
diesel generation.
With $8m in State REF Round VIII funding, the project will reduce energy costs by
providing clean energy at approximately 50% the cost of diesel-fired generation.
State PCE statistics indicate the 58.2% of total kWh sold in FY13 are PCE-eligible
kWh; if this ratio holds true, the State of Alaska would realize significant PCE
subsidization savings, with approximately 41.8% of cost-savings being realized by
current ratepayers.5
Helps to support the State of Alaska’s goal of 50% renewable energy by 2025.
5 Source: Most recently available AEA PCE report:
http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
Results
NPV Benefits $27,837,521.65
NPV Capital Costs $9,588,161
B/C Ratio 2.90
NPV Net Benefit $18,249,360
Performance Unit Value
Displaced Electricity kWh per year 4,900,000
Displaced Electricity total lifetime kWh 245,000,000
Displaced Petroleum Fuel gallons per year 350,000
Displaced Petroleum Fuel total lifetime gallons 17,500,000
Displaced Natural Gas mmBtu per year -
Displaced Natural Gas total lifetime mmBtu -
Avoided CO2 tonnes per year 3,553
Avoided CO2 total lifetime tonnes 177,625
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Will stabilize energy prices long term by reducing dependency upon diesel fuel – a
volatile commodity with pricing which escalates significantly faster than inflation.
By replacing diesel-fired generation, Yerrick Creek will reduce emissions, avoid
“social cost of carbon” costs, and will reduce ambient noise associated with operation
of diesel-fired generators in Tok.
Leverages private investment in the regional energy market, allowing the private
sector to share project development costs and risks.
Reduces operating costs for resident businesses, supporting retention, growth and
expansion.
Supports new economic development and resource development activities in the
upper Tanana region. (Ex: growth of value-added manufacturing of forest products
from locally harvested timber, and ancillary loads associated with an expanding local
workforce.)
Reduces operating expenses for local schools, medical facilities, and other non-profit
organizations, helping to support long-term sustainability.
Provides enhanced stability to the regional utility system.
Allows Tok and the surrounding Upper Tanana region to “home source” its energy
supply from local, renewable sources, reducing fuel purchases from outside of the
community, and allowing more wealth to remain and recirculate within the
community.
Reduces dependence on foreign oil. Geopolitics in oil-producing regions have been
extremely unstable; a heightened political or military crisis could cause sharp
escalation in fuel prices, which would devastate rural Alaskan communities
dependent upon diesel fuel for production of electricity.
Allows Tanacross Inc. to utilize its ANCSA lands to realize the promise of ANCSA;
generating economic returns in exchange for extinguishing indigenous land claims.
Allows Tanacross, Inc. and the Native Village of Tanacross to participate in the local
energy market.
Displaces 375,000 gallons of diesel fuel per year, or 18,750,000 during the project’s
initial 50-year period of operations. The project’s lifespan will be 100 years, so these
numbers could reasonably be doubled.
Displaces 3,533 tons of carbon dioxide avoidance per year, or 176,650 tons of carbon
dioxide over the project’s initial 50-year period of operation. This is equivalent to
approximately $14.9m in Social Cost of Carbon savings. (Calculated using the
average of all four federal calculated methodologies specified by the US Interagency
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Grant Application - Standard Form
Working Group for Social Cost of Carbon, as required for US EO 12866 review. A
50 year period of analysis was used. The project’s lifespan will be 100 years, so these
numbers could reasonably be doubled.)
Reduces the need to transport fuel from Fairbanks to Tok, lowering the potential for
leaks and spills along the Alaska Highway. Transferring fuel from a supply truck to
APC’s storage tank would be less frequent, reducing the potential for spills during
fueling, and keeping groundwater safer for the area.
2.6 PROJECT BUDGET OVERVIEW
Briefly discuss the amount of funds needed, the anticipated sources of funds, and the nature and
source of other contributions to the project.
Total Construction Cost: $19,000,000
Proposed AEA REF Round VIII Funds -- $8,000,000
Match: USDA RUS Construction Grant -- $961,733 in USDA RUS funds
(secured)
Match: Private Debt and Equity -- $10,038,267 (Approximately 25% equity /
75% debt). UTE and its partners will pursue commercial loan options, and will also
explore low-interest loan options from sources including the Alaska Power Project
Fund and USDA RUS, in order to attempt to provide the most affordable energy
possible to ratepayers.
2.7 COST AND BENEFIT SUMMARY
Include a summary of grant request and your project’s total costs and benefits below.
Costs for the Current Phase Covered by this Grant
(Summary of funds requested)
2.7.1 Grant Funds Requested in this application $ 8,000,000
2.7.2 Cash match to be provided $ 11,000,000
(State grant funds to be matched on a 1:1 basis)
1. New Match to New State Investment: $11,000,000
Match: USDA RUS Construction Grant -- $961,733 in USDA RUS funds (secured)
Match: Private Debt and Equity -- $10,038,267 (Approximately 25% equity / 75% debt).
AP&T will pursue commercial loan options, and will also explore low-interest loan options from
sources including the Alaska Power Project Fund and USDA RUS, in order to attempt to provide the
most affordable energy possible to ratepayers.
2. Match to Date:
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Expenditures to date include the following:
$100,000 AEA grant funds, supporting preliminary feasibility analysis. This project was concluded
successfully, with a final project summary submitted to the Alaska Energy Authority.
$713,267 in USDA RUS grant funds. These funds were used to pay for the permitting process, fish
habitat survey, wetlands inventory, water quality testing, hydrology analysis, stream gaging, TES
plant survey, other environmental analysis, cultural resource survey, geotechnical evaluations for
placement of project features, engineering design, and legal services for obtaining access to private
land that have occurred to-date.
$75,801 in private investment supplied by AP&T. These funds have supported supplemental project
development and business planning activities.
3. Funds currently available
$75,000 – AEA REF Round VII funds were awarded to the Native Village of Tanacross for this
project, and are currently being used for business development, business modeling, and PPA
finalization tasks, with expenditures scheduled for completion by close of SFY15.
2.7.3 In-kind match to be provided $ NA
2.7.4 Other grant funds to be provided $ See above
2.7.5 Total Costs for Requested Phase of Project (sum of 2.7.1 through 2.7.4)
$19,000,000
Other items for consideration
2.7.6 Other grant applications not yet approved None
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Project Costs & Benefits
(Summary of total project costs including work to date and future cost estimates to get to a fully
operational project)
2.7.7 Total Project Cost
Summary from Cost Worksheet, Section
4.4.4, including estimates through
construction.
$19,000,000
2.7.8 Additional Performance Monitoring
Equipment not covered by the project but
required for the Grant
Only applicable to construction phase
projects
NA
2.7.9 Estimated Direct Financial Benefit
(Savings)
The economic model used by AEA is
available at
www.akenergyauthority.org/REFund8.html.
This economic model may be used by
applicants but is not required. Other
economic models developed by the
applicant may be used, however the final
benefit/cost ratio used will be derived from
the AEA model to ensure a level playing
field for all applicants.
AEA model displays:
NPV Benefits of $27.8m
NPV Capital Costs of $9.6m,
B/C Ratio of 2.9, and
NPV Net Benefit of $18.2m.
A 50 year period of analysis was used. The
project’s lifespan will be 100 years, so project
benefits could reasonably be doubled.
2.7.10 Other Public Benefit
If you can calculate the benefit in terms of
dollars please provide that number here and
explain how you calculated that number in
Section 5 below.
State PCE statistics indicate the 58.2% of
total kWh sold in FY13 are PCE-eligible
kWh; if this ratio holds true, the State of
Alaska would realize significant PCE
subsidization savings, with approximately
41.8% of cost-savings being realized by
current ratepayers.6 Avoided carbon dioxide
statistics are provided below.
6 Source: Most recently available AEA PCE report:
http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
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Results of AEA Econometric Model:
A 50 year period of analysis was used. The project’s lifespan will be 100-years-plus, so project benefits
could reasonably be doubled.
SECTION 3 – PROJECT MANAGEMENT PLAN
Describe who will be responsible for managing the project and provide a plan for successfully
completing the project within the scope, schedule and budget proposed in the application.
3.1 Project Manager
Tell us who will be managing the project for the Grantee and include contact information, a resume
and references for the manager(s). In the electronic submittal, please submit resumes as separate
PDFs if the applicant would like those excluded from the web posting of this application. If the
applicant does not have a project manager indicate how you intend to solicit project management
support. If the applicant expects project management assistance from AEA or another government
entity, state that in this section.
Project Management Team:
Robert S. Grimm – Alaska Power & Telephone Company
360-385-1733 x 120
Bob.g@aptalaska.com
Resume and references attached.
Jason Custer – Alaska Power & Telephone Company
907-225-1950 x 33
Jason.c@aptalaska.com
Resume and references attached.
Results
NPV Benefits $27,837,521.65
NPV Capital Costs $9,588,161
B/C Ratio 2.90
NPV Net Benefit $18,249,360
Performance Unit Value
Displaced Electricity kWh per year 4,900,000
Displaced Electricity total lifetime kWh 245,000,000
Displaced Petroleum Fuel gallons per year 350,000
Displaced Petroleum Fuel total lifetime gallons 17,500,000
Displaced Natural Gas mmBtu per year -
Displaced Natural Gas total lifetime mmBtu -
Avoided CO2 tonnes per year 3,553
Avoided CO2 total lifetime tonnes 177,625
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Jeff Weltzin – Native Village of Tanacross
907-590-1304
jefferyweltzin@gmail.com
Resume and references attached.
Additional AP&T senior engineers and project managers will be used as needed to assist
with management and execution of the project [resumes enclosed].
Additional Details of Project Management Capacity
NVT has employed a tribal policy of “self-performance” of community and economic
initiatives development over the last 15 years; these efforts have included the following
Tanacross capital projects:
• Management and construction of a $4,600,000 twenty-home housing project at
Tanacross using force account labor and tribal staff project management. Completed
2007.
• Application of IHS and VSW funding to construct a $5,000,000 community-wide piped
water and sewer system at Tanacross, using force account labor. Completed 2006.
• Performance of multiple Department of Defense (DOD) Native American Lands
Environmental Mitigation Program (NALEMP) projects totaling $10,000,000 on lands
adjacent Tanacross, and contaminated due to prior military activities, using force
account labor and tribal staff management.
• Construction of the 9,600 square foot “Tanacross Multi-Purpose Community Health
Center Project” (in progress). $3,500,000 cost to date.
