Loading...
HomeMy WebLinkAboutAEA Board Meeting Nov 9 2004ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Financial Statements and Schedules June 30,2004 and 2003 (With Independent Auditors'Report Thereon) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Table of Contents Management's Discussion and Analysis Independent Auditors'Report Balance Sheets Statements of Revenues,Expenses,and Changes in Net Assets Statements of Cash Flows Notes to Basic Financial Statements Schedules 1 Schedule of Bradley Lake Hydroelectric Project Trust Account Activities 2 Schedule of Projects -Balance Sheet 3 Schedule of Projects --Revenues,Expenses,and Changes in Net Assets ALASKA ENERGY AUTHORITY (A Component Unit of the State Of Alaska) Management's Discussion and Analysis June 30,2004 and 2003 This discussion and analysis is intended to serve as an introduction to the June 30,2004 and 2003 financial statements of the Alaska Energy Authority (AEA or the Authority),a component unit of the State of Alaska. Financial information for 2002 is included for purpose of comparison. The Authority's operations are broken down into two major programs -the owned hydroelectric and intertie projects and the rural energy programs.Further information on AEA's programs can be found in note 1 to the financial statements. Financial Highlights AEA's assets exceeded its liabilities at June 30,2004 and 2003 by $420 million and $423 million,respectively. Of the total net assets at June 30,2004,$147 million was invested in capital assets net of related debt. $45 million was restricted and $228 million was unrestricted.Of the total net assets at June 30,2003, $154 million was invested in capital assets net of related debt,$48 million was restricted and $221 million was unrestricted. Financial Analysis Financial Position Total assets,total liabilities and total net assets at June 30,2004,2003,and 2002 follows (stated in.thousands): 2004 2003 2002 Current assets $6,483 9.607 15,274 Capital assets 281,831 291.436 300,566 Other noncurrent and restricted assets 286.918 277.970 282,255 Total assets $§75,232 579.013 598.095 Current liabilities $25,876 22,521 24,007 Noncurrent liabilities 129.681 133.405 136.466 Total liabilities 155.557 155.926 160,473 Total net assets 419.675 423.087 437,622 Total liabilities and net assets $§75.232 579.013 598,095 The decline in current assets at June 30,2004 compared to June 30,2003 was attributable to a $1.9 million decrease in grants receivable and $1.2 million decrease in current portion of loans receivable.The decline related to grants receivable resulted from collection of $1.1 million from the Department of Energy during the year plus a $1.7 million advance from the Department of Defense received at the end of the year.These decreases were offset by an increase in grants receivable from the Denali Commission due to higher accrued grant expenditures at June 30,2004.The decline in current portion of loans receivable was due to a combination of decrease in Joans originated and collections on loans.The decline in current assets at June 30.2003 compared to June 30,2002 resulted substantially from a decrease in grants receivable and operating revenue receivable.AEA began billing its largest grant provider,the Denali Commission,more frequently,resulting in a lower receivable amount at June 30,2003.The decrease in operating revenue receivable related to the Four Dam Pool Project which was ALASKA ENERGY AUTHORITY (A Component Unit of the State Of Alaska) Management's Discussion and Analysis June 30,2004 and 2003 sold on January 31,2002.Accordingly,there was a receivable at June 30,2002 related to the Four Dam Pool Project and no receivable at June 30,2003. The decrease in capital assets at June 30,2004 compared to the same date in 2003 resulted mainly from depreciation of the Alaska Intertie and Bradley Lake Hydroelectric Projects.Other noncurrent and restricted assets increased at June 30,2004 compared to the same date in 2003 due to fair value increases in the PCE Endowment Fund.The decrease in capital assets at June 30,2003 compared to the same date in 2002 resulted mostly from depreciation of the Alaska Intertie and Bradley Lake Hydroelectric Projects. The increase in current liabilities at June 30,2004 compared to the same date in 2003 was substantially caused by a grant payment due at June 30,2004 to The Four Dam Pool Power Agency from the Southeast Energy Fund. There was no similar grant liability at the prior fiscal year end.This increase was offset by a decrease in short term borrowings used to fund current bills and other decreases in accounts payable.AEA increased the frequency of billing other governmental agencies from quarterly to monthly,thereby reducing its reliance on short term borrowings.The decrease in current liabilities at June 30,2003 compared to June 30,2002 was substantially due to a decrease in the amount due to the State of Alaska (State),offset by an increase in accounts payable.During the year,accounting and invoice processing for the AEA rural energy programs were transferred from the State's accounting system to AEA's.This transfer eliminated AEA's usage of State monies and the subsequent repayment.The increase in accounts payable resulted mostly from increased construction management activities relating to Denali Commission projects. The decreases in noncurrent liabilities between June 30,2004 and 2003 and between June 30,2003 and 2002 were caused by the decrease in the long term portion of bonds payable at each year end.There were no new borrowings either year. The decrease in net assets from June 30,2003 to June 30,2004 and between June 30,2002 and 2003 resulted from the operating losses for those years offset by non-operating 'investment income. 2 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State Of Alaska) Management's Discussion and Analysis June 30,2004 and 2003 Operations Components of the Authority's operating revenues,operating expenses,and nonoperating investment income (loss)for the years ended June 30,2004 through 2002 follows (stated in thousands): 2004 2003 2002 Operating revenues: Federal grants $34,592 24,354 22,792 Revenue from operating plants 14,161 15,582 17,388 State of Alaska appropriations 9,530 5,190 13,151 Other 1,834 2.696 1,539 Total operating revenues 60.117 47,822 54.870 Operating expenses: Loss on sale of Four Dam Pool Project _--177,871 Grants and projects 45,861 31,087 24,832 Power cost equalization grants 15,461 15.565 15,652 Depreciation 10,312 10,373 15,782 Interest expense 8,782 9,004 9,275 Plant operating 4,306 3,257 5.347 General and administrative 1,583 1,757 2,209 Impairment loss -_--1,186 Provision for loan loss and bad debt expense (30)329 190 Total operating expenses 86,275 71,372 252,344 Operating loss (26,158)(23,550)(197,474) Nonoperating -investment income (loss)22,746 9.015 (2,180) Decrease in net assets $(3.412)(14.535)(199.654) Operating revenues increased $12.3 million during the year ended June 30.2004 compared to the same period in 2003.The increase was substantially due to increased federal grant revenue from the Denali Commission and increased revenue from State of Alaska appropriations for the Power Cost Equalization program.The increases were offset by decreased revenue from operating plants,primarily the Bradley Lake Hydroelectric project,which has revenue fluctuations based on budgeted expenditures,and from other state agencies.due to completion of a contract with the State Department of Environmental Conservation.Operating revenues declined $7 million during the year ended June 30,2003 compared to 2002.The net decline in June 30.2003 resulted from decreases in revenue from operating plants and State of Alaska appropriations,offset by an increase in federal grant revenues.The decline in revenues from State of Alaska appropriations resulted from a decrease in State funding of AEA rural energy programs.During the year ended June 30.2003,Denali Commission project funding significantly contributed to the increase in federal grant revenue compared to 2002.This increase was offset by decreased grant revenue from the U.S.Department of Agriculture.In 2002 AEA received a $5 million grant from the U.S.Department of Agriculture.There was no comparable grant in 2003. 3 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State Of Alaska) Management's Discussion and Analysis June 30,2004 and 2003 Operating expenses increased $14.9 million during the year ended June 30,2004 compared to the same period in 2003.The primary reason for the increase was higher grant and project expenses due to the increase in the number of active rural energy construction projects.The increase in grant and project expenses corresponded with the increase in federal grant project revenue.Operating expenses also increased due to repairs and maintenance costs on the Bradley Lake Hydroelectric Project.Operating expenses decreased $181]million in the year ended June 30,2003 compared to June 30,2002.The primary reason for the decrease was the 2002 loss on sale of the Four Dam Pool Project.The sale of the Four Dam Pool Project also resulted in the decline in depreciation and plant operating expenses.Grant and project expenses increased due to the increase in the number of rural energy construction projects.Other changes in operating expenses between the years included the impairment loss recognized on the Larsen Bay Project in 2002. The nonoperating investment income and loss fluctuated during the year end periods substantially due to fair value gains in 2004 and 2003 and losses in 2002 on the PCE Endowment Fund investments.The PCE Endowment Fund is a managed long term fund intended to generate the income to fund the PCE program.The fund value fluctuates with market changes. KPMG LLP Suite 600 701 West Eighth Avenue Anchorage,AK 99501 Independent Auditors'Report The Board of Directors Alaska Energy Authority (a Component Unit of the State of Alaska) We have audited the accompanying balance sheets of the Alaska Energy Authority (a Component Unit of the State of Alaska)(Authority)as of and for the years ended June 30,2004 and 2003,and the related statements of revenues,expenses,and changes in net assets,and cash flows for the years then ended.These financial statements are the responsibility of the Authority's management.Our responsibility is to express an opinion on these basic financial statements based on our audits. We conducted our audits 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 of material misstatement.An audit includes examining,on a test basis,evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and the significant estimates made by management,as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinions. In our opinion.the financial statements referred to above present fairly,in all material respects,the financial position of the Authority as of June 30.2004 and 2003,and the changes in its financial position and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards.we have also issued our report dated September 24.2004 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 the internal control over financial reporting or on compliance.That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The Management's Discussion and Analysis on pages |through 4 are not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America.We have applied certain limited procedures.which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information.However.we did not audit the information and express no opinion on it. KPMG LLP,a U.S.limited lizbility partnership,is the U.S. member firm:of KPMG International,a Swiss cooperative. aaa The Board of Directors Alaska Energy Authority (a Component Unit of the State of Alaska) Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The supplementary information included in schedules 1 to 3 is presented for the purpose of additional analysis and is not a required part of the basic financial statements.Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and.in our opinion.is fairly stated in all material respects in relation to the basic financial statements taken as a whole. KPIc LEP September 24,2004 ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Balance Sheets June 30,2004 and 2003 (Stated in thousands) Assets Current assets: Grants receivable Loans receivable (note 7) Operating revenue receivable Accrued interest receivable Total current assets Noncurrent assets: Restricted cash and investments (note 3) Cash and investments designated for specific purposes (note 3) Loans receivable,net of allowance (note 7) Capital assets (note 5) Less accumulated depreciation Capital assets,net Total noncurrent assets Total assets Liabilities and Net Assets Current liabilities: Due to State of Alaska Accounts payable Bonds payable -current portion (note 6) Accrued interest Total current liabilities Noncurrent liabilities: Bonds payable -noncurrent portion,net (note 6) Arbitrage interest payable (note 6) Other liabilities Total noncurrent liabilities Total liabilities Net assets: Invested in capital assets net of related debt Restricted for debt service Restricted by agreements with external parties Unrestricted net assets Total net assets Commitments and contingencies (notes 8 and 10) Total liabilities and net assets See accompanying notes to basic financial statements. 2004 2003 3,765 5.672 1.061 2,293 687 529 970 1.113 6.483 9.607 21.801 21,913 243.613 235,082 21,504 20,975 433.628 432,921 (151.797)(141.485) 281.831 291.436 568.749 569.406 375.232 579.013 694 750 16.360 13.095 5,370 5.085 3.452 3.591 25.876 22.521 129.205 132.697 373 604 103 104 129.681 133.405 155.557 155,926 147,256 153,654 21.801 21,913 22,974 26,034 227.644 221,486 419,675 423.087 575.232 579.013 ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Statements of Revenues,Expenses,and Changes in Net Assets Years ended June 30,2004 and 2003 (Stated in thousands) Operating revenues: Federal grants Revenue from operating plants State of Alaska appropriations Revenue from other state agencies Interest on loans Other revenue Total operating revenues Operating expenses: Grants and projects Power cost equalization grants Depreciation Interest expense Plant operating General and administrative Provision for loan loss and bad debt expense Total operating expenses Operating loss Nonoperating -investment mcome Decrease in net assets Net assets -beginning Net assets -ending See accompanying notes to basic financial statements. $ 2004 2003 34,592 24.354 14,161 15.582 9,530 5.190 981 1.675 701 945 152 76 60.117 47,822 45,861 31,087 15,461 15,565 10,312 10,373 8,782 9,004 4,306 3.257 1,583 1,757 (30)329 86.275 71,372 (26,158)(23,550) 22.746 9.015 (3.412)(14.535) 423,087 437,622 419,675 423.087 ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Statements of Cash Flows Years ended June 30,2004 and 2003 (Stated in thousands) 2004 2003 Cash flows from operating activities: Receipts from federal grants $36,499 28.419 Receipts from customers and users 14,263 16.491 Receipts from State of Alaska appropriations 9.721 5.055 Principal collected on loans 4,903 5.373 Receipts from other state agencies 1.058 1351 Interest collected on loans 763 802 Other operating receipts 24 -_- Loans originated (4,159)(5,325) Payments to suppliers (12,932)(12,390) Payments to grantees (50.032)(33.929) Net cash provided by operating activities 108 5.847 Cash flows from noncapital and related financing activities: Funds received in trust for subreceipient grantees (470)470 Net unremitted interest earned (returned)on federal grant advances (9)13 Net unremitted interest earned (returned)on state appropriation advances 5 -_ Net payments on operating loans from AIDEA (975)©(60) Net payments on operating loans from State of Alaska _-(5.625) Net cash used by noncapital and related financing activities (1.449)(5,202) Cash flows from capital and related financing activities: