HomeMy WebLinkAboutAEA FY17 Annual Financial Statement 2017-A
This report was issued by BDO USA, LLP, a Delaware limited liability partnership and
the U.S. member of BDO International Limited, a UK company limited by guarantee.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Basic Financial Statements and Schedules
June 30, 2017
(With Independent Auditors’ Report Thereon)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Basic Financial Statements and Schedules
June 30, 2017
(With Independent Auditors’ Report Thereon)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Table of Contents
Page(s)
Independent Auditor’s Report 1-2
Management’s Discussion and Analysis (Unaudited) 3-14
Basic Financial Statements
Government-Wide Financial Statements:
Statement of Net Position 15
Statement of Activities 16
Fund Financial Statements:
Governmental Fund:
Balance Sheet/Statement of Net Position - Governmental Activities 17
Statement of Revenues, Expenditures, and
Changes in Fund Balance/Statement of Activities – Governmental Activities 18
Enterprise Fund:
Statement of Net Position 19
Statement of Revenues, Expenses, and Changes
in Net Position 20
Statement of Cash Flows 21
Notes to Basic Financial Statements 22-42
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Table of Contents
Page(s)
Supplementary Information
Schedules
1 Bradley Lake Hydroelectric Project Trust Account Activities 43
2 Special Revenue Fund – Projects and Programs – Balance Sheet 44
3 Special Revenue Fund – Projects and Programs – Revenues,
Expenses, and Changes in Fund Balance 45
4 Business-Type Activities – Enterprise Fund – Projects and Programs – Statement of Net
Position 46
5 Business-Type Activities – Enterprise Fund – Projects and Programs – Revenues,
Expenses, and Changes in Net Position 47
Supplementary Information (Unaudited)
6 Schedule of Capital Assets Presented under
Federal Energy Regulatory Commission Requirements 48
7 Bradley Lake Historical Annual Project Cost 49
8 PCE Endowment Fund Historical Analysis 50
9 Supplementary Organization and Project Information 51-53
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Independent Auditor’s Report
The Board of Directors
Alaska Energy Authority
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities and
each major fund of Alaska Energy Authority (a Component Unit of the State of Alaska) (Authority), as of and for the
year ended June 30, 2017 and the related notes to the financial statements, which collectively comprise the Authority’s
basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial
position of the governmental activities, the business-type activities, and each major fund of the Authority as of June 30,
2017, and the respective changes in its financial position and, where applicable cash flows thereof for the year then
ended in accordance with accounting principles generally accepted in the United States of America.
2
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and
analysis on pages 3-14 be presented to supplement the basic financial statements. Such information, although not a part
of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic,
or historical context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for consistency with
management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our
audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because
the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise
the Authority’s basic financial statements. The supplementary information in schedules 1 through 9 is presented for
purposes of additional analysis and is not a required part of the basic financial statements.
The supplementary information in schedules 1, 2, 3, 4 and 5 is the responsibility of management and was derived from
and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the United
States of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to
the basic financial statements as a whole.
The supplementary information in schedules 6, 7, 8 and 9 has not been subjected to the auditing procedures applied in
the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on
it.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 27, 2017 on our
consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing,
and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral
part of an audit performed in accordance with Government Auditing Standards in considering the Authority’s internal
control over financial reporting and compliance.
Anchorage, Alaska
October 27, 2017
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
3
Overview of the Financial Statements
The Alaska Energy Authority (AEA or Authority) is a public corporation of the State of Alaska (State) within the
Department of Commerce, Community, and Economic Development (DCCED), but with a separate and
independent legal existence and a separate and self-balancing set of independently audited financial statements.
AEA’s operations consist of governmental fund activities reported as special revenue funds and business-type
activities reported as enterprise funds. The financial information in this report is later reported as a component unit
of the State and is discretely presented in the State’s financial statements.
AEA manages the following projects and programs: owned hydroelectric and intertie projects; rural energy
programs; and energy development programs. AEA’s programs are funded primarily by the State, federal grants,
investment income, and utility companies—for use of AEA owned assets. Further information on AEA’s programs
can be found in note 1 to the financial statements.
Management’s Discussion and Analysis
This section presents management’s discussion and analysis of the financial position and results of operations for
the year ended June 30, 2017. This information is presented to help the reader focus on significant financial matters
and provide additional information regarding the activities of the Authority. This information should be read in
conjunction with the Independent Auditors’ Report, the audited financial statements, and the accompanying notes.
Government-Wide Financial Statements
The government-wide financial statements report information about the overall finances of the Authority similar
to a business enterprise. These statements combine and consolidate short-term, spendable resources with capital
assets and long-term obligations.
The government-wide financial statements are divided into the following categories:
Governmental activities – These are functions of the Authority that are financed primarily by
intergovernmental revenues. AEA’s governmental activities include Power Cost Equalization Fund
(PCE), Renewable Energy Fund, Emerging Energy Technology Fund, Trans-Alaska Pipeline Liability
Fund, and Rural Energy Grant projects.
Business-type activities – These are functions of the Authority in which customer user fees and charges
are used to help cover all or most of the cost of services they provide. AEA’s business-type activities
include the Bradley Lake Hydroelectric Project, the Alaska Intertie, the Susitna-Watana Hydroelectric
Project, the Power Project Fund, the Rural Electrification Revolving Loan Fund, and the Power
Development and Railbelt Projects.
The Statement of Net Position presents information on all of AEA’s assets and deferred outflows of resources less
liabilities and deferred inflows of resources, which results in net position. This statement is designed to display
the financial position of AEA. Over time, increases and decreases in net position may serve as a useful indicator
of whether the financial position of the Authority is improving or deteriorating.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
4
The Statement of Activities provides information which shows how the Authority’s net position changed as a result
of the year’s activities. The statement uses the full accrual basis of accounting and the economic resources
measurement focus, which is similar to the accounting used by private-sector businesses. Revenues are recognized
when earned and expenses are recognized when a liability is incurred.
Fund Financial Statements
A fund is a grouping of related accounts used to maintain control over resources that have been segregated for
specific activities or objectives. The funds of the Authority are divided into two categories: governmental fund
and proprietary fund, both of which are further described below, and which provides more detail than the
government-wide statements. AEA uses fund accounting to ensure and demonstrate compliance with finance
related legal requirements.
Governmental Funds – Special Revenue Funds
Governmental funds are used to account for essentially the same functions reported as governmental activities in
the government-wide financial statements. However, unlike the government-wide financial statements,
governmental fund financial statements focus on the short-term view of AEA’s operations. Because the focus of
governmental funds is narrower than that of the government-wide, it is useful to compare the information presented
for the governmental funds with similar information presented for governmental activities in the government-wide
financial statements. These funds are combined on the Governmental Fund Balance Sheet/Statement of Net
Position – Governmental Activities and Governmental Fund Statement of Revenues, Expenditures, and Changes
in Fund Balance/Statement of Activities – Governmental Activities.
Proprietary Funds – Enterprise Fund
The Authority reports one enterprise fund. The enterprise fund is used to account for activities for which a fee is
charged to external users for goods and services.
The Statement of Net Position reports the Authority’s assets, deferred outflows of resources, liabilities, deferred
inflows of resources, and resulting net position. The net position is reported as net investment in capital assets,
restricted, and unrestricted. Restricted net position is subject to external limits such as bond resolutions, legal
agreements, or statutes. The Statement of Revenues, Expenses, and Changes in Net Position reports the Authority’s
revenues, expenses, and resulting change in net position during the periods reported. Both statements report on the
full accrual basis of accounting and economic resources measurement focus.
The Statement of Cash Flows reports the Authority’s sources and uses of cash and change in cash balance resulting
from the Authority’s activities during the periods reported.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
5
Notes to Basic Financial Statements
The notes provide additional information that is essential to fully understand the amounts reported in the
government-wide and fund financial statements.
Other Information
In addition to the basic financial statements and accompanying notes, this report also presents certain
supplementary information, which provides additional information about AEA’s projects and programs.
Required Components of the Financial Report
Basic Financial
Statements
(audited)
Required and
Optional*
Supplementary
Information
Government‐wide
Financial Statements
(audited)
Fund Financial
Statements
(audited)
Notes to the
Financial
Statements
(audited)
Management's
Discussion and
Analysis
(unaudited)
Summary
Detail
*Optional Supplementary Information:
Schedule 1: Schedule of Bradley Lake Hydroelectric Project Trust Account Activities (audited);
Schedule 2: Special Revenue Fund Schedule of Projects and Programs – Balance Sheet (audited);
Schedule 3: Special Revenue Fund Schedule of Projects and Programs – Revenues, Expenses and Changes
in Fund Balance (audited);
Schedule 4: Business-Type Activities – Enterprise Fund – Schedule of Projects and Programs – Statement
of Net Position (audited);
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
6
Schedule 5: Business-Type Activities – Enterprise Fund – Schedule of Projects and Programs – Revenues,
Expenses, and Changes in Net Position (audited);
Schedules 6: Schedule of Capital Assets Presented under Federal Energy Regulatory Commission (FERC)
Requirements (unaudited);
Schedule 7: Bradley Lake Historical Annual Project Cost (unaudited)
Schedule 8: PCE Endowment Fund Historical Analysis (unaudited); and
Schedule 9: Supplementary Organization and Project Information (unaudited).
Government-Wide Financial Analysis
As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In
the case with AEA as a whole, assets and deferred outflows exceeded its liabilities and deferred inflows by $1,461.2
million at June 30, 2017 and $1,395.2 million at June 30, 2016. Of the total net position at June 30, 2017, $321.5
million was invested in capital assets, net of related debt and $1,139.7 million was restricted. Of the total net
position at June 30, 2016, $307.6 million was invested in capital assets, net of related debt and $1,087.6 million
was restricted.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
7
Financial Analysis
The following tables are provided to show AEA’s total assets, deferred outflows of resources, liabilities,
deferred inflows of resources, and net position at June 30, 2017 and 2016:
Table 1
(in thousands of dollars)
Governmental Activities Business-Type Activities
2017 2016 Variance 2017 2016 Variance
Assets:
Current and other noncurrent assets $ 1,088,666 1,035,415 53,251 87,444 96,670 (9,230)
Capital assets - - - 374,937 370,154 4,783
Total assets 1,088,666 1,035,415 53,251 462,381 466,824 (4,447)
Deferred outflows of resources - - - 20 53 (33)
Total assets and deferred outflows $ 1,088,666 1,035,415 53,251 462,401 466,877 (4,480)
Liabilities:
Current liabilities 20,672 22,498 (1,826) 23,877 29,315 (5,442)
Noncurrent liabilities - - - 45,308 55,302 (9,994)
Total liabilities 20,672 22,498 (1,826) 69,185 84,617 (15,436)
Net position:
Net investment in capital assets - - - 321,462 307,569 13,893
Restricted 1,067,994 1,012,917 55,077 71,754 74,691 (2,937)
Total net position 1,067,994 1,012,917 55,077 393,216 382,260 10,956
Total liabilities and net position $ 1,088,666 1,035,415 53,251 462,401 466,877 (4,480)
Governmental Activities:
Current and other noncurrent assets are $53.2 million higher in the current fiscal year. The Power Cost
Equalization Endowment Fund had a net increase in cash and investments of $62.5 million. In the current
fiscal year, the PCE Endowment Fund had a total of $13.6 million reappropriated for community revenue
sharing, which reduced the balance of the fund. Operating receivables increased by $1 million in the current
fiscal year and will fluctuate annually. Grant receivables increased by $1.6 million. This increase is partially
due to the inclusion of federal awards, such as bulk fuel operatory training and technical assistance, which
use operating federal receipt authority. Cash and cash equivalents held by AEA are advances from state
appropriations and are drawn based on project need; therefore, these balance will fluctuate annually.