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3.2 Project Schedule and Milestones
Please fill out the schedule below. Be sure to identify key tasks and decision points in in your project
along with estimated start and end dates for each of the milestones and tasks. Please clearly identify
the beginning and ending of all phases of your proposed project.
Phase IV Activities proposed for AEA REF VIII Funding:
Milestones Tasks Start Date End Date
Completion of access road
Flagging, survey route, survey for active bird
nests (if construction between May 5-July
25), brush and grade right-of-way, install
culverts, final grade and surface
July 2015 July 2016
Award contract for supply of
generating equipment Contact gen/set supplier, get quotes, order July 2015 Sept 2015
Receipt of penstock materials Order penstock materials July 2015 Sept 2015
Installation of bridge across creek Order materials and install Sept 2015 Oct 2016
Receipt of major generating equipment Order penstock materials July 2016 Aug 2016
Completion of powerhouse structure Foundation and prefab structure assembled,
tailrace Aug 2016 Oct 2016
Completion of diversion structure Excavate, pour concrete, install valves,
flanges, intake, controls, gates Apr 2016 Oct 2016
Completion of generating equipment
installation
Install generating equipment, switchgear,
transformer Sept 2016 Nov 2016
Completion of Distribution Line to Tok Order materials, install poles and conductor April 2016 Oct 2016
Test and Startup Test equipment, operate project to fine tune
the instrumentation, etc. Nov 2016 Dec 2016
It should be noted that the schedule assumes no on-site outside work during the November-March
time period. If unusually harsh weather conditions extend that period, the entire schedule could slip.
Achievement of this schedule will also require multiple crews working throughout the 2016
construction season; if local labor is not sufficient to provide multiple crews, a 2017 construction
season may be required.
Before the grant funding is awarded in 2015, the following activities will be taking place in
preparation for construction, with funding support from USDA and UTE:
Milestones Tasks Start Date End Date
Tri-party MOA finalized Create tri-party MOA Completed Completed
Develop and Approve PPA Concept Obtain approval from AP&T Completed Completed
Develop and Incorporate IPP Entity Incorporation of IPP Entity Completed Completed
Finalize hydro system design AP&T engineering department to
complete design In Progress 15-May
Finalize project business / finance
plan:Produce Project business plan In Progress 15-Aug
a. Update business model Updated business model. In Progress 14-Nov
b. Develop Financing Plan
Updated finance plan. Details will
depend upon outcome of AEA REF VIII
grant application.
In Progress 15-Aug
c. Formalize USDA grant agreement
Work with USDA RUS to obtain
$961,733 High Energy Cost Program
grant agreement
Completed Completed
Finalize all agencies’ permitting Receipt of all permits, and transfer to
Upper Tanana Energy In Progress 15-Aug
Develop PPA Agreement Dependent on Financing / AEA Funding
Availability In Progress 15-Sep
Develop Construction Agreement Signed Construction Agreement In Progress 15-Sep
Develop O&M Agreement Signed O&M Agreement In Progress 15-Sep
Develop Land Use Agreement Signed Land Use Agreement In Progress 15-Sep
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Grant Application - Standard Form
3.3 Project Resources
Describe the personnel, contractors, personnel or firms, equipment, and services you will use to
accomplish the project. Include any partnerships or commitments with other entities you have or
anticipate will be needed to complete your project. Describe any existing contracts and the selection
process you may use for major equipment purchases or contracts. Include brief resumes and
references for known, key personnel, contractors, and suppliers as an attachment to your application.
Key APC involved in the project development and their roles will be:
• Greg Michelson, Project Manager and Transmission Design
• Mickey Henton, Assistant Project Manager
• Rex Goolsby, Construction Superintendent
• Vern Neitzer, Senior Engineer
• Bob Berreth, Electrical Design
• Ben Beste, Mechanical Design
• Larry Coupe, Civil Design
• Glen Martin, Resource Assessment and Permits
• Danny Gonce, Safety Director
• Karl Wood, Grant Administrator
APC is preparing the final design documents in-house using its staff civil, mechanical, and electrical
engineers, who all have extensive experience in hydroelectric development. These engineers designed
APC’s South Fork Hydroelectric Project which entered service in 2005, as well as APC’s Kasidaya
Creek Hydroelectric Project which entered service in October 2008.
They also participated in the design of two other APC hydroelectric projects, Black Bear Lake
Hydro and Goat Lake Hydro, and directly participated in the construction of both.
Phase IV: Construction
Construction will be by local contractors and APC staff, as follows:
• Access road - - local contractor(s)
• Diversion structure fabrications - - Reynold Grey Machining and Services
• Diversion structure installation - - local contractor(s)
• Penstock materials procurement - - APC
• Penstock installation - - local contractor(s)
• Generating equipment procurement - - APC
• Powerhouse fabrications - - Reynold Grey Machining and Services
• Powerhouse construction - local contractor(s) and APC
• Transmission line construction - - local contractor(s) and APC
• Testing and start-up - - APC
Incumbent Project Development / Construction Resources
As demonstrated in attached resumes, APC maintains formidable in-house capacity for reliable
utility operations, and development, construction, and long-term operation and maintenance of
hydropower projects. APC has power linemen, engineers, accounting and bookkeeping, and
project management personnel located at APC ’s service center in Tok, with additional staff
capacity throughout the state of Alaska, and at APC’s headquarters in Port Townsend,
Washington. APC currently owns and operates seven h ydropower projects (Dewey Lakes,
Lutak, Kasidaya, South Fork, Black Bear Lake, Goat Lake, Falls Creek), with an 8th hydropower
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project soon to be completed at Reynolds Creek on Prince of Wales Island. APC currently
maintains over 400 miles of transmission line. APC’s certified linemen are trained to install and
maintain transmission lines, and operate all associated equipment. If additional workforce or
experience is needed, APC will follow its standard practice of drawing from its labor pool of
personnel throughout its Alaska service areas.
APC’s experienced engineering staff have been involved in the design, construction, operation,
and maintenance of hydropower projects since the 1980s. Some outside contractors would be
hired to excavate the ground and haul materials to the project site. Qualified local laborers,
journeymen, and specialists (ex: blasting contractors) would be hired to assist with construction
activities. Specialty manufacturers and suppliers will be used to fabricate the project’s
powerhouse structure, turbine, generator, penstock, and other materials. APC’s personnel and
other hired labor would install and commission all structures and equipment. APC also has
experienced staff to maintain diesel generators and hydropower plants. APC maintains sufficient
staff certified as local linemen. Through hire of qualified personnel, OJT (on the job training),
and use of apprenticeship programs and educational partnerships, APC maintains sufficient
workforce for all aspects of utility operations.
APC intends to maximize opportunities for participation of qualified local workforce in construction
and operations, including Tanacross Inc. and Native Village of Tanacross constituents, and maximize
“local content” in a manner consistent with federal EEO laws and other applicable state and federal
requirements. This practice will help maximize local economic participation, benefit, and workforce
development.
3.4 Project Communications
Discuss how you plan to monitor the project and keep the Authority informed of the status. Please
provide an alternative contact person and their contact information.
The Yerrick Creek project team will adhere to AEA quarterly reporting requirements, and will make
itself available on a continual basis to address any additional needs, concerns, or requests for
information from the AEA.
As a regulated private utility, APC has been the recipient of numerous State and Federal grants, is
accustomed to fulfilling all agency requirements in a timely manner, and performs them on an
ongoing basis. APC has extensive State-wide experience in successful partnership, application of
grant funds, communication, and reporting in association with the Alaska Energy Authority. APC
maintains a capable and experienced staff with diverse skill sets well suited to performing all
management, accounting, administrative, and other requirements.
As a federally recognized tribe, the Native Village of Tanacross is accustomed to receiving, reporting
on, and tracking progress of grants, and performs these responsibilities on an ongoing basis.
At the completion of the project, Upper Tanana Energy will provide the AEA with a copy of the final
design drawings, specifications, and a report on successes, lessons learned, and recommendations for
similar projects which may be constructed in the future.
3.5 Project Risk
Discuss potential problems and how you would address them.
APC believes that its experience designing, constructing, and operating similar small hydropower
projects in Alaska; its longstanding vendor, technical service, supply chain relationships and industry
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knowledge; and its incumbent project development resources will help minimize risks and control
costs. APC has a strong understanding of risks through development/construction experience, as well
as an understanding of the processes involved in creating a durable hydropower asset capable of 50+
years of reliable, safe operation.
Inclement Weather – Working conditions in Alaska’s interior can be very harsh during the winter.
The proposed construction schedule assumes little/no work at the project site during winter months.
If it appears likely that a harsh winter would occur and extend for an unusually long time period, APC
and its contractor(s) can consider options such as double-shift work during long summer days, or
completing limited work during winter months.
Cost-Overrun – APC believes that its experience constructing similar small hydropower projects in
Alaska and its mature supply chain relationships shall minimize cost-overrun risks, and inform
determination of a reasonable contingency margin.
Environmental Opposition – No environmental opposition to Yerrick Creek is known. However,
there is significant environmental opposition to continued diesel-fired generation in the Tok region,
which will be addressed through development of the Yerrick Creek project. Tanacross Inc. and its
sister entity the Native Village of Tanacross are very sensitive to environmental impacts on Tanacross
lands; as development partners for Yerrick Creek, these entities share APC’s strong commitment to
minimizing environmental impacts during project construction and operation phases, while
maximizing the environmental benefits which will be produced by the project through the new
availability of clean, renewable energy.
Risk of Non-Development – Failing to develop the Yerrick Creek hydropower project due to lack of
interest or support by the State of Alaska and others will leave the residents of Tok, Tanacross, Tetlin,
and Dot Lake dependent on diesel-fired generation of electricity. If diesel-dependency persists, these
communities can expect exacerbated socioeconomic distress, continued lack of economic
opportunity, long term job loss, continued population outmigration, and the inability to respond to
emerging commercial opportunities and support new economic development.
3.6 Project Accountant(s)
Tell us who will be performing the accounting of this Project for the Grantee and include contact
information, a resume and references for the project accountant(s). In the electronic submittal, please
submit resumes as separate PDFs if the applicant would like those excluded from the web posting
of this application. If the applicant does not have a project accountant indicate how you intend to
solicit project management support.
Attached is a resume for Karl Wood, Accountant and grant administrator for APC.
If needed, supplemental accounting assistance can be supplied by APC.
