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HomeMy WebLinkAboutAEA Board Minutes October 25 2023Alaska Energy Authority BOARD MEETING MINUTES Wednesday, October 25, 2023 Anchorage, Alaska 1. CALL TO ORDER A&AkAUTHORITY ALASKA ENERGY Chair Pruhs called the meeting of the Alaska Energy Authority to order on October 25, 2023, at 8:30 am. A quorum was established. 2. ROLL CALL BOARD MEMBERS Members present: Chair Dana Pruhs (Public Member); Vice -Chair Bill Kendig (Public Member); Albert Fogle (Public Member); Micaela Fowler (Deputy Commissioner DCCED for Commissioner Julie Sande); Bill Vivlamore (Public Member); and Randy Eledge (Public Member). Chair Pruhs requested that individuals in the room state their name and affiliation, if any. 3. AGENDA APPROVAL MOTION: A motion was made by Vice -Chair Kendig to approve the agenda. Motion seconded by Mr. Vivlamore. The motion to approve the agenda passed without objection. 4. PRIOR MINUTES — September 22, 2023 MOTION: A motion was made by Vice -Chair Kendig to approve the prior minutes of September 22, 2023. Motion seconded by Mr. Fogle. The motion to approve the minutes of September 22, 2023 passed without objection. S. PUBLIC COMMENTS (2 minutes per person) There were no members of the public online or in -person who requested to comment. 6. NEW BUSINESS Mr. Thayer introduced Kent Sullivan, who is contracting with AEA and will hopefully become Chief Counsel. Mr. Sullivan briefly provided his professional background. COST OF ENERGY IN ALAS 813 W Northern Lights Blvd, Anchorage, AK 99503 - Phone: (907) 771-3000 • Fax: (907) 771-3044 - Email: info@akenergyauthority.org A. FY23 Audit Chair Pruhs requested Executive Director and Secretary -Treasurer Curtis Thayer to present the FY23 Audit. Mr. Thayer invited Lealan Miller of Eide Bailly to review AEA's financial statements. The statements are on time. Mr. Thayer indicated that Pam Ellis, AEA, and Mischiell Barrera, AEA, are attending today and were instrumental in producing the audit on time. Mr. Miller expressed appreciation to Clay Christian, AEA, Ms. Ellis, Ms. Barrera, and others for their helpful efforts in providing the information for the audit. He complimented staff on their understanding of AEA's complicated financial statements. Mr. Miller explained that the auditors have rendered a clean opinion. There are no qualifications or differences according to the Generally Accepted Accounted Principles (GAAP). The financial statements are materially correct. The other two reports included in the material are the financial statements that are audited according to government auditing standards, and the report related to the federal awards. There were no findings regarding those two reports. Mr. Miller noted the biggest change for the financial statements from last year to this year regards the $200 million of debt that was added during the year. Another change is that the investment earnings were better this year compared to last year. There are no new footnotes and no new standards issued for the financial statements. Chair Pruhs indicated that the Susitna-Watana Hydroelectric Project remains the same as last year at $183 million. He requested additional information regarding the accounting aspects of the project. Mr. Miller noted that he would have to research the information with staff and would provide an answer later today. Chair Pruhs noted that Bradley Lake was depreciated by almost $11 million, and the net asset position increased from $153 million to $155 million. He requested explanation of the relationship of the positions. Mr. Miller explained that the net position includes all the assets associated with the project: capital assets, change in cash receivables, and payables that affect the amount. The amounts on page 40 only show the capital assets. Bryan Carey, AEA, noted that last year's statement of values for Bradley Lake from an insurance standpoint increased by 16%, approximately $50 million, due to inflation escalation. This exceeds the depreciation that occurred. Chair Pruhs requested additional clarity on the relationship between the schedules for both Bradley Lake and the Susitna-Watana Hydroelectric Project reporting. Mr. Thayer informed that under covenants, the audited financials need to be accepted by Friday. Mr. Thayer asked Mr. Miller if he could provide the answer to Chair Pruhs' question by the end of today's meeting. Mr. Miller agreed. Chair Pruhs indicated that this item will be addressed again before the executive session. There was no objection. B. Power Project Loan (PPF) Application — Makushin Alaska Energy Authority Page 2 of 10 Mr. Thayer invited Tim Sandstrom, AEA Acting Chair of PPF Loan Committee, to discuss the Power Project Loan Application. Chair Pruhs requested a brief at -ease. There was no objection. A brief at -ease was taken. The Board reconvened, and Mr. Sandstrom indicated that Conner Erickson, AEA, would present the PPF Loan Application package. Mr. Erickson provided an overview of the 30 MW Makushin Geothermal Project and loan application from Ounalashka Chena Power LLC (OCCP, LLC), which is a partnership jointly owned by the Ounalashka Corporation