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AEA Board Meeting Dec 5 2005
Alaska Industrial Development and Export Authority Alaska Energy Authority 10. AGENDA ALASKA ENERGY AUTHORITY Board Meeting December 5,2005 Anchorage,Alaska Immediately Following AIDEA Board Meeting CALL TO ORDER BOARD OF DIRECTORS ROLL CALL PUBLIC ROLL CALL PUBLIC COMMENTS PRIOR MINUTES --July 25,2005 OLD BUSINESS NEW BUSINESS A.Financial Statements Presentation (Financial Statements available for review at the Exectutive Director's Office -after the meeting they will be posted on AEA's website) B.Alaska Intertie Update DIRECTOR COMMENTS A.Director's Status Report of AEA Programs and Projects B.Next Meeting Date -Follows AIDEA Board meeting Dates BOARD COMMENTS 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 Al Alaska Energy Authority ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS December 5,2005,@ 3:00 p.m. Anchorage and Juneau,Alaska 1.CALL TO ORDER Chairman Barry called the meeting of the Alaska Energy Authority to order on December 5,2005, at 3:00 p.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Mike Barry (Chairman/Public Member),Commissioner Bili Noll (Department of Commerce,Community and Economic Development),and Mr.John Winther (Public Member). Directors present in Juneau:Deputy Commissioner Tom Boutin (Designee for Department of Revenue). 3.PUBLIC ROLL CALL Staff present in Anchorage:Ron Miller (Executive Director),Jim McMillan (Deputy Director-Credit & Business Development),Valorie Walker (Deputy Director-Finance),Karl Reiche (Project Development Manager),Becky Gay (Project Manager),Brenda Applegate (Accountant),Mark Schimscheimer (Project Manager),Sara Fisher-Goad (Financial Analyst),Chris Rutz (Procurement Manager),Bernie Smith (Project Manager),Linda MacMillan (Accountant),(Brenda J.Fuglestad (Administrative Manager),and Jeff Williams (Administrative Assistant). Others attending in Anchorage:Mike Mitchell and Brian Bjorkquist (Department of Law),Tim Bradner and Margie Bauman (Alaska Economic Report),Bill White (Anchorage Daily News), Robert Sheldon (TATICC/ATM),Jan Sieberts (Washington Capital),David Germer and Jon Rubini (JL Properties,Inc.),Shirley Kelly (USDOC-EDA),Dane Hanson and John Duffy (Mat-Su Borough),Jim Walker (Matanuska Electric Association),Kathy Porterfield and Charlie Kozak (KPMG)and T.N.Obermeyer (Self). Others attending telephonically:Gary Roberts and Mike O'Leary (Callan Associates),Paul Bloom and Jeff Brown (Merrill Lynch),and Pat Clancy (Western Financial Group). 4.PUBLIC COMMENTS There were no public comments 5.PRIOR MINUTES The July 25,2005 AEA board minutes were approved as presented. 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 907 /269-3000 *FAX 907 /269-3044 ¢Toll Free (AL ASKA ONLY)888 /300-8534 *www.aidea.ore AEA Board Meeting December 5,2005 Meeting Minutes Page 2 6.OLD BUSINESS There was no old business. 7.NEW BUSINESS 7A.Financial Statements 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 intends to also issue unqualified opinions on the Authority's compliance with the provisions of its federal grants agreements.KPMG's unqualified opinion should be available next month. 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. Ms.Porterfield stated that the only change in terms of format of the financial statements was the implementation of new accounting standards with regard to investments.Ms.Porterfield also pointed out the information about the Bradley Lake trust accounts and the supplemental information provided 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. 7B.Alaska Intertie Update Mr.Miller stated that several issues regarding the Alaska Intertie were discussed at a previous board meeting:problems with the Agreement,projects that the IOC is focusing on,and the status of the pipeline project.He noted that a copy of the snow load monitoring procedureadoptedbytheIOConNovember16"is attached.The IOC had been discussing problems with the Intertie Operating Agreement along with possible amendments to that Agreement.AIDEA is in negotiations with ML&P regarding management and the Intertie Bypass Project.Henri Dale with Dryden &LaRue prepared summary studies on three structure foundations,which we should receive shortly. The !OC has discussed hiring consultants to study upgrade options with regard to the SPC issue.Mr.Smith stated they were still discussing the matter,but that issue is on the agenda for the January 19,2006 IOC meeting. Mr.Miller said that the participating general managers of the utilities requested AIDEA run financing scenarios for Intertie repair and replacement.AIDEA has complied with that request AEA Board Meeting December 5,2005 Meeting Minutes Page 3 but have not had a formal response from the general managers. Chairman Barry said that at a work session with the general managers it was agreed that there were several items on a checklist that had never been checked off and stated that one of the problems in getting those items resolved was not having a financing plan.They asked AIDEA to present a financing plan and we did. Mr.Bjorkquist stated that there has been some discussion on some of the financing points and that if the Board would like to get into the details that would be a topic appropriate for executive session.He said he could give an update on where things are in the negotiations and the Board could give staff direction as to what its pleasure would be.Mr.Bjorkquist also noted,regarding the Intertie Bypass Project,that there are ongoing negotiations on details for the contract and that this is another topic where staff could use some direction from the Board. Chairman Barry asked staff to prepare a report to the Board on those items that were identified in June as being delinquent and whether or not any of them have been addressed and,if not, list some suggestions as to how to get the utilities to address those issues.He stressed that what he meant by "address”was that these issues get resolved and not just talked about. In response to Board member questions,Mr.Bjorkquist addressed Mr.Winther's question and said that under the Agreement,there is no repair and replacement fund or other funded mechanism.The question is how to deal with the concern of funding necessary repairs and replacements and major maintenance as they arise.The details of this topic would also be appropriate for executive session. Chairman Barry stated he would prefer to have an executive session when there is more time available to discuss the issues,as this has been an ongoing issue for a number of years. Hearing no objection Chairman Barry moved on to Item 8A of the agenda. 8.DIRECTOR COMMENTS 8A.STATUS REPORT Mr.Miller stated that budget meetings have been held with the Office of Management and Budget for both agencies. In response to Board member questions,Mr.Miller replied that AEA expects to see a reduction in funds available for its energy programs from the Denali Commission,which is mainly because of the overall decline in funding for the Denali Commission and the increase in earmarks going to the Denali Commission for certain projects. 8B.NEXT MEETING DATES Chairman Barry stated that the next AEA meeting will follow the next AIDEA board meeting. 