Total liabilities decreased in the current fiscal year by $1.8 million. The Authority’s liabilities include
amounts due to the State and accounts payable and will fluctuate annually.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
8
Net position, during the current fiscal year increased by $55.1 million. This increase is a result of FY17
operations. Net position was increased $134.7 million from revenues earned in FY17 and decreased $66.1
million by expenses incurred in FY17. Net position was further reduced by the $13.6 million reappropriation
of the PCE Endowment Fund for community revenue sharing.
Business-Type Activities:
Current and other noncurrent assets decreased by $9.2 million in the current fiscal year. The decrease in
current and noncurrent assets is primarily due to a decrease in restricted cash and cash equivalents. These
balances comprise the total cash on hand for the Enterprise Fund projects and fluctuates relative to the
operational needs of the projects.
Capital assets, net of accumulated depreciation increased by $4.8 million relating to upgrades for the related
projects. In the current fiscal year, Susitna-Watana Hydroelectric project spent $696 thousand less on the
FERC license capital asset compared to the prior fiscal year. In the current fiscal year, AEA has continued
its efforts to complete studies and get the project to the point where the State’s investment, to date, is
preserved and the project can be left in abeyance. In the prior fiscal year, the Bradley Lake project repaired
the turbine nozzles, removed debris from the fishwater screens, and replaced the fish water valve actuators.
In the current fiscal year, the majority of spending was on the West Fork Upper Battle Creek section of the
Bradley Lake project, which increased CIP by $876 thousand. The Alaska Intertie project repaired and/or
replaced station equipment in the current fiscal, which increased the CIP by $3.2 million.
Deferred outflows of resources decreased in the current fiscal year by $33 thousand, due to amortized costs
relating to long-term debt.
Total liabilities decreased in the current fiscal year by $15.4 million. $9.1 million of the total decrease was
due to scheduled debt service payments on the Bradley Lake project bonds. Advances to AEA from the State
of Alaska decreased by $5.1 million in the current fiscal year. Advances from the State are drawn based on
project need; therefore, these amounts will fluctuate annually.
Net position increased in the current fiscal year by $11.0 million. The increase in net position was due to
the net effect of $30.2 million of revenues and $19.2 million of expenses in FY17.
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ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
9
Financial Analysis, continued
The following tables are provided to show AEA’s revenues, expenses, and changes in net position at June
30, 2017 and 2016:
Table 2
(in thousands of dollars)
Governmental Activities Business-Type Activities
2017 2016 Variance 2017 2016 Variance
Revenues:
Program revenues:
Charges for services $ - 2 (2) 19,179 18,972 207
Operating grants and contributions 22,096 23,300 (1,204) - - -
Capital grants and contributions - - - 9,148 9,167 (19)
General revenues:
Investment Income 112,618 9,313 103,305 1,825 1,735 90
Total revenues 134,714 32,615 102,099 30,152 29,874 278
Expenses:
Grants and projects 36,776 37,918 (1,142) - - -
Power cost equalization grants 25,853 31,198 (5,345) - - -
General and administrative 3,452 5,211 (1,759) 1,252 1,379 (127)
Interest expense - - - 2,652 3,177 (525)
Plant operations - - - 4,330 4,709 (379)
Depreciation - - - 10,808 10,529 279
Provision for loan loss - - - 154 (2) 156
Total expenses 66,081 74,327 (8,246) 19,196 19,792 (596)
State of Alaska reappropriation of
funds (13,556) - (13,556) - - -
Change in net position 55,077 (41,712) 96,789 10,956 10,082 874
Net position, beginning 1,012,917 1,054,629 (41,712) 382,260 372,178 10,082
Net position, ending $ 1,067,994 1,012,917 55,077 393,216 382,260 10,956
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
10
Governmental Activities:
Revenues for governmental activities increased by $102.1 million, based on the following:
Charges for services are $2 thousand less in the current fiscal year, due to decreased interagency
receipts;
Operating grants and contributions decreased by $1.2 million from a reduction of state and federal
funding; and
Investment income earned was $103.3 million higher than the prior fiscal year. PCE Endowment
Fund investment earnings for the current fiscal year were $112.3 million, which is a difference of
$103.3 million from the prior fiscal year. At June 30, 2017, the PCE investment balance was $1,023.6
million. The investment earnings increase was a product of market conditions and portfolio balance
compared to $24 million decrease in FY16.
Expenses for governmental activities decreased overall by $8.2 million from the prior fiscal year, based on
the following:
Grants and project expenses decreased by $1.1 million. The reduction is from reduced state and
federal funding for projects and will fluctuate annually;
PCE grants decreased by $5.3 million due to a reduction of the base rate calculated by the
Regulatory Commission of Alaska (RCA). This rate is calculated to determine which communities
are eligible for PCE reimbursements. Based on the calculation for FY17, several PCE communities
were no longer eligible for reimbursement; therefore, the grant payments decreased.; and
General and administrative expenses decreased by $1.8 million in the current fiscal year, primarily
due to decreases in payroll allocated to the rural energy operating programs and capital projects.
With the decrease in state funding for projects, staff working on AEA programs has decreased;
therefore, payroll expenses have been reduced from the prior year.
Business-Type Activities:
Revenues for business-type activities increased, overall, by $278 thousand in the current fiscal year, due to
the following:
Charges for services were increased by $207 thousand. Charges for services include the amounts
received from the utilities for services performed by AEA on behalf of the utilities. These services
are agreed to and the amounts are based on project expenditures, operating cash requirements, and
will fluctuate annually;
Capital grants and contributions from the State were less in the current fiscal year by $19
thousand. The decrease is primarily due to the reduction of state funding for capital projects, such as
the Susitna-Watana Hydroelectric project. In the current fiscal year, AEA has continued its efforts
to complete studies and get the project to the point where the State’s investment, to date, is preserved
and the project can be left in abeyance; and
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
11
Investment income increased by $90 thousand due to higher cash and cash equivalent balances at
June 30, 2017, when compared to prior fiscal year end balances. These balances will fluctuate
annually, based on operating cash needs of the projects.
Expenses for business-type activities decreased by $596 thousand in the current fiscal year, based on the
following:
General and administrative expenses decreased by $127 thousand. General and administrative
expenses will fluctuate annually. The current year decrease is minimal and a normal fluctuation;
Interest expense represents the cost of interest on AEA’s Bradley Lake Hydroelectric project bonds.
Interest expense decreased in the current fiscal year by $525 thousand due to lower outstanding bond
balances;
Plant operations for the Bradley Lake Hydroelectric project and the Alaska Intertie project were
decreased in the current fiscal year by $379 thousand. Plant operations consist of various activities
required to maintain operations of each project. These activities are provided as needed; therefore,
these amounts will fluctuate annually;
Depreciation expense increased slightly in the current fiscal year by $279 thousand, as a result of
placing assets previously under construction into service; and
Provision for loan loss increased by $156 thousand from the prior fiscal year. In the current fiscal
year, AEA added four new loans and, the annual provision for loan loss is calculated using the loan
portfolio balance; therefore, the new loans increased the total provision for loan loss.
Fund Balances
Governmental Funds:
The focus of AEA’s governmental funds is to provide information on near-term inflows, outflows, and
balances of spendable resources. Such information is useful in assessing AEA’s financing requirements.
At the end of the current fiscal year, AEA’s governmental funds reported combined ending fund balances of
$1,067.9 million, which is an increase of $55.1 million in comparison with the prior fiscal year.
The combined ending fund balance is categorized as restricted to indicate that there is an externally
enforceable limitation to its use. Specifically, the fund balance is entirely restricted by agreements with
external parties or by legislation.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
12
At the end of the current fiscal year, total fund balances for AEA’s governmental funds were as follows:
Table 3
Governmental Fund – Fund Balances
(in thousands of dollars)
Power Cost Equalization Fund $ 1,021,600
Renewable Energy Fund 38,770
Trans-Alaska Pipeline Liability Fund 4,398
Emerging Energy Technology Fund 1,230
Rural Energy Projects 1,996
Total Fund Balance $ 1,067,994
Proprietary Funds:
AEA’s proprietary fund financial statements consist of enterprise funds, which provide detailed information
of the same type found in the business-type activities section of the government-wide financial statements.
At the end of the current fiscal year, total net position for AEA’s proprietary funds were as follows:
Table 4
Proprietary Funds – Net Position
(in thousands of dollars)
Bradley Lake Hydroelectric Project $ 132,215
Alaska Intertie Project 29,026
Susitna-Watana Hydroelectric Project 183,021
Power Project Fund 49,006
Rural Electrification Revolving Loan Fund (52)
Total Net Position $ 393,216
At the end of the current fiscal year, AEA’s proprietary funds reported combined ending net position of
$393.2 million, which is an increase of $11.0 million in comparison with the prior fiscal year.
The combined ending net position is categorized as the following:
invested in capital assets, net of related debt ($321.5 million);
restricted for debt service ($21.5 million);
restricted by agreements with external parties ($1.3 million); and
restricted by legislation ($48.9 million).
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
13
Capital Assets and Debt Administration
Capital Assets:
AEA’s investment in capital assets for its business-type activities as of June 30, 2017 amounts to $374.9
million (net of accumulated depreciation), which is an increase of $4.8 million from the prior fiscal year.
The investment in capital assets only occurs in the enterprise funds and includes land and rights of way,
infrastructure, equipment, and construction in progress.
Table 5
Capital Assets
(net of depreciation, in thousands of dollars)
Business-Type Activities
2017 2016 Variance
Land and Rights of Way $ 11,212 11,212 -
Infrastructure 167,600 168,782 (1,182)
Equipment 152 175 (23)
Construction in Progress 195,973 189,985 5,988
Total $ 374,937 370,154 4,783
Major additions to capital assets during the current fiscal year include improvements to the Bradley Lake
Hydroelectric Project consisting primarily of the static VAR compensator replacement for Soldotna/Daves
Creek and continued work on the West Fork Upper Battle Creek project. The Susitna-Watana Hydroelectric
project continued its efforts to complete studies and get the project to the point where the State’s investment,
to date, is preserved and the project can be left in abeyance. The Alaska Intertie capital additions included
improvements to the static VAR compensator and Douglas substation upgrades.
Table 6
Capital Asset Additions
(in thousands of dollars)
SVC Replacement-Soldotna/Daves Creek $ 5,606
Bradley Turbine Nozzle Repair 12
Bradley Battle Creek Diversion 876
AK Intertie - SVC Project 751
AK Intertie - Douglas Substation Upgrade 20
Susitna-Watana Hydroelectric 8,327
Total Capital Asset Additions $ 15,592
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Management’s Discussion and Analysis
June 30, 2017
14
Long-Term Debt:
At the end of the current fiscal year, AEA had total long-term debt outstanding of $53.4 million. AEA’s
total long-term debt decreased by $9 million during the current fiscal year as a result of scheduled debt
service payments.