Principal paid on bonds (5.085)(4,825) Interest paid on borrowings (7,043)(7,316) Purchase of capital assets (707)(1.243) Net cash used by capital and related financing activities (12,835)(13.384) Cash flows from investing activities: Purchase of investments (29,230)(30,610) Proceeds from sales and maturities of investments 35,036 36,857 Interest received from investments 7.385 8,831 Net cash provided by investing activities 13.19]15.078 Net increase (decrease)in cash and cash equivalents (985)2,339 Cash and cash equivalents at beginning of year 36.429 34,090 Cash and cash equivalents at end of year (note 3)$35.444 36.429 Reconciliation of change in net assets to net cash provided by operating activities: Operating loss $(26,158)(23,550) Adjustments to reconcile operating loss to net cash provided by operating activities:Depreciation 10.312 10,373 Provision for loan loss and bad debt expense (30)329 Bond interest expense 8,782 9,004 Changes in assets and liabilities: Decrease in due to State of Alaska (61)(27) Decrease in grants receivable 1.907 751 Decrease in loans receivable 744 362 Decrease in interest receivable 62 42 (Increase)decrease in operating revenue receivable (167)2.475 Increase in accounts payable 4.717 6,088 Net cash provided by operating activities $108 5.847 See accompanying notes to basic financial statements. (1) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 Organization and Operations The Alaska Energy Authority (Authority or AEA)was created by the Alaska State Legislature in 1976. AEA is a public corporation and a component unit of the State of Alaska (State).AEA's mission is to promote,develop,and advance the general prosperity and economic welfare of Alaskans by providing a means to operate and maintain existing power projects that tap Alaska's natural resources to achieve the lowest reasonable consumer power costs. Throughout the 1980's,AEA 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.Today,AEA's two hydroelectric projects have an installed capacity in excess of 90 megawatts,and the Alaska Intertie's 170 miles of transmission line link Interior Alaska with the cheaper energy available in the Southcentral portion of the State. Pursuant to statute,on August 12,1993,the board of directors of the Alaska Industrial Development and Export Authority (AIDEA),a public corporation and a political subdivision of the State,became the board of directors of AEA.Concurrently,the Executive Director of AIDEA was also appointed as Executive Director of AEA.AIDEA provides personnel services for AEA.AEA continues to exist as a separate legal entity.The corporate structure and operating assets of AEA were retained but the ability to construct and acquire energy projects was eliminated.The intent of the legislation was that ongoing operation of the operating assets be assumed by the electric utility companies that use or purchase power from the assets with oversight responsibility retained by AEA;this has occurred to the extent possible.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. Pursuant to legislation 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.Five general energy programs comprising more than twenty smaller programs were moved to AEA.Rural energy programs were originally part of AEA prior to the reorganization that occurred in 1993. The following is a description of AEA's existing projects and programs: (a)Bradley Lake Hydroelectric Project The project has installed capability,under optimal conditions,of 126 megawatts 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 from Homer to Fairbanks as well as the Delta Junction area. (b)Alaska Intertie The 170-mile,345-kilovolt transmission line interconnects the power distribution systems of Anchorage and Fairbanks.The Alaska Intertie allows Golden Valley Electric Association in Fairbanks to purchase electricity produced with lower cost energy,such as natural gas and 10 (Continued) (c) (d) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30.2004 and 2003 hydroelectric,from the Anchorage and Kenai Peninsula utilities.The Alaska Intertie reduces the number of black/brownouts throughout the system.Operations and maintenance duties are overseen by the Intertie Operating Committee. Under legislation effective July 1,2002.the State appropriated $20,300.000 to AEA to upgrade and extend a portion of the Alaska Intertie.During the years ended June 30,2004 and 2003.AEA incurred costs for preliminary design work $64,000 and $87.000 respectively. Larsen Bay Hydroelectric Project The 475-kilowatt project went into commercial operation in 1991.In addition to producing electricity for this isolated Kodiak Island community,the project replaced the City of Larsen Bay's old water supply system and provides a better source of water with reduced maintenance and improved water quality.The City of Larsen Bay operates the project. Rural Energy Programs The rural energy programs of the Authority include Bulk Fuel Storage Upgrades.Rural Power System Upgrades,Power Cost Equalization,Alternative Energy,Utility Training,and Technical Assistance,two active loan programs funded from the Bulk Fuel Revolving Loan Fund and the Power Project Fund and one inactive loan program. (2)Summary of Significant Accounting Policies (a)Basis of Accounting -Enterprise Fund Accounting The accounts of the Authority are organized as an Enterprise Fund.Accordingly,the financial activities of the Authority are reported using the economic resources measurement focus and the accrual basis of accounting,whereby revenues are recorded when earned and expenses are recorded when goods or services are received or the related liability is incurred. GASB Statement No.20,Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting,provides two options for reporting proprietary fund activities (including component units using proprietary fund accounting).The Authority has elected to apply all applicable GASB pronouncements and all FASB Statements and Interpretations,Accounting Principles Board Opinions and Accounting Research Bulletins issued on or before November 30,1989,unless they conflict with or contradict GASB pronouncements. Operating Revenue and Expense The Authority considers all its revenues and expenses,except for investment income,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 assets. 1k (Continued) (b) (c) (d) (e) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 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 vears Intangible 30-50 Production 30-50 Transmission 20-40 General 5-30 The Authority recognizes impairment losses for long-lived assets whenever events or changes in circumstances result in the carrying amount of the assets exceeding the sum of the expected future cash flows associated with such assets. Cash and Investments All of AEA's cash and investments are restricted.For the purposes of the statement of cash flows, cash and cash equivalents consist of cash,short term commercial paper and repurchase agreements. AEA's marketable securities are reported at fair value in the financial statements.Unrealized gains and losses are reported as components of the deficiency of revenues over expenses.Fair values are obtained from independent sources. 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 assets.For purposes of the statement of cash flows,loans are treated as program loans. Allowance for Loan Losses The allowance for loan losses represents management's judgment as to the amount required to absorb potential 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. Environmental Issues The Authority's policy relating to environmental issues 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, 2004 and 2003,there were no environmental issues which met both of these criteria and, 12 (Continued) (3) (g) (h) (i) @) (k) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 accordingly,no provision has been made in the accompanying financial statements for any potential liability which may result. 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 political subdivision of the State performing an essential governmental function and is therefore exempt from State and federal income taxes. Appropriations and Grants The Authority recognizes grant revenue under the provisions of GASB Statement No.33, Accounting and Financial Reporting for Nonexchange Transactions,whereby revenue is recognized when all applicable eligibility requirements,including time requirements,are met. Segment Information The financial statements disclose all financial information required by the Authority's bond indenture. 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 balance sheet,and revenue and expenses for the period. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the 2003 financial statements to conform to the 2004 presentation. 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 herein,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 accounting principles generally accepted in the United States of America). At June 30,2004 and 2003 the Authority's carrying amount of deposits (all of which were restricted)was $35.444.000 and $36.429,000.respectively.The total of all bank balances was $37,117,000 and .$38,074.000,respectively. 13 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 The restricted and designated cash and investments were held in trust accounts for the following activities as of June 30,2004 (stated in thousands): Cash and cash equivalents Investments Total Power Cost Equalization Endowment Fund =$4 179,300 179,304 Bradley Lake Hydroelectric Project 1,790 26.844 28.634 Rural Energy Loan Funds 12,456 7,967 20.423 Rural Energy Operations 3.665 15,859 19,524 Southeast Energy Fund 8,782 -8,782 Funds advanced from State and federal agencies 3,924 -_3,924 Power Development Fund 2,065 -2,065 Power Cost Equalization and Rural Electric Capitalization Fund 1,970 -1,970 Alaska Intertie Project 704 -704 Electric Service Extension Fund 84 -84 Total cash and investments $35,444 229,970 265.414 The restricted and designated cash and investments were held in trust accounts for the following activities as of June 30,2003 (stated in thousands): Cash and cash equivalents Investments Total Power Cost Equalization Endowment Fund $_166,652 166,652 Bradley Lake Hydroelectric Project 1,791 28.919 30,710 Rural Energy Operations 7,279 12.953 20,232 Rural Energy Loan Funds 12,328 7,085 19,413 Southeast Energy Fund 6,395 4,957 11,352 Power Cost Equalization and Rural Electric Capitalization Fund 3,007 -3,007 Funds advanced from State and federal agencies 2,889 -2,889 Power Development Fund 2.006 -2,006 Alaska Intertie Project 650 -650 Electric Service Extension Fund 84 -84 Total cash and investments $36.429 220.566 256.995 At June 30,2004 and 2003.amounts restricted for debt service totaled $21.801.000 and $21,913,000, respectively,for the Bradley Lake Hydroelectric Project. AEA's cash,cash equivalents and investments are categorized below to give an indication of risk assumed by AEA at June 30.2004 and 2003.Category|includes investments that are insured,registered or 14 (Continued) (4) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30.2004 and 2003 collateralized with securities held by AEA or its agents in AEA's name.Category 2 includes uninsured and unregistered investments or collateralized investments,with securities held by the pledging financial institution's trust department in AEA's name.Category 3 includes uninsured and unregistered investments for which the securities are held by the counter party,or by its trust department or agent but not in AEA's name.Uncategorized securities are investments held in a pool managed by the State.A portion of the investments managed by the State were part of securities lending transactions (note 4). (Stated in thousands) Not Fair value at Category 1 Category 2 Category3 categorized June 30,2004 U.S.Treasury and Agency Securities $23,825 ---23,825 Money market funds --34,300 -34,300 Cash and investments with State Treasury ---179,840 179.840 Other investments -26.844 605 -27.449 $23.825 26.844 34.905 179.840 265.414 (Stated in thousands) Not Fair value at Category 1 Category 2 Category2 categorized June 30,2003 US.Treasury and Agency Securities $24,996 -_-_-24,996 Repurchase agreements --31,048 -31,048 Money market funds --1,782 -1,782 Cash and investments with State Treasury -_---170,240 170,240 Other investments -28.919 10 -28,929 $24.996 28.919 32.840 170,240 256.995 Securities Lending The Power Cost Equalization Endowment Fund and a portion of the Southeast Energy Fund are managed by the State Department of Revenue.A portion of the managed funds is in the Department of Revenue's securities lending program. Alaska Statute 37.10.07]authorizes the Commissioner of Revenue to lend assets,under an agreement and for a fee,against deposited collateral of equivalent market value.In January 2001,the Commissioner of Revenue entered into an agreement with State Street Corporation (the Bank)to lend fixed income and equity securities.The Bank,acting as the Commissioner's agent under the agreement,transfers securities to broker agents or other entities for collateral in the form of cash or securities and simultaneously agrees to return the collateral for the same securities in the future. 15 (Continued) (5) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 At June 30,2004 and 2003,the fair value of securities on loan allocable to the Power Cost Equalization Endowment Fund and the Southeast Energy Fund totaled $14.237,000 and $7,717,000,respectively.There is no limit to the amount that can be loaned and the Commissioner is able to sell securities on loan. International equity security loans are fully collateralized at not less than 105 percent of their fair value. All other security loans are fully collateralized at not less than 102 percent of their fair value.The Bank invests the cash collateral in a commingled investment pool;maturities of these investments generally did not match the maturities of the loaned securities because the lending agreements are terminable at will.The Bank may pledge or sell collateral upon borrower default.Since the Commissioner does not have the ability to pledge or sell the collateral unless the borrower defaults,no assets or liabilities are recorded on the financial statements.There is limited credit risk associated with the lending transactions since the Commissioner is indemnified by the Bank against any loss resulting from counterparty failure or default on a loaned security subject to limitation relating to war,civil unrest or revolution,or beyond the reasonable control of the Bank.The Bank and the borrower receive a fee from earnings on invested collateral. For the year ended June 30,2004 and 2003,there were no losses incurred as a result of securities lending transactions and there were no significant violations of Jegal or contractual provisions nor failures by any borrowers to return loaned securities. Capital Assets Capital asset activity for the years ended June 30.2004 and 2003 was as follows (stated in thousands): Balance at Balance at June 30,2003 Additions Deletions June 30,2004 Capital assets: Intangible $14 --14 Production 242,284 696 -242,980 Transmission 185,600 --185,600 General 5.023 11 -5.034 Total capital assets 432.921 707 _433.628 Less accumulated depreciation for: Intangible (2)(1)--(3) Production (59.062)(4.995)-(64.057) Transmission (77.756)(4.975)-(82.731) General (4.665)(341)-(5,006) Total accumulated depreciation (141.485)(10.312)-(151.797) Capital assets.net $291.436 (9.605)-281.831 16 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 Balance at Balance at June 30,2002 Additions Deletions June 30,2003 Capital assets: Intangible $14 --14 Production 241,070 1,214 -242.284 Transmission 185,600 --185,600 General 4,994 29 -5.023 Total capital assets 431.678 1,243 -432.921 Less accumulated depreciation for: Intangible (2)-_-(2) Production (54,067)(4,995)-(59,062) Transmission (72,781)(4,975)-(77,756) General (4.262)(403)-(4.665) Total accumulated depreciation (131,112)(10,373)-(141,485) Capital assets,net $300,566 (9.130)-291.436 (6)Long-Term Debt Long-term debt activity for the years ended June 30,2004 and 2003 was as follows (stated in thousands): Balance Balance at June 30,at June 30,Due within 2003 Additions .Deletions 2004 one year Bradley Lake Power Revenue Bonds: First Senes (a)$9.910 --9.910 -_ Second Series (a)11,520 _--_11,520 -_ Refunding,Third Series (a)$1,265 -(3.030)48,235 3,200 Refunding,Fourth Series (a)43,905 -_-(2,055)41,850 2,170 Refunding,Fifth Series (a)30.640 --30.640 - Total bonds payable 147.240 -(5.085)142.155 5.370 Arbitrage interest payable (b)604 228 (459)373 - Less bond discount and deferred interest (9.458)_-1.878 (7,580)_- $138.386 228 (3.666)134.948 5.370 17 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30.2004 and 2003 Balance Balance at June 30,at June 30,Due within 2002 Additions Deletions 2003 one year Bradley Lake Power Revenue Bonds: First Series (a)$9,910 --9.910 -_ Second Series (a)11,520 _-_11.520 -_ Refunding,Third Series (a)54,140 -(2,875)51.265 3.030 Refunding.Fourth Series (a)45,855 -_-(1.950)43.905 2.055 Refunding.Fifth Series (a)30.640 -_-_-30.640 - Total bonds payable 152.065 _(4.825)147.240 5.085 Arbitrage interest payable (b)402 202 -_-604 -_ Less bond discount and deferred interest (11.279)-_1,821 (9.458)-_ $141,188 202 (3,004)138.386 5.085 The minimum payments related to all bonds for the years subsequent to June 30,2004 are as follows (stated in thousands): Principal Interest Total Year ending June 30: 2005 $5,370 6,756 12,126 2006 5,665 6,542 12,207 2007 5,800 6,470 12,270 2008 5,810 6,457 12,267 2009 5,820 6,344 12,164 2010-2014 32,960 27,546 60,506 2015-2019 46,020 16.248 62,268 2020-2021 34,710 2.857 37.567 $142.155 79.220 221.375 (a)AEA issued the Power Revenue Bonds,First and Second Series (Bradley Lake 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.