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HomeMy WebLinkAboutHoonah Intertie App/4'E", ALASKA Renewable Energy Fund GC --)ENERGY AUTHORITY Grant Application 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://www.akenergyauthority.org/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 reg uested. 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 13 9/2/2008 ®ENERGYALASAUTHORA 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 electric coop. Mailing Address Physical Address 5601 Tonsgard Court, Juneau, Alaska 99801 P.O. Box 35466, Juneau, Alaska, 99803 Telephone Fax Email 907-789-3196 907.790.8517 jmitchell@alaska.com 1.1 APPLICANT POINT OF CONTACT Name Title Vice -President Jodi Mitchell Mailing Address PO Box 210149, Auke 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 13 9/3/2008 ®ALASKA Renewable Energy Fund ENERGYAUTHORITY Grant Application SECTION 2 — PROJECT SUMMARY Provide a brief 1-2 page overview of your project. Y 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 energy you intend to use. Refer to Section 1.5 of RFA. Type in your answer here and follow same formatfor rest of the application. Permitting, design and construction of a long-term, reliable and renewable Hydroelectric Transmission Intertie for the City of Hoonah. This project will complete the Juneau -Greens Creek-Hoonah 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 project will begin at the Hawk Inlet submarine cable termination yard on Admiralty Island as a continuation of the 69-kV line from Juneau. The cable termination yard will be located on the eastern shore approximately 2.75 miles up Hawk Inlet just inland from the shoreline and the submarine cable will be buried as it leaves the yard and proceeds offshore. The total length of the submarine cable is approximately 25 miles. Kwaan Electric Intertie Cooperative, Inc. (KWETICO) will own and operate the transmission line however Inside Passage Electric Cooperative (IPEC) will continue as the utility providing electrical service to the Hoonah area. IPEC will purchase power from Alaska Electric Light & Power (AEL&P) and KWETICO will charge IPEC a wheeling rate for providing power to Hoonah who will be the primary community served along with the old Whitestone Logging Camp. The project is part of the overall Southeast Intertie plan commissioned and supported by Southeast Conference and regional leaders. The Southeast Alaska Comprehensive Economic Development Strategy (CEDS) 2008 Update lists the intertie as the number one priority for the City of Hoonah. Jodi Mitchell the CEO/General Manager of IPEC will be the contact person on the project. Additional personnel from AEL&P that will be involved are Tim McLeod President and General Manager and, Eric Eriksen Vice President Transmission and Distribution Engineer. 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 Hoonah Intertie is a $37.4 million project of which grant funding of $36.7 million is being requested to finish the final Greens Creek-Hoonah intertie segment within 3 years. Of the total amount, $26.6 million is needed to purchase the submarine cable and the remainder is for shore side connections. Once funding is secured, the ordering/fabrication/deliver/installation of the submarine cable will take 2-3 years. IPEC is providing a match of $750,000 toward the project. Below is the project cost summary: Permitting and Design $ 1,697,000 Access Road from Hoonah to Spasski Bay for Overhead Lines 100,000 Submarine Cable Hawk Inlet to Spasski Bay 25,674,118 Termination Yards 3,000,000 Overhead Lines Spasski Bay to Hoonah 4,047,000 Contingency (10%) 2,941,852 Total 2008 Dollars $37,459,970 AEA 09-004 Grant Application Page 3 of 13 9/3/2008 /GIV-) A Renewable Energy Fund ® ENERGY AUTHORITY Grant Application 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. In 2007, IPEC burned 376,451 gallons of diesel fuel to generate electricity for Hoonah at a cost of $994,794 averaging $2.61 per gallon. As of September 301h this year, IPEC has burned 271,653 gallons of diesel fuel at a cost of $1,040,431 exceeding last's year total cost with three months left in the year. This year's average price per gallon is $3.83 which is $1.22 higher than last year. Completion of the intertie will displace burning this fuel resulting in elimination of approximately 3,822 metric tons of CO2 emissions annually. This equates to elimination of 15,058,040 gallons of fossil fuel consumption at a cost of $57,672,293 at today's fuel prices over the life of the project and eliminating 152,880 metric tons of CO2 emissions over the next 40 years with clean, renewable, environmentally friendly hydro -electric power. IPEC's customers in Hoonah, Angoon, Kake, Klukwan and the Chilkat Valley will benefit by the reduced postage stamp rate for an overall 1,300 customer benefit for an estimated savings of $32,997,044 over the life of the project. An additional project life savings of $114,640 will be realized since IPEC pays $2,866 annually to the State of Alaska Department of Environmental Conservation Division of Air Quality for emissions. Hoonah has approximately 151 licensed businesses (according to the State of Alaska Department of Community and Economic Development) that will also benefit by the hydro power project. Improved medical and educational opportunities will be available via the fiber optic internet cable and lower cost energy will stimulate economic growth. In August 2008, the city sold 40 new residential lots in one day at a bid opening. Hoonah's close proximity to Juneau (40 air miles) makes it an attractive location for residents and businesses. The State of Alaska will also benefit by the rate reduction savings to the Power Cost Equalization (PCE) Program. 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 $ 37,459,970 (including estimates through construction. 2.5.2 Grant Funds Requested in this application. $ 36,709,970 2.5.3 Other Funds to be provided (Project match) $ 750,000 2.5.4 Total Grant Costs (sum of 2.5.2 and 2.5.3) $ 37,459,970 2.5.5 Estimated Benefit (Savings) $ 57,786,933 2.5.6 Public Benefit (If you can calculate the benefit in terms of $ 32,997,044 over 40 years dollars please provide that number here and explain how ($824,426 per year you calculated that number in your application.) 4,878,261 kwh sold in 2007 x .169 rate reduction 2.5.5 Estimated Savings Breakdown: Fuel Savings Life of Project $57,672,293 Elimination of Division of Air Quality Permit Fees 114,640 Total Estimated Savings $57,786,933 Rate reduction calculation weighted avg. price per gallon $3.83 x gallons consumed 271,653 / kwh sold 3,542,886 = $.294 — purchase power $.125 = cost savings $.169 AEA 09-004 Grant Application Page 4 of 13 9/3/2008 /ALASKA Renewable Energy Fund 4NIED 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 entity, state that in this section. Type in your answer here and_follow same,format for rest of the application. Eric Eriksen AEL&P Vice President of Transmission and Distribution will be the project manager and will serve as the primary project contact providing engineering support and management of third party contractors. 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.) 2009 — complete permitting and design, order submarine cable, construct cable termination yards, construct access road to Hoonah for overhead lines from Spasski Bay $6,797,000 2010 — construct overhead line from Spasski Bay to Hoonah $4,047,000 2011 — install submarine cable from Hawk Inlet to Spasski Bay $26,615,970 3.3 Project Milestones Define key tasks and decision points in your project and a schedule for achieving them. Obtaining a language change in the federal legislation allowing AEL&P to sell power outside their service area (2 county) due to some tax exempt bond financing will be necessary for this project. Senator Lisa Murkowski is working on the amendment which will most likely happen in the spring of 2009. 