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HomeMy WebLinkAboutKake-Petersburg Intertie 1/40`Renewable Energy Fund ALASKA E'' ENERGY AUTHORITY Grant Application 'r G'- b�0 Application Forms and Instructions The following forms and instructions are provided for 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 http://wvnv.akenergyauthoritv.ora/RE Fund.html The following application forms are required to be submitted for a grant recommendation: Grant Application GrantApp.doc Application form in MS Word that includes an outline of Form 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 Costworksheet.doc Summary of Cost information that should be addressed Worksheet by applicants in preparing their application. Grant Budget GrantBudget.xls A detailed grant budget that includes a breakdown of Form costs by task and a summary of funds available and requested to complete the work for which funds are being requested. Grant Budget GrantBudgetlnstr.pdf Instructions for completing the above grant budget form. Form Instructions • 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 a plan 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. AEA 09-004 Grant Application Page 1 of 15 9/2/2008 /® ALASHKA Renewable Energy Fund Grant Application SECTION 1 — APPLICANT INFORMATION Name (Name of utility, IPP, or government entity submitting proposal) Kwaan Electric Transmission Intertie cooperative Inc. (KWETICO) Type of Entity: Non-profit regulated electric cooperative. Mailing Address Physical Address P.O. Box 35466, Juneau, Alaska, 99803 5601 Tonsgard Court, Juneau, Alaska 99801 Telephone Fax 1 Email 907-789-3196 907-790-8517 jmitchell@alaska.com 1.1 APPLICANT POINT OF CONTACT Name Title Jodi Mitchell Vice -President Mailing Address PO Box 210149, Auks Bay, AK 99821 Telephone Fax Email 907-789-3196 907-790-8517 jitchell@alaska.com Ext. 24 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 An electric utility holding a certificate of public convenience and necessity under AS 42.05, or An independent power producer, 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 endorsement for its project by its board of directors, executive management, or other governing authority. If 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 submitted with the application.) AEA 09-004 Grant Application Page 2 of 15 9/3/2008 I� ALASKA Renewable Energy Fund Grant Application SECTION 2 — PROJECT SUMMARY Provide a brief 1-2 page overview of 2.1 PROJECT TYPE Describe the type of project you are proposing, (Reconnaissance; Resource Assessment/ Feasibility Analysis/Conceptual Design; Final Design and Permitting- and/or Construction) as well as the kind of renewable enerov you intend to use. Refer to Section 1.5 of RFA. Environmental Documentation and Final Design for Kake-Petersburg Hydroelectric Transmission Intertie 2.2 PROJECT DESCRIPTION Provide a one paragraph description of your project. At a minimum include the project location, communities to be served, and who will be involved in the grant project. The applicant, along with the State Department of Transportation (ADOT), proposes to build a road and 69-kV transmission line to connect the community of Kake with Petersburg. The road/intertie will allow the delivery of surplus hydropower available from the Tyee project to Kake and eliminate its total reliance upon diesel generation. The community of Kake will continue to be served by the Inside Passage Electric Cooperative (IPEC). The transmission line infrastructure will be owned and operated by the Kwaan Electric Intertie Cooperative, Inc. (KWETICO, the applicant), who will charge IPEC for wheeling power to Kake. The road project will allow Kake citizens access to Petersburg's infrastructure including major air transportation, medical facilities, more frequent ferry service, engine repair facilities, and various services and industries not available in Kake. The Intertie will also provide broadband telecommunications to the community of Kake, and savings to the State's Power Cost Equalization Program. The project is part of the overall Southeast Intertie plan commissioned and supported by Southeast Conference and regional leaders. The road/Intertie dual construction will save money for both ADOT and KWETICO, and will facilitate access to the transmission line for repairs and maintenance. 2.3 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. Include a project cost summary that includes an estimated total cost through construction. The project environmental documentation will cost $4.3 million per ADOT estimates. Engineering costs for permitting, geotechnical surveying, alignment surveying, structure staking, and final engineering related solely to the transmission Intertie will cost $1.19 million per John Heberling, senior consultant for D Hittle & Associates. The estimated cost for the entire transmission Intertie project is expected to be $40 million (not including the road components). The total amount of funding necessary to complete the environmental documentation and transmission Intertie final design engineering is $5,490,000. Project match amounts include about $2 million leftover from the AKBC study (AEA has these funds), and about $500,000 from Southeast Conference. 2.4 PROJECT BENEFIT Briefly discuss the financial benefits that will result from this project, including an estimate of economic benefits (such as reduced fuel costs) and a description of other benefits to the Alaskan public. AEA 09-004 Grant Application Page 3 of 15 9/3/2008 /E ALASHKA Renewable Energy Fund Grant Application Project benefits include: • Reduced and stabilized electric rates to the community of Kake • Reduction/elimination of diesel -dependence for electric generation at Kake • Reduction of CO2 greenhouse gas emissions resulting in cleaner air • Savings to the State of Alaska's Power Cost Equalization Program from reduced residential rates at Kake • Reduced noise pollution from diesel -generation in Kake • Better loading of Lake Tyee hydro project • Access by Kake residents to Petersburg's medical facilities and other major infrastructure • Improved and cheaper transportation services for Kake residents and businesses • Improved telecommunication services for Kake residents and businesses (fiber -optics) • More disposable income for Kake businesses and residents will spur economic development • Road access to/from Kake will allow tourism industry opportunities • Employment/workforce opportunities during construction, and for year-round road maintenance • Road access to fish and other retail markets for Kake's fishermen, residents and businesses 2.5 PROJECT COST AND BENEFIT SUMARY Include a summary of your project's total costs and benefits below. 2.5.1 Total Project Cost $40,000,000 (including estimates through construction. 2.5.2 Grant Funds Requested in this application. $2,990,000 2.6.3 Other Funds to be provided (Project match) $2,500,000 2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $5,490,000 2.5.5 Estimated Annual Benefit (Savings) years 2008 - 2061 $3,053,154 2.5.6 Public Benefit (If you can calculate the benefit in terms of $ 3,053,154 average svgs dollars please provide that number here and explain how per year (see CBA) plus you calculated that number in your application.) cleaner air, reduced transportation costs, and many other public benefits (see list AEA 09-004 Grant Application Page 4 of 15 9/3/2008 ALASKA Renewable Energy Fund /41MILD ENERGY AUTHORITY Grant Application 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 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 entitv. state that in this section. The project manager for the environmental documentation will be Charles (Chuck) Tripp of ADOT. The Intertie engineering work through final design will be bid out if required; if not, the firm of D Hittle & Associates has indicated interest in performing the work. Project management assistance from AEA would be welcome and appreciated, but may not be needed. 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.) The entire project, through construction, is expected to take 4 — 5 years. The proposed environmental documentation and final design work is estimated to take about two years, and construction is estimated to take another two years. An extra year has been added in case the funding flow is interrupted, or for unforeseen delays. 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. The NEPA process will determine many factors in the final design engineering, including the exact route. The final design will determine what funding, materials, labor, and management will be necessary to complete the project. For this reason, the final design work must be completed before the project will be ready for construction. A lengthy feasibility study has already been completed (by D. Hittle & Associates in July 2005), and a copy of it is included with this application. 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. Personnel/Contractors: The ADOT environmental division will manage the NEPA process under the direction of Charles (Chuck) Tripp. Mr. Tripp will utilize other ADOT staff and resources to the extent possible, but if necessary they will contract some of the work. KWETICO would like to hire D Hittle & Associates, the engineering firm that prepared the Kake-Petersburg transmission Intertie study dated July 2005, to prepare the final design work, and they have indicated interest. However, contractors will be hired through a bid process if required. Others involved in the project will be Jodi Mitchell, KWETICO Vice -President, Robert Venables, Southeast Conference Energy Coordinator, and IPEC and AEL&P staff if needed. AEA 09-004 Grant Application Page 5 of 15 9/3/2008 r ALASHKA Renewable Energy Fund Grant Application Partnerships: KWETICO will partner with the ADOT to complete the NEPA process, and with contractors to prepare the final design. KWETICO shares a memorandum of understanding with Southeast Conference (SEC) to work together on the southeast Alaska transmission Intertie system (the MOU is included herein). The Kake-Petersburg Intertie has been identified as a priority for SEC. Commitments: IPEC has initiated power sales agreement (PSA) negotiations with the Four Dam Pool Power Agency (FDPPA) by writing a letter (see copy dated June 9, 2008) and entering into several discussions with Dave Carlson, FDPPA's CEO. The FDPPA is in the process of restructuring, and is currently constructing the Swan-Tyee Intertie in order to sell some of its surplus power to Ketchikan. The FDPPA has verbally assured IPEC that it has plenty of surplus power for Kake, but has asked IPEC to postpone negotiations until the end of 2008 (see FDPPA letter to IPEC dated August 13, 2008). The FDPPA expects to complete the restructuring transaction in December 2008 and will have a smaller board of directors more focused on southeast regional issues and identified solutions. IPEC is anticipating a rate of $.068/kWh plus an estimated $.098/kWh transmission wheeling charge from KWETICO (see page 6-20 of D Hittle study) at current kWh sales levels at Kake to recover $219,000 in estimated annual operating costs (this cost per kWh will be reduced with Kake's load growth). 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status The environmental documents and final design details will be shared with AEA as they are completed. If AEA assists with project management they will be well informed of the project's status. If not, KWETICO or IPEC will prepare regular reports as directed by AEA. 3.6 Project Risk Discuss potential problems and how you would address them. The NEPA process will identify and address potential environmental problems. There is a very small risk that the FDPPA will not cooperate with IPEC and KWETICO in power sales agreement negotiations. Since the FDPPA's hydroelectric infrastructure was built with state and federal dollars, and thus should be shared with other members of the public, this is highly unlikely. 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 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 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. 