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Home My WebLink AboutThayer Lake Generation Grant Application - Signed/ALASKA Renewable Energy Fund Round IV 401D04MY� Grant Application Application Forms and Instructions The following forms and instructions are provided to assist you in preparing your application for a Renewable Energy Fund Grant. An electronic version of the Request for Applications (RFA) and the forms are available online at: http7//www.akenerovauthority.orq/RE Fund-IV.hlml Grant Application GmntApp4.doc Application form in MS Word that includes an outline Form of information required to submit a complete application. Applicants should use the form to assure all information is provided and attach additional information as required. Application Cost Costworksheet4.doc Summary of Cost Information that should be Worksheet addressed by applicants in preparing their application. Grant Budget Form GmntBudget4.doc A detailed grant budget that includes a breakdown of costs by milestone and a summary of funds available and requested to complete the work for which funds are being requested. Grant Budget Form GrantBudgetlnstructionsCix1f Instructions for completing the above grant budget InsWctions form. • 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 completion of each phase. • 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 11-005 Application Page 1 of 28 7/21/2010 /R&ALASKA Renewable Energy Fund Grant Application Round IV SECTION 1 —APPLICANT INFORMATION Name Kootznoowoo Incorporated Type of Entity: Independent Power Producer Mailing Address Physical Address 8585 Old Dairy Road, Suite 104 8585 Old Dairy Road, Suite 104 Juneau, Alaska 99801 Juneau, Alaska 99801 Telephone Fax Email 907 790-2992 907-790-2995 peter@kootznoowoo.com 1.1 APPLICANT POINT OF CONTACT / GRANTS MANAGER Name This Peter Naoroz General Manager and President Mailing Address 8585 Old Dairy Road, Suite 104 Juneau, Alaska Telephone Faz Email peter@kootznoowoo.com 907 790-2992 907 790-2995 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 Xin the appropriate box) An electric utility holding a certificate of public convenience and necessity under AS 42.05, or X An independent power producer in accordance with 3 AAC 107.695 (a) (1), or A local government, or A governmental entity (which includes tribal councils and housing authorities); Yes 1.2.2. Attached to this application is formal approval and endorsementfor 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 participants 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 forth. (Any exceptions should be clearly noted and 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. AEA11-005 Grant Application Page 2 of 28 721/2010 ALASKA Renewable Energy Fund Grant Application Round IV 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) Type in your answer here and follow same format for rest ofthe application. Thayer Lake Hydropower Development (TLHD) Generation 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. The Project location is located on the west shoreline of Admiralty Island National Monument approximately 6 miles north of Angoon, Alaska in the middle of the Kootznoowoo Wilderness. The City of Angoon, the Southeast Region and the State of Alaska will benefit from this project. 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 X 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 a# that apply) Reconnaissance X Design and Permitting X Feasibility —update X Construction and Commissioning Conceptual Design 2.4 PROJECT DESCRIPTION Provide a brief one paragraph description of your proposed project. I nayer Laxe Hydropower Uevelopment consists of a 1+MW run of the river hydropower project located in the Tongass Forest within the Admiralty Island National Monument based on a proposal that Kootznoowoo submitted in March 2000 which is described more full in the Angoon Hydrologic Project Feasibility Evaluation Report (Project). The development would be located on Thayer Creek approximately 6 miles north of Angoon. Thayer Creek flows out of Thayer Lake (64 square mile reservoir) at a gentle grade through a broad forested valley then steepens for 6,800 feet through a narrow forested canyon and finally flattens again for 2000 feet before flowing into Chatham Strait. The development will tap the energy potential in the steep section of the stream and will avoid any impact on anadromous fish that use the lower portion of the creek. The average flow of Thayer Creek is approximately 370 cis and can vary from 25 cfs during the coldest periods of the winter to over 2000 cis during storms in the fall and winter. The generatinq facility has a head of 250 feet which is approximate because of the wording of AFA11-005 Gant Application Page 3 of 28 7/21/2010 � ALASKA Renewable Energy Fund � eeeacvnurnoarrr Grant Application Round IV the Forest Service Record of Decision (ROD) requiring maintenance of fish habitat An additional restriction set forth in the ROD which is not considered in the HDR proposal requires the overland transmission line be buried where feasible along the access road to the community of Angoon. The transmission line funding will be submitted in a separate companion application for Round III funds. 2.5 PROJECTBENEFIT Briefly discuss the financial and public benefits that will result from this project, (such as reduced fuel costs, lower energy costs, etc.) Kootznoowoo's goal in applying for these funds, which will augment other sources, is to design, permit and construct the generating portion of an energy generating and and transmitting project that meets the congressional requirements of the Secretary of Agriculture for the cultural and economic benefits for the community of Angoon and as such is mindful of the increased health risks and costs associated with the current diesel based generating capacity of Angoon, Alaska. While not quantified in terms of health care costs savings overtime and impacts on the global economy Kootznoowoo goal is to decrease and ultimately eliminating the hydrocarbon emissions attributable to current diesel generating facilities in the community and replacing it with clean generating capacity and backup. An additional public benefit is eliminating relatively risky shipments of diesel fuel in a very important state fisheries area surrounding the community of Angoon and the concomitant costs associated with stand by and actual clean up efforts which must be borne by the utility rate payers and both the State of Alaska and the federal government. Reduced fuel costs and lower energy costs, particularly to businesses and government sector users, provide significant public benefit and an opportunity for economic growth in an otherwise stagnant and declining economy. Finally, the replacement of volatile priced fuels that must be transported at significant additional expense will be replace by clean and stable priced renewable fuel which is locally produced. 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. Kootznoowoo has expended significant funds, time and effort to date on this project. The State of Alaska and the federal government have also contributed funds in identifying this project and preparing a Record of Decision and a Final Environmental Impact Statement. Based on the HDR feasibility and evaluation report (attached) updated for inflation and additional known charges, the following is the current budget for completion of the overall project: Reconnaissance, Feasibility, Environmental $ 2,200,000 Preconstruction Engineering, Permitting, Design & Construction $ 2,221,000 Construction Costs Generating Facility Only $ 4,372,402 Construction Costs Transmission Facility $ 4,784,000 AEA11-005 Grant Application Page 4 of 28 721/2010 ALASM Renewable Energy Fund eap ENEMYM ORI Y Grant Application Round IV Contingency $ 1,623,706 Total Project Cost with Contingency $15,201,108 Kootznoowoo is not seeking recovery of previously expended funds through this application. Kootznoowoo's request for funds under this application is for $4,000,000, which includes $1,200,000 for the final design and permitting and other pre -construction activities associated with the construction of the generating facility, road, diversion structure, and penstock and power house shown in the HDR, Alaska Project documents, and $2,800,000 for construction of same. In a separate application filed in conjunction with this application Kootznoowoo is requesting funds in the amount of $4,000,000 for the transmission line final design, permitting and construction (including construction of maintenance road and burying transmission lines where feasible as well as tunneling under Kootznoowoo Inlet to complete the transmission connection to the community). The intent of the separate application is to seek maximum State funds and begin the transmission components in the Summer of 2011. Kootznoowoo will contribute and endeavor to secure the additional funds necessary to complete the final project. It will seek additional funds from sources including but not limited to direct federal funds, tribal authorized funds and funds available from the community or the State of Alaska. 