9.BOARD COMMENTS There were no board comments. AEA Board Meeting Meeting Minutes 10.ADJOURNMENT Chairman Barry adjourned the meeting at 3:15 p.m. Ur by/Miller,Secretary December 5,2005 Page 4 November 16,2005 SNOW LOAD MONITORING PROCEDURE The Snow Load Monitoring System (SLMS)operates continuously for the purpose of advising the Southern Controller of weather conditions that may cause snow to load on the conductors of the Alaska Intertie.This condition creates the possibility that conductors will unload unevenly which may then lead to conductor unbalance that possibly may then lead to conductor clearance problems.A Patrol Contractor will be retained as part of the Snow Load Monitoring Procedure. The computer system is supplemented by a Patro]Contractor who performs line patrols at the direction of the Southern Controller or after any snowfall of more that 2”over 24 hours measured at the Susitna High School or the Talkeetna Airport unless the Southern Controller determines that a patrol is impracticable.The Patrol Contractor will check and report to the Southern Controller and Alaska Energy Authority by e-mail daily. There is adefinitive sequence of events that must occur in orderto create clearance problems along the Alaska Intertie.As determined by analysis of previous line models, the weight on the insulator string must increase by an average minimum of 1407 Ibs of snow (over the bare conductor weight)must first accumulate on the conductors in a number of spans to create the possibility for clearance problems which will trigger analarmontheSLMS.Then the snow must unload from a number of spans but not from all the spans.This creates a situation that may or may not cause a ground clearance problem. If the SLMS indicates the Intertie has one or more load cells in alarm the Southern Controller shall (1)advise all Intertie participants of the conditions,and (2)immediately initiate de-energizing the Intertie,consistent with prudent utility practices.Under normal circumstances,it is anticipated that the Intertie would be de-energized within 2 hours after a load cell alarm.The Intertie will remain de-energized until a patrol]is completed and it is determined that there is no conductor clearance problem. GVEA Henri Dale ML&P Doug Hall CEA John Cooley AEG&T Frank Bettine ahd.O AEA Bemie Smith _#2enee LE ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS July 25,2005,@ 10:50 a.m. Anchorage and Juneau,Alaska 1.CALL TO ORDER Chairman Barry called the meeting of the Alaska Energy Authority to order on July 25,2005,at 10:50 a.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Mike Barry (Chairman/Public Member),Mr.Mark Davis (Designee for the Department of Commerce,Community and Economic Development),and Mr. John Winther (Public Member). Directors present in Juneau:Deputy Commissioner Tom Boutin (Designee for the Department of Revenue). 3.PUBLIC ROLL CALL Staff present in Anchorage:Ron Miller (Executive Director),Valorie Walker (Deputy Director- Finance),Jim McMillan (Deputy Director-Credit &Business Development),Chris Rutz (Procurement Manager),John Wood (Project Manager),Becky Gay (Project Manager),Bruce Chertkow (Loan Officer),Brenda J.Fuglestad (Administrative Manager),Art Copoulos,(Project Manager),and Bernie Smith (Project Manager). Others attending in Anchorage:Rick Eckert (Homer Electric Association),Henri Dale (Golden Valley Electric Association),Angela Lendt and Ron Saxton (Ater Wynne),Craig Thorne (First National Bank),Jim Posey (Anchorage Municipal Light &Power),Joe Griffith (Chugach Electric), Robert Sheldon (TATICC),Brian Bjorkquist (Department of Law),Bill Noll (Governor's Office),Ken Vassar (Birch Horton Bittner &Cherot),Margie Bauman (Alaska Journal of Commerce),Jim Walker,Don Zoerb,Tuckerman Babcock,Mike Pauley and Wayne Carmony (Matanuska Electric).Jan Sieberts (WCM),Ken Kincaid (Self). Others attending telephonically:Gary Robertson and Mike O'Leary (Callan &Associates), Frank Roppel (Alaska Housing Finance). 4,PUBLIC COMMENTS There were no public comments. 5.PRIOR MINUTES The June 6,2005 minutes were approved as presented. AEA Board Meeting .July 25,2005 Meeting Minutes Page 2 6.OLD BUSINESS There was no old business. 7.NEW BUSINESS 7A.Alaska Intertie Update Mr.Ron Miller stated that the general managers of the utilities were invited to discuss the situation regarding the Alaska Intertie Agreement. Chairman Barry stated that one of the items before AEA wasa list of outstanding maintenance issues that had been identified by the IOC in October 2002.He stated that the Board was told that all the items on that list still remained and that none had been crossed off.Chairman Barry expressed concern with the lack of progress and concern with the agreement itself because it did not ensure a level of routine maintenance that the Board would like to see in an agreement. Chairman Barry acknowledged that the recent work session with the utilities'general managers was productive. Mr.Bernie Smith stated that the IOC budget had been approved.There were two items that had been debated in detail;one being the SVC's.We have a quote for three (3)SVC's on the Intertie for approximately $1 million each.The budget allows for one and the committee decided to wait to purchase all three SVC's at one time.The other item was regarding tower foundation repairs.It was decided to put only one of those in.The budget came close to exactly what it was in the previous year.There was a work session with the utility company's general managers where they discussed what was to be done about the Intertie Agreement. The general managers decided that the Agreement could and should be amended and suggested that the IOC members get back with the chairman of the IOC and present what they believe are some problems with the Agreement.They would then submit those requests for review. Mr.Brian Bjorkquist addressed Chairman Barry's concerns raised in his opening comments regarding the various types of deferred maintenance.Some of these issues,if any were to happen,could cause some significant disruption to the operation of the Intertie.Mr.Bjorkquist stated that there are foundations that need to be repaired so that the towers do not topple over and that the repairs that are critical for maintaining the operation of the intertie would require approximately $3.7 million dollars to fix.The maintenance repairs have not been done for quite some time because there is not a good mechanism under the Alaska Intertie Agreement to finance them.Mr.Bjorkquist stated that the Intertie Agreement is set up so that budgets are done on an annual basis and in order to do a repair you would have to fit that repair into an annual basis time frame.Mr.Bjorkquist noted that when there is major maintenance that requires a capital cost,putting it into one particular year is problematic because the budget for One year really cannot absorb the entire cost of the necessary repairs.At the work session there was an agreement and a commitment by the general managers to fix the Intertie Agreement so that it will be able to effectively take care of future major maintenance items as they come up.One of the topics discussed was the possibility of creating an R&R Fund.The details of how we are going to address the problem of the Agreement not providing a good mechanism for doing major maintenance will be addressed.Exactly how that's going to happen will require some discussion and negotiation with the utilities to come up with a good and fair solution.Another aspect of the Intertie Agreement that was discussed is that there are Provisions that have not been followed and are obsolete.It was agreed that the general managers would address those issues and clean up the Agreement so that it reflects what is AEA Board Meeting -July 25,2005 Meeting Minutes Page 34 actually happening and how the Intertie is being managed as opposed to what the original Agreement that dates back to the mid-80's provided.An example of an obsolete item is the Agreement's provision