14.1 Proposed Energy Resource AEA 09-004 Grant Application Page 6 of 15 9/312008 /E) ALASKA Renewable Energy Fund E ENERGY AUTHORITY Grant Application 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. According to a June 2, 2008 discussion with Dave Carlson, CEO of the FDPPA, the Tyee hydro project produces 130 million kWh on an average year. Wrangell and Petersburg combined consume about 65 million kWh. When the Swan Tyee Intertie is completed (2009) Ketchikan will consume an estimated 25 million kWh. Thus, the Tyee project will have about 40 million kWh available in surplus power for Kake, and for regional growth. Other hydro sources are expected to become available in the future. Metlakatla has surplus power (9 million kWh with potential for more) to sell on the grid, and is close to tying in from the South. Sitka has filed a FERC permit to build a hydro project at Takatz Lake, west of Kake, and the future plan is to build an Intertie between Sitka, Takatz, and Kake. There are also at least two parties interested in developing hydro projects in the Thomas Bay area north of Petersburg. Please see copy of the Southeast Electrical Intertie System map included herein for a full picture of the regional plans. Other energy resources have been studied near Kake, most promisingly the Cathedral Falls site 10 miles south of Kake (see excerpt of study prepared for Sealaska Corporation by Springtyme Company LLC dated 12-31-2005). Cathedral Falls is a viable energy resource for Kake, but it is known habitat for anadromous fish below the fall, and possibly in the lake, and is expected to require moderate environmental mitigation. Furthermore, the project would be run of the river, and would still require substantial supplemental diesel generation to satisfy all of Kake's energy needs. There may be significant wind power capacity at Turn Mountain, about 8 miles northwest of Kake, but this needs to be studied. Even if studies prove a viable wind resource, the high development costs and unpredictability make it less desirable than the Intertie, especially since a large amount of diesel generation will still be required. A combination of wind and hydro power from Cathedral Falls would be ideal, but probably less cost effective than a road/Intertie to Petersburg. The Intertie, along with the road, will help solve two of Kake's biggest economic problems: high electricity costs and high-priced limited transportation. Development of the alternatives will only aid in solving one of them. 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. IPEC owns and operates a diesel generation plant in Kake. Following is information requested regarding its three units: Unit 1: Caterpillar 3512 630 KW DES manufactured in 1984 Unit 2: Caterpillar 3512 1016 KW DES manufactured in 1995 Unit 3: Caterpillar 3512 855 KW DES manufactured in 1998 AEA 09-004 Grant Application Page 7 of 15 9/3/2008 /® ALASM Renewable Energy Fund Grant Application IPEC strives to operate its engines in the most economically efficient combinations to carry the Kake load, while balancing efficiency and maintenance costs. In 2007 Kake's generation efficiency was 13.01 kWh per gallon. 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. IPEC burned 196,029 gallons of diesel in 2007 to generate electricity to meet Kake's load. In 2006, the last year Kake's cold storage operated, IPEC burned 252,024 gallons. IPEC has experienced a dramatic increase in the price of diesel fuel at Kake: In 2006 the average price per gallon was $2.53; in 2007 it was $2.61; and as of September 2008 the average price is $3.97 with prices as high as $4.69 for dockside barge delivery in July. Over the same period, IPEC's cost of power adjustment per kWh sold has increased from $.1033 in March 2006 to $.1945 in September 2008. IPEC's most recent COPA adjustment shows that its average cost of power per kWh sold is $.3178. When the Intertie is operating, IPEC's diesel -generation infrastructure will be maintained on a stand-by basis for energy security purposes. 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. IPEC sold 2,975,191 kWh to Kake customers in 2006, and 2,223,978 kWh in 2007. The cold storage ceased operations at the end of 2006 due to financial and economic problems. It is difficult for businesses to survive in Kake due mostly to the high cost of electricity and transportation. Kake's population has dropped from a high of 775 in 1998 to a low of 536 in 2006 due in part to lack of jobs and extremely high costs of living. Lower priced electricity and a road will revive Kake's economy by allowing existing businesses to survive, and by allowing new industries such as tourism to bloom. Lower priced electricity and a road may also revive Kake's fishing industry, and allow its ports to be used by more "outside" boats, bringing in more business to Kake's merchants. If IPEC can sell more power at Kake it can spread its fixed costs over more units and thereby realize greater economies of scale. As a non-profit consumer -owned utility IPEC will pass these savings on through lower rates. AEA 09-004 Grant Application Page 8 of 15 9/3/2008 E ALASKA Renewable Energy Fund IMIED ENERGY AUTHORITY Grant Application 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 KWETICO proposes to tap into existing hydro surplus from the Tyee project by connecting the load center of Kake to Petersburg through a 69KV transmission line. Petersburg is already connected to the Tyee hydro project. Barriers will be identified through the NEPA process, but are not expected to preclude the project. 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. Please see D Hittle Study, pages 3-10 and 3-I I for a thorough land use issue analysis. The ADOT has already obtained a 300 foot easement from the US Forest Service/USDA along the route to develop a transportation/utility corridor. They have also completed a route survey, acquired aerial photography and LIDAR mapping, and are conducting ongoing geotechnical reconnaissance, environmental field work, and public outreach. The plan is to take the Intertie submarine at the mouth of the Wrangell Narrows outside Petersburg. The road will continue south behind the community of Kupreanof. Kupreanof has an ordinance against roads, but ADOT has expressed a commitment to minimize concerns to the fullest extent. 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 D Hittle Study, pages 3-13 through 3-16 for a complete list. The NEPA process will identify barriers and what mitigation measures are necessary, and is expected to take 2 — 3 years. Final design engineering can be done in conjunction with the NEPA process to reduce overall time to complete the project. 4.3.4 Environmental Address whether the following environmental and land use issues apply, and if so how they will be addressed: AEA 09-004 Grant Application Page 9 of 15 9/3/2008 /� ALASKA Renewable Energy Fund 4OWC ENERGY AUTHORITY Grant Application • 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 Please see D Hittle study pages 3-17 through 3-20 for a complete list of environmental issues to be addressed in the NEPA process. 4.4 Proposed New System Costs (Total Estimated Costs and proposed 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 Please see D Hittle Study prepared in July 2005 pages 4-8 and 4-9. ADOT staff updated the D Hittle study estimates using current construction costs, which resulted in an estimated cost of $47.4 million for the Intertie alone (total estimated cost in 2005 was $38.672 million). ADOT estimates that co -development of the road and Intertie will result in a cost savings for both projects, and will reduce environmental impacts (see ADOT presentation dated September 2008). The co -development will save $7.4 million for the Intertie, reducing the total estimated cost to $40 million. KWETICO and ADOT need a total of $5,490,000 to conduct the NEPA process ($4.3 million) and perform final design engineering ($1.19 million) to make the Intertie "construction -ready". The AEA currently holds about $2 million in leftover funding for the project, and the Southeast Conference has about $500,000 in funds for the project. After accounting for the available funds, a total of $2,990,000 is needed to complete this stage of the project. The project will need further funding in the future. The ADOT will pursue State and possibly Federal highway funds for the road project, and has submitted a funding request of $1 million for the environmental documentation. However, the ADOT believes there is a lot of competition for available ADOT funds this year, so we can't count on the request being granted. KWETICO and 1PEC will pursue Federal grant funding sources as necessary. IPEC may be able to borrow a small amount for eao fundine if needed. AEA 09-004 Grant Application Page 10 of 15 9/3/2008 ALASKA Renewable Energy Fund /IIIIIIIIIIIND ENERGY AUTHORITY Grant 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. • Total anticipated project cost for this phase There will be no operating and maintenance costs until the project is complete and energy is wheeled to Kake over the Intertie. Thus, anticipated O&M expenses for this phase are zero. A complete analysis and discussion of operating and maintenance costs was prepared in the D Hittle Study on pages 6-16 through 6-18. Assuming tree -trimming costs will be shared with ADOT, the completed project will have estimated annual operating and maintenance costs of $219,000 including $46,000 per year for a capital reserve fund for Intertie replacement. As loads grow these fixed costs will be spread over more kWh 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 qrant-funded project IPEC will buy power for resale to the community of Kake from the FDPPA's Tyee Hydro Project for around $.068/kWh. The power will be wheeled through KWETICO's proposed transmission line for an estimated $.098/kWh (or a flat wheeling charge of $219,000 per year). KWETICO will not earn a rate of return from the grant -funded project— it proposes to cover operating costs plus an annual repair & replacement reserve charge, all of which are included in the $219,000 estimated annual charge. 4.4.4 Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. INFORMATION SOURCES USED TO PREPARE THE COST WORKSHEET: Part 1, renewable energy resource information came from the FDPPA. Part 2, existing energy generation came from IPEC's sales records, and financial and statistical reports Part 3 - 4, source is the 2005 D Hittle Study Part 5 — source is IPEC's records, and the ADOT September 2008 analysis Part 6 — information came from discussions with FDPPA AEA 09-004 Grant Application Page 11 of 15 9/3/2008 /E; ALASKA Renewable Energy Fund E ENERGY AUTHORITY Grant Application 4.4.5 Business Plan 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. Both IPEC and KWETICO are non-profit, member owned, member -governed, tax exempt, regulated electric cooperatives. As such, they exist to serve their member -customers at the lowest responsible cost with the best service. IPEC strives to reduce and stabilize electric rates to its members at Kake by reducing or eliminating its dependence on diesel generation. IPEC's history demonstrates its willingness to accept low margins in order to keep electric rates low while satisfying lender loan covenants. Power cost savings from the Kake-Petersburg Intertie will be passed on to its customers through lower rates. IPEC serves members in Angoon, Hoonah, Kake, Chilkat Valley and Klukwan, and currently operates under a "postage -stamp" rate structure whereby all ratepayers pay the same regardless of which town they reside in. Thus, lower power costs in Kake (or any of IPEC's other service areas) are shared with all members. IPEC is working toward the more typical cost -based rate structure, but cannot do so until extreme cost disparities are mitigated at its Chilkat Valley service area (IPEC is seeking relief from the State and Federal government). Calculations in this grant application attempt to isolate costs to serve Kake, and should not be extrapolated to its other towns. KWETICO is made up of two members — IPEC and Alaska Electric Light & Power (AEL&P). KWETICO currently serves only one customer — the Greens Creek Mine on Admiralty Island. AEL&P sells power to the mine which is wheeled over KWETICO's transmission lines for $.0125/kWh. KWETICO was created by for members of the Southeast Conference to take on construction and operations of planned transmission interties between load centers and energy resources in Southeast Alaska. Included in this application is a copy of the memorandum of understanding (MOU) between Southeast Conference and KWETICO which describes how and when an Intertie segment becomes part of KWETICO. KWETICO has been wheeling power to the Greens Creek Mine outside Juneau since 2006, and is working toward extending the Intertie on to the IPEC community of Hoonah. The point is that KWETICO is a going concern. Included in the D Hittle Kake-Petersburg Intertie study is a section on KPTL annual costs (pages 6-16 through 6-17 and beyond). This section itemizes annual operating costs, and estimates an annual $46,000 repair and replacement fund deposit for the transmission line. The total annual costs total $219,000 assuming tree -trimming is shared with the ADOT's estimated annual road maintenance costs, and may even be lower if more costs can be shared. Load growth in Southeast Alaska will be met by development of new several new hydroelectric sources such as Thomas Bay outside Petersburg, Takatz Lake east of Kake, and the connection of Metlakda to Ketchikan from the south. The towns and utilities in Southeast Alaska are committed to working together to ensure long term hydroelectric resource planning through the Southeast Conference Energy Committee. 