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. $ 4,000,000 2.7.2 Other Funds to be provided (Project match) $ 978,000 2.7.3 Total Grant Costs (sum of 2.7.1 and 2.7.2) $4,978,000 Project Costs & Benefits (Summary of total project costs including work to date and future cost estimates to get to a fully 2.7.4 Total Project Cost (Summary from Cost Workshest $15,201,109 Including estimates through construction) 2.7.5 Estimated Direct Financial Benefit (Savings) 1 $20.7 million 2.7.6 Other Public Benefit (If you can calculate the benefit in $14.4 million conversion terms of dollars please provide that number here and of diesel home heating explain how you calculated that number in your application from diesel (Section 5.) AEA11-005 Grant Application Page 5 of 28 7212010 ALASKA Renewable Energy Fund �04EROY AU ORrN Grant Application Round IV SECTION 3 — PROJECT MANAGEMENT PLAN Describe who will be responsible for managing the project and provide a plan for successfully Icompleting the project within the scope, schedule and budgetproposed 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. Type in your answer here and follow same format for rest of the application. The project manager will be Peter Naoroz the General Manager and President of Grantee. Mr. Naoroz's resume is attached. Mr. Naoroz has begun a search for an assistant project manager who will be retained by a firm with significant qualifications in completing run of river hydroelectric projects. Because of the unique nature of this project's location and permitting requirements, Mr. Naoroz will maintain full responsibilities for permitting, project funding including power sales agreement, and project implementation including but not limited to procuring project construction management services and retaining qualified general contractors who meet requirements of the USDA Forest Service. Firms which have expressed an interest in providing project management services include Chatham Electric, AP&T, and Cascade Creek, LLC. We will be continuing our search for qualified firms and select one based on a proven capability to perform work on time and on budget, experience in designing and building hydropower in Southeast Alaska; proven experience in building Low Impact Hydropower Institute approved hydropower generation facilities. Kootznoowoo expects to coordinate with a solicit input from AEA, the City of Angoon, the Angoon Community Association and the certificated public utility, IPEC during each phase of the Project. 3.2 Project Schedule Include a schedule for the proposed work that will be funded by this grant. (You may include a chart or table attachment with a summary of dates below.) Many phases of the development project have successfully been completed. The reconnaissance and preliminary feasibility and environmental work necessary for proceeding to preconstruction activities have been completed and fully funded by either Kootznoowoo or the federal government. The schedule of proposed work that will be funded by the first phase of this grant includes the following major tasks: • Selection of Project Consultants including legal team to prepare Power Purchase Agreement • Pre -Construction Engineering , Design and Construction Documentation • Permitting including Special Use Permit and License Articles • Additional fundraising 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. The Milestones must also be included on your budget worksheet to demonstrate how you propose to manage the project cash flow. (See Section 2 of the RFA or the Budget Form.) AEA11-005 Grant Application Page 6 of 28 M112010 /�ALASM Preconstruction Renewable Energy Fund Grant Application Round IV Project scoping and contractor solicitation for planning and design February 2012 Permit applications (as needed) December 2012 Final environmental assessment and mitigation plans as needed August 2012 Resolution of land use, right of way issues September 2012 Permit approvals September 2012 Final system design January 2012 Engineers cost estimate update and verification January 2012 Updated economic and financial analysis January 2012 Negotiated power sales agreements with approved rates March 2012 Final business and operational plan March 2012 Secure additional funding or raise funds necessary to complete January 2012 Construction Phase Confirmation that all design and feasibility requirements are complete. January 2012 Completion of bid documents January2012 Biddin , Feedback and Bid Awards March 2012 Road Construction — Generation Facility September 2012 Road Construction — Power Line and Transmission September 2012 Power House Construction March 2013 Transmission Line Construction Aril 2013 Integration and testing June 2013 Decommissioning old systems or System Integration August 2013 Final Acceptance, Commissioning and Start-up Au ust 2013 Operations Reporting September 2013 3.4 Project Resources Describe the personnel, contractors, 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. No formal partnerships or commitments with other entities other the U.S. Department of Energy have been entered into. Kootznoowoo has entered into a Memorandum or Understanding with the local federally recognized tribe, Angoon Community Association. We have the support and cooperation of the City of Angoon and the Angoon Community Association as can be evidenced by the attached Energy Resolution which remains in effect, as well as the Resolutions of Support from each organization. This critical group of entities will work collaboratively on supporting the development of the Project and utilize their influence to move the project to completion. In exchange for this support Kootznoowoo will endeavor to make the project a success by completing tasks on time and on budget, and by keeping these entities informed on progress; utilizing open and competitive bidding on project components; and providing for and requiring a local hiring preference for labor and contracting. Kootznoowoo selection processes include a preference for shareholders and their spouses during AFA11-005 Grant Application Page 7 of 28 7/212010 ALASKA Renewable Energy Fund ENF.RGYgOItlOnnY Grant Application Round IV competitive bidding. Kootznoowoo also commits to the procurement requirements of the federal government, its agencies and including those requirements of the Recovery Act (Stimulus). The AEA will have access to all final bid documents and criteria prior to bid awards. Kootznoowoo Project Manager retains all contract decision authority. IPEC, the community of Angoon's electric utility, has prepared a strategic plan which has been adopted by its Board of Directors identifying the Project as its renewable solution for the Community. The plan states that TLHD will displace 90% of the diesel requirement it uses to generate electricity. On June 1' 2009 representatives of IPEC and the AEA described Thayer Lake as Angoon's perfect solution to decrease local diesel generation. The purpose of the meeting was to seek common ground to building the project. Subsequent to this meeting Kootznoowoo has received a bid from a highly regarded law firm to assist Kootznoowoo in entering into a power sales agreement once we are in a position to determine the final economics and fund construction of the project. Kootznoowoo expects significant public benefits to ensue from the project which will be memorialized in the final power sales agreement. IPEC has reported to the Southeast Conference in its Status Report on Quest for Diesel Independence dated September 14, 2009 that "it is conceived that IPEC will buy power from Kootznoowoo when the project is built as long as it is cheaper than diesel - generated power." Kootznoowoo will not proceed with this project unless this is the case and it will not proceed unless TLHD can significantly reduce the overall cost of power to Angoon ratepayers. IPEC's letter dated November 7, 2009 is enclosed with this application. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. During finalization of Project Design and Permitting, the Project Manager will initiate a bidding process with the advice and guidance of the Kootznoowoo Advisory Committee which has been constituted in preparation for the award of the renewable energy grant submission of 2009 and includes the following organizations and interests which has been authorized by the Kootznoowoo Board of Directors: Kootznoowoo, Inc. — Peter Naoroz, General Manager and Chair of Committee Local Utility — Peter Bibb, COO, IPEC has been invited State of Alaska — Lawrence Blood, Rural Utilities Business Staff, DCRA, State of Alaska has accepted Representative of the USDA Forest Service -- Marty Marshall Admiralty District Ranger is in the process of being replaced as she is now the Juneau District Ranger Representative of the City of Angoon — Mayor Albert Howard or designee Representative of the Angoon Community Association -- President Wally Frank or designee Natural Currents LLC— Mr. Roger Bason, President and CEO Kootznoowoo will plan to monitor phases of the project and keep AEA informed on the status by communicating internally and externally as follows: Weekly conference calls amona the Proiect Manager and Dotential contractors AEA11-005 Grant Application Page 8 of 28 72112010 r ALASM Renewable Energy Fund Grant Application Round IV and consultants with a report of findings to the Advisory Committee via email. Scheduling of initial meeting with agenda setting and action items within 1 month of notice of grant authorization from AEA. Monthly Scheduled meeting of Kootznoowoo Advisory Committee with written progress reports to AEA and