3.7 Financial Accounting System
Discuss the accounting system that will be used to account for project costs and whom will be the
primary user of the accounting system.
APC and NVT. shall develop and share an accounting system which is acceptable to the AEA, and
which shall be used to account for project costs. APC is accustomed to utilizing accounting systems
for AEA grants. NVT is accustomed to utilizing its accounting system for grants from various state
and federal sources.
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This section of the REF application is new, and it is unclear to us which financial accounting systems
and standards the AEA may prefer. Rather than risk specifying a system which the AEA may not
prefer or favor, we would like to demonstrate a willingness and flexibility to utilize any system which
may be acceptable to the AEA.
APC is a regulated utility, and is required to track and substantiate expenses in a manner which is
acceptable to the Regulatory Commission of Alaska. Thus, APC is accustomed to maintaining data
on utility costs and expenditures which meets with a very high standard in terms of assuring that
expenses are reasonable, ordinary, and necessary. Upper Tanana Energy’s Yerrick Creek hydropower
project will sell power to APC under a power purchase agreement regulated by the Regulatory
Commission of Alaska, and will be subject to similar oversight. The RCA does not allow grant funds
to be included within the rate base.
3.8 Financial Management Controls
Discuss the controls that will be utilized to ensure that only costs that are reasonable, ordinary and
necessary will be allocated to this project. Also discuss the controls in place that will ensure that no
expenses for overhead, or any other unallowable costs will be requested for reimbursement from the
Renewable Energy Fund Grant Program.
APC is a regulated utility, and is required to track and substantiate expenses in a manner which is
acceptable to the Regulatory Commission of Alaska. Thus, APC is accustomed to maintaining data
on utility costs and expenditures which meets with a very high standard in terms of assuring that
expenses are reasonable, ordinary, and necessary, and that regulated return on investment is justified.
Upper Tanana Energy’s Yerrick Creek hydropower project will sell power to APC, an AP&T
subsidiary, under a power purchase agreement regulated by the Regulatory Commission of Alaska,
and will be subject to similar oversight. The RCA does not allow grant funds to be included within
the rate base.
APC is a private sector utility business which is accustomed to managing and controlling costs in
order to maximize value and return on investment while ensuring sustainable benefits.
APC and NVT are accustomed to implementing State and federal grant-funded projects which have
restrictions as to allowable costs and overhead.
The involvement of two partners – APC and NVT – helps ensure “checks and balances” to safeguard
against any accidental expenditures which are not necessary or allowable.
The unique partnership aspect of this project helps create greater efficiency and value, and will help
manage and control costs to only include reasonable, ordinary, and essential expenses.
Upper Tanana Energy and its members are willing to follow any other reasonable guidelines
suggested by the AEA to prevent unallowable expenses.
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SECTION 4 – PROJECT DESCRIPTION AND TASKS
The level of information will vary according to phase(s) of the project you propose to undertake with
grant funds.
If some work has already been completed on your project and you are requesting funding for an
advanced phase, submit information sufficient to demonstrate that the preceding phases are
satisfied and funding for an advanced phase is warranted.
4.1 Proposed Energy Resource
Describe the potential extent/amount of the energy resource that is available.
Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be
available for the market to be served by your project. For pre-construction applications, describe the
resource to the extent known. For design and permitting or construction projects, please provide
feasibility documents, design documents, and permitting documents (if applicable) as attachments
to this application.
Work on Previous Phases:
The following documents are enclosed for AEA to demonstrate that considerable reconnaissance,
feasibility, design, and permitting work has been completed. In addition, the completed field study
reports can be provided to AEA upon request. Significant activities have been completed over the
last 7 years, and have brought this project to the point where construction can begin in July of 2015,
in time with issuance of State REF Round VIII funds.
• U.S. Army Corps of Engineers. May 2014. Permit No. POA-2009-445. E-Mail regarding in-
lieu mitigation.
• U.S. Army Corps of Engineers. May 2014. Permit No. POA-2009-445. Renewed.
• U.S. Army Corps of Engineers. May 2012. Permit No. POA-2009-445. Renewed.
• Alaska Power Company. June 2010. COE In-Lieu Fee paid to The Conservation Fund.
• The Conservation Fund. May 2010. Letter to Alaska Power Company explaining the amount
needed for in-lieu fee.
• U.S. Army Corps of Engineers. April 2010. Permit No. POA-2009-445. Issued to construct
the Yerrick Creek Hydroelectric Project.
• ADNR – Office of History and Archaeology. March 2010. Correspondence with RUS. Section
106 consultation.
• Alaska Power Company. June 2010. Request to ADNR for a Material Sales. Rock extraction
location.
• Alaska Department of Fish & Game. July 2014. Draft of Fish Habitat Permit Renewal.
• Alaska Power Company. November 2012. Request to ADF&G to renew Fish Habitat Permit
FH09-III-0182.
• Alaska Department of Fish & Game. August 2009. Fish Habitat Permit FH09-III-0182.
• Federal Energy Regulatory Commission. March 2007. Finding of License not required.
Amount of Energy Available, and Pros and Cons of Yerrick Creek Project:
The 1.5 MW Yerrick Creek hydropower will provide 4.9 aGWH of affordable, renewable energy to
Tok and surrounding communities in the upper Tanana region (Tok, Tanacross, Tetlin, Dot Creek),
which are currently dependent upon 100% diesel-fired generation of electricity, and pay energy costs
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of $0.50 / kWh (before PCE).7 While slightly larger and smaller turbine sizes have been considered,
engineers have determined that a 1.5 MW capacity project provides an optimal energy delivery profile
and project economics, while meeting permit requirements.
Lowers Energy Costs. Applicants are requesting $8m in construction funding through the AEA REF
VIII program – it is estimated that this level of funding support by the State of Alaska will result in a
project which produces clean energy for half of the cost of diesel-fired generation of electricity. Over
time, annual savings will increase as the cost of diesel fuel continues to escalate over stabile
hydropower pricing.
Stabilizes Energy Costs Long Term. The Yerrick Creek hydropower project will stabilize local
energy costs by reducing dependency on diesel fuel – a volatile commodity with costs which escalated
faster than the rate of inflation. Hydropower maintenance and operating costs are extremely low
compared to that those associated with diesel-fired generation.
Long Project Lifespan with Additional Cost-Savings Available Beyond Capital Cost
Repayment – Yerrick Creek has an estimated useful life of over 50 years. Properly constructed
hydropower sites can provide over 100+ years of reliable service. (For example, AP&T’s Dewey
Lakes hydropower project has been operating for 109 years.) After the financing period is complete
and capital costs are paid off, the cost of maintaining and operating a hydropower project drops to
very low levels.
Diesel Fuel Displacement Benefit. The Yerrick Creek hydropower project will displace
approximately 40% of the region’s diesel-fired generation of electricity with clean, renewable
hydropower from a local, low-impact source. The project will eliminate use of 375,000 gallons of
diesel fuel per year for a 50+ year operating life, avoiding a total of 18,750,000 gallons of diesel fuel.
Supports State Renewable Energy Policy Goals. By supplanting diesel-fired generation with clean,
renewable hydropower, Yerrick Creek will help to support the State of Alaska’s goal of 50%
renewable energy by 2025.
MOU Executed Between Project Partners. Tanacross Inc., the Native Village of Tanacross, and
AP&T signed a Memorandum of Understanding expressing willingness to work cooperatively on the
Yerrick Creek project in August of 2014. The three entities established a new venture named Upper
Tanana Energy to develop, own, and operate the project as an independent power producer (IPP).
Power Sales Agreement Concept Approved by Incumbent Utility. The Yerrick Creek
hydropower project will sell energy to Alaska Power Company – the incumbent for the Tok region,
and a subsidiary of Alaska Power & Telephone (AP&T) – under a power sales agreement transaction
regulated by the Regulatory Commission of Alaska (RCA). As a UTE project partner, AP&T is
agreeable to this arrangement.
Avoids Costly, Time-Consuming Federal Permitting Requirements. Yerrick Creek is located on
private and State lands and has received a non-jurisdictional determination from the Federal Energy
Regulatory Commission (FERC), making it possible to develop this low-impact hydropower project
in a timely fashion without undergoing lengthy federal permitting processes through FERC.
7 Source: Most recently available AEA PCE report:
http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
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Expedient Construction Possible. Construction is anticipated to be complete by 2017. Project
partners anticipate that all remaining permitting, power sales agreement, and other pre-construction
activities will be complete by the 2015 construction season, making REF VIII construction phase
funding timely and appropriate.
Benefits Communities which are Still 100% Diesel Dependent. The project will benefit the
interconnected communities of the Upper Tanana region, including Tok, Tanacross, Tetlin, and Dot
Lake. Unlike other communities in Alaska, Tok and surrounding communities of the upper Tanana
region have not yet had the opportunity to transition from 100% diesel-fired generation to an energy
mix including renewables. The most recently available AEA PCE report identifies $0.50 kWh pricing
for this service region, with an average PCE payment of $0.28 per eligible kilowatt hour.
Potential to Extend Benefit to Additional Communities -- If the Slana-Chistochina-Mentasta grid
becomes connected to Tok in the future, these communities will also benefit from the presence of the
Yerrick Creek hydropower project. Similarly, if Northway, Northway Junction, and Northway
Village also become connected to Tok, they will benefit from this project. All of these communities
are served by APC, and are currently 100% dependent on diesel-fired generation. The most recently
available AEA PCE report identifies $0.69 / kWh pricing for these service regions, with an average
PCE Payment of $0.47 per eligible kilowatt hour.
Generates Significant Power Cost Equalization Savings for the State of Alaska. Due to current
100% dependency on diesel-fired generation, the State of Alaska would experience significant Power
Cost Equalization subsidization savings. State PCE statistics indicate the 58.2% of total kWh sold in
the Tok service region in FY13 are PCE-eligible kWh; if this ratio holds true, the State of Alaska
would realize significant PCE subsidization savings, with approximately 41.8% of cost-savings being
realized by current ratepayers.8
Existing Market for 100% of Power and Energy. Economic viability of many hydropower projects
in Alaska is challenged by the difficulty of matching the utility’s incremental load growth to the size
of locally available hydropower resources; this produces the frequently occurring situation in which
100% of power and energy from a new hydropower project cannot be sold during initial years of
operation. Yerrick Creek does not have this problem – 100% of the project’s 4,900,000 kWh will be
saleable from year one, replacing diesel-fired generation.