1 4.4.6 Analysis and Recommendations AEA 09-004 Grant Application Page 12 of 15 9/3/2008 IORITY � AENELASRGYAUTHKA Renewable Energy Fund Grant Application Provide information about the economic analysis and the proposed project. Discuss your recommendation for additional project development work. As of September 2008 IPEC's year-to-date average fuel cost per kWh sold at Kake is $.335 per IPEC's records. As of September IPEC's 2008 average cost of fuel at Kake $3.97 per gallon, it has burned 147,280 gallons, and has sold 1,743,610 kWh. If IPEC had been able to buy power from FDPPA for $.068 and pay $.098 per kWh for wheeling (both of these prices may end up being lower), it could have saved Kake's customers $.169 per kWh sold so far in 2008. Power cost savings to Kake customers rise as fuel costs rise. It is impossible to quantify the economics of the road project, but a fairly exhaustive list of potential economic benefits has been included in the application. Based on this information, this project would provide numerous benefits to Kake and should be built. 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 (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 avoided cost of ownership) • 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 • IPEC will displace 252,024 gallons of fuel burned at Kake in 2006, and 196,029 gallons in 2007 • At 2008 average prices, IPEC would have paid $999,777 in 2007 and $777,645 in 2007 for fuel • KWETICO proposes an annual charge of $219,000 to IPEC to wheel power from FDPPA to Kake in order to cover its operating costs and to provide a repair & replacement fund • If the Intertie were in place in 2008 Kake's ratepayers would've saved $.169/kWh (September billing rates per residential customer were about $.639/kWh) • Lower electric rates will allow economic growth and diversification in Kake • Construction of the Intertie will displace approximately 2,147 metric tons of CO2 emissions annually, resulting in cleaner air • Kake has a population of 536, and 51 business licenses have been issued in the community according to the State of Alaska Department of Community and Economic Development, all of which will benefit from this road/intertie project • Intertie cable will include fiber -optics, which will improve telecommunications at Kake and possible allow another source of operating cost recovery for KWETICO • Kake residents would have less expensive and improved transportation and infrastructure access • The Intertie/Road may assist with the ADOT's Southeast Alaska Transportation Plan • Reduced rates to Kake residents will result in savings to the State's PCE program AEA 09-004 Grant Application Page 13 of 15 9/3/2008 ALASKA Renewable Energy Fund ® ENERGY AUTHORITY Grant Application SECTION 6 — GRANT BUDGET Tell us how much your total project costs. Include any investments to date and funding sources, how much is requested in grant funds, and additional investments you will make as an applicant an estimate of budget costs by tasks using the form - The total estimated all -in cost of the Kake-Petersburg Intertie is $40 million (the road project is separate except for the environmental documentation). The environmental documentation and engineering through final design is estimated to cost $5.49 million, but needs $2.99 million after deducting matching contributions from the Southeast Conference and AEA. The Southeast Conference and regional leaders have commissioned various Intertie feasibility studies at unknown costs. Southeast Conference has $500,000 in State grant funds for the project. In about 2000, Congress authorized up to $384 million in Federal funding for the Southeast Alaska Electrical Intertie System, approximately 25 — 30% of which has been appropriated and spent on the Swan-Tyee Intertie, the Juneau -Greens Creek Intertie, and various other projects. Thus, it is possible that the Federal government will honor its commitment to assist in funding the Intertie system. The AK -BC Workgroup chose unanimously to redirect about $2 million in leftover funds to development of the Kake-Petersburg Intertie (some of the original $3.2 million were spent on the Hatch -Acres AK -BC feasibility study). KWETICO is committed to working with the Southeast Conference, IPEC, and other entities to garner funding for the Kake-Petersburg Intertie. IPEC has expressed willingness to obtain a small amount of loan funding if necessary for gap funding. AEA 09-004 Grant Application Page 14 of 15 9/3/2008 �cALASKA Renewable Energy Fund Grant Application SECTION 7 — ADDITIONAL DOCUMENTATION AND CERTIFICATION SUBMIT THE FOLLOWING DOCUMENTS WITH YOUR APPLICATION: A. 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 6. D. An electronic version of the entire application per RFA Section 1.6 E. Governing Body Resolution per RFA Section 1.4 Enclose a copy of the resolution or other formal action taken by the applicant's governing body or management that: - authorizes this application for project funding at the match amounts indicated in the application - authorizes the individual named as point of contact to represent the applicant for purposes of this application - states the applicant is in compliance with all federal state, and local, laws including existing credit and federal tax obligations. F. 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 Jodi Mitchell Signature Title Vice -President Date 6)t, vV AEA 09-004 Grant Application Page 15 of 15 9/3/2008 ➢ ALASKA Renewable Energy Fund L) ENERGY AUTHORITY Application Cost Worksheet Please note that some fields might not be applicable for all technologies or all project phases. Level of information detail varies according to phase requirements. 1. Renewable Energy Source The Applicant should demonstrate that the renewable energy resource is available on a sustainable basis. Annual average resource availability. 135,000 MWh (Tyee); 40,000 MWh surplus Unit depends on project type (e.g. windspeed, hydropower output, biomasss fuel) 2. Existing Energy Generation a) Basic configuration (if system is part of the Railbelt' grid, leave this section blank) i. Number of generators/boilers/other 3 Generators ii. Rated capacity of generators/boilers/other 2500 KW iii. Generator/boilers/other type Caterpillar Diesel -Electric Sets iv. Age of generators/boilers/other 1984, 1995 and 1998 (24, 13, and 10 years old) v. Efficiency of generators/boilers/other 13.01 kWh average per gallon in 2007 b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank) i. Annual O&M cost for labor $103,062 in 2007 (g/I 548.3) ii. Annual O&M cost for non -labor $600,564 (2007 547.3, 549.3, and 4yr aver 553.3XX) 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] 2,531,131 generated in 2007 ii. Fuel usage Diesel [gal] 196,029 gallons in 2007; 252,024 in 2006 Other iii. Peak Load 496 KW in 2007; 920 KW in 2006 (last year cold storage operated) iv. Average Load 421 KW in 2007; 575 KW in 2006 v. Minimum Load 352 KW in 2006; 392 KW in 2006 vi. Efficiency 13.01 kWh per gallon of diesel vii. Future trends d) Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] ii. Electricity [kWh] 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. RFA AEA 09-004 Application Cost Worksheet revised 9126108 Page 1 /E ALASKA Renewable Energy Fund L) ENERGY AUTHORITY iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other a) Installed capacity 69 Kv transmission line b) Annual renewable electricity generation i. Diesel [gal or MMBtu] ii. Electricity [kWh] iii. Propane [gal or MMBtu] iv. Coal [tons or MMBtu] v. Wood [cords, green tons, dry tons] vi. Other a) Total capital cost of new system $40,000,000 estimated total cost b) Development cost c) Annual O&M cost of new system $219,000 d) Annual fuel cost -0- 5. Project Benefits a) Amount of fuel displaced for i. Electricity 196,02 ii. Heat iii. Transportation — 252,024 gallons of diesel b) Price of displaced fuel $777,646 - $999,777 at 2008 YTD aver $3.97/gallon c) Other economic benefits Reduced electric rates to Kake ($.15 - $.25 per kWh depending on price of fuel — currently paying $.639/residential kWh and $.55/aver all other kWh) Reduced transportation costs (see ADOT analysis) Enhanced economic development (unquantifiable) Employment opportunities (unquantifiable) Improved telecommunications through fiber -optics RFA AEA 09-004 Application Cost Worksheet revised 926/08 Page 2 ALASKA Renewable Energy Fund � ENERGY AUTHORITY d) Amount of Alaska public benefits Savings to PCE program (difficult to quantify) Improved transportation services (ADOT SATP) Less CO2 emissions (cleaner air) 6. Power Purchase/Sales Price a) Price for power purchase/sale $.068/kWh (maybe lower) from Tyee (FDPPA) 7. Project Analysis a) Basic Economic Analysis — see Kake-Petersburg CBA2008.xls Project benefit/cost ratio .92 (but would be higher if could quantify road and other benefits) Payback 13.1 years RFA AEA 09-004 Application Cost Worksheet revised 9126108 Page 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 c o 0 0 0 0 0 en `fs en u> oo Fn c N m o J T Cl) F T O � � O O O O O O t0 O O o o O o O O o 0 o O O O <» e» e> F» O O N J O 01 Q O fs? H O � O O N O w U O a 1N0 y O' C N s O R t N O " N' W O O 69 Q (A U v c t Y w R � _ N R a U C O 7 ...I LL Cl) t t U N RU _ N R a U C J LL O O N O O O O O O O CD O O O Z LL O O> 0)O O °' " r Q w N Y fN6 � � r O LL a O Z 3 W LL C a. W ❑ � N m Li r2 OJ O R � N O Ll Q O 3 p O n Y w c`lo= .~.. d G C N N e d ❑ W U � m W O 00 .- N cm v Ln co 0 O 0 fn O O O O O O O r 71, Resolution 2008-2 Kwaan Electric Transmission Intertie Cooperative Inc. September 30, 2008 ENTITLED: 200 8-2 AUTHORIZING THE VICE PRESIDENT TO APPLY FOR GRANT FUNDING UNDER THE RENEWABLE ENERGY FUND AND ENDORSING THE APPLICATION OF SAID FUNDING UNDER RFA AEA-09-004 WHEREAS, Alaska Statute AS 42.45.045 established the Renewable Energy Grant Recommendation Program; and WHEREAS, under this program, the Alaska Energy Authority (AEA) is soliciting competitive applications from qualified applicants in order to make recommendations to the Alaska State Legislature for funding of renewable energy projects. NOW THEREFORE BE IT RESOLVED THAT, the Board of Directors of Kwaan Electric Transmission Intertie Cooperative, Incorporated hereby authorizes this application for project funding for the Kake-Petersburg Intertie; and authorizes Jodi Mitchell the Vice -President to serve as the point of contact to represent the applicant for purposes of the grant application; and states that Kwaan Electric Transmission Intertie Cooperative Inc. is compliant with all federal, state, and local laws including existing credit and federal tax obligations. PASSED, APPROVED AND ADOPTED this 30th day of September, 2008. ATTEST: Tim McLeod, President (S E A L) INSIDE PASSAGE ELECTRIC COOPERATIVE Resolution 2008-8 Inside Passage Electric Cooperative Inc. September 12, 2008 ENTITLED: 2008-8 AUTHORIZING THE CEO/GENERAL MANAGER TO APPLY FOR GRANT FUNDING UNDER THE RENEWABLE ENERGY FUND AND ENDORSING THE APPLICATION OF SAID FUNDING UNDER RFA AEA-09-004 WHEREAS, Alaska Statute AS 42.45.045 established the Renewable Energy Grant Recommendation Program; and WHEREAS, under this program, the Alaska Energy Authority (AEA) is soliciting competitive applications from qualified applicants in order to make recommendations to the Alaska State Legislature for funding of renewable energy projects; NOW THEREFORE BE IT RESOLVED THAT, the Board of Commissioners of Inside Passage Electric Cooperative, Incorporated hereby authorizes this application for project funding at the match amounts as indicated in the application; and authorizes Jodi Mitchell the CEO/General Manager to serve as the point of contact to represent the applicant for purposes of the grant application; and states that Inside Passage Electric Cooperative is compliant with all federal, state, and local laws including existing credit and federal tax obligations. PASSED, APPROVED AND ADOPTED by a vote of Jl Yeas, $— Nays and Absent this 12th day of September, 2008. "i Michaef See, C�n ATTEST: 4ell_' 4 Wilbur Brown, Secretary/Treasurer P.O. Box 210149 Auke Bay, Alaska 99821 (907) 789-3196 Fax (907) 790.8517 \� }� !]){ /4)i\; R ! 