and Chena Power. OCCP is a certificated electric utility with the Regulatory Commission of Alaska (RCA). The loan would support the construction of the geothermal power project on the Makushin Volcano in Unalaska and is inclusive of the transmission necessary to convey the power to the island, approximately 14 miles away. Mr. Erickson discussed that he and a team from AEA visited the site in March. They were able to inspect the current progress of the development of the utility access corridor. The man -camp has been established and significant progress has been made on the road. He noted discussions that occurred with community members and seafood processors regarding the ability to access renewable power. Mr. Erickson explained that the loan is essentially a bridge loan in the amount of $4.9 million to keep the development of the utility access corridor and wellfield activities on schedule. The majority of the project is to be funded through a Department of Energy (DOE) Tribal Loan Program loan in the amount of $193 million. Mr. Erickson indicated that he has spoken with members of the Loan Program Office at DOE and the project is undergoing its full due diligence phase. DOE anticipates an issuance of a final decision will be in the first quarter of next year. Mr. Sandstrom does not expect any new findings that would be detrimental to the project. Additionally, staff utilized independent and third -party reviewers for the technical and financial aspects of the project, and no material risks were identified. He discussed that the plant design is modular and allows for efficient additions to the plant, if required. Mr. Erickson explained that the City of Unalaska consumes approximately half of the plant's proposed production. A Power Purchase Agreement was entered into with the City of Unalaska in 2020, and has been extended. Mr. Erickson provided additional information regarding the agreement. Chair Pruhs asked if the current seafood processors get their power from the local utility. Mr. Erickson informed that the processors are independent and self -generate their power with diesel. Chair Pruhs inquired as to other opportunities for the use of geothermal beyond electricity. Mr. Erickson is unaware of additional opportunities at this time. He is confident that the seafood processors would look to utilize and leverage the geothermal powerplant as their primary source of power. There is a 1% escalation in the power price over the life of the project. One risk is that if the powerplant were to stop operating for an extended period of time, OCCP would be liable for the cost of the generation for the City. Mr. Erickson discussed that geothermal powerplants are quite reliable with a consistent availability of greater than 95%. Alaska Energy Authority Page 3 of 10 Chair Pruhs requested Mr. Erickson review the terms of the loan for the record. Mr. Erickson indicated that the PPF Loan Committee approved that the loan to be brought before the Board, subject to specific terms. The loan amount requested is $4.9 million. The closing fee of $44,000 is to be rolled into the principal balance. The term is 30 years, which is the life of the project, and is at a fixed rate of 5.03%. There are no prepayment penalties. Mr. Erickson explained that the fixed line of credit is for 12 months. Chair Pruhs inquired as to the methodology that will be used to monitor the draws and uses of the funds. Mr. Erickson discussed that all PPF loans use the same structure and that the borrower issues invoices and proof of payment to AEA. Additional verification can also be provided. Chair Pruhs asked if the terms include an option to refinance if interest rates decrease. Mr. Erickson agreed, and noted that is subject to additional fees and review by AEA. Mr. Erickson reviewed the sources of repayment are the debt service reserve account established by OCCP, the revenues from the Power Purchase Agreement, and the Investment Tax Credit Receipts. Mr. Erickson indicated that the memorandum states that payments would be made via draws on the DOE line of credit; however, this is not allowed and is no longer a possibility. Chair Pruhs asked if AEA has ever given a loan for a geothermal project such as this. Mr. Erickson noted that he is unaware of any. Chair Pruhs asked if there are additional opportunities in Alaska that will fit this model for geothermal. Mr. Erickson agreed. He discussed that within the application for Round XV for the Renewable Energy Fun (REF), Homer Electric Association (HEA) has proposed studying the potential geothermal power production on the islands of St. Augustine and Mount Spurr. Chair Pruhs asked if this project could be considered as a pilot program. Mr. Erickson agreed. He noted that the technology is not new, but the scale and use in the state of Alaska is new. Mr. Erickson discussed the guarantees required by AEA. The conditions precedent is the same that were used for the Houston Solar Project that the Board approved last October. Mr. Fogle expressed appreciation for the presentation. He inquired as to when the first quarterly payment would be made after their first draw. Mr. Erickson discussed