Significant Local Support and Cooperation. AP&T, Tanacross Inc., and the Native Village of
Tanacross have signed a Memorandum of Agreement agreeing to cooperate to develop the Yerrick
Creek project for the benefit of the region. The project is well supported by the Tok community, due
to its ability to lower energy rates.
Experienced Hydro Development Partner. Project partner APC has significant experience
developing, owning, and operating low impact hydropower projects. APC has developed 4 new
hydropower projects in Alaska in the last 20 years, with a 5th hydropower project (Reynolds Creek)
currently entering final construction. APC also owns and operates a total of 7 hydropower projects.
APC has over 50 years’ experience as a private sector Alaskan business engaged in ownership,
development, and reliable operation of hydropower projects. APC has also performed hydropower
development services for a wide range of utilities within the State of Alaska. APC’s in-house
8 Source: Most recently available AEA PCE report:
http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
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engineering department continues to be in high demand for assisting utilities, IPPs, tribal
organizations, and others on a contractual basis to plan and develop new renewable energy resources.
Support for State of Alaska Resource Development and Economic Development Policy. The
upper Tanana region is challenged by high energy costs, which limit economic development and
employment opportunities. While businesses are actively pursuing new value-adding opportunities
within the forest products sector and are conducting mining exploration activities, commercial
feasibility of these resource-driven opportunities is limited by high local energy costs. The current
situation creates constraints to realizing State of Alaska’s Natural Resource Policy, as defined in
Article 8 Section 1 of the State of Alaska Constitution, which is as follows: “It is the policy of the
State to encourage the settlement of its land and the development of its resources by making them
available for maximum use consistent with the public interest.”
Existing Investment to Date. The Yerrick Creek hydropower project has benefitted from significant
investment supporting 7 years of study, which has brought the project to its current state of
development readiness:
$100,000 AEA grant funds, supporting preliminary feasibility analysis. This project
was implemented and concluded successfully, with a final project summary
submitted to the Alaska Energy Authority.
$713,267 in USDA RUS grant funds. These funds were used to pay for the permitting
process, fish habitat survey, wetlands inventory, water quality testing, hydrology
analysis, stream gaging, TES plant survey, other environmental analysis, cultural
resource survey, geotechnical evaluations for placement of project features,
engineering design, and legal services.
$75,801 in private investment supplied by APC. These funds have supported
supplemental project development activities and business planning and development.
$75,000 in AEA REF Round VII funds were awarded to the Native Village of
Tanacross for this project, and are currently being used for business development,
business modeling, and PPA finalization tasks, with expenditures scheduled for
completion by close of SFY15.
Some USDA Construction Funding Already Secured. $961,733 in USDA RUS funding (secured)
is currently available for construction-phase activities.
Willing Private Sector Investor. AP&T is very interested in participating as an equity investor in
the Yerrick Creek project, and is committing to work through the UTE partnership to develop and
implement an economically and financially feasible financing package. After economically and
financially feasible loan terms can be negotiated, project partners would be in the position to make a
final financial commitment to the project.
Ease of Integration – Hydropower can be readily incorporated alongside diesel-fired generation
within a small utility system, with minimum integration concerns.
Disadvantage – Large Capital Expenditure Requirement. The major drawback of hydropower
projects is that they are extremely capital intensive. While hydropower projects have very long useful
lifespans (50+ or even 100+ years), commercial financing is typically available for a 30 year period
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at most. UTE is seeking to help offset these drawbacks by requesting 50% State of Alaska funding
for construction.
Discussion of Energy Technology Alternatives in the Tok Region.
APC’s “Technology-Neutral” Approach for Lowering Energy Costs for Ratepayers:
APC utilizes a “technology neutral” approach, and considers all possible technologies which may
produce clean, reliable energy at a lower rate for the benefit of the ratepayers. While APC considers
solar, wind, river hydrokinetic, hydropower, biomass, and alternative fuels, the company ultimately
focuses on the opportunities which meet the criteria of providing ratepayers with the most affordable,
reliable, and low-risk clean energy possible. After studying a wide variety of options, APC has
identified Yerrick Creek as the renewable energy option offering the best value to ratepayers within
the Tok and upper Tanana region.
Solar: Challenged by Intermittency – Solar power is an intermittent resource
which is only available when the sun is shining in sufficient quantity to produce
useable energy and power. Solar is not yet competitive with diesel-fired generation
in the Tok and Upper Tanana region; part of the reason for this is that even in the
presence of solar, dispatchable generation sources such as diesel power plants are still
needed to supply power to fully serve the local load at times when the sun is not
shining – for example, at night, during times of cloud-cover, and during the interior’s
long winters when hours of sunshine are scarce. Diesel power plants must still be
staffed, maintained, and operated – and so while installation of solar panels may
eliminate purchase of some diesel-fired generation, it does not reduce these “fixed
costs” incurred by the utility and its ratepayers. While storage and load-shaping
technology is available to help to mitigate intermittency, these technologies are not
yet commercially competitive versus the cost of diesel-fired generation.
There are also limits to the amount of intermittent resources which can be integrated
into a small, insular system before significant transmission line and other upgrades
are necessary to preserve system stability.
The article below, published by the Economist, looks at the costs of “intermittency,”
which are oftentimes not reflected in levelized energy costs or comparisons of solar
power versus other generation alternatives.
http://www.economist.com/news/finance-and-economics/21608646-wind-and-
solar-power-are-even-more-expensive-commonly-thought-sun-wind-and
Despite these challenges, APC is investigating new opportunities and business
models for deployment of small-scale solar. While solar deployment may be
economically feasible in future years as technology advances and diesel costs
continue to rise, the economics of the Yerrick Creek hydropower project are
presently far more attractive.
Wind: Challenged by Intermittency – Like solar, wind is an intermittent resource
which requires availability of dispatchable back-up from thermal or hydropower plant
sources, and can present significant integration challenges / expenses to small, insular
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grid systems. APC is studying opportunities for wind deployment and integration in
its service regions – however, economics of the Yerrick Creek hydropower project
are presently far more attractive.
Biomass CHP: Challenged Lack of Viable Market for Heat and Fuel Supply
Risks – With the support of State funding, APC has studied the opportunity for a
commercial-scale biomass CHP power plant in the Tok and Upper Tanana region.
While studies found that biomass-fired generation of electricity is feasible, the
Yerrick Creek hydropower project is far more economically attractive than a
biomass CHP plant, and offers a better value to the Tok and upper Tanana
region’s ratepayers, with significantly less risk. The business case for biomass
could be improved upon if a market can be found for the heat produced by a CHP
biomass power plant; however, no viable markets currently exist. Other challenges
to biomass implementation in the Tok region include securing a long-term timber
supply which assures financially feasible operations for a period coinciding with
project financing and obtaining assurances of sufficient fuel quality, and stability of
fuel supply. It would be necessary to find a supplier with the willingness and financial
means to commit to a long-term supply agreement which addresses liquidated
damages in the event that fuel of agreed-upon quality is not delivered in a timely
manner. Another consideration is fuel cost escalation that could occur over time as
nearby biomass is exhausted, creating a need to obtain fuel supply from locations
further away, at a higher cost of transportation.
LNG: Currently Challenged by Supply Availability, Economies of Scale, and
Technology Issues – While APC has investigated LNG options, an economically
viable business model for small-scale LNG has not yet been identified. Challenges
include lack of currently available supply, significant transportation/logistics
challenges, and lack of commercially viable and cost-competitive technology for
LNG storage and powerplants in a service area as small as Tok. Emissions from
natural-gas fired generation are lower than those from diesel-fired generation,
however, they are still considerably higher than emissions from hydropower
generation.
Diesel: A Costly and Unsustainable Energy Source – Tok and the upper Tanana
region are currently 100% dependent on diesel-fired generation. This energy source
is very costly, with pricing escalating faster than inflation due to the rising price of
petroleum – a volatile commodity sensitive to a wide variety of supply risks and
political factors. The high cost of diesel-fired generation places financial pressure on
rural communities, businesses, and schools, forcing migration to other regions with a
more affordable cost of living and doing business. Diesel fuel expenditures are made
outside of the Tok community, resulting in ongoing financial leakage and attrition.
Diesel-fired generation also has high environmental costs, producing a significant
level of emissions and carbon, and carrying risks of fuel spills. Continued 100%
dependency on diesel-fired generation is not a sustainable way of life for
residents of the Tok and upper Tanana region. Residents in this service area have
been increasingly outspoken about the unsustainability of continued 100% reliance
on diesel-fired generation. However, diesel-fired generation does present advantages
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in terms of dependability, dispatchability, and the ability to quickly respond to and
match load requirements. It is likely that diesel-fired generation will maintain some
presence within the Tok region’s energy mix until a commercially viable and
financially feasible thermal generation alternative becomes available.
Other Hydropower Options: Viable, but Further from Development – Other
hydropower options exist in the upper Tanana region. Like Yerrick Creek, the
Clearwater Creek project is also economically attractive, and has the advantage of
being located entirely on State lands; however, the understanding of this project is
not as advanced as Yerrick Creek, which has experienced a higher level of work and
investment to date. APC anticipates that with increased analysis and study,
Clearwater Creek and other hydropower options may prove viable for integration
after Yerrick Creek, and is working to advance its understanding of these projects so
that they can be developed at a future time following Yerrick.
4.2 Existing Energy System
4.2.1 Basic configuration of Existing Energy System
Briefly discuss the basic configuration of the existing energy system. Include information about the
number, size, age, efficiency, and type of generation.
The existing electrical energy market in the Upper Tanana area consists of an isolated power grid
serving the communities of Tok, Tetlin, Dot Lake and Tanacross, as well as other, scattered rural
ratepayers. A diesel powerplant located in Tok supplies this small grid system.
The Tok powerplant is comprised of five diesel gensets:
Unit #3 = CAT Model D3516, 1320 kW, Purchased / Installed 1999
Unit #4 = CAT/KATO Model 3516, 1135 kW, Purchased / Installed 1989
Unit #5 = CAT/KATO Model 3516, 1135 kW, Purchased / Installed 1995
Unit #8 = CAT/KATO Model D3508, 440 kW, Purchased / Installed 1985
Unit #9 = CAT/KATO Model 3512C, 1050 kW, Purchased / Installed 2008
If the Slana-Chistochina-Mentasta grid becomes connected to Tok in the future, these communities
will also benefit from the presence of the Yerrick Creek hydropower project. Similarly, if Northway,
Northway Junction, and Northway Village also become connected to Tok, they will benefit from this
project. All of these communities are served by APC, and are currently 100% dependent on diesel-
fired generation. The most recently available AEA PCE report identifies $0.69 / kwh pricing for these
service regions, with an average PCE Payment of $0.47 per eligible kilowatt 9.