4 r 9 ! R 4 9 ! !r „ >! R ! # r 9 ! r! !! § !« « §! ! 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M O M m e r In o J 0 M (7 O r r A o] N (O W F O � H r W O J W Q p o 0 0 0 0 o O o 0 0 0 o H m Qo m m m m>> >'m u o a aoi f m O N c c m O a v a F r� O N � • 1 O O � N O O O • _ h N I p Y O W p Y C7) N O p) �"� al � • M N L _ p L � N 4- 0-2 Y • • N l0 w O � p V N t vYi � r's OL � O o Y O M O ,ZOoOI Y O_ O N , O 0 -- o N El I rn � 1 rn rn M 1 N r-I u a ��I La�1: 6iS G� ills INSIDE PASSAGE ELECTRIC COOPERATIVE June 9, 2008 Mr. Dave Carlson Chief Executive Officer Four Dam Pool Power Agency P.O. Box 110987 Anchorage, AK 99511-0987 Re: Power Rates for Kake Dear Mr. Carlson: This letter is to formally request that Inside Passage Electric Cooperative ("IPEC") be considered a second -tier customer (along with Ketchikan) with respect to hydro power priority, and that IPEC be charged the wholesale pooled rate of $.068 per kWh from the Four Dam Pool when the intertie from Kake to Petersburg is complete. IPEC's 2007 sales to Kake were 2,223,978 kWh, with a generation peak of 444 KW. In 2006, when the cold storage last operated, IPEC sold 2,975,124 kWh with a generation peak of about 900 KW. Since IPEC's electric sales to Kake aren't very large, it would not significantly affect Lake Tyee hydropower availability to Ketchikan if Kake is grouped with them as a second -tier priority customer. IPEC strives to reduce and stabilize electric rates to its customers, and the best way to do that over the long term is to intertie our communities to hydro sources. The Kake — Petersburg intertie is a prime opportunity for IPEC to reduce and stabilize power costs by cutting diesel generation in favor of low-cost hydro from the Four Dam Pool. The long term viability of Kake depends on our success, especially given the recent surge in oil prices and its effect on Kake's electric rates and local economy. IPEC envisions purchasing power from the Four Dam Pool through Kwaan Electric Transmission Intertie Cooperative ("KWETICO"), the entity formed by Southeast Conference to own and operate the planned segments of the southeast intertie grid as they become eminent. To the extent that we can displace diesel generation, and depending on the rates charged by the Four Dam Pool and KWETICO, Kake's rates could be substantially reduced. Once IPEC receives rate information from the two entities we can better analyze what Kake's rates will be after the intertie is operational. IPEC, as a non-profit member -owned cooperative, will pass cost reductions on to its members while simultaneously meeting its Rural Utilities Service loan covenants. P.O. Box 210149 Auke Bay, Alaska 99821 (907) 789-3196 Fax (907) 790-8517 Four Dam Pool June 9, 2008 Page 2 of 2 As you know, another intertie and hydro source is contemplated between Kake and Takatz in the future. Furthermore, I understand Metlakatla has excess capacity they may wish to sell to the southeast grid when all of the communities are connected. It is my hope and belief that our region will be well -supplied with hydro power into the future as we work together toward long term capacity planning. I appreciate the time you spent discussing this matter with me last week. I look forward to a long term, mutually beneficial relationship between IPEC, KWETICO, and the Four Dam Pool. Please call me if I can provide any more information, or if IPEC can support efforts to restructure the agency to better serve the regions. Best regards, INSIDE PASSAGE ELECTRIC COOPERATIVE, INC. /udw_( Jodi Mitchell, CMA CEO/General Manager CC: Mr. Steven Haagenson, P.E., AEA Executive Director Mr. Jim Strandberg, P.E., AEA Project Manager IPEC Board of Directors City of Kake Mr. Tim McLeod, KWETICO President Mr. Robert Venables, Southeast Conference Interim Energy Coordinator SOLOMON GULCH' TERROR LAKE" THE FOUR DAM POOL POWER AGENCY 0 • TYEE LAKE a SWAN LAKE August 13, 2008 Ms. Jodi Mitchell Inside Passage Electric Association PO Box 210149 Auke Bay, Alaska 99821 Subject: Power Rates for Kake Dear Ms. Mj36Ni- AUG A 0 2ooB BY: I apologize for the tardiness in responding to your letter dated June 9, 2008. As you are probably aware, I have been very busy dealing with our Restructuring efforts, which will result in the transferring of two of our hydroelectric projects to Kodiak Electric Association (KEA) and Copper Valley Electric Association (CVEA). In addition, the Swan-Tyee Intertie is under construction. Between both of these efforts, my time has been constrained. I also forestalled responding to you because I was waiting to see if our Board could reach final resolution on the remaining issues surrounding Restructuring. I won't go into detail, but I am pleased to report that it appears the Board has reached final agreement with respect to the economic terms of the transaction. Restructuring will be moving forward, with final closing planned by the end of the year. This will result in a smaller Board of Directors with KEA and CVEA no longer represented. It will be at that time when I believe it will be beneficial for IPEC and our smaller agency to begin discussions about the sale of power to Kake. I am very excited and pleased that the Kake-Petersburg Intertie appears to be moving forward. That is indeed good news. I will keep you advised with the progress of our Restructuring efforts. Best Regards, Dave Carslon Chief Executive Officer PHYSICAL: 1 301 HUFFMAN RD. SUITE 201 • ANCHORAGE, AK 99515 MAILING: PO Box 1 10987 • ANCHORAGE, AK 9951 1-0987 PH: 907.256.2281 • FAX: 907.258.2287 0 WWW.FDPPA.ORG MEMORANDUM OF UNDERSTANDING between KWAAN ELECTRIC TRANSMISSION INTERTIE COOPERATIVE, INC. and SOUTHEAST CONFERENCE This Memorandum of Understanding ("MOU") is between Kwaan Electric Transmission Intertie Cooperative, Inc., an Alaska nonprofit electric cooperative corporation ("KWETICO"), and Southeast Conference, an Alaska nonprofit corporation ("SEC"). KWETICO and SEC are referred to in this MOU individually and collectively as "Party" or "the Parties," respectively. Section 1. Purpose. The purpose of this MOU is to memorialize the good faith intentions and understandings of the Parties with respect to future cooperation between the Parties and their future roles in planning for the acquisition, construction, and expansion of electric transmission facilities ("Intertie Segments") between communities in Southeast Alaska to help reduce the cost of electricity in Southeast Alaska. Section 2. History. A. The combination of high precipitation levels and mountainous terrain has made significant quantities of low-cost hydroelectric power available in some locations in Southeast Alaska. However, the mountainous, island environment of Southeast Alaska has also limited the development of electric transmission facilities and prevented the distribution of low-cost hydroelectric power to the region as a whole. This has resulted in significant reliance on diesel electric generation in many Southeast Alaska communities, despite the existence of significant hydroelectric resources in the region. Reliance on diesel electric generation has presented a number of problems, including high, volatile retail electric rates; potential interruptions of fuel delivery; and environmental concerns related to fuel handling, air pollution, and noise. B. In recent years, the economy of Southeast Alaska has been negatively impacted by various factors, including reduced economic activity in the timber, fishing, and seafood processing industries. For decades, the availability of lower cost electricity has been identified as an important element in attracting diverse commercial activities for stabilizing and expanding the economy of Southeast Alaska. C. SEC is a regional, nonprofit corporation that advances the collective interest of the people, communities, and businesses of Southeast Alaska by striving to help develop and maintain a stable and diversified economy throughout the region. SEC's mission is to undertake and support activities that promote strong economies, healthy communities, and a quality environment in Southeast Alaska. SEC's members include municipalities, Native corporations and village councils, public utilities, other regional and local businesses, civic organizations, and individuals throughout the region. In 1987, SEC first fS\SEC\F0.ati0n\SEC\Fina1(6-29-04) proposed a concept of building a network of electric transmission lines connecting most of the communities in Southeast Alaska. In 1997, SEC commissioned a study by Acres International, which compiled information from previous studies and provided estimated costs and timelines for development of a Southeast Alaska intertie system. In 2000, federal legislation was enacted that authorized federal funding of up to $384 million to assist in the construction of the "Southeastern Alaska Intertie system" as generally identified in SEC's 1997 study by Acres International. D. In 2001, SEC obtained funding to study options for forming a single legal entity that would receive federal and other funds for the acquisition and construction of various Intertie Segments and own, operate, maintain, and manage those segments. The form, goals, and attributes of the legal entity were discussed and debated among SEC members and within the SEC Intertie Committee at various meetings in 2001 and 2002. In 2002, SEC hired an Intertie Coordinator to facilitate continuation of the process of forming a legal entity for the project and to facilitate the identification of Intertie Segments that can begin the planning and permitting process. E. The SEC Intertie Committee met in November 2002 and voted unanimously to prioritize the Juneau to Hoonah and the Petersburg to Kake segments as the next Intertie Segments to be added to the Southeast Alaska Intertie system. In 2003, SEC obtained funding from the U.S. Department of Agriculture, Rural Development ("USDA-RD") to commission the Southeast Alaska Intertie Study. That study was completed by D. Hittle & Associates, Inc. in December 2003, and provided engineering and economic analyses of future Intertie Segments, including an update to SEC's 1997 study. The Study was divided into two phases: Phase 1 analyzed the two segments prioritized by the SEC Intertie Committee (Juneau to Hoonah and Petersburg to Kake); Phase 2 provided an in-depth analysis of all the segments of the Southeast Alaska Intertie Project. The Study did not include an analysis of the Swan Lake to Lake Tyee Intertie segment, which is presently under development and construction by the Four Dam Pool Power Agency. The Study estimated the costs and benefits of eight new Intertie Segments, assuming that the capital costs of the Intertie Segments will be grant -funded, and provided a proposed timeline for completion of construction of those segments based on estimates of when each segment would be "economically justifiable." The study results confirmed that the Juneau to Hoonah and the Petersburg to Kake Intertie Segments were presently "economically justifiable." The first proposed Intertie Segment ("SEI-I") was estimated to be completed by 2007 and consists of transmission facilities connecting Juneau, Kennecott Mining Company — Greens Creek Mine ("KMC-GC"), and Hoonah. The second proposed segment (SEI-2) is the Petersburg to Kake segment, which will extend transmission facilities from the current Lake Tyee to Petersburg transmission line to Kake. In future years, it is expected that the six additional new Intertie Segments will be constructed, and that other, existing Intertie Segments could be acquired if they satisfy "economic feasibility" requirements. F. Existing Intertie Segments are presently in place and owned and operated by other public utilities, including the Four Dam Pool Power Agency ("FDPPA"), MEMORANDUM OF UNDERSTANDING BETWEEN KWAAN ELECTRIC TRANSMISSION INTERTIE COOPERATIVE, INC. AND SOUTHEAST CONFERENCE Page 2 of 6 fs%SEC\Forma(ion\SEC\Fina1(6-29-04) Alaska Electric Light & Power, Inc. ("AEL&P"), and Alaska Power Company ("APC"). It is expected that some or all of these existing segments will continue to be owned and operated by the present owners. However, it is also envisioned that KWETICO could acquire ownership of one or