under the budget that the Legislature would appropriate the budget for a fiscal year and then the wheeling rate paid by the utilities would reimburse the state for those expenses;this has not been followed since 1993. Chairman Barry acknowledged that the staff is only reporting essentially on the concerns that the board had raised previously,but that it should be mentioned that during the work session, staff made a commitment to prepare a financing study for the utilities to determine how some of these issues could be paid for and the most efficient way to do that. Public Comments on 7A Mr.Mike Pauley stated that there were a number of concerns in response to the June 24,2005 letter from Executive Director Ron Miller regarding the Alaska Intertie Agreement and that they wished to comment on the workshop that was held here on the same subject.Mr.Pauley said that their senior legal counsel at MEA,Mr.Jim Walker,had prepared a letter that goes into some detail on their concerns with the Intertie Agreement and that he would provide the Board with a copy of that at the conclusion of his comments.He then gave a brief overview of MEA's position. Mr.Pauley stated that MEA's primary concern with the operation of the Intertie relates to the clear public safety hazard posed by unbalanced snow loading on the Intertie conductors.The contractor working with the IOC on this issue,Dryden &LaRue,had previously concluded that the only certain cure for the snow loading problem was to place inset towers in the area where this phenomena is known to occur.Mr.Pauley stated that at the June 9,2005 meeting of the IOC,they learned that Dryden &LaRue had been instructed to cease work on designing the inset towers and they have subsequently learned that there was apparently no formal vote on this matter,the item did not appear in the agenda,and it is not noted in the minutes and that the only certain cure for the snow loading problem has essentially been swept under the rug as a low priority item for a majority of the participants.He said that the area where the low clearance problems occur is an MEA service territory and members of the public face the highest likelihood of death or injury and many recreational trails used by skiers,snow machine riders and dogsled racers run through this area.Mr.Pauley stated that earlier this year MEA was a defendant in a lawsuit that resulted from the electrocution death of a young man who came in contact with one of their lines.They believe that based on the clear language of the Alaska Intertie Agreement,MEA would not be shielded from liability in the event that someone was injured or killed because of sagging lines on the Alaska Intertie. Mr.Pauley said that section 7.4.2 of the Alaska Intertie Agreement gives AEA the authority to make the changes that are necessary to protect public safety,and in section 18.1,AEA has agreed to indemnify the other participants from claims arising from AEA's acts or omissions. With the abandonment of the inset tower project,they can only conclude that AEA and a majority of IOC members are willing to risk public safety by relying on the current load cells and inclinometers.These devices are placed at infrequent intervals along the Intertie and the reliability for detecting clearance problems is highly questionable.They also believe that the IOC has not followed its own procedures that were designed to mitigate the risk to public safety, stating that at the December 8,2004 meeting of the IOC,the committee adopted procedures stating that the Intertie would be inspected for clearance problems whenever more than two (2) inches of snow accumulated during a twenty-four (24)hour period at Susitna High School or Talkeetna Airport.He said that the 1OC had stated that if such an inspection could not occur at first light of day following the snowfall and if snow is continuing to fall,the line would be de- AEA Board Meeting -July 25,2005 Meeting Minutes Page 4 energized.Based on the record of this last winter they believe that the Intertie operator has failed to consistently implement this protocol and he listed examples of this happening.Mr. Pauley said that this disregard of the most basic and predetermined preventative action makes the risk of punitive damages,in the event someone is injured,a substantial possibility.Mr. Pauley made a couple of additional comments regarding the clearance problems with the Intertie.They believe it is clear that the installation of inset towers is the only certain,effective long-term solution and that the failure to fix the snow loading problems points to deficiencies in the Intertie Agreement.The existing Agreement contains no mechanism for funding major maintenance or upgrade projects.In the absence of a provision for funding capital for improvements and major construction,they believe it is clear that the Intertie Agreement will not function over the long-term.MEA believes that the termination of this defective Agreement is necessary to start the process of eliminating a known threat to public safety and to craft a new Agreement that will insure the long-term reliability of the Intertie.MEA recommends that the Alaska Energy Authority immediately give the forty-eight (48)month notice of termination under section 2.2.3 of the Agreement. Before Mr.Pauley left,Chairman Barry opened the floor for questions and he asked the first one.Chairman Barry asked if this was the first time anybody had heard about this from MEA or did they go to the Intertie Operating Committee meeting and lay that issue on the table;where it probably should be dealt with first? Mr.Pauley's reply was that he knew that they had a substantial paper trail indicating occasions where they have brought that up.Their representative who attends the IOC meetings was not here today but they can get back to the Board about the particular times that they brought that to people's attention. Chairman Barry commented that the IOC has a policy now of recording their minutes and AEA's board has a policy of receiving those minutes so that we can monitor it directly and that he would appreciate if they could make sure that in the future any problems that they have with the operation,go first to the IOC.Chairman Barry then asked if there were any other questions of Mr.Pauley from the Board.There was.no more public testimony and the Board did not have any questions of the staff.Chairman Barry expressed that the board is very encouraged by the commitment made by the general managers to review the Agreement and correct the outstanding elements in the Agreement and suggested they allow those general managers to perform under that commitment,have AEA's staff to monitor the progress and to come back to the board at the next meeting with a report. Mr.John Winther questioned if we are we looking at some time to be able to get a working Agreement in place or if this is going to be a meeting-by-meeting situation that develops over a . long period of time or whether the board is going to consider the recommendation that we do a forty-eight (48)month termination. Mr.Brian Bjorkquist replied that his perception of how we are going to proceed is going to be basically on a two (2)path track.One is to address the major maintenance issue dealing with the Alaska Intertie and dealing with that on a financing type basis.The second track is going to be to cure the Interties so that these types of situations do not arise in the future.He stated that there may be different time frames for the two and that he thinks that there was a commitment made by the Chairman that within a couple of weeks AEA would