that interest would begin accruing after their first draw and the quarterly payment would be due at the beginning of the following quarter. Staff requested the Board to approve the resolution. MOTION: A motion was made by Vice -Chair Kendig to approve Resolution 2023-02, Ounalashka Chena Power, LLC, PPF Loan, as presented. Motion seconded by Mr. Fogle. Mr. Fogle asked if the Board wants to hear from the Makushin representatives attending the meeting. Chair Pruhs expressed appreciation for the thorough presentation and the due diligence that has been conducted. He does not feel that representatives need to comment. Chair Pruhs requested that program staff provide an update to the Board in six months on the progress and overview of the DOE's loan. There was no objection. Alaska Energy Authority Page 4 of 10 Mr. Fogle commented that this project is fulfilling AIDEA's mission to lower the cost of energy in Alaska. Mr. Fogle asked if an economic impact study has been conducted on the effects on the community by lowering electricity rates and economic activity. Mr. Erickson noted that he has not explicitly seen impact modeling. He is confident of the opportunities for ancillary development and leveraging the excess power. Chair Pruhs commented on the additional benefit of the project in reducing the environmental exposure of bringing diesel to the region. A roll call was taken, and the motion to approve Resolution 2023-02 passed unanimously. C. AEA Board Meeting Dates — 2024 MOTION: A motion was made by Vice -Chair Kendig to approve the 2024 Board Meeting Dates, as presented. Motion seconded by Mr. Fogle. The motion to approve the 2024 Board Meeting Schedule passed without objection. 7. OLD BUSINESS - None A brief at -ease was taken. The Board reconvened, and Chair Pruhs requested Mr. Miller to discuss the answers to the previous questions regarding the FY23 Audit. Mr. Miller explained that the business type activities for Bradley Lake for 2023, as shown on pages 12 and 15, increased $2.4 million and comports with the reported increase. The depreciation, also shown on page 12, is taken into consideration for the overall operations for the business activities. Extensive explanation occurred by Mr. Thayer, Mr. Miller, Mr. Christian, AEA, and Ms. Ellis regarding the asset positions in the report. Chair Pruhs requested a delineation of the value of each of the assets, including Bradley Lake. He commented that members of the public have asked him for the value of Bradley Lake. Ms. Ellis agreed to provide that level of information. Chair Pruhs requested additional information regarding the Susitna-Watana reported numbers. Mr. Miller discussed that the predevelopment intangible costs of $183 million will remain unchanged until the project is placed in service and moves forward. If the project ultimately does not go forward, then the asset will be subject to impairment and write -down. The project has been out of abeyance since 2018. Chair Pruhs commented that the value of the intangible costs certainly has increased from the reported numbers. Mr. Christian agreed. He explained that the accounting records are based on historical costs and book value, and do not report commercial value or replacement value. Alaska Energy Authority Page 5of10 MOTION: A motion was made by Vice -Chair Kendig to approve the Fiscal Year 2023 Alaska Energy Authority Audited Financial Report, as presented. Motion seconded by Mr. Fogle. Mr. Fogle recommended that the spelling of Susitna-Watana is corrected. There was no objection. A roll call was taken, and the motion to approve the Fiscal Year 2023 Alaska Energy Authority Audited Financial Report passed unanimously. 8. DIRECTOR COMMENTS A. Responses to Board Questions from September Board Meeting Mr. Thayer reviewed the responses to Board questions included in the packet. As requested, the advanced draft copy of the Alaska Railbelt Transmission System Study is provided. B. IIJA / IRA Grant Funding Update • Solar For All Mr. Thayer discussed the included grant program narrative is given on a weekly basis. The Solar For All application deadline was extended to October 11, and the application was submitted on time. Additional applications to be submitted include the Energy Future Grant and the High Energy Cost Grant. Mr. Thayer announced that AEA was awarded $206.5 million for the Grid Resilience and Innovation Partnership Program Topic 3 (GRIP 3) competitive application. A 100% State match is required. He noted that out of the over 700 applications nationwide, 58 applications were successful, and AEA received the highest amount of funding in the country. Mr. Thayer expressed appreciation to the team and to Mr. Carey for their efforts in submitting a successful application. Mr. Thayer gave an overview of the projects, including the new HVDC line asset, within the application, and discussed the process of negotiations and the timeline of additional information that is required in order to receive funding. Staff is working with legal counsel to assist in the negotiations with DOE. Additionally, the federal receipt authority of $206.5 million and the match of $206.5 million was recently