HomeMy WebLinkAboutMahoney REF 8 VIII Final 9-2015 Email FormatRenewable Energy Fund Round VIII
Grant Application - Standard Form
AEA 15003 Page 1 of 52 7/2/14
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.
Renewable Energy Fund Round VIII
Grant Application - Standard Form
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SECTION 1 – APPLICANT INFORMATION
Name (Name of utility, IPP, or government entity submitting proposal)
City of Saxman (Saxman),in partnership with Cape Fox Corporation (CFC) and Alaska Power
& Telephone (AP&T), dba Ketchikan Electric Company (KEC)
Type of Entity: Fiscal Year End:
Public-Private Partnership: Local Government
(Saxman); Power & Communication Utility
(AP&T); and ANCSA Corporation (CFC)
June 30th, 2015
Tax ID #
Tax Status: ☒ For-profit ☐ Non-profit ☒ Government (check one)
Date of last financial statement audit: December, 2013
Mailing Address: Physical Address:
City of Saxman 2841 S. Tongass Highway
Attn: Jason Custer Ketchikan, Alaska 99901
Rt. 2, Box 1 -- Saxman
Ketchikan, AK 99901
Telephone: Fax: Email:
907-225-1950 x 29 907-225-6450 Jason.c@aptalaska.com
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:
Leona Haffner 907-225-4166 x 13 cityclerksaxman@kpunet.net
Renewable Energy Fund Round VIII
Grant Application - Standard Form
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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)
Renewable Energy Fund Round VIII
Grant Application - Standard Form
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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.
Mahoney Lake Hydropower Project: Phase III
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: 55.416653,-131.529814
The Mahoney Lake hydroelectric project is located in the Ketchikan Gateway Borough,
approximately 5 miles northeast of Ketchikan, Alaska. The project is located approximately 4 miles
from existing transmission lines at the Silvis Lakes / Beaver Falls hydroelectric project (owned and
operated by Ketchikan Public Utilities, or KPU), and approximately 5 miles from the Swan-Tyee
Intertie (owned by the Southeast Alaska Power Agency, or SEAPA). The site of the project’s
proposed powerhouse is connected to the Ketchikan region’s road system, and is accessible via
Cape Fox Corporation’s privately owned White River road system, which has been recently
upgraded and improved through new “roads to resources” investment by the State of Alaska. The
project is located on lands owned by the Cape Fox Corporation and the US Forest Service (USFS).
2.2.2 Community benefiting – Name(s) of the community or communities that will be the
beneficiaries of the project.
Primary -- The project has the potential to benefit the City of Ketchikan, the City of Saxman, the
Ketchikan Gateway Borough, Wrangell, and Petersburg by providing renewable energy via existing
transmission lines.
Secondary -- The project can eventually benefit communities such as Metlakatla and Kake, which
seek to construct new transmission lines allowing them to connect to the SEAPA-region system. In
the event that southeast Alaska constructs additional transmission lines between communities, the
Mahoney Lake project will function as an important energy generation asset within a more
extensive regional electrical grid.
Tertiary – Outlying rural communities such as those found on Prince of Wales Island share strong
economic ties with Ketchikan, and would benefit from new economic growth in the Ketchikan
region. Mahoney Lake has the potential to play a critical supporting role to industries such as
mining (ex: ore processing in the Ketchikan area), advanced manufacturing (ex: expansion of
Alaska Ship & Drydock), growth of tech-based industries, the visitor industry (allowing cruise ships
to “plug-in” and purchase energy from the regional utility grid, at lower financial and environmental
Renewable Energy Fund Round VIII
Grant Application - Standard Form
AEA 15003 Page 5 of 52 7/2/14
cost than relying upon diesel generators), and others. The benefits of this economic growth will
extend to neighboring rural communities.
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
☐ 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
Renewable Energy Fund Round VIII
Grant Application - Standard Form
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2.4 PROJECT DESCRIPTION
Provide a brief one paragraph description of the proposed project.
The 9.6MW Mahoney Lake hydroelectric project (FERC License P-11393) will provide Ketchikan
and SEAPA-region residents and businesses with 41,743,000 average annual KWH (41.7 aGWH)
of renewable hydropower per annum, allowing for continued economic and community growth
while displacing use of diesel fuel. Approximately 17,900,000 average annual KWH (17.9 aGWH)
of power is available between November and April as winter storage, allowing the project to meet
the key SEIRP objective of increasing winter storage. A detailed cost estimate was performed by
Mead & Hunt, a third party engineering firm, in August of 2014, which estimated the project’s total
cost at $45,320,707, making the Mahoney Lake hydroelectric project one of southeast Alaska’s
most affordable options for new hydropower energy and capacity. This alpine lake tap project
does not require construction of a dam, and the project’s FERC license has already been issued.
This application proposes State participation in the project through grant-funded cost-sharing in
remaining Phase III Final Design and Permitting tasks, which will help assure the Mahoney Lake
can be constructed in a manner which benefits the Alaskan public, and provides the additional
benefits of supporting new economic growth and job creation. Project proponents are requesting
$800,000 AEA REF Round VIII funds, and are proposing $100,000 match (cash and in-kind) to
follow through on $200,000 of work funded to date by a SFY14 Capital Appropriation from the
State of Alaska. The $800,000 request for Mahoney Lake is endorsed by the City of
Ketchikan, Ketchikan Gateway Borough, and City of Saxman as the #4 regional investment
priority (#2 energy sector investment priority), as documented on the three entities’ Joint
Capital Priorities List for SFY16, and was also included as a priority of the three
governments in SFY14 and SFY15. (Source: Ketchikan Gateway Borough Clerk’s Office.)
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.)
Reduced reliance upon diesel generation of electricity and heating oil.
Leverages private investment in the regional energy market, allowing the private sector to
share costs and risks.
Responds to regional growth, and growing regional demand for affordable energy.
Responds to increased conversion to electric heat by residential, commercial, industrial,
municipal, and non-profit sectors.
Reduces operating costs for resident businesses, supporting growth and expansion.
Cuts operating expenses for schools and non-profit organizations by supporting addition of
or conversion to electric boilers, reducing regional tax burdens.
Supports construction of new community facilities requiring additional energy.
Assures availability of clean, renewable energy for resident ratepayers.
Affordable energy rates and abundant supply of renewable energy attracts new businesses,
and support new economic opportunities.
Keeps southeast Alaska competitive with peer/benchmark communities competing to attract
new businesses and jobs (ex: British Columbia, Puget Sound, etc.).
Supports new economic development and rapidly emerging opportunities in priority
industries, such as Ketchikan-based ore processing, mining industry development, and
growth of the regional maritime industry sector.
Provides enhanced stability to region-wide system.
Could potentially help provide electricity to cruise ships, lowering environmental impact of
the visitor industry, and assuring compliance with federal environmental quality
standards/regulations. (SEIRP forecasts 35,529 MWH annual demand by
Ketchikan/Wrangell/Petersberg-area cruise ships).
Reduces dependence on foreign oil.
Renewable Energy Fund Round VIII
Grant Application - Standard Form
AEA 15003 Page 7 of 52 7/2/14
Supports the ability for Cape Fox Corporation to utilize its ANCSA lands to realize the
promise of generating economic returns in exchange for surrender of their indigenous land
claims.
Supports SEIRP goal of additional hydropower storage.
Supports SEIRP goal of private investment and market participation.
Provides an opportunity to leverage private investment to build energy
infrastructure through private partnership and investment, and conserve State and
local tax dollars to address education, public health, and public safety needs which
cannot be addressed through private investment. This is a significant area of
opportunity during our current time of declining State revenues.
Project received a recommendation supporting development in a 3rd party “due
diligence” study commissioned by Ketchikan Public Utilities, and performed by
Hatch Acres in 2008.
Mahoney Lake – an Affordable Energy Solution for the Region
In mid-2008, Ketchikan Public Utilities hired Hatch Acres to perform a 3rd party “due diligence”
study of the Mahoney Lake hydropower project. AP&T supplied detailed information about the
project to KPU and Hatch Acres. Hatch also examined system-wide loads, historical data, and
completed load growth modelling using information supplied by KPU. Hatch estimated the direct
construction cost for the project at $36.4m ($2008), and specified that it would be a good fit for
integration within the regional utility system. Hatch also gave a series of favorable
recommendations supporting development of the project, which are as follows:
“On the basis of load analyses recently performed for the KPU electric system and priorities
in place for other system resources, the full capability of project’s estimated 46.1 GWh of
average annual energy can accommodate load growth within the KPU electric system until
the year 2034.
The first-year annual cost is estimated to be $4,521,000 in 2008 dollars based on 5%
financing over a 30-year period. Assuming the ability to fully utilize the estimated average
annual energy for the project of 46.1 GWh, this in turn would result in a first year cost of
energy of 9.8 ¢/kWh in 2008 dollars.
With the assumed base case economic parameters, a combined Whitman / Mahoney
hydropower addition demonstrates a net positive Present Value over the life of the financing
period for the initial project placed into the system with only two early years of negative
cash flow.” [We believe that if the possibility of negative cash flow still exists, this can be offset
through creative financing.]
AP&T performed an in-house cost estimate in September of 2013, which estimated a total project
cost of $46m.
This cost-estimate was updated by Mead & Hunt, a third-party engineering firm, in August of 2014,
and found to be $45.3m expressed in $2017.
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Renewable Energy Fund Round VIII
Grant Application - Standard Form
AEA 15003 Page 10 of 52 7/2/14
Source: Ketchikan Gateway Borough School District 2011 Energy Audit and Southeast Alaska Integrated
Resource Plan
Proximity to Opportunities – In the 1990s, the collapse of Southeast Alaska’s robust forest products
industry devastated southern southeast Alaska’s economy. Currently, the region’s future is looking brighter
due to proximity to emerging opportunities.
Southern southeast Alaska has the potential to contribute substantially to new private sector economic
activity, including: ore processing; mining; growth of advanced manufacturing (shipbuilding and repair);
serving as a supply/support sector to Arctic offshore oil and gas fleets seeking ice-free winter moorage in
communities with well-developed supply chains; State-wide growth of maritime activity; technology-based
business; and more. Southeast Alaska must have infrastructure already in place to support these emerging
opportunities. Southeast Alaska’s infrastructure capacity will make the critical difference between these jobs
remaining in Alaska, and jobs being exported to other states or nations with greater foresight.
