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Home My WebLink AboutSaxman Mahoney AEA Round 6Renewable Energy Fund Round 6 �40NED Grant Application 4IIIIIIIIIIIIIIED ENERGY AUTHORITY Application Forms and Instructions This instruction page and the following grant application constitutes the Grant Application Form for Round 6 of the Renewable Energy Fund. An electronic version of the Request for Applications (RFA) and this form are available online at: http://www.akenergyauthority.org/RE Fund-6.html • If you need technical assistance filling out this application, please contact Shawn Calfa, the Alaska Energy Authority Grant Administrator at (907) 771-3031 or at scalfa(a_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 satisfied 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. 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 3 AAC 107.630 (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. AEA 13-006 Application Page 1 of 44 7/3/2011 Renewable Energy Fund Round 6 � �-� Grant Application �4001--) ENERGY AUTHORITY 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: Public -Private Partnership: Local Municipal Government (Saxman); Power & Communication Utility (AP&T); and ANCSA Corporation (CFC) Fiscal Year End: June 30"' Tax ID # 92-0041226 Tax Status: Non-profit (Local Government) Mailing Address Physical Address City of Saxman 2841 S. Tongass Highway Rt. 2, Box 1 - Saxman Ketchikan, AK 99901 Ketchikan, AK 99901 Telephone Fax Email 907-225-4166 x 13 907-225-6450 jasonryancuster@gmail.com 1.1 APPLICANT POINT OF CONTACT / GRANTS MANAGER Name Title Jason Custer Development Coordinator, City of Saxman Mailing Address City of Saxman Rt. 2, Box 1 - Saxman Ketchikan, AK 99901 Telephone Fax Email 907-225-4166 x 13 907-225-6450 jasonryancuster@gmail.com 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) X (AP&T) An electric utility holding a certificate of public convenience and necessity under AS 42.05, or X (AP&T) An independent power producer in accordance with 3 AAC 107.695 (a) (1), or X A local government, or (Saxman) A governmental entity (which includes tribal councils and housing authorities); Yes 1.2.2 Attached to this application is formal approval and endorsement for its project by its 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 Yes or No in the box ) Yes 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. Yes 1.2.4 If awarded the grant, we can comply with all terms and conditions of the attached grant form. (Any exceptions should be clearly noted and AEA13-006 Grant Application Page 2 of 44 7/3//2012 Renewable Energy Fund Round 6 GOLD -- - - . - vranL 1ANN11t;dL1 [1 W WEED, ENERGY AUTHORITY submitted with the application.) Yes 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. AEA13-006 Grant Application Page 3 of 44 7/3//2012 Renewable Energy Fund Round 6 - Grant Application IIIIIIIIIIIIIIIED EN ERGY AUTHORITY SECTION 2 — PROJECT SUMMARY This is intended to be no more than a 1-2 page overview of your project. 2.1 Project Title — (Provide a 4 to 5 word title for your project) Mahoney Lake Hydroelectric 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. The Mahoney Lake hydroelectric project is located in the Ketchikan Gateway Borough, approximately 5 miles northeast of Ketchikan, Alaska. 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 component of a more extensive regional electrical grid. 2.3 PROJECT TYPE Put X in boxes as appropriate 2.3.1 Renewable Resource Type Wind Biomass or Biofuels X Hydro, including run of river Transmission of Renewable Energy Geothermal, including Heat Pumps Small Natural Gas Heat Recovery from existing sources Hydrokinetic Solar Storage of Renewable Other (Describe) 2.3.2 Proposed Grant Funded Phase(s) for this Request (Check all that apply) Pre -Construction Construction Reconnaissance X Design and Permitting Feasibility Construction and Commissioning Conceptual Design 2.4 PROJECT DESCRIPTION Provide a brief one paragraph description of your proposed project. AEA13-006 Grant Application Page 4 of 44 7/3//2012 Renewable Energy Fund Round 6 �4 p _� Grant Application ®ENE ORFrYY The City of Saxman was issued a license for the Mahoney Lake hydroelectric project by the Federal Energy Regulatory Commission (FERC) on January 22, 1998 (Project No. P-11393). The project was licensed to be a storage -type project with a lake tap of Upper Mahoney Lake, a tunnel -and -pipe penstock, a single unit powerhouse, and an overhead transmission line connecting to the existing KPU transmission system at the Beaver Falls substation. The licensed capacity is 9.6 MW and the estimated potential annual generation is 41.7 GWH. Design documents were submitted to FERC for review in 2001 in anticipation of starting construction in 2002. However, at that time a decision was made to construct the Swan-Tyee Intertie instead of the Mahoney Lake project; the Mahoney Lake project license was stayed until requested by Saxman, but no later than 6 years after completion of the Swan-Tyee Intertie. Saxman has until 2015 to request lifting of the stay. The design documents submitted to FERC in 2001 proposed to construct the penstock using horizontal directional drilling (HDD), which was a different penstock design than licensed and an untested technology for the hydroelectric industry. FERC had not commented on the design submittal prior to the stay being issued. Load growth in the SEAPA-interconnected systems and the potential for new industrial loads now makes it timely to resume the development of the Mahoney Lake project. However, because of the long delay, it is necessary to reexamine some aspects of the project, in particular: • Re-evaluate the HDD-based design based on advances in the HDD industry in the last decade. It now appears possible to simplify the design and eliminate some expensive elements. • Re-evaluate the storage potential of the upper basin, either by lowering the lake tap in Upper Mahoney Lake or adding storage in two natural lakes above Upper Mahoney Lake. Additional storage would allow more wintertime generation by the project, which is critical for the SEAPA-interconnected system. • Route the transmission line north along the existing road system on Cape Fox land to an interconnection to the Swan Lake line at the White River, rather than south over USFS land to the Beaver Falls substation. • Review permit status, and renew or revise permit applications as appropriate. • Update the design drawings, specifications, and design report as appropriate for changes in the design concept. • Update the cost estimate and economic analysis for the project, including any revisions to the design as described above. • Begin power sales negotiations, and prepare a business and operational plan based on the anticipated power sales agreement. At the completion of this work, KEC will be ready to begin construction on the project as soon as final financing is arranged. The proposed work is more fully described in Section 4 of this proposal. AEA13-006 Grant Application Page 5 of 44 7/3//2012 Renewable Energy Fund Round 6 i©�� Grant Application GEED ENERGY AUTHORITY 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, etc.) ■ Reduced reliance upon diesel generation of electricity and heating oil ■ 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 supports 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, growth of the regional maritime industry sector ■ Provides enhanced stability to region -wide system ■ Could help provide electricity to cruise ships, lowering environmental impact of the visitor industry, and assuring compliance with federal environmental quality standards/regulations. (SEW forecasts 35,529 MWH annual demand by Ketchikan/Wrangell/Petersberg-area cruise ships) ■ Reduces dependence on foreign oil Growth in Regional Demand for Electricity Demand for electricity has been increasing substantially in the Ketchikan and SEAPA regions. The Southeast Alaska Integrated Resource Plan (SEW) states: "The number of [Ketchikan area] customers increased from 7,347 in 2008 to 7,418 in 2010. Most of the customer increases have been due