get together and have some financing options to take care of the immediate major maintenance issues.Mr.Bjorkquist felt that it should be reflected,for the record,that the IOC is contemplating that there will be a third party independent engineer taking a look at whatever solution there is (regarding the snow load problem)to make sure that it does fit the definition of prudent utility practices and accomplishes AEA Board Meeting July 25,2005 Meeting Minutes Page 5 a level of safety that everyone would agree needs to be done on the Intertie.He stated that there are many ways to take care of a problem and the solution that MEA suggested was a capital project of approximately $32 million which basically price the Intertie out of the market. He wanted to make sure the record reflects that the IOC in moving forward with their proposal to have an independent engineer look at those type of safety issues to insure that good utility practices are being followed. Chairman Barry stated that we will be getting a report from staff as to the progress,or lack thereof,at every board meeting until there is a final resolution. Mr.John Winther expressed his concern that the state of Alaska has millions of dollars in this asset and that we need keep that asset a valuable asset.He does not believe that the state's money has been very well protected so far because it has not had the proper maintenance.His interest is seeing this done post haste. Chairman Barry expressed to those of the Board who were not present at the work session that there certainly is a different viewpoint presented by the Railbelt Utilities than the one Matanuska Electric has to the dire straits of the Intertie.He stated that they will have a transcript of Friday's work session and the IOC meeting sent to the Board within the next few days. Mr.Ron Miller stated that members of the IOC have already begun email communications © among themselves to exchange information on what they perceive as needed changes to the Intertie Operating Agreement. 8A.DIRECTORS COMMENTS Mr.Miller informed the Board that AEA's website has been reconstructed and the new address is www.akenergqyauthority.orq Mr.Miller also expressed his regrets to the Board that Art Copoulos,who has been a key staff member on numerous projects,has resigned from the Authority.The Board and staff wished Mr. Copoulos well in his future endeavors. 8B.NEXT MEETING DATES Chairman Barry stated the next meeting date would be Monday,August 8,2005 immediately following the AIDEA Board Meeting. 9.BOARD COMMENTS There were no board comments. 10.ADJOURNMENT Chairman Barry adjourned the meeting at 11:23 a.m. Ron Miller,Secretary Alaska Industrial Development and Export Authority co MEMORANDUM TO:Board of Directors Alaska Energy Authority FROM:Ron Miller Executive Director DATE:December 5,2005 "SUBJECT:Financial Reports Included with your packet are the June 30,2005,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-all\pjffinance\wtwifinancial reports 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 ANT 1960 INNN @ LAV ANT 1760 INAA @ TAI]Eraa (Al ACKA CONITV)BRA /ANNLRERIAA evananar aidea nra Alaska Industrial Development and Export Authority MEMORANDUM TO:Board of Directors Alaska Energy Authority FROM:Ron Miller Executive Director DATE:December 5,2005 SUBJECT:Alaska Intertie Project The following progress has been made on the Alaska Intertie issues: Snow Load Monitoring Procedure:The Intertie Operating Committee (IOC)initiated more stringent monitoring procedures November 16,2005 (copy attached).AEA will contract for an independent review of Intertie snow related safety procedures in early 2006. Intertie_Agreement_Amendments:The IOC discussed Participant concerns with the Intertie Agreement at its meeting of November 16,2005.Discussions will continue at an 1OC meeting scheduled for November 30,2005.An amendment will require the unanimous consensus of all Participants. AEA and IOC counsel (through Jenny Trieu -Ater Wynne atty)have also discussed the possibility of using "side agreements"to address the problems with the Intertie agreement.The primary area would be a side agreement to address funding necessary repairs and major maintenance.It is up to IOC counsel to further develop this option.Discussion in this regard will occur on November 30™between AEA and IOC's counsel. Intertie Bypass Project:Negotiations continue over an agreement under which ML&P would manage the bypass project.The next meeting between AEA and ML&P is scheduled for November 30,2005.. Repair and Replacement Projects:Structure concerns were addressed at the October 20,2005 IOC meeting.GVEA's representative Henri Dale and consultant Dryden & LaRue summarized studies conducted for three structure foundations of concern. Recommendations included continued monitoring of soils and foundations,with no major repairs required.AEA has requested copies of consultant reports. Regarding SVC's,the IOC has discussed hiring a consultant to study upgrade options. Repair and Replacement Funding:AEA transmitted Alaska Intertie Repairs Financing Scenarios to Participant General Managers,as requested by the General Managers during the July 22,2005 Alaska Intertie Work Session (copy attached).Participants have not responded to the information provided. 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 November 16,2005 SNOW LOAD MONITORING PROCEDURE The Snow Load Monitoring System (SLMS)operates continuously for the purpose of advising the Southern Controller of weather conditions that may cause snow to load ontheconductorsoftheAlaskaIntertie.This condition creates the possibility that conductors will unload unevenly which may then lead to conductor unbalance that possibly may then lead to conductor clearance problems.A Patrol Contractor will be retained as part of the Snow Load Monitoring Procedure. The computer system is supplemented by a Patrol Contractor who performs line patrols at the direction of the Southern Controller or after any snowfall of more that 2”over 24hoursmeasuredattheSusitnaHighSchoolortheTalkeetnaAirportunlesstheSouthern Controller determines that a patrol is impracticable.The Patrol Contractor will check and report to the Southern Controller and Alaska Energy Authority by e-mail daily. There is a definitive sequence of events that must occur in order to create clearance problems along the Alaska Intertie.As determined by analysis of previous line models, the weight on the insulator string must increase by an average minimum of 1407 lbs of snow (over the bare conductor weight)must first accumulate on the conductorsina | number of spans to create the possibility for clearance problems which will trigger an alarm on the SLMS.Then the snow must unload from a number of spans but not from all the spans.This creates a situation that may or may not cause a ground clearance problem. If the SLMS indicates the Intertie has one or more load cells in alarm the Southern Controller shall (1)advise all Intertie participants of the conditions,and (2)immediately initiate de-energizing the Intertie,consistent with prudent utility practices.Under normal circumstances,it is anticipated that the Intertie would be de-energized within 2 hours after a load cell alarm.The Intertie will remain de-energized until a patrol is completed and it is determined that there is no conductor clearance problem. GVEA Henri Dale )caeSL AIlvvw CEA John Cooley BS a a |CO)AEG&T Frank Bovine deh ieee AEA Bemie Smith __@&2enee LEE ML&P Doug Hall Alaska Industrial Development and Export Authority Alaska Energy Authority August 17,2005 Mr.Bradley P.Janorschke General