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.All of the revenues derived by AEA from the operation of the project and all moneys, securities and funds (except the excess 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 18 (Continued) (b) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 bonds.AEA has covenanted to notify the State Legislature of any failure to maintain the capital reserve fund at its required level.The bonds 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 5%to 6.25%. The arbitrage interest payable is due to the Internal Revenue Service 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 in accordance with Section 148 of the Internal Revenue Code of 1986.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. In addition,the Authority has participated in the following debt agreements: Other Debt -In 1982,AEA assumed $44,859.000 of 5%mortgage notes payable which require quarterly principal and interest payments to the Rural Utilities Service (RUS)in connection with the Solomon Gulch Hydroelectric Project.Concurrent with the assumption,AEA deposited with a trustee Treasury notes sufficient to satisfy and provide for timely repayment of all principal and interest due on the assumed RUS loans.Accordingly,the loans and related trust assets are not included in the financial statements of AEA.At June 30,2004,the unpaid principal balance of the notes was $22,998,000 and the trust assets had a fair value of $24.051.000. Conduit Financing -City and Borough of Sitka -Utility Revenue Refunding Bonds,Series 1997 and Utility Revenue Bonds,Series 1992 -In May 1992,AEA issued $56,890.000 of tax-exempt bonds that allowed the City and Borough of Sitka (Sitka)to refinance its 1979 municipal bonds,resulting in significant debt service savings to Sitka.In November 1997,AEA issued $22.080,000 of tax-exempt bonds to advance refund and defease $20.145.000 of the Series 1992 bonds (collectively with the Series 1992 bonds,the Sitka Bonds).The Sitka Bonds are not included in these financial statements.As of June 30,2004,the outstanding balance was $46,025.000. The Sitka Bonds are special obligations of AEA secured under a trust indenture by and between AEA and U.S.Bank Trust National Association,as trustee.The Sitka Bonds are payable solely from the sources provided under the trust indenture.They are equally and ratably secured by a pledge and assignment of the municipal revenue bonds of Sitka held by AEA under the trust indenture,the obligation of Sitka to make payments under its loan agreement with AEA and the money and securities held under the trust indenture,including a capital reserve fund.AEA has covenanted to notify the State Legislature of any failure to maintain the capital reserve fund at its required level. The bonds are further secured by bond insurance. The Sitka Bonds do not constitute an indebtedness or other liability of the State.including AEA,and do not directly,indirectly or contingently obligate the State.including AEA,or any political subdivision thereof to levy any form of taxation for the payment of the bonds.Neither the full faith and credit nor the taxing power of the State,including AEA,or Sitka is pledged for the payment of the Sitka Bonds. 19 (Continued) (7) (8) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 Loans The Authority administers the Power Project Loan Program,the Rural Electrification Revolving Loan Program and the Bulk Fue]Revolving Loan Program.Loans outstanding at June 30.2004 and 2003 are classified as follows (dollar amounts stated in thousands): 2004 2003 No.of No.of Loans Amount Loans Amount Power Project Loan Program 43 $22,105 46 $22.274 Rural Electrification Revolving Loan Program 8 1,208 10 1,504 Bulk Fuel Revolving Loan Program 38 743 46 1.021 89 24,056 102 24,799 Less allowance for loan losses (1.491)(1.531) $22.565 $23.268 Loans that are more than 90 days past due on which the accrual of interest has been discontinued amounted to $2,119,000 and $1,388,000 at June 30,2004 and 2003,respectively. An analysis of changes in the allowance for loan losses for the years ended June 30,2004 and 2003 follows (stated in thousands): 2004 2003 Balance at beginning of year $1.531 1,198 Recoveries -4 Provision for loan loss (40)329 Balance at end of year $1.491 1.531 Risk Management AEA is exposed to various risks of loss.AEA obtains coverage for its risks through the purchase of commercial insurance,participation in the State Risk Management Pool and the establishment of self-insurance plans. (a)General Liability -Watercraft and Aviation All risks are covered by the State insurance plan through an annual charge assessed by the State Division of Risk Management and payroll markup. 20 (Continued) (9) (b) (c) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 Property 1.Alaska Intertie The utilities participating in the Alaska Intertie operating agreement retain the property risk associated with the Alaska Intertie. 2.Bradley Lake and Larsen Bay Hydroelectric Projects The risks are covered by commercial insurance purchased through the State Division of Risk Management,and the self-insured retentions are the responsibility of the respective projects from operating funds. Boiler and Machinery These risks are covered by commercial insurance purchased through the State Division of Risk Management and a private carrier. Additionally,utilities benefiting from the use of the facilities owned by AEA participate in the responsibility for deductibles and self insured retentions under the terms of the respective agreements. Related Parties (a) (b) (c) Alaska Industrial Development and Export Authority Pursuant to understandings and agreements between AIDEA and AEA,AIDEA provides administrative,treasury,personnel,legal.data processing.communications,and other services to AEA.During 2004 and 2003,AEA expensed $2,437,000 and $2,361,000,respectively,for such services.In addition,AEA has a borrowing arrangement with AIDEA to provide working capital funds.At June 30,2004 and 2003.AEA had $694.000 and $750.000 payable to AIDEA for services and borrowings. Alaska Intertie Operating Committee Effective May 1,1986,AEA entered into an agreement with utilities using the Alaska Intertie for wheeling of electrical power.Pursuant to the agreement.the Intertie Operating Committee (IOC)was established to manage the system.The IOC 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.The agreement may be terminated by mutual agreement of the participants. Bradley Lake Project Management Committee Effective December 7.1987.AEA entered into a power sales agreement with entities purchasing electric power produced by the Bradley Lake Hydroelectric Project.Pursuant to the agreement,a Project Management Committee (PMC)was formed.The PMC is comprised of a representative from 21 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2004 and 2003 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,including debt service and annual administrative fee to AEA. (10)Commitments and Contingencies AEA,in the normal course of business,is involved in various claims and pending litigation.The State Department of Law manages all pending litigation of AEA,and any liability arising from the settlement of pending claims is a liability for which the Department of Law or AEA requests an appropriation from the Legislature to satisfy judgment in the event that the judgment exceeds available funds or the proceeds from applicable insurance policies.In the opinion of management,the disposition of current claims and pending litigation is not presently expected to have a material adverse effect on AEA's financial position. 22 ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Schedule of Bradley Lake Hydroelectric Project Trust Account Activities Year ended June 30,2004 (Stated in thousands) Schedule ! Debt Capital Renewal and Construction Excess Operating service reserve contingency unallocated earnings Revenue Operating reserve account account account account account account account account Total Balance at June 30,2003 8.677 12,834 4,037 1,781 402 1,760 684 $35 30,710 Interest received 527 614 291 8 _-339 35 44 1,858 Bond principal paid (5,085)___=___(5,085) Bond interest paid (7,043)_-__-____(7,043) Arbitrage interest paid --__(459)___(459) Construction expenditures -_-_(720)_-___-(720) Operating revenue received _-_-__12,751 _-12,751 Operating expenses paid -__-____(3,378)-_(3,378) Transfers between funds 11.746 (614)495 -_202 (14,850)2.954 67 - Balance at June 30,2004 8.822 12,834 4.103 1,789 145 _-295 646 28,634 See accompanying independent auditors'report. 23 Assets Current assets: Grants receivable Loans receivable Operating revenue receivable Accrued interest receivable *Total current assets Noncurrent assets: Restricted cash and investments Designated for specific purposes Loans receivable.net of allowance Capital assets Less accumulated depreciation Capital assets,net Total noncurrent assets Total assets Liabilities and Net Assets Current liabilities: Due to State of Alaska Accounts payable Bonds payable current portion Accrued interest Total current liabilities Noncurrent liabilities: Long-term debt.net of current portion: Bonds payable -noncurrent portion,net Arbitrage interest payable Other liabilities Fotal noncurrent liabilities Total liabilities Net ussets: Investment in capital assets net of related debt Restricted for debt service Restricted by agreements with external parties Unrestricted net assets Total net assets Commitments and contingencies Total liabilities and net assets See accompanying independent auditors'report. ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Schedule of Projects --Balance Sheet June 30,2004 (Stated in thousands) Schedule 2 Administration Bradley Lake Alaska Larsen Bay and Power Hydroelectric Intertie Hydroelectric Development Rural Energy Combined Project Project Project Fund Programs balance $---_-(1,697)5.462 3,765 ---__1,061 1,06 74 483 __130 687 928 __-42 970 1,002 483 _(1,697)6.695 6,483 21,801 ____21,801 6.833 704 _5,989 230,087 243,613 _-__21.504 21,504 308.966 124,246 416 -_-433,628 (88,385)(62,996)(416)__(151,797) 220,581 61,250 =_=281,831 249,215 61,954 _5,989 251,591 568,749 $250,217 62,437 =4.292 258,286 575,232 $__1.358 (664)694 372 1171 112 7162 13,943 16.360 5,370 -__$.370 3,452 -_--_3,452 9.194 1.17]112 2.120 13,279 25,876 129,205 --_-129,205 373 _-473 103 --=-103 129.681 __-_-_129.68] 138.875 1.471 112 2,120 13,279 155,557 86.006 61,250 ___-147,256 21,801 ____21.801 3,535 16 -_19.423 22,974 _=(112)2.172 225,584 227.644 111,342 61,266 (112)2,172 245.007 419,675 $250,217 62,437 _4,292 258.286 575.232 24 Operating revenues: Federal gra nts Revenue trom operating plants State of Alaska appropriations Revenue from other state agencies Interest on loans Other revenue Total operating revenues Operating expenses: Grants and Power cost projects equalization grants ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Schedule of Projects -Revenues,Expenses,and Changes in Net Assets Year ended June 30,2004 (Stated tn thousands) Schedule 3 Depreciation Interest expense Plant operating General and administrative Provision tor loan loss and bad debt expense Nonoperating: Investment Total operating expenses Operating income (loss) income Decrease in net assets Net assets -heginning Net assets ending See accompanying independent auditors'report. Administration Bradley Lake Alaska Larsen Bay and Power Hydroelectric Intertie Hydroelectric Development Rural Energy Combined Project Project Project Fund Programs balance -_----34,592 34,592 ° 12,820 1,338 3 --14,161 64 --9,466 9,530_----981 981 ---_-701 701 _---4l {il [52 12,820 1,402 3 41 45,851 60,117 ----45,861 45,861 ----15,461 [5,461 6,910 3,402 ---_-10,312 8,782 -_--8,782 3,011 1,267 28 --4,306 289 140 9 -1,145 1,583 _-10 -(40)(30) 18,992 4,809 47 -62,427 86,275 (6,172)(3,407)(44)4](16,576)(26,158) 1,582 4 --21,160 22,746 (4,590)(3,403)(44)41 4,584 (3.412) 115,932 64,669 (68)2,131 240,423 423,087 111,342 61,266 (112)2,172 245,007 419,675 25 Alaska Industria]Development and Export Authority-AIDEA/A Alaska Energy Authority AGENDA ALASKA ENERGY AUTHORITY Board of Directors November 9,2004 Anchorage,Alaska 1.CALLTO ORDER " 2.BOARD OF DIRECTORS ROLL CALL " 3.PUBLIC ROLL CALL" 4.PUBLIC COMMENTS” 5.PRIOR MINUTES -January 26,2004” 6.OLD BUSINESS " 7.NEW BUSINESS A.Financial Statements/Audit Presentation a (Financial Statements available for review at the Executive Director's Office -after the meeting they will be posted to AEA's website) B.AEA Regulation Changes http://www.aidea.org/AEAdocuments/REGrequlationschanges 10-26-04 pdf C.Rural Transmission Lines and other Property 8.DIRECTOR COMMENTS A.Director's Status Report of AEA Programs and Projects vo B.Next Meeting Date -Follows AIDEA Board meeting Dates 9.BOARD COMMENTS 10.ADJOURNMENT 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 907 /269-3000 »FAX 907 /269-3044 «Toll Free (ALASKA ONLY)888 /300-8534 *www.aidea.org Alaska Industrial Development and Export Authority Alaska Energy Authority ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS November 9,2004,@ 2:35 p.m. Anchorage and Juneau,Alaska 1.CALL TO ORDER Chairman Barry called the meeting of the Alaska Energy Authority to order on November 9,2004, at 2:35 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Mike Barry (Chairman/Public Member),Commissioner Edgar Blatchford (Department of Community,Commerce and Economic Development),and Mr.John Winther (Public Member). Directors present in Juneau:Deputy Commissioner Tom Boutin (Designee for the Department of Revenue),and Commissioner Mike Barton (Department of Transportation and Public Facilities). 