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 will include Eric Eriksen and Tim McLeod with AEL&P, Jodi Mitchell CEO/General Manager for IPEC. Contractors: S. Tinney Associates, Inc. will be the Permitting Coordinator to facilitate and administer the permitting process with USFS, USFWS, NMFS, EPA, USCG, USACE, ADF&G, ADGC, ADEC, ADNR, ADOT and public comments; Cabletricity Connections Ltd. will provide engineer design of submarine cable, review marine survey, determine route selection and installation and provide quality control; David Evans & Associates will provide the marine survey; The Shipley Group will provide environmental consultation and compliance review; Power Engineers, Inc. will provide the overall electrical system modeling and review as well as the over head transmission line design; Toner-Nordling will provide civil engineering and surveying services; Construction contracts will be offered for bidding when engineering is completed as will the submarine cable manufacture and installation. Other necessary materials and equipment will be selected when engineering is completed. AEA 09-004 Grant Application Page 5 of 13 9/3/2008 /®ALASKA Renewable Energy Fund ENERGYAUTHORnY Grant Application Partnerships will include KWETICO and Southeast Conference since they have a Memorandum of Understanding (MOU) for the Southeast Alaska Transmission Intertie System. KW ETICO has a meeting scheduled for October 9, 2008 to discuss a Power Sales Agreement for the Hoonah Intertie. The preliminary estimated rate is 12.5 cents per kwh including the wheeling rate. 3.5 Project Communications Discuss how you plan to monitor the project and keep the Authority informed of the status. Monthly progress reports will be submitted to AEA. 3.6 Project Risk Discuss potential problems and how you would address them. This project is located within a rural/remote location that will be challenging however no insurmountable obstacles are foreseen. The bathometric study indicates the project is feasible. The permitting project schedule and budget is dependent upon the regulatory agencies comments and requests but we do not see that as a barrier or problem. 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. 4.1 Proposed Energy Resource Describe the potential extent/amount of the energy resource that is available. Discuss the pros and cons of your proposed energy resource vs. other alternatives that may be available for the market to be served by your project. The potential extentlamount of energy resource available is difficult to answer. AEL&P has multiple load growth projections for Juneau. One projection makes the assumption that oil prices will continue to inflate in the future and people will discontinue using monitor oil stoves and dual fuel customers will choose electric over oil for heating. In that scenario, AEL&P could provide Hoonah's load of 5,000,000 kwh's with existing resources and Phase 1 of Lake Dorothy for 5 years. If we do not see the mass migration from oil to electric heat but most new homes and buildings continue to install electric heat as is currently the case, AEL&P could supply Hoonah's load with existing resources and Phase 1 of Lake Dorothy for about 10 years. With construction of Phase 2 of Lake Dorothy, AEL&P could provide Hoonah's load under the first scenario of an additional 5 years or under the second scenario for an additional 20 years. In summary, AEL&P's best estimate is: With existing resources and Lake Dorothy Phase 1, Hoonah's load of 5,000,000 kwhs for 5 and 10 years (25 to 50 gwh). With existing resources and Lake Dorothy phases 1 & 2, Hoonah's load of 5,000,000 kwhs for 10 to 30 vears (50 to 150 owh). AEA 09-004 Grant Application Page 6 of 13 9/3/2008 ALASKA Renewable Energy Fund �GMID ENERGY AUTHORITY Grant Application Other hydro resources may be discovered and constructed beyond Lake Dorothy Phase 1 & 2. On the pro side of the intertie is clean, renewable, hydro electric power generation; elimination of dependence on diesel fuel at significant savings including potential fuel delivery interruptions; elimination of susceptibility of fuel prices to wide variation; elimination of thousands of tons of CO2 emissions annually; reduced rates to rural villages in Southeast Alaska; and elimination of noise pollution. On the con side is the high cost of the project due to the 25 mile submarine cable which must be ordered and installed in one segment. The high cost of fuel makes diesel generation a highly effective but cost prohibitive alternative. 4.2 Existing Energy System 4.2.1 Basic configuration of Existing Energy System Briefly discuss the basic configuration of the existing energy system. Include information about the number, size, age, efficiency, and type of generation. The Hoonah Power Plant operates on three CAT generators: Generator Number 1 is a model D398PC 610 KW manufactured in 1977 with 72,388 hours of operation. Generator Number 2 is a model 3512 1000 KW manufactured in 1997 with 67,739 hours of operation. Generator Number 3 is also a model 3512 855 KW manufactured in 1991 with 78,072 hours of operation. Block life on these generators is 100,000 hours. In 2007, the kilowatt hours generated per gallon of diesel fuel in Hoonah averaged 14.25. 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. Sealaska Corporation completed a wind energy study in Hoonah which was finalized in December 2005. The wind resources were measured on the 1,417 foot elevation ridge above town. The measurements were very low with a six month average of 3.9 mps (8.7 mph) at 60 meters above ground level. Annual average wind speed was measured at 4 mps (9 mph). Using a wind turbine such as a GE 1500 kW machine would achieve a Gross Capacity Factor of less than 10% and a Net Capacity Factor of 9% making cost effective wind energy in Hoonah very unlikely. HydroWest looked at hydro sources in Hoonah such as Game Creek and Gartina Creek. Game Creek is relatively large in size and has good topography for developing a storage project however it was dropped from consideration because it is a major anadromous fish stream. It was determined that Gartina Creek has potential to supply 40% of the Hoonah load however the study was completed before Icy Strait Point was completed. Potential pitfalls for Gartina Creek include loss of anadromous fish habitat between the base of the falls and the powerhouse. Disruption of brown bear feeding patterns due to the powerhouse location is another point for consideration. Geothermal sources are located at least 10 miles from the community which makes this an unlikely resource as well. Both the City of Hoonah and IPEC have determined that the intertie is the best, reliable and most cost efficient source of energy for the community. AEA 09-004 Grant Application Page 7 of 13 9/3/2008 /ou ALASKA Renewable Energy Fund 401E) ENERGY AUTHORITY Grant Application 4.2.3 Existing Energy Market Discuss existing energy use and its market. Discuss impacts your project may have on energy customers. In 2007, the kilowatt hours sold in Hoonah totaled 4,878,261 with non -interruptible and interruptible sales equaling 3,189,531 and 1,602,730 respectively. The largest consumers were Icy Strait Point (cruise ship destination refurbished cannery) 477,410 kwh, Hoonah City Schools 386,400 kwh, Hoonah Trading (grocery, fuel stop and hardware store) 375,560 kwh and the Hoonah Cold Storage 363,360 kwh. Commercial enterprises and school districts do not qualify for the Power Cost Equalization (PCE) program therefore this intertie project will benefit them even more than residential customers which in turn spurs the economy and provides much needed sales tax dollars to the city and school district. Sales tax revenues provide most of the city's operational funding since there is no property tax due to restricted deed and federal properties within Hoonah's boundaries that are exempted from sales tax. 