to high growth in commercial and industrial activities. Unlike other areas in Alaska, Ketchikan has seen a recent spurt in commercial and industrial activities which has led to new customers coming into the area." In January of 2012, Ketchikan Public Utilities experienced new peak demands for electricity, with peak demand exceeding the prior record by 13.7%, and total KWH delivered in a 24-hour period exceeding the prior record by 14.3%. Growing Demand in Ketchikan — New January, 2012 Peak Demand Peak 34.7 MW 30.5 MW 4.2 MW 1 3.7% Total KWH 726,600 634,700 91,300 KWH 1 4.3% (per24-hour KWH KWH period) Source: Interview with Ketchikan Public Utilities Staff In addition to meeting the current growing demand for electricity, investment in new hydroelectric AEA13-006 Grant Application Page 6 of 44 7/3//2012 Renewable Energy Fund Round 6 GEED Grant Application GENEDENERGY AUTHORTY resources will support new private sector investment and job creation in an array of industry sectors, which will help assure that Southeast Alaska has a bright future characterized by a healthy, diverse economy. Southeast Alaska's most promising industry sectors — shipbuilding and repair; mining / ore processing; the seafood industry; the maritime industry; and tech -based enterprise — all require significant amounts of affordably -priced electricity to assure growth and long-term prosperity. Private sector business owners understand that "time is money," and will not "wait" for southeast Alaska to build infrastructure capacity necessary to support proposed business activities; if the infrastructure they need is unavailable, they will operate and create employment in better -prepared communities. 2010-2011 SEAPA Region Population Growth 7.0% 6.0% b• O• KV Source: 2012 Alaska Department of Labor Report http://l`abor.alaska.gov/research/poplpopest.htm Market Conditions — As Oil Costs Continue to Rise, so will Consumer Demand for Clean, Reasonably -Priced Hydroelectricity Businesses, residents, and non-profit organizations all seek to purchase the most affordable energy available. Rising heating oil costs have caused many Ketchikan-region residents and businesses to convert to more affordable electric boilers, which see heaviest use during winter months, when storage hydro projects are not receiving new flows. At present, the SEAPA region's growing demand for renewable electricity exceeds supply; a trend which is unlikely to change. It is particularly difficult to alter consumer behavior; with all other factors being equal, consumers will always follow the lowest bottom line. Responding to Southeast Alaska's existing homeowner and private sector demand for affordably priced renewable electricity offers the most effective approach to supporting continued community and economic growth, and expanding Southeast Alaska's tax base. A 2011 Energy Audit completed for the Ketchikan Gateway Borough School District projects that the cost of heating oil is rising at 6% annually. Section 5 of the SEIRP presents ISER-generated heating oil price projections which were developed using historical heating oil prices, imported crude oil prices from the AEO, and the CORAC. The SEIRP's "Medium Case Scenario" for the cost of Ketchikan heating oil in 2037 is $14.57 / gallon (expressed in nominal 2012 dollars, not adjusted for inflation). The SEIRP's "High Case Scenario" is $22.56 (nominal 2012 dollars, not adjusted for inflation). The SEIRP's "Low Case Scenario" is $6.75 per gallon. In June of 2012, the price of heating oil in Ketchikan was approximately $5/gallon (Source: June 2012 Ketchikan Gateway Borough / City of Ketchikan Cooperative Relations Committee Meeting Notes). AEA13-006 Grant Application Page 7 of 44 7/3//2012 Renewable Energy Fund Round 6 WIND Grant Application i4111111111111111111D ENERGY AUTHORITY Ketchikan Heating Oil Cost Projections: 5, 10, and 25 Years (In Nominal 2012 Dollars) $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 2037 M >EIRP High Case School District Audit odium Case se Source: Ketchikan Gateway Borough School District 2011 Energy Audit and Southeast Alaska Integrated Resource Plan The Ketchikan Gateway Borough School District's October 2011 Energy Audit for Ketchikan High School, funded by the Alaska Housing Finance Corporation and conducted by Alaska Energy Engineering, LLC (Juneau) recommends adding electric boilers to assist the school district in lowering heating oil consumption and operating costs. The School District desires to add electric boilers at regional schools so that it can provide a more cost-effective education system, but is challenged by regional energy shortages; as a result, taxpayers must bear the burden of costlier oil bills via taxes. The School District Superintendent reports that KGBSD still plans to convert to electric boilers, and anticipates that following conversion, KGBSD would purchase $500,000 of electricity per annum. 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 AEA13-006 Grant Application Page 8 of 44 7/3//2012 Renewable Energy Fund Round 6 Grant Application SOME) ENERGY AUTHORITY 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 Mahoney Lake Hydroelectric Project will produce enough energy to displace 3,105,000 gallons of diesel per annum. Over the initial term of its existing FERC license, the project would displace 142,830,000 gallons of diesel. The avoided cost of the diesel in nominal dollars is $3 billion, and in 2011 dollars is $530 million. Total carbon dioxide emissions avoided over the initial term of the existing FERC license would equal 1.8 million metric tons, valued at $67.7 million in 2007 dollars. (Assumptions: 8% Discount Rate. Initial operating term of FERC License begins 2016, ends 2061. KPU fuel efficiency = 14.81 kilowatt-hours per gallon of diesel #2. Mahoney Lake average annual energy = 41.7 GWH, per the FERC License P-11393. Fuel price projections from Black & Veatch, under contract with AEA for SE Alaska Integrated Resource Study. Carbon Dioxide emissions from Department of Energy and EPA, July 2000 Social Cost of Carbon per Metric ton of Carbon Dioxide Emissions from Interagency Working Group on Social Cost of Carbon, February 2010. This study concludes the cost is $24.3 in 2016 and increases to $44.9 per metric ton in 2061 in 2007 dollars.) The project reduces dependence upon foreign oil, allowing Alaskans to invest half of a billion dollars of their hard-earned money locally, rather than sending it overseas where much of it will end up in the hands of hostile regimes. By supplanting "dirty" diesel fuel with clean, renewable energy, Mahoney Lake will help avoid 1.8 metric tons of carbon dioxide emissions, valued at $67.7 million in 2007 dollars. 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. AEA13-006 Grant Application Page 9 of 44 7/3//2012 Renewable Energy Fund Round 6 Grant Application ENERGY AUTHORITY Mahoney Lake Socioeconomic Benefits Support for a Growing Community — Ketchikan's population is growing, and with it, the community's array of facilities. New projects in varying stages of planning and development include the new Ketchikan library, PeaceHealth Medical Center Expansion, Community Connection's new facility, Saxman Harbor, a redeveloped Saxman Seaport, Ketchikan Indian Community's SSEATEC, the Ketchikan Performing Arts Center, Ketchikan Aquatic Center, Alaska Ship & Drydock's new Assembly Hall, a new Women's Shelter for WISH, Saxman Harbor, and more. AEA13-006 Grant Application Page 10 of 44 7/3//2012 Renewable Energy Fund Round 6 _A_ Grant Application W ENERGYAUTHORITY Ketchikan's New Facilities Will Result in Increased Regional Demand for Electricity Community Connections r_ Hospital Expansion KIC SSEATEC Training Center �LJ4as at Ketchikan Shipyard Performing Arts Center 'U New Library �." I4 Z-. Ketchikan Aquatic Center School District 2.6 PROJECT BUDGET OVERVIEW Briefly discuss the amount of funds needed, the anticipated sources of funds, and the nature and source of other contributions to the project. 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 2012), the total value of private sector investment in the project, expressed in 2012 dollars, is approximately $6,000,000. 