Table 7
Outstanding Debt
(in thousands of dollars)
Business-Type Activities
2017 2016 Variance
Bradley Lake Power Revenue
and refunding Bonds $ 53,495 62,585 (9,090)
Total $ 53,495 62,585 (9,090)
Conclusion
Ongoing operations and maintenance of the owned hydroelectric and intertie projects are approved by the
utilities using the assets and are subject to bond resolutions and other agreements. Susitna-Watana
Hydroelectric project expenditures are funded by state capital appropriations. Continued operations of the
rural energy programs and energy development programs and projects are based on State legislation, annual
appropriations, and federal grant awards.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statement of Net Position
June 30, 2017
(stated in thousands)
Governmental Business-Type
Assets and Deferred Outflows of Resources Activities Activities Total
Current assets:
Restricted cash and cash equivalents (note 3) $ 34,258 53,990 88,248
Operating receivable 1,628 316 1,944
Prepaid expense — 895 895
Grants receivable 1,565 — 1,565
Loans receivable (note 7) — 515 515
Due from State of Alaska 1,741 — 1,741
Accrued interest receivable — 1,079 1,079
Internal balances 712 (712) —
Total current assets 39,904 56,083 95,987
Noncurrent assets:
Restricted investments (note 3) 1,048,762 20,593 1,069,355
Loans receivable, net of allowance (note 7) — 10,768 10,768
Capital assets, net of accumulated depreciation (note 4)— 374,937 374,937
Total noncurrent assets 1,048,762 406,298 1,455,060
Deferred outflows of resources:
Deferred charge on bond refundings — 20 20
Total assets and deferred outflows of resources $ 1,088,666 462,401 1,551,067
Liabilities and Net Position
Current liabilities:
Advances from the State of Alaska $ 6,616 3,456 10,072
Accounts payable 14,056 8,687 22,743
Bonds payable – current portion (note 6) — 9,555 9,555
Other bond liabilities – current portion (note 6) — 743 743
Accrued interest payable — 1,436 1,436
Total current liabilities 20,672 23,877 44,549
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 6) — 43,940 43,940
Other bond liabilities – noncurrent portion (note 6) — 790 790
Other liabilities — 578 578
Total noncurrent liabilities — 45,308 45,308
Total liabilities 20,672 69,185 89,857
Net Position:
Net investment in capital assets — 321,462 321,462
Restricted for debt service — 21,482 21,482
Restricted by agreements with external parties 4,398 1,318 5,716
Restricted by legislation 1,063,596 48,954 1,112,550
Total net position 1,067,994 393,216 1,461,210
Total liabilities and net position $ 1,088,666 462,401 1,551,067
Commitments and contingencies (note 12)
See accompanying notes to basic financial statements.
15
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Statement of Activities
Year ended June 30, 2017
(stated in thousands)
Fees,
Fines, Operating Capital
and Grants Grants
Charges and and Govern- Business-
for Contri- Contri- mental Type
Activities Expenses Services butions butions Activities Activities Total
Governmental:
Power Cost Equalization Fund $26,755 — — — $(26,755) — (26,755)
Renewable Energy Fund 15,430 — — — (15,430) — (15,430)
Emerging Energy Technology Fund 1,099 — 192 — (907) — (907)
Trans Alaska Pipeline Liability Fund 895 — — — (895) — (895)
Rural Energy Projects 21,902 — 21,904 — 2 — 2
Total governmental
activities 66,081 — 22,096 — (43,985) — (43,985)
Business-type:
Bradley Lake Hydroelectric Project 13,782 17,970 — 51 — 4,239 4,239
Alaska Intertie Project 4,583 888 — 770 — (2,925) (2,925)
Susitna-Watana Hydroelectric Project — — — 8,327 — 8,327 8,327
Larsen Bay Hydroelectric Project — 11 — — — 11 11
Power Project Fund 767 305 — — — (462) (462)
Rural Electrification Revolving Loan Fund 64 5 — — — (59) (59)
Total business-type
activities 19,196 19,179 — 9,148 — 9,131 9,131
Total activities 85,277 19,179 22,096 9,148 (43,985) 9,131 (34,854)
General Revenues
Interest and Investment Income 112,618 1,825 114,443
Total general revenues 112,618 1,825 114,443
State of Alaska reappropriation of funds (13,556) — (13,556)
Change in net position 55,077 10,956 66,033
Net Position, beginning 1,012,917 382,260 1,395,177
Net Position, ending $1,067,994 393,216 1,461,210
See accompanying notes to basic financial statements.
Net (Expense) Revenue and
Program Revenues Changes in Net Position
16
Major
Special Statement of
Revenue Net Position
Fund Total
Current assets:
Restricted cash and cash equivalents (note 3)$34,258 $34,258
Operating receivable 1,628 1,628
Grants receivable 1,565 1,565
Due from State of Alaska 1,741 1,741
Due from other funds/internal balances 712 712
Total current assets 39,904 39,904
Noncurrent assets:
Restricted investments (note 3)1,048,762 1,048,762
Total assets $1,088,666 $1,088,666
Current liabilities:
Due to State of Alaska $6,616 $6,616
Accounts payable 14,056 14,056
Total current liabilities 20,672 20,672
Total liabilities 20,672 20,672
Fund balance:
Restricted by agreements with external parties 4,398
Restricted by legislation 1,063,596
Total fund balance 1,067,994
Total liabilities and fund balance $1,088,666
Net Position:
Restricted by agreements with external parties 4,398
Restricted by legislation 1,063,596
Total net position 1,067,994
Total liabilities and net position $1,088,666
Commitments and contingencies (note 12)
See accompanying notes to basic financial statements.
Liabilities and Fund Balance
Assets
(stated in thousands)
(A Component Unit of the State of Alaska)
ALASKA ENERGY AUTHORITY
Governmental Fund
Balance Sheet/Statement of Net Position - Governmental Activities
June 30, 2017
17
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Governmental Fund
Statement of Revenues, Expenditures, and Changes in
Fund Balance/Statement of Activities - Governmental Activities
Year ended June 30, 2017
(stated in thousands)
Major
Special
Revenue Statement of
Revenues:Fund Activities
State of Alaska appropriations $16,092 $16,092
Federal grants 5,992 5,992
Revenue from operating plants 8 8
Investment income, net 112,618 112,618
Other revenues 4 4
Total revenues 134,714 134,714
Expenditures/Expenses:
Grants and projects 36,776 36,776
Power cost equalization grants 25,853 25,853
General and administrative 3,452 3,452
Total expenditures/expenses 66,081 66,081
State of Alaska reappropriation of funds (13,556) (13,556)
Net change in fund balance 55,077
Change in net position 55,077
Fund balance/Net position – beginning 1,012,917 1,012,917
Fund balance/Net position – ending $1,067,994 $1,067,994
See accompanying notes to basic financial statements.
18
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Net Position
June 30, 2017
(stated in thousands)
Assets and Deferred Outflows of Resources
Current assets:
Restricted cash and cash equivalents (note 3)$53,990
Operating receivable 316
Prepaid expense 895
Loans receivable (note 7)515
Accrued interest receivable 1,079
Total current assets 56,795
Noncurrent assets:
Restricted investments (note 3)20,593
Loans receivable, net of allowance (note 7)10,768
Capital assets, net of accumulated depreciation (note 4)374,937
Total noncurrent assets 406,298
Deferred outflows of resources:
Deferred charge on bond refundings 20
Total assets and deferred outflows of resources $463,113
Liabilities and Net Position
Current liabilities:
Advances from the State of Alaska $3,456
Accounts payable 8,687
Bonds payable – current portion (note 6)9,555
Other bond liabilities – current portion (note 6)743
Accrued interest payable 1,436
Due to other funds 712
Total current liabilities 24,589
Noncurrent liabilities:
Bonds payable – noncurrent portion, net (note 6)43,940
Other bond liabilities – noncurrent portion (note 6)790
Other liabilities 578
Total noncurrent liabilities 45,308
Total liabilities 69,897
Net position:
Net investment in capital assets 321,462
Restricted for debt service 21,482
Restricted by agreements with external parties 1,318
Restricted by legislation 48,954
Total net position 393,216
Total liabilities and net position $463,113
Commitments and contingencies (note 12)
See accompanying notes to basic financial statements.
19
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Revenues, Expenses, and Changes in Net Position
Year ended June 30, 2017
(stated in thousands)
Operating revenues:
State of Alaska appropriations $ 179
Revenue from operating plants 18,690
Interest on loans 292
Other revenues 18
Total operating revenues 19,179
Operating expenses:
Depreciation 10,809
General and administrative 1,251
Interest expense 2,652
Plant operations 4,330
Provision for loan loss (note 7) 154
Total operating expenses 19,196
Operating loss (17)
Nonoperating activities:
Investment income, net 1,825
State of Alaska appropriations 9,148
Total nonoperating activities 10,973
Increase in net position 10,956
Net position – beginning 382,260
Net position – ending $ 393,216
See accompanying notes to basic financial statements.
20
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Enterprise Fund - Major Fund
Statement of Cash Flows
Year ended June 30, 2017
(stated in thousands)
Cash flows from operating activities:
Receipts from customers and users $ 19,641
Payments from State of Alaska 179
Payments to suppliers (5,454)
Net cash provided by operating activities 14,366
Cash flows from noncapital and related financing activities:
Net unremitted interest returned on State appropriation advances (70)
Net decrease in short-term borrowings from AIDEA for working capital (493)
Net cash used for noncapital and related financing activities (563)
Cash flows from capital and related financing activities:
Principal paid on bonds (9,090)
Interest paid on bonds (3,138)
State of Alaska appropriation for capital assets 9,078
Investment in capital assets (15,592)
Net cash used for capital and related financing activities (18,742)
Cash flows from investing activities:
Purchase of investments (22,751)
Proceeds from sales and maturities of investments 24,125
Interest received from investments 1,825
Principal collected on loans 137
New loans issued (5,263)
Net cash used for investing activities (1,927)
Net decrease in cash and cash equivalents (6,866)
Cash and cash equivalents at beginning of year 60,856
Cash and cash equivalents at end of year $ 53,990
Reconciliation of operating loss to net cash provided by operating activities:
Operating loss $ (17)
Adjustments to reconcile operating loss to net cash provided by operating activities:
Depreciation 10,809
Amortization of bond deferred charges 33
Provision for loan loss and bad debt expense 154
Bond interest expense 2,652
Changes in assets and liabilities that provided (used) cash:
Decrease in due to State of Alaska (5,132)
Decrease in operating receivables 497
Decrease in due to from other funds 6,576
Decrease in accrued interest 144
Decrease in other liabilities (15)
Increase in other bond liabilities 67
Increase in prepaid assets (895)
Decrease in operating accounts payable (507)
Net cash provided by operating activities $ 14,366
Noncash capital and related financing and investing activities:
Ending balance of capital assets accounts payable $ (3,075)
Net decrease in contingent liability on sold loans 21
See accompanying notes to basic financial statements.
21
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
22
(1) Organization and Operations
The Alaska Energy Authority (AEA or Authority) was created by the Alaska State Legislature in 1976. AEA
is a public corporation of the State of Alaska (State) within the Department of Commerce, Community, and
Economic Development with separate and independent legal existence. AEA has its own self-balancing set
of financial statements independently audited separate from the State. For financial reporting, AEA is a
component unit of the State. AEA finances various energy infrastructure projects and energy programs to
reduce the cost of energy throughout the State. AEA receives funding from the State, federal grants, and
utility companies for use of AEA owned assets.
Pursuant to legislation enacted in 1993, the Members of the Board of the Alaska Industrial Development and
Export Authority (AIDEA) also serve as the Board of Directors of AEA. AIDEA provides personnel services
for AEA (per statute, AEA has no employees) and has a Board approved borrowing agreement to provide
short-term working capital funds to AEA. AIDEA and AEA have separate executive directors, both are
employees of AIDEA. There is no commingling of funds, assets, or liabilities between AIDEA and AEA
and there is no responsibility of one for the debts or the obligations of the other. Neither AIDEA’s accounts
nor activities are included in the accompanying financial statements.