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 The project is a continuation of the 69-kV line from Juneau. The cable termination yard will be located on the eastern shore approximately 2.75 miles up Hawk Inlet just inland from the shoreline and the submarine cable will be buried as it leaves the yard and proceeds offshore. The total length of the submarine cable is approximately 25 miles. The cable will be brought ashore at Spasski Bay and connected to a submarine cable termination yard similar to the one in Young Bay on Admiralty Island. The Spasski Bay cable termination yard will include 69-kV disconnect switches, a 3-phase reactor bank, lightning arrestors and risers to connect the cable to a 69-kV overhead line to Hoonah. This overhead line will be approximately 3.5 miles in length and will use single -pole structures and 336 kcmil ACSR conductor. The Hoonah substation will be constructed near the existing powerhouse and will serve as the termination end of the Juneau -Greens Creek-Hoonah intertie. The substation will include breakers, a disconnect switch and a 69/4.16 kV transformer to interconnect with the local distribution system in Hoonah. The low voltage side of the substation will connect to the 4.16-kV bus at the Hoonah powerhouse. The system was designed for a Hoonah load of 2 MW with the current load at approximately 900 KW. However the cable will have the capacity for a 40 MW load leaving plenty of room for expansion. The manufacturer in this case is driving the actual size of the cable rather than current or anticipated loads. There are no anticipated barriers regarding the hydroelectric power system. 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. Huna Totem the local Native Corporation owns the majority of land where the overhead lines will meet the submarine cable at Spasski Bay. The City of Hoonah and Huna Totem have signed a Memorandum of Understanding (MOU) where Huna Totem grants a 30 foot wide electric utility easement from USFS 8502 road approximately '/< mile north of the Hoonah airport to Spasski Bay. The length of the road is approximately 1.25 miles. The MOU also allows for a submarine cable terminal station. AEA 09-004 Grant Application Page 8 of 13 9/3/2008 ALASKA Renewable Energy Fund '® ENERGY AUTHORITY Grant Application 4.3.3 Permits Provide the following information as it may relate to permitting and how you intend to address outstanding permit issues. • List of applicable permits • Anticipated permitting timeline • Identify and discussion of potential barriers Listed below are the permits needed from each agency: US Forest Service — National Environmental Policy Act (NEPA). The project route within USFS land is designated as a road/utility corridor and appears that an Environmental Assessment (EA) may be adequate to make a determination of Finding of No Significant Impact (FONSI). After the conclusion of the NEPA process a Special Use Authorization, Construction Permit, Timber Disposal Cost and Easement Fee (5% of the fair market value of the land) will be needed. Estimated time of completion is between 12 and 24 months. US Army Corps of Engineers (COE) — Section 10 (all structures and work in navigable waters) and Section 404 (disposal of dredged or fill material in waters of the U.S. including wetlands). The COE would route the permit applications to NMFS, USFWS and EPA as well as State agencies such as DNR, DFG, and DGC through the Alaska Coastal Management Program (ACMP). NOAA would also be notified and a permit from DOTPF will be needed. Estimated time for completion is 2 to 4 months. Address whether the following environmental and land use issues apply, and if so how they will be addressed: • Threatened or Endangered species • Habitat issues • Wetlands and other protected areas • Archaeological and historical resources • Land development constraints • Telecommunications interference • Aviation considerations • Visual, aesthetics impacts • Identify and discuss other potential barriers The Alaska Coastal Management Program (ACMP) consistency review will address threatened or endangered species, habitat issues, wetlands and other protected areas, archaeological and historical resources. We are not aware of any land development constraints, telecommunications interference, aviation considerations, or visual/aesthetics impacts. 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 AEA 09-004 Grant Application Page 9 of 13 9/3/2008 /GILDZipALASKA Renewable Energy Fund GOD ENERGY AUTHORITY Grant Application • Projected capital cost of proposed renewable energy system • Projected development cost of proposed renewable energy system Total anticipated project cost for this phase $37,459,970 Requested grant funding 36,709,970 IPEC matching funds 750,000 Potential federal funding 15,000,000* *Dependant upon State match 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 The total anticipated cost for this phase is $37,459,970 with requested grant funding of $36,709,970. Total anticipated O & M costs for the intertie are $47,180 which is included in the rate structure. The O & M can be broken down as follows: Cable termination sites $8,850 Submarine cable 8,350 Overhead line from Spasski to Hoonah 20,150 Switch yards 9,830 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 The Board of Directors of KWAAN Electric Transmission Intertie Cooperative Inc. (KWETICO) have scheduled a meeting on October 9, 2008 to discuss a power purchase sales agreement between Alaska Electric Light and Power (AEL&P) and Inside Passage Electric Cooperative (IPEC). IPEC will purchase power from AEL&P for the Hoonah Intertie and KWETICO will own the actual transmission line. Currently AEL&P and IPEC are the only two utilities belonging to KWETICO. The estimated purchase price is 12.5 cents per kWh including the wheeling rate from KWETICO. The rate of return on grant funded plant investment is 0% due to IPEC and KWETICO being non-profit regulated utilities. 4.4.4 Cost Worksheet Complete the cost worksheet form which provides summary information that will be considered in evaluating the project. Download the form, complete it, and submit it as an attachment. Document any conditions or sources your numbers are based on here. AEA 09-004 Grant Application Page 10 of 13 9/3/2008 /®ALASKA Renewable Energy Fund ® ENERGYAUTHORITY 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. 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 all its members including Hoonah by reducing or eliminating its dependence on fossil fuel generation. IPEC's history demonstrates its willingness to accept low margins (7.8% in 2007) in order to keep electric rates low while satisfying lender loan covenants. Power cost savings from the Hoonah Intertie will be passed on to its customers through lower rates. IPEC serves members in Hoonah, Kake, Angoon, Chilkat Valley and Klukwan, and currently operates under a "postage -stamp" rate structure whereby all ratepayers pay the same regardless of the area they reside in. Thus, lower power costs in Hoonah (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 debt relief from the State and Federal government for this). Calculations in this grant application attempt to isolate costs to serve Hoonah, and should not be extrapolated to its other service areas. 