submitted to the Governor for consideration. During the application process, the Governor wrote a letter of support for the projects and the State match. Chair Pruhs noted that the Governor and the Legislature have to approve the match. He asked if the funds have to be taken in one year or if they can be disbursed over multiple years. Mr. Thayer explained that level of detail is being discussed, as well as the form and timeline for the match. The Federal funding is reimbursable and is not provided up front. The terms and goals include construction to begin promptly and to have the projects in service in eight years. Mr. Thayer discussed the possibility of utilizing previously bonded funds for batteries for a portion of the State's match. These nuances and different scenarios for cash flow are under examination. Mr. Thayer indicated that routine studies and line loss studies will also be considered. Alaska Energy Authority Page 6 of 10 Mr. Thayer noted that discussions with Board members and the Chair will occur next week regarding additional personnel needs for the projects and for administering the funds. Preliminary conversations have occurred with the Department of Commerce and OMB. Mr. Thayer reiterated the enormity of the success of the grant award. He emphasized the community team effort with aspects of support provided by the utilities and unions. Mr. Fogle complimented Mr. Thayer and the team for their excellence in obtaining these grants. He asked what type of public notice or marketing would occur to inform the public and to celebrate these benefits that increase energy reliability and reduce the cost of energy, as well as the other positive economic impacts that the awarded funds will provide to Alaskans. Mr. Thayer commented on the excellent efforts of Brandy Dixon, AEA, in providing information through social media. He noted that the additional federal funding requires a significant amount of outreach that is beyond the scope of her position. He reiterated the importance of increasing personnel in order to support the current team members. Mr. Fogle suggested that advertising or letters to the editor could be written to Anchorage Daily News to inform the public of AEA's recent accomplishments. Chair Pruhs expressed Board support for advocating and assisting in any way possible for increased personnel. Mr. Thayer commented that employee pay bands have been adjusted. Turnover is low. The team is fantastic, and morale is at an all-time high. Mr. Eledge requested discussion regarding the Solar For All Program. Mr. Thayer explained that the highly competitive application was submitted in collaboration with Alaska Housing Finance Corporation (AHFC) and would provide residential rooftop solar for qualifying households on the Railbelt, as well as in rural communities over a five-year period, if awarded. A determination is expected to be released in February or March. Mr. Eledge commented on the White House Executive Order identifying all Tribal lands as disadvantaged, which applies to most of the lands in Alaska. He asked if this definition pertains to the Solar For All Program. Mr. Thayer explained that the GRIP applications through DOE utilize a different disadvantage definition than the Solar For All Program through Environmental Protection Agency (EPA). Audrey Alstrom, AEA, indicated that the team used PCE communities as a baseline to identify disadvantaged communities within the state. Josi Hartley, AEA, added that Tribal areas are generally designated as being disadvantaged communities. Regarding grant applications for disadvantaged communities, all of the villages in rural Alaska qualify due to their Tribal status. The Justice40 designations based on census information are also used in identifying disadvantaged communities. C. Governor's State Energy Security Task Force Update -DRAFT Report Mr. Thayer provided the update on the Governor's Alaska Energy Security Task Force (AESTF). The latest 120-page draft report is included in the Board packet. The final meeting will be held next Tuesday. Two days of public comments have concluded, and over 250 hours of in -person meetings have transpired. Staff, with the assistance of the contractor, has been instrumental in Alaska Energy Authority Page 7 of 10 developing these efforts that are a priority for the Governor. D. Electric Vehicle Update Mr. Thayer complimented Ms. Hartley and her team for receiving an award of $11.2 million for the FY24 National Electric Vehicle Infrastructure (NEVI) Implementation Plan. He noted that the plan was ranked as one of the six top plans in the country by the Federal Highway Administration (FHWA), whose representative personally visited Alaska to present the award. Ms. Hartley acknowledged that another significant aspect of the approval of the NEVI Plan is that the FHWA is potentially accepting of the Phase I corridor as sufficient for the build -out. This is a requirement in order to move to the second phase of the program, which is to install infrastructure in the remainder of the State's highway system, the marine highway system, and other areas with higher concentrations of EVs. FHWA is happy with