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. Previously issued permits may require renewal, and additional permits may now be required. The following pre - construction tasks are proposed for the Phase III work, which are aligned with the milestones suggested for Phase III by the grant application instructions: AEA13-006 Grant Application Page 11 of 44 7/3//2012 Renewable Energy Fund Round 6 141111111111D —ebb, Grant Application GEED ENERGY AUTHORITY • Review and revise conceptual design ....... $ 275,000 • Review, revise, and resubmit permit applications......................................$165,000 • Obtain permit approvals..............................................................................$110,000 • Revise and resubmit final design documents..............................................$275,000 • Prepare final cost estimate............................................................................$55,000 • Update economic and financial analysis.......................................................$55,000 • Power sales evaluation................................................................................$110,000 • Prepare business and operational plan..........................................................$55,000 • Total.........................................................................................................$1,100,000 Saxman requests that AEA provide $1,000,000 of this amount through a Renewable Energy Fund grant. The remaining $100,000 will be provide by Saxman and the Mahoney Lake partners as matching funds through direct labor and benefits of employees. The terms and conditions assumed in this request are based upon the outcome of previous permitting. The Mahoney Lake partnership recognizes that the probable design changes will require an amendment of the FERC license; they believe it will be a minor amendment and not require a new environmental assessment. While we hope that there are not new issues or permit conditions which arise from the proposed work, the Mahoney Lake partnership recognizes the importance of completing remaining permitting -related activities as soon as possible, so that the Mahoney Lake hydroelectric project can be developed in a timely fashion. The pre -construction investment proposed above is consistent with near -term investment recommendations of the Southeast Alaska Integrated Resource Plan (SEIRP) to complete activities which reduce "unknowns" for potential future hydroelectric projects. 2.7 COST AND BENEFIT SUMARY Include a summary of grant request and your project's total costs and benefits below. Grant Costs (Summary of funds requested) 2.7.1 Grant Funds Requested in this application. $1,000,000 2.7.2 Cash match to be provided NA ($4,000,000 provided to date) 2.7.3 In -kind match to be provided $100,000 (estimated staff time) 2.7.4 Other grant applications not yet approved $0 2.7.5 Total Grant Costs (sum of 2.7.1 through 2.7.3) $5,100,000 Project Costs & Benefits (Summary of total project costs including work to date and future cost estimates to get to a fully operational project) 2.7.6 Total Project Cost (Summary from Cost Worksheet including $ 51,100,000 estimates through construction) 2.7.7 Estimated Direct Financial Benefit (Savings) $6,136,221 per annum. (Expressed in 2012 dollars.) AEA13-006 Grant Application Page 12 of 44 7/3//2012 Renewable Energy Fund Round 6 vran>< Hppllca><lvn 4011—) ENERGY AUTHORITY 2.7.8 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 your application (Section 5.) $306,811,050 over initia150- year license period of the project. (Expressed in 2012 dollars.) Direct Benefit -Cost Ratio: 6.7 Economic Development / Job Creation Benefit -- $651,499,200 (Total Payroll — direct, indirect, and induced — supported by Project.) Economic Development Benefit Cost Ratio: 14.2 (Total payroll creation benefit divided by estimated capital construction cost) Total Project benefits: $958,310,250 (potential annual fuel displacement savings plus total payroll creation) Total Benefit Cost Ratio: 20.8 [Potential annual fuel displacement savings + total payroll creation] divided by estimated capital construction cost AEA13-006 Grant Application Page 13 of 44 7/3//2012 Renewable Energy Fund Round 6)© mi_- ALASKA-z� Grant Application c ENERGY AUTHORITY 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). 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: Leona Haffner— City Administrator, City of Saxman Jason Custer — Development Coordinator, City of Saxman 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. Start End Milestones Tasks Date Date Site visit Obtain new topographic mapping 7/1/13 7/5/13 Obtain new bathymetric mapping 7/1/13 8/30/13 Geotechnical investigations 7/1/13 8/30/13 Review potential for HDD penstock 7/1/13 11/1/13 const. 7/8/13 8/9/13 Review and revise conceptual design Review transmission line alignment 7/8/13 8/9/13 Evaluate potential for additional storage 9/2/13 11/1/13 Determine the installed capacity that is 11/4/13 12/6/13 most appropriate for the changes to the conceptual design and anticipated power utilization Summary report 12/9/13 1/3/14 Evaluate current status of all permits 7/1/13 8/30/13 Prepare environmental plans as 1/6/14 5/9/14 Review, revise, and resubmit permit required applications Prepare and file revisions to permits 1/6/14 3/7/14 applications as necessary Respond to agency requests and obtain 3/10/14 12/5/14 Obtain permit approvals approvals Prepare drawings and specifications 1/6/14 7/4/14 Revise and resubmit final design Prepare design report 7/7/14 9/5/14 documents Submit documents to FERC and USFS 9/8/14 9/8/14 Obtain FERC and USFS approvals 9/9/14 11/9/14 In-house cost estimate 7/7/14 9/5/14 Prepare final cost estimate Contractor estimate 7/7/14 9/5/14 Summary report 9/8/14 9/19/14 In-house analysis 9/8/14 10/10/14 Update economic and financial Contractor estimate 9/22/14 11/28/14 analysis Summary report 1 12/1/14 1 12/12/14 AEA13-006 Grant Application Page 14 of 44 7/3//2012 Renewable Energy Fund Round 6� �qq� Grant Apalication i ENERGY AUTHORITY Identify and meet with potential 9/8/14 11/28/14 Power sales evaluation purchasers Summary report 12/1/14 12/12/14 Prepare business and operational plan Develop plan 12/15/14 1/16/15 AEA13-006 Grant Application Page 15 of 44 7/3//2012 Renewable Energy Fund Round 6 Grant Application GONE-- ENERGY AUTHORITY 3.3 Project Resources Describe the personnel, contractors, accounting or bookkeeping 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. The majority of work 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 • 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 • 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 AEA13-006 Grant Application Page 16 of 44 7/3//2012 Renewable Energy Fund Round 6 C7 (,(/� Grant Application iMMEDENEAUTHORITY 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. 3.5 Project Risk Discuss potential problems and how you would address them. The proposed Phase III work is intended to reduce the uncertainties associated with the Project development, as indicated below: • New Permitting Requirements — Activities proposed within this application help address any new permitting requirements / updates necessary. • Cost Uncertainty — Activities proposed within this application will help update project construction cost estimates, and reduce cost uncertainty. • Lead time — Activities proposed within this application will identify supply times for major components to reduce uncertainty with the project development schedule. • Power Sales — Activities proposed within this application (ex: cost -estimate update) will support development of more accurate project cost and energy rate projections needed to inform 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 regional entities (public and private) which are currently considering power sales agreements and/or other business relationships for Mahoney Lake power. • 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. With regard to risks for the actual Phase III work: • Site Control — Saxman will apply to the Forest Service for an investigative special use authorization to conduct any work on National Forest land. • Inclement Weather — Working conditions in the Upper Mahoney Lake area can be very harsh during the winter. The proposed schedule assumes no work during the winter at the lake. AEA13-006 Grant Application Page 17 of 44 7/3//2012 Renewable Energy Fund Round 6 aniu Grant Application GMW) ENERGY AUTHORITY SECTION 4 — PROJECT DESCRIPTION AND TASKS • The level of information will vary according to phase(s) of the project you propose to undertake with grant funds. • If some work has already been completed on your project and you are requesting funding for an advanced phase, submit information sufficient to demonstrate that the preceding phases are satisfied and funding for an advanced phase is warranted. 