Affordable electricity is an area of common need shared by all business types. Because demand for
electricity currently outpaces supply, it should be prioritized as an area requiring immanent investment;
otherwise, southeast Alaska runs the risk of seeing jobs exported to communities and nations which are better
able to respond to private sector demand.
Social Benefits:
The AEA’s econometric modeling tool produces the following results for petroleum fuel displaced by
Mahoney Lake, and avoided carbon dioxide [based on project life of 50 years; hydro project life spans are
easily over 100 years, which at minimum doubles the numbers below].
Total carbon dioxide emissions avoided through diesel to hydropower conversion over the initial term of the
existing FERC license would equal 1.5 million metric tons, valued at $127m expressed in $2007 per federal
guidelines (US IWG calculation methodology for US EO 12866 review: average of all 4 econometric
models).
Mahoney lake will support new economic activity, jobs, and prosperity which will increase family
sustainability, expand the regional tax base, and allow southeast Alaska’s young residents to remain within
their communities as gainfully employed, successful adults. The project will result in lower energy costs for
businesses, families, non-profit organizations, and community facilities.
The University of California’s “Berkeley Green Job Calculator” calculates the Mahoney project will create
11.315 direct, indirect, and induced jobs.
Mahoney Lake Socioeconomic Benefits
Performance Unit Value
Displaced Electricity kWh per year 41,700,000
Displaced Electricity total lifetime kWh 2,085,000,000
Displaced Petroleum Fuel gallons per year 2,978,571
Displaced Petroleum Fuel total lifetime gallons 148,928,571
Displaced Natural Gas mmBtu per year -
Displaced Natural Gas total lifetime mmBtu -
Avoided CO2 tonnes per year 30,233
Avoided CO2 total lifetime tonnes 1,511,625
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Renewable Energy Fund Round VIII
Grant Application - Standard Form
AEA 15003 Page 12 of 52 7/2/14
Cape Fox Corporation, and backed by a long term power purchase agreement with SEAPA, or one
of its municipal members such as Ketchikan Public Utilities.
AP&T and Cape Fox Corporation would potentially seek to leverage additional grant and low
interest loan opportunities which are available for renewable energy projects, in order to maximize
benefits for regional ratepayers. Grant and loan programs vary by year, depending on available
funding. Potential funding sources could include the State of Alaska’s Power Project Fund, or
USDA RUS funds.
Additionally, there is an opportunity for SEAPA, distribution utilities, or other off-takers to share
investment costs/risks in the Mahoney Lake project by participating in equity placement, or serving
as a conduit borrower providing access to lower-cost capital through an entity such as the Alaska
Municipal Bond Bank Association. AP&T is willing and eager to support partnership opportunities
of this type, if they are of interest to incumbent utilities or other off-takers.
Consistent with the AEA’s requirements, the Mahoney Lake project would charge a cost-based rate.
Private enterprise would not earn a return on public moneys or investment – only on private
investment. Sale of energy from Mahoney Lake would be a regulated transaction, which would be
subject to RCA oversight and approvals.
Additional information about financing plans can be provided to the AEA and REF Round VIII
reviewers upon request. In prior years, reviewers’ comments have reflected questions and
uncertainty about specifics of financing options – questions which could have been very
readily answered by the applicant. If there are any questions or uncertainty during Round
VIII review, please be sure to contact the grant applicant with your questions, so that the
needed information can be provided.
Summary of Funds to Date:
In the mid-90s, CFC and AP&T invested approximately $2 million cash each, plus significant
unquantified staff time, in completion of Phase I and Phase II tasks for the project, which resulted in
issuance of a FERC license, and construction of roads to the site of the project’s future powerhouse.
If adjusted for inflation using a Bureau of Labor Statistics Consumer Price Index Inflation
Calculator (1995 to 2013), the value of private sector investment in the project, expressed in 2012
dollars, is approximately $6,320,000.
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(Source: http://www.bls.gov/data/inflation_calculator.htm/)
A stay was placed on the Mahoney Lake project’s FERC license for the purpose of assuring
completion of the Swan-Tyee Intertie. The stay is still in effect, until request of the license holder.
Because existing permits are stale-dated, Mahoney Lake’s permits require renewal – and in the case
of USFS permits – may require reissuance.
In SFY2014, the City of Saxman received $200,000 in State of Alaska Capital Appropriations funds
to begin to update the conditions of the Mahoney Lake hydroelectric project in advance of
construction. These funds represent only 20% of the full amount of $1,000,000 requested by
Saxman for this task. Work on initial activities which can be addressed within the $200,000 budget
made available to Saxman was initiated in August of 2013. These project activities are scheduled
for completion by December of 2014.
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 $ 800,000
2.7.2 Cash match to be provided $ See below
1. New Match to New State Investment:
$100,000 cash and in-kind
2. Match to Date:
$4,000,000, which has been used to date in completing Phase I and Phase II tasks.
3. Match (Subsequent Activities)
Subsequent funding for construction of the project would be supplied through a combination of
private equity and debt, obtained through Alaska Power & Telephone and Cape Fox Corporation,
and backed by a long term power purchase agreement with SEAPA, or one of its municipal
members such as Ketchikan Public Utilities.
AP&T and Cape Fox Corporation would potentially seek to leverage additional grant and low
interest loan opportunities which are available for renewable energy projects, in order to maximize
benefits for regional ratepayers. Grant and loan programs vary by year, depending on available
funding. Potential funding sources could include the State of Alaska’s Power Project Fund, or
USDA RUS funds.
Additionally, there is an opportunity for SEAPA, distribution utilities, or other off-takers to share
investment costs/risks in the Mahoney Lake project by participating in equity placement, or serving
as a conduit borrower providing access to lower-cost capital through an entity such as the Alaska
Municipal Bond Bank Association. AP&T is willing and eager to support partnership opportunities
of this type, if they are of interest to incumbent utilities or other off-takers.
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Consistent with the AEA’s requirements, the Mahoney Lake project would charge a cost-based rate.
Private enterprise would not earn a return on public moneys or investment – only on private
investment. Sale of energy from Mahoney Lake would be a regulated transaction, which would be
subject to RCA oversight and approvals.
Additional information about financing plans can be provided to the AEA and REF Round VIII
reviewers upon request. In prior years, reviewers’ comments have reflected questions and
uncertainty about specifics of financing options – questions which could have been very readily
answered by the applicant. If there are any questions or uncertainty during Round VIII review,
please be sure to contact the grant applicant with your questions, so that the needed information can
be provided.
4. Prior State-Funding
$200,000 in SFY14 State of Alaska Capital Appropriations funding has been allocated to remaining
pre-construction activities. These activities are scheduled for completion by December of 2014.
2.7.3 In-kind match to be provided $ 100,000
2.7.4 Other grant funds to be provided $ NA
2.7.5 Total Costs for Requested Phase of Project (sum of 2.7.1 through 2.7.4) $
1,100,000 ($800,000 request plus $200,000 existing State Capital Appropriation, plus
$100,000 cash and in-kind match)
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.
$45,320,707 Construction, plus $800,000 AEA
REF VIII request, plus $200,000 SFY14
investment, plus $100,000 AP&T cash and in-
kind match to AEA REF VIII grant.
2.7.8 Additional Performance Monitoring
Equipment not covered by the
project but required for the Grant
Only applicable to construction phase
projects
$ Does not apply
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 Econometric Model Results are provided
below:
Results
NPV Benefits $334,530,525.72
NPV Capital Costs $9,588,161
B/C Ratio
34.89
NPV Net Benefit $324,942,365
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.
The University of California’s “Berkeley Green Job
Calculator” calculates the Mahoney project will create
11.315 direct, indirect, and induced jobs.
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:
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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.
Leona Haffner – City Administrator, City of Saxman
907-225-4166 x 15
cityclerksaxman@kpunet.net
Resume and references attached.
Additional AP&T senior engineers and project managers can be used as needed to assist with
management and execution of the project.
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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.
Please fill out form provided below. You may add additional rows as needed.
Phase III Activities:
Milestones Tasks
Start
Date
End
Date
Review and revise conceptual design
Site visit
Obtain new topographic mapping
Obtain new bathymetric mapping
Geotechnical investigations
Review potential for HDD penstock
const.
Review transmission line alignment
Evaluate potential for additional storage
Determine the installed capacity that is
most appropriate for the changes to
the conceptual design and anticipated
power utilization
Summary report
Complete
Complete
Complete
7/1/15
7/1/15
7/1/15
Complete
Complete
1/9/16
Complete
Complete
Complete
10/31/15
9/30/15
9/30/15
Complete
Complete
1/31/16
Review, revise, and resubmit permit
applications
Evaluate current status of all permits
Prepare environmental plans as
required
Prepare and file revisions to permits
applications as necessary
Complete
7/1/15
7/1/15
Complete
9/9/15
9/7/15
Obtain permit approvals Respond to agency requests and obtain
approvals
9/10/15
12/30/15
Revise and resubmit final design
documents
Prepare drawings and specifications
Prepare design report
Submit documents to FERC and USFS
Obtain FERC and USFS approvals
1/1/16
6/1/16
9/1/16
9/1/16
8/31/16
8/31/16
9/1/16
11/30/16
Prepare final cost estimate
In-house cost estimate
Contractor estimate
Summary report
Update Report Prior to Construction
Complete
Complete
7/1/15
12/1/16
Complete
Complete
8/1/15
12/15/16
Update economic and financial
analysis
In-house analysis
Contractor estimate
Summary report
Complete
Complete
7/1/15
Complete
Complete
8/1/15
Power sales agreement
Identify and meet with potential
purchasers, negotiate power purchase
agreement
Summary report
Initiated
12/1/16
11/30/16
12/15/16
Prepare business and operational plan Develop plan 12/16/16 1/16/17
Milestone or Task
Anticipated
Completion
Date
RE- Fund
Grant Funds
Grantee
Matching
Funds
Source of
Matching
Funds:
Cash/In-
kind/Federal
Grants/Other
State
Grants/Other
TOTALS
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Review and revise conceptual
design 10/31/2015 $200,000 $25,000 Cash, In-Kind $225,000
Review, revise, and resubmit
permit applications 9/9/2015 $125,000 $15,000 Cash, In-Kind $140,000
Obtain permit approvals 12/30/2015 $80,000 $10,000 Cash, In-Kind $90,000
Revise and resubmit final
design documents 11/30/16 $250,000 $15,000 Cash, In-Kind $265,000
Finalize cost estimate 8/1/2015 $20,000 $10,000 Cash, In-Kind $30,000
Finalize economic and
financial analysis 8/1/2015 $30,000 $10,000 Cash, In-Kind $40,000
Power Sales Agreement 12/15/2016 $55,000 $15,000 Cash, In-Kind $70,000
Finalize business and
operational plan 1/16/2017 $40,000 $0 Cash, In-Kind $40,000
$ $ $
$ $ $
$ $ $
$ $ $
TOTALS $800,000 $100000 $900,000
Budget Categories:
Direct Labor & Benefits $ $100000 $100000
Travel & Per Diem $ $ $
Equipment $ $ $
Materials & Supplies $ $ $
Contractual Services $800,000 $ $800000
Construction Services $ $ $
Other $ $ $
TOTALS $800000 $100,000 $900000
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.