3.PUBLIC ROLL CALL Staff present in Anchorage:Ronald W.Miller (Executive Director),James A.McMillan (Deputy Director-Credit &Business Development),Mike Harper (Deputy Director-Rural Energy),Valorie Walker (Deputy Director-Finance),Shauna Howell (Administrative Assistant),Sara Fisher-Goad (Financial Analyst),Karl Reiche (Projects Development Manager),Becky Gay (Project Manager), Linda MacMillan (Accountant),Brenda Applegate (Accountant),and Bruce Tiedeman (RuralOutreachCoordinator). Others attending in Anchorage:Kathy Porterfield (KPMG)Michael O'Leary (Callan Associates), Brian Bjorkquist and Mike Mitchell (Department of Law),and Wanetta Ayers (S.W.Alaska Municipal Conference),and Margie Bauman (Journal of Commerce). Others attending in Juneau:Gary Bater (Department of Revenue). 4.PUBLIC COMMENTS There were no public comments. 5.PRIOR MINUTES The January 26,2004,board minutes were approved as presented. 6.OLD BUSINESS 6A.Alaska Intertie TLS Issue 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 ANF 1940 DAAN 2 CAV ONT 1 OLN DOAA @ TAL Denn (AL ACMA CANIEVY 900 /INN QRIA wrananernidan ara AEA Board Meeting November 9,2004 Meeting Minutes Page 2 Mr.Bjorkquist said that the Regulatory Commission of Alaska held hearings a couple of weeks ago related to the nineteen mile portion of what used to be part of the Alaska Intertie physically it is 19 miles and it is called the MEA TLS.Prior to July 1 of 2004,the Alaska Energy Authority under contract with MEA provided the right to cross over that 19 miles as part of the Alaska Intertie.MEA did not want to extend that contract and so as of July 1,2004 it was terminated and instead MEA contracts directly with the utilities that use the Alaska Intertie to allow electricity to go over that 19-mile stretch.Basically what you have with the Alaska Intertie is that there is approximately 5.5 miles of Alaska Intertie,19 miles of MEA transmission line and then the balance of the Alaska Intertie.All of it is necessary for power to move from Anchorage up to Fairbanks.The question before the RCA was continuing to allow the joint use and interconnection,which is basically allowing that 19 miles to be used so that energy could flow either north or south,most of it flows north over the Alaska Intertie.In the hearings themselves there is no objection to the continued use of the 19 miles so there is no indication that the Alaska Intertie would stop being used to transmit power.The only issues in dispute between the utilities are the terms and conditions that the 19 miles can be used for.One of the issues is whether the line should continue to be operated at 138kv or reduced to 115kv and then in addition to that there is disputes related to how much Matanuska Electric should be paid for power being transferred over that.Those are issues that were presented to the RCA ina hearing and it is now pending before the RCA for decision so they will decide terms and conditions for the continued use.MEA nor any of the other utilities objected to the continued use so it is just a matter of what terms and conditions they would continue to be used.Currently the right to use the line extends through the end of this year and every indication is that RCA will make its decision prior to that time so the use can continue. In response to Board questions,Mr.Bjorkquist said if the RCA decides that the use should not continue then the rest of the intertie for the most part becomes unusable.There could be some uses for it but the primary current use would necessarily change because the primary current use of electricity is transmitted from Anchorage to Fairbanks.There are some other uses of the transmission line but they are very small in comparison to the transmission of power north to Fairbanks. 7C.Financial Statements/Audit Presentation Ms.Porterfield,Managing Partner with KPMG LLP,summarized the audited financial statements and letter to the Board. She said that because the Energy Authority has significant funding from the Federal Government through the Denali Commission there are additional audit requirements and KPMG has issued reports that the Federal Government requires regarding your compliance with grants.KPMG has also issued unqualified opinions on the Authority's compliance with the provisions of its federal grants agreements,which is positive. She said the purpose of the audit is for KPMG to gain reasonable assurance that the financial statements are free of material misstatement.KPMG conducted appropriate audit procedures and has concluded that the financial statements are fairly stated in all material respects in accordance with generally accepted accounting principles,resulting in an unqualified or a clean opinion.KPMG obtained reasonable assurance during the audit that the financial statements are free of material misstatement. She said the Authority has very good accounting records and it was not necessary to propose any significant audit adjustments.The Authority has an effective system of internal control in place., AEA Board Meeting November 9,2004 Meeting Minutes Page 3 In response to Board questions,Ms.Porterfield said her understanding is that nothing is being studied at this time as to whether GASB would require AIDEA to mark the loan portfolio to the market. 7B.AEA Regulation Changes Mr.Miller stated that the Authority has issued a public notice that we have proposed to adopt regulatory changes to the AEA regulations with a public hearing set for December 2,2004 and the deadline for submission of written comments on December 17,2004.He referred the Board to their packets for detailed information. 7C.Rural Transmission Lines and other Property He said that when the State Energy Policy Task Force was created and under Mr.Barry's direction that AIDEA and AEA should consider divesting itself of energy assets.Staff started searching through all of the AEA books and records and discovered some rural transmission lines that were actually built by the former Alaska Power Authority and listed as being owned by the Alaska Energy Authority.He referred the Board to their packets for a list of the assets owned by AEA. Chairman Barry stated that it his understanding that one of the transmission lines is utilized by Alaska Power and Telephone.He said that he is a director of AP&T and is on record that he has a potential ethics conflict.Chairman Barry recused himself from any discussions related to that subject. Mr.Bjorkquist stated that it is his understanding that the Chairman is recusing himself in large part based on advice that was provided by the Ethics Attorney in response to a disclosure that you made some time ago.This was the process that was recommended by the Attorney. Chairman Barry affirmed that statement. Executive Session Mr.Bjorkquist stated that there is proprietary information,strategy,and financial matters to discuss related to potential legislation for AEA.Under the open meetings act a body,such as the AEA Board,can go into executive session for matters the immediate knowledge of which would clearly have an adverse affect on the finances of AEA.The appropriate procedure for doing that is to have a Board member make a motion to go into executive session for that purpose and to vote on that motion. MOTION:Mr.John Winther moved to go into executive session to discuss proprietary information,strategy,and financial matters related potential legislation for AEA. Seconded by Commissioner Blatchford.There being no discussion,the question was called.A roll call vote was taken and the motion passed with Messrs.Barry,Boutin, Winther,Barton,and Blatchford voting yea. EXECUTIVE SESSION --2:45 p.m. The Board reconvened its regular meeting at 3:00 p.m. The Board did not taken any formal action on the matters discussed while in Executive Session. AEA Board Meeting November 9,2004 Meeting Minutes Page 4 Roll call was taken and a quorum was established.Chairman Barry stated that due to his ethics disclosure earlier in the meeting and since the subject matter of the Executive Session was related to that matter he did not participate in the Executive Session. 8A.DIRECTORS COMMENTS Mr.Miller referred the Board to their packets on the following information: e Director's Status Report of AEA Programs and Projects e Elder's and Youth Conference for the Alaska Federation of Natives 8B.Next Board Meeting Date The Board would be polled as to the next meeting date. 9.BOARD COMMENTS Chairman Barry stated that in the recent past there has been concern in Rural Alaska about the impact of rising energy prices on diesel fuel.As such,more attention has been paid to the administration of the Bulk Fuel Program and he passed along to staff the appreciation the Board and the Administration has for the great job that is being done with this program. 10.ADJOURNMENT Chairman B adjourned the meeting at 3:03 p.m. he we.ia Miller,Secretary Alaska Industrial Development and Export Authority Alaska Energy Authority ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS January 26,2004,@ 11:47 a.m. Anchorage,Juneau,and Petersburg,Alaska and Chicago,Illinois Teleconference 1.CALL TO ORDER Chairman Barry called the meeting of the Alaska Energy Authority to order on January 26,2004,at 11:47 a.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Mike Barry (Chairman/Public Member),Commissioner Mike Barton (Department of Transportation and Public Facilities),and Deputy Commissioner Bill Noll (Designee for Department of Community and Economic Development). Directors present in Juneau:Deputy Commissioner Tom Boutin (Designee for Department of Revenue). Directors present in Petersburg:Mr.John Winther (Public Member). 3.PUBLIC ROLL CALL Staff present in Anchorage:Ronald W.Miller (Executive Director),James A.McMillan (Deputy Director-Credit),Valorie Walker (Deputy Director-Finance),Brenda J.Fuglestad (Administrative Manager),Reuben Loewen (Development Specialist),Karl Reiche (Projects Development Manager),Sara Fisher-Goad (Financial Analyst),Art Copoulos (Project Manager),and BernieSmith(Project Manager). Others attending in Anchorage:Brian Bjorkquist (Department of Law),Richard Richtmyer (Anchorage Daily News),Mike Pauley,Wayne Carmony,Don Zoerb,Larry DeVilbiss,Tuckerman Babcock and Lee Jordan (Matanuska Electric Association),and John Cooley (Chugach Electric). 4.PUBLIC COMMENTS There were no public comments. 5.PRIOR MINUTES The November 17,2003 Board minutes were approved as presented. 6.OLD BUSINESS There was no old business. 813 West Northern Lights Boulevard °Anchorage,Alaska 99503DAMINEINARNwanATATNNN)ow te i oar ae aS 2 AAA TRAA APN -ae afte 2 AEA Board Meeting January 26,2004 Meeting Minutes Page 2 7.NEW BUSINESS 7A.Alaska Intertie Mr.Copoulos said that currently the northern half of the intertie is maintained by Golden Valley Electric Association and the southern half is maintained by Matanuska Electric Association (MEA).MEA has indicated that they no longer want to maintain the southern portion of the intertie because of concerns they have with snow-loading.AEA is in the process of assigning a contract to Chugach Electric Association for the maintenance of the southern portion of the intertie.The process is on-going and is expected to be finalized in a few weeks. He said the other issue is with regard to the 19-mile by-pass.Currently,the intertie is from Healy to Willow and then from Willow to the Tealand Substation,with the exception of a five mile portion,which is owned by MEA.There is currently a transmission services agreement (TSA)between AEA and MEA that expires in July of 2004.The status of the agreement is being reviewed and is the subject of a Regulatory Commission of Alaska (RCA)case. Mr.Bjorkquist said there have been some developments in the last week with respect to the RCA case.Last May MEA gave notice that they would not extend the transmission services agreement beyond June 30,2004.That became the subject of an RCA pleading where the utilities that used the Alaska Intertie brought a petition to the RCA seeking joint use and interconnection of that 19-mile transmission line to extend beyond June 30,2004.After discussions between MEA and the Utilities,with AEA participating,MEA agreed to extend the use of those 19 miles under the same terms and conditions as are currently in existence under the TSA,however the new arrangement would replace AEA with the Utilities.This extension would take us through December 31,2004.The purpose of the extension is to give time for all of the parties to get together and discuss issues and concerns with respect to those 19 miles and the Alaska Intertie.If the discussions fail,then the RCA still has jurisdiction over this and would take up the issues before the extended period expires on December 31,2004.At this point,the use of the 19-miles is assured through December 31,2004. Mr.Bjorkquist stated that after June 30,2004,AEA will no longer be a direct party regarding the MEA 19-mile transmission line. Mr.Copoulos said that two years ago the Legislature appropriated approximately $19 million to build a by-pass around the 19-mile section of the intertie.He said that currently,Anchorage Municipal Light &Power and Chugach Electric Association have expressed an interest in taking a lead role in managing the project.It appears that a parallel route to the existing line is the most desirable option for the project.He said the route would include some of the MEA right-of- way,how much of the right-of-way is unresolved at this time. Mr.Bjorkquist said that it is his understanding that portions of the route would overlap with the MEA right-of-way and the issue is to build it sufficiently far away so that there is not a conflict of use with the existing transmission line.There would be a new right-of-way,but it would overlap with the existing MEA right-of-way. Mr.Miller said that some of the utilities thought that there could be some economies of scale brought to the project if entities such as ML&P played a lead role in the construction of the 19- mile by-pass. In response to Board questions,Mr.Copoulos said that the direction is to have ML&P be the project manager...He said that staff is currently envisioning a project management agreement AEA Board Meeting ,January 26,2004 Meeting Minutes Page 3 between AEA and ML&P.The intertie agreement assigns the |OC certain responsibilities associated with an upgrade of the line,so we have to take that into account in the management agreement.There are still quite a few details that need to be worked out. Chairman Barry urged staff to be extremely careful that the functions to be performed are delineated very clearly in writing before anybody starts spending money.And,to the best that we can,directly involve those that are going to have to live with the operation,namely the Utilities,in the decision making. e Matanuska Electric Association Proposal to Purchase the Alaska Intertie Mr.Wayne Carmony asked that they be allowed to present their proposal to the Board in executive session. Mr.Bjorkquist stated that the discussion of MEA's confidential proposal for the purchase of the Alaska Intertie is grounds for the Board to meet in executive session.The basis is that AEA is dealing with matters associated with the negotiation of the sale of an asset,the immediate knowledge of which could have an adverse impact on the finances of the Alaska Energy Authority.With respect to that,it is important to note on the public record that all the Board is dealing with is the proposal made by Matanuska Electric Association.The Board is not in a position to accept and close a deal at this point.A public process would need to take place before any type of arrangement could be finalized;and,in this circumstance it would probably include a legislative process with authorization for the Alaska Energy Authority to dispose of the asset.These are preliminary negotiations which would then become a public process for the disposal of an asset. , As such,Mr.Bjorkquist stated that there are negotiations,strategy,and financial matters to discuss related to Matanuska Electric Associations'proposal to purchase the Alaska Intertie.Under the open meetings act a body,such as the AEA Board,can go into executive session for matters the immediate knowledge of which would clearly have an adverse affect on the finances of AEA.The appropriate procedure for doing that is to have a Board member make a motion to go into executive session for that purpose and to vote on that motion. MOTION:Commissioner Barton moved to go into executive session to discuss negotiation,strategy,and financial matters related to Matanuska Electric Associations' proposal to purchase the Alaska Intertie.Seconded by Deputy Commissioner Noll. There being no discussion,the question was called.A roll call vote was taken and the motion passed with Messrs.Barry,Boutin,Winther,Barton and Noll voting yea. EXECUTIVE SESSION -12:00 p.m. The Board reconvened its regular meeting at 1:17 p.m. Roll call was taken and a quorum was established.Chairman Barry advised that the Board had not taken any formal action on the matters discussed while in Executive Session. Chairman Barry requested that staff prepare a recommendation on the MEA proposal and explore with other railbelt utilities whether they have any interest in making an offer to AEA.