Manager Homer Electric Association,!nc. 3977 Lake Street Homer,Alaska 99603 Fax:(907)235-3323 Mr.Dave Calvert Utility Manager City of Seward P.O.Box 167 Seward,Alaska 99664 Fax:(907)224-4085 ... Mr.Jim Posey General Manager Anchorage Municipal Light &Power 1200 East First Avenue Anchorage,Alaska 99501 Fax:(907)263-5204 RE:Alaska Intertie Agreement Gentlemen: Mr.Joe Griffith Chief Executive Officer Chugach Electric Association,Inc. P.O.Box 196300 Anchorage,Alaska 99519-6300 Fax:(907)562-0027 Mr.Steve Haagenson President &Chief Executive Officer Golden Valley Electric Association,Inc. P.O.Box 71249 Fairbanks,Alaska 99707-1249 Fax:(907)458-5951 Enclosed is a letter from Matanuska Electric Association ("MEA”)dated August 12,2005 sent in response to my letter of August 4,2005 (copy enclosed)regarding issues MEA raised in their letter of July 25,2005 (copy enclosed).Your comments on MEA's positions in their August 12 letter,particularly the statement that MEA does not believe the Alaska Intertie Agreement cannot be amended,but must be terminated.Please send your comments by end of business August 31,2005. erely Mae |/]We.WarnMiller Executive Director RWM:bjmf H:AAEA Projects\Alaska Intertie Project\Correspondence\GM2005-01.doc 23 Nie Bran |Mies .Duna &via &$karl: 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 ,.=A ap Ee TS a'Matanuska Electric -rF VE MEW ie ip g oa e .ie,whe ia hes poopy F -Association,Inc.|ns a bee LWA aye 78 2008 P.O.Box 2929 aca Abe Palmer,Alaska 99645-2929 AIDEAJAGE Telephone:(907)745-3231 Fax:(907)761-9368 August 12,2005 Ronald W.Miller Executive Direcior Alaska Energy Authority 813 West Northern Lights Blvd.. Anchorage,Alaska 99503 Dear Mr.Miller: |want to thank you for your response tomy letter of July 25,2005 regarding theAlaskaIntertieAgreement(Agreement).Matanuska .Electric .Association,Inc.(MEA)also believes that at:least some of MEA's.concerns.could.be 'addressed:bytheIntertieOperating:Committee.(IOC)..:-However,:substantial,public.safetyissuesrelated.to the Alaska Intertie-have.been discovered since-1985 wtién the Agteementwas.signed and MEA doés not believe that the''Agreement;”"as 'currently 'written,provides an adequate mechanism 'for dealing with those problems,"Afterconsideringyourresponse;MEA remains of the opinion that the flaws in the Agreement are so severe as to require termination. Economic Feasibility Of Inset Tower Project In reply to the specific points under your heading number 1,the inset tower projectcanbemadeeconomicallyfeasible.Since the Agreement does not currently include a mechanism for spreading costs over a period greater than one year,the most obvious method forfinancing this project would be to utilize the $20.3 milliongrantinChapter1,SLA 2002,Section 78(c).'.MEA recognizes that the Legislativepurposeforthisgrantwas"to upgrade and extend the-Anchorage to Fairbanks power transmission intertie to the Teeland substation.”While the inset tower projectisarguablywithinthescopeofthispurpose,MEA also recognizes that AEA might 'This grant has been targeted by AEA and some Intertie Participants to finance a.proposednew230kVTeelandSubstationtoDouglasSubstationtransmissionline.As was acknowledged by Golden Valley Electric Association,Inc.(GVEA)Chief Executive Officer Steve Haagenson during negotiations to resolve Regulatory Commission of Alaska (RCA)Dacket No.U-03-100;:GVEA will.not need 230.kV.service over.the Alaska.Intertie:for theforeseeablefutureand:certainly not for the next ten years.'Assistant Attarney General:BrianBjorkquistandatleastoneotherAEAstaffpersonrepresented:theAlaska Energy Authority.(AEA)at each of the U-03-100 negotiations..Thus;construction of a new 230 kV segmentfortheAlaskaIntertieispremature,and may not ever be required..© Ronald W.Miller Alaska Intertie Agreement August 12,2005 Page 2 desire legislative approval prior to spending this grant money on the inset towerproject. For a number of years,Dryden &LaRue has estimated that the inset tower project might cost as much as $18 million.The inset tower project actually approved for design by the IOC on April 15,2004 was estimated to cost $13.8 to $16.9 million. However,Mr.LaRue recently increased this estimate to as much as $32 million. While we should thoroughly examine the justification for this extraordinary increase in the cost estimate,it is clear that Mr.LaRue has not changed his professionalopinionthattheinsettowerprojectistheonlycurefortheexisting.problem of inadequate ground clearance during unbalanced snow loading conditions.Thus,aone-time investment of up to $32 million would prevent the possibility of multiple tragic accidents,each of which could cost AEA and the other Participants substantially more than $32 million.2 The potential for such tragic accidents will remain until such time as the risk of inadequate ground clearance has been prudently mitigated. Snow Load Monitoring ProtocolItisMEA's understanding that the December 8,2004 protocol was intended to provide better protection to the public than the earlier protocol.Therefore,the only reasonable interpretation of that protocol requires de-energization of the Intertie if alinepatrolcouldnotbeinitiatedduetoinclementconditionswheneither;(1)a SLMS system alarm was received,or (2)two inches or more of snow had accumulated at Talkeetna Airport or Susitna Valley High School and it was continuing to snow at those locations. You presented us with two differing interpretations of the December 8,2004 protocol in your letter,neither of which would provide an adequate level of protection to the public.In the first full paragraph on page 2 of your letter,you indicate that the protocol requires de-energization of the Intertie "only”if (1)one ormoreSLMSloadcellswereinalarm,(2)two or more inches of snow has accumulated,and (3)line patrols cannot be initiated.This interpretation leads to the appalling result that the line would not be de-energized even if:(1)we haveknowledgeofinadequategroundclearanceobtainedfromsomeotherreliable source,or (2)in the extreme,if a line patrol identified a clearance problem when noalarmwasreceived. In paragraph 3(a)of your letter,you indicate that the protocol only requires de- energization of the Intertie if one or more SLMS monitoring load cells are in alarm. See for example,Goldberg v.Florida Power &Light Company,899 So.2d 1105 (Fla., 2005),a case where the estate of deceased twelve year old brought a wrongful death action against electric company.The child was not electrocuted,and the traditional higher standard of care for the transmission of electricity was not an issue in this claim.The electric company was found to have acted negligently,resulting in death of child,and jury awarded $37 million in damages.The Florida Supreme Court affirmed this award,which did not include any claim for punitive damages.In Alaska,under Civil Rule 82(b),the attorney fee award based upon this damage award would have been an additional $3.7 million. Ronald W.Miller Alaska Intertie Agreement August 12,2005 Page 3 _Thus,both of your interpretations depend entirely upon the SLMS system working. The Intertie was initially energized for testing in 1986,and within three years,by 1989,inadequate ground clearance caused by unbalanced snow loading was recognized by the IOC as a serious and recurring problem.It is MEA's understanding that there has not been a single SLMS alarm attributed to unbalanced snow loading since installation of that system was completed in 1997. This inexplicable eight-year period of no alarms does not engender confidence that the installed SLMS system works.As a result,MEA does not believe that either