4.1 Proposed Energy Resource Describe the potential extent/amount of the energy resource that is available. Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be available for the market to be served by your project. For pre -construction applications, describe the resource to the extent known. For design and permitting or construction projects, please provide feasibility documents, design documents, and permitting documents (if applicable) as attachments to this application. Work on Previous Phases: Saxman is requesting funding for Phase III (design and permitting) work, as there has been a considerable amount of work done in the past. In fact, a substantial amount of Phase III work has 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. I (design drawings) Saxman is aware of other studies of the Mahoney Lake site by the Corps of Engineers, but does not have documentation. Proposed Work: Although much design and permitting work has been done, Saxman believes that additional work is necessary and prudent for the following reasons: AEA13-006 Grant Application Page 18 of 44 7/3//2012 GELD Renewable Energy Fund Round 6 411111111111111111D Grant Application ® ENERGY AUTHORITY • FERC review and approval of the submitted design documents was not achieved before the license was stayed. It is considered likely that the Mahoney Lake partners will need to provide additional information to FERC before they consent to the use of horizontal directional drilling (HDD) for the penstock as proposed, since that is an untested technique in the hydropower industry. • The HDD industry has advanced considerably in the decade since the license was stayed, and it now appears that the design could be modified substantially to reduce costs. • The Mahoney partners now believe the project transmission line should interconnect to the Swan Lake line near the White River (north of the Mahoney powerhouse) rather than to KPU system at the Beaver Falls substation. This should reduce environmental impacts, as the line will follow existing roads rather than cut through forested land. Nevertheless, it will require an amendment to the FERC license and modification of other permits. • Cost increases in many of the materials and equipment to be used for the Project have been substantial in the decade since the license was stayed, and recent bid openings on hydroelectric projects in Southeast Alaska have shown that engineer's costs estimates can be very low. A detailed review of the estimated construction cost is warranted, including review and/or preparation by a construction contractor. The following tasks are proposed for the Phase III work; these are aligned with the milestones specified in the grant application instructions: • Review and revise conceptual design o Site visit to assess current conditions and potential changes to the design concept o Topographic mapping of currently unmapped areas o Bathymetric mapping of lakes above Upper Mahoney Lake 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 o Review proposed new transmission line route and site of Swan Lake line interconnection 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 o Review the proposed installed capacity and mode of operation to determine the optimum 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 AEA13-006 Grant Application Page 19 of 44 7/3//2012 Renewable Energy Fund Round 6 "SK . Grant Application ENERGY AUTHORITY 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 o Solicit cost information from major equipment suppliers o Independent review of unit costs by a qualified construction contractor o Summary report • Update economic and fmancial analyses o Develop pro forma economic and financial analysis based on the final cost estimate, expected financing parameters, and preliminary power purchase rates 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 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, with approximately 18 GWh available during the critical winter months. This information was developed by HDR Engineering under contract to Saxman in the late 1990's. As part of the proposed Phase III work, the Mahoney Lake partners will evaluate the potential for increasing the Project storage to shift more of the generation into the winter months and to determine if the currently licensed capacity is optimum (in the near term, a smaller capacity may generate almost as much usable energy at a lower cost). Comparison to alternative energy sources: The Southeast Integrated Resource Plan (SEIRP) identifies several alternative energy sources for the SEAPA-connected systems, including new AEA13-006 Grant Application Page 20 of 44 7/3//2012 Renewable Energy Fund Round 6 �� Grant Application GEED ENERGY AUTHORITY 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. The SEIRP does focus on DSM/EE and biomass space heating for the Southeast region to negate the conversion to electric space heating that the region's utilities are currently experiencing. 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 other than Whitman Lake; all other potential projects will not be available for many years due to the time-consuming licensing process. Bids were recently opened for KPU's Whitman Lake project. The lowest bid was approximately twice the cost of the estimate provided by KPU's consulting engineering firm, Hatch Acres. At the time of this application's preparation, it was unclear to Saxman whether or not the Whitman Lake project would be able to proceed as an economical project. By providing the $1,000,000 grant proposed in this application, the AEA would provide the region with reliable information regarding the Mahoney Lake project, so that an informed decision can be made regarding development of new hydroelectric projects in the Ketchikan region. Very importantly, Saxman intends to have the cost estimate for Mahoney Lake developed and/or reviewed by a knowledgeable construction contractor, rather than a consulting engineer, to provide greater reliability in results. 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, the project would appear to have significant technological and regulatory hurdles to overcome with regard to assuring dam safety. 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. AEA13-006 Grant Application Page 21 of 44 7/3//2012 Renewable Energy Fund Round 6 � - Grant Application ® ENERGY AUTHORITY 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. South Fork Prince of Wales AP&T 2 6.7 5.5 AP&T Generation Records Black Bear Lake Prince of Wales AP&T 4.5 21.4 19.2 AP&T Generation Records Swan Lake Ketchikan SEAPA 22.5 72 59 KPU Generation Records Commonwealth Associations, Inc., Tyee "Southeast Alaska Energy Lake Wrangell/Petersburg SEAPA 22.5 116.8 67.2 Export Study," 2006 Silvis Ketchikan KPU 2.1 11.4 9.6 KPU Generation Records Ketchikan Lakes Ketchikan KPU 4.2 19.8 15 KPU Generation Records Beaver Falls Ketchikan KPU 6 38.4 33 KPU Generation Records Purple Lake Metlakatla MP&L 3.9 12.6 10.7 MP&L Generation Records Chester Lake Metlakatla MP&L 1 3.5 2.1 MP&L Generation Records Acres International Inc. Blind "Flow Studies and Slough Petersburg PMP&L 2 10.4 10 . Hydrology Report," 2002 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 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 AEA13-006 Grant Application Page 22 of 44 7/3//2012 Renewable Energy Fund Round 6� Grant Application GNED ENERGY AUTHORITY 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. Existing energy resources are described in Section 4.2.1. (above) Impacts: ■ Will augment existing resources to help serve a growing regional demand load ■ Will reduce production of electricity from diesel generators, lowering production costs of other regional utilities. ■ Will support trend of residential, commercial, industrial, municipal, and non-profit conversion to and use of electric boilers, reducing production of heat from costly heating oil. ■ Will support a more stable regional electrical system. 