The following is a description of AEA’s existing owned projects and programs:
(a) Bradley Lake Hydroelectric Project
The project has 120 megawatts of installed capacity and transmits its power to the State’s main power
grid via two parallel 20–mile transmission lines. The project, which cost in excess of $300 million,
went into commercial operation in 1991. The project is now operated by Homer Electric Association
under contract with AEA. Bradley Lake serves Alaska’s Railbelt (the power-sharing area between
Interior Alaska and South Central Alaska, connected by roads, generating facilities, and transmission
lines) from the Kenai Peninsula to Fairbanks, as well as the Delta Junction area.
In September 2016 the Authority received an amendment to the Federal Energy Regulatory
Commission (FERC) license for a diversion of West Fork Upper Battle Creek into the Bradley Lake
project. The diversion will increase the Bradley Lake projects annual energy by approximately 37,000
megawatt hours (MWh). Construction may begin in 2018 and be completed in the fall of 2019.
(b) Alaska Intertie Project
The Alaska Intertie is a 170–mile transmission line designed for 345 kilovolts and is operating at 138
kilovolts. It runs between Willow and Healy and interconnects the power systems in the Anchorage
and Fairbanks areas. The Alaska Intertie Agreement appointed the Intertie Management Committee
(IMC) and AEA to oversee the activities of the Alaska Intertie project. AEA contracts with the
following Participating Utilities for operations and maintenance: Golden Valley Electric Association
(GVEA) in Fairbanks, and Southcentral Alaska utilities, Chugach Electric Association (CEA),
Matanuska Electric Association (MEA), and the Municipality of Anchorage, d/b/a Municipal Light
and Power (ML&P). The Intertie reduces the number of black/brownouts throughout the system by
enabling power to move either north or south when major system disturbances occur. The Intertie
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
23
enables GVEA to obtain lower cost power from Southcentral utilities and allows Southcentral Alaska
utilities to purchase power from Fairbanks during power shortages. It also enables GVEA to receive
power generated by the Bradley Lake Project, which is some of the lowest priced power in the Railbelt
region.
(c) Susitna-Watana Hydroelectric Project
The Alaska Legislature appropriated $193 million in funding to AEA towards the development of a
large hydroelectric project to be built in the Railbelt Region. The proposed project would be located
approximately half-way between Anchorage and Fairbanks on the upper Susitna River and would
include a single dam that would produce 2,800,000 MWh annually, equivalent to approximately 50%
of the Railbelt’s annual electrical use.
AEA is currently in the process of obtaining a FERC license for this project. Pursuant to Administrative
Order 271, AEA is using existing appropriations to incrementally advance the licensing process
through the updated FERC Study Plan Determination. Currently, efforts are being made to get the
project to the point where the State’s investment is preserved and the project can be left in abeyance.
(d) Rural Energy Programs
The rural energy programs include Bulk Fuel Storage Upgrades, Rural Power System Upgrades, the
Power Cost Equalization (PCE) Grant Program, Utility Training, Technical Assistance, one active loan
program (the Power Project Fund), and one inactive loan program (Rural Electrification Revolving
Loan Fund). The PCE Endowment Fund provides the PCE program a long-term stable financing
source in order to reduce electricity costs for residential and community facility customers in otherwise
high-cost service areas.
(e) Energy Development Programs
The energy development programs include the Renewable Energy Grant Fund and Recommendation
Program, Alternative Energy and Energy Efficiency (AEEE) programs, and the Emerging Energy
Technology Fund (EETF) grant program.
The purpose of the Renewable Energy Grant Fund and Recommendation program is to finance
renewable energy projects in Alaska. The AEEE programs support the development of alternative
energy resources specific to Alaska. The purpose of the EETF grant program is to promote and provide
financial assistance to applicants to test, conserve, and improve emerging energy technologies.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
24
(2) Summary of Significant Accounting Policies
(a) Basis of Accounting
As a component unit of the State, and for the purpose of preparing financial statements in accordance
with U.S. Generally Accepted Accounting Principles (GAAP), the Authority, as a public corporation
of the State with separate and independent legal existence, is subject to the accounting requirements
as set forth by the Governmental Accounting Standards Board (GASB).
The funds of the Authority are organized as Governmental Fund and Proprietary Fund. The financial
activities of the Authority are recorded in various funds as necessitated by sound fiscal management.
The funds are combined for financial statement purposes.
(b) Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of
activities) report information on all of the activities of the Authority. In general, the effect of inter-
fund activity has been removed from these statements to minimize the double-counting of internal
activities. Governmental activities, which normally are supported by intergovernmental revenues, are
reported separately from business-type activities, which rely primarily on fees and charges to external
parties.
The statement of activities demonstrates the degree to which the direct expenses of a given function
or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with
a specific function or segment. Program revenues include 1) fees, fines and charges to customers or
applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a
given function or segment and 2) grants and contributions that are restricted to meeting the operational
or capital requirements of a particular function or segment. Taxes and other items not properly included
among program revenues are reported instead as general revenues. Investment earnings are general
revenues.
Separate financial statements are provided for the special revenue fund and enterprise fund.
(c) Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The government-wide and proprietary fund financial statements are reported using the economic
resources measurement focus and the full accrual basis of accounting. Revenues are recorded when
earned and expenses are recorded when a liability is incurred, regardless of the timing of the related
cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements
imposed by the provider have been met.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
25
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as
they are both measurable and available. Revenues are considered to be available when they are
collectible within the current period or soon enough thereafter to pay liabilities of the current period.
For this purpose, the Authority considers all revenues, except reimbursement grants, to be available if
they are collected within 60 days after year end. Reimbursement grants are considered available if they
are collected within one year of the end of the current fiscal period. Expenditures generally are
recorded when a liability is incurred, as under full accrual accounting. However, debt service
expenditures are recorded only to the extent they have matured.
(d) The Authority reports the following major funds:
Major governmental funds:
AEA uses a special revenue fund to account for its governmental activities. This fund does not have
a legally adopted budget, and hence the budget to actual is not presented in the financial statements.
Major proprietary funds:
The enterprise fund accounts for all financial activities primarily related to fees and charges to external
parties.
(e) Revenue Recognition
AEA does not have a General Fund since all funds are legally restricted with specific purposes by external
agreements, legislation or statute. As a general rule, the effect of inter-fund activity has been eliminated
from the government-wide financial statements.
Amounts reported as program revenues include 1) charges to customers or applicants for goods, services,
or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions.
Internally dedicated resources are reported as general revenues rather than as program revenues. In
addition, general revenues include federal and State of Alaska appropriations.
For purposes of proprietary fund presentation, the Authority considers its revenues and expenses, except
investment income, the sale of program loans, fund transfers with the State, and conveyance of capital
assets, to be part of its principal ongoing operations and, therefore, classifies these revenues and expenses
as operating in the statement of revenues, expenses, and changes in net position.
(f) Fair Value Measurement and Application
Securities or other assets are reported and measured at fair value if (a) we hold it primarily for the
purpose of income or profit and (b) it has a present service capacity based solely on its ability to
generate cash or be sold to generate cash.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
26
(g) Cash and Cash Equivalents
All of AEA’s cash and cash equivalents are restricted or designated as to use. AEA has trust accounts
defined by bond resolutions, agreements with external parties, and state legislation restricting the use
of cash and investments.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash, short-term
commercial paper, and money market funds.
(h) Investments
Marketable securities are reported at fair value in the financial statements. Unrealized gains and losses
are reported as components of the change in net position. Fair values are obtained from independent
sources. Investments are segregated between current and noncurrent based on stated maturity and
intended use. Investments maturing within a year are classified as current if they are considered to be
potentially needed for current operations. This classification recognizes that a portion of our
investment portfolio may be needed for current operations. A noncurrent investment may be sold for
operational cash flow needs, if needed, and is beneficial under current market conditions.
(i) Loans and Related Interest Income
Loans are generally carried at amounts advanced less principal payments collected. Interest income is
accrued as earned. Accrual of interest is discontinued whenever the payment of interest or principal is
more than ninety days past due or when the loan terms are restructured. The Authority considers
lending activities to be part of its principal operations and classifies it as operating in the statement of
revenues, expenses, and changes in net position. For purposes of the statement of cash flows, the loan
program activities are treated as investing activities.
(j) Allowance for Loan Losses
The allowance for loan losses represents management’s judgment as to the amount required to absorb
probable losses in the loan portfolio. The factors used by management to determine the allowance
required include historical loss experience, individual loan delinquencies, collateral values, economic
conditions, and other factors. Management’s opinion is that the allowance is currently adequate to
absorb known losses and inherent risks in the portfolio.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
27
(k) Capital Assets
Capital assets are stated at cost and depreciation is charged to operations by use of the straight-line
method over their estimated useful lives.
The estimated economic lives of the assets are as follows:
Utility plant Life in years
Intangible 30–50
Production 30–50
Transmission 20–40
General 5–30
AEA recognizes intangible assets per the guidance of GASB Statement No. 51, Accounting and
Financial Reporting for Intangible Assets. Intangible assets are assets which are nonfinancial in
nature, lack physical substance, are identifiable and have a useful life extending beyond a single
reporting period. Costs associated with the generation of internally generated intangible assets are
capitalized when incurred after the following milestones have been met:
Determination of the specific objective of the project and the nature of the service capacity that is
expected to be provided by the intangible asset upon the completion of the project
Demonstration of the technical or technological feasibility for completing the project so that the
intangible asset will provide its expected service capacity
Demonstration of the current intention, ability, and presence of effort to complete or, in the case
of a multiyear project, continue development of the intangible asset
The Authority recognizes impairment losses for long-lived assets whenever there is a significant
unexpected decline in service utility.
(l) Fund Balance
In the fund financial statements, the Special Revenue Fund reports aggregate amounts for five
classifications of fund balances based on the constraints imposed on the use of these resources. The
nonspendable fund balance classification includes amounts that cannot be spent because they are either
(a) not in spendable form—prepaid items or inventories; or (b) legally or contractually required to be
maintained intact. The spendable portion of the fund balance comprises the remaining four
classifications: restricted, committed, assigned, and unassigned.
Restricted fund balance – this classification reflects the constraints imposed on resources either (a)
externally by creditors, grantors, contributors, laws, or regulations of other governments; or (b)
imposed by law through constitutional provisions or enabling legislation.
All of the Authority’s fund balance is restricted.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
28
(m) Net Position
Net position is displayed in three components, as follows:
Net investment in capital assets – This consists of capital assets, net of accumulated depreciation, less
the outstanding balances of any bonds, mortgages, notes, and accounts payable or other borrowings
that are attributable to the acquisition, construction, or improvement of those assets.
Restricted – this consists of net assets that are legally restricted by outside parties. Those restrictions
come in the form of legislation or State statute that cannot be modified by AEA’s board of directors.
Unrestricted – This consists of net assets that do not meet the definition of “restricted” or “net
investment in capital assets.”
The Authority’s spending policy is to evaluate, on a case by case basis, whether restricted or
unrestricted net position should be spent. This evaluation is performed by management as part of the
overall spending plan.
(n) Environmental Issues
The Authority’s policy relating to environmental issues, including pollution and contamination
remediation obligations to address the current or potential detrimental effects of existing pollution by
participating in pollution remediation activities such as site assessments and cleanups, is to record a
liability when the likelihood of Authority responsibility for clean-up is probable and the costs are
reasonably estimable. At June 30, 2017, there were no outstanding environmental issues which met
both of these criteria and, accordingly, no provision has been made in the accompanying financial
statements for any potential liability which may result.
(o) Income Taxes
The Internal Revenue Code provides that gross income for tax purposes does not include income
accruing to a state or territory or any political subdivision thereof which is derived from the exercise
of any essential governmental function or from any public utility. AEA is a public corporation of the
State performing an essential governmental function and is therefore exempt from State and federal
income taxes.