U.S. DOE Golden. Selection of Final Design Firm, Permitting consultants and legal fine to prepare Power Purchase Agreement and recommendation from Advisory Committee and Project Manager to Kootznoowoo Board of Directors with copy to AEA and U.S. DOE Golden for informational purposes. Submittal of updated Schedule and Cost Estimates to all interested parties including AEA, and United States Department of Energy Golden Field Office (US DOE- Golden). During Project construction, communications within the team will consist of: Weekly conference calls among the Project Manager, Construction Manager, Construction Superintendents, Design Engineer, and representatives of the Forest Service with written report to Kootznoowoo Advisory Committee. Weekly regarding compliance with environmental requirements Bi-weekly written reports from the Construction Manager and Design Engineer detailing work completed, work to be completed in the next two weeks, and potential problems identified. Periodic site visits by the Project Manager, Construction Manager, Design Engineer, with a detailed report on findings provided to the members of the Kootznoowoo Advisory Committee These internal discussions and reports will form the basis of monthly reports and quarterly reports to the AEA and the Department of Energy Golden Field Office (U.S. DOE- Golden). The reports will show in a clear and concise manner progress made on the various tasks and milestones, the work to be accomplished in the ensuing month, and potential problems and corrective actions to be considered or implemented. Cost data as described above will also be provided on a monthly basis. Microsoft Project or similar software will be used to develop and maintain schedule and budget information; updating of the management files will be on a bi-weekly basis. 3.6 Project Risk Discuss potential problems and how you would address them. Resource construction always carry certain amounts of uncertainty be it technical or financial. Construction of a run of river project such as TLHD carries significantly less AFA11-005 Grant Application Page 9 of 28 721/2010 /B') ALAS`KA Renewable Energy Fund �� ma�wrxoam Grant Application Round IV risks than say a lake tap project with significant underground work. Additionally the technology is proven and risks are further mitigated by complete and thorough Forest Service oversight; particularly, when the standards are established and applied by the USDA Forest Service under their standard field manual and a ROD which has been thoroughly vetted by stakeholders through a full blown Environmental Impact Statement and a to be established Special Use Permit. This high level of scrutiny was established by the U.S. Congress under ANILCA. However risks do exist and some of the potential risks and mitigating actions being taken by Kootznoowoo Incorporated for TLHD includes the following. Permitting — Kootznoowoo has taken a hands on and close working relationship with the USDA Forest Service who is the primary permitting authority for TLHD. Additionally they have engaged HDR, Alaska, a well -respected and international engineering firm, to lead the effort to design an environmentally acceptable Project design which is highlighted on the video produced by Kootznoowoo which can be seen at htto://www.vimeo.com/5659693. Additionally, Kootznoowoo has met through the Forest Service permitting team with Corp of Engineer and State of Alaska agencies that have permitting authority over hydroelectric projects and are establishing a basis to clear all permits through the auspices of the Forest Service as required by the Forest Service Handbook. In order to mitigate the effects of changes in personnel within the Forest Service they have agreed to assign personnel to a stakeholder advisory committee to advise Kootznoowoo in all aspect of final design, procurement, contract, power purchase agreement, construction and operation. Design — HDR's design has led to a Record of Decision by the Forest Service and is now at the point to finalize with the new requirement of the Forest Service record of Decision and the economic reality of $4.13 per gallon diesel as well as inflation over the past 9 years. Kootznoowoo has applied for and received a grant award from the Department of Energy to complete project design and permitting primarily because of the Forest Service work leading up to the Final EIS in which a buried line alternative was heavily favored in discussion as was consideration for moving the power house location and penstock closer to the fish barrier located on Thayer Creek. Advances in monitoring options available as well as a newly installed fiber optic service to Angoon has provided a significant opportunity to finalize a more efficient and productive Project with advances in technology and data. Kootznoowoo will search for opportunities to segment design elements and project components to minimize overall project costs. Those activities such as road construction will not be taken further but rather constructed on a design/build basis in an effort to lower Project costs. Assuming funding of this application design of the remaining elements by the State of Alaska at the end of FY12 the final design and permitting can conceivable be completed by the end of the second quarter FY13. The ROD requires design documents to be submitted to Forest Service for review— by including District Ranger and Monument manager in the decision making process we expect this review to be completed timely. Seismic — Project components will be designed appropriately for seismic activity, and it is noted that the Eastern Denali- Chatham fault line runs through Chatham Straits where Thayer Creek outfalls. The ROD requires that the diversion dam be constructed to meet the guidelines for low hazard dams established by the Alaska Department of Natural Resources. (ROD page 11) AFA11-005 Grant Application Page 10 of 28 721/2010 r ALASKA Renewable Energy Fund Grant Application Round IV unaergrouna construction — The current design for the project does not include significant underground construction. Appropriate Geotechnical work will be done at the diversion structure and power house foundation and Penstock placemen to assure sound construction. Cost Overruns —The Project budget includes an appropriate level of contingency. Operations — All major elements of the Project will carry standard warranties as appropriate. Operations and maintenance of the Project will be performed by qualified contractors in accordance with Forest Service and Kootznoowoo hiring and employment policies SECTION 4—PROJECT DESCRIPTION AND TASKS • Tell us what the project is and how you will meet the requirements outlined in Section 2 of the RFA. • The level of information will vary according to phase(s) of the project you propose to undertake with grant funds. • If you are applying for grant funding for more than one phase of a project provide a plan and grant budget form for completion of each phase. • 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. The TLHD as envisioned will be a 1+ megawatt hydroelectric resource located approximately 6 miles north of Angoon Alaska. Annual energy production during an average water year is estimated to be 8 million kilowatt-hours. The community load factor needs to be confirmed based on the passage of time, new telecommunication, entertainment and broadband services and the conversion of diesel heat to electric heat as well as projected load factors.. During final design the Project will be evaluated to accommodate increased storage in the future and new technology to deal with freeze that will allow for better matching generation with load requirements. These features are not felt to be warranted at this time but as loads increase will be reconsidered. Advantages: As will be discussed in the next subsection, diesel generation must be used to provide electric generation in Angoon. The TLHD project will eliminate the need for approximately 95% of the diesel generation until alternative reliable backup can be provided that is capable of generations during low water according to estimates provided by Inside Passage Electrical Cooperative, the certificated community utility. While other small hydroelectric resources are available in the area, none are as accessible and proximate to Angoon nor are they ready for immediate construction AEA11-005 Grant Applica8on Page 11 of 28 7/21/2010 rALASKA Renewable Energy Fund MEaararta Grant Application Round IV The project is located in a hydro reserve envisioned by Congress to provide power to Angoon. Tidal energy has promising potential in and near Angoon but the technology will need to be proven and deployment cannot be deemed feasible nor reliable at this time. Geothermal, biofuel, wind and other alternative energy production is all of limited application to Angoon at this time because of the lack of development of the regional intertie. Until this is accomplished the best source of power necessary to displace diesel in Angoon is this Project. 