more of these segments if the current owner of such a segment desires to divest itself of ownership and if acquisition of the segment satisfies economic feasibility requirements. G. In 2003, the SEC Intertie Committee formed a Legal Entity Formation Subcommittee and obtained funding through the Denali Commission to complete the analysis of available legal entities to own and operate the Intertie Segments based on goals and characteristics identified by the SEC Intertie Committee in 2002 and 2003. In March 2004, the legal entity selection analysis was completed by Kemppel, Huffman & Ellis, P.C. Based upon that analysis, and upon the recommendations of the Legal Entity Formation Subcommittee and the SEC Intertie Committee, SEC's Board of Directors authorized the formation of a member - owned transmission cooperative corporation to own, operate, and manage the Intertie Segments to facilitate the build -out of the Southeast Alaska Intertie Project. In May 2004, SEC obtained additional funding from USDA-RD to fund the formation and initial operation of the transmission cooperative. SEC has provided for the services of legal counsel and SEC's Intertie Coordinator to facilitate the formation and initial operation of the cooperative. The SEC Legal Entity Formation Subcommittee prepared draft Articles of Incorporation for the cooperative, the name of which is "Kwaan Electric Transmission Intertie Cooperative, Inc." On June 15, 2004, those draft Articles of Incorporation were presented to and discussed with the SEC Intertie Committee. On June 29, 2004, SEC's Board of Directors, upon the recommendation of the SEC Intertie Committee, voted in support of the KWETICO incorporators filing the Articles of Incorporation with the State of Alaska, Department of Community and Economic Development, Division of Banking, Securities and Corporations. Section 3. Mutual Understandin¢. A. The Parties agree that the objective of forming KWETICO was to extend the availability of low-cost, hydroelectric power in Southeast Alaska through the acquisition and construction of Intertie Segments between communities in Southeast Alaska, as was generally envisioned by SEC and the SEC Intertie Committee as part of SEC's Southeast Alaska Intertie Project. B. One potential concern with forming KWETICO was that, once formed, KWETICO might, over time, lose interest in continuing to pursue acquisition and construction of additional, economically feasible Intertie Segments beyond those segments that it already owns. To address this concern, the Parties agree that once KWETICO has constructed and begun operation of one or more Intertie Segments, it is expected that KWETICO will continue to acquire, construct, operate, and maintain additional Intertie Segments, consistent with the goals of the Southeast Alaska Intertie Project, when it is reasonably determined that such segments will be economically feasible. Uniform standards for determining economic feasibility will be cooperatively developed by KWETICO and SEC as necessary to fulfill the MEMORANDUM OF UNDERSTANDING BETWEEN KWAAN ELECTRIC TRANSMISSION INTERTIE COOPERATIVE, INC. AND SOUTHEAST CONFERENCE Page 3 of 6 fs\SEC\Fo=adon\SEC\Fina1(6-29-04) mutual goals of the Parties with respect to the Southeast Alaska Intertie Project. Once developed, those standards will be included in KWETICO's first Bylaws. C. Consistent with SEC's 2003 Southeast Alaska Intertie Study, it is expected that the capital cost of future Intertie Segments will, to the maximum extent possible, be grant -funded, and whether an Intertie Segment is determined to be "economically feasible" will reflect that expectation. That is, SEC and KWETICO will continue to seek grant funding for the capital costs of additional Intertie Segments in the future and, to the extent those efforts are successful, the economic feasibility (including sustainability) of acquiring and constructing additional Intertie Segments will be determined based on the costs of operating, maintaining, and providing for reasonable repair and replacement reserves for such a segment, without respect to the initial capital cost of acquiring or constructing the segment. D. The Parties agree that in pursuing the goal of interconnecting the electric systems of Southeast Alaska, KWETICO and SEC will consider the acquisition of existing Intertie Segments (if and to the extent the current owner desires to divest itself of such segments) as well as the construction of new Intertie Segments. However, the addition of an Intertie Segment will be required to meet the same general economic feasibility criteria regardless of whether the segment is a new or existing Intertie Segment. E. The Parties agree that KWETICO will be structured and governed to allow the public utilities that purchase electric transmission service from KWETICO to become members of KWETICO, provided they satisfy the requirements and qualifications of membership as set forth KWETICO's Bylaws. At some point in time prior to construction or acquisition of a particular Intertie Segment, it will be necessary for the entity or entities that will purchase electric transmission service over that segment to become a member of KWETICO to allow meaningful participation in KWETICO decision -making regarding the segment. Precisely when such entity will become a member of KWETICO prior to construction or acquisition of the Intertie Segment at issue will depend on how "imminent" the acquisition or commencement date of permitting and construction of the segment is, based on uniform criteria that will be set forth in KWETICO's Bylaws. The Parties will cooperate regarding the development and application of those imminence criteria. F. Although KWETICO is a separate legal entity with independent duties and responsibilities to its members, both Parties agree that there will be a need for ongoing cooperation and consultation between KWETICO, SEC, and the SEC Intertie Committee (or its successor committee) to ensure fulfillment of the mutual goals of both Parties and the objectives of the Southeast Alaska Intertie Project. In this respect, each of the Parties will have the following general roles, but will cooperate and consult with one another regarding issues of mutual importance: MEMORANDUM OF UNDERSTANDING BETWEEN KWAAN ELECTRIC TRANSMISSION INTERTIE COOPERATIVE, INC. AND SOUTHEAST CONFERENCE Page 4 of 6 fOSECTomadoMSECTinal (6-29-04) (1) SEC Roles. (a) Perform strategic planning and analysis regarding future Intertie Segments in Southeast Alaska, including analysis of electric generation resources and load requirements, engineering and permitting requirements, costs and benefits of interconnection between Southeast Alaska communities, and proposed prioritization of future Intertie Segments for incorporation into the KWETICO system; (b) Provide assistance and support in obtaining grant funding for future Intertie Segments to be incorporated into the KWETICO system; (c) Assist in the development and application of KWETICO's "imminence" criteria and "economic feasibility" standards; and (d) Provide input to KWETICO regarding KWETICO planning issues that relate to economic development in Southeast Alaska, and participate on advisory committees established by KWETICO. (2) KWETICO Roles. (a) Cooperate and consult with SEC regarding existing and new Intertie Segments to be incorporated into the KWETICO system; (b) Plan, design, and construct new Intertie Segments that meet established criteria; (c) Acquire existing Intertie Segments that meet established criteria, if and to the extent that the current owner desires to divest itself of such segments; (d) Own, operate, maintain, and manage the Intertie Segments and telecommunications plant, facilities, and equipment collocated with the Intertie Segments; and (e) Provide electric transmission and ancillary services and telecommunications services through Intertie Segments owned and operated by KWETICO, and obtain the revenues necessary for operation and maintenance of the Intertie Segments. G. Prior to adoption of KWETICO's first Bylaws by the KWETICO Board of Directors, KWETICO, SEC, and the SEC Intertie Committee will work together to develop mutually agreeable Bylaw provisions that are necessary to fulfill the goals and objectives of the Southeast Alaska Intertie Project and the long-term interests of current and future KWETICO members. In the future, KWETICO will consult with SEC and the SEC MEMORANDUM OF UNDERSTANDING BETWEEN KWAAN ELECTRIC TRANSMISSION INTERTIE COOPERATIVE, INC. AND SOUTHEAST CONFERENCE Page 5 of 6 fs\SEC\Fo=a ion\.SEC\Fina1(6-29-04) Intertie Committee regarding proposed amendments to KWETICO's Articles of Incorporation or Bylaws which may significantly impact the fulfillment of the goals and objectives of the Southeast Alaska Intertie Project. In the event a conflict arises between KWETICO, SEC, and the SEC Intertie Committee (or its successor committee) regarding such a proposed amendment, the Parties agree to work together in good faith to resolve such conflict prior to KWETICO's members voting on the proposed amendment. �74Date: �� 0 President Kwaan Electric Transmission Intertie Cooperative, Inc. Date: d President Southeast Conference MEMORANDUM OF UNDERSTANDING BETWEEN KWAAN ELECTRIC TRANSMISSION INTERTIE COOPERATIVE, INC. 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F. i -_ Ib� i> coo � _ d`^ S 6>a >a�nDRAD�'>A�-• � . 3z ✓ 1 f137 �>�nD y4.�zia DAD anbD y .Xt;v qEel. f v i .4' K _ v%l ju � y 10 771.' _ _ Fr 1 ro.`q o ❑ _ i3aN w< g -i L� 4 •_p C C N C N Y :- — __ __ .. z w w N W ow 07 ¢ w ❑ w '4-_-t- <. ['- rf m1-� '1 n- "`✓`'! i + �,-;;I N U' Q q Z zypw z C C X— w O n a) m i 4-a U) cn AR .E N c0 O 0 O O O E E O Q 4- w J 0 --0 U O N O 0 J co O N 2 O ♦-; cn 0 Q 0 L 70 U) O cm 0 i rl- Q 70 m U. a. co O 0 O a) AV y-- O cm .� .co 4-0 O 4-0 u U Q� 4-a L O � O U O C6 O 4.5 > Q, L C Lo O U >, O � — � U W U L C: U N N O C U Q C: E '0' •— .— m O C: 4T n n U42 O O O O •' • m 70 m City of Kake P.O. BOX 50 0 KAKE, AK 99830 PHONE: (907) 785-3804 "HOME OF THE WORLD'S LARGEST TOTEM POLE" FAX: (907) 785-4815 RESOLUTION NO. 2008 — 010: A Resolution Supporting the Kake-Petersburg Road and Intertie Project along the northern route of Kupreanof Island. WHEREAS, the City of Kake, city council:members are in full support of the Kake-Petersburg Intertie Project as our top priority; and WHEREAS, the City of Kake and its community members are facing economic collapse due in large part to the high cost of fuel and electricity; and WHEREAS, the City of Kake sees the need and opportunity to expedite the Kake- Petersburg Road and Intertie Project that will result in lowering the high costs of energy and transportation; and WHEREAS, the Alaska Department of Transportation has plans to develop a road between Kake and Petersburg that could expedite the development of the Intertie project; and WHEREAS, the Southeast Conference and Alaska Energy Authority have been funded by the Governor and Legislature to begin work this summer; and WHEREAS, a resolution of support from the City Council is of great importance to the region and State to demonstrate the need and desire for the road and intertie project and such support from the city council will be helpful in the permitting phase and the quest for more funding. NOW THEREFORE BE IT RESOLVED THAT the City of Kake, City Council does hereby fully, support the Kake-Petersburg Road and Intertie Project: Passed and approved by a duly constituted quorum vote of 1Jr with yea's, I% nays, and 'abstaining this day of,, 2008. i77 Attest Organized Village of Kake P.O. Box 316 Kake, Alaska 99830-0316 �f Telephone 907-785-6471 Fax 907-785-4902 / email KeexKwaan@starband.net (Federally Recognized Tribal Government serving the Kake, Alaska area) Resolution No. 2008-15 - Support for Kake-Petersburg Electrical Intertie WHEREAS, the Organized Village of Kake (hereinafter referred to as OVK) is a federally recognized Indian Tribe and is organized pursuant to the authority of the Federal Indian Reorganization Acts (hereinafter IRA) of 1934 and 1936, which is the contemporary sovereign government of the Kake Tribe dating back to time immemorial; and, WHEREAS, the IRA Council as the duly elected governing body formed under the OVK Constitution and By -Laws is authorized to act on behalf of its Tribal Citizens/Members; and, WHEREAS, the community of Kake has been and continues to be dependent on diesel -generated electrical power which has always placed a hardship on the community due to the high rate costs that must be passed on to the consumers; and, WHEREAS, economic