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 about $.0125/kWh. O & M costs are incorporated into rate purchased from AEL&P. 4.4.6 Analysis and Recommendations Provide information about the economic analysis and the proposed project. Discuss your recommendation for additional project development work. The estimated cost savings for Hoonah are .169 cents per kwh. This was calculated by taking the current weighted average cost of fuel in Hoonah at $3.83 multiplied by the number of gallons of diesel fuel consumed as of September 30, 2008 271,653 and dividing by the 2008 year to date kilowatt hours sold 3,542,886. The gross savings amount to .294 cents per kwh less purchased power of .125 per kwh from AEL&P including the wheeling rate from KWETICO yields a net savings of .169 cents per kwh. IPEC sold 4,878,261 kwh in 2007 multiplied by the estimated savings amounts to $824,426 per year extrapolated over the life of the project yields a net savings of $32,977,044. Total fuel savings over the life of the project amount to $57,672,293 in addition to Division of Air Quality emission fees of $114,640. Hoonah is one of the few rural villages in northern Southeast Alaska that has an economic engine in place The Hoonah Cold Storage has been in continuous operation for several years providing the city with much needed fish tax revenues. Icy Strait Lumber and D & L Woodworks are two local sawmills in operation providing local employment and a quality product. Hoonah Trading provides fuel, groceries and hardware items in addition to providing significant sales tax revenues. The addition of Icy Strait Point has made a tremendous impact providing local employment and sales tax dollars to the community. The Hoonah City School District has more students than the other communities of similar size. Based on the factors stated above, we believe this to be a viable, sustainable and worthwhile project for the community. By providing low cost power to Hoonah, with its rich heritage, this community will be able to continue to grow and be an economic model for other communities in Southeast Alaska. AEA 09-004 Grant Application Page 11 of 13 9/3/2008 /© ALASKA Renewable Energy Fund ® ENERGY AUTHORITY Grant Application 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 ro'ect Based on fuel consumption of 376,451 gallons in 2007 and a cable life of 40 years, we estimate the fuel displacement over the life of the project to be 15,058,040 gallons saving $57,672,293 in fuel costs based on a weighted average of current fuel prices at $3.83 per gallon in Hoonah. Anticipated annual revenues equal $609,783. The non -economic benefits to Alaskans and the environment are the reduction of 152,861 metric tons of CO2 emissions over the life of the project and reduction of noise pollution. 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. Include an estimate of bud et costs by tasks using the form - GrantBud et.xls Provide a narrative summary regarding funding sources and ,your financial commitment to the project. Total project cost $37,459,970 Less IPEC matching funds 750,000 Grant funds requested $36,709,970 AEA 09-004 Grant Application Page 12 of 13 9/3/2008 /ORrry � ALASAUTrNERGYHKA 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 M,' 4AAAA ' � V Title Vice -President Date 10/06/08 AEA 09-004 Grant Application Page 13 of 13 9/3/2008 ALASKA Renewable Energy Fund GEILD 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. 5,000,000 kw 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 ii. Rated capacity of generators/boilers/other 610 KW, 855 KW, 1000 KW iii. Generator/boilers/other type iv. Age of generators/boilers/other 31, 17, 11 years v. Efficiency of generators/boilers/other 14.25 kWh per gallon b) Annual O&M cost (if system is part of the Railbelt grid, leave this section blank) i. Annual O&M cost for labor $93,825 ii. Annual O&M cost for non -labor $1,085,066 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] 4,878,261 ii. Fuel usage d) Diesel [gal] 376,451 Other iii. Peak Load 900 iv. Average Load 845 v. Minimum Load 780 vi. Efficiency 14.25 kWh per gallon vii. Future trends Annual heating fuel usage (fill in as applicable) i. Diesel [gal or MMBtu] n/a ii. Electricity [kWh] n/a 1 The Railbelt grid connects all customers of Chugach Electric Association, Homer Electric Association, Golden Valley Electric Association, the City of Seward Electric Department, Matanuska Electric Association and Anchorage Municipal Light and Power. RFA AEA 09-004 Application Cost Worksheet revised 9126108 Page 1 ALASKA Renewable Energy Fund ® ENERGY AUTHORITY iii. Propane [gal or MMBtu] n/a iv. Coal [tons or MMBtu] n/a v. Wood [cords, green tons, dry tons] n/a vi. Other a) Installed capacity 40 MW b) Annual renewable electricity generation i. Diesel [gal or MMBtu] n/a ii. Electricity [kWh] 5,000,000 iii. Propane [gal or MMBtu] n/a iv. Coal [tons or MMBtu] n/a v. Wood [cords, green tons, dry tons] n/a vi. Other a) Total capital cost of new system $37,459,970 b) Development cost $0 c) Annual O&M cost of new system $47,180 d) Annual fuel cost $0 S. Project Benefits a) Amount of fuel displaced for i. Electricity 376,451 ii. Heat n/a iii. Transportation n/a b) Price of displaced fuel c) Other economic benefits $1,040,431 Rate reduction, eliminate CO2 emissions and air quality permit fees, economic growth d) Amount of Alaska public benefits $57,786,933 6. Power Purchase/Sales Price a) Price for power purchase/sale 12.5 cents per kWh 7. Project Analysis a) Basic Economic Analysis Project benefit/cost ratio Payback 1.54 44.5 years RFA AEA 09-004 Application Cost Worksheet revised 9126108 Page 2 /Zf; ALASKA Renewable Energy Fund ONE= ENERGY AUTHORRY RFA AEA 09-004 Application Cost Worksheet revised 9126108 Page 3 01 O O O O O O 0 0 0 O O O 0 0 CO O O N O O .-� O 0 0 O O �--� O O 00 n O V O n .--i m to O n lD O 0 C O d M Lr rr v rl H 1/T O N vT 1^ VT V? h O 0 O O u � O Y V O N � U -C O 3 J LL 0 0 0 0 0 0 O O O O O 0 O'O 00 O O N O O c-I O O Lf) a 0 0 O O w cr, ovon �i to t 0 N Off) Lr ni M N' Y � !n a C LL LL N N C u b0 u a r w i R C m (IJ a, tto o E m E L j c ai a vim) rn F O u O O O O O O O O O O O O O O O 6 0 6 0 0 C) V) it a)- vi. 0 V) O m n N fT J L < a�iJ m O v F L O O O O N N 00 00 W W 0�1 T N N u O 0 O O O O O O O 0 f\ r a d O O a a O 0 O 0 O O O O O O O 0 O 0 rf ff V1 to M O O O 0 m o6 P, rl Lo LD V) to N N N � N O O O O O O O O 0 0 O O V} VT Y h O 0 O O O O O � O O a r ri C 0Ol o O � m Y G ➢ Resolution 2008-1 Kwaan Electric Transmission Intertie Cooperative Inc. September 30, 2008 ENTITLED: 200 8-1 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 Hoonah 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. Tim McLeod, President ATTEST: (S E A L) Je a ina, Secretary 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 Jr Yeas, Nays and Absent this 12th day of September, 2008. Michaef See, Chairman ATTEST: 4;�Za ilbur Brown, Secretary/Treasurer P.O. Box 210149 Auke Bay, Alaska 99821 (907) 789-3196 Fax (907) 790-8517 p.2 Memorandum of Understanding Spasski Bay Utility Easement Hoonah, Alaska Project Location: The City of Hoonah and Huna Totem Corporation agree that low a energy is needed in the community of Hoonah. The Juneau to Hoonah Intertie Projec represents the most viable option to provide that need in the near term. This understanding outlines the willingness of the two above entities to allow for planning occur. As project funding becomes available official agreements will be executed by both respective governing bodies to allow- for a utility easement. Spasski Bay Utility easement is a new alignment construction from the USFS 8502 ro approximately 1/4 mile north of the Hoonah Airport to Spasski Bay. The proposed