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. Inside Passage Electrical Cooperative (IPEC) until recently operated (3) 500 We diesel fired generators at a diesel cost of over $4.13 a gallon (fluctuates) resulting in a power cost to consumers and businesses that are approximately $.52 per KWh currently and as high as $0.62 per kWh recently. Significant upgrades have occurred under the supervision and by the AEA. The Grantee is aware of the upgrade to the system and the addition of a new control system which currently is presently having 'bugs worked out". It is assumed that the efficiency of the system will be slightly better. Until the system reliability is confirmed by IPEC and AEA we assume that the historic numbers mentioned elsewhere are accurate for this grant proposal. Feedback from AEA and IPEC would be helpful in other grant request the Grantee will be making. Historically and until the past couple of months the community of Angoon has been serviced by IPEC with four diesel generators. Generators (#2 diesel fuel engines) Caterpillar 3456ATAAC 475 kW Caterpillar 3508DI 550 kW (existing) Angoon's electric generation facility consists of three diesel generator sets (genset) with a total capacity of approximately 1,500 kw. The community's load is typically between AEA11-005 Grant Application Page 12 of 28 721/2010 �rALASKA Renewable Energy Fund eernerw Ox Grant Application Round IV 250kw and 400kw. Their voltage output is 480v 3-phase which feeds three -250kw overhead transformers. These transformers boost to a 7,200v distribution voltage and a majority of the community receives power by an overhead distribution system. Kootznoowoo understands that these systems have been removed and replaced with one 1 CAT 3456 genset with planned heat exchanger. We understand that this planned unit is in testing mode and no reliable data on efficiency has been established. While optimistic about savings, this application assumes similar efficiency going forward on the basis of a stable load. AEA will have the best information available through its oversight of the project. 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 entirely diesel generation by the local electric utility and a combination of wood, diesel and propane for heating and cooking. Several other residences and a large lodge utilize diesel generation for their electric production. As detailed in the next section significant need and demand exists under a lower cost price structure for electricity. The Project is designed to displace fossil fuel and replace with local clean renewable energy. In 2007, IPEC bumed 147,157 gallons of diesel to produce 1,949,156 of sold kWh. The average cost of diesel was $2.55 in 2007, but exceeded $4.00 in 2008.Today the cost of number 1 diesel is $4.10 plus delivery. A recent quote on #2 is 4.13 plus delivery. Our hydropower development will stabilize electrical costs to a low rate, reduce operating costs, reduce fuel spill issues and reduce carbon emissions in our community. These ancillary benefits are in addition to significantly increasing the standard of living of one of the lowest income per capita communities $11,357 with 82% of the residents being Alaska Natives with an overall community poverty rate of 27.9% (2000 US Census and Alaska Dept of Labor Workforce and Development 2007) with 87% unemployment (TANF, Central Council of Tlingit and Haida Indians of Alaska). The average annual flow of Thayer Creek is estimated to be 369 cis with peak flows exceeding 2000 cis (HDR 2000 and with 2003 update data included). Hydrodynamic head at proposed power house site is 250 feet. The development has the capacity to generate 8,500,000 kWh annually or four times the current consumption load of the community. It is anticipated that economic forces of elasticity of demand in the consumer, tribal and business markets will increase demand from the current usage. Further, most homes, businesses and schools are heated with diesel fuel. It is anticipated that with the advent of low cost hydropower that space heating energy usage will begin substitution from oil heat to electrical heat once the project is completed. Kootznoowoo expects the demand to expand as future local demand as sales opportunities are created. One demonstration solar energy site has been developed in the last year involving a single residential home. No data is available at this time. 1 4.2.3 Existing Energy Market AEA11-005 Grant Application Page 13 of 28 7/21/2010 ALASKA Renewable Energy Fund �eYERGYAUPHQRM Grant Application Round IV Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. The following table provides a historic summary of energy sales over the past six years according to IPEC and as publish by AEA for the community of Angoon FY2003 1,755,719 kWh FY2004 1,765,541 kWh FY 2005 1,746,764 kWh FY 2006 1,658,402 kWh FY2007 1,677,750 kWh FY2008 1,934,201 kWh FY2009 1,893,727 kWh The Thayer Lake Hydropower Development is the highest economic and energy priority for the City of Angoon, the Angoon Community Association (traditional IRA tribe) and Kootznoowoo Incorporated as evidenced ourjointly developed Angoon Community Energy Plan. The economic benefits of this project are profound and will decrease the diesel generated electrical expenses to the State of Alaska (through PCE program) community residences, businesses and tribal members by over $900,000 a year (2008 cost of $0.62 per kWh versus an expected hydropower development cost $0.15 per kWh at a community usage of 2,000,000 kWh per year). This is a profound economic impact since the community has a population of approximately 470. In addition, the advent of low cost electricity will provide strong incentive for businesses, schools, municipal buildings and homes of tribal members to convert from expensive diesel space heating to cheaper and more economically reliable hydropower electricity. It is estimated that this will provide an additional $1.5 million dollars in collective energy savings in displacing another 500,000 gallons of diesel a year. Kootznoowoo through TLHD has the goal to completely displace the use of fossil fuel use in Angoon with a goal of 100% renewable energy driven Native community as a hallmark of the only community in the Admiralty Island National Monument Wilderness. TLHD will allow Angoon to become energy self sufficient in energy generation for current and future load growth. Converting police, municipal, school, and fire vehicles (as well as personal vehicles) to plug in electrioand or electric hybrid vehicles will over time further decrease the use of fossil fuels in Angoon. In addition to the substantial increase in the standard of living and promotion of economic benefits, TLHD will provide cultural and social benefits. Currently the Angoon public schools have cut back on sports and extracurricular activities in order to pay energy expenses. These lack of activities have spawned unwanted social behaviors that would be eliminated if these programs could resume with lower energy costs. The gym and other sports activities are unheated or not heated after hours which have further reduced the recreational and social activities or our youth. In some cases, this has led some of our tribal member families to move out of their traditional community so they can provide resources to their children. TLHD will reverse this downward social spiral impacting our youth and young adults. Many of our elders are on fixed income and many residents live on a subsistence AEAi 1-005 Grant Application Page 14 of 28 7212010 Renewa MD ALASKA Grant Application Round IV le Energy Fund ©ENAUiHIXifIV lifestyle where fishing and hunting provide the majority of the protein consumed in many households. Allowing fish and game to be readily and more cheaply frozen will allow more sharing of resources with our elderly and at our social gatherings where subsistence foods is a staple. Additionally, many of our citizens have curtailed their transportation expenses to regional cultural events so that they can pay their energy bills. This has led to a decrease in some of our most respected elders and leaders from attending and contributing to important Native issues and forums. In some cases, our elders have had to move out of their traditional community leaving a vacuum of tribal knowledge and protocol with some clans. Some of our traditional clan houses have become in disrepair because there are no funds to heat the houses which has led to further degradation. Lower energy costs will allow clans and their members to fix and maintain structures that are over 100 years old. It is important to the community of Angoon to protect and allow these cultural structures to be preserved. Furthermore, it is difficult for our community to host regional events that Angoon has traditionally hosted due to the high cost of energy. Therefore, low cost hydropower will revitalize our ability to host cultural and traditional events that we have been forced to eliminate. An ancillary benefit is that Thayer Creek has the opportunity to provide future clean water source for the community of Angoon. The location of existing small dam and water line along the planned transmission line provides the opportunity for additional infrastructure along an existing grandfathered right of way for future water sourcing. Although the current Angoon water source is acceptable, it has limitations and the Thayer Creek could provide a better quality water source in the future. An underground crossing alternative across Kootznoowoo Inlet provides significant opportunity to enhance water supply and fire protection as part of the Project at no additional costs. Angoon's largest employer, a destination lodge of national reputation has until recently