development in Kake has been and continues to be challenged in its ability to produce competitively -priced goods and services; and, WHEREAS, households which are already challenged by the limited jobs & economic options have similar challenges, which has resulted in very energy conscious consumers to save on their utility bills which in turn has reduced the economy of scale for the electrical co-op; and, WHEREAS, current rates are nearly 60-cents per kilowatt and although the Power Cost Equalization (PCE) assistance provides some relief to households, it only applies to a base portion of use and the net relief to households is still marginal leaving overly high bills, and PCE does not assist governmental offices, school systems or businesses; and, WHEREAS, there are two routes for an electrical intertie between Kake and Petersburg that stand out from a listing of various alternatives developed by an extensive study performed and reported on in 2005; and, WHEREAS, one of these routes, generally referred to as the "center -south route' was determined as a cost effective route and the other is the "northern route" which would parallel a proposed Kake-Petersburg road and could have advantages due to sharing a common right-of-way; and, WHEREAS, an electrical intertie could significantly lower the cost of electricity in Kake and funding is available to move forward on permitting and related tasks that could ready a project for construction. THEREFORE BE IT RESOLVED, that the Organized Village of Kake formally supports the development of an electrical intertie between Kake and Petersburg and that it be pursued as expeditiously as possible to; and, BE IT FURTHER RESOLVED, that the funding now available for the Kake-Petersburg Electrical Intertie be expeditiously utilized for necessary pre -construction costs (e.g. permitting, EIS as needed, etc.) and build upon the latest of several studies over past decades, i.e. the final work product of D. Hittle & Associates that was recently published in 2005 for Southeast Conference, entitled "Kake -- Petersburg Transmission Intertie Study"; and, OVK Resolution No. 2008-15 Page 2 BE IT FURTHER RESOLVED, that in the interest of selecting a final route for the electrical intertie, OVK supports steps to expeditiously determine which of the aforementioned routes, either "center -south" or "northern", and begin affirmative action so that the Kake- Petersburg Electrical Intertie can be built as soon as possible to provide Kake with a much -needed lifeline of reasonably priced electrical power; and, BE IT FINALLY RESOLVED, that OVK reaffirms its commitment to working with other entities to fulfill the goal of the electrical intertie and asks that OVK's president and executive director be directly notified of meetings, hearings, and related activities so that it can most effectively assist the development of process while also staying current on information related to the intertie development. CERTIFICATION This resolution was duly adopted at an IRA Council meeting held this Z" day of v t: 200$ by a quormn of 7 (includes president as non -voting chairperson except in case of tie vote) with Q yes votes, __N_ no votes, and _e%'_ abstaining. Casimero A. Aceveda, President AttFsfed by Southeast P.O. Box 21989 612 W. Willoughby Accnuc, Suite A Juneau, AK 99302 (907) 523-2310 Conferenc 90,.secofer fax www. seconfemnce. October 1.2008 Jodi M. Mitchell KWAAN Electric, VP IPEC, CEO P.O. Box 210149 Juneau, AK 99821 Dear Ms Mitchell: Southeast Conference is a private membership organization that works to advance the collective interests of the people, communities and businesses of Southeast Alaska. It is our mission to undertake and support activities that promote strong economies, healthy communities and a quality environment in our region. The Kake — Petersburg Intertie project is, without question, a project that addresses each of those missions. Southeast Conference has long been a proponent of the Kake intertie and fully supports your organization's efforts to obtain the necessary funding for the next phase of permitting and design. The Kake intertie project is unique in that it promotes the development of an integrated corridor that will address both the energy and transportation needs of that region. It is refreshing to see multiple communities and state agencies working together to make this project a success. Southeast Conference is committed to doing whatever is possible to support the Kake intertie project and urges other agencies and funders to give this project the fullest support possible. If there are any questions, do not hesitate to contact me at the Southeast Conference office. Sincerely, ,a� " ,1,� Shelly Wright O Executive Director Mike Korsmo Board President Southeast Ala ke ivathte Et € ntornic Future Coa litiort 1 _Lii. ..i.al3 ii• `ii _,... .�.>:.,A c!`'Yi! ! i ia. s:. AFN' Southeast 'Ala6i Villages I-- ANB Grand January 18, 2008 Camp ANS Grand Honorable Henrich Kadake CampCity of Kake City of Kake P.O. Box 188 DouglasKake, Alaska 99830 Indian Association Re: Letter supporting the Kake Intertie Goldbeft Incorporated Dear Mayor Kadake: Haida Corporation The Southeast Alaska Native Economic Futures Coalition writes this letter Huna Totem supporting the planning, building, and implementation of the Kake Intertie. The Corporation support includes, but is not ,limited to, securing State of Alaska and Federal grant Hydaburg funds for the Intertie to the village of Kake; Alaska. Like Kake, the Coalition is Cooperative extremely concerned about the continuing declining populations and lack of Association economic opportunities due to theextremely high price of energy throughout rural Inside Southeast Alaska. To addressthe current continuing energy crisis, we support the Passage Electric Intertie to Kake so that reasonably priced 'reliable energy can be available for Cooperative residential and commercial use. It is with:great commitmentthatthe Coalition writes Inc.this letter of support to secure the necessary funding to complete the Intertie to Kake Tribal Kake. Corporation Kootznoowoo Affordable energy is a fundamental element for economic development throughout Incorporated rural Alaska, including the village of Kake. The continued high cost of fuel prices Organized remains detrimental to the lives of life long Alaskans residing in Kake and their Vi llage Kbusinesses. Please contact us if we can offer further assistance with this critical asaan an Sealaska community energy Intertie project. Thank you for,your time and consideration. Corporation Sealaska Sincerely, Heritage \ 1 Institute '�_�\Kn��l.''••t Southeast Alaska Dewey Skan Regional Health Chair Consortium Tlingit& c: Sarah Palin, Governor, State of Alaska Haida Mike Tibbles, Chief of Staff, Office of the Governor, State of Alaska council Karen Rehfeld, Director of the Office of Management and Budget, State of Alaska James S. Strandberg, AIDEA/AEA, Alaska/British Columbia Workgroup Tlingit- J.C. Conley, Southeast Conference Energy Committee and Heide h Alaska/BritisColumbia workgroup Regional g p Housing Karl Lehr, General Manager, Kake Tribal Corporation Authority December 17, 2007 Governor Sarah Palin State of Alaska P.O. Box 110001 Juneau, AK 99811-0001 Dear Governor Palin: We would like to offer our strong support for the proposed power line extension from Petersburg to Kake. This line is the next logical section of the SE region intertie system that will eventually interconnect SE Alaska with a transmission grid. With the funding for the Swan-Tyee intertie now secured, and completion expected by the fall of 2009, it's important to move forward with this next important link. The environmental assessment has been completed by SE Conference and the preferred route has been selected, so the next step is permitting and design. The transmission link is not only critical to the future of the community of Kake, which now relies entirely on diesel generation, but will also accomplish: • The next step in the SE Alaska grid system • A significant reduction in diesel generation and associated emissions • Making existing, low cost hydroelectric generation available to small, rural communities • Assist in the recovery of the Kake economy and associated jobs Also, because of moderate terrain and existing road systems on Kupreanof Island, the extension will be environmentally benign, and economical to build and maintain. Thank you for your consideration. Al Dwyer, Mayor Cc: Mayor Henrich Kadake, Kake Senator Bert Stedman Representative Peggy Wilson Representative Bill Thomas Senator Albert Kookesh Jim Strandberg, AK Energy Authority Shelly Wright, Southeast Conference Page 1 of 2 Jodi Mitchell From: Hughes, Andrew N (DOT) [andy.hughes@alaska.gov] Sent: Monday, September 29, 2008 3:23 PM To: Jodi Mitchell Subject: FW: Baranof Island - Sitka - Takatz Lake Jodi, Support for the Kake-Petersburg Inter -tie. Andy From: Charlie Walls [mailto:charlie@cityofsitka.com] Sent: Monday, September 29, 2008 1:59 PM To: Hughes, Andrew N (DOT) Cc: Menzies, Malcolm A (DOT); Gallion, Irene M (DOT); Skagerberg, Verne R (DOT); Potdevin, Jim (DOT); Benson, Stephanie V (DOT) Subject: RE: Baranof Island - Sitka - Takatz Lake Andy, For the power component, the long range concept is a power line linking Sitka with Kake — Petersburg — Wrangell — Ketchikan etc so those communities can share hydroelectric resources. Sitka will be very interested in the development of the Kake - Petersburg corridor as the next step is Kake — Baranof Warm Springs (Takatz Lake Hydro) — Sitka. Sitka has used up its existing hydroelectric resources and is in the process of expanding the existing Blue Lake Hydro to its maximum capacity. However, that project will not come on line until 2015 at the earliest. Meanwhile Sitka will be supplementing its hydro with diesel ($$$). Our view of the future for energy is colored by the basic assumption that we are entering an era of increasingly scarce and increasingly expensive oil. What appears to be in the cards for all of southeast Alaska is displacing the land based oil consumption with renewable energy resources (mostly hydro) over the next 20 years or so. That poses major infrastructure challenges. If you have need of info on the Sitka electric system planning etc., we will be posting our studies etc. on our web site: http://cityofsjtka.com/deptlelectric/elecidx.htm Charlie From: Hughes, Andrew N (DOT) [mailto:andy.hug hes@alaska.gov] Sent, Monday, September 29, 2008 1:15 PM To: Charlie Walls Cc: Malcolm A Menzies; Gallion, Irene M (DOT); Verne Skagerberg; Potdevin, Jim (DOT); Benson, Stephanie V (DOT) Subject: RE: Baranof Island - Sitka - Takatz Lake Charlie, We are in the process of initiating an update of the regional transportation plan and are interested in coordinating transportation and power line development. We are currently working on a coordinated utility -transportation corridor development effort between Kake and Petersburg. Andy 10/6/2008 Page 2 of 2 From: Charlie Walls [mailto:charlie@cityofsitka.com] Sent: Monday, September 29, 2008 8:13 AM To: Hughes, Andrew N (DOT) Cc: m_menzies@alaska.gov Subject: Baranof Island - Sitka - Takatz Lake Andy, We have a preliminary permit issued by the Federal Energy Regulatory Commission to investigate the feasibility of developing the Takatz Lake Hydroelectric Project. See attached. The power system strategy here is to displace oil with hydroelectric energy. Oil accounts for most of Sitka's energy consumption. Consumers are reacting to the rapid run-up in oil prices by switching to the relatively low cost hydroelectric energy. So, we are busy planning to increase Sitka's hydroelectric capability to meet that increased demand for hydroelectric energy (see attached chart). Part of the Takatz Lake Hydro project will be building a power transmission line across Baranof Island to interconnect with the existing Sitka electric system. Our thinking is to route the transmission line up the Baranof River Valley, drill a 1.9 mile tunnel through the mountainous spine of Baranof Island and then continue down the Medvejie River valley to interconnect with the existing Sitka Transmission system at Silver Bay in the general vicinity of NSRAA's Medvejie fish hatchery (see attached map). This same route was studied by DOT for a transportation corridor. Is there any interest in looking at this as a joint power/transportation project? Seems like some good synergy here that could reduce the risks significantly for everyone as well as provide some long term solutions to Sitka's transportation problems. Our