Non-Construction Activities:
The majority of remaining non-construction activities will be completed by contractors.
Contractors will be selected based on criteria to include:
Cost
Experience
Ability to undertake and complete work in a timely manner
Familiarity with Mahoney Lake project
Successful work performed on Mahoney Lake project to date
Successful existing and/or recent working relationships with the City of Saxman,
Alaska Power & Telephone, and/or Cape Fox Corporation
Contractors have not yet been selected. Potential contractors include:
Topographic mapping ....................................................................... Aerometric Alaska
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Geotechnical investigations .............................................................. GeoEngineers, Inc.
HDD evaluation........................................................................ CompleteCrossings, Inc.
Cost estimating .......................................................................................... Kiewit Pacific
Economic analysis .................................................................................... Mike Hubbard
Northern Economics
The project will also leverage private sector resources, and employ the extensive knowledge, skills, and
experience of Alaska Power & Telephone, a founding Mahoney Lake partner. Key AP&T personnel
include:
Bob Grimm ....................................... Power Sales Negotiations and Business Planning
Jason Custer…….…………..Business Planning, Technical Writing, Administration
Vern Neitzer ........................................................................................... AP&T Manager
Bob Berreth .......................................................................................... Electrical Design
Ben Beste ........................................................................................... Mechanical Design
Larry Coupe .................................................................................................. Civil Design
Glen Martin .................................................... Permits and Environmental Assessment
Karl Wood .................................................................................................... Accounting
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.
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 municipality, the City of Saxman is accustomed to these tasks and performs them on an
ongoing basis. The City has the systems and personnel in place for monitoring projects and keeping
stakeholders informed of their current status.
The City of Saxman recently worked with the Alaska Energy Authority to successfully complete a
grant-funded Energy Efficiency Community Development Block Grant project, and complied fully
with all reporting, performance, and inspection requirements, including stringent requirements
specific to American Reinvestment and Recovery Act (ARRA) funding. The City of Saxman has
successfully completed and administered a number of projects funded via State of Alaska direct
capital appropriations, and administered by the State DCCRA.
AP&T has extensive State-wide experience in successful partnership, application of grant funds,
communication, and reporting in association with the Alaska Energy Authority. AP&T maintains a
capable and experienced staff with diverse skill sets well suited to performing all management,
accounting, administrative, and other requirements.
At the completion of the project, AP&T and Saxman 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.
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3.5 Project Risk
Discuss potential problems and how you would address them.
Pre-Construction Phase Risks:
Pre-construction phase activities are intended to help reduce the level of risk and uncertainty
associated with the project.
New Permitting Requirements – Pre-construction activities will help address any new
permitting requirements / updates necessary.
Cost Uncertainty – Pre-construction activities will help update project construction cost
estimates, and reduce cost uncertainty.
Lead time – Pre-construction activities will identify supply times for major components to
reduce uncertainty with the project development schedule.
Power Sales – Pre-construction activities (ex: cost-estimate update) will support
development of more accurate project cost and energy rate projections needed to finalize
power sales agreements and other business relationships. State investment will support
lower rates for end line users, will help attract additional new investment, and will bolster
confidence of entities which are currently considering power sales agreements and/or other
arrangements for Mahoney Lake power.
Risk of Non-Development:
Saxman believes it is critical that Mahoney Lake’s FERC license; investment made by
Alaska Power & Telephone and Cape Fox; and $200,000 SFY2014 investment by the State
of Alaska are leveraged for the benefit of the region through timely construction of this
project. Lack of interest in the project by the State of Alaska or municipal utilities will
produce conditions where another entity seeking to meet demand in the SEAPA-region will
be required to repeat the FERC licensing process for Mahoney Lake, or another project.
Such a licensing process would be a high-cost, 9+ year process comprised of significantly
redundant work which, of a municipal utility or governmental entity, would come at a cost
to the public, the State, and/or ratepayers, who will in some combination shoulder the cost of
these redundant activities. Because the licensing process for new hydroelectric projects is so
lengthy, ratepayers would be forced to rely upon more costly diesel fuel until an alternative
project can be licensed and developed.
Acceptance of Independent Power Producers (IPPs) -- At present, IPPs in southeast Alaska are
forced to overcome the significant obstacle of seeking approval from incumbent municipal utilities,
which may prefer the convenience of developing their own projects – or partnering with other
incumbent municipal utilities -- to partnering with new entities including private sector businesses,
ANCSA corporations, and tribal partners. The Ketchikan region is certainly no exception. While
SEAPA has represented that its new Request for Offers (RFO) process creates an opportunity for
independent power producers to meet regional demands for affordable energy by selling into the
regional system, the Mahoney Partnership is concerned that this document does not create an equal
opportunity or level playing field for IPPs to receive fair consideration. Saxman believes that
dedication of State funds to support construction of Mahoney Lake will help eliminate these
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risks, and encourage SEAPA to engage in productive discussions with the Mahoney
partnership, and other IPPs.
Seismic – Geotechnical investigations will be conducted to provide an adequate level of
knowledge about seismic and other geotechnical risks. Project components will be designed
appropriately for seismic activity, since the Project will be located in a moderate-risk
seismic zone. Structures will be buried as much as possible to minimize seismic impacts.
Site Control – Saxman will apply to the Forest Service for an investigative special use
authorization to conduct any work on National Forest land.
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 for AP&T.
If needed, supplemental accounting assistance can be supplied by AP&T, and/or the City of
Saxman.
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.
AP&T, the City of Saxman, and Cape Fox Corporation shall develop and share an accounting system which
is acceptable to the AEA, and which will be used to account for project costs.
AP&T is accustomed to utilizing accounting systems for AEA grants. The City of Saxman is accustomed to
utilizing its municipal accounting system for grants from various State and Federal Sources. Cape Fox
Corporation is accustomed to performing accounting activities through a variety of systems for US federal
government 8(a) contracts. Between these three entities, an accounting system can be selected which meets
with AEA requirements.
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 specify 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.
AP&T is a regulated utility, and is required to track and substantial expenses in a manner which is acceptable
to the Regulatory Commission of Alaska. Thus, AP&T 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.
AP&T is aware that some unregulated utilities and joint action agencies in the State of Alaska recapture State
and federal grant funds by including the value of state and federal grants within their depreciation expenses.
While this may be acceptable on a technical basis from an accounting point of view, it is not acceptable from
the point of view of a regulated utility.
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Thus, the Mahoney partnership can assure the State of Alaska that it will not include grants within its rate
base, nor depreciation.
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.
Alaska Power & Telephone and Cape Fox Corporation are private sector businesses which are accustomed to
managing and controlling costs in order to maximize value.
AP&T and Saxman are both accustomed to implementing State and federal grant-funded projects which have
restrictions as to allowable costs and overhead.
The involvement of three partners – AP&T, Cape Fox, and Saxman – helps ensure “checks and balances” to
safeguard against any accidental expenditures which are not necessary or allowable.
The unique public-private 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.
AP&T is a regulated utility, and is required to track and substantial expenses in a manner which is acceptable
to the Regulatory Commission of Alaska. Thus, AP&T 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.
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ECTION 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: A substantial amount of pre-construction work has already been
accomplished, and Saxman has received a FERC license for the project.
The following documents can be provided to AEA to demonstrate that considerable reconnaissance,
feasibility, design, and permitting work has been completed.
R.W. Beck and Associates, Inc. June, 1977 Appraisal Report Swan Lake, Lake Grace,
and Mahoney Lake Hydroelectric Projects.
R.W. Beck and Associates, Inc. March 1986 Appraisal Study 1985 Update Future
Hydropower Resources Ketchikan, Petersburg, Wrangell, and Quartz Hill.
HDR Engineering, Inc. 1993 Mahoney Lake Hydroelectric Project Feasibility Report
City of Saxman and HDR Engineering, Inc. May 1996 Application for License for Major
Unconstructed Project Mahoney Lake Hydroelectric Project (3 volumes).
City of Saxman and HDR Engineering, Inc. May 1996 Preliminary Supporting Design
Report Mahoney Lake Hydroelectric Project (3 volumes).
Robert B. Forbes Sept. 1998 Geotechnical Reconnaissance of the Mahoney Lake Project
Area, Ketchikan District, Alaska
Alaska Power & Telephone Co. July, 2001 Mahoney Lake Hydroelectric Project, FERC
Project No. 11393 Technical Specifications for FERC Review Per Article 303
Alaska Power & Telephone Co. July, 2001 Mahoney Lake Hydroelectric Project, FERC
Project No. 11393 Supporting Design Report for FERC Review Per Article 303
Alaska Power & Telephone Co. July, 2001 Mahoney Lake Hydroelectric Project,
Ketchikan, Alaska General Construction, Contract No. 1 (design drawings)
Saxman is aware of other studies of the Mahoney Lake site by the Corps of Engineers.