provided its own diesel generated power and has become an IPEC customer. This Lodge burns about 15 gallons per hour of diesel for 90 days a year or about 32,400 gallons. The national economic picture makes predictions about the future of the Lodge uncertain however lower cost energy will certainly enhance operations. The City of Angoon has expended funds on renovation of a cold storage facility and is expected to be operational as soon as economic and less expensive power is available. This facility was constructed in conjunction with the Angoon Community Association with contributions from Kootznoowoo but cannot operate at the existing cost of power and therefore it cannot support the fishing industry. When operating much of the operation will be seasonal in nature. However, the facility will be open the entire year with some basic maintenance load during the off-season months. Kootznoowoo in collaboration with Tlingit and Haida and Sealaska had created the Angoon Business Center which limped through 2009/2010 but will reported be terminated for lack of funds to support the operations going forward. This business incubator while run as energy efficiently as possible supported 15 computer terminals and a fledgling business which manufactured coats with a number of sewing machines. The Angoon business center will hopefully find new sponsors and continue to provide a reliable load to help support the local load. AEA11-005 Grant Application Page 15 of 28 7/21/2010 ALASKA Renewable Energy Fund �ereacrautnowrr Grant Application Round IV Kootznoowoo is also considering establishing a tourist destination facility that will include a large commercial all electric commercial kitchen that was contributed to the community as a gift from a local benefactor. This kitchen served a camp of 125 workers daily and with significant power requirements that will likely be served by a standalone generator. Kootznoowoo has been contacted by more than one small cruise operator and has looked at the potential benefits of attracting small boutique boats to Angoon. The lack of modern amenities and the cost of services with embedded costs of utilities make such a proposition marginal in terms of economics. Being able to attract and charge berth fees which include reliable shore power would change to economics to marginally attractive. Perhaps the single most significant factor which must be considered as a potential impact on the energy market is the possibility of bringing on significant new housing to the market. Remarkably at a time when most of Alaska is experience significant migration to regional centers Angoon continues to maintain a core population despite the high cost of transportation and energy. The reasons are beyond the scope of this application but importantly each and every original shareholder of Kootznoowoo was deeded a residential lot of a minimum size of Y acre and up to 1.5 acre depending on location. In addition to this conveyance nearly 900 acres of prime real estate was conveyed to the City of Angoon for future development. There is no other community in Southeast Alaska with this inventory of platted residential lots and opportunities for immediate growth. If the average usage is extrapolated over 4 times the number of homes and business in Angoon it is reasonable to predict the load growth will quadruple and the load growth would be faster than average due to pent up demand. Reasonable scenarios exist that completely reverse the stable to declining economy of Angoon with reduction of energy costs. GCI has recently installed a cable landing station in Angoon that is a customer of IPEC This cable landing station also provides television, broadband and telephone service to Angoon at the lowest rate in the State. Accordingly, it is reasonable to expect use of these services to increase the average household demand for electricity in the future. The historic TV cable provider (the City of Angoon) will be displaced with higher value lower cost content provided by GCI. Without TLHD any one of these loads would create significant need for diesel generation. The Project will provide the long-term/low-cost power required for the development of these and other potential loads. The Project will increase the value of the public's private property and business in Angoon and increase the likelihood that new businesses will begin and be able to maintain themselves and not fail due to the high cost of electricity. AEA11-005 Grant Application Page 16 of 28 7/21/2010 r= AL.ASKA Renewable Energy Fund r� wmcrwmoAm Grant Application Round IV 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 capacityfactor • Anticipated annual generation • Anticipated barriers • Basic integration concept Attached is the HDR feasibility and evaluation along with the Forest Service FEIS which fully describes in detail the system we propose. Land ownership, permits and environment issues are described at length and the proposed system is suitable and well thought out and designed to meet the requirements of the U. S. Congress in granting certain rights to Kootznoowoo to develop hydroelectric resources for Angoon. . The speck technology is well established and proven and consists of a small diversion dam, a pipeline and penstock which powers two Francis turbines which in turn generate the renewable energy. From the powerhouse the power will be transmitted to Angoon via an overland transmission line which will be buried where feasible consistent with the ROD. The proposed plan is to install two generators capable of producing 1 MIN however the next phase will review all assumptions related to potential load and stream flow with the goal of optimizing capacity. Given Angoon's current average load and peak load this configuration is optimum as it will allow Angoon's current load to be serviced reliably with some room to grow. As designed the anticipated annual generation is approximately 8,500,000 mWh per year which is approximately 4 times the annual requirements. Please see the details in Selected Arrangements in the HDR report. Given the completion of the Environmental work the only anticipated barrier to this .shovel ready project" is funding. Occasional, low water flows will require the current diesel genset to serve in a back up capacity on average less than a week during the coldest days of the year. The energy produced will be transmitted over a 6 mile transmission line which will be buried where feasible and which will ideally be run through a drilled conduit under Kootznoowoo Inlet to the existing power grid operated by IPEC, the Angoon's utility. The local utility will purchase power from Kootznoowoo as provided in a power sales agreement and operation and maintenance responsibilities will be detailed in that agreement. 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. AEA11-005 Grant Application Page 17 of 28 7212010 ALASKA Renewable Energy Fund rr W E"EnYAMn FrY Grant Application Round IV All the land and waters upon which the Project will be situated is either National Forest in a highly restricted category of land status — "Wilderness Monument" or on land surface estate owned by Kootznoowoo, Inc. The Alaska National Interest Lands Conservation Act (ANILCA), Section 506(a)3(B) gives Kootznoowoo, Inc., the right to develop hydroelectric resources on Admiralty Island at the Project locations, subject to such conditions as the Secretary shall prescribe for the protection of water, fishery, wildlife, recreational and scenic values of Admiralty Island. The Secretary through the USDA Forest Service has prescribed these conditions in the ROD completed in July 2009. The intertie connection across Kootznoowoo Inlet between Kootznoowoo's surface estate and the City of Angoon will involve future negotiation for easements with private landowners and these details are anticipated as part of finalizing the permitting and several options are available and funds necessary are anticipated to be well within the contingencies provided. 4.3.3 Permits Provide the following information as it may relate to permitting and how you intend to address outstanding permit issues. • List of applicable permits • Anticipated permitting timeline • Identify and discussion of potential barriers Please see the ROD which is attached for a complete list of applicable permits. Permit timeline will ensue once sufficient funds are available to engage permitting professional and pay necessary fees including mitigations impacts necessary after negotiations. Anticipated Permitting Timeline: Assuming available funds as early as September 2011 Identify and discussion of potential barriers to permitting: Kootznoowoo does not anticipate barriers based on discussions to date with Forest Service officials who are responsible for coordinating activities of permitting authorities. The only significant barrier to permits is funding. In all likelihood Kootznoowoo will need to mitigate the impacts of affecting wetlands as required by the requirement of the U.S. Army Corps of Engineer's 404 permit. Importantly Thayer Lake Hydropower Development is the number one priority of the combined Angoon Energy plan in which Kootznoowoo, Incorporated, the City of Angoon and the Angoon Community Association (traditional IRA) have signed off on. Please see attached resolutions and letter to President Obama. In addition, IPEC submitted a strong letter of support in Environmental Impact Study process and has demonstrated their political and local support for the development. Additionally other communities and important economic entities continue to support the Project and TLHD is blessed with wide community support from within the community and tribal members that live outside the community but would like to return once energy costs have been stabilized and an economy can return. The development has a Final Environmental Impact study that is culmination of years of environmental wrangling with the US Forest Service and Environmental groups. We now enjoy the support of the US Forest Service along with local and national Environmental groups. Our only barrier to development that we are working on is securing funds for preconstruction and construction funds to build the development. With help from the State of Alaska, the Department of Energy, Agriculture and Interior the cash flow from the project will more than pay for the anticipated AEA11-005 Grant Application Page 18 of 28 7/21/2010 /— ALASKA Renewable Energy Fund �aexcvnumMM Grant Application Round IV operating costs and under our scenarios make a return to Kootznoowoo to provide resources for our tribal members. 