more creative folks envision a a cruise ship/ferry port at Baranof Warm Springs with an electrified railway to take tourists across the island to Sitka as well as roadway traffic for the marine highway system. Charlie Charlie Walls, Electric Utility Director City & Borough of Sitka 105 Jarvis Street Sitka, Alaska 99835 907-747-1870, FAX 907-747-3208 10/6/2008 DOE Award Number: DE-FC36-02GO12105 Final Report Comprehensive Renewable Energy Feasibility Study for Sealaska Corporation Period covered: September 2002 through December 2005 Date of Report: December 31, 2005 Recipient Organization: Sealaska Corporation Michele Metz, Assistant Lands Manager Sealaska Corporation One Sealaska Plaza, Suite 400 Juneau, Alaska 99801 Phone: (907) 586-9226; Fax: (907) 463-3897 n*hele.metz(a,sealaska. corn Technical Contact: Robert Lynette Springtyme Company LLC 212 Jamestown Beach Lane, Sequim, WA 98382 Phone: (360) 681-3289; Fax: (360) 681-7509 E-mail: windnr66)olypen.com As can be seen from Figure 25, the Reynolds Creek Project appears to be economical only if 100% of its cost can be funded with grants, or if there is substantial load growth on Prince of Wales Island, such as from a new industrial development. Thus, the Reynolds Creek Project is judged to have a low potential for economic and financial feasibility. Regulatory Assessment The Reynolds Creek Project has already received a FERC license and various state permits. If Haida Corporation proceeds with the project in the future, it could elect for regulation by the State rather than FERC in accordance with the Energy Act of 2000, which transfers regulatory authority from FERC to the State for project of 5 MW capacity or less. Should Haida Corporation wish to try to modify any of the license conditions, it could also be either under FERC regulation or State regulation, assuming the amendment process is started after the State institutes its regulatory program. Interconnection Potential As noted earlier, Hydaburg will soon be interconnected to the Alaska Power & Telephone's system on Prince of Wales Island. Also, the 1998 Acres update study for the Southeast Intertie suggested that a link between Ketchikan and Prince of Wales Island should occur in the 2025 time frame. If this link were constructed, it would hydro projects on Prince of Wales Island to generate to meet loads in the interconnected Southeast system. The construction cost was estimated to be about $39 million in 1996 dollars. Project will not be economical if there is little load to be served. AP&T's interconnected load on Prince of Wales Island (including the planned interconnections to Hydaburg and Hollis) is currently about 26.0 GWh. AP&T's hydroelectric generation capability from the Black Bear Lake Project and the planned South Fork Project is about 30 GWh. Load growth has been very limited in the last few years, however, for purposes of this economic analysis, load growth has been forecast as follows: As can be seen from Figure 25, the Reynolds Creek Project appears to be economical only if 100% of its cost can be funded with grants, or if there is substantial load growth on Prince of Wales Island, such as from a new industrial development. Thus, the Reynolds Creek Project is judged to have a low potential for economic and financial feasibility. 3.3.4 Kake Existing Power Supply IPEC currently supplies electric power to Kake, which is generated at a plant in town with diesel generators. The power plant capacity is 2,585 kW, and the cost of power to Kake citizens in 2003 was 14.54 0/kWh for up to 500 kWh per month (after PCE subsidy of 18.21 0/kWh). Power is distributed by an overhead system. The annual electrical energy requirement has been about 4,200 MWh. Hydroelectric Potential Hydroelectric potential in the Kake area has been the subject of at least two studies, as follows: Preliminary Appraisal Report on the Hydroelectric Potential for the Villages of Angoon, Craig, Hoonah, Hydaburg, Kake, Kasaan, Klawock, Klukwan, Pelican, and Yakutat; September 1977 by R. W. Retherford Associates. Cathedral Falls Project, A Reconnaissance Report; October 1979 by Haiza Engineering Company Gunnock Creek Project Arrangements of Previous Studies Gunnock Creek flows through Kake into Keku Strait, and has a drainage area of about 11.5 sq. miles. Retherford considered Gunnock Creek as a potential hydroelectric site, and developed a project arrangement with two dams, 14,500 acre-foot storage reservoir, 2800-foot long pipeline, and 1800 kW power plant. On the basis of the Retherford study, the Alaska Power Authority contracted with Haiza Engineering to study the Gunnock Creek site. Harza's initial studies of the site concluded that the cost of the Gunnock Creek project would be much higher than estimated by Retherford. The Gunnock Creek site was then dropped in favor of the Cathedral Falls site, which had also been identified by Retherford. Potential Modifications of Previous Project Arrangements Harza's evaluation of the Gunnock Creek development as proposed by Retherford undoubtedly holds true today. However, we understand that the Corps of Engineers will include an outlet in the new water supply dam that could be used for the addition of a generating plant, but they are not planning on pursuing power development as part of the dam. Much of the water available at the dam is piped downstream for the hatchery, and therefore the greatest generation would be obtained if a power plant were constructed near the hatchery that would make use of the additional head and flow. Assuming a hydraulic capacity of 60 cfs and a generating head of 125 feet, the capacity of a power plant at the hatchery would be about 500 kW. Salmon are reported to spawn in Gunnock Creek as far upstream as the water supply dam. Development of the power plant at the hatchery could have a detrimental impact on natural spawning and rearing in Gunnock Creek if the diversion rate is greater than the current hatchery withdrawal. Also, the hatchery may not be agreeable to a power plant since it could result in a colder water supply to the hatchery. Consequently, the most practicable use of Gunnock Creek for generation is likely to be a small generator at the water supply dam, discharging to the stream directly below the dam. The capacity would be quite small (perhaps 25-50 kW), but the installation cost should be small as well. The feasibility of such an installation has not been evaluated herein because it will depend to a great degree on the arrangement of the facilities in the dam, and that information is not currently available. Once the details of the dam design are known, we recommend a detailed feasibility study, as there is likely to be a high potential for it being cost-effective. Cathedral Falls Creek Project Arrangements of Previous Studies 70 Cathedral Falls Creek flows into Hamilton Bay about 10 miles south of Kake. Retherford considered Cathedral Falls Creek as a hydroelectric site because of the existence of a moderate height waterfall. Retherford suggested a project with a 70-foot-high concrete dam, a 2000-foot long penstock, and a powerhouse at the base of the falls with a capacity of around 2000 kW. However, Retherford did not prepare a cost estimate of cost of power analysis, as they focused on the Gunnock Creek site. Harza's arrangement for the Cathedral Falls site included a 27-foot-high concrete dam at the head of the falls, a 210-foot-long, a 9-foot-diameter tunnel 360 feet long, a 78-inch diameter penstock 470 feet long, and a 2-unit 750-kW power plant at the base of the falls. Harza estimated the construction cost to be $7.1 million. Harza's plan provided for future expansion of the powerhouse to include 2 additional generating units for an ultimate capacity of 1,500 kW. Potential Modifications of Previous Project Arrangement The following modifications to the Harza project arrangement are likely to result in a more economical project: • Minimize the height of the diversion dam. • Construct the dam with a concrete core wall and grouted rockfill rather than all concrete. Incorporate a sluice gate for removing accumulated sediment. • Construct the tunnel and penstock with a microtunnel boring machine, and decrease the diameter to 4 feet. • Utilize Ossberger-type generating units in the power plant to allow more efficient use of the available flow. The generating capacity of this modified arrangement would be 1,000 kW, with no fixture expansion potential. The intake would probably need to be screene if there are resident fish above the falls. Likewise; a screened tailrace would probably be needed to protect anadromous fish below the falls. The drainage basin above the falls appears to be relatively flat, but the stream appears to be somewhat incised. Harza indicated storage could not be developed at the damsite, however, they did not indicate if storage could be develop elsewhere in the basin. One intriguing possibility is to develop a reservoir in the Goose March area on Slo Due Creek, with a diversion fi-om Cathedral Falls Creek. Water from Cathedral Falls Creek and Slo Due Creek could be stored during high flow periods, then released to Cathedral Falls Creek for generation, possibly through a second power plant. This concept has not been reviewed in detail, as the available topographic mapping is not sufficiently detailed. If development of the Cathedral Falls site is pursued, we recommend that this storage option be explored in more detail. Potential Generation Harza estimated the annual generation with their arrangement to be about 3.45 GWh. With the revised arrangement as described above, the average annual energy potential is estimated to be 3,300 MWh, assuming no requirement for instream flows in the bypassed reach. Environmental Assessment Anadromous fish utilize Cathedral Falls Creek extensively below the fall. Because the project will operate in a run -of -river mode and return flow at the base of the falls, impacts to the anadromous fish population would be insignificant. However, it is reasonable to expect 71 regulatory agency concern for the anadromous population and adoption of several measures to ensure minimal impact. The measures could include: • Screened tailrace design • Immediate release of flow at the diversion site whenever the power plant trips offline. • Rate -of -change restrictions on the power plant discharge. The Harza report does not indicate if there are resident fish in Cathedral Falls Creek above the falls. Based on the topography, it is reasonable to expect the stream to be capable of supporting a sizable resident population. Screening of the power intakes is likely to be required to prevent losses to any resident population. It is unknown whether there are significant aesthetic or cultural issues that would be associated with diminishing flow over the falls. There do not appear to be any environmental issues that would prevent development of a run -of - river project at Cathedral Falls, but a moderate amount of environmental mitigation would be required. Therefore, the Cathedral Falls Project is judged to have a moderate potential for environmental feasibility. Economic Assessment The estimated construction annual operating costs of the Cathedral Falls Project as described above are shown in Table 24 and results of the economic analysis are shown in Figure 26. The construction costs are based on a review and adjustment of the Harza cost estimate. The earliest possible on-line date is estimated to be 2009, considering the current status of the development effort. As can be seen from Figure 26, the Cathedral Falls Project appears to be economical if approximately 55% of its cost can be funded with grants (i.e. grants totaling about $2,900,000 would be required). This indicates a moderate potential for economic and financial feasibility. Regulatory Assessment Some or all of the land occupied by the Cathedral Falls site is in the Tongass National Forest. In other states, occupying US land automatically results in jurisdiction by the Federal Energy Regulatory Commission. However, the State of Alaska will begin regulation of small hydro projects in the state once it develops and receives approval of its own regulatory program. The state has just begun developing its program, so it is too early to tell how complicated or expensive it will be. Interconnection Potential The 1998 Acres update study for the Southeast Intertie suggested that the link between Petersburg and Kake should occur in the 2011 to 2015 time frame. The transmission link would allow sale of surplus power from the Tyee Lake hydro project to IPEC to serve Kake loads. The construction cost was estimated to be about $19.7 million in 1996 dollars. 