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 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/seirpNolume%202%20- %20Southeast%2OAlaska%20IRP.pdf AEA13-006 Grant Application Page 23 of 44 7/3//2012 Renewable Energy Fund Round 6 SKA Grant Application ENERGY AUTHORITY 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 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 Energv 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 ■ Supports new job creation and economic/community growth 4.3 Proposed System Include information necessary to 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: • A description of renewable energy technology specific to project location • Optimum installed capacity • Anticipated capacity factor • Anticipated annual generation • Anticipated barriers • Basic integration concept Delivery methods 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). In its design submittal to FERC in 2001, KEC proposed to construct the penstock by horizontal directional drilling (HDD), which to Saxman's knowledge has not been used before for a penstock. As part of the proposed work, KEC intends to reevaluate the use of HDD in light of progress that industry has made in the last decade, with the goal of simplifying the process and the overall project arrangement. Optimum Installed Capacity: The project is currently licensed for an installed capacity of 9.6 MW. As part of the proposed work, KEC intends to reevaluate the installed capacity to determine if a slightly smaller capacity might allow a significant decrease in construction cost without a significant decrease in utilized generation. 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 AEA13-006 Grant Application Page 24 of 44 7/3//2012 Renewable Energy Fund Round 6 �� .w. Grant Application ®ENERGYAUTHORITY will supply energy to an isolated system, the actual utilized generation will be limited by the 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. Anticipated Barriers: The most significant barriers to development which are apparent to Saxman include the following: Load -generation imbalance -- Due to seasonal runoff patterns and loads, and the relatively small amount of reservoir storage, much of the Mahoney Lake project's generation will be during summer months when there is already a surplus of hydro energy. During the proposed Phase III work, Saxman will evaluate methods of increasing the storage to shift an increased proportion of generation to winter months of high demand. Saxman will also evaluate the potential for direct sales to industrial customers with load profiles which may match project generation patterns. • Economic — During the proposed Phase III work, Saxman will conduct economic and financial evaluations, and perform a reliable cost estimate update. These activities will determine power sales rates, and levels of financial support necessary for the project to be feasible. • Environmental -- Most environmental issues with the Project have been resolved through FERC's licensing process. Saxman anticipates that changes made to the project design, which may require a license amendment, will be environmentally neutral or beneficial. Saxman realizes that unanticipated issues may arise during this process. • KPU attitude: In the past, KPU has opposed Saxman's development of the project, for reasons not clear to Saxman. Saxman hopes to develop a better working relationship with KPU during the proposed Phase III work, as Saxman believes the Project will be beneficial for both parties, and ratepayers throughout the region. 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. 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 the 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 Phase III work and modify its application or submit a new application as appropriate. AEA13-006 Grant Application Page 25 of 44 7/3//2012 Renewable Energy Fund Round 6 iemuGNEED5 Grant Aplication ENERGYAUTHORITY 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 • Identifv and discussion of potential barriers List of applicable permits: 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 The Coastal Zone Consistency Review process has lapsed in Alaska, but could resume through future legislative action, in which case an additional permit or review process would be required. Anticipated permitting timeline: KEC is considering changes to the project design that might require modifications to existing permits and environmental plans. KEC expects to complete any conceptual design modifications by the end of 2013 and submit revised permit applications during the spring of 2014. Permit approval time will vary with agency, but permits are generally expected to be issued by the end of 2014. 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 submittal. Because FERC is generally quite conservative, KEC anticipates FERC could have reservations regarding the use of horizontal directional drilling (HDD) for the penstock. If KEC's design review during the proposed Phase III work confirms a desire to use HDD for the penstock, KEC expects to have a technical meeting with FERC staff and KEC's HDD consultant to familiarize FERC with this technology, and the low level of risk associated with its application in development of the Mahoney Lake project. • 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. AEA13-006 Grant Application Page 26 of 44 7/3//2012 Renewable Energy Fund Round 6 � SKAz- Grant Aaalication 1 4001—) ENERGY AUTHORITY • 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 2013 so that hydroelectric development is better addressed than in the current 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 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 AEA13-006 Grant Application Page 27 of 44 7/3//2012 Renewable Energy Fund Round 6 Grant Application Jeclow"') IU&�A__ __ � ENERGY AUTHORITY F_• Projected development cost of proposed renewable energy system I Total anticipated project cost and cost for this phase The total anticipated project cost is estimated to be $51,100,000, as outlined below: • Total expenditures to date.......... $4,000,000 (feasibility, licensing, access roads) • Cost of this phase ....................... $1,100,000 • Construction cost ..................... $46,000,000 • Total ......................................... $51,100,000 The estimated construction cost ($46,000,000) is based on escalating the 1998 feasibility level cost estimate, and is believed to be accurate to ±20%. The cost estimate will be updated during the proposed Phase III work. Requested grant funding The City of Saxman requests $1,000,000 State investment to complete the following pre -construction tasks: • Review and revise conceptual design .......................................... $250,000 • Review, revise, and resubmit permit applications ....................... $150,000 • Obtain permit approvals.............................................................. $100,000 • Revise and resubmit final design documents ............................... $250,000 • Prepare final cost estimate............................................................. $50,000 • Update economic and financial analysis ....................................... $505000 • Power sales evaluation................................................................. $100,000 • Prepare business and operational plan ........................................... $50,000 • Total.......................................................................................... $1,000,000 Applicant matching funds — loans, capital contributions, in -kind. $100,000 in -kind anticipated. (AP&T, City of Saxman, CFC staff time) Identification of other funding sources Saxman has not applied for any other loans or grants to fund the proposed work, but it may do so in the future if appropriate programs are identified. The Mahoney Lake partners will fund their proposed $100,000 match from normal operating funds. Projected capital cost of proposed renewable energy system The capital cost is for this application considered to be the construction cost, which is estimated to be $46,000,000 +/- 20% by escalating the estimate shown in the FERC license application. A new cost estimate will be prepared as part of the proposed grant -funded activities. Projected development cost of proposed renewable energy system The development cost is considered to be the total of the costs for Phases I,11, and III, and is projected to be $5,100,000 ($4,000,000 costs to date plus $1,100,000 for the work proposed in this application). 