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 Discussion • Any threatened and endangered species have been fully disclosed in the Final Environmental Impact study and do not pose a barrier to Project completion • Habitat Issues are also disclosed in the same document and requirements for mitigating the impacts on habitat are fully articulated. • Wetlands and other protected areas are fully disclosed in the Final Environmental Impact Statement (FEIS) and do not pose a significant barrier to Project completion. The Army Corp of Engineers has physically been present on the site with the Forest Service and Grantee and no barriers to construction are anticipated with the current design. • Archaeological and historical resources have been disclosed by the FEIS and certain mitigation measures will be required which Kootznoowoo feels are attainable and will require continued community participation and monitoring. • Land development constraints have been fully analyzed by both HDR, Alaska and the Forest Service based on their experts and significant experience. The original road to the diversion dam was relocated based on recent experience in Gustavus with roads that are proximate to streams and creeks. The relocation will add slightly to the length but will protect critical habitat and reduce the chance of unstable soils and fill • Telecommunications interference — there is no anticipated telecommunication interference. • Aviation considerations — the crossing off Kootznoowoo Inlet is designed to be under water to avoid impacting the seaplane approach that is currently utilized by the community. • Visual, aesthetics impacts have been addressed fully to the standards established by ANILCA in the Forest Service Record of Decision (ROD) based on the alternatives established in the Final Environmental Statement. • Identify and discuss other potential barriers Kootznoowoo does not anticipate barriers based on discussions to date with Forest Service officials who are responsible for coordinating activities of permitting authorities. Importantly Thayer Lake Hydropower Development is the number one priority of the AEA11-005 Grant Application Page 19 of 28 71212010 /w ALASKA Renewable Energy Fund �e+e+evnum " Grant Application Round IV combined Angoon Energy plan in which Kootznoowoo, Incorporated, the City of Angoon and the Angoon Community Association (traditional IRA) have signed off on. Please see attached resolutions and letter to President Obama. In addition, IPEC submitted a strong letter of support in Environmental Impact Study process and has demonstrated their political and local support for the development. Additionally other communities and important economic entities continue to support the Project and TLHD is blessed with wide community support from within the community and tribal members that live outside the community but would like to return once energy costs have been stabilized and an economy can return. The development has a Final Environmental Impact study that is culmination of years of environmental wrangling with the US Forest Service and Environmental groups. We now enjoy the support of the US Forest Service along with local and national Environmental groups. Our only barrier to development that we are working on is securing funds for preconstruction and construction funds to build the development. With help from the State of Alaska, the Department of Energy, Agriculture and Interior the cash flow from the project will more than pay for the anticipated operating costs and under our scenarios make a return to Kootznoowoo to provide resources for our tribal members 4.4 Proposed New System Costs and Projected Revenues (Total Estimated Costs and Projected Revenues) The level of cost information provided will vary according to the phase of funding requested and any previous work the applicant may have done on the project Applicants must reference the source of their cost data. For example: Applicants Records or Analysis, Industry Standards, Consultant or Manufacturer's estimates. 4.4.1 Project Development Cost Provide detailed project cost information based on your current knowledge and understanding of the project. Cost information should include the following: • Total anticipated project cost, and cost for this phase • Requested grant funding • Applicant matching funds — loans, capital contributions, in -kind • Identification of other funding sources • Projected capital cost of proposed renewable energy system • Projected development cost of proposed renewable energy system Proposed New System Costs and Projected Revenues (Total Estimated Costs and Projected Revenues) Attached is the detailed budget submitted to the US DOE GOLDEN 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. Also attached is a Schedule of HDR cost estimates which have been adjusted to 2011 dollars using a 3% inflation rate. 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 AEA11-005 Grant Application Page 20 of 28 7/21/2010 IWALASKA Renewable Energy Fund Grant Application Round IV (Note: Operational costs are not eligible for grant funds however grantees are required to meet ongoing reporting requirements for the purpose of reporting impacts of projects on the communities they serve. TABLE 4.4.2 Project Operating and Maintenance Costs O&M Cost Basis Amount Labor 1 half-time position $25,000 Transportation 200 trips/year@$25/trip $5,000 Misc. Expenses $15,000 Administrative 35%of 0&M $15,000 Insurance 0.1% of Total Construction Cost $8,000 Replacements SnurteNOR Macon Hvdmelmtric 0.2% of Total Construction Cost PruimlFmsibildv EvaWafion Renon Mach 2000 $17,000 Operating cost estimates from HDR's study assume coordination with the O&M of the existing diesel plant so that a single new half time position is required. Kootznoowoo believes that in order to retain qualified personnel to maintain both systems the position will need to pay more than the estimated costs even if inflated for wage inflation over the past 10 years. Additionally the transportation estimate of $25 per trip will need to inflate at the rate of inflation of gasoline over the same period of time. These estimates will be updated with the updated feasibility analysis completed with this phase of the project and negotiated in the Power Sales Agreement 4.4.3 Power Purchase/Sale The power purchase/sale information should include the following: • Identification of potential power buyers)/customegs) • Potential power purchase/sales price - at a minimum indicate a price range • Proposed rate of return from grant -funded Proiect • Potential power buyers and customers include existing utility— IPEC is anticipated to be the major customer. Depending on the utility rate structure — particularly for large interruptible users at least one lodge has expressed an interest in purchasing power directly from Kootznoowoo. Kootznoowoo also may start a business venture with a large user of energy on lands on the North side of Kootznoowoo Inlet that would be serving after the communities power needs were met in order to avoid spilling surplus power. • Kootznoowoo is targeting a pro forma $0.15 kWh for power sales which cuts power cost based on recent prices in half. In 2009-2010 fuel costs averaged as much as $.30 per kWh, however until the next phase of the Project involving the preconstruction activities can reveal the likely economics of the projects including available federal grant funds this figure is only a target. A price range would be $0.13 to $0.18 depending on other terms of the power sales agreement such as sharing of employees and creation of operating efficiencies. By including the COO of IPEC in this critical final design phase we are optimistic about reducing our operating costs by working collaboratively on reducing maintenance and operation costs. For example a buried transmission line with an underground cable through Kootznoowoo inlet should reduce O&M for the life of the project. Because of the lack of economies of scale it is essential for the utility and Kootznoowoo to look for every possible savings in order to keep the rate as low as possible. AEA11-005 Grant Application Page 21 of 28 7/21/2010 ALASKA Renewable Energy Fund �ERERaY6 HORM Grant Application Round IV Kootznoowoo is endeavoring to make the community cost of power as low as possible. Given the significant current investment in the project it is unrealistic for Kootznoowoo to expect to accomplish this without significant grant funds. A full recovery on the basis of a risk adjusted fair market basis requires considerations aside from the power sale revenues.. As Kootznoowoo and its original shareholders and their heirs and assigns own significant land in the service area it only makes sense to pursue public funds to best of our ability while available and therefore avoid unnecessary expenses. Simply put, Kootznoowoo is not looking for a direct market rate return from the State of Alaska's grant funded portion of the project. By keeping energy prices as low as possible the return from grant funds can be seen elsewhere in ways that are not traditionally measure — such as the health and sustainability of the City of Angoon as well a business ventures Kootznoowoo can sponsor. On new funds, Kootznoowoo would expect a normal market rate of return from its financial contributions. Kootznoowoo believes it will be able to achieve significant public benefit as is described further in Section 5 and elsewhere. 