the work presented by AEA and has given the indication that AEA will be able to expeditiously move forward with the program. Ms. Hartley provided an overview of the information provided in the Board packet. The Request for Applications was released in March with the aim of installing NEVI -compliant Electric Vehicle Supply Equipment (EVSE) at a maximum of 14 sites located along the roadway between Anchorage and Fairbanks. A total of 34 applications were received for 13 of the 14 sites. The Selection Committee selected nine sites to be developed: one in Fairbanks, Ester, Nenana, Healy, Cantwell, Denali State Park, Trapper Creek, Wasilla, and Anchorage. The total cost to install EV charging infrastructure will be approximately $8 million, of which $6.5 million is Federal funds and $1.5 million is from credit investment from the site hosts. The individual site development costs range from $550,000 to $1.3 million due to the different types of charging stations and the location of power. All sites are located at existing commercial establishments. Mr. Fogle asked if the extreme cold temperatures remain an issue when charging the vehicles. Ms. Hartley believes that any issues that did exist have been addressed by the market and by the developers of the charging infrastructure. Certain sites maintain heated enclosures around the charging infrastructure to mitigate those types of issues. Mr. Fogle asked if AEA is monitoring the sites to report if they remain in service. Ms. Hartley discussed that monitoring would occur, especially as it relates to the NEVI Program and its Federal requirements. Mr. Fogle inquired if the energy at the stations is complementary or if a charge is applied. Ms. Hartley informed that all of the stations will charge per kW for the energy. The Level 3 charging stations typically charge approximately 40 cents per kW, which is significantly lower than the cost of a full tank of gas. Furthermore, along the Railbelt between Anchorage and Fairbanks, the utilities have adopted a special rate for EV charging without demand charges, which is approximately 16 cents per kW. E. Renewable Energy Grant Fund (REF) Update — None F. Denali Commission Update Mr. Thayer informed that there is $44 million in active Denali Commission awards, less the Alaska Energy Authority Page 8 of 10 spending on active awards of $26 million, which totals approximately $18 million. G. Power Project Loan (PPF) Update Mr. Thayer noted there are 16 outstanding loans with no delinquencies. After today's meeting, there are now 17 outstanding loans. He directed the Board's attention to the loan program summary and the low uncommitted cash balance amount value. Mr. Thayer explained that the loan amount approved today was set aside upon receipt of the application. There is currently a request to the Governor's Office and the Legislature to recapitalize the loan program. H. Community Outreach Mr. Thayer discussed the extensive community outreach that has occurred this fall as shown in the provided list. 1. Articles of Interest Mr. Thayer stated that the Articles of Interest are also contained with the Board packet. J. Next Regularly Scheduled AEA Board Meeting Wednesday, December 6, 2023 Mr. Thayer informed that during executive session, he will discuss the information provided to OMB, and discuss owned assets with regards to the GRIP funding. MOTION: A motion was made by Vice -Chair Kendig to go into executive session to discuss confidential matters and owned assets, the immediate disclosure of which would have an adverse impact on the Authority. This is supported by the Open Meetings Act, AS 44.62.310, which allows a board to consider confidential matters in executive session. In this case, the board believes that these are subjects which would have an adverse effect upon the finances of AEA and are protected by law, due to the rules protecting personal privacy and certain business information. Motion seconded by Mr. Fogle. A roll call was taken, and the motion to go into executive session passed unanimously. 9. EXECUTIVE SESSION: 10:35 a.m. — To discuss confidential financial matters, and owned assets the immediate knowledge of which would have an adverse effect on Alaska Energy Authority. The Board reconvened its regular meeting at 11:23 am. Chair Pruhs advised that the Board did not take any formal action on matters discussed while in Executive Session. Alaska Energy Authority Page 9 of 10 10. BOARD COMMENTS Mr. Eledge reiterated praise and tribute to the staff and leadership for their results of achieving the rank of number five out of 700 applications. Mr. Thayer commented on the significant team effort, while maintaining focus on the mission. He expressed appreciation to all those involved. Chair Pruhs expressed appreciation for the information presented today. He commented on the many opportunities that are forthcoming and highlighted that the Board is available to help support those opportunities. 11. ADJOURNMENT There being no further business of the Board, the AEA meeting adjourned at 11:28 am. Curtis W. Thayer, Excutive Director / Secretary 0%N RGYq QRPOJ?gp SEAL - %97a Alaska Energy Authority Page 10 of 10