(p) Appropriations and Grants
The Authority recognizes appropriations and grant revenue when all applicable eligibility
requirements, including time requirements, are met.
(q) Estimates
In preparing the financial statements, management of the Authority is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent
assets and liabilities as of the date of the Statements of Net Position. These estimates impact revenue
and expenses for the period. Actual results could differ from those estimates.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
29
(r) Deferred Outflows/Inflows of Resources
In addition to assets, the statements of net position reports a separate section for deferred outflows of
resources. This separate financial statement element, deferred outflows of resources, represents a
consumption of net position that applies to a future period(s) and so will not be recognized as an
outflow of resources (expense) until then. AEA only has one item that qualifies for reporting in this
category. It is the deferred charge on debt refunding reported in the statements of net position. A
deferred charge on debt refunding results from the difference in the carrying value of refunded debt
and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the
refunded or refunding debt.
In addition to liabilities, the statements of financial position will sometime report a separate section
for deferred inflows of resources. This separate financial statement element, deferred inflows of
resources, represents an acquisition of net position that applies to a future period(s) and so will not be
recognized as an inflow of resources (revenue) until that time. AEA has no activity that qualifies for
reporting in this category.
(s) Recently Issued Accounting Pronouncements
GASB Statement No. 81 – Irrevocable Split-Interest Agreements (Statement 81) – was issued by the
GASB in March 2016. The objective of Statement 81 is to improve accounting and financial reporting
for irrevocable split-interest agreements by providing guidance for recognition and measurement in
situations that a government is an agreement beneficiary. Split-Interest agreements are a giving
agreement which provides resources to two or more beneficiaries, including governments. The
provisions of this Statement are required to be implemented for the fiscal year ending June 30, 2017
with retroactive application. The Authority has determined that there is no financial statement impact
from GASB Statement No. 81.
GASB Statement No. 83, Certain Asset Retirement Obligations (Statement 83) was issued by the
GASB in November 2016. Statement 83 addresses accounting and financial reporting for certain assets
retirement obligations. Statement 83 generally requires a government that has legal obligations to
perform future assets retirement activities related to its tangible capital assets to recognize a liability
based on the guidance in this Statement. Asset retirement obligation is defined as a legally enforceable
liability associated with the retirement of a tangible capital asset. The Statement establishes criteria for
determining the time and pattern of recognition of a liability and a corresponding deferred outflow of
resources for asset retirement obligations. The Statement requires that recognition occurs when the
liability is both incurred and reasonably estimable. Statement 83 is required to be implemented for
financial reporting periods beginning after June 15, 2018. We have not implemented Statement 83 and
are currently evaluating the impact on future financial statements.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
30
GASB Statement No. 84, Fiduciary activities (Statement 84) was issued by the GASB in January 2017.
The objective of Statement 84 is to improve guidance regarding the identification of fiduciary activities
for accounting and financial reporting purposes and how those activities should be recorded. This
Statement establishes criteria for identifying fiduciary activities of all state and local governments. The
focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary
activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are
included to identify fiduciary component units and postemployment benefit arrangements that are
fiduciary activities. The provisions of this Statement are required to be implemented for the reporting
periods beginning after December 15, 2018. We have not implemented Statement 84 and are currently
evaluating the impact on future financial statements.
GASB Statement No. 85, Omnibus 2017 (Statement 85) was issued by the GASB in March 2017. The
objective of Statement 85 is to address practice issues that have been identified during implementation
and application of certain GASB Statements. This Statement addresses a variety of topics including
issues related to blending component units, goodwill, fair value measurement and application, and
postemployment benefits (pensions and other postemployment benefits [OPEB]). Specifically, this
Statement addresses the following topics:
Blending a component unit in circumstances in which the primary government is a
business-type activity that reports in a single column for financial statement presentation
Reporting amounts previously reported as goodwill and “negative” goodwill
Classifying real estate held by insurance entities
Measuring certain money market investments and participating interest-earning investment
contracts at amortized cost
Timing of the measurement of pension or OPEB liabilities and expenditures recognized in
financial statements prepared using the current financial resources measurement focus
Recognizing on-behalf payments for pensions or OPEB in employer financial statements
Presenting payroll-related measures in required supplementary information for purposes of
reporting by OPEB plans and employers that provide OPEB
Classifying employer-paid member contributions for OPEB
Simplifying certain aspects of the alternative measurement method for OPEB
Accounting and financial reporting for OPEB provided through certain multiple-employer
defined benefit OPEB plans.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
31
The provisions of this Statement are required to be implemented for the periods beginning after June
15, 2017. We have not implemented Statement 85 and are currently evaluating the impact on future
financial statements.
GASB Statement No. 86, Certain Debt Extinguishing Issues (Statement 86) was issued by the GASB
in May 2017. The objective of Statement 86 is to improve consistency in accounting and financial
reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and
other monetary assets acquired with only existing resources—resources other than the proceeds of
refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This
Statement also improves accounting and financial reporting for prepaid insurance on debt that is
extinguished and notes to financial statements for debt that is defeased in substance. The provisions of
this Statement are required to be implemented for the reporting periods beginning after June 15, 2017.
We have not implemented Statement 86 and are currently evaluating the impact on future financial
statements.
GASB Statement No. 87, Leases (Statement 87) was issued by the GASB in June 2017. The objective
of Statement 87 is to better meet the information needs of financial statement users by improving
accounting and financial reporting for leases by governments. This Statement increases the usefulness
of governments’ financial statements by requiring recognition of certain lease assets and liabilities for
leases that previously were classified as operating leases and recognized as inflows of resources or
outflows of resources based on the payment provisions of the contract. It establishes a single model
for lease accounting based on the foundational principle that leases are financings of the right to use
an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an
intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred
inflow of resources, thereby enhancing the relevance and consistency of information about
governments’ leasing activities. The provisions of this Statement are required to be implemented for
the reporting periods beginning after December 15, 2019. We have not implemented Statement 87 and
are currently evaluating the impact on future financial statements.
(3) Cash and Investments
Pursuant to various agreements, appropriations, and statutory requirements relating to its operations, AEA
has established accounts for assets restricted to construction, operation, and financing activities. As used
throughout this note, “Fund” means a separate account established by the State legislature and does not refer
to a separate group of self-balancing accounts as contemplated by GAAP.
At June 30, 2017, the Authority’s carrying amount of cash and cash equivalents (all of which were restricted
or designated for specific purposes) was $88,248,000. The total of all bank balances on the same dates totaled
$88,248,000.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
32
The restricted cash and cash equivalents and investments were held in trust and restricted accounts for the
following activities as of June 30, 2017:
Restricted Cash and Cash Equivalents
(in thousands of dollars)
Governmental
Business-
Type
Activities Activities Totals
Power Cost Equalization Endowment
Fund
$ 2,423 - 2,423
Renewable Energy Grant Fund 15,124 - 15,124
Emerging Energy Technology Fund 1,262 - 1,262
Trans-Alaska Pipeline Liability Fund 4,532 - 4,532
Rural Energy and Energy Development
Programs
634 - 634
Funds advanced from state and federal
agencies
10,283 1,285 11,568
Bradley Lake Hydroelectric Project - 11,884 11,884
Alaska Intertie Project - 842 842
Rural Energy Loan Funds - 38,769 38,769
Power Development Fund - 1,210 1,210
Total restricted cash and cash
equivalents
$
34,258 53,990 88,248
Restricted Investments
(in thousands of dollars)
Governmental
Business-
Type
Activities Activities Totals
Power Cost Equalization Endowment
Fund
$ 1,023,566 - 1,023,566
Renewable Energy Grant Fund 25,196 - 25,196
Bradley Lake Hydroelectric Project - 20,593 20,593
Total restricted investments $ 1,048,762 20,593 1,069,355
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
33
Investment Holdings
The Power Cost Equalization Endowment Fund (PCE Fund), created under Alaska Statute (AS) 42.45.070,
the Renewable Energy Fund (RE Fund), created under AS 42.45.045, and the Emerging Energy Technology
Fund (EET Fund), created under AS 42.45.375, are under the fiduciary authority of the State Department of
Revenue, Treasury Division (Treasury).
Other AEA Cash and Investments – Bradley Lake Hydroelectric Project investments are substantially
invested pursuant to investment agreements with JP Morgan Chase Bank that guarantees annual interest
earnings of 7.38% or 7.41% per annum that end the earlier of July 1, 2021 or the date of repayment of the
Bradley Lake Power Revenue Bonds, First Series. These investments are in nonparticipating contracts and
are measured at cost in accordance with GASB 31.
Under the Internal Revenue Code of 1986, as amended, certain earnings in excess of arbitrage yield on the
Bradley Lake bonds must be rebated to the U.S. Treasury. The bulk of the Bradley Lake investments are
subject to rebate computation.
Internal staff manage AEA’s internally managed portfolio for liquidity and safety. There is no AEA Board
approved investment policy; however, staff follows AIDEA’s Board approved investment policy for
internally managed investments. The AEA managed portfolio consists of the following eligible securities:
Debt instruments issued or guaranteed by the U.S. government, its agencies and instrumentalities, and
Government Sponsored Enterprises (GSEs);
Money market funds collateralized by U.S. Treasury, agency securities, and repurchase agreements;
Units in the investment pool or any series of investment pool of the Alaska Municipal League
Investment Pool, Inc., or any successor to that entity, or any other investment pool for public entities
of the State of Alaska that is established under the Alaska Investment Pool Act (AS
37.23.010-37.23.900); and
Other investments specifically approved by the board.
At June 30, 2017, the fair values of AEA’s cash and investments are as follows:
Fair Value of Cash and Investments
(in thousands of dollars)
Governmental Business-Type
Activities Activities Totals
Deposits $ 4 - 4
Money market funds 34,254 53,990 88,244
Investment agreements - 20,593 20,593
Investments managed by
Department of Revenue
1,048,762 - 1,048,762
Total invested assets $ 1,083,020 74,583 1,157,603
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
34
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will negatively affect the fair value of an investment.
The Resolution addresses interest rate risk. Duration is an indicator of a portfolio’s market sensitivity to
changes in interest rates. In general, major factors affecting duration are (in order of importance):
1) Maturity
2) Prepayment frequency
3) Level of market interest rates
4) Size of coupon
5) Coupon payments
Rising interest rates generally translate into the fair market value of fixed income investments declining,
while falling interest rates are generally associated with increasing market values. Effective duration attempts
to account for the price sensitivity of a bond to changes in prevailing interest rates, including the effect of
embedded options. For example, for a bond portfolio with a duration of 5.0, a one percentage point parallel
decline in interest rates would result in an approximate price increase on that bond portfolio of 5.0%.
AEA Internally Managed Investments – AEA has no written policy for interest rate risk for internally
managed investments; however, staff follows and is in compliance with AIDEA’s written policy for interest
rate risk. The duration for investments is 2 years or less. The maximum maturity of any issue is 3 years from
the date of purchase.
Credit Risk
AEA has no written policy with regard to credit risk; however, staff follows and is in compliance with
AIDEA’s written policy for credit risk. Since AEA only invests in highly rated money markets and
U.S. government and agency securities and GSEs, credit risk is minimal.
The Bradley Lake Hydroelectric Project investments are substantially invested in guaranteed investment
contracts collateralized by federal obligations, which minimize credit risk.
Custodial Credit Risk
Custodial credit risk is the risk that deposits may not be returned in the event of a bank failure. Treasury’s
policy with regard to custodial credit risk is to collateralize State deposits to the extent possible. At June 30,
2017, AEA’s deposits managed by Treasury were uncollateralized and uninsured.