- Also,please inform any interested parties that it would be AEA's intention to work with the Administration and the Legislature to the extent that is appropriate. AEA Board Meeting Meeting Minutes 8A.DIRECTORS COMMENTS There were no director's comments. 8B.Next Board Meeting Date The Board would be polled as to the next meeting date. 9.BOARD COMMENTS There were no Board comments. 10.ADJOURNMENT Chairman Barry adjourned the meeting at 1:20 p.m. Ron Miller,Secretary January 26,2004 Page 4 Alaska Industrial Development and Export Authority Alaska Energy Authority MEMORANDUM TO:Board of Directors Alaska Energy Authority FROM:Ron Miller |Executive Director DATE:November 9,2004 SUBJECT:Financial Reports Included with your packet are the June 30,2004,Financial Statements and Letter to the Board of Directors. Ms.Kathy Porterfield,Managing Partner of the Anchorage office of KPMG,LLP,will be in attendance at the meeting to discuss the reports and to answer any questions the Board members may have. h:ail\bjffinance\wtwfinancial reports 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 QN7 /260-2000 *FAX QN7 /260.2044 ©Tall Free (ALASKA ONIY)822 /200-2534 ©wan aidea ara ALASKA ENERGY AUTHORITY (a Component Unit of the State of Alaska) Letter to the Board of Directors September 24,2004 September 24,2004 The Board of Directors Alaska Energy Authority (a Component Unit of the State of Alaska) Dear Members: We have audited the basic financial statements of the Alaska Energy Authority,a Component Unit of the State of Alaska (Authority),for the year ended June 30,2004,and have issued our report thereon dated September 24, 2004.Under auditing standards generally accepted in the United States of America,we are providing you with the following information related to the conduct of our audit. Our Responsibility Under Auditing Standards Generally Accepted in the United States of America Our audit of your financial statements as of and for the year ended June 30,2004 was planned and performed to obtain reasonable assurance about whether the financial statements are free of material misstatements,whether caused by error or fraud.In planning and performing our audit,we considered internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements.An audit does not include examining the effectiveness of internal control and does not provide assurance on internal control. Significant Accounting Policies The significant accounting policies used by the Authority are described in note 2 to the financial statements.No new accounting policies were adopted and the application of existing policies was not changed during 2004. Significant Transactions We noted no transactions entered into by the Authority during the year that were both significant and unusual, and of which,under professional standards,we are required to inform you,or transactions for which there is a lack of authoritative guidance or consensus. Management Judgments and Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based upon management's current judgments.Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments.We evaluated the key factors and assumptions used to develop management's judgments and estimates in determining that amounts recorded were reasonable in relation to the financial statements of the Authority taken as a whole. The allowances for loan losses represent management's judgment as to the amount required to absorb potential losses in the loan portfolio.The factors used by management to determine the allowances include historical loss experience,individual delinquencies,existing economic conditions and other factors.Management's estimates The Board of Directors Alaska Energy Authority (a Component Unit of the State of Alaska) September 24,2004 Page 2 of potential loss are charged to operating expense through provisions for loan losses.The allowance totaled approximately $1.5 million at June 30,2004,and we agreed with management that the allowance is reasonable in relation to the financial statements taken as a whole. Significant Audit Adjustments We did not propose corrections of the financial statements that could,in our judgment,either individually or in the aggregate,have a significant effect on the Authority's financial reporting process. Other Information in Documents Containing Audited Financial Statements Our responsibility for other information in documents containing the Authority's financial statements and our report thereon does not extend beyond the financial information identified in our report,and we have no obligation to perform any procedures to corroborate other information contained in these documents.We will, however,read the other information included in the Authority's annual report and offering documents,and will communicate to management and,if necessary,the Board of Directors any items that caused us to believe that such information,or its manner of presentation,is materially inconsistent with information,or manner of its presentation,appearing in the financial statements. Disagreements with Management There were no disagreements with management on financial accounting and reporting matters that,if not satisfactorily resolved,would have caused a modification of our report on the Authority's 2004 financial statements. Consultation with Other Accountants To the best of our knowledge,management has not consulted with or obtained opinions,written or oral,from other independent accountants during the past year that were subject to the requirements of Statement on Auditing Standards No.50,Reports on the Application of Accounting Principles. Major Issues Discussed with Management Prior to Retention We generally discuss a variety of matters,including the application of accounting principles and auditing standards,with management prior to retention each year as the Authority's auditors.However,these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Difficulties Encountered in Performing the Audit We encountered no difficulties in dealing with management in performing our audit. 7K KO This report is intended solely for the information and use of the members of the Alaska Energy Authority's Board of Directors and is not to be and should not be used by anyone other than these specified parties. Very truly yours, KPMG LEP Alaska Industrial Development and Export Authority MEMORANDUM TO:Board of Directors Alaska Energy Authority FROM:Ron Miller |\,Executive Direc , DATE:November 9,2004 SUBJECT:Proposed changes to the AEA regulations The Alaska Energy Authority (AEA)has issued public notice that it proposes to adopt regulation changes in Title 3 of the Alaska Administrative Code (AAC)affecting AEA and its programs.A copy of proposed regulations is attached,and the regulatory changes are briefly described as follows: Chapter 105,dealing with administrative and other provisions of AEA:Existing chapter 3 AAC 105 is proposed to be amended by adding a new section addressing AEA's administration of assistance from other agencies and other sources. Chapter 106 dealing with AEA's loan programs:Existing provisions in chapter 3 AAC 106 dealing with loans from the power project fund and from the bulk fuel revolving loan fund are proposed to be amended to be consistent with chapter 36 SLA 2004. Chapter 107 dealing with AEA grant program:Existing provisions in chapter 3 AAC 107 dealing with the power cost equalization program are proposed to be amended byaddingadefinitionof"residential customer.” Chapter 108 dealing with financial and technical assistance for energy systems, facilities,and equipment:A new chapter 108 is proposed to be added to 3 AAC to include provisions addressing bulk fuel facility and power system upgrade assistance provided by AEA;eligibility for and AEA prioritization of such assistance;conditions to receiving such assistance;phased approach to such assistance;the purpose of AEA's circuit rider and electrical emergencies programs;circuit rider assistance provided by AEA;eligibility and selection for circuit rider assistance;electrical emergencies 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 QN7 /PAO-RNNN ¢FAX QN7 /940.2044 ©Tall Free (ALASKA ONIEV)888 /200524 ©unsnaraidaa aro Memorandum November 9,2004 Page 2 of 2 assistance provided by AEA;conditions to receiving such assistance;alternative energy and energy efficiency assistance provided by AEA;alternative energy and energy efficiency assistance plan;conditions to receiving such assistance;and general provisions on notice of availability of assistance and status of AEA's financial and technical assistance programs,protests and appeals,and definitions. Public hearing:Will be held from 10 a.m.-1 p.m.,on Thursday,December 2,2004,at the AIDEA/AEA Board Room.To be connected by phone,please call the Legislative teleconference network,at 1-800-395-5073 at 10:00 a.m.Written comments on the proposed regulations,including the potential costs to private persons of complying with the proposed changes,are to be submitted to AEA,Attn:Becky Gay.Comments may also be received by email at bgay @ aidea.org or by fax at (907)269-3044. Deadline for all comments:Comments must be received no later than 5:00 p.m.,Friday, December 17,2004. Public Distribution:Notices were published in the Anchorage Daily News on October 27, 2004,during the AFN Convention,and during the first week of November in the weekly rural papers of Bristol Bay,Arctic Sounder,Tundra Drums and Dutch Harbor.Additionally, a complete packet was mailed directly to the Power Cost Equalization (PCE)communities and utilities.Packets were electronically sent to the Legislative committees of jurisdiction, the Speaker of the House and the Senate President's offices and a hard copy to the Legislative library.A copy of the complete notice and regulation packet is available on the AEA web page.We have notified the Denali Commission,as well as the Bulk Fuel Loan Recipients and the Power Project Fund loan recipients,that the regulations are open for comment.A public service announcement has also been distributed. After the Public Comment Period Ends:The proposed regulations and public comment will be presented to the AEA Board for adoption. Fiscal Impacts:No fiscal impacts are projected,although there could be some hidden anomalies in the PCE "residential”definition as proposed.The Legislature will still determine the amount of PCE funding overall,as it currently does. This memo is for your informational purposes only and does not require any action at this time. NOTICE OF PROPOSED CHANGES IN THE REGULATIONS OF THE ALASKA ENERGY AUTHORITY (AEA) AEA proposes to adopt regulation changes in Title 3 of the Alaska Administrative Code (AAC),chapter 105,dealing with administrative and other provisions of AEA,chapter 106 dealing with AEA's loan programs,chapter 107 dealing with AEA grant programs,and adding a new chapter 108 dealing with financial and technical assistance for energy systems,facilities,and equipment,including the following: e Existing chapter 3 AAC 105 is proposed to be amended by adding a new section addressing AEA's administration of assistance from other agencies and other sources. e Existing provisions in chapter 3 AAC 106 dealing with loans from the power project fund and from the bulk fuel revolving loan fund are proposed to be amended to be consistent with chapter 36 SLA 2004. e Existing provisions in chapter 3 AAC 107 dealing with the power cost equalization program are proposed to be amended by adding a definition of "residential customer.” e Anew chapter 108 is proposed fo be added to 3 AAC to include provisions addressing bulk fuel facility and power system upgrade assistance provided by AEA;eligibility for and AEA prioritization of such assistance; conditions to receiving such assistance;phased approach to such assistance;the purpose of AEA's circuit rider and electrical emergencies programs;circuit rider assistance provided by AEA;eligibility and selection | for circuit rider assistance;electrical emergencies assistance provided by AEA;conditions to receiving such assistance;alternative energy and energy efficiency assistance provided by AEA;alternative energy and energy efficiency assistance plan;conditions to receiving such assistance;and general provisions on notice of availability of assistance and status of AEA's financial and technical assistance programs,protests and appeals,and definitions. How to Comment:A public hearing will be held from 10 a.m.-1 p.m.,on Thursday,December 2, 2004,at the AIDEA/AEA Board Room,Third Floor,at 813 West Northern Lights Boulevard, Anchorage,Alaska 99503.To be connected by phone to the public hearing,please call the Legislative teleconference network,at 1-800-395-5073 at 10 a.m.Special Accommodations:If you are a person with a disability who needs a special accommodation in order to participate in this process,please contact Becky Gay at (907)269-3024 no later than Friday,November 19,2004,to ensure that any necessary accommodations can be provided.Written comments on the proposed regulations,including the potential costs to private persons of complying with the proposed changes, may be submitted to the Alaska Energy Authority,Attn:Becky Gay,at the above address. Comments may also be received by email at bgay@aidea.org or by fax at (907)269-3044. How to Get Your Copy:For a copy of the proposed regulation changes,contact the Alaska Energy Authority at 269-3000 and let us know the best way to get you a copy.Or,pick up a copy at 813 West Northern Lights Boulevard,Anchorage,Alaska 99503 or go to www.aidea.orq for the electronic version. Deadline for all comments:Comments must be received no later than 5:00 pm,Friday,December 17,2004.. After the Public Comment Period Ends The Alaska Energy Authority will either adopt these or other provisions dealing with the same subject,without further notice,or decide to take no action on them.The language of the final regulations may be different from that of the proposed regulations.YOU SHOULD COMMENT DURING THE TIME ALLOWED IF YOUR INTERESTS COULD BE AFFECTED.WRITTEN COMMENTS RECEIVED ARE PUBLIC RECORDS AND ARE SUBJECT TO PUBLIC INSPECTION. Statutory Authority:AS 42.45.010;AS 42.45.020;AS 42.45.030;AS 42.45.060;AS 42.45.100;AS 42.45.100; AS 42.45.120;AS 42.45.130;AS 42.45.140;AS 42.45.150;AS 42.45.160;AS 42.45.170;AS 42.45.250;AS 42.45.400;AS 44.83.080 Statutes Being Implemented,Interpreted,or Made Specific:AS 42.45.010;AS 42.45.020;AS 42.45.030;AS 42.45.060;AS 42.45.100;AS 42.45.100;AS 42.45.120;AS 42.45.130;AS 42.45.140;AS 42.45.150;AS 42.45.160;AS 42.45.170;AS 42.45.250;AS 42.45.400;AS 44.83.080 Fig¥al Inform#tion:The proposed regulation changes are not expected to require an increased appropriation. /b/ab/oFFpratdW.Miller,Executive Director DA Register ,2004 ALASKA ENERGY AUTHORITY 3 AAC 105 is amended by adding a new section to read: 3 AAC 105.020.Administration of assistance from other sources.The authority may apply for,accept,and administer funding and other assistance from the United States,other agencies of the state,municipalities,and private sources for the construction,financing, operation,and maintenance of power projects and for bulk fuel,waste energy,energy conservation,energy efficiency,and alternative energy facilities,equipment,or programs that are consistent with the authority's statutory authority and programs.It may accept conditions placed on federal and other state assistance that do not conflict with the authority's statutory authority and programs.