Phase III: Remaining Pre-Construction Work:
The following tasks are anticipated to be included within Phase III work; these are aligned with the
milestones specified in the grant application instructions:
Review and revise conceptual design
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o Site visit to assess current conditions and potential changes to the design concept
(Completed 2014)
o Topographic mapping of currently unmapped areas (Completed 2014)
o Bathymetric mapping of lakes above Upper Mahoney Lake (Completed 2014)
o Geotechnical investigations associated with potential changes to the design concept
o Evaluate the feasibility of a partially-line HDD penstock and an HDD alignment that
avoids the long drill-and-blast lake tap of the current design (Completed 2014)
o Review proposed new transmission line route and site of Swan Lake line interconnection
(Completed 2014)
o Evaluate the feasibility of additional storage, by lowering the lake tap of Upper Mahoney
Lake and/or developing storage in two existing lakes upstream of Upper Mahoney Lake
(Completed 2014)
o Review the proposed installed capacity and mode of operation to determine the optimum
(Completed 2014)
o Prepare a report summarizing the results of the conceptual design review
Review, revise, and resubmit permit applications
o Coordinate with FERC staff to determine the extent of license requirement for the
revised design concept (license amendment, environmental assessment)
o Coordinate with USFS staff to determine potential issues with current land use
designation
o Review current status of all required permits and mitigation plans, and determine extent
of any necessary modifications
o Revise and submit mitigation plans and permit applications as required for the revised
design concept and/or stale dating of existing permits
Obtain permit approvals
o Respond to information requests from permitting agencies
o Review permit conditions when issued
Revise and resubmit final design documents
o Revise drawings and specifications as necessary for the revised design concept
o Revise design report as necessary
o Submit drawings, specifications, and design report to FERC and USFS
o Respond to FERC and USFS requests and comments
Prepare final cost estimate
o Determine construction quantities and estimate unit costs (Completed 2014)
o Solicit cost information from major equipment suppliers (Completed 2014)
o Independent review of unit costs by a qualified construction contractor (Completed
2014)
o Summary report
Update economic and financial analyses
o Develop pro forma economic and financial analysis based on the final cost estimate,
expected financing parameters, and preliminary power purchase rates (Completed 2014
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– however, subsequent review and updating will be required during and after
Power Purchase Agreement negotiations)
o Independent review of the economic and financial analysis by a qualified economics
consultant
o Summary report
Power sales evaluation
o Meet with potential power purchasers to ascertain their level of interest and associated
power purchase rates (Ongoing)
o Summary report
Prepare business and operational plan
o Prepare preliminary plan based on the results of the economic and financial analysis and
power sales evaluation
Amount of Energy Available: Previous analyses for the project have determined a potential
average annual generation of 41.7 GWh for the licensed capacity of 9.6 MW.
Comparison to alternative energy sources:
Comparison of competing energy development alternatives must include a number of factors.
Wherever possible, factors must be equalized to avoid asymmetric analysis and bias. Certain
factors may be difficult or impossible to “equalize” due to the technical and financial improbability
of bringing a large number of projects to an advanced stage of licensing.
Level / quality of information available. Mahoney Lake is the best understood of
available new hydropower options in the SEAPA region, as well as the most
development-ready, because the FERC license for the project has already been
issued. It is not necessary to spend additional money on studies or analysis beyond
federal permitting requirements.
Development Readiness. See comment above.
Risk of Successful Licensing. See comment above.
Cost of Capital. Should be equalized or “neutral” in order to avoid asymmetrical
analysis and comparison.
Quality of Construction Cost Estimate. This may be difficult to “equalize”
without bringing projects to an advanced licensing stage, at which time all agency
requirements impacting project design and construction requirements are well
understood.
Project Period. SEAPA’s Request for Offers (RFO) requires IPP entities to
constrain their projects to a 20-year project period for purposes of PPA “offers” and
analysis, whereas SEAPA and its member utilities are considering self-build
hydropower projects with 50-year timelines. This creates asymmetrical analysis.
Additional Energy Produced by Project. The value of new energy produced by
the project must be considered. Mahoney provides a significant amount of new
energy – 41.7 aGWH.
aGWH delivery profile. Projects should be compared on a basis of average
annual gigawatt hour production, or aGWH, which is the industry standard
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for analysis and licensing practices. Mahoney Lake’s production profile is
being described in terms of the industry/licensing standard of aGWH,
whereas other projects in the region may be described in terms of maximum
GWH (describing output as “up to” a specified amount) which can be
produced by the project in years of highest rainfall.
Additional Capacity Produced by Project. The value of new energy and new
capacity of new projects must both be monetized and considered. Mahoney
provides a significant amount of new capacity – 9.6 MW.
Timing of new energy and capacity produced by project. Mahoney Lake
provides a significant amount of storage and capacity during the time of year when
it is most needed. (Approximately 18 aGWH.) Other run of river alternatives
provide the majority of their energy during the spring / summer freshet, when
existing hydropower projects are spilling water/energy. Whereas BC Hydro has
standardized measures for pro-rating energy and capacity by season and time of
delivery – for example, within Standing Offer Program guidelines – guidelines of
this type are not yet available in Alaska
Ratio of New Capacity to New Energy
Developer Experience in Identifying, Designing, Developing, Constructing,
Owning, Operating, and Maintaining Hydropower Projects – While there are
many prospective hydropower and renewable energy developers, the number of
developers with experience successfully completing projects of this type is quite
limited. This is true of some incumbent utilities which may not have experience in
developing new assets.
Ability to leverage private sector capital and experience. Mahoney Lake is the
only hydropower development opportunity in the SEAPA region which leverages
private sector capital and experience to complete new energy infrastructure. This
helps reduce the need for investment of public dollars, freeing tax dollars up for
other important needs, and shifts project development risks and costs to the private
sector.
The Southeast Integrated Resource Plan (SEIRP) identifies several alternative energy sources for
the SEAPA-connected systems, including new hydroelectric projects, biomass, and others. The
SEIRP does not evaluate the many individual hydro projects because of an inconsistent level of data
quality, therefore, its conclusions cannot be reliably used to guide funding decisions on the
individual hydro projects.
EE/DSM -- The SEIRP focuses on DSM/EE for the Southeast region to negate the conversion to
electric space heating that the region’s utilities are currently experiencing. However, since the time
of the SEIRP’s issuance, few if any of the DSM/EE action items have been implemented, which
makes the SEIRP’s projections regarding load grow and recommendations regarding timing of new
hydropower resources significantly flawed.
As discussed above, electricity prices in the Ketchikan/SEAPA region are extremely low compared
to home heating oil prices. This causes many consumers to convert from heating oil to electric
heating systems. Low-efficiency resistance space heaters are particularly attractive to consumers
due to their very low capital outlay requirements – initial expenditures on these units, which can
cost $100 or less, can be realized through home heating cost savings in only 2-3 months. It would
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be very challenging to develop a DSM/EE program which could compete successfully with the
financial incentives prompting consumers to convert or add electric heat sources.
Biomass – Very few (if any) of the biomass recommendations of the SEIRP have been
implemented. While Ketchikan region has seen a small number of heavily subsidized biomass
“pilot projects” projects (ex: Ketchikan Discovery Center and Federal Building), these projects do
not appear commercially viable without direct grant investment negating capital cost requirements.
At present, biomass supply is brought into Alaska from out of state. Locally manufactured biomass
is not currently economically feasible or cost competitive due to: 1) lack of reliable timber supply;
2) supply consistency; 3) the challenges and energy costs involved in reducing moisture content to
achieve fuel of acceptable quality; 4) lack of economies of scale.
Other Hydropower Projects -- The SEIRP acknowledges that some new hydroelectric projects
will be built, including “committed” projects that are well along in the development process, such as
the Whitman Lake project promoted by KPU. The Mahoney Lake project was not considered to be
a “committed” project for reasons not clear to Saxman and its partners. Mahoney Lake is the only
unconstructed hydro project in the SEAPA area with a FERC license; all other potential projects
will not be available for many years due to the time-consuming licensing process. At the time of
this application’s preparation in 2014, no other entities were engaged in permitting or licensing new
projects in the SEAPA region, with the exception of SEAPA’s license amendment to add a small
amount of storage (7.5 aGWH or average annual gigawatt hours) to the Swan Lake hydropower
project.
Saxman believes it is critical that Mahoney Lake’s existing FERC license, investment by Cape Fox
Corporation and AP&T, and $200,000 SFY2014 investment by the State of Alaska are leveraged
for the benefit of the region through construction of this project, rather than being allowed to going
to waste. Repeating the FERC licensing process for a new project is anticipated to take nearly 10
years, at very high cost, which would be redundant to the $4m in expenditures made by AP&T and
Cape Fox Corporation.
Southeast Alaska is fortunate to have over 100 years of detailed hydropower recon studies available,
most of which are available through the AEA’s renewable energy resource base. SEAPA is
currently overseeing contractors performing State-funded analysis of additional hydropower
development options in the region, but the scope of work and projects being considered are
unknown, and are not currently available from SEAPA.
Saxman is aware that SEAPA is currently considering increasing the storage in Swan Lake by
adding gates to the spillway. While neither Saxman nor KEC has had an opportunity to complete a
thorough review of the design concept, AP&T staff who have performed dam safety analysis for the
Swan Lake project (prior to employment with AP&T) have noted that the project would appear to
have significant technological and regulatory hurdles to overcome with regard to assuring dam
safety. Also, this project provides additional stored energy, but does not provide any additional
capacity to the regional utility system. SEAPA describes the potential benefit of this project in
terms of maximum annual gigawatt hours (GWH) possible rather than average annual gigawatt
hours (aGWH).
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Saxman is also aware that Metlakatla is developing a transmission intertie to the KPU system, also
with the aid of State grant funding. The amount of power available to KPU from Metlakatla is not
known at this time, nor is the likely cost.
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.
At the time of this report’s preparation, the Whitman Lake hydropower project had not yet been
commissioned. KPU’s legislative request described the project as a 4.6MW project producing an
estimated 16 aGWH; however, engineering final design may have slightly reduced either capacity
or energy output.
All info below is provided from the Southeast Alaska Integrated Resource Plan (SEIRP).
Primary:
Ketchikan – Ketchikan Public Utilities (KPU) buys, generates and resells all of the electricity
consumed in the City of Ketchikan / Ketchikan Gateway Borough area. KPU owns the Ketchikan
Lakes hydro and Beaver Falls hydro projects (including Silvis Plant), totaling 11.5 MW. KPU
operates the 22.5 Swan Lake hydro project, which is owned by the Southeast Alaska Power
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Agency. KPU also owns and operates a four-unit diesel plant with a capacity of 23 MW. As of
March 2010, the residential electric rate was 9.58 cents per KWH.