4.2.2 Existing Energy Resources Used
Briefly discuss your understanding of the existing energy resources. Include a brief discussion of
any impact the project may have on existing energy infrastructure and resources.
Existing power plant resources are described in section 4.2.1. above.
9 Source: http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
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Existing potential renewable / alternative energy resources are discussed in section 4.1 above.
APC’s engineers have designed the Yerrick Creek hydropower project in a manner allowing it to be
integrated within the existing utility system as a reliable alternative to diesel-fired generation.
While some transmission upgrades will be required and are included within construction costs, the
Yerrick Creek project will help enhance system stability.
Yerrick Creek will not produce the types of system stability problems which could be produced by
attempting to integrate a high degree of intermittent resources such as wind and solar.
4.2.3 Existing Energy Market
Discuss existing energy use and its market. Discuss impacts your project may have on energy
customers.
Existing Energy Use and Market
The project will benefit the interconnected communities of the Upper Tanana region, including
Tok, Tanacross, Tetlin, and Dot Lake, as well as additional rural customers. The most recently
available AEA PCE report identifies $0.50 kwh pricing for this service region, with an average
PCE payment of $0.28 per eligible kilowatt hour.
The figures below provide a characterization of this energy market:
i. Electricity [kWh] 10.9 GWh
ii. Fuel usage
Diesel [gal] 778,571
Other NA
iii. Peak Load 2.2 MW
iv. Average Load 1.1 MW
v. Minimum Load 0.5 MW
vi. Efficiency 30%
vii. Future trends Transition to non-diesel sources, increased distributed generation
If the Slana-Chistochina-Mentasta grid becomes connected to Tok in the future, these communities
will also benefit from the presence of the Yerrick Creek hydropower project. Similarly, if Northway,
Northway Junction, and Northway Village also become connected to Tok, they will benefit from
this project. All of these communities are served by APC, and are currently 100% dependent on
diesel-fired generation. The most recently available AEA PCE report identifies $0.69 / kwh pricing
for these service regions, with an average PCE Payment of $0.47 per eligible kilowatt hour.
Impacts Upon Energy Customers
As discussed at length above, the high and rising cost of energy in these communities severely limits
economic opportunities; contributes to unemployment and population outmigration; places
pressures upon household budgets, as well as budgets of schools, community facilities, and
government entities; and inhibits realization of the State of Alaska’s natural resource policy goals.
Development of the Yerrick Creek hydropower project will help mitigate these conditions, and
create energy cost and economic parity between the Tok and upper Tanana region, and other areas
of Alaska.
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Lowers Energy Costs. Applicants are requesting $8m in construction funds through the AEA
REF VIII program – it is estimated that this level of funding support by the State of Alaska
will result in a project which produces clean energy for half of the cost of diesel-fired
generation of electricity. Over time, annual savings will increase as the cost of diesel fuel
continues to escalate over stabile hydropower pricing.
Stabilizes Energy Costs Long Term. The Yerrick Creek hydropower project will stabilize
local energy costs by reducing dependency on diesel fuel – a volatile commodity with costs
which escalated faster than the rate of inflation. Hydropower maintenance and operating costs
are extremely low compared to that those associated with diesel-fired generation.
Long Project Lifespan with Additional Cost-Savings Available Beyond Capital Cost
Repayment – Yerrick Creek has an estimated useful life of over 50 years. Properly
constructed hydropower sites can provide over 100+ years of reliable service. (For example,
APC’s Dewey Lakes hydropower project has been operating for 109 years.) After the
financing period is complete and capital costs are paid off, the cost of maintaining and
operating a hydropower project drops to very low levels.
Generates Significant Power Cost Equalization Savings for the State of Alaska. Due to
current 100% dependency on diesel-fired generation, the State of Alaska would experience
significant Power Cost Equalization subsidization savings. State PCE statistics indicate the
58.2% of total kWh sold in the Tok service region in FY13 are PCE-eligible kWh; if this ratio
holds true, the State of Alaska would realize significant PCE subsidization savings, with
approximately 41.8% of cost-savings being realized by current ratepayers.10
4.3 Proposed System
Describe the system you are intending to develop and address potential system design, land
ownership, permits, and environmental issues.
4.3.1 System Design
Provide the following information for the proposed renewable energy system:
Renewable Energy Technology: Run-of-river hydropower.
Optimum Installed Capacity: 1.5 MW
Anticipated Annual Generation: 4,900,000 average annual kilowatt hours.
Capacity Factor: 37.2%
Integration Concept: The Yerrick Creek hydropower project will be integrated within the
incumbent Alaska Power Company utility system as an alternative to current diesel-fired generation.
The project will supplant 4,900,000 average annual kilowatt hours of diesel-fired generation, or
approximately 40% of the Tok region’s load. During summer months of highest flows and lowest
electricity demand, it is anticipated that the project will be able to support 100% of the region’s power
10 Source: Most recently available AEA PCE report:
http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
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and energy needs. During winter months of lower flows and higher electricity demand, it is
anticipated Yerrick Creek will meet 10% of the region’s power and energy needs.
As discussed above, Upper Tanana Energy (UTE) will function as an IPP for the project. UTE will
sell power and energy from the Yerrick Creek project to Alaska Power Company – an AP&T
subsidiary – via a long-term power sales agreement, as an alternative to diesel-fired generation. One-
hundred-percent of the project’s power and energy will be fully subscribed, beginning in the first year
of commercial operations. APC is agreeable to this arrangement.
As discussed below, integration will include 10 miles of transmission line upgrade, which is included
with project construction costs.
Description of Project Features:
The Project will consist of:
• Approximately 3 miles of single-lane access road from the highway to the diversion site.
Efforts will be made to utilize existing road corridors to the extent possible. The clearing
width for the road will generally be 40-50 feet, but may be somewhat wider in areas
of significant ground slope due to the widths of cuts and fills. The right-of-way (ROW)
width will be 100 feet to provide for minor field adjustment of the alignment if necessary.
The road will cross Yerrick Creek at one location approximately 2 miles from the highway;
the bridge will be roughly 200 feet long.
• A diversion structure at about El 2220, just below the confluence of the main stem of
Yerrick Creek and two tributaries. The diversion structure will include a concrete-faced
rockfill dike on the west abutment, a concrete-faced rockfill spillway and roughened
channel outlet in the central portion, and a concrete intake on the right abutment.
• A buried pipeline approximately 15,000 feet in length (known as a penstock) using 42-
inch HDPE pipe for the upper 55% and 36-inch ductile iron pipe for the lower 45%. The
penstock will cross Yerrick Creek just above the bridge noted above; it will be buried
below the stream channel and encased in concrete.
• A powerhouse approximately 1,500 feet upstream of the Alaska Highway where the water
will pass through a single turbine to the tailrace. Other powerhouse equipment will
include the 1,500 kW generator, controls and switchgear, bridge crane, and pad-mount
transformer. The powerhouse structure will be a metal building set on a concrete
foundation.
• A tailrace consisting of a pond and 800 feet of excavated canal to an existing overflow
channel of Yerrick Creek. The pond will be formed in a borrow pit excavated to
provide fill material for the access road. The pond is expected to develop a stable ice
cover in winter that will allow the turbine to discharge without glaciering.
• A transmission line consisting of 1,500 feet of 12.4 kV underground transmission cable
from the powerhouse to the highway and 10 miles of upgraded 12.4 kV overhead
transmission line adjacent to the highway (see Figure 3).
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FIGURE 3: Transmission Line Features
The proposed Project requires state and federal permitting prior to project commencement of
construction. The permits needed are: (1) a Department of Natural Resource (DNR) land lease
permit; (2) DNR water rights permit (will be issued after operations start); (3) Department of Fish
& Game (ADF&G) habitat permit; and, (4) a U.S. Army Corp of Engineers permit. In addition,
besides being on State of Alaska managed lands, this project is also on Tanacross, Inc. lands
(private), which is a Native corporation. The diversion structure and approximately 7,000 feet of
the penstock and access road will be on state land, the remainder of the penstock and access
road as well as the powerhouse and buried portion of the transmission line will be on private
land. The size of easement needed on state land will be approximately 28.4 acres. The size of
easement needed on private land will be approximately 27.7 acres.
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Yerrick Creek Development Schedule:
Delivery methods:
Project will deliver energy to Alaska Power Company via conventional transmission lines and
substations. As noted above, construction includes 10 miles of transmission line upgrades.
4.3.2 Land Ownership
Identify potential land ownership issues, including whether site owners have agreed to the project or
how you intend to approach land ownership and access issues.
This project is located entirely on lands owned by the State of Alsaka, and private lands owned by
Tanacross, Inc.
Milestones Tasks Start Date End Date
Tri-party MOA finalized Create tri-party MOA Completed Completed
Develop and Approve PPA Concept Obtain approval from AP&T Completed Completed
Develop and Incorporate IPP Entity Incorporation of IPP Entity Completed Completed
Finalize hydro system design AP&T engineering department to
complete design In Progress 15-May
Finalize project business / finance
plan:Produce Project business plan In Progress 15-Aug
a. Update business model Updated business model. In Progress 14-Nov
b. Develop Financing Plan
Updated finance plan. Details will
depend upon outcome of AEA REF VIII
grant application.