With respect to AEA managed investments, amounts totaling approximately $88,244,000 at June 30, 2017
are held in money market funds with the custodian, the trust department of a commercial bank; therefore, no
custodial risk exists for these securities. Investment agreements in the amount of $20,593,000 are held with
the custodian institution and are collateralized.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
35
Renewable Energy Fund and Emerging Energy Technology Fund Investment Holdings
The State Department of Revenue – Treasury Division has created a pooled environment by which it
manages the investments for which its Commissioner has fiduciary responsibility. Actual investing is
performed by investment officers within Treasury or by contracted external investment managers. The Fund
invests in the State’s internally managed General Fund and Other Non-Segregated Investments Pool
(GeFONSI). The GeFONSI consists of investments in the State’s internally managed Short-term Fixed
Income Pool, Short-term Liquidity Fixed Income Pool and the Intermediate-term Fixed Income Pool. The
complete financial activity of the Fund is shown in the Comprehensive Annual Financial Report (CAFR)
available from the Department of Administration, Division of Finance.
Assets in the pools are reported at fair value. Investment purchases and sales are recorded on a trade-date
basis. Securities are valued each business day using prices obtained from a pricing service.
The full accrual basis of accounting is used for the investment income and GeFONSI investment income is
distributed to pool participants monthly if prescribed by statute or if appropriated by the State legislature.
Income in the Short-term, Short-term Liquidity, and Intermediate-term Fixed Income Pools is allocated to
the pool participants daily on a pro-rata basis.
At June 30, 2017, the GeFONSI total for the Renewable Energy Fund was $25,196,000. The Emerging
Energy Technology fund had no balance invested in the GeFONSI at June 30, 2017. For additional
information on interest rate risk, credit risk, foreign exchange, derivatives, fair value, and counterparty credit
risk see the separately issued report on the Invested Assets of the Commissioner of Revenue at:
http://treasury.dor.alaska.gov/Investments/Annual-Investment-Reports.aspx.
Power Cost Equalization Endowment Fund Investment Holdings
Treasury has created a pooled environment by which it manages the investments the Commissioner has
fiduciary responsibility for. Actual investing is performed by investment officers in Treasury or by
contracted external investment managers. The Fund invests in the State’s internally managed Short-term
Fixed Income Pool, the Broad Market Fixed Income Pool, as well as the State’s internally managed Domestic
Equity and International Equity Pools. The complete financial activity of the Fund is shown in the
Comprehensive Annual Financial Report (CAFR) available from the State - Department of Administration,
Division of Finance.
Assets in the pools are reported at fair value. Investment purchases and sales are recorded on a trade-date
basis. Fixed income and equity securities are valued each business day. Securities expressed in terms of
foreign currencies are translated into U.S dollars at the prevailing exchange rates.
The full accrual basis of accounting is used for investment income. Income in the Short-term and Broad
Market Fixed Income Pools is allocated to pool participants daily on a pro-rata basis.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
36
At June 30, 2017, the Fund’s share of pool investments was as follows:
Power Cost Equalization Fund
Investment Pools
(in thousands of dollars)
FY17
Cash and cash equivalents
Short-term fixed income pool $ 1,742
Domestic fixed income
Broad market fixed income pool 325,084
Equity
Domestic equity pool 381,215
International Equity Pools 287,266
Real Estate Investment Trust Pool 28,257
Income receivable (payables) 2
Net Invested Assets $ 1,023,566
For additional information on interest rate risk, credit risk, foreign exchange, derivatives, fair value, and
counterparty credit risk see the separately issued report on the Invested Assets of the Commissioner of
Revenue at: http://treasury.dor.alaska.gov/Investments/Annual-Investment-Reports.aspx.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
37
(4) Capital Assets
Capital asset activity for the year ended June 30, 2017 was as follows (stated in thousands):
Balance at Balance at
Business-Type Activities
July 1,
2016 Additions Deletions
June 30,
2017
Capital assets not being depreciated:
Land and Rights of Way $ 11,212 - - 11,212
Construction in progress:
Intangibles 179,287 9,203 - 188,490
Other 10,698 6,377 (9,592) 7,483
Total capital assets not
being depreciated 201,197 15,580 (9,592) 207,185
Depreciable capital assets:
Infrastructure 438,763 9,604 - 448,367
Equipment 5,576 - - 5,576
Total depreciable capital
assets 444,339 9,604 - 453,943
Less accumulated depreciation:
Infrastructure (269,981) (10,786) - (280,767)
Equipment (5,401) (23) - (5,424)
Total accumulated
depreciation (275,382) (10,809) - (286,191)
Capital assets, net $ 370,154 14,375 (9,592) 374,937
Depreciation expense was charged to the functions as follows for the year ended June 30, 2017 (stated in
thousands):
Business-Type Activities
Bradley Lake Hydroelectric Project $7,118
Alaska Intertie Project 3,691
Total depreciation expense – business type activities $ 10,809
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
38
(5) Interfund Receivables, Payables, and Transfers
Interfund balances typically result from short-term operating or capital advances. Transfers typically result
from operating activities. A schedule of interfund balances as of and for the year ended June 30, 2017 follows
(stated in thousands):
Due from other funds
Due to Special Revenue Fund from Enterprise Fund $ 712
(6) Long-Term Debt
Long-term debt activity for the year ended June 30, 2017 was as follows (stated in thousands):
Balance at Balance at Due
Business-Type Activities
July 1,
2016 Additions Deletions
June 30,
2017
within
one year
Bradley Lake Power
Revenue Bonds:
First Series (a) $ 100 - - 100 -
Refunding, Third Series (a) 11,135 - (5,405) 5,730 5,730
Refunding, Fourth Series (a) 22,920 - (3,285) 19,635 3,485
Refunding, Sixth Series (a)(b) 28,430 - (400) 28,030 340
Total bonds payable 62,585 - (9,090) 53,495 9,555
Arbitrage interest payable (c) 660 319 - 979 504
Bond original issue premium 806 - (252) 554 239
Total other bond liabilities 1,466 319 (252) 1,533 743
Total long-term debt $ 64,051 319 (9,342) 55,028 10,298
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
39
(a) AEA issued the Power Revenue Bonds, First and Second Series (Bradley Lake Hydroelectric Project
Bonds), in September 1989 and August 1990, respectively, for the long-term financing of the
construction costs of the Bradley Lake Hydroelectric Project and refunded AEA’s Variable Rate
Demand Bonds which were issued in November 1985 to provide interim financing of the project.
AEA issued the Power Revenue Refunding Bonds, Third and Fifth Series in April 1999 to refund a
portion of the First Series Bonds and to provide costs of issuance. The First Series refunded bonds
were called on July 1, 1999. AEA issued the Power Revenue Refunding Bonds, Fourth Series in
April 2000 to refund a portion of the Second Series Bonds and to provide costs of issuance. The
Second Series refunded bonds were called on July 1, 2000. All of the revenues derived by AEA from
the operation of the project and all moneys, securities and funds (except the excess investment
earnings fund), including a capital reserve fund, held or set aside are pledged and assigned to secure
the payment of principal, redemption premium, if any, and interest on the bonds. No other revenues
of AEA are pledged as security for the payment of the bonds. AEA has covenanted to notify the
State Legislature of any failure to maintain the capital reserve fund at its required level. The bonds,
except for the Sixth Series, are further secured by bond insurance. AEA collects from each power
purchaser a percentage share of annual project costs. The outstanding Bradley Lake bonds mature
annually each July 1 through the year 2021 with interest rates ranging from 3.0% to 6.25%.
(b) In July 2010, the Authority issued $28,800,000 of Power Revenue Refunding Bonds, Sixth Series,
to refund and defease $30,640,000 aggregate outstanding principal amount of the Authority’s Power
Revenue Refunding Bonds, Fifth Series, and to pay costs of issuing the bonds. The refunding
resulted in aggregate debt service payments over the next eleven years of approximately $3,316,000
less than the debt service payments which would have been due on the refunded bonds. There was
an economic gain of approximately $2,350,000 which is calculated as the net difference between the
present value of the old debt service requirements and the present value of the new debt service
requirements, discounted at the effective interest rate and adjusted for additional cash paid. The
refunded bonds were called on August 2, 2010.
(c) The arbitrage interest payable is due to the U.S. Treasury for the excess of investment income on the
proceeds of each series of AEA’s tax exempt Bradley Lake bonds over the related interest expense
computed in accordance with Section 148 of the Internal Revenue Code of 1986, as amended. The
accumulated arbitrage interest payable amount is computed each year, and the amount for each series
is first due after the end of the fifth bond year and every five years thereafter. AEA maintains a
separate account for each series with the trustee and each year sets aside a sufficient amount to
satisfy the liability.
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
40
The minimum payments related to all bonds, for the years subsequent to June 30, 2017, are as follows:
Business-Type Activities
(in thousands of dollars)
Principal Interest Total
Fiscal Year Ending June 30:
2018 $ 9,555 2,590 12,145
2019 10,470 2,031 12,501
2020 11,025 1,479 12,504
2021 11,575 893 12,468
2022 10,870 291 11,161
Total $ 53,495 7,284 60,779
(7) Loans Receivable
The Authority administers the Power Project Fund Loan Program and the Rural Electrification Revolving
Loan Program. Loans outstanding at June 30, 2017 are classified as follows (stated in thousands):
Business-Type Activities
(in thousands of dollars)
No. of
Loans Amount
Power Project Fund Loan Programs 14 $ 11,442
Rural Electrification Revolving Loan Program 2 190
16
Less: Allowance for Loan Loss (349)
Balance at end of year $ 11,283
Loans more than 90 days past due are not included in the accrual of interest. At June 30, 2017, there were
no loans more than 90 days past due.
An analysis of changes in the allowance for loan losses for the years ended June 30, 2017 follows (stated in
thousands):
Balance at beginning of year $ 195
Provision for loan loss 154
Balance at end of year $ 349
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
41
On September 30, 2010, the Authority sold a portion of its Power Project Fund loan portfolio to AIDEA.
Under the agreement, upon AIDEA’s request, AEA is required to repurchase any loan upon a payment
default. On June 30, 2017, the outstanding principal balance of the loans sold was $15,235,010 for which
AEA has recognized an estimated liability for potential repurchase of $457,050.
(8) Fund Balance
Fund balances reported in the aggregate on the governmental fund balance sheet are subject to the following
constraints (stated in thousands):
Restricted by
External Parties
Restricted by
Legislation
Power Cost Equalization Fund $ - 1,021,600
Renewable Energy Fund - 38,770
Emerging Energy Technology Fund - 1,230
Trans-Alaska Pipeline Liability Fund 4,398 -
Rural Energy Projects - 1,996
Total fund balance $ 4,398 1,063,596
(9) Net Position
At June 30, 2017, the Authority reports net position in the amount of $1,461,210, of which restricted net
position amounted to $1,139,748. At June 30, 2017, net investment in capital assets totaled $321,462.
(10) Risk Management
AEA is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets; errors
and omissions; and natural disasters. AEA covers that risk through the purchase of commercial insurance
and participation in the State’s Risk Management Pool. The Risk Management Pool administers a self-
insurance program for each State agency, which covers all sudden and accidental property and casualty
claims. Annual assessments allocated by Risk Management are the maximum each agency is called upon to
pay, forestalling the need for supplemental appropriation or disruption of vital state services after a major
property loss, adverse civil jury award, or significant workers compensation claim.