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 AEA13-006 Grant Application Page 28 of 44 (/3//ZU I Z Renewable Energy Fund Round 6 Grant Application i 4MW__) ENERGY AUTHORITY (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 thev serve.) Operational costs are estimated to be $600,000 per year in 2012, based on adjustments to AP&T historical costs for its hydroelectric projects. Operational costs include: direct labor and benefits for operations, maintenance, and administrative personnel; spare parts and replacements; tools; vehicle O&M costs; helicopter services; insurance; and taxes. 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 ■ Large-scale commercial and industrial consumers (via direct power sales agreement) Potential power purchase/sales price - at a minimum indicate a price range Potential price of 7.3 cents per KWH, assuming $46,000,000 construction cost, and 50% State participation in construction. Proposed rate of return from grant -funded project: Economic and financial analysis proposed within the purview of this grant request will provide information essential to determining appropriate rates of return. It is assumed that a reasonable rate of return on private sector investment will be a function of factors including the level of private sector investment, the level of risk assumed by the private sector, and expectations of the Alaska Energy Authority. Saxman suggests identifying peer "benchmark" projects and business arrangements, and comparing rates of return to determine a return rate which is reasonable to all stakeholders, including the Alaska Energy Authority. 4.4.4 Project Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. Renewable Energy Source The Applicant should demonstrate that the renewable energy resource is available on a sustainable basis. Annual average resource availability. 42.7 cfs average flow and 1730 feet net head Unit depends on project type (e.g. windspeed, hydropower output, biomasss fuel) AEA13-006 Grant Application Page 29 of 44 7/3//2012 Renewable Energy Fund Round 6 `✓ 011111117= ENERGY AUTHORITY a) Grant Application Existing Energy Generation and Usage Basic configuration (if system is part of the Railbelt' grid, leave this section blank) 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 9.6 MW hydroelectric (Wind, Hydro, Biomass, other) [kW or MMBtu/hr] b) Proposed annual electricity or heat production (fill in as applicable) i. Electricity [kWh] 41.7 GWh 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. AEA13-006 Grant Application Page 30 of 44 7/3//2012 IIIIIIIIIIIIE Renewable Energy Fund Round 6 - Grant Application 4011--) ENERGY AUTHORITY 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 [cords, green tons, dry tons] NA iv. Other NA Project Cost a) Total capital cost of new system $46,000,000 +/- 20% b) Development cost $5,100,000 ( including $4,000,000 cost to date) c) Annual O&M cost of new system $600,000 d) Annual fuel cost NA 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 $3.68/gallon, equivalent to approx. $0.25/kWh c) Other economic benefits $651,499,200 d) Alaska public benefits Assures that Southeast Alaska remains competitive with other nations and non -Alaska communities competing for jobs. Allows ore processing jobs to stay local to Alaska. Supports in -state construction of the Alaska Class Ferry. Supports visitor industry, growth of the marine industry sector. Reduces dependence upon foreign oil, allowing southeast Alaskans to spend and invest $459,360,000 locally, rather than purchasing oil from OPEC nations and hostile regimes. Reduces environmental impacts of burning diesel fuel (1.8 metric tons of carbon dioxide avoided). Power Purchase/Sales Price _7 a) Price for power purchase/sale Will be determined based upon outcome of proposed activities. Busbar power cost is currently estimated at 7.3 cents per kWh with 50% State funding. AEA13-006 Grant Application Page 31 of 44 7/3//2012 FIN Renewable Energy Fund Round 6 i41111111111111D Grant Application ® ENERGY AUTHORITY Project Analysis a) Basic Economic Analysis Project benefit/cost ratio Payback (years) Direct Benefit -Cost Ratio: 6.7 (Potential fuel displacement savings divided by estimated capital construction cost) Economic Development Benefit Cost Ratio: 14.2 (Total payroll creation benefit divided by estimated capital construction cost) Total Benefit Cost Ratio: 20.8 ([Potential fuel displacement savings + total job and payroll creation] divided by estimated capital construction cost) Payback Period: Potential Fuel Displacement Savings Only: 7.5 years Payback Period: Potential Fuel Displacement plus New Direct, Induced, and Indirect Payroll: 4.5 Years Assumptions: Capital Construction Cost: $46,000,000 with 50% State Participation Potential Savings: Fuel Displacement $0.22 per KWH diesel generation cost (2008 KPU estimate quoted in 2008 Renewable Energy Grant Fund application) minus $0.073 per KWH cost of Mahoney Lake energy (target power cost, assuming 50% State investment), times 41,760,000 KWH of potential annual fuel displacement = $6,136,221 per annum, expressed in 2012 dollars. Potential Savings: Economic Benefits Mahoney Lake's construction will support addition of 60-100 ore processing jobs, and growth of the mining industry supply chain, AEA13-006 Grant Application Page 32 of 44 7/3//2012 GOOD Renewable Energy Fund Round 6 Ial--ASK. Grant Application ENERGY AUTHORITY marine industry sector, shipbuilding & repair -- high quality jobs in priority sectors, paying at or above the regional median household income level. Estimated 200 jobs x Ketchikan Gateway Borough MHI of $61,695 = $12,339,000 in new annual payroll. For purposes of conservative modeling, we are assuming a "ramp up" period of 20 jobs per year over the initial 10 year period of the project's operation. (In reality, Heatherdale Resources has indicated that it anticipates entering commercial production in the next 2 years — the approximate date that the Mahoney Lake project would be constructed — meaning that the project would begin supporting new ore processing jobs during year 1. Similarly, new investment and major projects at Alaska Ship & Drydock — such as construction of the Alaska Class Ferry — will result in abrupt job increases.) IMPLAN modeling conducted by the McDowell Group for AIDEA in January of 2010 indicates a payroll multiplier of 1.32 for Alaska Ship and Drydock, meaning that every $1 in payroll at ASD generates an additional $0.32 of payroll as ASD payroll recirculates within the local service and supply sector. IMPLAN-modeled indirect/induced benefits for mining, manufacturing, technology, and offshore oil/gas tend to be much higher. For the purposes of modeling, we are assuming an average payroll multiplier of 1.32 (same as the current Alaska Ship & Drydock multiplier) for the new, ug ality jobs supported by Mahoney Lake's renewable energy. In reality, the payroll multiplier will increase as the local supply chain grows to meet the growing needs of priority industries such as shipbuilding & repair, and mining. Mahoney Lake Hvdro Project: Amortized Benefits Years 1-10 Y1 $6,136,211 $1,628,748 20 $1,233,900 $394,848 $7,764,959 0.17 Y2 $6,136,211 $3,257,395 40 $2,467,800 $789,595 $17,158,565 0.37 Y3 $6,136,211 $4,895,244 60 $3,710,700 $1,184,544 $28,190,020 0.61 Y4 $6,136,211 $6,514,992 80 $4,935,600 $1,579,392 $40,841,223 0.89 Y5 $6,136,211 $8,143,740 100 $6,169,500 $1,974,240 $55,121,174 1.20 Y6 $6,136,211 $9,772,488 120 $7,403,400 $2,369,088 $71,029,873 1.54 Y7 $6,136,211 $11,401,236 140 $8,637,300 $2,763,936 $88,567,320 1.93 Y8 $6,136,211 $13,029,984 160 $9,871,200 $3,158,784 $107,733,515 2.34 AEA13-006 Grant Application Page 33 of 44 7/3//2012 Renewable Energy Fund Round 6 � ALA ^\ z � ENERGY AUTHORITY Grant Application Y9 $6,136,211 $14,658,732 180 $11,105,100 $3,553,632 $128,528,458 2.79 Y10 $6,136,211 $16,287,480 200 $12,339,000 $3,948,480 $150,952,149 3.28 see analysis in Sections 2.7.7. and 2.7.8. 