In Progress 15-Aug
c. Formalize USDA grant agreement
Work with USDA RUS to obtain
$961,733 High Energy Cost Program
grant agreement
Completed Completed
Finalize all agencies’ permitting Receipt of all permits, and transfer to
Upper Tanana Energy In Progress 15-Aug
Develop PPA Agreement Dependent on Financing / AEA Funding
Availability In Progress 15-Sep
Develop Construction Agreement Signed Construction Agreement In Progress 15-Sep
Develop O&M Agreement Signed O&M Agreement In Progress 15-Sep
Develop Land Use Agreement Signed Land Use Agreement In Progress 15-Sep
Negotiate AEA REF grant
agreement
Await legislative and Governor approval
of Project AEA REF request 15-Jul 15-Aug
Completion of access road
Flagging, survey route, survey for active
bird nests (if construction between May 5-
July 25), brush and grade right-of-way,
install culverts, final grade and surface
15-Jul 16-Jul
Award contract for supply of generating
equipment Contact gen/set supplier, get quotes, order 15-Jul 15-Sep
Receipt of penstock materials Order penstock materials 15-Jul 15-Sep
Installation of bridge across creek Order materials and install 15-Sep 16-Oct
Receipt of major generating
equipment Order penstock materials 16-Jul 16-Aug
Completion of powerhouse structure Foundation and prefab structure
assembled, tailrace 16-Aug 16-Oct
Completion of diversion structure Excavate, pour concrete, install valves,
flanges, intake, controls, gates 16-Apr 16-Oct
Completion of generating equipment
installation
Install generating equipment, switchgear,
transformer 16-Sep 16-Nov
Completion of Distribution Line to Tok Order materials, install poles and
conductor 16-Apr 16-Oct
Test and Startup Test equipment, operate project to fine
tune the instrumentation, etc.16-Nov 16-Dec
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Tanacross, Inc. has agreed to support development of the project. In July of 2014, Tanacross, Inc.
entered into a memorandum of understanding with Alaska Power & Telephone and the Native Village
of Tanacross supporting development of the Yerrick Creek Hydropower Project. This resulted in the
formation of Upper Tanana Energy -- a partnership between AP&T, Tanacross Inc., and the Native
Village of Tanacross.
4.3.3 Permits
Provide the following information as it may relate to permitting and how you intend to address
outstanding permit issues.
• List of applicable permits
• Anticipated permitting timeline
• Identify and discuss potential barriers
The following permits have been received:
• State of Alaska Department of Natural Resources; Land permit – need to provide
agreement with Tanacross, Inc. to receive permit (MOU), which will then be filed with
ADNR); Water permit – won’t be issued until after operations begin
• State of Alaska Department of Fish & Game (FH2009-III-0182)
• State of Alaska State Historical Preservation Office; March 24, 2010, letter to from
SHPO to RUS confirms their review and determination of no impacts.
• U.S. Army Corp of Engineers; (POA-2009-445)
Anticipated permitting timeline: Permits will be completed by July 2015
Potential barriers: Weather is the single greatest potential barrier to the projects construction
timeline.
4.3.4 Environmental
Address whether the following environmental and land use issues apply, and if so how they will be
addressed:
• Threatened or endangered species
• Habitat issues
• Wetlands and other protected areas
• Archaeological and historical resources
• Land development constraints
• Telecommunications interference
• Aviation considerations
• Visual, aesthetics impacts
• Identify and discuss other potential barriers
Enclosed in the Appendices is the Environmental Assessment and Finding-of-No-Significant-
Impacts from RUS.
TES: No TES species were identified by a wildlife biologist or by USF&WS to be using the Yerrick
Creek drainage.
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Habitat: A fish habitat assessment was conducted using a qualified fish biologist. No salmon utilize
the creek. ADF&G issued permit FH14-III-XXX, which is currently being finalized. ADF&G would
like to see final design before construction can begin.
Wetlands: The project site has wetlands. The COE required an in-lieu fee of $8,700 to compensate
for the loss of wetlands. This fee was to be paid to The Conservation Fund, which is out of Eagle
River, Alaska. This was done in June 2010 (Correspondence enclosed in Appendices/Permitting).
Archaeological / Historical: An archaeologist surveyed the project site and available literature.
Although some historical artifacts were identified, APC rerouted the project to avoid them. SHPO
and RUS both stated that there will be no impact to said artifacts because of our moving (mitigation)
the project features.
Land Development Constraints: In the past, land development was constrained by the need to
develop an agreement with the private land holder, Tanacross Inc. APC has overcome this constraint
by signing an MOU with Tanacross, Inc. and the Tanacross Village Council, which specifies
willingness of the three partners to jointly cooperate to complete the project.
Telecommunications: This project will not affect telecommunications because of the low voltage
involved.
Aviation: This project will not impact aviation. The project is not near an airport and the transmission
line will replace the existing overhead structures along the Alaska Highway, adding approximately
10 feet to their height. Because the transmission line route is mostly through forest, it is unlikely that
aviation will be impacted.
Visual: Visual impacts will be related to an access road off of the Alaska Highway, but there are
many roads off of the highway, making this a familiar feature for the area. No other project features
are expected to be visible because of screening by vegetation and terrain. The transmission line from
the powerhouse to the existing overhead infrastructure along the highway will be buried (mitigation)
to reduce visual impacts.
4.4 Proposed New System Costs and Projected Revenues
(Total Estimated Costs and Projected Revenues)
The level of cost information provided will vary according to the phase of funding requested and any
previous work the applicant may have done on the project. Applicants must reference the source of
their cost data. For example: Applicants records or analysis, industry standards, consultant or
manufacturer’s estimates.
4.4.1 Project Development Cost
Provide detailed project cost information based on your current knowledge and understanding of the
project. Cost information should include the following:
• Total anticipated project cost, and cost for this phase
• Requested grant funding
• Applicant matching funds – loans, capital contributions, in-kind
• Identification of other funding sources
• Projected capital cost of proposed renewable energy system
• Projected development cost of proposed renewable energy system
A summary project cost estimated is provided below. Estimate was performed by APC engineers in
September 2014 based on internal records, industry standards, experience on other similar projects in
rural Alaska, and supply chain/vendor information. Additional budget detail and sources of cost data
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/ pricing based upon industry sources can be provided to the AEA upon request; however, some of
this information may be considered confidential due to agreements between AP&T and other project
partners, and APC and vendors / suppliers.
YERRICK CREEK HYDROELECTRIC PROJECT
ESTIMATE OF CONSTRUCTION COST – 9/2014
331 STRUCTURES AND IMPROVEMENTS
0.1 MOBILIZATION $ 500,000
0.2 POWERHOUSE $ 405,000
332 RESERVOIRS, DAMS, AND WATERWAYS
0.1 DIVERSION STRUCTURE $ 1,553,000
0.2 UPPER PENSTOCK (HDPE PIPE) $ 1,547,000
0.3
LOWER PENSTOCK (DUCTILE
IRON PIPE) $ 3,191,000
333 TURBINES AND GENERATORS
0.1 TURBINE SHUTOFF VALVES $ 230,000
0.2 HYDRAULIC TURBINES $ 690,000
0.3 SYNCHRONOUS GENERATORS $ 820,000
0.4 AUXILIARY DIESEL GENERATOR $ 56,000
334 ACCESSORY ELECTRICAL EQUIPMENT
0.1 SWITCHGEAR $ 52,000
0.2 CONTROL SYSTEM $ 250,000
0.3 DC POWER SYSTEM $ 45,000
335 MISCELLANEOUS MECHANICAL EQUIPMENT
0.1 POWERHOUSE CRANE $ 134,000
0.2 FIRE PROTECTION AND SECURITY $ 12,000
0.3 SHOP EQUIPMENT $ 14,000
336 ROADS AND BRIDGES
0.1 ROAD TO DIVERSION $ 1,489,000
353 SUBSTATION EQUIPMENT AND STRUCTURES
0.1 POWERHOUSE SUBSTION $ 215,000
355 POLES AND FIXTURES
0.1
UPGRADE EXISTING LINE (10
MILES) $ 850,000
0.2 REMOVE OLD LINE (12 MILES) $ 840,000
0.3 CONSTRUCT NEW LINE (12 MILES) $ 1,740,000
356 OVERHEAD CONDUCTOR AND DEVICES
0.1
357 UNDERGROUND CONDUIT
0.1 TRANSMISSION LINE $ 37,000
358 UNDERGROUND CONDUCTORS AND DEVICES
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0.1 TRANSMISSION LINE $ 104,000
SUBTOTAL $ 14,774,000
Contingency 10.0% $ 1,477,000
Escalation 10.4% $ 1,687,000
SUBTOTAL $ 17,938,000
Permitting 0.5% $ 90,000
Design 2.0% $ 359,000
CM 3.5% $ 613,000
SUBTOTAL $ 19,000,000
Proposed cost allocation summary is provided in Section 2.7 above, and is as follows:
2.7.1 Grant Funds Requested in this application: $8,000,000
2.7.2 Cash match to be provided: $11,000,000
(State grant funds to be matched on a 1:1 basis)
1. New Match to New State Investment: $11,000,000
Match: USDA RUS Construction Grant -- $961,733 in USDA RUS funds (secured)
Match: Private Debt and Equity -- $10,038,267 (Approximately 25% equity / 75% debt).
AP&T will pursue commercial loan options, and will also explore low-interest loan options from
sources including the Alaska Power Project Fund and USDA RUS, in order to attempt to
provide the most affordable energy possible to ratepayers.
4.4.2 Project Operating and Maintenance Costs
Include anticipated O&M costs for new facilities constructed and how these would be funded by the
applicant.
(Note: Operational costs are not eligible for grant funds however grantees are required to meet
ongoing reporting requirements for the purpose of reporting impacts of projects on the communities
they serve.)
Operational costs for this project are minimal in comparison to operation of the APC Tok-based
diesel-fired power plant. Project operational costs include maintenance of automated controls
systems and related remote communication to APC’s SCADA control center, periodic inspections
by AP C Tok-based maintenance staff to ensure clearing of debris at the upper catchment/intake
structure and powerplant maintenance activities. It is estimated that power plant operations and
maintenance expenses will be $100,000 annually.
4.4.3 Power Purchase/Sale
The power purchase/sale information should include the following:
• Identification of potential power buyer(s)/customer(s)
• Potential power purchase/sales price - at a minimum indicate a price range
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• Proposed rate of return from grant-funded project
Customer:
Upper Tanana Energy intends to enter into a long-term power sales agreement with APC for 100
percent of the power produced, using AEA’s prescribed “cost-based rate.” While power purchase
agreements to be finalized at a later date, APC has agreed to an arrangement of this type.
Potential Power Purchase / Sales Price:
Estimated pricing of 50% of the cost of diesel-fired generation with $8m AEA REF funding support.
However, pricing will depend upon grant funding availability and final loan terms. Price estimates
will be updated based upon outcome of AEA REF VIII funding awards, and subsequently based upon
potential loan terms.
Proposed Rate of Return from Grant-Funded Project:
The PPA transaction – including the associated rate of return -- would be regulated by the Regulatory
Commission of Alaska, and would generate a regulated return on private investment consistent with
the rate of return for similar projects. As a regulated utility, APC and likewise Upper Tanana Energy
would not be permitted to earn a rate of return on grant funds, or otherwise include grant funds in the
rate base – Upper Tanana Energy would earn a rate of return on private investment only.