4.4.4 Project Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. Download the form, complete it, and submit it as an attachment. Document any conditions or sources your numbers are based on here. Cost worksheets are attached and a narrative is included as an additional attachment which includes documentation. SECTION 5— PROJECT BENEFIT Explain the economic and public benefits of your project and how the people of Alaska will benefit from the project Include direct cost saving] The benefits information should include the following: • Potential annual fuel displacement (gal and $) 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 (Le. 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 Diesel generation pollutes Angoon's otherwise pristine environment and community. Per a July 9, 2007 letter submitted the US Forest by the Inside Passage Electric Cooperative (IPEC), the utility discharged 3,437,981 pounds of CO2 emissions in 2006. One key benefit of our development would be to mitigate this discharge of CO2 emissions in our community that impacts the health and safety of our shareholder, tribal and community members — all of whom are residents of Alaska in Angoon. Kootznoowoo expects to receive on behalf of its shareholders significant benefit from low cost power. The least of these benefits is the annual revenue contemplated under the Power AEA11-005 Grant Application Page 22 of 28 7/2112010 ALASKA Renewable Energy Fund �ENERW unxoam Grant Application Round IV Purchase Agreement. Targeting a sales price of $0.15 per kWh and adjusting for the cost incurred (HDR, Alaska, 2000) net operating income in the range of $200,000 is reasonable to expect initially. Significant growth will cause this revenue to increase and the average cost to drop so it is reasonable for revenues to grow faster than inflation. However, the real benefits to Kootznoowoo's land holdings and the value of shareholder lots is immediate as the community moves toward positive economic growth and expectations change to a more positive economic future. Tax credits, green tags and renewable energy subsidies may or may not be available depending on the action of state and federal policy makers. This project is not dependent on such incentives but if they are available they should inure to the benefit of Kootznoowoo Shareholders and the community of Angoon. Other benefits including the possibility of eliminating all diesel household heat. Angoon's annual electric diesel generation produces approximately 2,000,000 kWh (source AEA). There are other independent producers of diesel generated electricity and these figures are unknown at this time. No known renewable energy produces electricity in Angoon at this time. However, more disturbing, no use of electricity is used for space heating in Angoon due to the high cost of electricity. Therefore over 95% of the energy usage for space heating for homes and businesses is produced through diesel generated heat. Approximately 5% of the homes use firewood or are supplemented with firewood. The CBJ Greenhouse Gas Emission study released in March 2009 reveals that Juneau is 81 % dependent on diesel in its total non -transportation use of energy. Naturally, Angoon does not have hydropower so it is 100% diesel dependent. Converting the MMBTU requirements for Angoon using the CBJ 81 % figure, we find that Angoon would convert to its diesel usage to electrical usage if the price of electricity provided the economic incentive to convert to lower cost electrical heat. Theoretically, (based on 2,000,000 kWh figure) the community of Angoon would need 10,500,000 kWh (2,000,000/19%) if it completely converted its home heating and diesel fuel usage to electrical generation from low cost methods. Theoretically, the community of Angoon currently needs the equivalent of 10,500,000 kWh for its current needs if their needs can be compared "one to one" with Juneau's usage. Because of the high cost of fuel in Angoon and current conservation efforts this estimate is very conservative but is a straightforward extrapolation. We know that the PCE supplement creates a significant barrier to realistically making this conversion. However a significant reduction in the price of electricity would allow for conversion to occur. In other words low cost power would drive conversion from diesel and other CO2 producing fuel sources in the community of Angoon much as has recently occurred in Juneau, Petersburg, Sitka and other communities. IPEC will be able to completely idle their diesel generation capacity to a stand by status and would be able to salvage unnecessary equipment further reducing cost of operating existing infrastructure. IPEC would however need to build and expand its distribution system in Angoon as demand will increase the number of homes, business and public AEA11-005 Grant Application Page 23 of 28 7/21/2010 rALASKA Renewable Energy Fund MERGY nul IW Grant Application Round IV buildings which are operated as the economy moves forward. In a community planning on building an airport in the next year or so and building a new ferry terminal and other necessary infrastructure it is entirely reasonable to expect significant economic growth particularly compared to recent years of decline. There exists the potential for many new housing starts do to one of the highest level of vacant but "shovel ready" housing lots in the Community directly the result of Kootznoowoo shareholders receiving lands from Kootznoowoo. We expect Angoon to likely experience an unprecedented power demand in converting home heat fuel from diesel to relatively inexpensive hydroelectric power which, in turn would justify line upgrades and line expansion to new areas within the community. Currently, the community of Angoon has one of the highest unemployment rates at 87% (source TANF program, Central Council of Tlingit and Heide Indians of Alaska) and lowest per capita income in Southeast Alaska. The per capita income for Angoon was $11, 357. Nearly a third of families and Angoon's overall population are below the poverty line (source US Census Bureau Fact finder for Angoon, Alaska). Alaska ranks number one in energy use per capita. According to the Cold Climate Housing Research Center 2009 Alaska Housing Assessment, the average Sealaska household (of which Angoon belongs) consumes $6,072 of energy per year. Over half of the average household per capita income of Angoon residents is spent on energy. The impact of this project to bring low cost hydropower to the community of Angoon and energy customers is potentially profound. Energy customers are making decisions to either heat their homes or feed their household. TLHD is ready to finalize its design based on these facts and the enormous price increase in the cost of diesel since the HDR feasibility analysis. An updated design and procurement of necessary permits and funding is all that remains between continuing the decline associated with diesel generation and the growth anticipated with economical and non volatile hydroelectric power generation. The boost to the economy with the construction should be the catalyst for this growth as families begin to return to Angoon once the see progress on the horizon. An investment by the State of Alaska alongside the current award by the US DOE in this project is needed now in order to save this community. IPEC currently sells electricity in a non -subsidized rate at over $0.52 per kWh. TLHD would dramatically reduce and stabilize the electrical rate, would provide for a meaningful alternative to heating fuels such as diesel, propane and wood and would allow the City of Angoon to prosper. It will result in direct out of pocket annual savings to Angoon ratepayers of over $300,000 annually for electricity alone and increase disposable income by nearly $600 per capita or $1800 for a household of three. As can be seen from the attached chart conversion to electric heat is entirely likely to occur and the update to the existing feasibility will recalculate loads based on rational economic behavior which can be shown graphically by the following chart. New homes will also likely be constructed with electric heating as part of design. It is expected that this conversion will be directly related to the price of electricity which in turn is based on future demand predictions. Kootznoowoo would prefer to overestimate demand estimates and encourages AEA to do the same for the factors mentioned above and for the reasons we have seen other communities react to lower cost power. AEA11-005 Grant Applica8on Page 24 of 28 721/2010 & MYMGYA�M Figure 3.2.1 Electricity Price Threshold for Cmversion Renewable Energy Fund Grant Application Round IV sam� emennreaa sm conrumw oas >•+•n....a rm...r, --------.