2.7.7 Estimated Direct Financial Benefit (Savings) below, with additional supporting detau. Methodology: $0.22 per KWH diesel generation cost (2008 KPU estimate quoted in 2008 Renewable Energy Grant Fund application) minus $0.073 per KWH cost of Mahoney Lake energy (target power cost, assuming 50% State investment), times 41,760,000 KWH of potential annual fuel displacement = $6,136,221 per annum, expressed in 2012 dollars. The rising costs of heating oil and diesel fuel are not included within this estimate, and will result in greater savings over the initial 50-year license period of the project. 2.7.8 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 your application (Section 5.) Methodology: Will support addition of 60-100 ore processing jobs, and growth of the mining industry supply chain, marine industry sector, shipbuilding & repair -- high jobs paying at or above the regional median household income level. Estimated 200 jobs x Ketchikan Gateway Borough MHI of $61,695 = $12,339,000 in new annual payroll. Assuming these 200 jobs are present in year 10 of operations, and sustained over the 40 year period of the project, total value in 2012 dollars is $493,560,000. Employer receipts / profit margins, tax payments to local government, etc. not included. In a "no build" scenario, many of these benefits would likely be realized by communities in British Columbia. IMPLAN modeling conducted by the McDowell Group for AIDEA in January of 2010 indicates a payroll multiplier of 1.32 for Alaska Ship and Drydock, meaning that every $1 in payroll at ASD generates an additional $0.32 of payroll as ASD payroll recirculates within the local service and supply sector. (There is significant room for growth, as nationally, the payroll multiplier is 2.6) Research by the Ketchikan Marine Industry Council, which was been confirmed by McDowell Group researchers in June of 2011, indicates that this multiplier will grow to 1.52 over the next 10-20 years, as the local supply chain matures around the needs of the shipyard. IMPLAN-modeled indirect/induced benefits for mining, manufacturing, technology, and offshore oil/gas tend to be much higher. If one assumes an average payroll multiplier of 1.32 (same as the $6,136,221 per annum. (Expressed in 2012 dollars.) $306,811,050 over initia150- year license period of the project. (Expressed in 2012 dollars.) Direct Benefit -Cost Ratio: 6.7 (Potential Annual fuel displacement divided by estimated capital construction cost) Economic Development / Job Creation Benefit -- $651,499,200 (Total Payroll — direct, indirect, and induced — supported by Project.) $651,499,200 Economic Development Benefit Cost Ratio: 14.2 (Total job and payroll creation benefit divided by estimated capital construction cost) Total Project benefits (potential annual fuel displacement plus total job and payroll creation): $958,310,250 Total Benefit Cost Ratio: 20.8 [Potential annual fuel displacement + total job and payroll creation] divided by estimated capital construction cost AEA13-006 Grant Application Page 34 of 44 7/3//2012 Renewable Energy Fund Round 6 �- ENERGY AUTHORITY Grant Application 4.4.5 Proposed Biomass System Information Please address the following items, if know. (For Biomass Projects Only) �►I_1 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 The Mahoney Lake Hydroelectric Project will produce enough energy to displace 3,105,000 gallons of diesel per annum. Over the initial term of its existing FERC license, the project would displace 142,830,000 gallons of diesel. The avoided cost of the diesel in nominal dollars is $3 billion, and in 2011 dollars is $530 million. Total carbon dioxide emissions avoided over the initial term of the existing FERC license would equal 1.8 million metric tons, valued at $67.7 million in 2007 dollars. (Assumptions: 8% Discount Rate. Initial operating term of FERC License begins 2016, ends 2061. KPU fuel efficiency = 14.81 kilowatt-hours per gallon of diesel #2. Mahoney Lake average annual energy = 41.7 GWH, per the FERC License P-11393. Fuel price projections from Black & Veatch, under contract with AEA for SE Alaska Integrated Resource Study. Carbon Dioxide emissions from Department of Energy and EPA, July 2000 Social Cost of Carbon per Metric ton of Carbon Dioxide AEA13-006 Grant Application Page 35 of 44 7/382012 Renewable Energy Fund Round 6 Grant Application 41111111111111W)ENERGY AUTHORrrY Emissions from Interagency Working Group on Social Cost of Carbon, February 2010. This study concludes the cost is $24.3 in 2016 and increases to $44.9 per metric ton in 2061 in 2007 dollars.) • Anticipated annual revenue (based on i.e. a Proposed Power Purchase Agreement price, RCA tariff, or cost based rate) The annual revenue from the sale of the project generation will be determined during the proposed Phase III studies. If the entire Project output were to be sold at the projected cost of power ($0.073/kWh), the annual revenue stream would be approximately $3,000,000 per year. Potential additional annual incentives (i.e. tax credits) 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 challenge 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. SECTION 6— SUSTAINABILITY Discuss your plan for operating the completed project so that it will be sustainable. Include at a minimum: • Proposed business structure(s) and concepts that may be considered. • How you propose to finance the maintenance and operations for the life of the project • Identification of operational issues that could arise. AEA13-006 Grant Application Page 36 of 44 7/3//2012 Renewable Energy Fund Round 6 iGEED ' -- A---� ENERGY AUTHORITY Grant Application • 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). 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. AEA13-006 Grant Application Page 37 of 44 7/3//2012 Renewable Energy Fund Round 6 � AI ..AS A� Grant Apalication i 411111111W�DENERGY AUTHORITY 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 $500,000 per year in 2012, based on adjustments to AP&T historical costs. Operational costs include: direct labor and benefits for operations, maintenance, and administrative personnel; spare parts and replacements; tools; vehicle O&M costs; helicopter services; insurance; and taxes. 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. Tasks proposed within the purview of this application will bring the project to construction -ready status, and support construction of the project in a manner synchronized to rapidly emerging economic opportunities such as ore processing, expansion of Alaska Ship & Drydock, and more. 