Petersburg – Petersburg Municipal Power & Light buys the majority of its electrical requirements
from the Tyee Lake Hydro Plant owned by SEAPA. Additionally, the city owns a hydro facility at
Blind Slough (Crystal Lake) and a small diesel plant. As of March 2011, the rate for residential
electric service is 11.8 cents per KWH.
Saxman – The City of Saxman’s power is provided by Ketchikan Public Utilities (see above).
Wrangell – Wrangell Municipal Light & Power (WMLP) buys the majority of its electrical
requirements from the Lake Tyee Hydro Plant owned by SEAPA. WMLP also owns a diesel plant
which is used for backup. As of March, 2011, the residential electric rate was 12.6 cents per KWH.
Secondary:
Kake – Electric service for the area is provided by the Inside Passage Electric Cooperative with
diesel. 2010 electric rates were 56.08 cents per KWH, reduced to 19.78 per KWH by power cost
equalization.
Metlakatla – Metlakatla Power & Light generates electricity at the Purple Lake and Chester Lake
hydro sites. They also operate the Centennial Diesel Plant. The residential electric rate is 9.2 cents
per KWH.
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.
In mid-2008, Ketchikan Public Utilities hired Hatch Acres to perform a 3rd party “due diligence”
study of the Mahoney Lake hydropower project. AP&T supplied detailed information about the
project to KPU and Hatch Acres. Hatch also examined system-wide loads, historical data, and
completed load growth modelling using information supplied by KPU. Hatch estimated the direct
construction cost for the project at $36.4m ($2008), and specified that it would be a good fit for
integration within the regional utility system. Hatch also gave a series of favorable
recommendations supporting development of the project, which are as follows:
“On the basis of load analyses recently performed for the KPU electric system and priorities
in place for other system resources, the full capability of project’s estimated 46.1 GWh of
average annual energy can accommodate load growth within the KPU electric system until
the year 2034.
The first-year annual cost is estimated to be $4,521,000 in 2008 dollars based on 5%
financing over a 30-year period. Assuming the ability to fully utilize the estimated average
annual energy for the project of 46.1 GWh, this in turn would result in a first year cost of
energy of 9.8 ¢/kWh in 2008 dollars.
With the assumed base case economic parameters, a combined Whitman / Mahoney
hydropower addition demonstrates a net positive Present Value over the life of the financing
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period for the initial project placed into the system with only two early years of negative
cash flow.” [We believe that if the possibility of negative cash flow still exists, this can be offset
through creative financing.]
Based on this report and third party analysis commissioned by KPU, we believe that Mahoney Lake
remains an excellent new hydropower option for the SEAPA region. The project offers significant
storage, which will help offset diesel-fired generation and increase operational flexibility.
The project can also function as a “platform” allowing for future incremental expansion.
Additional, future increments of storage could be obtained through creation of a
small diversion at one or more of the other upper Mahoney Lakes (there are 4 upper
lakes total).
Prior project concepts at Mahoney Lake examined the possibility of adding a small
dam to the project, in order to maximize storage. While the project is currently
licensed as a “lake tap” project which does not require use of a dam, the possibility
exists to add a dam at a later time as a future storage increment, through a FERC
license amendment.
KPU officials have expressed interest in the possibility of later converting Mahoney
Lake into a pumped storage project. This would create significant additional
storage and system operation flexibility.
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 its Market
The SEAPA-region’s energy use and market is described in great detail within the Southeast Alaska
Integrated Resource Plan in Section 8.2, “Southeast Alaska Power Agency” (pages 8-29 through 8-
51). This section of the SEIRP is included as an attachment to this application.
Link to document:
http://www.akenergyauthority.org/PDF%20files/seirp/Volume%202%20-
%20Southeast%20Alaska%20IRP.pdf
Additional Notes
While the Ketchikan region’s current “per kilowatt hour” billing rate is relatively low ($0.0897 per
KWH), residents and businesses also pay “diesel surcharge fees,” which are not reflected in the per
KWH rate quoted by regional studies and analysis. The Ketchikan Gateway Borough School
District Superintendent reports that regional schools are unable to add or convert to electric boilers
(as recommended by third party energy auditors), due to limited available of electricity in the
Ketchikan region; the School District’s higher cost of burning heating oil is subsidized through
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property taxes – an additional “hidden” energy cost not reflected in the per KWH billing rate.
Similarly, many regional businesses, residents, and non-profits utilize costly heating oil when an
abundance of renewable hydroelectric energy could support increased use of electric boilers, at
lower expense to regional energy consumers.
Impacts on Energy Customers
-- Provides a reliable local supply of affordably-priced renewable energy
-- Supports more stable regional electrical system
-- Reduced dependence on diesel will lower customer energy costs
-- Provides additional capacity to support conversion to electric heating systems, reducing heating
oil costs, emissions, and environmental risks associated with fuel transportation and on-site storage
-- Supports new job creation and economic/community growth
-- Provide additional storage flexibility
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: The project will be a storage-type high-head hydroelectric project, which
is a mature technology in comparison to many other renewable energy technologies. The storage component
will be provided via a lake tap of Upper Mahoney Lake. While uncommon, lake taps have been successfully
constructed in Alaska (e.g. Snettisham, Lake Dorothy).
Optimum Installed Capacity: The project is currently licensed for an installed capacity of 9.6 MW.
Anticipated Annual Generation: Previous operations studies during the feasibility analysis and licensing
of the project determine a potential average annual generation of 41.7 GWh. Since the project will supply
energy to an isolated system, the actual utilized generation will be a function of system loads, which will
change over time.
Capacity Factor: The Mahoney Lake Project’s capacity factor when fully utilized will be about 0.50,
typical for a storage product. For comparison, the Swan Lake project operates at a 0.42 plant factor, and the
combined KPU-owned hydroelectric projects operate at 0.63 plant factor.
Basic integration concept: The Mahoney Lake hydroelectric project will provide energy to
existing hydro-based utility systems. Integration of an additional hydro project should not provide
any technical challenges. The project can also be viewed as a “platform” allowing for future incremental
expansion.
Additional, future increments of storage could be obtained through creation of a small
diversion at one or more of the other upper Mahoney Lakes (there are 4 upper lakes total).
Prior project concepts at Mahoney Lake examined the possibility of adding a small dam to
the project, in order to maximize storage. While the project is currently licensed as a “lake
tap” project which does not require use of a dam, the possibility exists to add a dam at a
later time as a future storage increment, through a FERC license amendment.
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KPU officials have expressed interest in the possibility of later converting Mahoney Lake
into a pumped storage project. This would create significant additional storage and system
operation flexibility.
Delivery methods:
Project will deliver energy to SEAPA-connected systems via conventional transmission lines and
substations.
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.
The project is located on private land owned by Cape Fox Corporation and Federal public land
administered by the US Forest Service (USFS). Cape Fox Corporation is a primary partner in the
Mahoney Lake partnership, and has invested approximately $2 million in the project to date.
Use of the Federal public land will be authorized by a special use authorization from the USFS.
KEC will review the status of the special use authorization with the USFS during the proposed pre-
construction work and modify its application or submit a new application as appropriate.
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
Saxman anticipates the following permits will be required:
FERC license
USFS special use authorization
USCOE Section 404 permit and Section 401 water quality certification
ADFG fish habitat permit
ADNR water rights permit
ADNR storm water permit
Anticipated permitting timeline: Permit approval time will vary with agency, but permits are
generally expected to be issued by the end of 2015. The project timeline could be extended if the
proposed design changes require new field studies or NEPA documentation; at this time KEC does
not believe either will be required.
Potential barriers: KEC plans the following actions for the identified potential barriers.
FERC design review – FERC’s licensing process requires submittal of design documents
for review by FERC. Mahoney Lake’s license was stayed before FERC had responded to
KEC’s previous Final Design submittal. A Final Design must be re-submitted to FERC for
final review and approval.
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USFS special use authorization -- The USFS previously indicated they would not
undertake consideration of a special use authorization until KEC completed a finance plan as
required by the FERC license. KEC intends to begin fresh consultations with the USFS
after finalizing the design concept, and submit an application for a special use authorization.
KEC assumes that the USFS will act in a professional manner in accordance with their
administrative rules and regulations.
USFS land use designation – The Mahoney Lake project area is currently designated as
Semi-Remote Recreation. While that designation does not necessarily restrict project
development, it may hinder it. KEC knows that restrictive land use designations are a
problem for many proposed hydroelectric projects in Southeast Alaska, and expects to
participate in the development and review of the Tongass Land Management Plan update
scheduled for 2014 so that hydroelectric development is better addressed than in the current
plan. At the time of this application’s preparation, the NOI for the USFS’ TLMP plan
amendment included mention of hydropower-related revisions to the plan.
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
With the exception of “telecommunications interference” and “aviation considerations,” all
environmental and land use issues listed were addressed in the FERC Environmental Assessment
issued in November, 1997. The FERC license includes many articles that provide protection for the
environmental resources. Saxman expects similar provisions to be included in new Federal and
state permits.
Saxman does not believe that “telecommunications interference” and “aviation consideration”
issues apply to the Mahoney Lake project.
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
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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
Total Anticipated Project Cost:
$4,000,000 – Expenditures to date, resulting in issuance of FERC license and
construction of access roads
$200,000 – SFY14 funding from the State of Alaska
$800,000 – AEA REF Round VIII request
$100,000 – Proposed in‐kind and cash match to AEA REF Round VIII funding
$45,320,707– Total Construction Cost
Requested grant funding
The City of Saxman requests $800,000 AEA REF Round VIII State investment to assist with initial
construction activities. $100,000 of additional in-kind and cash match would be provided by AP&T. State
REF Round VIII investment would also be matched by $4,000,000 investment by Cape Fox Corporation and
AP&T to date.
Identification of other funding sources
Saxman has not applied for any other loans or grants to fund Phase III project activities, but it may do so in
the future if appropriate programs are identified.
Projected capital cost of proposed renewable energy system
$45,320,707 – August, 2014 estimate provided by 3rd party engineering firm. (Mead & Hunt)
Projected development cost of proposed renewable energy system
The total project development cost – inclusive of all costs described above -- $50,420,707
Subsequent Funding: Subsequent funding for construction of the project would be supplied
through a combination of private equity and debt, obtained through Alaska Power & Telephone and
Cape Fox Corporation, and backed by a long term power purchase agreement with SEAPA, or one
of its municipal members such as Ketchikan Public Utilities. Activities proposed in this grant
application would include financial/economic analysis, and Power Sales Agreement negotiations
which would be essential to developing a financially viable project suitable for investment.