(Eff./__/,Register___) Authority:AS 44.83.080 3 AAC 106.110(d),(e),(f),and (g)are amended to read: (d)A loan committee comprised of authority staff designated by the executive director of the authority shall make the final decision of the authority on applications for loans up to and including$2 million.For loans in excess of $2 million,the board of directors of the authority,upon recommendation by the Joan committee,shall make the final decision of the authority on applications for loans,except for loans that require legislative approval under AS 42.45.010(j).The final decision of the authority to approve or disapprove an application for a loan will be in the form of a written determination that contains the findings required by this section,and any other comments the authority considers appropriate.The authority will transmit copies of the determination to the applicant [AND TO THE LOAN COMMITTEE]. (e)If the authority approves the loan application,the authority will deliver a copy of its decision to the applicant [LOAN COMMITTEE]within 30 days of making its decision.The decision will: (1)indicate whether there are conditions that the applicant must satisfy before the authority will make the loan to the applicant; (2)include proposed loan terms;and (3)include a statement or statements,as applicable,describing the process of further reviews or approvals required under as 42.45.060. (f)If the authority approves an application,and after approval of the loan by the [LOAN COMMITTEE OR}legislature to the extent required under AS 42.45.010(j)[AS 42.45.060],the authority will enter into a loan agreement with the applicant under conditions complying with 3 AAC 106.120,but only after receiving a certified copy of the resolution or other official action taken by the applicant's governing body agreeing to the terms of the loan. (g)It is the responsibility of the applicant and not of the authority to obtain the approval by the legislature if approval of the applicant's loan is required under AS 42.45.010(j)[AS 42.45.060(g)].(Eff.2/16/96,Register 137;am /__/,Register ) Authority:AS 42.45.010 AS 42.45.060 AS 44.83.080 3 AAC 106.220(c),(d),and (e)are amended to read: (c)If the authority approves the loan application,the authority will prepare a written decision and deliver a copy of its decision to the applicant [LOAN COMMITTEE,AS APPLICABLE UNDER AS 42.45.060].The decision will: (1)indicate whether there are conditions that the applicant must satisfy before the authority will make the loan to the applicant; (2)include proposed loan terms;and (3)include a statement or statements,as applicable,indicating the (A)loan application is subject to review by the loan advisory committee in accordance with AS 42.45.030 and 3 AAC 106.230;| (B)process of further review or approval required under AS 42.45.060. [(d)IT IS THE RESPONSIBILITY OF THE APPLICANT AND NOT OF THE AUTHORITY TO OBTAIN THE APPROVAL BY THE LEGISLATURE IF APPROVAL OF THE APPLICANT S LOAN IS REQUIRED UNDER AS 42.45.060(g).] (e)If the authority approves an application,[AND IF APPLICABLE,THE LOAN IS ALSO APPROVED BY THE LOAN COMMITTEE OR THE LEGISLATURE UNDER AS 42.45.060,]the authority will prepare a loan agreement and other appropriate documentation to reflect the terms of the loan sufficient,as determined by the authority to assure repayment of the loan in accordance with its terms,and to provide for other matters the authority considers appropriate in connection with the loan.The authority will not disburse the proceeds of the loan to the borrower until the borrower has entered into the loan agreement with the authority.(Eff.. 2/16/96,Register 137;am pep,Register__) Authority:AS 42.45.020 AS 42.45.060 AS 44.83.080 AS 42.45.020 3 AAC 106.300(3)is amended to read: (3)written endorsement from the governing body of the community,where the applicant is a person generating power or selling fuel _in the community [FOR AN INDIVIDUAL APPLYING FOR A BULK FUEL LOAN ON BEHALF OF THE COMMUNITY]; (Eff.2/16/96,Register 137;am__//,Register ) Authority:AS 42.45.250 AS 44.83.080 3 AAC 106.310(1)and (4)are amended to read: (1)an applicant must intend to use the loan for purchase of fuel for an emergency or annual or semiannual supply,including the necessary costs of transporting the fuel; (4)the amount of the Joan,added to the amounts of all other bulk fuel loans to the same borrower in the same fiscal year,may not exceed $300,000 [$100,000].(Eff.2/16/96,Register 137;am /_f/f ,Register ). Authority:AS 42.45.250 AS 44.83.080 3 AAC 107.270(a)is amended by adding a new paragraph to read: (6)"residential customer'?means a customer who resides at the location receiving electrical service;the rules for determining residence of a voter under AS 15.05.020 shall apply in determining a customer's residence; a customer who engages in commercial activity at the customer's residence is considered a residential customer: (Eff.2/6/96,Register 137;am__/__/,Register ) Authority:AS 42.45.100 AS 42.45.130 AS 42.45.160 AS 42.45.110 AS 42.45.140 AS 42.45.170 AS 42.45.120 AS 42.45.150 .AS 44.83.080 3 AAC is amended by adding a new chapter to read: Chapter 108.Financial and Technical Assistance for Energy Systems,Facilities,and Equipment. Article 1.Bulk Fuel Facility and Power System Upgrades 3 AAC 108.100.Bulk fuel facility and power system upgrade assistance provided by the authority.Subject to appropriation and availability of funds,the authority may provide financial assistance and technical assistance,including construction management and training,to recipients eligible for bulk fuel storage facility and power system upgrade assistance. 3 AAC 108.110.Eligibility for and authority prioritization of assistance.(a) Utilities,municipalities,school districts,unincorporated villages,community associations, Alaska Native corporations,federally recognized tribes,and other persons providing power or fuel to the public in one or more communities are eligible for assistance under 3 AAC 108.100 - 108.190. (b)To prioritize its assistance for bulk fuel facility upgrades,the authority shall evaluate and rank deficiencies and needs for upgraded bulk community fuel storage facilities in each Alaska community with a population of at least 20 but less than 2,000 that is not predominantly a military or industrial site and that: (i)has significant bulk fuel storage needs;and (ii)is either located off an interconnected road system or,if located on an interconnected road system,is more than 20 miles from Anchorage,Fairbanks,Juneau, Kenai,Ketchikan,Kodiak,Nikiski,Sitka,Soldotna,Valdez,or another major fuel distribution center. (c)To prioritize its assistance for power system upgrades,the authority shall evaluate and rank deficiencies and needs for upgraded community power generation and distribution systems in each Alaska community with a population of at least 20 but less than 2,000 that is not predominantly a military or industrial site and that: (i)has a central community power system;and (ii)is not connected to the Railbelt CHomer-Seward-Anchorage-Fairbanks), Four Dam Pool (Glennallen-Valdez,Wrangell-Petersburg,Ketchikan, Kodiak),or Juneau power systems. (d)The authority may reevaluate and modify its evaluations and rankings based on changed assumptions or new information.The authority shall publish and periodically update its rankings on its internet web site. (e)In providing assistance under 3 AAC 108.100 -108.190,the authority shall give priority to those communities found in the authority's rankings under (b)and (c)of this section to have the greatest needs for assistance.The authority may adjust priorities and deviate from its prioritization based on requirements of federal or state agencies or other entities providing funding or based on the authority's determination of a recipient's readiness to proceed with the project,the community's ability to meet conditions for assistance under 3 AAC 108.220,or cost- effectiveness factors that warrant deviating from the authority's prioritization.(Eff. /__/,Register ) Authority:AS 42.45.400 44.83.080 3 AAC 108.120.Conditions to receiving assistance.As a condition to providing assistance under 3 AAC 108.100 -108.190,the authority may require the recipient to: (1)execute a grant agreement prepared by the authority that describes the terms and conditions of the assistance; (2)execute a waiver of sovereign immunity; (3)provide a business plan or other documentation demonstrating to the satisfaction of the authority the recipient's ability to operate and maintain the facility for the public benefit for its useful life and to replace the facility at the end of its useful life; (4)provide matching funds,property,services or another form of contribution to the project; (5)establish that the recipient has title to or a leasehold interest in the site on which the facility is located;and (6)abide by other terms and conditions that the authority determines are needed to maximize the public benefit from the assistance provided under this chapter.(Eff.__/ / _, Register___) Authority:AS 42.45.400 44.83.080 3 AAC 108.130.Phased approach to assistance.The authority may employ a phased approach to providing assistance under 3 AAC 108.100 -108.190,including providing assistance for a conceptual design or other planning documents to determine whether to provide further assistance.(Eff./-/,Register ) Authority:AS 42.45.400 44.83.080 Article 2.Circuit Rider and Electrical Emergencies Programs 3 AAC 108.200.Purpose of circuit rider and electrical emergencies programs.(a) The purpose of the circuit rider program is to assist eligible utilities to improve the efficiency, safety and reliability of power systems and reduce the risk and severity of emergency conditions or emergency disruptions in the operation of community power systems,by providing training, consultation,on-site assistance with maintenance and minor repairs,and other technical assistance. (b)The purpose of the electrical emergencies program is to assist eligible utilities respond to emergencies that affect their ability to reliably generate and transmit power,by providing financial or technical assistance in response to emergency conditions or emergency disruptions in the operation of community power systems.(Eff.__//__,Register___) Authority:AS 42.45.400 44.83.080 3 AAC 108.210.Circuit rider assistance provided by the authority.Circuit rider assistance may include one or more visits to the community whose utility is selected to receive .assistance or it may be limited to assistance provided telephonically or by electronic mail.The circuit rider assistance to be provided will be determined based on the authority's assessment,in consultation with the utility,of the utility's major needs and the authority's ability to provide assistance for those needs.Assistance may include,without limitation: (1)review of and recommendations to improve the system condition and system operations and maintenance; (2)training utility personnel;and (3)performing,or assisting utility personnel in their performance of,minor maintenance and repairs.(Eff./__/,Register___) Authority:AS 42.45.400 44.83.080 3 AAC 108.220.Eligibility and selection for circuit rider assistance.(a)Subject to appropriation and available funding,utilities in communities with population of less than 2,000 located off the interconnected road system are eligible for circuit rider assistance. (b)At the beginning of each fiscal year,the authority shall identify the communities to receive priority for circuit rider assistance that year based on power system deficiencies identified in the evaluation and prioritization of communities needs under 3 AAC 108.120,and also taking into account the risk of catastrophic system failure,the utility's management practices and operations and maintenance practices,the utility's ability to obtain and pay for assistance from other sources,and how recently the utility received circuit rider assistance from the authority. (c)The authority shall respond to requests for circuit rider assistance from eligible utilities taking into account the prioritization under (b)of this section,available funding,and the authority's ability to efficiently administer circuit rider assistance,including its ability to provide assistance in multiple communities during one circuit rider trip.(Eff.___/__/,Register -___) Authority:AS 42.45.400 44.83.080 3 AAC 108.230.Electrical emergency assistance provided by the authority.(a)In the event a utility in a community with population of less than 2,000 located off the interconnected road system suffers an electrical emergency,the authority will,subject to appropriation and availability of funds,assist the utility in responding to the emergency and recovering its ability to generate and transmit power to its customers in a manner that does not constitute a significant threat to life or property.Assistance may include,without limitation, financial assistance or technical assistance,including emergency repairs. (b)In this section,"electrical emergency”means a condition in a utility's system that presents an imminent danger to life or likelihood of significant disruption of electrical service. (Eff.//_,Register___) Authority:AS 42.45.400 44.83.080 3 AAC 108.240.Conditions to receiving assistance.As a condition to providing assistance under 3 AAC 108.200 -108.240,the authority may require the recipient to: (1)execute an agreement prepared by the authority that describes the terms and conditions of the assistance; (2)execute a waiver of sovereign immunity;and (3)abide by other terms and conditions that the authority determines are needed to maximize the public benefit from the assistance provided under this chapter.(Eff...// Register ) Authority:AS 42.45.400 44.83.080 10 Article 3.Alternative Energy and Energy Efficiency Programs. 3 AAC 108.300.Alternative energy and energy efficiency assistance provided by the authority.(a)Subject to appropriation and availability of funds,the authority may provide financial and technical assistance to utilities,municipalities,school districts,unincorporated villages,community associations,Native corporations,federally recognized tribes,and businesses for evaluation and development of sources of energy in the state for local consumption and for evaluation,development,and installation of measures to improve the efficient utilization of energy that is consumed locally. (b)In providing assistance under this chapter,the authority will give priority to those projects that show the greatest potential for reducing communities'dependence on diesel fuel for power generation.(Eff.__-//,Register___) Authority:AS 42.45.400 44.83.080 3 AAC 108.310.Alternative energy and energy efficiency assistance plan.The authority shall prepare,publish on its internet web site,and periodically update a biennial plan for providing alternative energy and energy efficiency assistance under this chapter.The plan shall include a description of available funding and funding the authority plans to request for alternative energy and energy efficiency assistance,the types of assistance the authority provides and plans to provide,and the criteria for allocating funds that the authority uses and plans to use. (Eff./_/,Register___) Authority:AS 42.45.400 44.83.080(S),(10),(13) 11 3 AAC 108.330.Conditions for receiving assistance.As a condition to providing assistance under this chapter,the authority may require the recipient to: (a)execute a grant agreement prepared by the authority that describes the terms and conditions of the assistance; (b)execute a waiver of sovereign immunity; (c)provide matching funds,property,services or another form of contribution to the project;and (d)abide by other terms and conditions that the authority determines are needed to maximize the public benefit from the assistance provided under this chapter.