(11) Related Parties
(a) Alaska Industrial Development and Export Authority
Pursuant to understandings and agreements between AIDEA and AEA, AIDEA provides
administrative, personnel, data processing, communications, and other services to AEA. During the
current fiscal year, AIDEA provided the following for services to AEA (stated in thousands):
Expensed services – governmental activities $ 5,534
Capitalized services – business-type activities 592
Total services $ 6,126
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Notes to Basic Financial Statements
June 30, 2017
42
AEA has a Board approved borrowing agreement with AIDEA to provide short-term working capital
funds up to a maximum of $7,500,000. At June 30, 2017, AEA had $3,800,000 payable to AIDEA for
services and borrowings, which are included in accounts payable.
As a result of implementing Governmental Accounting Standards Board No. 68 Accounting and
Financial Reporting for Pensions, AIDEA recorded a net pension liability. AEA’s annual payments
to AIDEA for personnel services supporting AEA activities includes a Public Employees Retirement
System contribution component. Payments to AIDEA for personnel services supporting AEA
activities comprise over half of AIDEA’s personnel costs.
(b) Alaska Intertie Management Committee
AEA is party to agreement with utilities (GVEA, MEA, CEA, and ML&P) using the Alaska Intertie
for wheeling of electrical power. Pursuant to the Intertie Agreement, the IMC was established to
manage the system. The IMC is comprised of a representative from AEA and each of the utilities.
AEA is reimbursed for operation and maintenance costs on a monthly basis with an annual settlement
to adjust the payments to actual costs. AEA received $43,446 during fiscal year 2017 for administrative
services.
(c) Bradley Lake Project Management Committee
On December 7, 1987, AEA entered into a Power Sales Agreement (PSA) with entities purchasing
electric power produced by the Bradley Lake Hydroelectric Project. In 1988, legislation was passed
which made the PSA effective. Pursuant to the PSA, a Project Management Committee (PMC) was
formed. The PMC is comprised of a representative from AEA and each of the power purchasers. The
participating power purchasers make monthly payments directly to the bond trustee based on their
respective percentage share of the estimated annual project costs. AEA has an agreement with the
PMC to provide administrative services to the Bradley Lake Project.
(12) Commitments and Contingencies
In the normal course of business, AEA also has various commitments, such as commitments for the extension
of credit and award of grants. At June 30, 2017, AEA had open Power Project Fund loan commitments of
$16,841,000.
At June 30, 2017, AEA had cumulative prior year commitments from grant awards that are funded by State
appropriations and federal awards; the amounts committed were $60,278,000.
In management’s opinion, the final outcome of any present legal proceedings or other contingent liabilities
and commitments will not materially affect our financial position.
Schedule 1
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Bradley Lake Hydroelectric Project Trust Account Activities
Year ended June 30, 2017
(stated in thousands)
Excess
Capital Renewal and Investment Operating
Debt Service Reserve Contingency Earnings Revenue Operating Reserve
Fund Fund Reserve Fund Fund Fund Fund Account Total
Balance at July 1, 2016 $10,792 12,779 5,624 314 385 1,404 1,116 32,414
Interest received 233 951 362 34 245 123 78 2,026
Bond principal paid (9,090) — — — — — — (9,090)
Bond interest paid (3,138) — — — — — — (3,138)
Operating budget surplus paid — — (1,056) — — (1,064) — (2,120)
Construction expenditures — — (4,973) — — — — (4,973)
Operating revenue received — — — — 20,416 — — 20,416
Operating expenses paid — — — — — (3,063) — (3,063)
Transfers between funds 12,193 (951) 3,263 334 (19,707) 5,031 (163) —
Balance at June 30, 2017 $10,990 12,779 3,220 682 1,339 2,431 1,031 32,472
See accompanying independent auditors’ report.
43
Schedule 2
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Projects and Programs – Balance Sheet
June 30, 2017
(stated in thousands)
Emerging Trans Alaska
Power Cost Renewable Energy Pipeline Rural
Equalization Energy Technology Liability Energy
Fund Fund Fund Fund Projects Eliminations Totals
Current assets:
Restricted cash and cash equivalents $2,423 15,124 1,262 4,532 10,917 — 34,258
Operating receivable — 1,409 — — 219 — 1,628
Grants receivable — — 7 — 1,558 — 1,565
Due from State of Alaska — — — — 1,741 — 1,741
Due from other funds — — — — 4,795 (4,083) 712
Total current assets 2,423 16,533 1,269 4,532 19,230 (4,083) 39,904
Noncurrent assets:
Restricted investments 1,023,566 25,196 — — — — 1,048,762
Total assets $1,025,989 41,729 1,269 4,532 19,230 (4,083) 1,088,666
Liabilities and Fund Balance
Current liabilities:
Due to State of Alaska $41 — — — 6,575 — 6,616
Accounts payable 4,269 1,651 39 — 8,097 — 14,056
Due to other funds 79 1,308 — 134 2,562 (4,083) —
Total current liabilities 4,389 2,959 39 134 17,234 (4,083) 20,672
Total liabilities 4,389 2,959 39 134 17,234 (4,083) 20,672
Fund Balance:
Restricted by agreements with external parties — — — 4,398 — — 4,398
Restricted by legislation 1,021,600 38,770 1,230 — 1,996 — 1,063,596
Total fund balance 1,021,600 38,770 1,230 4,398 1,996 — 1,067,994
Total liabilities and fund balance $1,025,989 41,729 1,269 4,532 19,230 (4,083) 1,088,666
Commitments and contingencies
See accompanying independent auditors’ report.
Special Revenue Fund
Assets
44
Schedule 3
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Special Revenue Fund
Schedule of Projects and Programs – Revenues, Expenses, and Changes in Fund Balance
Year ended June 30, 2017
(stated in thousands)
Emerging Trans Alaska
Power Cost Renewable Energy Pipeline Rural
Equalization Energy Technology Liability Energy
Fund Fund Fund Fund Projects Totals
Operating revenues:
State of Alaska appropriations $— — — — 16,092 16,092
Federal grants — — 192 — 5,800 5,992
Revenue from operating plants — — — — 8 8
Investment income, net 112,374 224 — 20 — 112,618
Other revenues — — — — 4 4
Total operating revenues 112,374 224 192 20 21,904 134,714
Operating expenditures:
Grants and projects — 14,008 1,099 878 20,791 36,776
Power cost equalization grants 25,853 — — — — 25,853
General and administrative 902 1,422 — 17 1,111 3,452
Total operating expenditures 26,755 15,430 1,099 895 21,902 66,081
State of Alaska reappropriation of funds (13,556) — — — — (13,556)
Increase (decrease) in fund balance 72,063 (15,206) (907) (875) 2 55,077
Fund balance – beginning 949,537 53,976 2,137 5,273 1,994 1,012,917
Fund balance – ending $1,021,600 38,770 1,230 4,398 1,996 1,067,994
See accompanying independent auditors’ report.
45
Schedule 4
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Projects and Programs – Statement of Net Position
June 30, 2017
(stated in thousands)
Rural Power Development
Bradley Lake Alaska Susitna-Watana Power Electrification and
Hydroelectric Intertie Hydroelectric Project Revolving Loan Railbelt Energy
Assets and Deferred Outflows of Resources Project Project Project Fund Fund Projects Eliminations Totals
Current assets:
Restricted cash and cash equivalents $11,884 842 — 38,703 66 2,495 — 53,990
Operating receivable — 312 — — — 4 — 316
Prepaid expense — 895 — — — — — 895
Loans receivable — — — 453 62 — — 515
Accrued interest receivable 1,038 — — 39 2 — — 1,079
Due from other funds — — — — — 797 (797) —
Total current assets 12,922 2,049 — 39,195 130 3,296 (797) 56,795
Noncurrent assets:
Restricted investments 20,593 — — — — — — 20,593
Loans receivable, net of allowance — — — 10,645 123 — — 10,768
Capital assets, net of accumulated depreciation 162,907 29,009 183,021 — — — — 374,937
Total noncurrent assets 183,500 29,009 183,021 10,645 123 — — 406,298
Deferred outflows of resources:
Deferred charge on bond refundings 20 — — — — — — 20
Total assets and deferred outflows of resources $196,442 31,058 183,021 49,840 253 3,296 (797) 463,113
Liabilities and Net Position
Current liabilities:
Due to/from State of Alaska, net $— 904 (1,049) — 305 3,296 — 3,456
Accounts payable 6,867 1,120 644 56 — — — 8,687
Bonds payable – current portion 9,555 — — — — — — 9,555
Other bond liabilities – current portion 743 — — — — — — 743
Accrued interest payable 1,436 — — — — — — 1,436
Due to other funds 793 8 405 303 — — (797) 712
Total current liabilities 19,394 2,032 — 359 305 3,296 (797) 24,589
Noncurrent liabilities:
Bonds payable – noncurrent portion, net 43,940 — — — — — — 43,940
Other bond liabilities – noncurrent portion 790 — — — — — — 790
Other liabilities 103 — — 475 — — — 578
Total noncurrent liabilities 44,833 — — 475 — — — 45,308
Total liabilities 64,227 2,032 — 834 305 3,296 (797) 69,897
Net position:
Net investment in capital assets 109,432 29,009 183,021 — — — — 321,462
Restricted for debt service 21,482 — — — — — — 21,482
Restricted by agreements with external parties 1,301 17 — — — — — 1,318
Restricted by legislation — — — 49,006 (52) — — 48,954
Total net position 132,215 29,026 183,021 49,006 (52) — — 393,216
Total liabilities and net position $196,442 31,058 183,021 49,840 253 3,296 (797) 463,113
Commitments and contingencies
See accompanying independent auditors’ report.
Business-Type Activities - Enterprise Fund
46
Schedule 5
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Business-Type Activities - Enterprise Fund
Schedule of Projects and Programs – Revenues, Expenses, and Changes in Net Position
Year ended June 30, 2017
(stated in thousands)
Rural Power
Bradley Lake Alaska Susitna-Watana Larsen Bay Power Electrification Development and
Hydroelectric Intertie Hydroelectric Hydroelectric Project Revolving Loan Railbelt Energy
Project Project Project Project Fund Fund Projects Totals
Operating revenues:
State of Alaska appropriations $— 179 — — — — — 179
Revenue from operating plants 17,970 709 — 11 — — — 18,690
Interest on loans — — — — 287 5 — 292
Other revenues — — — — 18 — — 18
Total operating revenues 17,970 888 — 11 305 5 — 19,179
Operating expenses:
Depreciation 7,118 3,691 — — — — — 10,809
General and administrative 290 284 — — 611 66 — 1,251
Interest expense 2,652 — — — — — — 2,652
Plant operating 3,722 608 — — — — — 4,330
Provision for loan loss — — — — 156 (2) — 154
Total operating expenses 13,782 4,583 — — 767 64 — 19,196
Operating income (loss)4,188 (3,695) — 11 (462) (59) — (17)
Nonoperating activities:
Investment income, net 1,643 5 — — 177 — — 1,825
State of Alaska appropriations 51 770 8,327 — — — — 9,148
Increase (decrease) in net position 5,882 (2,920) 8,327 11 (285) (59) — 10,956
Net position – beginning 126,333 31,946 174,694 (11) 49,291 7 — 382,260
Net position – ending $132,215 29,026 183,021 — 49,006 (52) — 393,216
See accompanying independent auditors’ report.
47
Schedule 6
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Schedule of Capital Assets Presented under Federal Energy Regulatory Commission Requirements
June 30, 2017
(stated in thousands)
Balance at Balance at
July 1, 2016 Additions Deletions June 30, 2017
Capital assets:
Intangible $174,708 8,327 — 183,035
Production 265,949 888 — 266,837
Transmission 190,261 15,198 — 205,459
General 14,618 771 (9,592) 5,797
Total capital assets 645,536 25,184 (9,592) 661,128
Less accumulated depreciation:
Intangible (6) — — (6)
Production (127,558) (5,498) — (133,056)
Transmission (142,421) (5,291) — (147,712)
General (5,397) (20) — (5,417)
Total accumulated
depreciation (275,382) (10,809) — (286,191)
Capital assets, net $370,154 14,375 (9,592) 374,937
Unaudited - See accompanying independent auditors’ report.