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AP&T and Cape Fox Corporation would potentially seek to leverage additional grant and low
interest loan opportunities which are available for renewable energy projects, in order to maximize
benefits for regional ratepayers. Grant and loan programs vary by year, depending on available
funding. Potential funding sources could include the State of Alaska’s Power Project Fund, or
USDA RUS funds.
Additionally, there is an opportunity for SEAPA, distribution utilities, or other entities to share
investment costs/risks in the Mahoney Lake project by participating in equity placement, or serving
as a conduit borrower providing access to lower-cost capital through an entity such as the Alaska
Municipal Bond Bank Association. AP&T is willing and eager to support partnership opportunities
of this type, if they are of interest to incumbent utilities or other off-takers.
Consistent with the AEA’s requirements, the Mahoney Lake project would charge a cost-based rate.
Private enterprise would not earn a return on public moneys or investment – only on private
investment. Sale of energy from Mahoney Lake would be a regulated transaction, which would be
subject to RCA oversight and approvals.
Additional information regarding financing plans / opportunities can be provided to the AEA and
REF Round VIII reviewers upon request. In prior years, reviewers’ comments have reflected
questions and uncertainty about specifics of financing options – questions which could have
been very readily answered by the applicant. If there are any questions or uncertainty during
Round VIII review, please be sure to contact the grant applicant with your questions, so that
the needed information can be provided.
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 are estimated to be $600,000 per year in 2014, based on adjustments to AP&T
historical costs for its hydroelectric projects, and verification from third party engineer.
O&M costs will be funded entirely through power sales.
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
Proposed rate of return from grant-funded project
Identification of potential power buyer(s)/customer(s)
KPU
SEAPA
Mahoney project representatives have met repeatedly with KPU, SEAPA, and municipal officials to discuss
opportunities for developing a PPA for output from the project. Response from these potential off-takers
indicates that there is interest in the project, although questions remain about current remaining “unknowns.”
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We believe that the work proposed to be completed by AEA Round VIII-funded activities will address these
remaining “unknowns” and create the knowledge-base which is sufficient for off-takers to feel confident
enough in the project to proceed with a commitment to purchase energy and power.
Additionally, Saxman is participating in SEAPA’s Request for Offers process. Project funds will provide
information which will help support participation and potential negotiation of a power sales agreement or
other commercial arrangements through this process.
Potential power purchase/sales price
Estimated roughly at $140 / MWH, assuming no grants subsidizing construction. This information will be
updated and supported by a detailed business case as part of Phase III activities proposed for AEA REF
Round VIII funding.
Proposed rate of return from grant-funded project:
Consistent with AEA requirements, the project would sell power under a cost-based power purchase
agreement.
As a private, regulated utility, AP&T is accustomed to achieving a regulated rate of return on private assets
and equity. KEC would propose a rate of return on private investment which is consistent with AP&T’s
current return on investment.
Public (State) monies invested in this project will be utilized to lower energy costs for ratepayers through
power sales agreements with public utilities – not with direct power sales agreements to private sector
commercial / industrial off-takers. The Mahoney partners do not expect to earn a rate of return on public
monies invested in the project, nor do they expect public monies invested in the project to lower energy costs
in any future direct power sales agreements with commercial / industrial off-takers.
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. 41.7 GWH, 42.7 cfs average flow and 1730 feet net head
Unit depends on project type (e.g. windspeed, hydropower output, biomass fuel)
Existing Energy Generation and Usage
a) Basic configuration (if system is part of the Railbelt1 grid, leave this section blank)
1 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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i. Number of generators/boilers/other 6 hydro projects, 17 diesel generators
ii. Rated capacity of generators/boilers/other 55.7 MW hydro, 45.7 MW diesel
iii. Generator/boilers/other type Hydroelectric with diesel backup
iv. Age of generators/boilers/other Varies
v. Efficiency of generators/boilers/other Varies
b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank)
i. Annual O&M cost for labor Unknown
ii. Annual O&M cost for non-labor Unknown
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] 275 GWh (Source: SEIRP Table 8-1)
ii. Fuel usage
Diesel [gal] NA
Other NA
iii. Peak Load 49 MW (Source: SEIRP Table 8-2)
iv. Average Load 31.4 MW (derived from 275 GWh annual load)
v. Minimum Load Unknown
vi. Efficiency NA
vii. Future trends NA
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]
9.6 MW hydroelectric
b) Proposed annual electricity or heat production (fill in as applicable)
i. Electricity [kWh] 41.7 aGWH
ii. Heat [MMBtu] NA
c) Proposed annual fuel usage (fill in as applicable)
i. Propane [gal or MMBtu] NA
ii. Coal [tons or MMBtu] NA
iii. Wood or pellets [cords, green tons, NA
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dry tons]
iv. Other NA
Project Cost
a) Total capital cost of new system $45,320,707
b) Development cost $5,000,000
c) Annual O&M cost of new system $600,000
d) Annual fuel cost None
Project Benefits
a) Amount of fuel displaced for
i. Electricity 3.1 million gallons of diesel per annum, or 142.8 million gallons total
ii. Heat NA
iii.
Transportation
NA
b) Current price of
displaced fuel
AEA Econometric Model for REF applications quotes $4.04 gallon
for 2017, equivalent to approx.. $0.289 / kwh
c) Other economic
benefits
The cost of maintaining a hydropower project is substantially lower
than the cost of maintaining equivalent diesel gen sets.
d) Alaska public
benefits
The University of California’s “Berkeley Green Job Calculator” calculates
the Mahoney project will create 11.315 direct, indirect, and induced jobs.
Outcome of AEA REF Round VIII econometric model provided below.
Total carbon dioxide emissions avoided through diesel to hydropower
conversion over the initial term of the existing FERC license would equal
1.5 million metric tons, valued at $127m expressed in $2007 per federal
guidelines (US IWG calculation methodology for US EO 12866 review:
average of all 4 econometric models).
Mahoney lake will support new economic activity, jobs, and prosperity
which will increase family sustainability, expand the regional tax base, and
allow southeast Alaska’s young residents to remain within their
communities as gainfully employed, successful adults. The project will
Performance Unit Value
Displaced Electricity kWh per year 41,700,000
Displaced Electricity total lifetime kWh 2,085,000,000
Displaced Petroleum Fuel gallons per year 2,978,571
Displaced Petroleum Fuel total lifetime gallons 148,928,571
Displaced Natural Gas mmBtu per year -
Displaced Natural Gas total lifetime mmBtu -
Avoided CO2 tonnes per year 30,233
Avoided CO2 total lifetime tonnes 1,511,625
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result in lower energy costs for businesses, families, non-profit
organizations, and community facilities.
The University of California’s “Berkeley Green Job Calculator” calculates
the Mahoney project will create 11.315 direct, indirect, and induced jobs.
Power Purchase/Sales Price
a) Price for power purchase/sale Currently estimated at approximately $140 / MWH –
however, this is a function of a wide variety of
variables. PPA pricing will be determined more
precisely as part of Phase III activities proposed under
REF Round VIII funding.
Project Analysis
a) Basic Economic Analysis
Project benefit/cost
ratio Results
NPV Benefits $334,530,525.72
NPV Capital Costs $9,588,161
B/C Ratio 34.89
NPV Net Benefit $324,942,365
This assumes a 50-year period of analysis coinciding with the
project’s initial license term.
Payback (years) The AEA econometric model provided for AEA REF VIII applications
displays 5 year payback realized through “electric cost savings.”
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.
Mahoney Lake has the potential to supplant ever-growing diesel-fired generation in
the Ketchikan / SEAPA region during times of peak demand, which would help
sustain current rates.
Adding a new customer such as Kake to the SEAPA-region grid will increase
demand for energy through the region. Mahoney Lake could potentially help offset
this new demand increment, which would sustain current rates.
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Population growth has been ongoing in the SEAPA region. This growth has been
occurring in tandem with growth in employment, wages, new business, and new
construction – indications pointing to a period of long term economic growth.
Mahoney Lake will provide additional energy which can help offset associated
annual growth in demand for electricity.
Private sector investors have gone to considerable expense to bring the Mahoney
Lake project to its current state of development-readiness. Efforts and expenditures
to date have resulted in issuance of the project’s FERC license. Lack of interest in
the project by the State of Alaska or municipal utilities will produce conditions
where another entity seeking to meet demand in the SEAPA-region will be required
to repeat the FERC licensing process for Mahoney Lake, or another project. Such a
licensing process would be a high-cost process comprised of significantly redundant
work which, in the case of a municipal utility or governmental entity, would come
at a cost to the public, the State, and/or ratepayers, who must invariably shoulder the
costs. As another, related consideration, licensing and license amendment processes
take many years – oftentimes 9+ years or longer, with significant risk of a license
not being issued. (Ketchikan’s Whitman Lake was a 12 year process). Delaying
development of renewable energy projects to meet future demand will mean that
Alaskan energy consumers will spend longer amounts of time paying for diesel fuel
over a greater time period, as they await more affordable new renewable energy
solutions. This alternative will result in higher rates.
Impacts upon rates will be in part a function of the level of supported which is
available from the State of Alaska. If the State of Alaska provides Saxman with a
level of support which is equitable or near-equitable to that provided to Ketchikan
and other communities in Southeast Alaska in recent years, development of the
project could support sustained low rates. However, if the State of Alaska is unable
or unwilling to support this project in an equitable manner through grant funds, the
level of debt service would be higher, and these higher costs would be passed on to
ratepayers.
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Grant Application - Standard Form
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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)
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 annual fuel displacement (gallons and dollars) over the lifetime of the evaluated
renewable energy project
Total carbon dioxide emissions avoided through diesel to hydropower conversion over the initial term of the
existing FERC license would equal approximately 1.5 million metric tons, valued at $127m expressed in
$2007 per federal guidelines (US IWG calculation methodology for US EO 12866 review: average of all 4
econometric models).
• Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement
price, RCA tariff, or cost based rate)
Business case analysis, revenue modeling, and development of Power Purchase Agreements are all
activities proposed for completion with the support of AEA Round VIII funding.
Power Purchase Agreements would be regulated by the RCA, which determines a reasonable rate of
return. AP&T typically realizes a rate of return of 12.8% on private equity, and would anticipate a
similar internal rate of return for Mahoney Lake.