(Eff.__-/_/_, Register ) Authority:AS 42.45.400 44.83.080 Article 4.General Provisions 3 AAC 108.400.Notice of availability of assistance and status of programs.The authority shall publish and periodically update on its internet web site information on procedures for requesting assistance under this chapter and criteria that the authority uses to select recipients of assistance;available funding for assistance under this chapter and allocation of available funding to projects;status of rural power system upgrades,bulk fuel storage facility upgrades, alternative energy projects,and energy efficiency projects under this chapter;and changes to programs for providing assistance under this chapter considered or proposed by the authority. (Eff./ /,Register __) Authority:AS 42.45.400 44.83.0830 12 3 AAC 108.410.Protests and appeals.(a)Except as otherwise provided by law or as a condition of assistance provided to the authority under 3 AAC 105.020,protests and appeals of action taken by the authority under this chapter shall be made in accordance with this section. (b)A person who is adversely affected by proposed or final action of the authority under this chapter may submit a protest to the executive director of the authority. (c)The protest must be submitted by fax,by mail,or by delivery to the authority and must be received by the authority within ten calendar days after the authority provides notice of the authority's action.If the protester shows good cause,the executive director may consider a protest that is not filed in a timely manner. (d)The protest must be in writing,must be signed by the protester,and must include (1)the name,address,and telephone number of the protester; (2)the signature of the protester or the protester's representative; (3)identification of the procurement,solicitation,or other matter at issue; (4)a detailed statement of the legal and factual grounds of the protest,including copies of relevant documents;and (5)a statement of the remedy requested. (e)Upon receipt of the protest,the executive director will provide notice to other interested parties and: (1)make a final decision upon review of the protest and other relevant information; (2)delegate review of the protest to the authority's procurement manager or other person for a recommendation and makea final decision based on the recommendation;or 13 (3)conduct a formal or informal hearing,or designate a hearing officer to conduct a formal or informal hearing and provide a recommendation,upon which the executive director's decision will be based. (f)A decision of the executive director is a final administrative decision of the authority. An appeal of the decision shall be to the superior court in Anchorage under the Alaska Rules of Appellate Procedure.(Eff./__/,Register___) Authority:AS 42.45.400 44.83.080 3 AAC 108.490.Definitions.In this chapter,unless the context requires otherwise, (a)"alternative energy”means energy or fuels for production of electricity,heat,or mechanical power derived from renewable or local sources other than liquid petroleum, including wind,solar,geothermal power,hydroelectric,biomass,and local sources of coal and natural gas; (b)"construction”means planning for,designing,preparing the site for,building, altering,testing,and improving the facility or equipment being upgraded; (c)"bulk fuel storage facility”means tanks and appurtenant facilities and equipment, including pipelines and headers,for the storage and distribution of fuel for local consumption or power generation; (d)"energy efficiency”means improvement of energy generation from,transmission by, or utilization at existing facilities in the state,and includes facility insulation,energy-efficient lighting,improved efficiency in diesel generation of power,and co-generation of electricity,heat or mechanical power; (e)"power system”or "power project”has the meaning given in AS 44.83.990. 14 (f)"upgrade”means construction,renovation,repair,replacement,or other improvements to a facility or equipment,and includes taking out of service facilities or equipment replaced or rendered obsolete by the improvements to facility or equipment.(Eff. __/_/__,Register___) Authority:AS 42.45.400 44.83.080 15 ADDITIONAL REGULATIONS NOTICE INFORMATION -_ Adopting agency:Alaska Energy Authority General subject of regulation:Alaska Energy Authority's power project fund and bulk fuel revolving loan fund loan programs,power cost equalization program,and financial and technical assistance for energy systems,facilities,and equipment. Citation of regulation (may be grouped):3 AAC 105.020 -108.490 (new chapter 108) Reason for the proposed action: ()compliance with federal law (X )compliance with new or changed state statute ()compliance with court order ()development of program standards ()other:(please list) BRU/component affected:Alaska Energy Authority/AEA Rural Energy Operations Cost of implementation to the state agency and available funding (in thousands of dollars): Initial Year Subsequent -FY 2005 'Years Cost $0 $0 Federal receipts $0 $0 General fund match $0 $0. General fund $0 $0 General fund/ program receipts $0 $0 General fund/ mental health $0 $0 Other funds (specify)$0 $0 The name of the contact person for the regulations: Name:Becky Gay Title:Project Manager Address:813 West Northern Lights Boulevard Anchorage,Alaska 99503 Telephone:(907)269-3024E-mail address:bgay@aidea.org The origin of the proposed action: X___staff of state agency federal government general public petition for regulation change other (please list) 9.Date:October13,2004 Prepared by:iName(typed)"Beckysay(/Title (typed)§Project MaTelephone:(907)269-3024 Regulations Attorney Legislation/Regulations Section Department of Law Becky Gay Project Manager Alaska Energy Authority October 13,2004 NEW PROJECT File-opening request 3 AAC 105.020 -108.490 for new regulations project on the Financial and Technical Assistance for Energy Systems, Facilities,and Equipment We are requesting that you open a new file for a regulations project regarding the Financial and Technical Assistance for Energy Systems,Facilities,and Equipment for the Alaska Energy Authority. Attached are a draft of the regulations and a draft public notice,for your review. Please assign an assistant attorney general to this project.We have worked with Assistant Attorney General Mike Mitchell on this topic. Our contact person for the project is Becky Gay at (907)269-3024. FISCAL NOTE* I.Regulation-adopting agency:Alaska Energy Authority 2.General subject of regulation:Alaska Energy Authority's power project fund and bulk fuel revolving loan fund loan programs,power cost equalization program,and financial and technical assistance for energy systems, facilities,and equipment. 3.Citation of regulation (may be grouped):3 AAC 105.020-108.490 4.BRU/component:Alaska Energy Authority/AEA Rural Energy Operations 5.Estimated appropriations required (in thousands of dollars): Current Next Next Next FY 05 FY 06 FY 07 FY 08 PERSONAL SERVICES TRAVEL CONTRACTUAL SUPPLIES EQUIPMENT LAND AND STRUCTURES GRANTS AND CLAIMS MISCELLANEOUSTOTAL 0.0 0.0 |0.0 0.0 6.Funding Source (in thousands of dollars): 1002 Federal Receipts 1003 General Fund Match 1004 General Fund 1005 General Fund/Program Receipts 1037 General Fund/Mental Health Other (Specify Type) Total 0.0 0.0 0.0 0.0 7.Positions: FULL-TIME PART-TIME TEMPORARY 8.Analysis (attach a separate page if necessary): The regulations will amend the standards for eligibility for power cost equalization by defining "residential customer"for purposes of AS 42.45.110.Whether this will increase the number of recipients of PCE assistance is unknown.In any event,since AS 42.45.110(i)provides for pro rata reduction in PCE assistance where the amount appropriated is insufficient for payment in full under the statutory formula (as has been the case in recent years),the regulations will not require an increased appropriation. 9.Date:__10/13/04 Prepared by:AL uteheclae. Sara Fisher-Goad 'Alaska Energy Author Telephone:269-4623 a Alaska Industrial Development and Export Authority sie. CONFIDENTIAL FOR ALASKA ENERGY AUTHORITY BOARD. AND STAFF ONLY y MEMORANDUM a SS TO:Board of Directors SS---Alaska Energy Authority S FROM:Ron Miller ///) NO) Executive Djrettéor DATE:November 9,2004 SUBJECT:Disposition of Alaska Energy Authority Rural Transmission Lines and Other Property Purpose:The purpose of this memo is to present information regarding AEA's ownership of certain rural remote Transmission Lines and other property and to seek Board approval to initiate disposal of the following properties: 1.Craig to Klawock Transmission Line 2.Klawock Lot 3.Napakiak to Bethel Transmission Line 4.Shungnak to Kobuk Transmission Line Property descriptions are attached. Background:The State of Alaska constructed the transmission lines described above in the 1980's so that power might be more reliable and less costly to rural Alaskans.Because the construction has long been completed,it is reasonable that AEA seek to properly dispose of assets that accrue benefits largely to local communities in remote SE,SW,and NW parts of the state.Given the recommendations of the Alaska Energy Policy Task Force that the State divest 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 ONT 1 9L0 DANA 2ACAV ANT 1 IED ANAL o TAIL Denn fAT ACIZA FARINA COO SIND ODDA wsnmimerntaan nee Confidential Memorandum November 9,2004 Page 2 of 2 itself of energy assets,AEA staff has proposed to dispose of thee above-described properties through the following course of action: AEA staff will gather all information on each project; AEA will contact the appropriate operators and users to initiate transfer discussions after researching leases and contracts; Assessment site visits will be performed as necessary; AEA staff will identify necessary upgrades,associated costs and sources of funding needed prior to transfer; AEA will seek Governor's Office approval for any legislation needed to facilitate transfer; AEA staff and the Assistant AG's will prepare draft legislation; AEA staff and counsel will prepare transfer documents; Official transfer. Legal Authority:The Craig-Klawock transmission line and the Shungnak-Kobuk line were constructed as part of the energy program for Alaska,a program under which AEA acquired or constructed certain power projects with money appropriated to the power development fund. AS 44.83.396(a)states:"A power project that was acquired or constructed as part of the former energy program for Alaska is owned,and shall be administered,by the authority.”Thus, legislation is needed to dispose of these interties. Legislation is not necessary for disposal of the Napakiak-Bethel line and the Klawock Lot (although AEA could choose disposal by legislation),since AEA has general statutory authority under AS 44.83.080(7)to sell,donate,and convey property in furtherance of its corporate purposes.If disposal of these properties is not through legislation,AEA must follow its regulations found at 3 AAC 105.400-.480 for the disposal of assets.The regulations require executive director authorization,but do not require board authorization.3 AAC 105.400(b). They require AEA to attempt to dispose of property at its fair market value,except disposal may be to a state agency,municipality,utility,or non-profit for less than fair market value.3 AAC 105.420.Disposal is to be by "spot bids,competitive bids,public auction,or other disposition methods selected by the authority”(which appears to preclude a sole-source disposal).3 AAC 105.400(g).At least 30 days notice is required,with notice to be published in specified media. 3 AAC 105.440. Recommendation:Unless the Board directs otherwise,AEA's Executive Director and staff will pursue appropriate disposal of each of the transmission lines and the real property discussed above.This will require legislative appropriation of funds to upgrade individual!properties. PROPERTY DESCRIPTIONS 1.Project Name:CRAIG/KLAWOCK INTERTIE Description:5.5 mile distribution line between Craig and Klawock on Prince of Wales Island. Intertie was completed in 1988 and is presently operated by AP&T.Initial funding of the project came from legislative appropriations (SLA 1981,Ch 90)for $750,000 and (SLA 1984,Ch 24)for $139,393. Scope of Work:Survey the intertie for deficiencies.Bury approximately 1 mile of line to keep birds from nesting or landing on poles near landfill area. Status:AEA and AP&T have discussed this transfer for the past several years.A timeframe and transfer considerations should be identified and agreed to.The buried part of the line would reduce brownouts to the local communities. Estimated Cost:$90,000 2.Project Name:KLAWOCK PROPERTY Description:A staging area lot of approximately 0.9 acre (or 41,312 sq ft),located on the corner of Klawock-Hollis Highway and Big Salt Road.Legal description is identified as Lot 6, Block 65,USS 1569 Klawock Townsite.AEA owned this property when the Black Bear Hydro project was being built.AP&T has leased this property and has made improvements (i.e., leveled lot,built substation on it,storage facility for company vehicles,etc). Scope of Work:Finalize terms of a sale. Status:AP&T has been leasing this lot for utility use.A 2004 appraisal of the property was completed with a value of $250,000.Environmental assessment and cleanup done in 2001. Discussions of a transfer of this lot has been ongoing since the 1990s. Estimated Cost:$0 3.Project Name:NAPAKIAK/BETHEL INTERTIE Description:10.5 mile Single Wire Ground Return (SWGR)distribution line between Napakiak and Bethel.Built in 1982 as a "demonstration”project.”Currently in need of upgrading to 3- phase before the Village of Napakiak would be willing to take ownership. Scope of Work:Upgrade the 10.5 mile SWGR,construct a backup RPSU facility,and upgrade part of the community distribution line to 3-phase,code-compliant system. Status:AEA and Napakiak need to continue the dialogue for a transfer.A timeframe and transfer considerations should be identified and agreed to. Estimated Cost:$2,775,000.00 4.Project Name:SHUNGNAK/KOBUK INTERTIE Description:10.5 mile intertie between Kobuk and Shungnak.Originally built as a SWGR "demonstration”intertie.Rebuilt in 1992 for $1,000,952.00 as a 3-phase line.Kobuk uses this line to transfer electricity from AVEC's plant in Shungnak to Kobuk,a non-AVEC community. Kobuk presently operates and maintains the intertie. Scope of Work:Survey the line and replace any deficient parts or poles. Status:AEA and Kobuk have discussed a transfer since 1984.The subject of a transfer should be reinstated.A timeframe and transfer considerations should be identified and agreed to. Estimated Cost:Unknown until survey completed. Alaska Industrial Development and Export AuthorityA|D =AniAlaska Energy Authority Alaska Energy Authority Board of Directors Briefing Paper -AEA Energy Project Update 9 November 2004 1.List of Projects Completed Year To Date: BFU Pedro Bay Nanwalek Sterling Landing Karluk (SSR)Deering False Pass RPSU Distribution Systems Atmauthluak Koyukuk White Mountain Powerhouses Stevens Village |Kokhanok | Alternative Energy &Energy Efficiency Akiachak Distribution |Galena Diesel Efficiency |Chignik Lake Consolidation 2.List of Projects Scheduled to Complete by Year End -2004: BFU Akutan Koyukuk Akiachak Larsen Bay Nelson Lagoon RPSU Powerhouses