ror roughly parallels the Spasski Trail. The length is approximately 1.25 miles. This utilir easement will be for the installation of the overhead power line transmission line. Exh. 1 shows the approximate ROW location. Parties to the Agreement: City of Hoonah, Alaska And Huna Totem Corporation Spasski Bay Utilily Easement Approximately 1.25 miles ofnew access road construction. This agreement will be for an up to 30' wide utility easement and construction of overhead electric lines and poles. It will also include the area for a t submarine cable terminal station to be constructed in the future. The electric facility will be constructed by City of Hoonah and its partners. The City and its partners will be responsible for all required vegetation removal, grading, and utility construction within the easement area. Project Development:. Design activities beyond the preli the acquisition minary work required for alternatives evaluation, and of Right -Of -Way will not proceed until the project is fully funded. Right -of -Way All land surrounding the project belongs to Huna Totem Corporation, The ROW agreement is for utility installation and maintenance only. The City of Hoonah with its mo-p LL Uo UO.Ioa p.3 partners of IPEC and AEL&P will construct, operate, and maintain the utility easem for the overhead power transmission line. Huna Totem agrees to allow for future ac for line maintenance only. The City recognizes that Huna Totem can limit access to easement by the general public. Environmental clearance work for an up to 30' wide utility easement and construction overhead electric lines and poles adjacent to Spasski Bay Utility Easement will be performed by the City and its partners. The work will also include the area for a submarine cable terminal station to be constructed in the future. The electric facility w be constructed by the City and its partners. Construction: As soon as practical after the plans are complete and funding is avail; Maintenance: The City agrees to exercise operation responsibilities and maintain or cause to be maintained the completed Spasski Bay utility easement. This Agreement shall be effective as of the date of the latest signature below. Date �J/1 City of Hoonah� Dennis H. Gray, Jr., Mayor p- Huna Totem Corporation Robert Wysocki, Chief Executive Officer RCN c4 vo uo.ias E' s ICY Halibut Island Pt: Sophia 15 74 Inner Pt. H001VA V� Long Is. •m F Game Pt. a d 5 {{ • f� NOTE: PRELIMINARY TRANSMISSION CORRIDOR ALICNMENT IS SUBJECT TO CHANGE BASED ON PHIAL ROAD DESIGN, PERMITTING 21 0 s 23 Qo LOCATION STRAIT Neck Spasski Bay 31 NOTE Q I f G I S 11 Zrl 12 I L--] PROPOSEDPROAO'ED JUNEAU>" GREENS It CREEKIHOONAH, 1 ALASKA INTERTIE PROJECT AiASKA NT,• AAA SAAD wER CTRic UG* �UN'A� A' 99SO CUV. rlGUP.E7 R&M PAW..: 031836 r. 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\Fo=ation�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-1") 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\SECTo=ation\.SEQFina1(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 Understanding. 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\SECTo(maflon\SECTina1(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 fASECTormatioMSECTinal (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\SEC1Formation\SEC\Final (6-2M4) 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. i � Date: President Kwaan Electric Transmission Intertie Cooperative, Inc. Date: U' President Southeast Conference MEMORANDUM OF UNDERSTANDING BETWEEN KWAAN ELECTRIC TRANSMISSION INTERTIE COOPERATIVE, INC. AND SOUTHEAST CONFERENCE Page 6 of 6 fs\SECTomation\SEC\Final (6-29-04) 2.6 Transmission Considerations There are two transmission considerations associated with this project: • The cost of transmission lines from anew project to the existing electrical infrastructure, and • The SE Alaska intertie and how plans for extending the intertie might impact new project decisions. The costs of transmission for all of the projects covered in this report are included in the economic analyses contained herein. The existing and proposed SE Alaska intertie were discussed in Section 1.2.2 and shown in Figure 2. Referring to Figure 2, the Intertie to the Greens Creek Mine has recently been completed, and there is an ongoing effort to get the estimated $26 million required to construct the intertie to Hoonah. Yakutat is very isolated from the intertie and there is little chance that they can get electrical energy from outside sources. There is a reasonably good chance that Hydaburg and Klukwan will eventually be connected to the intertie, and Kake has a lower probability of being connected to the intertie. 2.7 Economic Analysis for a Potential Wind Power Station at Hoonah and/or Yakutat Both Hoonah and Yakutat are isolated from any central grid. In order to ensure grid stability, a wind power station should be sized such that it never exceeds 30% of the load. Hoonah has a nameplate capacity of 2,455 kW and Yakutat has a capacity of 2,880 kW. Using 30% of the load and assuming that the peak load is approximately 80% of the nameplate capacity yields a maximum wind turbine rating of approximately 585 kW at Hoonah and 690 kW at Yakutat. If the wind turbine has a somewhat higher rating, it can be derated to meet this criteria. A Vestas 680 kW wind turbine was chosen for economic modeling. There are two methods generally used to determine the economic viability of a wind power project: 1. A Cost -of -Energy (COE) model used to derive an approximate cost of generation, and 2. Amore complex economic model that reflects the approach used by developers and financial institutions to finance commercial projects. Because the wind resource results were significantly below the wind speeds generally required to achieve financial viability, the first method was chosen, since it provides results that puts the project is an easy to understand perspective. It should be noted that the capital costs for wind turbines delivered to a US market has increased significantly during the past two years due to the weakening of the US dollar and dramatic 39 increases in the cost for steel in 2004. (Steel is used for most wind turbine components, but the major cost increase impact is for the wind turbine towers whose cost is directly proportional to the price of steel.) The numbers used herein reflect prices in late 2005. 2.7.1 Cost-of-Enerev Calculation The simplified Cost -of -Energy (COE) model is: Cost of Energy = ((fixed charge rate x capital cost) + annual O&M (inc. schd. replacements/overhauls)) annual net energy generation Tables 12 and 13 show the results for values that represent the most likely costs and financing terms for a commercial project with no grants and today's (December 2005) costs for financing a project. The fixed charge rate is based on a blend of equity (12% return) and debt (8% return) financing, assuming 50% equity and 50% debt. The cost for the wind turbine ($950,000/MW) is the minimum current cost for "bankable"2 wind turbines. The balance -of -station costs (engineering, roads, control/storage building, wind turbine foundations, monitoring and control systems, one-time installation fee by land owner, and electrical infrastructure) have a range of $230,000 - $280,000 per installed MW for plants rated at 10 —100 MW. A value of $280,000 per MW was used for this calculation since it is a "one-off' installation and sophisticated controls will be required to integrate the wind turbine to the grid. Approximately $150,000 will also be required at both locations to install the transmission lines from the wind turbine to the utility interconnect. In addition, barging the crane in and out and delivering the wind turbine and 60-meter steel