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 SUPORT Discuss what local support or possible opposition there may be regarding your project. Include letters of support from the community that would benefit from this project. Documented Local Support ■ Investment priority supported by Southeast Conference, the Alaska Regional Economic Development Organization (ARDOR) representing the collective interests of all AEA13-006 Grant Application Page 38 of 44 7/3//2012 � Renewable Energy Fund Round 6 0I®La� ' ®� Grant Application ENERGY AUTHORITY communities in Southeast Alaska. ■ Ranked on the City of Ketchikan / City of Saxman / Ketchikan Gateway Borough joint legislative priority list as the Ketchikan region's #2 overall priority for SFY2014 investment by the State of Alaska. This project is the only energy project prioritized for SFY2014 investment, and was prioritized above all other projects, save for the Ketchikan General Hospital. At the time of this proposal's preparation, this prioritization had been formally endorsed by the Ketchikan Executive Lobbying Committee, the Ketchikan Gateway Borough, the City of Saxman, and was awaiting final approval by the City of Ketchikan in advance of submittal to the Governor's office. ■ 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 ■ Identified in the Southeast Alaska Integrated Resource Plan as Southeast Alaska's only currently -licensed hydro project yet to receive construction funding. Activities proposed within the purview of this application will help reduce remaining unknowns and risks (ex: construction cost), and will provide community members and entities currently considering power sales agreements with a better understanding of the proj ect's benefits and costs. The construction cost update and economic and financial analyses will help inform power sales agreements for the project. SECTION 9 — GRANT BUDGET Tell us how much you want 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. The City of Saxman requests $1,000,000 in AEA grant investment for the proposed Phase III work. The project proponents (City of Saxman, Cape Fox Corporation, and Alaska Power & Telephone, all dba Ketchikan Electric Company) have invested approximately $4,000,000 for the feasibility studies and licensing work performed to date. All investment to date was funded via private sector operating revenues, none from grants, or public investment. The project proponents will invest an additional $100,000 in matching funds, primarily from direct labor and benefits of proponent's staff. Anticipated RE- Fund Grantee Source of Milestone or Task Completion Grant Funds Matching Matching TOTALS Date Funds Funds: AEA13-006 Grant Application Page 39 of 44 7/3//2012 Renewable Energy Fund Round 6 � A Grant Application 40SED ENERGY AUTHORITY Cash/In- kind/Federal Grants/Other State Grants/Other Review and revise conceptual design 1/3/2014 $250,000 $25,000 Cash, in -kind $275,000 Review, revise, and resubmit permit applications 3/7/2014 $150,000 $15,000 Cash, in -kind $165,000 Obtain permit approvals 12/5/2014 $100,000 $10,000 Cash, in -kind $110,000 Revise and resubmit final design documents 9/8/2014 $250,000 $25,000 Cash, in -kind $275,000 Prepare final cost estimate 9/19/2014 $50,000 $5,000 Cash, in -kind $55,000 Update economic and financial analysis 11/28/2014 $50,000 $5,000 Cash, in -kind $55,000 Power sales evaluation 5/29/2015 $100,000 $10,000 Cash, in -kind $110,000 Prepare business and operational plan 6/30/2015 $50,000 $5,000 Cash, in -kind $55,000 TOTALS $1,000,000 $100,000 $1,100,000 Budget Categories: Direct Labor & Benefits $720,000 $100,000 Cash, in -kind $820,000 Travel & Per Diem $30,000 $00 Cash, in -kind $30,000 Equipment $0 $0 Cash, in -kind $ 0 Materials & Supplies $0 $0 Cash, in -kind $ 0 Contractual Services $250,000 $0 Cash, in -kind $250,000 Construction Services $0 $0 Cash, in -kind $ 0 Other $0 $0 Cash, in -kind $ 0 TOTALS $1,000,000 $75,000 $1,100,000 Prninrt Milactnnpc that chnuld he addressed in Budget Proposal Reconnaissance Feasibility Design and Permitting Construction 1. Project scoping and 1. Project scoping 1. Project scoping 1. Confirmation that all contractor solicitation. and contractor and contractor design and feasibility solicitation. solicitation for requirements are 2. Resource planning and complete. identification and 2. Detailed energy design analysis resource analysis 2. Completion of bid 2. Permit documents 3. Land use, permitting, 3. Identification of applications (as and environmental land and regulatory needed) 3. Contractor/vendor analysis issues, selection and award 4. Preliminary design 4. Permitting and 3. Final environmental 4. Construction Phases analysis and cost environmental assessment and _ 5. Cost of energy and analysis mitigation plans g p Each project will have P 1 market analysis 5. Detailed analysis of (as needed) unique construction existing and future nhqqPq, limitations, AEA13-006 Grant Application Page 40 of 44 7/3//2012 Renewable Energy Fund Round 6 jM, Grant Application 4MK--) ENERGY AUTHORITY 6. Simple economic energy costs and 4. Resolution of and schedule analysis markets land use, right of constraints which 7. Final report and 6. Assessment of way issues should be identified by the grantee recommendations alternatives 5. Permit approvals 7. Conceptual design 6. Final system 5. Integration and testing analysis and cost design estimate 7. Engineers cost 6. Decommissioning old 8. Detailed economic estimate systems and financial g Updated 7. Final Acceptance, analysis economic and Commissioning and 9, Conceptual financial analysis Start-up business and 9. Negotiated 8. Operations Reporting operations plans power sales 10. Final report and agreements with recommendations approved rates 10. Final business and operational plan AEA13-006 Grant Application Page 41 of 44 7/3//2012 Renewable Energy Fund Round 6 i� K 4EK7:D ENERGY AUTHORITY Grant Application SECTION 10 — AUTHORIZED SIGNERS FORM Community/Grantee Name: City of Saxman Regular Election is held: October Date: 9/1/2012 Authnrized Grant Sinnerkl- Printed Name Title Term Signature Leona Haffner City Administrator, City of Saxman ( \ Jason Custer Development Coordinator, City of Saxman I authorize the above person(s) to sign Grant Documents: (Highest ranking organization/community/municipal official) Printed Name Title Term 'gnature Harvey Shields Mayor 2012 Grantee Contact Information: 1 e Mailing Address: City of Saxman Attn: Jason Custer Rt. 2, Box 1 — Saxman Ketchikan, AK 99901 Phone Number: 907-225-4166 x 13 Fax Number: 907-225-6450 E-mail Address: jasonryancuster(a).gmail.com Cityclerksaxman(a-)-kpunet.net Federal Tax ID #: E I N : 92-0041226 Please submit an updated form whenever there is a change to the above information. AEA13-006 Grant Application Page 42 of 44 7/3//2012 Renewable Energy Fund Round 6 Grant Application ®4001—' ENERGY AUTHORITY AEA13-006 Grant Application Page 43 of 44 7/3//2012 Renewable Energy Fund Round 6 ce. K _ � ENERGY AUTHORITY Grant Application SECTION 11 —ADDITIONAL DOCUMENTATION AND CERTIFICATION SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION: A. Contact information, resumes of Applicant's Project Manager, key staff, partners, consultants, and suppliers per application form Section 3.1 and 3.4. Applicants are asked to separate resumes submitted with applications, if the individuals do not want their resumes posted. B. Letters demonstrating local support per application form Section 8. C. An electronic version of the entire application on CD per RFA Section 1.7. D. Governing Body Resolution or other formal action taken by the applicant's governing body or management per RFA Section 1.4 that: - Commits the organization to provide the matching resources for project at the match amounts indicated in the application. - Authorizes the individual who signs the application has the authority to commit the organization to the obligations under the grant. - Provides as point of contact to represent the applicant for purposes of this application. - Certifies the applicant is in compliance with applicable federal, state, and local, laws including existing credit and federal tax obligations. E. CERTIFICATION The undersigned certifies that this application for a renewable energy grant is truthful and correct, and that the applicant is in compliance with, and will continue to comply with, all federal and state laws including existing credit and federal tax obligations and that they can indeed commit the entity to these obligations. Print Name �, S Signature Title Date L V AEA13-006 Grant Application Page 44 of 44 7/3//2012