4.4.4 Project Cost Worksheet
Complete the cost worksheet form which provides summary information that will be considered in
evaluating the project.
Please fill out the form provided below.
Renewable Energy Source
The Applicant should demonstrate that the renewable energy resource is available on a sustainable
basis.
Annual average resource availability. 4,900,000 aKWH
Existing Energy Generation and Usage
a) Basic configuration (if system is part of the Railbelt 11 grid, leave this section blank)
i. Number of generators/boilers/other 5
ii. Rated capacity of generators/boilers/other Unit #3 = CAT Model D3516, 1320 kW,
Purchased / Installed 1999
Unit #4 = CAT/KATO Model 3516, 1135 kW,
Purchased / Installed 1989
Unit #5 = CAT/KATO Model 3516, 1135 kW,
Purchased / Installed 1995
Unit #8 = CAT/KATO Model D3508, 440 kW,
Purchased / Installed 1985
11 The Railbelt grid connects all customers of Chugach Electric Association, Homer Electric Association, Golden Valley Electric
Association, the City of Seward Electric Department, Matanuska Electric Association and Anchorage Municipal Light and Power.
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Unit #9 = CAT/KATO Model 3512C, 1050 kW,
Purchased / Installed 2008
iii. Generator/boilers/other type As noted above
iv. Age of generators/boilers/other As noted above
v. Efficiency of generators/boilers/other 14 kwh per gallon of diesel (aggregate for all
generators)
b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank)
i. Annual O&M cost for labor $119,000 (2012)
ii. Annual O&M cost for non-labor $102,000 (2012)
c) Annual electricity production and fuel usage (fill in as applicable) (if system is part of the
Railbelt grid, leave this section blank)
i. Electricity [kWh] 10.9 GWh
ii. Fuel usage
Diesel [gal] 778,571
Other NA
iii. Peak Load 2.2 MW
iv. Average Load 1.1 MW
v. Minimum Load 0.5 MW
vi. Efficiency 30%
vii. Future trends Transition to non-diesel sources, increased distributed generation
d) Annual heating fuel usage (fill in as applicable)
i. Diesel [gal or MMBtu] NA
ii. Electricity [kWh] NA
iii. Propane [gal or MMBtu] NA
iv. Coal [tons or MMBtu] NA
v. Wood [cords, green tons, dry tons] NA
vi. Other NA
Proposed System Design Capacity and Fuel Usage
(Include any projections for continued use of non-renewable fuels)
a) Proposed renewable capacity
(Wind, Hydro, Biomass, other)
[kW or MMBtu/hr]
1.5 MW Run-of-River hydropower
b) Proposed annual electricity or heat production (fill in as applicable)
i. Electricity [kWh] 4,900,000 aKWH
ii. Heat [MMBtu] NA
c) Proposed annual fuel usage (fill in as applicable)
i. Propane [gal or MMBtu] NA
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ii. Coal [tons or MMBtu] NA
iii. Wood or pellets [cords, green tons,
dry tons]
NA
iv. Other NA
Project Cost
a) Total capital cost of new system $19,000,000
b) Development cost $1,000,000
c) Annual O&M cost of new system $100,000
d) Annual fuel cost None
Project Benefits
a) Amount of fuel displaced for
i. Electricity Estimated 375,000 gallons of diesel per year
ii. Heat NA
iii. Transportation NA
b) Current price of displaced fuel $4 / gallon – equivalent to $0.2857 / kwh
c) Other economic benefits $1,000,000 in deferred maintenance/replacement of
diesel generator at Tok power plant
d) Alaska public benefits Significant PCE Savings for the State of Alaska.
Power Purchase/Sales Price
a) Price for power purchase/sale Target of $0.25 cents / kwh
Project Analysis
a) Basic Economic Analysis
Project benefit/cost ratio See below – 2.9
Payback (years) See below
Results of AEA Econometric Model:
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4.4.5 Impact on Rates
Briefly explain what if any effect your project will have on electrical rates in the proposed benefit
area. If the is for a PCE eligible utility please discuss what the expected impact would be for both
pre and post PCE.
State PCE Savings:
PCE is a complex calculation with outputs which are a function of a variety of variables, including:
1) level of legislatively authorized appropriation; 2) the performance of the PCE endowment, and
level of investment income produced during a given period; 3) current power and energy prices in
“benchmark” communities used as a point of comparison, which in turn are determined by their own
unique set of variables; 4) the cost of diesel fuel.12 The extent to which PCE subsidization is
deployed in recipient communities is a function of the level of energy consumed by eligible
recipients, and in the case of “community facilities,” a function of local population. This makes it
difficult to forecast PCE savings. However, State PCE statistics indicate the 58.2% of total kWh
sold in the Tok region in FY13 are PCE-eligible kWh; if this ratio holds true, the State of Alaska
would realize significant PCE subsidization savings, with approximately 41.8% of cost-savings
being realized by current ratepayers.13 Due to the fact that PCE subsidizes the first 500 kwh per
month of residential energy purchases, and the first 70 kwh per month x the community population of
community facility expenses, the State of Alaska is “at the front of the line” to experience cost savings
for PCE-eligible ratepayer classes. These PCE savings can be used to assist other, less fortunate
communities in other parts of Alaska.
12 Source: http://www.akenergyauthority.org/PDF%20files/PCEProgramGuideJuly292014EDITS.pdf
13 Source: Most recently available AEA PCE report:
http://www.akenergyauthority.org/PDF%20files/pcereports/FY13StatisticalRptComt.pdf
Results
NPV Benefits $27,837,521.65
NPV Capital Costs $9,588,161
B/C Ratio 2.90
NPV Net Benefit $18,249,360
Performance Unit Value
Displaced Electricity kWh per year 4,900,000
Displaced Electricity total lifetime kWh 245,000,000
Displaced Petroleum Fuel gallons per year 350,000
Displaced Petroleum Fuel total lifetime gallons 17,500,000
Displaced Natural Gas mmBtu per year -
Displaced Natural Gas total lifetime mmBtu -
Avoided CO2 tonnes per year 3,553
Avoided CO2 total lifetime tonnes 177,625
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Grant Application - Standard Form
The project will benefit the interconnected communities of the Upper Tanana region, including Tok,
Tanacross, Tetlin, and Dot Lake. The most recently available AEA PCE report identifies $0.50 kwh
pricing for this service region, with an average PCE payment of $0.28 per eligible kilowatt hour.
If the Slana-Chistochina-Mentasta grid becomes connected to Tok in the future, these communities
will also benefit from the presence of the Yerrick Creek hydropower project. Similarly, if Northway,
Northway Junction, and Northway Village also become connected to Tok, they will benefit from this
project. All of these communities are served by APC, and are currently 100% dependent on diesel-
fired generation. The most recently available AEA PCE report identifies $0.69 / kwh pricing for these
service regions, with an average PCE Payment of $0.47 per eligible kilowatt hour.
Impacts Upon Rates
As discussed at length earlier in the application, the high and rising cost of energy in Yerrick Creek
beneficiary severely limits economic opportunities; contributes to unemployment and population
outmigration; places pressures upon household budgets, as well as budgets of schools, community
facilities, and government entities; and inhibits realization of the State of Alaska’s natural resource
policy goals. Development of the Yerrick Creek hydropower project will help mitigate these
conditions, and create energy cost and economic parity between the Tok and upper Tanana region,
and other areas of Alaska.
Lowers Energy Costs. Applicants are requesting $8m in construction funds through the AEA
REF VIII program – it is estimated that this level of funding support by the State of Alaska
will result in a project which produces clean energy for half of the cost of diesel-fired
generation of electricity. Over time, annual savings will increase as the cost of diesel fuel
continues to escalate over stabile hydropower pricing.
Stabilizes Energy Costs Long Term. The Yerrick Creek hydropower project will stabilize
local energy costs by reducing dependency on diesel fuel – a volatile commodity with costs
which escalated faster than the rate of inflation. Hydropower maintenance and operating costs
are extremely low compared to that those associated with diesel-fired generation.
Long Project Lifespan with Additional Cost-Savings Available Beyond Capital Cost
Repayment – Yerrick Creek has an estimated useful life of over 50 years. Properly
constructed hydropower sites can provide over 100+ years of reliable service. (For example,
APC’s Dewey Lakes hydropower project has been operating for 109 years.) After the
financing period is complete and capital costs are paid off, the cost of maintaining and
operating a hydropower project drops to very low levels.
SECTION 5– PROJECT BENEFIT
Explain the economic and public benefits of your project. Include direct cost savings, and
how the people of Alaska will benefit from the project.
The benefits information should include the following:
• Potential annual fuel displacement (gallons and dollars) over the lifetime of the evaluated
renewable energy project
• Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement price, RCA
tariff, or cost based rate)
• Potential additional annual incentives (i.e. tax credits)
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• Potential additional annual revenue streams (i.e. green tag sales or other renewable energy
subsidies or programs that might be available)
• Discuss the non-economic public benefits to Alaskans over the lifetime of the project
Potential Fuel Displacement
1 Year – 375,000 gallons -- $1,500,000 ($2014, assuming $4 / gallon)
50 Years – 18,750,000 gallons -- $75,000,000 ($2014, assuming $4 / gallon)
100 Years – 37,500,000 gallons -- $150,000,000 ($2014, assuming $4 / gallon)
Anticipated Annual Revenue
Project will charge a cost-based rate, and generate a regulated return on private equity only, similar
to the IRR for other APC hydropower projects. The AEA could consider the Reynolds Creek
hydropower project a potential comparable.
Additional information on this aspect of the Yerrick Creek project can be provided to the AEA upon
request, but may require some level of confidentiality due to agreements between project development
partners.
Potential Additional Annual Incentives
Significant power cost equalization savings for the State of Alaska
Potential Additional Annual Revenue Streams
While Alaska does currently not have Renewable Portfolio Standards, these conditions could change,
and there may potentially be a market for Renewable Energy Certificates or other environmental
attributes from the project at a future date.
5.1 Public Benefit for Projects with Private Sector Sales
Projects that include sales of power to private sector businesses (sawmills, cruise ships, mines, etc.),
please provide a brief description of the direct and indirect public benefits derived from the project
as well as the private sector benefits and complete the table below. See section 1.6 in the Request
for Applications for more information.
Does not apply.
SECTION 6– SUSTAINABILITY
Discuss your plan for operating the completed project so that it will be sustainable.