of your interpretations is consistent with the public safety goal of this protocol,nor does it believe that either of your interpretations is consistent with the intent of the lOc. AEA's Comprehensive Approach To Address Snow Loading Concerns Regarding the action items listed in your paragraphs under heading number 3,MEA does not believe that the IOC has ever properly voted to undertake those matters inlieuoftheinsettowerproject.MEA understood those items as being authorizedsolelyinashorttermefforttotemporarilyprovideimprovedlevelsofpublic .protection while the inset tower project is implemented. AEA Authority To Implement The Inset Tower Project Regarding the matters discussed under your heading number 4,AEA does have authority under Section 7.4.2 of the Agreement to unilaterally make improvements to the Alaska Intertie.A lack of [OC approval does not prohibit construction of -improvements to the Alaska Intertie by AEA if public safety requires that such improvements be constructed. Footnote Discussion of Intertie Agreement Section 10.3.5 Regarding the discussion in your footnote number 1,MEA believes that you are misinterpreting the authority granted to ML&P and GVEA by Section 10.3.5 of the Agreement.That Section does indeed provide a mechanism for creation of an operating budget when unanimous consent cannot be obtained for a budget proposal under Section 10.3.4.However,that mechanism is very limited.ML&P (the southern operator under Section 10.1.2)and GVEA (the northern operator under Section 10.1.3)are authorized by Section 10.3.5 to continue recovering from AEA their historic cost of operating the Alaska Intertie as shown in their Section 10.4 accounting records in the event a budget is not approved pursuant to Section 10.3.4. This carefully crafted provision allows continued operation of the Alaska Intertie at historic cost levels in the event that unanimous consent on a budget cannot be obtained.However,ML&P and GVEA are not given a blank check to recover any Alaska Intertie related costs they desire to incur.If the later were true,then ML&P and GVEA could simply submit their own budgets for operation of the Alaska Intertie,and that would be the Alaska Intertie budget.This interpretation would render Section 10.3.4 completely superfluous,and contracts are to be interpreted so Ronald W.Miller Alaska Intertie Agreement August 12,2005 Page 4 as to give meaning to each term if possible.®Interpretation of Section 10.3.5 to give ML&P or GVEA unilateral authority to impose new costs on the other Participants would render the unanimous agreement requirement in Section 10.3.4 a nullity,and thus is not a reasonable interpretation. Inequitable Cost Allocation Under heading 6 of your letter,you asked MEA to explain the inequitable allocation of costs that we are concerned about.To do so,|will use the Alaska Intertie BudgetproposedJuly19,2005 as an example.*Under this proposal,AEG&T would have paid 30 times more than GVEA for budgeted energy transfers over the Alaska Intertie (18.8 cents/kWh versus 0.6 cents/kWh).This is clearly inequitable,particularly when you consider that AEG&T is only utilizing twenty miles of the Alaska Intertie while GVEA is utilizing the entire 190 mile length of this line.This inequity is a direct result of the MITCR cost allocation methodology set out in Articles 7 and 8 of the Agreement. If you have any questions,please call me at (907)761-9275. Sincerely, ZV Wh, James L.Walker Senior Counsel jimh 51 oee for example,Grant v.Anchorage Police Dept.,20 P.3d 553,555-556 (Alaska,2001)."The budget subsequently approved on July 21,2005 was differentiin amount,but MEA hasnotyetbeenprovidedwiththedetailedinformationnecessarytoperformasimilar calculation. Alaska Energy Authority August 4,2005 Mr.James Walker Matanuska Electric Association,Inc. P.O.Box 2929 'Palmer,Alaska 99645 Re:Alaska Intertie Agreement Dear Mr.Walker: The Alaska Energy Authority (AEA)has reviewed your letter dated July 25,2005,regarding the Alaska Intertie Agreement,and believes it appropriate that most of the concerns you raise be addressed by the intertie Qperating Committee (IOC).| First,as we further explain below,information provided to AEA,if accurate,suggests that yourlettercontainscertainfactualerrorsandmisinterpretationsoftheAlaskaIntertieAgreement, intertie operations,and the snow-load procedures.The IOC would appear to be the appropriate - forum to set the record straight,as intertie operators and contractors can clarify whether factual information is accurate,and participants can clarify interpretations of the agreement. Second,AEA believes it essential that the IOC clarify any ambiguities.in current snow-load procedures and what further actions will be implemented to help ensure safety in future intertie . operations. AEA does not intend this letter to be an exhaustive response;that can be done at the LOC.Instead,AEA attempts to highlight what it perceives to be the most significantissues you raised. 1.IOC Determination on Inset Tower Project. AEA would fully support MEA's request that the IOC revisit the determination regarding the inset tower project.AEA's recollection is that after Dryden &LaRue increased the construction cost estimate from $18 million to $32 million,they and various utilitiessuggestedthattheprojectwouldnolongerbeeconomicallyfeasible.Dryden &LaRuealsoadvisedthatcontinuedworkontheinsettowerprojectwasnotlikelytoprovide. anything beneficial.|OC efforts then focused upon improving the snow-load proceduresthatwerethenineffectinApril2005.lf there are factual errors,and the inset tower Utilities'reconsideration of that project. 2.IOC Snow-Load Procedures -April 2005. MEA suggests at page 4 of your letter that "the Intertie operator has failed to consistently implement the December 8,2004 protocol.”AEA's understanding of that protocol and 813 West Northern Lights:Boulevard.*Anchorage.Alaska 99503 Mr.James Walker August Page 2 4,2005 'information provided to AEA suggests that the southern operator fully complied with the lOC snow-load procedures that were in effect in April 2005.The |OC should confirm the relevant facts. Attached is a copy of what AEA understands to be the adopted December 8,2004 protocol.Those adopted procedures did not require de-energizing the intertie under any circumstances unless the SLMS was already in alarm at one or more load cells.Only if the SLMS was in alarm and both 2 inches of snow had accumulated and snow patrols or aerial inspection could not be dispatched "at first light”should de-energizing the line be required.Absent each of those conditions,de-energizing was not required,but was left to the discretion of the southern intertie operator.: AEA has been informed by Dryden and LaRue that none of the SLMS load cells have been in alarm over the past 3 or more years.If accurate,that would lead to the conclusion that the southern operator could not have failed to implement the December 8,2004 protocol since its inception. implementing New IOC Snow-Load Procedures. In lieu of pursuing the inset tower project,AEA understands that the |OC committed to improving the snow-load protocol and ensuring that fully satisfy the obligation that the intertie is operated in a safe and responsible manner consistent with Prudent Utility Practices.There are several interconnected provisions,some of which include: (a)A new snow-load protocol has already been adopted under which the southern operator will immediately initiate de-energizing the intertie if one or more SLMS load cells goes into alarm. (b)Dryden &LaRue are reviewing the SLMS system to ensure it operates in a manner so that