tower is estimated to cost $110,000. These costs are included in the balance -of - station costs. An installation fee of $5,000 per wind turbine, which would be paid to the land owner was also applied to the balance -of -station number, which reflects typical current values. Table 12, Cost -of -Energy Calculation for Hoonah Item Value Turbine rating 680 kW Project life ears 25 Fixed charge rate 0.14 Wind turbine cost $ 646,000 Balance -of -station cost $ 450,400 Soft costs $ 50,000 Total Capital Cost $ 1,146,400 Annualized amortization FCR x Capital Cost $166,799.37 Annual operation & maintenance inc. major re I. $ 20,000 Total annualized cost $ 186,799 Annual net kWh 536,110 Cost of energy COE before royalty a ments $ 0.35 s `Bankable" wind turbines are from well -established manufacturers with good reputations for delivering on time and carry warranties that satisfy financing entities. M Water Sungly Creek Project Arrangements of Previous Studies HydroWest also considered a hydroelectric development on a tributary of Gartina Creek, referred to in their study as Water Supply Creek. Water Supply Creek flows north and northeast into Gartina Creek a few hundred feet above Gartina Falls. About 2,500 feet above that confluence, the City of Hoonah diverts water for a municipal water supply. The land is entirely Sealaska Corporation land. The arrangement proposed by HydroWest includes the following: • A concrete and rockfill diversion dam at about El 800 that raises the water surface about 8 feet. An intake structure would be located on the east abutment. • A power conduit consisting of 4,000 feet of 24-inch diameter HDPE pipe and 1,500 feet of 20-inch diameter steel pipe. The power conduit would be located adjacent to an existing logging road for much of its length. • A powerhouse located just below the existing water supply diversion. The powerhouse would have a single 600-kW generating unit. The power plant would discharge back to the pond behind the water supply diversion dam. • A transmission line about 4.1 miles long to connect to the existing IPEC system near the airport. Note that if both the Gartina Falls and Water Supply Creek projects are developed, the cost of most of the transmission line would be shared. • An access road about 1,300 feet long from the end of existing logging road to the diversion structure. The construction cost for the HydroWest arrangement was estimated to be $3.1 million. Note that the City of Hoonah began collecting streamflow data just upstream of the water supply diversion in spring 2003 as the first step in a more serious consideration of developing the site. Potential Generation The potential generation of the Water Supply Creek Project was estimated by HydroWest to be about 1,800 MWh per year, which is approximately 40% of the current Hoonah load. HydroWest did not estimate the amount of that potential generation that would actually be usable. There should be little problem absorbing all or nearly all of the potential generation into the Hoonah system. Environmental Assessment There are no issues known at this time that would prevent the development of the Water Supply Creek project. If subsequent surveys determine that there is a significant population of resident fish in the creek between the diversion and the powerhouse, then some regulatory agencies want to impose an instream flow requirement, which would seriously jeopardize the project's feasibility. The project is judged to have a high potential for environmental feasibility. 60 Economic Assessment The estimated construction and annual operating costs of the Water Supply Creek Project as described above are shown in Table 22 and the results of the economic analysis are shown in Figure 24. Table 22, Gartina Falls and Water Supply Creek Hydro Projects (Hoonah) Summary of Project Costs CONSTRUCTION COST (2002 Cost Level) FERC Account Description Project Arrangement Water Supply Gartina Falls Creek Amount Amount 330 Land and Land Rights $ - $ - 330.5 Mobilization and Logistics $ 76,000 $ 67,000 331 Structures and Improvements $ 330,000 $ 178,000 332 Reservoirs, Dams, and Waterways $ 836,000 $ 814,000 333 Turbines and Generators $ 325,000 $ 299,000 334 Accessory Electrical Equipment $ 215,000 $ 215,000 335 Miscellaneous Mechanical Equipment $ 75,000 $ 75,000 336 Roads and Bridges $ 73,000 $ 61,000 353 Substation Equipment and Structures $ 100,000 $ 100,000 355 Transmission Line $ 280,000 $ 287,000 SUBTOTAL Contingencies TOTAL DIRECT CONSTRUCTION COST Permitting and Engineering TOTAL INVESTMENT COST (2002 Cost Level) Escalation (Approx. 2.3%) TOTAL INVESTMENT COST (2003 Cost Level) $ 2,310,000 $ 2,096,000 $ 578,000 $ 524,000 $ 2,888,000 $ 2,620,000 $ 775,000 $ 625,000 $ 3,663,000 $ 3,245,000 $ 87,000 $ 75,000 $ 3,750,000 $ 3,320,000 Project Arrangement Water Supply Gartina Falls Creek OPERATING COSTS (2002 Cost Level) Amount Amount Incremental Labor $ $ Transportation $ $ - Other Operating Costs(1) $34,000 $34,000 TOTAL OPERATING COSTS (2002 Cost Level) $ 34,000 $ 34,000 Escalation (Approx. 2.3%) $ 1,000 $ 1,000 TOTAL OPERATING COSTS (2003 Cost Level) $ 35,000 $ 35,000 (1) Includes administration, insurance, taxes, land use feed, interima replacements, and environmental mitigation. 61 As can be seen from Figure 24, the Water Supply Creek Project appears to be economical if approximately 40% of its cost can be funded with grants (i.e. $1,300,000 in grants). This indicates a moderate potential for economic feasibility. Joint Development The HydroWest study concluded that only one of the two projects should be developed, as there was insufficient load in Hoonah to justify both. That conclusion did not take into consideration the Point Sophia development, which is expected to add considerable load. It is quite possible that development of both projects can be justified when the Point Sophia load is considered, but more detailed study of the timing of the loads and generation would be required. Joint development would decrease the construction cost somewhat, and if the projects were developed sequentially, could provide construction employment for a number of Hoonah residents for 3 - 4 years. Interconnection Potential Alaska Electric Light & Power (AELP), the utility serving Juneau, has proposed to construct an intertie between Juneau and Hoonah through Greens Creek. AELP is also proposing to develop the Lake Dorothy Hydroelectric Project, which would produce the power needed to supply the Greens Creek mine and Hoonah. In 2003, D. Hittle & Associates evaluated the feasibility of such an intertie. That report determined that the cost of power to Hoonah would be about 9.6 0/kWh in 2007, based on the following key assumptions: • The construction cost of the intertie ($37.1) million would be funded by grants. • The interconnection to Hoonah would be complete in 2007. • The allocated operating costs of the intertie would be about $61,000 in 2007, including operation and maintenance, administrative and general, and reserves and replacement fund expenses. • The busbar cost of power from Lake Dorothy would be about 8.5 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 Hoonah at a rate that is substantially cheaper than diesel generation. However, the following circumstances should be noted: • Power from Lake Dorothy may not be firm in the long term, as AEL&P's first priority may be to supply Juneau loads. • Hoonah's loads are small compared to the Greens Creek mine loads, but the cost of the line from Greens Creek to Hoonah is relatively high. Thus, there is less economic incentive for the Greens Creek-to-Hoonah segment than there is for the Juneau -to -Greens Creek segment. If funding is difficult to obtain, the Greens Creek-to-Hoonah segment could be sacrificed. • Hoonah's cost of power with the intertie could go up substantially when the Greens Creek mine ceases operation, since Hoonah would need to pay the O&M cost for the entire intertie. • If the Hoonah hydroelectric projects were evaluated on the same basis (i.e. 100% grant funding), then their cost of power would be even less than the intertie. 