Include at a minimum:
• Proposed business structure(s) and concepts that may be considered.
• How you propose to finance the maintenance and operations for the life of the project
• Identification of operational issues that could arise.
• A description of operational costs including on-going support for any back-up or existing systems
that may be require to continue operation
• Commitment to reporting the savings and benefits
Proposed business structure(s) and concepts that may be considered.
The Native Village of Tanacross, Tanacross Inc., and AP&T have developed a MOU supporting
development of the Yerrick Creek hydropower project (enclosed), and have established a partnership
named Upper Tanana Energy (UTE) – an IPP which will own the Yerrick Creek hydropower project,
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and sell power to Alaska Power Company – the incumbent utility, owned by Alaska Power &
Telephone -- via a regulated long-term power sales agreement transaction. APC has agreed to this
project concept, and is a participating development partner.
Proposed Operations & Maintenance
Operational costs for the project are estimated to be $100,000 per year expressed in $2014, based on
adjustments to APC historical costs.
O&M will be financed through a negotiated O&M cost component accompanying a long-term power
sales agreement with APC.
Back-up requirements
There will be no back-up systems installed. APC’s existing Tok-based diesel power plant will provide
100% back-up power supply capacity.
Identification of operational issues that could arise.
Mechanical:
Well designed and constructed hydroelectric projects generally have few major mechanical
operational issues once the inevitable initial bugs have been worked out. Mechanical operational
issues are typically replacement of worn parts.
Other:
A potential operational issue is the impact of climate change on inflows to the project. It is not certain
what changes will occur, but there is some support for the belief that hydropower operation in Alaska
may be beneficially affected by climate change in that there will be more precipitation in the winter
in the form of rain rather than snow, which may result in additional energy during winter months
when hydropower flows tend to be lowest.
Commitment to reporting the savings and benefits
In the event of State investment, project partners would be glad to commit to reporting of savings and
benefits in a manner consistent with AEA requirements.
As a regulated utility serving PCE-eligible communities, APC is required to keep highly detailed
records of costs. These records can also be used to help identify savings to the AEA.
SECTION 7 – READINESS & COMPLIANCE WITH OTHER GRANTS
Discuss what you have done to prepare for this award and how quickly you intend to proceed with
work once your grant is approved.
Tell us what you may have already accomplished on the project to date and identify other grants that
may have been previously awarded for this project and the degree you have been able to meet the
requirements of previous grants.
The Yerrick Creek hydropower project has benefitted from 7 years of study and analysis by AP C.
This work builds upon prior reconnaissance studies and analysis; for example, Ebasco Services, Inc.’s
June 1982 report titled “Regional Inventory and Reconnaissance Study for Small Hydropower
Projects Northeast Alaska.”
Expenditures to date include the following:
$100,000 AEA grant funds, supporting preliminary feasibility analysis. This project was
concluded successfully, with a final project summary submitted to the State of Alaska.
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$713,267 in USDA RUS grant funds. These funds were used to pay for the permitting process,
fish habitat survey, wetlands inventory, water quality testing, hydrology analysis, stream gaging,
TES plant survey, other environmental analysis, cultural resource survey, geotechnical
evaluations for placement of project features, engineering design, and legal services for obtaining
access to private land that have occurred to-date.
$75,801 in Private Investment has been supplied by AP&T. These funds have supported
supplemental project development and business planning activities.
Additionally $75,000 in AEA REF Round VII grant funds were made available to the Native Village
of Tanacross in July of 2014 to assist with partnership formation, PPA development, and business
planning activities. These activities are currently ongoing, with expenditures scheduled for
completion by SFY16.
$961,733 in USDA RUS funds (secured) are currently available to support construction phase
activities.
AP&T has been successful in meeting all requirements of previous grants, including the $100,000
AEA grant supporting feasibility study activities.
Work Performed under the AEA Grant Agreement No. 2195345
Wetland Delineation
TES Plant Survey
Water Quality and Hydrology Baseline Study
Fish Surveys
Preliminary Design
Before the AEA grant funding is awarded in 2015, the following activities will be taking place in
preparation for construction:
• Final design (which will be reviewed by resource agencies)
• Final construction permits acquired from ADNR and ADF&G
Phase IV Activities:
Milestones Tasks Start Date End Date
Completion of access road
Flagging, survey route, survey for active bird
nests (if construction between May 5-July
25), brush and grade right-of-way, install
culverts, final grade and surface
July 2015 July 2016
Award contract for supply of
generating equipment Contact gen/set supplier, get quotes, order July 2015 Sept 2015
Receipt of penstock materials Order penstock materials July 2015 Sept 2015
Installation of bridge across creek Order materials and install Sept 2015 Oct 2016
Receipt of major generating equipment Order penstock materials July 2016 Aug 2016
Completion of powerhouse structure Foundation and prefab structure assembled,
tailrace Aug 2016 Oct 2016
Completion of diversion structure Excavate, pour concrete, install valves,
flanges, intake, controls, gates Apr 2016 Oct 2016
Completion of generating equipment
installation
Install generating equipment, switchgear,
transformer Sept 2016 Nov 2016
Completion of Distribution Line to Tok Order materials, install poles and conductor April 206 Oct 2016
Test and Startup Test equipment, operate project to fine tune
the instrumentation, etc. Nov 2016 Dec 2016
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It should be noted that the schedule assumes no on-site outside work during the November-March
time period. If unusually harsh weather conditions extend that period, the entire schedule could slip.
Achievement of this schedule will also require multiple crews working throughout the 2016
construction season; if local labor is not sufficient to provide multiple crews, a 2017 construction
season may be required.
SECTION 8 – LOCAL SUPPORT AND OPPOSITION
Discuss local support and opposition, known or anticipated, for the project. Include letters of
support or other documentation of local support from the community that would benefit from this
project. The Documentation of support must be dated within one year of the RFA date of July 2,
2014
Documented Local Support
Letters of support are provided as attachments to this application.
The Yerrick Creek project is well-supported by residents of the Tok service area due to its ability to
provide clean, affordable energy at a price lower than the cost of diesel-fired generation. There is
significant community opposition to continued reliance upon diesel-fired generation.
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SECTION 9 – GRANT BUDGET
Tell us how much you are seeking in grant funds. Include any investments to date and funding
sources, how much is being requested in grant funds, and additional investments you will make as
an applicant.
9.1 Funding sources and Financial Commitment
Provide a narrative summary regarding funding source and your financial commitment to the project
$961,733 in USDA RUS funds (secured) are currently available to support construction phase
activities.
Providing 50% State grant funding can be made available, Upper Tanana Energy (UTE) will proceed
to seek and secure financing for the remaining project cost. UTE anticipates utilizing a combination
of debt and private equity. UTE will explore low interest loan options, in order to help ensure a
feasible project which maximizes savings for ratepayers in the Tok region. Options which will be
considered include the State of Alaska Power Project Fund, and USDA RUS.
Alaska Power & Telephone is very interested in participating as an equity investor in the Yerrick
Creek project, and is committing to work through the UTE partnership to develop and implement an
economically and financially feasible financing package. After economically and financially feasible
loan terms can be negotiated, project partners would be in the position to make a final financial
commitment to the project.
9.2 Cost Estimate for Metering Equipment
Please provide a short narrative, and cost estimate, identifying the metering equipment, and its
related use to comply with the operations reporting requirement identified in Section 3.15 of the
Request for Applications.
Yerrick Creek’s project design and construction budget includes a SCADA system, which will track
and generate reliable data on energy usage from the project. This data can be used in terms of
determining the level of power purchased by APC from UTE, and can also be supplied to the State of
Alaska. APC is required to report on details of operations in order to comply with PCE eligibility
and RCA requirements – this will include energy purchase from UTE. This information can be
supplied to the AEA.
If the AEA has an additional metering requirements, or preferences for monitoring project use, UTE
would be glad to accommodate these requests.
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NOTE: Upper Tanana Energy is willing to adjust allocation of AEA REF VIII funds across
different categories, if preferred by the AEA.
Milestone or Task
Anticipated
Completion
Date
RE- Fund
Grant Funds
Grantee
Matching
Funds
Source of
Matching
Funds:
Cash/In-
kind/Feder
al
Grants/Ot
her State
Grants/Ot
her
TOTALS
Structures and Improvements:
Mobilization and Powerhouse
Construction
16-Oct $905,000 0 NA $905,000
Reservoirs, Dams, and
Waterways: Diversion
Structure and Penstock
Installation
16-Oct $2,946,000 $3,345,000 UTE $6,291,000
Turbines and Generators –
Installation of all Equipment 16-Nov 0 $1,796,000 UTE $1,796,000
Accessory Electrical
Equipment – Installation of all
Equipment
16-Nov 0 $347,000 UTE $347,000
Mechanical Equipment –
Powerhouse crane, fire
protection/safety, shop
equipment
16-Oct $160,000 0 NA $160,000
Roads and bridges 16-Jul $1,489,000 0 $1,489,000
Substation Equipment 16-Oct $215,000 UTE $215,000
Poles and fixtures – purchase
and installation 16-Jul $2,500,000 $930,000 USDA
RUS, UTE $3,430,000
Underground conduit,
conductors, and devices 16-Nov 0 $141,000 UTE $141,000
Contingency (10%) NA 0 $1,477,000 UTE $1,477,000
Escalation (10.4%) NA 0 $1,687,000 UTE $1,687,000
Permitting (0.5%) See Above 0 $90,000 USDA RUS $90,000
Design (2%) See Above 0 $359,000 USDA RUS $359,000
Construction Management
(3.5%) NA 0 $613,000 UTE $613,000
TOTALS
Budget Categories:
Direct Labor & Benefits $ $ $
Travel & Per Diem $ $ $
Equipment $ $ $
Materials & Supplies $ $ $
Contractual Services $8,000,000 $10,387,000 $18,387,000
Construction Services $ $ 613,000 $613,000
Other $ $ $
TOTALS $ $ $
USDA RUS – indicates existing USDA grant for Yerrick Creek.
UTE – indicates funding will be supplied by Upper Tanana Energy. Providing 50% State grant
funding can be made available, UTE will proceed to seek and secure financing for the remaining
project cost. UTE anticipates utilizing a combination of debt and private equity. UTE will explore
low interest loan options, in order to help ensure a feasible project which maximizes savings for
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ratepayers in the Tok region. Options which will be considered include the State of Alaska Power
Project Fund, and USDA RUS.
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