load cells go into alarm whenever snow has accumulated to the extent that uneven snow-load problems might exist.Dryden &LaRue's work will ensure that the lines maintain minimum ground clearances to bare ground.The IOC will implement additional procedures to account for the height of snow-pack 'that would reduce ground clearance. (c)Dryden &LaRue will recommend any upgrades,modifications or additions to the SLMS system that may be necessary to ensure that the SLMS functions properly,and provides accurate information about the minimum possible ground clearance to bare ground.AEA will forward a copy of your letter to Dryden & LaRue -including your suggestion that the intertie has an inadequate number of load cells to provide accurate information.If MEA has any other or more specific suggestions regarding how to improve the SLMS system (or snow-load protocol or procedures)please provide them. (d)AEA is encouraging the IOC to consider and implement additional procedures so that accumulated snow is removed from the intertie before reaching load cell alarm levels. Mr.James Walker August 4,2005: Page 3 (e)Ground snow-machine patrols and aerial patrols of the intertie will continue as -under the prior snow-load protocol and procedures.These patrols will continue to provide visual inspection of the actual conditions when conditions warrant. Further,they will help to reduce potential risk from blunt force trauma after the line is de-energized.Visual inspections will help ensure that low sagging lines will be promptly discovered so that MEA,as the southern maintenance contractor,may then expeditiously remove snow from the lines and eliminate the risk of injury.AEA appreciates the critical role MEA plays in ensuring public safety. (f)The snow-load protocol will be reviewed by an independent engineer who will be asked to opine that the snow-load protocol and procedures fully satisfy the obligation that the intertie is operated in a safe and responsible manner consistent with Prudent Utility Practices. (g)An insurance,risk-management analysis will be conducted on intertie operations --including snow-load protocol and procedures. AEA believes that these provisions offer a comprehensive approach to address snow- load concerns.As you will observe,these provisions do not rely solely upon any existing protocol,procedure,or operating equipment,but invite thorough review of current circumstances,and invites improvement wherever appropriate.AEA invites MEA (itselfandaspartofAEG&T)to fully participate to help ensure that the intertie is operated iinasafeandresponsiblemannerconsistentwithPrudentUtilityPractices. 4.AEA Cannot Unilaterally Implement the Inset Tower Project. AEA believes that Sections 7.4.2 and 7.4.3 of the Alaska Intertie Agreement("Agreement”)reflect a fundamentalflaw in the Agreement in that it provides no useful mechanism to implement repairs or major maintenance.Those provisions provide that AEA or any Participating Utility may recommend modifications to the intertie.However, the "funding mechanism”they provide is that the entity making the recommendation pays the cost of the modification unless the IOC determines,in advance,that the "modification is of direct benefit to other or all Participants.” MEA errs when it asserts on page 2 of its letter that AEA under Section 7.4.2 of the Agreement could "make the changes required to protect the public from the hazard”-- which the letter defines as completing the inset tower project.Without the Participating Utilities agreeing to provide funding for that or any other project,AEA has no capability to implement any modification to the intertie.Further,the Participating Utilities have haddifficultyprovidingfundinginannualbudgets,so repairs and major maintenance simply gets deferred (e.g.,the |OC's recent failure to approve funding for SVC upgrades or all tower foundation repairs in the FY 2006 budget). Mr.James Walker August 4,2005 Page 4 AEA believes the Agreement needs to be amended to provide a meaningful mechanism to provide funding necessary to undertake repairs and major maintenance.Will MEA (itself or through AEG&T)assist to accomplish that goal? Annual Budgets. Many of MEA's comments regarding the annual budgets for the Alaska Intertie appear to mirror AEA's concerns.We hope MEA (itself or through AEG&T)will join AEA and theIOCtomakeappropriateamendmentstotheAgreementtocuretheseconcerns.' "Inequitable Cost Allocation”. MEA,at page 5 of your letter,suggests that unanimous consensus to amend the Alaska Intertie Agreement is not likely to be achieved because of "the inequitable allocation of costs under the Agreement.”This comment is not explained.What are MEA's concerns?The follow up questions to other Participating Utilities include: (a)Are participants willing to accommodate these concerns?and (b)To cure the substantial defects in the Agreement,is there any viable alternative to AEA giving notice of termination? AEA looks forward to MEA's continued participation to help address problems and concernsrelatedtotheAlaskaIntertie. Signature fren MillerExecutive Director RWM:-bifH:\AEA Projecis\Alaska Intertie Projeci\Correspondence\WalkerMEAQS-001.doc Cc.AEA Board 1OC General Managers IOC Members Dryden &LaRue 'One additional comment,AEA does not understand MEA's assertion on page 5 of your letter that "[uJnder Section 10.3.4 of the Agreement,an intertie construction project. cannot be undertaken absent unanimous consent of all parties.”That Section 10.3.4 appears to establish one mechanism for establishing the the scope of operations and to fixed cost component for the operating budget.Absent unanimous consensus, however,Section 10.3.5 appears to provide an alternative mechanism. SNOW LOAD MONITORING PROCEDURE The Snow Load Monitoring System (SLMS)operates continuously for the purpose of advising the Southern Controller of weather conditions that may cause snow to load on the conductors of the Alaskan Intertie.This condition creates the possibility that conductors will unload unevenly which may then lead to conductor unbalance that possibly may then lead to conductor clearance problems.A Patrol Contractor will be retained as part of the Snow Load Monitoring Procedure. The computer system is supplemented by a Patrol Contractor who performs line patrols atthedirectionoftheSouthemControllerorafteranysnowfallofmorethat2”over 24 hours measured at the Susitna High School or the Talkeetna Airport.The Patrol Contractor will check and report to the Southern Controller by e-mail daily. There is a definitive sequence of events that must occur in order to create clearance problems along the Alaskan Intertie.As determined by analysis of previous events,the weight on the insulator string must increase by an average minimum of 1407 Ibs (over the bare conductor weight)of snow must first accumulate on the conductors in 4 number of spans to create the possibility for clearance problems which will trigger an alarm on the SLMS.Then the snow must unload from a number of spans but not from all the spans. _This creates a situation that may or may not cause'a ground clearance problem. If the SLMS indicates the Intertie has a load cell in alarm the Southern Controller will monitor the weather stations at Douglas and Stevens Subs (when its available)every 2 hours and continue to monitor the tower which is in alarm.The Patrol Contractor will be . called out to patrol the line and determine what is occurring and if the line needs to be cleared by the Southern Maintainer. If the Patrol Contractor can not initiate a patrol at first light as a result of inclement weather and the snow continues to load the conductor spans and one or more load cells are in alarm the Southern Controller shall initiate an Ariel patrol.If conditions are such that this cannot be done,the Southern Controller shall advise all Intertie participants of the conditions and prepare to de-energize the Intertie. Approved by the IOC December 8,2004 RAE A Matanuska ElectricSynergyWorks.Association,Inc. PO.Box 2929 Palmer,Alaska 99645-2929 Telephone:(907)745-3231 Fax:(907)761-9368 July 25,2005 Ronald W.Miller Executive Director Alaska Energy Authority 813 West Northern Lights Boulevard Anchorage,Alaska 99503 Dear Mr.Miller: |have reviewed the July 6,2005 letter to you regarding the Alaska Intertie (Intertie)from Chugach Electric Association,Inc.