63 JUNEAU AREA POWER SUPPLY SYSTEM, HOONAH PHASE KWAAN ELECTRIC TRANSMISSION INTERTIE COOPERATIVE, INC PROJECT MANAGEMENT PLAN 1. PROJECT DESCRIPTION 1.1. Project Purpose The Juneau Area Power Supply System is a $49 million plan to provide a long term, reliable, and renewable hydroelectric energy system for the area surrounding Juneau Alaska. Additionally, the areas served by the plan will receive the benefit of fiber optic and broadband internet services. There are two segments of the plan : The $20 million, 34.9-mile line extension from the Juneau Area Power Grid to Greens Creek Mine on Admiralty Island, and the $29 million, 29-mile intertie to the community of Hoonah on Chichagoff Island. In 2005, the transmission segment from Juneau to Admiralty Island was completed. Completion of this segment has allowed excess hydroelectricity from the Juneau area power grid to offset the fossil fuel generation needs of Greens Creek Mine, one of the largest Juneau employers, with clean renewable hydroelectricity. The remaining element is the design, permitting, and construction of the line extension to Hoonah. Completion of this line will increase economic development opportunities in Hoonah, have a positive environmental impact, and provide a branching -off point to interconnect other Southeast Alaska communities. 1.2. Proposed Facilities The project will include the following features: • A 11.5-mile overhead transmission line extension from the existing Juneau 69- kilovolt power grid to the North end of Douglas Island. This line is a wood pole type construction. • A submarine cable termination yard at North Douglas Island to transition from over head transmission line to a submersible under water transmission line. This fenced facility requires shore access and cable support equipment. • A 9.5-mile armored submarine cable laying between Douglas Island and Young Bay. This cable will provide 69-kilovolt A.C. power and fiber-optic communication to Admiralty Island. • A submarine cable termination yard at Young Bay to transition from the submarine cable back to an over head transmission line. This small fenced facility requires shore access and cable support equipment. Hoonah Regional Line Extension I September 30. 2008 • A 5.6-mile over head transmission line from Young Bay termination yard to Hawk Inlet and an additional 8.3-mile line from Hawk Inlet to Greens Creek Mine. This line is a wood pole type construction. • A submarine cable termination yard at Hawk Inlet to transition from the existing over head 69-kilovolt transmission line to a submersible under water transmission line. This fenced facility will also require shore access and cable support equipment. • A 25-mile armored submarine cable laying between Hawk Inlet and Spasski Bay. This cable will provide 69-kilovolt A.C. power and fiber-optic communication. • A submarine cable termination yard at Spasski Bay to transition from the submarine cable back to an over head transmission line. This fenced facility will also require shore access and cable support equipment. • A 3.5-mile over head transmission line will be built from Spasski Bay termination yard to the Hoonah substation. This line will be wood pole type construction. • A Hoonah substation will be constructed to transform 69-kilovolt electricity down to 4160-volt, to match Hoonah's generation voltage. This substation will be located near Hoonah's generation plant and have a tie point to the generation bus. 1.3. General Drawings Enclosed are the following preliminary maps and drawings: Map 1 — Project Map Drawing 1 — Electrical One -Line Drawing 2 — Hawk Inlet Submarine Cable Termination Yard Layout Drawing 3 — Hawk Inlet Submarine Cable Landing Layout Drawing 4 — Spasski Bay Submarine Cable Landing Layout Drawing 5 — Spasski Bay Submarine Cable Termination Yard Layout Drawing 6 — Spasski Bay to Hoonah, 3.5-Mile Transmission Line Drawing 7 — Hoonah Substation Layout 1.4. Current Status Preliminary engineering started in the summer of 1999. This included a review of alternate solutions, electrical system feasibility, planning budget, preliminary layout drawings, and permitting review. The following complementary construction phases have been completed: • 11-mile transmission line extension to North Douglas • 9.5-mile submarine cable installation between North Douglas and Young Bay • 5.6-mile transmission line construction from Young Bay to Hawk Inlet • 8.3-mile transmission line construction from Hawk Inlet to Greens Creek Mine Hoonah Regional Line Extension 2 September 30. 2008 Final design and permitting of the final phase of construction to Hoonah, is expected to begin early in 2007 and be completed by late 2008. 2. ORGANIZATION AND STAFFING 2.1. Project Organization Chart Figure 1, shows a general organization chart and includes direction of authority and communication. 2.2. Responsibilities of Involved Organizations KWAAN Electric Transmission Intertie Cooperative, Inc. (KWETICO) • Owner - KWAAN was formed as a Cooperative to establish ownership and management of the facilities between entities participating in the regional interie plan. To date, the membership consists of AEL&P, Greens Creek Mine, and Island Passage Electric Cooperative (IPEC, utility serving Hoonah). Each of these members has a representative on a KWAAN board of directors. KWAAN has selected Alaska Electric Light & Power, as the largest member, to provide project management of the intertie construction process. Alaska Electric Light & Power (AEL&P) • Overall Project Management, including payments and reimbursements • Engineering oversight and final design review • Permitting oversight and compliance • Management of contracts and construction • Acquisition of materials and equipment • Start-up and testing AEL&P Subcontractor Listing • S. Tinney Associates, Inc. (Permitting Coordinator) - Facilitate and Administer Permitting Process with agencies: USFS. USFWS, NMFS, EPA, USCG, USACE, ADF&G, ADGC, ADEC, ADNR, ADOT, ..., and Public Comments • Cabletricity Connections, Ltd. - Provide engineer design of submarine cable, review marine survey, determine, route selection, and installation quality control • David Evans & Associates (Marine Surveying) - Desktop Study & Preliminary Route Selection - Marine Survey Phase I of Preliminary Route Selection - Marine Survey Phase I Report - Marine Survey Phase II and Final Route Selection noonan Kegional Line Extension 3 September 30. 