In accordance with AEA requirements, AP&T proposes charging a cost-based rate. This cost-based
rate would be subject to regulation by the RCA.
• Potential additional annual incentives (i.e. tax credits)
Performance Unit Value
Displaced Electricity kWh per year 41,700,000
Displaced Electricity total lifetime kWh 2,085,000,000
Displaced Petroleum Fuel gallons per year 2,978,571
Displaced Petroleum Fuel total lifetime gallons 148,928,571
Displaced Natural Gas mmBtu per year -
Displaced Natural Gas total lifetime mmBtu -
Avoided CO2 tonnes per year 30,233
Avoided CO2 total lifetime tonnes 1,511,625
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Grant Application - Standard Form
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The project proponents do not believe the project will qualify for existing tax credit programs for
renewable energy, as lake tap hydropower is not currently eligible (although it technically is
renewable energy).
• Potential additional annual revenue streams (i.e. green tag sales or other renewable
energy subsidies or programs that might be available)
The project proponents estimate the maximum annual revenue that could be derived from green tag
sales is approximately $40,000 per year.
• Discuss the non-economic public benefits to Alaskans over the lifetime of the project
A robust economy provides the foundation upon which safe, healthy communities grow and thrive.
The emotional and financial pressures of joblessness and poverty contribute to the full spectrum of
social ills. Creation of new, quality, legacy jobs will help effect long-term improvements to
Southeast Alaska’s economic baseline, resulting in a healthier, safer community.
Tax income associated with new economic growth can help support an expanded array of
community services, amenities, and facilities.
Southeast Alaska is challenged by an aging workforce, and migration of youth and skilled
workforce to other communities, oftentimes to urban centers out of State. New, high-quality jobs in
priority industries will allow young southeast Alaskans to remain within their communities as
successful adults, and will help southeast Alaska maintain a competitive, multi-skilled workforce.
While communities such as Ketchikan, Wrangell, Petersburg, Metlakatla, and others have long-
since developed energy resources which contribute to meeting regional demand, Saxman has not yet
had the opportunity to develop its resources and infrastructure, and play an equitable role in the
region’s economy. State participation in the Mahoney Lake project would help assure that Saxman
has a similar, equitable role in meeting future regional needs for renewable energy.
The University of California’s “Berkeley Green Job Calculator” calculates the Mahoney project will create
11.315 direct, indirect, and induced jobs.
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:
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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.
Power sales agreements with local / regional utilities, or direct power sales agreements with
large-scale commercial or industrial consumers.
The City of Saxman, Alaska Power & Telephone, and Cape Fox Corporation would be willing to
consider any reasonable business structure(s) and concepts that would support construction of the
project in a timely manner.
Current Project Partnership Structure – In September of 2011, the City of Saxman, Cape Fox
Corporation (CFC), and Alaska Power & Telephone (AP&T) renewed a public-private partnership
for development of the Mahoney Lake hydroelectric project. The FERC license for the project is
issued to the City of Saxman. Cape Fox Corporation and Alaska Power & Telephone each have
50% ownership of “Ketchikan Electric Company, LLC” (AK Business License # 267588) – a
company formed to develop, own, and operate the Mahoney Lake project. In the mid-90s, CFC and
AP&T invested approximately $2 million each in the project, which resulted in issuance of a FERC
license, and construction of roads to the site of the project’s future powerhouse.
How you propose to finance the maintenance and operations for the life of the project
O&M costs would be financed from power sales revenues.
Identification of operational issues that could arise.
Well designed and constructed hydroelectric projects generally have few major operational issues
once the inevitable initial bugs have been worked out. Operational issues are typically replacement
of worn parts. Project partner AP&T has several operating hydro projects, two of which are similar
in design and size to the Mahoney Lake project, and is thus fully capable of providing operational
services for the project.
One potential issue is that the headworks will require helicopter access for maintenance tasks, and
weather conditions can limit that access. This would be similar to AP&T’s Goat Lake and Black
Bear Lake projects. However, an advantage of the Mahoney Lake site is that it will not require a
siphon intake, as at Goat Lake and Black Bear Lake, which will significantly reduce the headworks
maintenance. During the proposed Phase III work, the design concept will be reviewed with the
goal of further reducing the amount of headworks maintenance (ex: moving the bypass capability
from the headworks to the powerhouse). AP&T is also studying the potential to install a cable-car /
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cable-haul system for transporting equipment and personnel at a lower cost than helicopter
transportation.
A second potential operational issue is the impact of climate change on the inflows to the project. It
is not certain what changes will occur, but there is some support for the belief that hydropower
operation in Southeast may be beneficially affected by climate change in that there will be more
precipitation in the winter as rain rather than snow, which will lessen the need for storage to meet
winter loads.
A description of operational costs including on-going support for any back-up or existing
systems that may be required to continue operation
Operational costs for the project are estimated to be $600,000 per year in 2012 dollars, based on
adjustments to AP&T historical costs.
Saxman does not believe there would be any cost to the project for support for any back-up or
existing systems.
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.
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.
Work completed on the Mahoney Lake Hydroelectric project to date has resulted in issuance of a
federal FERC license, and construction of roads to the site of the future Mahoney Lake powerhouse.
The Mahoney Lake partnership is currently working to apply $200,000 in SFY2014 investment in
the project to provide an updated understanding of the project’s conditions, economics, and current
prospective market, as well as negotiating business agreements for sale of the project’s power and
energy.
The Mahoney Lake partnership intends to proceed immediately upon award of grant funds to
complete any remaining pre-construction tasks required, and initiate construction of the project.
The City of Saxman has a strong history of compliance with local, State, and federal grants,
including grants administered by the AEA/AIDEA (ex: ARRA EECBG Community Block Grants).
Alaska Power & Telephone has a significant history of collaborating with AEA / AIDEA, local
government, and tribal organizations to construct new energy projects in the State of Alaska.
SECTION 8 – LOCAL SUPPORT AND OPPOSITION
Renewable Energy Fund Round VIII
Grant Application - Standard Form
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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
#1 SFY2016 economic development priority for the City of Saxman
SFY16 #4 region-wide investment priority (#2 energy investment priority) for City
of Ketchikan, Ketchikan Gateway Borough, and City of Saxman Joint Legislative
Priority list.
Priority on joint City of Ketchikan, Ketchikan Gateway Borough, City of Saxman
Joint Legislative Priority list for SFY14-16
Investment priority supported by Southeast Conference, the Alaska Regional
Economic Development Organization (ARDOR) representing the collective
interests of all communities in Southeast Alaska.
Regional development priority on most recent Ketchikan Gateway Borough
Comprehensive Economic Development Strategy (CEDS) list – only hydroelectric
project on current list
#1 community development priority on joint City of Saxman / Organized Village of
Saxman CEDS List
Letter of support from Ketchikan Chamber of Commerce
Letter of support from Ketchikan Gateway Borough School District
Letter of support from Ketchikan Indian Community
Letter of support from Alaska Ship & Drydock
Letter of support from US Representative Don Young
Letter of support from Alaska Native Brotherhood / Alaska Native Sisterhood
Letter of support from Organized Village of Saxman
Identified in the Southeast Alaska Integrated Resource Plan as Southeast Alaska’s
only currently-licensed hydro project yet to receive construction funding.
Project Opposition
Saxman is unaware of any entities or individuals who are opposed to the development of the
Mahoney Lake project. In fact, the project is supported as the #2 energy investment priority (#4
overall investment priority, all sectors) by the City of Ketchikan, Ketchikan Gateway Borough, and
the City of Saxman for State Fiscal Year 2016. The project has been a joint priority of all three
governments since SFY14.
There is a risk that incumbent public / governmental utilities may be resistant to the idea of working
with new organizations such as Saxman, tribal entities, an ANCSA corporation such as Cape Fox,
or an independent power producer such as AP&T, and that incumbent public utilities would prefer
to develop, own, and operate their own resources in a closed market, instead. However, this type of
business model – where political criteria or criteria of ownership rather than economic criteria are
used to select projects – is not in the best interest of the ratepayer, nor the State of Alaska, which
has limited resources for investment in energy and other infrastructure projects. Projects should be
selected based upon the level of economic benefit which can be produced for the ratepayer, and
neutral towards ownership and political factors. Also, as noted above, local governments – which
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Grant Application - Standard Form
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control the incumbent utilities – have prioritized Mahoney Lake as a regional investment priority
continually since SFY14 on the Joint Regional Priority List.
In a number of the communities served by AP&T, there are other parties -- such as ANCSA
corporations, tribal organizations, or private businesses – with potential renewable energy
development options available to them. In some cases, these entities have a strong interest in
entering and participating within the regional energy market where AP&T is the incumbent utility.
In such situations, if the prospective project has technical and economic viability, and is likely to
meet ratepayers’ energy needs at an attractive price point, AP&T has gladly partnered and
cooperated with these outside entities so that their projects can be developed, and so that they can
participate in the market, with the end goal being that the customers AP&T serves receive the best-
priced energy possible. Examples would include Reynolds Creek (Haida Corporation), and Yerrick
Creek (Tanacross Inc. and the Native Village of Tanacross).
These types of partnerships require AP&T to think outside the “business as usual” case and adapt
and evolve the AP&T business model – but AP&T has been willing and eager to do that, because
the company wishes to provide its ratepayers with the best service and best priced energy possible.
AP&T could try to maintain a “business as usual” case and shut other entities with economically
attractive projects out of the market, but that does not serve the ratepayers well. This type of
inflexible model is neither sustainable, nor in keeping with a utility’s job of providing ratepayers
with the best service possible.
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
Activities proposed for REF Round VIII funding include developing a financially viable business
case, and negotiating and developing power sales agreements. Additionally, project activities will
involve final permitting and design activities that may have some bearing on final project costs –
and thus power pricing, and financing requirements.
Alaska Power & Telephone and Cape Fox Corporation are eager to complete the investment they
initiated years ago by investing in $4m in development-phase activities for the Mahoney Lake
hydropower project.
After PPA terms are developed, AP&T and Cape Fox Corporation will seek to finance the project
through a combination of private equity, and debt. In order to maximize the level of benefit and
value available to ratepayers while minimizing “rate shock” and assuring financial feasibility,
AP&T and Cape Fox will seek to utilize low interest loan and grant programs which may be
available to assist with the project.