+.arn _____________________________________ ______________________________________________________________ _________ __________________ _____________---------�ay--_ _______________________ nm ________ __________ _________ __________ _______ E _ _______ _______ __________ ____________ ______ _ ____ a_ __________________________ _____ ____ ___________________ ____ ___ __ _______________________________ o___________ _______________ ___ __ _ _ _ _____________________________________ ________________________ e.ss ______________________________ ---- ______ _____________________________ ________________________ s.m s.m s.,s ses ,se xeo >m zw xw x.es xor ur as xw sw ue us aw aes su coo ou mwlaa6w0 SECTION 6— SUSTAINABILITY Discuss your plan for operating the completed project so that it will be sustainable. Include at minimum: • Proposed business structure(s) and concepts that may be considered. • How you propose to finance the maintenance and operations for the life of the project • Identification of operational issues that could arise. • A description of operational costs including ongoing support for any back-up or existing systems that may be require to continue operation • Commitment to reporting the savings and benefits Kootznoowoo will operate the Project in a corporate entity. At present it has reserved the name Natural Power for such a purpose. The likely entity will be an LLC that will operate as an [PP. The LLC structure gives Kootznoowoo the benefits of corporate protection of assets and is consistent with other entities owned by Kootznoowoo, Inc., and it can be managed for little additional costs. This form of business structure gives us the greatest opportunity to attract and retain partners such as the local utility once the project is fully constructed and in an operating mode. Other concepts may need to be considered as facts and circumstances dictate. Kootznoowoo expects the project to finance the maintenance and operations for the fife of the project as run of river hydro projects while expensive are very well understood and relatively simple to maintain and operate. Identification of operational issues that could arise. According to HDR the operational cost of the Project was calculated to be $86,000 per year in 1999 dollars. Costs identified were Labor, Transportation by boat, Miscellaneous Expenses, Administrative, Insurance and Replacement Reserves. Even after adjusting for inflation these figures appear too low and unrealistic given reporting requirements for IPP's in Alaska. We believe that economies of scale and operation can be achieved by working very closely and cooperatively with the local utility and we will explore this thoroughly during the negotiations for a power sales agreement. Because on -going back-up to the Project must be provided by IPEC we expect to be able to achieve our mutual goals of the lowest cost power to AEA11-005 Grant Application Page 25 of 28 7/21/2010 ALASKA Renewable Energy Fund �o4Eaarnmxo Grant Application Round IV the community and at the same time look forward to increased economy as demand and revenues grow. • Kootznoowoo is commitment to reporting the savings and benefits of this project as part of its on going responsibilities under the Grant and under its role of steward of the lands and waters in and around Angoon. It will of course have a long term interest in Angoon as its largest landowner and as its business interests grow with economic and competitive energy becomes available. 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. Kootznoowoo has received a Department of Energy award of $1,110,500 in matching funds for Kootznoowoo to immediately match AEA funding. These awarded funds are Kootznoowoo's contribution to an AEA Renewable Energy Grant. As stated elsewhere significant milestones have been accomplished in developing and constructing this much needed project. Kootznoowoo has previously received other grants from the Department of Agriculture which completed the HDR study. Milestones that have been achieved include the following: • HDR Feasibility and Evaluation Report March 2000 • Additional Stream gauging and analysis by HDR 2003 • Establish Community Energy Policy in December 2008 which was adopted by the City of Angoon and later endorsed as to top priority of the Tribal Council in Angoon in March of 2009 • Completed Environmental Impact Statement and Record of Decision which enjoyed considerable community and regional support. March 2009 and July 2009 for end of appeal period. • Awarded a $1,110,500 grant from DOE for completion of design, permitting and preconstruction activities associated with TLHD. August 2009 We intend to proceed as quickly as possible to be in a position to enter the next phase of this project just as soon as we raise necessary funds for matching the DOE grant or have other funds available to proceed. As you can see Kootznoowoo will need to fund the project activities until other funds are available such as the DOE funds discussed elsewhere 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. AEA11-005 Grant Applimfion Page 26 of 28 721/2010 ALASKA Renewable Energy Fund Grant Application Round IV The City of Angoon, the Angoon Community Association (federally recognized tribe), IPEC and relevant entities have made it clear that this project is uniformly considered the number 1 community priority and project. The City of Angoon, the Angoon Community Association (federally recognized tribe) and Kootznoowoo considers this project the community's highest priority. This may be the only project in the Tongass that enjoys support from both the conservation groups as well as the industry. According to the Forest Supervisor of the Tongass, Forrest Cole and as reported to Kootznoowoo, Inc. by the Monument Ranger in June 2010, it is the number 1 priority of the Tongass National Forest. Kootznoowoo does not expect any opposition to the project. Enclosed are letters of support. Please review the EIS for a complete list of support letters from the region and the community. Attached are local letter of support 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. Include an estimate of budget costs by milestones using the form — GrantEludget3.doc As described throughout this grant application, the total cost of TLHD is estimated to be $14 million, including all costs spent to date. Initial reconnaissance studies, preliminary design, and the necessary environmental work were funded from internal equity and a small federal grant as well as support from the USDA Forest Service who prepared the Record of Decision, the project scoping and environmental work necessary to complete the FEIS. Currently, internal equity totals approximately $2.2 million. For several years, intemal equity has been used to move the Project forward. A federal award was recently added to the project sources of funds and the Kootznoowoo Board has accepted these funds and directed staff to seek sources of the match. This application is one such effort. Other efforts include possibility of liquidating assets of Kootznoowoo to invest in the project. Given the economics both to Kootznoowoo and the future ratepayers it essential to maximize efforts to find grant funds from all possible sources. Significant stimulus funds, tribal funds for economic development and healthy communities and as well as funds designed for simply creating sustainable communities are now available for the first time. The State of Alaska's contribution would certainly improve the chances of completing this project at the earliest date possible. Future costs will be funded by a combination of corporate equity, federal grants, and proceeds from this grant. Total equity will be targeted at 20 percent of total Project costs ($2.8 million). Kootznoowoo is committed to the completion of Thayer Creek and we will continue to rely on the City of Angoon and the federally recognized tribe (the Angoon Community Association) for project support so that benefits may flow to the ratepayers of Angoon. AEA11-005 Grant Application Page 27 of 28 721/2010 e�ALASKA Renewable Energy Fund weacvwreoRm Grant Application Round IV SECTION 9—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. B. Cost Worksheet per application form Section 4.4.4. C. Grant Budget Form per application form Section 9. D. Letters demonstrating local support per application form Section 8. E. An electronic version of the entire application on CD per RFA Section 1.6. F. Authorized Signers Form. G. 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. H. 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. Print Name Peter M. Naoroz Signature d a President and General Manager Date September 14, 2010 AFA11-006 Grant Application Page 28 of 28 721/2010