2008 r------------------ - - - - -, � ] _ §ƒ ,\ 2\ §) u k} 1- k( > §�\ A ----------------------- 4 ± ; { - § 4 a z> r w » § e 2 3 k\ ) ; eu a� d4 ! m\ _ // }\ �) 4 0 2 zG u/ o �e E4 £b ( 5@ 2z= )k\ ■ ;Z� 0U p \ \3 )k __ §\ 2( �* 022 � ,/ Ea ) /j 00j * b� j uu § I SCHEDULE 3.1. Project Tasks and Schedule A two year design and permitting phase will begin early 2007, after an approved Project Management Plan and funding is received. Then a contract will be awarded for Phase I of a two phase marine survey. Marine Survey Phase I, will begin with a table top study to gather existing information and develop potential routes. Then a marine vessel will be deployed to investigate these routes using multi -beam bathometric survey equipment and acoustic seismology equipment. Phase I will conclude in June 2007, with a summary report and identification of the most desirable route. Completion of Marine Survey Phase I, will provide information to continue items 4, 5, 6, and 7 shown on Table 1. The plan will be to have completed a preliminary project design and file the necessary applications by the end of 2007. During 2008, we will receive agency comments on the permit applications and a preliminary indication of design approval. At this point in spring of 2008, Marine Survey Phase 11 will be awarded. This final marine phase will consist of a side -scan sonar survey and video imaging to conclude a detailed cable route design. The final marine survey information and agency comments will be addressed in a final design and permitting phase, which is shown in Table 1 below as items 10 and 11. By the end of 2008, a final design will be complete, all permits will be received, and a construction plan developed to make ready for construction spring 2009. Table 1 Hoonah Line Extension Design, Permitting, and Construction Schedule No. Description Start Finish 1 Project Management Plan Fall, 2006 Jarmury, 2007 2 Marine Survey Contract & Award January, 2007 February, 2007 3 Marine Survey Phase I Aril, 2007 June, 2007 4 Preliminary Land Segments Design & Survey Aril, 2007 December, 2007 5 Route Select & Cable Design June, 2007 December, 2007 6 Electrical System Studies August, 2007 December, 2007 7 Be in Permit Application & Filing June, 2007 December, 2007 8 Public Notices and Permitting Process January, 2008 August, 2008 9 Marine Survey Phase II Aril, 2008 June, 2008 10 Finalize Designs, & Construction Plan July, 2008 December, 2008 11 Receive Final Permitting &Construction Plan December, 2008 12 Construction Schedule January, 2009 September, 2010 Hoonah Regional Line Fxtension 6 Sentember 30 2008 3.2. Progress Tracking Procedures The Project Manager will receive a biweekly update from personnel and compare the planned versus actual project schedule, budget, and goals. A monthly project update will be given to AEL&P General Manager. Tracking and progress reporting will be generated by using the Microsoft Office Suite of software. A Project filing system will be maintained in both electronic and hard copy. 4. FINANCIAL 4.1. Financial Tracking Shown in Table 2, is an accounting plan by activity that will be established in AEL&P's financial tracking system. The plan only includes activities covered under current anticipated funding to complete the design and permitting phase of the project. Table 2 Project Accounting Master Project No. Activity Description EB06538 Hoonah Regional Line Extension 01 Project Management/Administration 02 Permitting 03 Electrical System Study 04 Marine Survey & Design 05 Hawk Inlet Land Survey & Design 06 Spasski Bay Land Survey & Design 07 Spasski To Hoonah Line Survey & Design 08 Hoonah Substation Design Hoonah Regional Line Extension 7 September 30. 2008 4.2. Cash Flow The estimated cash flow for permitting and design is shown in Figure 2. Figure 2 Cash Flow 1,000 0 900 0 � 800 z 700 0 600 Q 500 W > 400 J 300 200 7 U 100 � o� 6` o, 4' p� o� So� o' )'Dc 41 10, S°\ gaPll gad 04 Date 4.3. Reimbursement Procedures KWAAN will apply to DOE for payment of allocated Federal funds on a milestone basis. The established schedule is shown in Table 3. Table 3 Milestone Payment Schedule No. MILESTONE DESCRIPTION AMOUNT 1 Approved Non -Project Management Plan $100,000 2 Marine Survey Phase I Contract Award $150,000 3 Marine Survey Phase I Completed $150,000 4 Preliminary Design & Permitting Report $100,000 5 Updated Non -Construction Project Management Plan $100,000 6 Marine Survey Phase II Contract Award $200,000 7 Marine Survey Phase 11 Complete $120,000 8 Final Design & Permitting Report $10,000 9 Construction Project Management Plan $10,000 10 Final Construction and Cost Report $10,000 TOTAL $950,000 4.4. Budget Tracking Procedures AEL&P's accounting system will produce monthly spreadsheets showing actual expenses, both cleared and outstanding. The expenses will be compared against budget, and the difference will be shown. The Project Manager and General Manager Hoonah Regional Line Extension 8 September 30, 2008 will review the accounting monthly and determine if corrective action is necessary. The overall project budget and a detailed budget for the Hoonah phase design and permitting are shown in Table 4 and Table 5. Table 4 Juneau Area Power System Project Budget No. DESCRIPTION AMOUNT SOURCE 34.9-mile line extension from the Juneau Area $5,000,000 Private 1 * Power Grid to Greens Creek Mine on Admiralty Island. $15,000,000 Denali Commission 2 Design & Permitting of a 29-mile line extension U.S. Department of to Hoonah $950,000 Energy 3 Construct the 29-mile line extension to the Government Funding community of Hoonah on Chichagoff Island. $28,050,000 (undetermined source) *Item 1, completed 2005 TOTAL PROJECT COST $48,000,000 Table 5 Hoonah Phase Design & Permitting Budget YEAR EM EXPENSE DESCRIPTION 2007 2008 1 Project Management/Administration $25,000 $25,000 2 Permitting $103,000 $130,000 3 Electrical System Study $12,000 $10,000 4 Marine Survey Phase I $170,000 5 Marine Survey Phase II $295,000 5 Hawk Inlet Land Survey & Design $20,000 $5,000 6 Spasski Bay Land Survey & Design $20,000 $5,000 7 Spasski To Hoonah Line Survey & Design $30,000 $5,000 8 Hoonah Substation Design $20,000 $5,000 9 Route Selection & Cable Design $50,000 $20,000 Year End Totals $450,000 $500,000 Design & Permitting Total $950,000 Hoonah Regional Line Extension 9 September 30, 2008 5. POTENTIAL ISSUES 5.1. Permitting Project schedule and budget will be dependent on the regulatory agencies comments and request. 5.2. Technical This is a rural/remote project and will present world class challenges, however no insurmountable obstacles are foreseen. 5.3. Management/Staffing No anticipated issues. 5.4. Budget KWAAN anticipates that the allocated Federal funds beginning 2007 will be sufficient to complete the design and permitting phase of the project through 2008. If additional funding is not received prior to 2009, the project will be delayed. 5.5. Schedule No anticipated obstacles at this time. Hoonah Regional Line Extension 10 September 30. 2008 APPENDIXI PROJECT DRAWINGS (Note: Drawings are preliminary and subject to revision during final design) Hoonah Regional Line Extension I I September 30. 2008 § § ) , � � \ � 2 ) � )` ■ \ ƒ \ ■ / \ : e i \\ƒ \ } \\ v ! ) \-§ ]/\ - »« / [k »\ - )\ ) ! . yy m« ! � ƒ . ! ` , \ 2 a e \) Drawing 2 — Hawk Inlet Submarine Cable Termination Yard Layout rm VIEW - A 0 REf+LipR RENCipR RENCipR 69kV 69kV 69kV IRCUR SVIi CH ER 69kV Rr= Vm l2kV E%ISiIN6 69 KV LA OVER HERB LINE A. I SUBMARINE CABLE ip SPASSKI BAV (25 MILE) 69kV CABLE SIN %`RV NEER, 72kV SE6 BRE REM U A, J2kV GNB SVITCH TERMINATIONS DISCONNECTS A A L J CONTRpL BUIL BINL 0' 0' Scple In Eeek VIEW - B Hoonah Regional Line Extension 14 September 30 2008 W N J _ O r—I I N L E T per^ w O r O =w < b � N z - B�Jpo pm rc t E Drawing 4 — Spasski Bay Submarine Cable Termination Yard Layout SLACK SPAN VIEW - A NG REACTOR REACTOR REACTOR 69kV 69kV 69kV BUSS SUPPORTS 72kV 69kV LA OVERHEAD 691,V TO HOONAH SUBMARINE CABLE TO HAWK INLET (25 MILE) 69kV CABLE 60OA, 721,V TERMINATIONS 600A, 72kV DISCONNECTS STA SERV XFMR GND SWITCH A A i A Hoonah Regional Line Extension 16 September 30, 2008 r E E g w w wlw 'DNV) 2_ cv f U y LL wN ,QURCO n U)R LLp NIICzp NT U ,fI rOywwRno m �LLaC R .¢LLC d'F w'.° , p o u ¢ aFA7yI IIII !L4Ro°iC a Q >te �o CROZQ pVQm) Q wU QZ NLL IIcLLNRCon �LLRRN LLdpRy LLp'cRowR W� mC U IULL U?Q p 1IU0 �UodLLN' 4 _ !.LLLmlLLmC CI cNW Uw cW CCR NN IRN �CWR7 p ANaO Q w a01LL Q O} tO u1 N Q�LLhN W(� c m la to c o IV `o 'b IV Iv I,� y ILL ILL Im iLL LL d �p ails pp O a N 01� . 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