48
Schedule 7
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Bradley Lake Historical Annual Project Cost
Year ended June 30, 2017
(stated in thousands)
Operating Data 2017
Project costs:
Operations and maintenance $2,867
General and administrative 590
Insurance 555
Contributions to renewal and contingency fund and operating reserve account 3,539
Subtotal 7,551
Debt service 12,426
Less investment income (1,657)
Total cost of power $18,320
Energy delivered (MWh)422,006
Total unit cost of power (cents per kWh)4.34
Unaudited - See accompanying independent auditors’ report.
This schedule is provided as part of the municipal secondary market disclosure requirements relating to the
Bradley Lake Hydroelectric Power Revenue and Refunding Bonds.
49
Schedule 8
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
PCE Endowment Fund Historical Analysis
June 30, 2017
(stated in thousands)
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
Beginning investment fund balance $303,354 320,714 364,529 751,780 840,215 977,867 969,389 946,939
Inflows:
Annual investment earnings 38,387 67,651 10,948 111,488 171,112 33,192 8,912 112,331
Capital fund transfers in — — 400,000 — — — — —
Total inflows 38,387 67,651 410,948 111,488 171,112 33,192 8,912 112,331
Outflows:
Transfers to AEA for PCE payments (1)(20,725) (23,458) (23,154) (22,527) (32,773) (41,002) (30,622) (34,956)
Program administration - AEA (160) (174) (211) (198) (241) (248) (255) (243)
Administrative fee - Regulatory Commission — (78) (129) (90) (110) (107) (100) (112)
Management fee - Department of Revenue (142) (126) (203) (238) (336) (313) (385) (393)
Total outflows (21,027) (23,836) (23,697) (23,053) (33,460) (41,670) (31,362) (35,704)
Ending investment fund balance $320,714 364,529 751,780 840,215 977,867 969,389 946,939 1,023,566
(1) Final PCE program expenditures reported may vary depending on outstanding PCE payables at June 30, not included in this presentation.
Unaudited - See accompanying independent auditors’ report.
50
Schedule 9
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2017
Unaudited - See accompanying independent auditors’ report. 51
Organization and Operations
Throughout the 1980’s, Alaska Energy Authority (AEA or Authority) worked to develop the State’s energy
resources as a key element in diversifying Alaska’s economy. A number of large-scale projects were constructed;
four of those projects were sold in 2002 and one was transferred to the City of Larsen Bay in the fall of 2010. The
Bradley Lake Hydroelectric project provides some of the least expensive electric energy to the Railbelt. The Alaska
Intertie provides for connection and movement of power north or south to increase reliability and allow Interior
Alaska to obtain less expensive electric energy available from the Southcentral portion of the state.
Pursuant to statute, on August 12, 1993, the Board of Alaska Industrial Development and Export Authority
(AIDEA), a public corporation and a political subdivision of the State, became the Board of Directors of AEA.
AEA continues to exist as a separate legal entity. The corporate structure and operating assets of AEA were
retained, but the ability to have employees and construct or acquire energy projects was eliminated. Among other
things, AIDEA provides personnel services, at cost, for AEA. The AEA executive director is an employee of
AIDEA, but is separate and independent and is not subject to supervision by AIDEA’s executive director. There is
no commingling of funds, assets, or liabilities between AIDEA and AEA, and there is no responsibility of one for
the debts or the obligations of the other. Consequently, the accounts of AIDEA are not included in the
accompanying financial statements. The Legislature, in 1993, required AEA, to the maximum extent feasible, to
enter into contracts with public utilities and other entities to carry out AEA duties with respect to the ongoing
operation and maintenance of the AEA owned operating assets; this has occurred with oversight responsibility
retained by AEA.
The Alaska Legislature empowered AEA to acquire the Susitna River power project under AS 44.83.080 (18),
effective July 1, 1999. Rural energy programs previously administered by the former Department of Community
and Regional Affairs, Division of Energy, were transferred to AEA for administration, as part of a larger
reorganization of State agencies. These rural energy programs were originally part of AEA prior to the 1993
reorganization. During fiscal year 2009, legislation added energy development programs to AEA.
Effective July 14, 2011, the legislature empowered AEA to acquire, construct, own, and operate a hydroelectric
project located on the Susitna River. Under this legislative authorization, AEA is working on planning, designing,
and Federal Energy Regulatory Commission (FERC) licensing of the Susitna-Watana Hydroelectric Project.
Bradley Lake Hydroelectric Project
The project has 120 Megawatts (MW) of installed capacity and transmits its power to the State’s main power grid
via two parallel 20–mile transmission lines. The project, which cost in excess of $300 million, went into
commercial operation in 1991. Homer Electric Association now operates the project under contract with AEA.
Bradley Lake serves Alaska’s Railbelt from the Kenai Peninsula to Fairbanks, as well as the Delta Junction area.
In September 2016, the Authority received an amendment to the FERC license for a diversion of West Fork Upper
Battle Creek into Bradley Lake project. The diversion will increase the Bradley Lake Hydroelectric Project annual
energy output by approximately 37,000 Megawatt hours (MWh). The Battle Creek project addition includes
construction of three miles of road, a concrete diversion dam, and a pipe and canal to convey the water to Bradley
Lake. The estimated cost of construction provided in February 2017 was approximately $46.5 million.
Construction could begin in 2018 and be completed in the fall of 2020.
Schedule 9 (Continued)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2017
Unaudited - See accompanying independent auditors’ report. 52
Alaska Intertie Project
The Alaska Intertie is a 170–mile transmission line designed for 345 kilovolts and is operating at 138 kilovolts. It
runs between Willow and Healy and interconnects the power systems in the Anchorage and Fairbanks areas. The
Intertie reduces the number of black/brownouts throughout the system by enabling power to move either north or
south when major system disturbances occur. The Alaska Intertie allows Railbelt utilities to implement informal
power to lower the costs to rate paying consumers. It also allows Southcentral Alaska utilities to purchase power
from Fairbanks during power shortages. AEA contracts with the following Participating Utilities for operations
and maintenance: Golden Valley Electric Association (GVEA) in Fairbanks, to purchase lower cost electricity
produced by Chugach Electric Association (CEA), and the Municipality of Anchorage, d/b/a Municipal Light and
Power (ML&P). The Alaska Intertie also enables GVEA to receive power generated by the Bradley Lake Project,
which is some of the lowest priced power in the Railbelt region. It also allows Southcentral Alaska utilities to
purchase power from Fairbanks during power shortages.
The Alaska Intertie Agreement appointed the Intertie Management Committee (IMC) and AEA to oversee the
activities of the Alaska Intertie project. AEA contracts with certain Participating Utilities for operations and
maintenance. The IMC and AEA oversee the Alaska Intertie under the second amended and restated Intertie
Agreement (Agreement) executed on March 11, 2014. The Agreement improves the reliability of the
interconnected electrical systems, outlines how the transfer over the Intertie of electrical capacity and energy
among the participants will occur, and establishes the IMC. The IMC’s primary responsibility is to provide
governance, control, operation, maintenance, repair, and improvement to the Intertie, subject to AEA’s oversight.
The IMC is comprised of a representative from AEA and each of the Participating Utilities.
Summarized below are the State’s appropriations to upgrade and extend a portion of the Alaska Intertie (in
thousands):
Appropriation Description Year Amount
Upgrade and extension of the Intertie
(net of FY08 and FY12 reappropriations) FY02 $ 9,300
Repair of Static VAR compensators (SVC)
and a tower foundation repair FY08 10,000
Substation upgrades and tower repairs FY12 5,000
Railbelt transmission plan FY12 1,000
ML&P was contracted to perform the repairs and upgrades. The tower repairs are now complete. Design and
construction of the new static VAR compensators (SVC’s) is substantially complete as of June 30, 2017, with
minor punch list items being completed and periodic training for utility maintenance personnel. AEA will continue
to work with the Railbelt utilities to extend the intertie to Lake Lorraine.
Schedule 9 (Continued)
ALASKA ENERGY AUTHORITY
(A Component Unit of the State of Alaska)
Supplementary Organization and Project Information
June 30, 2017
Unaudited - See accompanying independent auditors’ report. 53
Susitna-Watana Hydroelectric Project
Starting in 2010, AEA conducted preliminary planning and conceptual design for a large hydroelectric project to
be built in the Railbelt Region. A number of hydroelectric generation alternatives were studied and AEA issued a
Preliminary Decision Document selecting what is now known as the Susitna-Watana Hydroelectric Project as the
primary large hydroelectric project for the State to pursue.
The proposed Susitna-Watana Hydroelectric Project would be located approximately half-way between Anchorage
and Fairbanks on the upper Susitna River. The Susitna-Watana dam would be located within a steep-sided valley
of the Susitna River below Watana Creek at River Mile 184, above the mouth approximately 22 miles upstream of
the Devil's Canyon rapids.
The project would include a single roller compacted concrete dam with a height providing nominal crest elevation
at 2,050 feet mean sea level with a 23,546 acre, 42.5-mile long reservoir with an average width of one to two miles.
The height of the dam was determined to be 705 feet tall during the engineering feasibility studies. The powerhouse,
dam, and related facilities would be linked by transmission lines connecting the project to the Alaska Intertie. The
project would produce about 50% of the Railbelt's electrical demand or an annual average of 2,800,000 MWh.
AEA filed a Notice of Intent and Pre-Application Document with the FERC to begin the licensing process for the
project in December 2011. The FERC approved all 58 environmental study plans in early 2013. In implementing
the study plans, AEA worked closely with the Alaska Department of Fish and Game in conducting the fishery and
wildlife studies. On June 3, 2014, AEA filed the Initial Study Report (ISR) for the project. The approximately
7,000 page ISR presents information collected from the first year of field studies.
The Alaska Legislature has appropriated a total of $193,400,000 for AEA to plan, design, and obtain a FERC
permit for the project. On December 26, 2014, the Governor of Alaska issued Administrative Order 271 suspending
discretionary spending on the project. On January 8, 2015, the FERC granted AEA’s request to hold the licensing
process in abeyance. On July 6, 2015, the Governor’s office authorized AEA to proceed with the Integrated
Licensing Process (ILP) using previously appropriated funds. AEA, in August 2015, requested the FERC’s
permission to resume the licensing efforts. On August 4, 2016, the Governor issued a letter to FERC requesting
to proceed with the ILP to the point of issuing an updated Study Plan Determination (SPD) to preserve the State
of Alaska’s investment in the project. On August 26, 2016, FERC responded to the Governor’s letter stating that
FERC will proceed with the ILP to complete the SPD. After issuing the SPD, the project will be put into abeyance
as requested by the Governor.
On June 22, 2017, FERC issued its Determination on the ISR for Susitna. Overall, it was very favorable to the
State. However, since it was issued more than 100 days beyond the ILP schedule of March 10, 2017, there was
insufficient time within FY17 to complete previously authorized scopes of work to complete a comprehensive
analysis of the Determination and revise study reports as needed. AEA requested that a portion of the Susitna
appropriation be extended for 90 days to complete this work and preserve the value of the State’s investment to
the maximum extent possible.
On July 18, 2017, the OMB issued a memo to AEA authorizing the continued spending on the project 90 days
from June 30, 2017. AEA was granted concurrence and authorization to spend necessary funds in order to proceed
to the point where the State’s investment, to date, is preserved and the project can be left in abeyance.