Golovin Alternative Energy &Energy Efficiency N/A 813 West Northern Lights Boulevard *Anchorage,Alaska 99503907/269-3000 *FAX 907 /269-3044 ®Toll Free (ALASKA ONLY)888 /300-8534 *www.aidea.org .Cost Containment Discussions: Regionalization Combining bulk fuel and RPSU whenever possible Using prefabricated modules for smaller power plant projects. building our own used oil blenders instead of buying commercial blenders Aluminum pump boxes instead of steel in tank farms FUNDING SCENARIO FOR 2005 Program #Projects Funding BFU 15 $22.4 million RPSU 14 $26.0 million AE&EE 3 (Programs)$3.3 million BFU RPSU Powerhouses:AE&EE Point Baker Kwigillingok Energy Cost Reduction RFP Diomede Kongiganak Village End Use Efficiency Clarks Point Koyukuk Wind Assessment Atka Hughes Tenakee Springs Arctic Village Whitestone Nikolski (Module) Levelock Atka(Module w/Hydro) Kwethluk Manokotak Aniak Pedro Bay Chuathbaluk Buckland Crooked Creek Allakaket Red Devil MKREP Sleetmute RPSU Small Scale Upgrades: Stony River Newtok Takotna Karluk Rural Energy Group Bulk Fuel Upgrade (BFU)Program October 2004 Projects Projects Completed Scheduled Pre-2001 24 2001 9 2002 9 2003 12 2004 11 2005 15 Post 2005 42 Total Value 924.9 $16.3 $15.7 $20.7 $22.6 $22.4 $64.5 Manis tawvgy Aubuorty Rural Energy Group Bulk Fuel Upgrade (BFU)Program October 2004 Composition of Bulk Fuel Projects (194 projects in 171 villages) AEA Projects,142 ee Done by Others,9 -AEA Unscheduled,22 --AEA In Progress,46Non-AEA Projects,52}4 --AEA On Hold,13 --AEA Complete,53 Rural Energy Group Bulk Fuel Upgrade (BFU)Program 2003 ProjectsChenegaBay Lime Village Nikolai Buckland Alatna Igiugig Kokhanok Aleknagik Golovin White Mountain Akhiok Egegik October 2004 2004 ProjectsAkutan Pedro Bay Nanwalek Koyukuk Sterling Landing Larsen Bay Akiachak Karluk (SSR) Deering Nelson Lagoon False Pass 2005 ProjectsPointBaker ¢Diomede ¢Clarks Point ¢Atka ¢Tenakee Springs ¢Whitestone ¢Levelock ¢Kwethluk ¢ Aniak ¢Chuathbaluk ¢Crooked Creek ¢Red Devil ¢ Sleetmute ¢Stony River ¢Takotna Manin trarty Auth ty White Mountain Bulk Fuel Upgrade Project Before and After Pictures Beg, Rural Energy Group Rural Power System Upgrade (RPSU)Program October 2004 Projects Projects Total Completed Scheduled Value Pre-2001 0 2001 4 $3.7 2002 2 $2.5 2003 5 $4.5 2004 6 $5.7 2005 -14 , $26.0 Post 2004 Balance ural Energy Group Rural Power System Upgrade (RPSU)Program October 2004 Composition of Power Generation Projects (129 AEA RPSU Projects in 125 Communities) AEA RPSU Projects,129 AEA On Hold,3 AEA Complete,14 AEA In Progress,30OtherNon-AEA §; Communities,50 Fg? AEA Unscheduled,75 AEA Done by Others, 7Inter-tie/Grid Communities,9 Rural Energy Group Rural Power System Upgrade (RPSU)Program October 2004 - 2003 Projects 2004 Projects Golovin (Distribution)*Distribution Systems: Kotlik Waste Heat -Atmauthluak Kotlik Powerhouse -Koyukuk Nunam Iqua -White Mountain Tuluksak ¢Powerhouses: -Stevens Village -Golovin -Kokhanok 2005 Projects ¢Powerhouses: -Kwigillingok -Kongiganak -Koyukuk -Hughes -Arctic Village -Nikolski (Module) -Atka (Module w/Hydro) -Manokotak -Pedro Bay -Buckland -Allakaket -MKREP ¢Small Scale Upgrades: -Newtok -Karluk Alaska incuawialDevelopmentandfxponAuthority Tuluksak Rural Power System Upgrade Project |'Before and After Pictures Rural Energy Group Alternative Energy &Energy Efficiency (AEEE)Program October 2004 Energy Cost Reduction Program °28 projects funded in three RFPs «Projects ranked and funded based on benefit/cost. sara rye fi DC Grant Cost fo 76.70 feet OLocal /AEA Loan DO Life C Benefit 15.0 20.0 $Million -5.0 10.0 Shag oye,oe :Oe ™ Rural Energy Group | Alternative Energy &Energy Efficiency (AEEE)Program October 2004 Energy Cost Reduction Project Completion DC Funds Award Year|Completed 2005 2006-7 ($M) 2002 |10 $3.2 2003 3 2 1 $1.7 2004 11 1 $1.8 Total 3 23 2 $6.7 Aisha inchatria)DevetogmemsedExpon Rural Energy Group Alternative Energy &Energy Efficiency (AEEE)Program October 2004 Village End Use Efficiency Program «Lighting and heating system efficiency measures in up to 83 community facilities in 18 RPSU villages. eAudits completed 10/03. «Measures starting 11/04,to be completed 2005. ¢Typical payback in 4-5 years. jectsoj ve Pr ect Photo iclency ProjiencyIClese Energy &Energy Eff |Eff ive False Pass D Alternat Rural Energy Group Alternative Energy &Energy Efficiency (AEEE)Program October 2004 Wind Energy Development Program «Locations determined by ranking potential economic potential and community interest. «Meteorological (met)towers installed in 17 communities. ¢Additional 8 communities to receive towers this winter. ¢30 other communities are on a waiting list.Towers will be moved to new locations after 1 year of assessment. ¢Cost share by AEA,USDOE,and local communities. ”)ae)oO2,Oo}=Oo.>©cOoSSoo=OLupj>o}==coOWw2)fo)%330Ooxc&WNLu@2wad©roi@ |:<Ea A Cost Saving Measures Regionalization Combining bulk fuel and RPSU whenever possible Using prefabricated modules for smaller power plant projects. building our own used oil blenders instead of buying commercial blenders Aluminum pump boxes instead of steel in tank farms tits RawearotThisrsagtiritonit™ Alaska Industrial Development and Export Authority (AIDEA)and the Alaska Energy Authority (AEA) afe proud sponsors of the AEN/Fitst Alaskans |Visit us on the Web -WWW.aidea.org Or at our offices 813 W.Northern Lights ' ;Anchorage,AK 99503 Main number: 907-269-3000 FAX:907-269-3044 i ji1 International Wind-Diesel Workshops in Alaska by Reuben Loewen,Project Manager--AlternativeEnergy |Last month,people from ten countries,across Alaska and the USA gathered in Anchor- age and Girdwood for the 2004 Wind Diesel Workshop co-sponsored by the AEA and the U.S.Department of Energy's National Renew- able Energy Lab (NREL.) People interested in wind- diesel hybrid power systems came to Alaska from Europe, Australia,South Reliable and affordable energy is one of the keys to economic development and this is also true in rural Alaska,where the cost of fuel for home heating and power generation affects the very survival of some communities. The main purpose of wind- hybrid systems versus tra- America and the Lower 48 to share recent =experi- ences,discuss the latest technol. ogy developments _+° and to introduce the concept to] new attendees. A highlight of the Bugive conference was a field trip to see working wind-diesel systems in St. Paul,Kotzebue and Selawik. volatile fuel in the ditional diesel power plants generation of elec- tricity.In some iE to displace ex- designs,excess pensive and price 'uy energy is used to n¥displace fuel i heating applica- |tions as well}a (shops,schools, water systems.) Wind and other renew- (Continued on page 2) | : Bertha Black,Kongiga- nak,with the Energy Hog at AEA's 2004 Rural En- ergy Conference in Tal- keetna this summer.For more on Energy Hog,see Thanks to \AVEC,Selawik,KEA|iandTDXPoweri for their extra ef- forts on the 2004 Wind Diesel || field trip!: data logger connected to the new tower for analyzing wind resources on site -a first step. Dillingham:Students examine the New Stuyahok:The anemometer "Met” tower on a clear day. New Stuyahok:Locals get involved in setting up a "Met”tower. Notice to the Affected Public:AEA proposed regulations changes are available for public comment now,ask for a copy.Your comments are important to us! Selawik wind farm and bulk fuel storage facil- :|October 2004 fAIDEA/AEA AFN Newsletter eenAaahtsh}a>«Ua ity -a recent AVEC project ay einiadvi AeEe tite at"Oe by 2 nema Fourof Kotzebue Electric Association's (KEA) twelve downwind turbines on lattice towers. A partial array of the Kotzebue Electric's wind turbines on a beautiful October day. Who is Energy Hog? A "spokes-Villain,”Energy Hog represents energy wasters,but delivers funny energy awareness messages that children can learn and share with their family.The lessons provide simple ways to use energy more effi- ciently.An interactive website has games for kids to play to become Official Energy Hog Bust- ers and a scavenger hunt to play with parents to evaluate the efficiency of their own homes.It is for all ages and can save you money!For more,visit www.energyhog.org Wind-Diesel 2004, (Continued from page 1) ables, hydro and geother- mal energy,can reduce the run time on diesel genera- tors,allow them to be operated more efficiently and lower costs associated with fuel such as storage and disposal of waste oil. These hybrid power plants have higher upfront capital costs,but allow utilities to estimate future costs of operation more accurately, since the price of wind does not change.AEA's Rural Energy plan has iden- tified over thirty (30)com- munities with positive benefit-cost ratios for wind energy systems un- .wr.including F-7s. continued: Wind-diesel technology has improved dramatically in the last twenty .years.Since its first "U9 experiments with wind power generation, Alaska is now a world leader in working wind-diesel hybrid systems,with wind-diesel power plants in the state and more in the development stage. Oil at $50 a barrel may be good news for State coffers, but itis hard on those who rely on fuel oil for heating and power generation.It also makes wind a more economic alternative. When combined with energy efficiency measures and newer,more efficient diesel engines,wind-hybrid sys- ,tems offer the poten-der conservative |tial to significantly scenarios,nd reduce reliance on Higher capital costs,imported fuel. more complicated By utilizing a clean, control systems,lack predictable,local of off-the-shelf _jresource that fits inequipmentand_in-with the existing die- creased operation and sel system,communities maintenance requirements in remote,extreme envi- ronments have slowed the adoption of utility-scale wind power in rural Alaska. with good wind resources have an exciting opportunity to transition dependency on imported fuel deliveries. Alternative Funding Sources by Rural Community Outreach Coordinator Bruce Tiedeman four John Lyons of TDX Power briefs the tour at the TDX St.Paul facility. Reuben at the St.Paul turbine,an enclosed tower with a 120 foot climb to the top. Tour participants,along with guide Jason Bourdakofsky of TDX Corporation,inspect the generators at the City of St.Paul power utility. =ALASKA >ENERGY AUTHORITY AEA manages Denali Commission funds for energy projects,but AEA also works with other agen- cies that have funding capabilities.Other community development funding sources may come from HUD,USDA,EDA,the Rasmussen Foundation,ANA,U.S.Dept.of Energy and the State of Alaska through its Mini-grant (planning)or CDBG (community development block grant for cit- ies/municipalities.)Whenever possible,and where there is a need for supplemental funding, AEA works with the local entities in leveraging these funding sources for energy projects.AEA also provides technical assistance where energy projects are being planned. Grants Available for Application.Apply Now!!! For Cities/Municipalities:FY2004 CDBG for up to $500,000.Applications due 12/3/04. For Tribes/IRAs:FY2004 ICDBG for up to $500,000.Applications due 12/13/04. For Tribes/Native Corporations/Villages:DOE Tribal Energy Grants.Applications due 2/4/05. AEA Contact:Bruce Tiedeman at 269-4641 wa :|October 20047AIDEA/AEA AFN Newsletter Training Opportunities with AEA|._ and the Denali Commission AEA,through the Denali Training Fund,contin- ues to provide training opportunities to local residents on their energy projects and infra- structure. AEA also works with the Alaska Dept.of Labor, Alaska Works Partnership and regional non- profits on training needs.The intent of the train- ing is to ensure that the infrastructure built in a rural community has the best service available to sustain the tank farm or powerhouse in a busi- ness-like manner.With the proper training,operators will keep their facili- ties code-compliant.Good management and training is the key to suc- cess.With the right training,and a continued commitment to train com- munity personnel,infrastructure should last its entire usefulness life span. Contact:Project Assistant Monica Moore at 269-3026 Kesha tieIgiugig:On the Job training onthe Making Life Better with AEA and the Denali Commission 4 AIDEA:Financing Alaska's Future -_ wm dee 2004/2005 May 16 -27,2005 October 18 -29,2004 November 8 -19,2004ProjectAssistantMonica Moore awards a certificate. Hydro Training Utility Clerk Training Alaska Energy Authority Training Program Schedule Page 3 Advanced Powerplant Operator Training Bulk Fuet Operator Training November 29 -December 10,2004 On-Site Bulk Fuel Training Site visits will be in late May and June 2005. Powerplant Operator Training January 10,2005 -March 4,2005 March 14,2005 -May 6,2005 March 29,2005 -April 5,2005 Specific dates/locations not yet known for: aneKoyukuk:A future Bulk Fuel Facility Op- erafor surveys the AEA materials site for an bpgrade. Diomede:Remote delivery of bulk fuel project materials is challenging. py ORE Tes ae ognseeines, Kokhanok:First time debit card used in the new retail fuel dispenser. le u communities and utilities will pick up around two- Pedro Bay:Local compactor operator {two communities.AEA estimates savings over the on the job training. Cost Reduction Grant Awards by Program Manager Peter Crimp AEA is in the process of awarding grants for 13 projects totaling $1.8 million under the Energy Cost Reduction program funded by Denali Com- mission.In this third RFP,AEA staff and contrac- tors conducted life cycle economic analyses of 69 project proposals received and recommended grant funding for projects with benefit-cost ratios greater than one.Projects receiving funding will install energy-efficient diesel generators,a geo- thermal power system,heat recovery systems in two communities and rebuild an intertie linking lives of the projects to be $12.8 million,over twice the total project cost of $5 million.Local thirds of the cost of the projects. sf 'October 2004AIDEA/AEA AFN NewsletterbeeitteeeceameteriecrematenSSIAe AEA Staff or "Who You Gonna Call?” Deputy Director -Rural Ener. Mike Harper 269-3025 Community Outreach Bruce Tiedeman 269-4641 Business Plans Jolene John 269-3022 Manager -BF &RPSU Chris Mello 269-4649 Bulk Fuel (BF) David Lockard 269-4541 Bryan Carey 269-4688 Mark Schimscheimer 269-4689 Ron Brown 269-4698 Rural Power System Upgrades (RPSU) Kris Noonan 269-4697 Lenny Landis 269-4684 Fintan Lyons 269-3001 Power Cost Equalization (PCE) Terri Harper 269-4630 Cheryl Smith 269-4626 Alternative Energy Peter Crimp 269-4631 Reuben Loewen 269-3027 Rebecca Garret 269-4624 Training Monica Moore 269-3026 Administrative Jodi Peterson 269-4636 Pedro Bay,Alaska Bulk Fuel Storage Project Complete!mbspicbedal. _seniPhotos by David RP ARRSsLockardEW@:-'.ae Pédro Bay:Deliveringproject."tgmaterials,Alaska Style.: Designed and built by AEA,funded by the Denali Commission.oinin,s,eyselySuioueul'VAGIV,--Job complete:A picture-perfect :..bulk.fuel.storage facility.2 Recon saul Rural Community Coordinator Bruce Tiedeman announced the successful award of $500,000,due to CDBG assistance,to Larsen Bay to upgrade power facilities. Saal Power Cost Equalization (PCE):Distance Delivery Update by Program Manager Terri Harper New training video under production:AEA's PCE program staff is currently producing a distance learning video about the filing and reporting requirements of the PCE program. We hope the electric utilities will find this video useful in the management of their facility and the training of their staff. PCE plays a vital role in the economic health of many rural communities,reducing the cost of power paid by residential and community facility customers.If you need technical as- sistance with PCE filings and reports,please don't hesitate to contact us. |At left,AEA's Project Development Specialist Jolene John,the "Energy Hog”and PCE Pro- gram Manager Terri Harper at AEA's Rural Energy Conference in Talkeetna in April 2004 .