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Grant Application - Standard Form
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Providing financially feasible terms are available, AP&T and Cape Fox will be very glad to make
the commitment to complete the investment they initiated years ago.
Total Anticipated Project Cost:
$4,000,000 – Expenditures to date, resulting in issuance of FERC license and
construction of access roads
$200,000 – SFY14 funding from the State of Alaska
$800,000 – AEA REF Round VIII request
$100,000 – Cash and in‐kind match from AP&T, proposed as match to $800,000 AEA
REF Round VIII request
$45,320,707– Total Construction Cost
Requested grant funding
The City of Saxman requests $800,000 AEA REF Round VIII State investment to assist with initial
construction activities. $100,000 match would be provided by AP&T (cash and in-kind).
Identification of other funding sources
Saxman has not applied for any other loans or grants to fund Phase III project activities, but it may
do so in the future if appropriate programs are identified.
Projected capital cost of proposed renewable energy system
$45,320,707– August, 2014 estimate provided by 3rd party engineering firm. (Mead & Hunt)
Projected development cost of proposed renewable energy system
The total project development cost – as described above -- $50,420,707
Subsequent Funding: Subsequent funding for construction of the project would be supplied
through a combination of private equity and debt, obtained through Alaska Power & Telephone and
Cape Fox Corporation, and backed by a long term power purchase agreement with SEAPA, or one
of its municipal members such as Ketchikan Public Utilities.
AP&T and Cape Fox Corporation would potentially seek to leverage additional grant and low
interest loan opportunities which are available for renewable energy projects, in order to maximize
benefits for regional ratepayers. Grant and loan programs vary by year, depending on available
funding. Potential funding sources could include the State of Alaska’s Power Project Fund, or
USDA RUS funds.
Additionally, there is an opportunity for SEAPA, distribution utilities, or other off-takers to share
investment costs/risks in the Mahoney Lake project by participating in equity placement, or serving
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as a conduit borrower providing access to lower-cost capital through an entity such as the Alaska
Municipal Bond Bank Association. AP&T is willing and eager to support partnership opportunities
of this type, if they are of interest to incumbent utilities or other off-takers.
Consistent with the AEA’s requirements, the Mahoney Lake project would charge a cost-based rate.
Private enterprise would not earn a return on public moneys or investment – only on private
investment. Sale of energy from Mahoney Lake would be a regulated transaction, which would be
subject to RCA oversight and approvals.
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.
The capital cost for this project includes metering equipment which will be used to monitor sales
from Mahoney Lake to an off-taker such as SEAPA and/or KPU. Data produced by this metering
equipment can be used to meet the AEA’s operations reporting requirements.
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Grant Application - Standard Form
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Applications MUST include a separate worksheet for each project phase that was identified in
section 2.3.2 of this application, (I. Reconnaissance, II. Feasibility and Conceptual Design, III. Final
Design and Permitting, and IV. Construction and Commissioning). Please use the tables provided
below to detail your proposed project’s budget. Be sure to use one table for each phase of your
project.
If you have any question regarding how to prepare these tables or if you need assistance preparing
the application please feel free to contact AEA at 907-771-3031 or by emailing the Grants
Administrator, Shawn Calfa, at scalfa@aidea.org.
Phase III Activities:
Milestones Tasks
Start
Date
End
Date
Review and revise conceptual design
Site visit
Obtain new topographic mapping
Obtain new bathymetric mapping
Geotechnical investigations
Review potential for HDD penstock
const.
Review transmission line alignment
Evaluate potential for additional storage
Determine the installed capacity that is
most appropriate for the changes to
the conceptual design and anticipated
power utilization
Summary report
Complete
Complete
Complete
7/1/15
7/1/15
7/1/15
Complete
Complete
1/9/16
Complete
Complete
Complete
10/31/15
9/30/15
9/30/15
Complete
Complete
1/31/16
Review, revise, and resubmit permit
applications
Evaluate current status of all permits
Prepare environmental plans as
required
Prepare and file revisions to permits
applications as necessary
Complete
7/1/15
7/1/15
Complete
9/9/15
9/7/15
Obtain permit approvals Respond to agency requests and obtain
approvals
9/10/15
12/30/15
Revise and resubmit final design
documents
Prepare drawings and specifications
Prepare design report
Submit documents to FERC and USFS
Obtain FERC and USFS approvals
1/1/16
6/1/16
9/1/16
9/1/16
8/31/16
8/31/16
9/1/16
11/30/16
Prepare final cost estimate
In-house cost estimate
Contractor estimate
Summary report
Update Report Prior to Construction
Complete
Complete
7/1/15
12/1/16
Complete
Complete
8/1/15
12/15/16
Update economic and financial
analysis
In-house analysis
Contractor estimate
Summary report
Complete
Complete
7/1/15
Complete
Complete
8/1/15
Power sales agreement
Identify and meet with potential
purchasers, negotiate power purchase
agreement
Summary report
Initiated
12/1/16
11/30/16
12/15/16
Prepare business and operational plan Develop plan 12/16/16 1/16/17
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Milestone or Task
Anticipated
Completion
Date
RE- Fund
Grant Funds
Grantee
Matching
Funds
Source of
Matching
Funds:
Cash/In-
kind/Federal
Grants/Other
State
Grants/Other
TOTALS
Review and revise conceptual
design 10/31/2015 $200,000 $25,000 Cash, In-Kind $225,000
Review, revise, and resubmit
permit applications 9/9/2015 $125,000 $15,000 Cash, In-Kind $140,000
Obtain permit approvals 12/30/2015 $80,000 $10,000 Cash, In-Kind $90,000
Revise and resubmit final
design documents 11/30/16 $250,000 $15,000 Cash, In-Kind $265,000
Finalize cost estimate 8/1/2015 $20,000 $10,000 Cash, In-Kind $30,000
Finalize economic and
financial analysis 8/1/2015 $30,000 $10,000 Cash, In-Kind $40,000
Power Sales Agreement 12/15/2016 $55,000 $15,000 Cash, In-Kind $70,000
Finalize business and
operational plan 1/16/2017 $40,000 $0 Cash, In-Kind $40,000
$ $ $
$ $ $
$ $ $
$ $ $
TOTALS $800,000 $100000 $900,000
Budget Categories:
Direct Labor & Benefits $ $100000 $100000
Travel & Per Diem $ $ $
Equipment $ $ $
Materials & Supplies $ $ $
Contractual Services $800,000 $ $800000
Construction Services $ $ $
Other $ $ $
TOTALS $800000 $100,000 $900000
SECTION 10 – AUTHORIZED SIGNERS FORM
Est.1958
July 29, 2014
To Whom it may Concern:
Southeast Conference would like to express its support for development of the Mahoney Lake
hydropower project. The project is a low-impact, alpine lake tap, does not require use of a dam and is a
short distance away from existing transmission lines.
The City of Saxman, Cape Fox Corporation, and Alaska Power & Telephone are seeking to develop a 9.6
MW hydropower project located at upper Mahoney Lake. This project offers the opportunity to utilize
Cape Fox’s ANCSA lands to provide up to 41.7 annual gigawatt hours of clean, renewable energy to help
support future economic growth in southeast Alaska, and to reduce the need to burn fossil fuels in
diesel power plants and home heating oil systems.
Mahoney Lake is recognized within the Southeast Alaska Integrated Resource Plan and has recently
been awarded $200,000 by the State of Alaska in SFY14, to initiate remaining pre-construction activities
for the project. These funds are allowing Saxman to begin advancing the project to final design and the
next steps toward construction. Saxman is now seeking additional funding to help support remaining
pre-construction costs.
Significant progress has been made due to private investment by the Cape Fox Corporation and Alaska
Power & Telephone. Roads have been completed to the project’s powerhouse site, and the FERC license
for the project has already been issued, which is a significant advantage.
Support for the Mahoney Lake hydropower project will help assure progress continues as this
partnership seeks to supply the region with clean energy which is needed to displace use of diesel fuel,
and support future economic growth and job creation. We urge you to consider supporting
development of this project to the fullest extent possible. Feel free to contact me or Energy Coordinator,
Robert Venables with any questions.
Sincerely,
Shelly Wright
Executive Director
Southeast Conference
612 W. Willoughby., Suite B ● P.O. Box 21989 Juneau, AK 99802● 907-523-4350● Fax 907-463-5670 ● info@seconference.org
3801 N Tongass, P.O. Box 9470, Ketchikan, AK 99901
Phone 907.225.7199 / fax 907.247.7199 / alaskashipanddrydock.com
September 11, 2013
To Whom it May Concern,
Alaska Ship & Drydock (ASD) is a Vigor Industrial company which operates the Ketchikan Shipyard under
agreement with the Alaska Industrial Development and Export Authority (AIDEA), and is engaged
primarily in shipbuilding and repair.
The purpose of this letter is to express Alaska Ship & Drydock’s support for development of the
Mahoney Lake Hydroelectric project in a manner which assures competitively priced energy to
businesses and ratepayers in southeast Alaska. The Mahoney Lake project has already received its FERC
license through $4,000,000 in private sector investment by Alaska Power & Telephone and Cape Fox
Corporation, and has recently received $200,000 in State of Alaska direct capital appropriation funding
support to help update the project’s conditions and prepare for construction. ASD believes that it is vital
to leverage the project’s license and existing investment for the benefit of the region. ASD also believes
that market entry by independent power producers is a valuable concept, which will help encourage
more competitive energy pricing structures.
Alaska Ship and Drydock is working to develop Alaska’s infrastructure and workforce, to support growth
of Alaska’s marine transportation, resource development, fisheries, and on/off-shore gas industries
through shipbuilding and repair activities; a subsector of advanced manufacturing. Ketchikan’s shipyard
attracts marine vessel fleet owners and operators (AMHS and NOAA) to the region, and enhances
Ketchikan’s potential as a base port for commercial vessels engaged in in economic activity throughout
Alaska. Growth in demand for shipyard supplies, material, and workforce supports expansion of local
businesses, attracts new businesses, and creates new economic opportunities and diversity.
Along with other components of the region’s maritime industry sector, Alaska Ship & Drydock’s facilities
are expanding to meet increasing demand associated with expanding markets. With such growth comes
concurrent, long-term demand for competitively priced energy, which can be provided by hydroelectric
projects such as Mahoney Lake.
Sincerely,
Doug Ward