72 In 2003, D. Hittle & Associates evaluated the feasibility of the Petersburg-Kake transmission line. Their report concluded that the cost of power to Kake would be about 9.6 0/kWh in 2007, based on the following key assumptions: • The construction cost of the intertie ($23.1 million) would be funded entirely by grants. • The interconnection to Kake would be complete in 2007. • The operating costs of the intertie would be about $255,000 in 2007, including operation and maintenance, administrative and general, and reserves and replacement fund expenses. • The busbar cost of power from the Tyee Lake Project would be about 4.0 0/kWh in 2007. It is impossible at this time to determine whether these assumptions are realistic. If they are, then the interconnection would provide power to Kake at a rate that is substantially cheaper than diesel generation. However, the following circumstances should be noted: Power from Tyee Lake may not be firm in the long term, as the first priority will be to supply Petersburg & Wrangell loads, and then Ketchikan loads as a second priority. The preferred route of the transmission line is overland and away from the coast. However, there is a separate proposal to construct a road linking Kake to Petersburg that would follow the coastline. If the road were constructed, there would be some environmental incentive to route the transmission line along the road, even though that might not be the most economical route. This interface with the road complicates and probably delays the transmission line development. If the Cathedral Falls hydro project was evaluated on the same basis (i.e. 100% grant funding), then their cost of power would be even less than the intertie. Construction of the Cathedral Falls hydro project would not necessarily preclude the construction of the intertie. • Development of the project could be viewed as an alternative to construction of the Petersburg-Kake link of the Southeast Intertie. If viewed in that context, the economics of the hydro projects are highly favorable. However, there would still be a need for a substantial amount of diesel generation in Kake. 73 Table 24, Cathedral Falls Hydroelectric Project (Kake) Summary of Project Costs CONSTRUCTION COST Cost level Project Arrangement Harza Modified Harza 1979 2003 FERC Account Description Amount Amount 330 Land and Land Rights $ 17,000 $ - 330.5 Mobilization and Logistics $ 500,000 $ 126,000 331 Structures and Improvements $ 126,000 $ 204,000 332 Reservoirs, Dams, and Waterways $ 2,800,000 $ 1,500,000 333 Turbines and Generators $ 320,000 $ 600,000 334 Accessory Electrical Equipment $ - $ 295,000 335 Miscellaneous Mechanical Equipment $ 82,000 $ 70,000 336 Roads and Bridges $ 444,000 $ 90,000 353 Substation Equipment and Structures $ - $ 65,000 355 Poles and Fixtures $ 497,000 $ 720 000 SUBTOTAL Contingencies TOTAL DIRECT CONSTRUCTION COST Permitting and Engineering TOTAL CONSTRUCTION COST $ 4,786,000 $ 3,670,000 $ 1,197,000 $ 918,000 $ 5,983,000 $ 4,588,000 $ 1,117,000 $ 712,000 $ 7,100,000 $ 5,300,000 Project Arrangement Harza Modified Harza Cost level 1979 2003 OPERATING COSTS Amount Amount Incremental Labor $ - Transportation $ 10,000 Other Operating Costs (1) $ 40,000 $ 40,000 TOTAL OPERATING COSTS $ 40,000 $ 50,000 (1) Includes administration, insurance, taxes, land use feed, interima replacements, and environmental mitigation. o O LD LO N N O n 0 o O 0 0 0 0 0 0 0 0 0 0 t0 Nt CDN O O i 00M `S11d3N3813N 031NnooSIO 3Aiiv-i wno LO V IN LO M O co Lo Q N W O N LO b LO .mT- 0 0 0 O N i THE WAY FORWARD,. A PRELIMINARY STRATEGIC ECONOMIC DEVELOPMENT PLAN FOR KAKE, ALASKA Michael lEbbard and Robert Adkins November, 2005 , •IPRI Paper 05-003c THE WAY FORWARD: A PRELIMINARY STRATEGIC ECONOMIC DEVELOPMENT PLAN FOR KAKE, ALASKA Endorsements Community of Kake Letter of Intent to Cooperate, August 23, 2004 City of Kake, August 16, 2005 Kake City School District, August 19, 20005 'Organized Village of Kake, September 6, 2005 Kake Nonprofit Fisheries Corporation, September 21, 2005 Kake Chamber of Commerce, September 21, 2005 Kake Tribal Corporation, October 14, 2005 44 The Communiiyof Kake, Alaska Letter of Intent August 23, 2004 The community of Kake is privileged to have a sound body of government and private industry entities that have historically guided and supported economic growth and social stability for its people. Among these entities are the City of Kake, The Organized Village of Kake and the Kake Tribal Corporation. Together these local factions have independently grown and divested into necessary components of the community and have, through the last several decades, contributed greatly to the cultural sense of place that Kake now enjoys. The development of recent socio-economic conditions of southeast Alaska has put• communities like Kake in the position of re-evaluating their strengths and "weaknesses regarding future prosperity. Kake is fortunate to have the strong local civilian leadership that has stepped forward to demonstrate community contributions like the creation of the newly formed Chamber of.Commerce, and the outstanding achievements of the Kake City School District to ascend its youth's educational standards and performances to increasingly higher levels. The leadership of Kake recognizes that any one contribution or accomplishment that is gained by government, non-profit, or private industry will collectively benefit the community as a whole. It is for this reason that the above mentioned leaders of Kake have agreed to sign this (non -legally binding) letter of intent to cooperate in working together for the purpose of economic development and the consummation of a . comprehensive economic development strategic plan in which they have enlisted the Planning, Public Policy, and Management Department of the University of Oregon to help create. ��y Paul Reese, Mayor Date City of Kake :�-3�Zoov Bertha Cavanaugh Date Vice President Kake Tribal Corporatio r Harry B uillette President CommerceNisitor's Bureau Gc d A . Gary Willi s Date Executive Director ized • 'page of aC"1`e Eric Gebhart Date Superintendent Kake City School District • Robert Adkins, Student Date Planning, Public Policy and Management Department, University of Oregon City of Kake P.O. B X oo KAKE,9830 + PHONE: (907) 785-380, +"HOME OF THE WORLD'S LARGEST TOTEM POLE" FAX: (907) 785-4815 RESOLUTION NO.2005 — 012x A Resolution to Adopt the Strategic Economic Development Plan WHEREAS, the community of Kake is experiencing serious,'ongoing economic dislocation; and WHEREAS, this economic dislocation has forced people to leave Kake in search of jobs and income; and WHEREAS, the Kake City Council determines that a strategic economic development plan is necessary to chart a strategy for the community and prioritize projects; and WHEREAS, the Kake City council sees the need to create a broad based committee to oversee the preparation and implementation of the strategic economic development plan; and I I WHEREAS, the University of Oregon's Institute for Policy research and Innovation has worked with the community to prepare a draft strategic economic development plan NOW THEREFORE BE IT RESOLVED THAT by the Kake City Council: 1) The "Preliminary Strategic Economic Development PIan for Kake, Alaska" is hereby adopted as the economic development plan of the City of Kake. 2) The "Strategic Economic Development Committee" formed to oversee the University of Oregon planning work is hereby constituted as an official committee of the City of Kake. It is charged with overseeing the implementation of the plan, with revising it as necessary, and with reporting regularly to the Kake City Council. 3) This resolution is effective immediately upon passage. Passed and approved by a duly constituted quorum vote of 5 with 4 yea's, 0 nays, and 0 abstaining this 16th day of August , 2005. P.O. Box 4S0 Bake, Alaska 99830 (907) 785 3741 Resolution #081905 —1 Entitled: Adoption of the Strategic Economic Development Plan WfMEAS, the community of Kake is experiencing serious, ongoing economic dislocation; and WfTREAS, this economic dislocation has forced people to leave Kake in search of jobs and income; and WHEREAS, the economic dislocation and population loss threatens the long-term survival of the community and school; and WHEREAS, the school board of the Kake City School District determines that a strategic economic development plan is necessary to chart a strategy for the community and prioritize projects; and WHEREAS, the Kake City School Board sees the need to create a broad based committee to oversee the preparation and implementation ofthe strategic economic development plan; and WHEREAS, the University of Oregon's Institute for Policy Research and Innovation has worked with the community to prepare a draft strategic economic development plan. NOW, THEREFORE, BE IT RESOLVED by the Kake City School Board that: 1) The "Preliminary Strategic Economic Development Plan for Kake, Alaska" is hereby adopted as the economic development plan of the City of Kake. 2) The "Strategic Economic Development Committee" formed to oversee the University of Oregon planning work is recognized by the school district as an official committee. It is charged with overseeing the implementation of the plan, with revising it as necessary, and with reporting regularly to the Kake City School Board and other community entities as necessary. 3) This resolution is effective immediately upon passage. 1 ADOPTED this 171 School District. Eric Gebhm% Superintendent Kake City School District Kake City School District is an Equal Opportunity Employer Organized Village of Kake r. P.O. Box 346 � vow ft Kake, Alaska 99830-03i6 �� Telephone 907-785.6471 M "AW41. Fax 907-785-4902 l email KeexKwaan@starband.net (Federally Recognized Tribal Government serving the Kake, Alaska area) Resolution No. 2005-10 —Adoption of Kake Strategic Economic Plan and C'EDS Planning Process WHEREAS, the Organized Village of Kake (hereinafter referred to as OVK) is a federally recognized Indian Tribe and is organized pursuant to the authority of the Federal Indian Reorganization Acts (hereinafter IRA) of 1934 and 1936, which is the contemporary sovereign government of the Kake Tribe dating back to time immemorial; and, WHEREAS, the IRA Council as the duly elected governing body formed under the OVK Constitution and By -Laws is authorized to act on behalf of its Tribal Citizens/Members; and, WHEREAS, OVK is recognized by the United States of America as being eligible for programs and services through the federal government, based on OVK's status as a federally recognized Indian Tribe, including activities and functions serving its Citizens; and, WHEREAS, the community of Kake is experiencing serious, ongoing economic dislocation; and, WHEREAS, this economic dislocation has forced people to leave Kake in search of jobs and income which, along with the related population loss, threatens the long-term survival of Kake; and, WHEREAS, the OVK IRA Council has determined that a strategic economic development plan is necessary to chart a strategy for the community and prioritize projects; and, WHEREAS, the OVK IRA Council also sees the need to create a broad based committee to oversee the preparation and implementation of the Comprehensive Economic Development Strategic (hereinafter CEDS) Plan, and, WHEREAS, the University of Oregon's Institute for Policy Research and Innovation (hereinafter IPRI), has worked with the community to prepare the draft strategic economic development plan and will also serve as an independent monitoring and evaluation agency; THEREFORE BE IT RESOLVED, that the "Preliminary Strategic Economic Development Plan for Kake, Alaska" is hereby adopted as the economic development plan of the Organized Village of Kake; and, BE IT FURTHER RESOLVED, that the "Strategic Economic Development Committee" formed to work with the University of Oregon planning effort is hereby constituted as an official committee of OVK, and it is charged with overseeing the implementation of the plan, revising it as necessary, and reporting regularly to the OVK Council; and, BE IT FINALLY RESOLVED, that this resolution is effective immediately upon passage. CERTIFICATION This resolution was duly adopted at an IRA Council meeting held this 5-tk day of S e 2005 by a quorum of 5' (includes president as non -voting chairperson except in case of tie vote) with yes votes, no votes, and � abstaining. Henrich B. Kadake r., President