(Chugach),the Municipality of Anchorage d/b/a.Municipal Light and Power (ML&P),and Golden Valley Electric Association,Inc.(GVEA), and attended the July 22,2005 workshop held at their request.|am writing to express MEA's disagreement with several statements made by these utilities.As maintenance contractor,owner of one segment of the Intertie,and ultimate recipient of firm power transmitted on that line,MEA is at least as interested in the reliable operation of the Intertie as Chugach,ML&P or GVEA,and obviously more interested in the safe operation of this line,especially where it goes through our service territory and clearance problems are known to exist. In their July 6 letter,the three utilities emphasize that the Intertie Operating Committee (1OC)has kept down operating costs.However,they fail to acknowledge their consistent refusal to insist that the known safety problems related to excessive line sag during certain snow loading conditions be corrected,when prudent utility practice and publicsafetyconsiderationsrequiressuchaction. The July 22,2005 suggestion by ML&P's General Manager that we solve this problem by fencing off the Intertie corridor shows the lack of serious consideration that this safety issue has received.An easement holder simply cannot fence off an easement to prevent use of the surface estate by the owner of that estate.Some of the Intertie crosses private lands,and there would undoubtedly be significant costs involved with purchasing fee title to those lands before a fence could be built.Much of the Intertiecrossespubliclands,and-there would certainly have to be a significant public process before this fencing option couid be approved. This failure to seriously consider public safety was also evident at the June 9,2005 iOC meeting held at AEA's office,where it was announced by Mr.Henri Dale (GVEA)that the firm of Dryden &LaRue had been instructed to cease work on designing the inset towers.This action was taken despite Mr.LaRue's previous finding that these inset towers were the only certain cure for the unbalanced snow loading problem.Under RonaldW.Miller July 25,2005 Page 2 Section 9.1.2 of the Alaska Intertie Agreement,and the protocols adopted by the 1OC pursuant to that Section,an action of this magnitude should have been placed on a meeting agenda,giving Participants advance notice it would be discussed.MEA is aware of no evidence that the decision to abandon this public safety project was properlyadoptedinaccordancewiththerequirementsoftheAlaskaIntertieAgreement.'It was simply swept under the rug as unimportant. It has long been known to AEA and all members of the IOC that the Alaska Intertie is designed in such a way that unbalanced snow loading on Intertie conductors results in excessive sagging that brings the line down to levels where contact with persons and equipment under the line is a reasonably foreseeable hazard.From the decision inStatev.Sanders?it is apparent that State ownership of the Alaska Intertie does not shield AEA from liability in the event a person is injured as a result of this known hazard. AEA can be held liable for such injury because Section 7.4.2 of the Alaska Intertie Agreement gives AEA authority to make the changes required to protect the public from this hazard.Under Section 18.1 of the Alaska Intertie Agreement,AEA has agreed to indemnify the other Participants from all claims arising from AEA's acts and omissions. AEG&T has repeatedly requested implementation of the inset tower cure for the unbalanced snow loading design problem.The failure of AEA under the current Agreement to provide any mechanism for timely construction of this necessary safety upgrade cannot be blamed on a tack of knowledge.It is unclear whether adequate disclosure of this unbalanced snow loading issue has been made to the IOC's insurance carrier,and whether a failure to adequately disclose such information could result in joss of coverage in the event of a tragic accident. Now that the inset tower project has been abandoned,one can only conclude that AEA and a majority on the IOC are willing to risk public safety by continuing reliance on thecurrent"load cells and inclinometers”.2 MEA does not believe that this decision is consistent with prudent utility practice.There is one load cell/inclinometer installation per span located approximately every ten towers through the area where potential snow 'loading problems have been identified.These devices are on alternating phases so that 'At the July 21,2005 IOC meeting,Mr.Dale acknowledged that there was no formal vote taken on this issue.Mr.Dale indicated that Dryden &LaRue had been informally instructed that other work within the scope of their contract with AEA was of higher priority than the inset tower design.This instruction effectively precluded Dryden &LaRue from being able to continue work on the inset tower design due tofundinglimitationsinthecontract.2944 P.2d 453 (Alaska,1997)- 3 The segment of the Alaska Intertie between MEA's Douglas Substation and the Intertie Midpoint,where unbalanced snow loading has resultedin clearance problems,was designed and constructed for operation at 345,000 voits.In this segment,each of the three phases consists of two individual conductors bundled together in a manner that allows more snow andice to accumulate on the conductors than would normally occur if just one conductor were used.The IOC previously authorized installation of load cells, inclinometers,and related communications equipment on individual phases at certain towers.The purpose of these devices is to measure the sag and line clearance,and to communicate this information to ML&P dispatch.It was anticipated that when ML&P dispatch received an alarm indicating that line loads or sag -certain designated levels;dispatch could presume ground clearance was inadequate and would de-energize the line.So far,to MEA's knowledge,these devices have never resulted in the Intertie being de-energized. 'Ronald W.Miller July 25,2005 Page 3 any given phase is only monitored every thirty towers (or roughly once every seven miles).This is clearly inadequate coverage given the variations in local conditions that can be found along the Alaska Intertie in the affected area.Further,these devices have never been calibrated to observed ground clearances during actual snow loading conditions.MEA has no confidence that these devices provide any information relevant to the identification and remediation of ground clearance problems.during periods of differential snow loading. As owner of a transmission line energized at 138,000 volts,AEA has a legal obligation to isolate that line,either through insulation or through distance,from persons who couldcomeintocontactwithit.The Alaska Supreme Court has clearly followed the common law adopted in other states in imposing this duty on the owners of lines carrying electricenergy.The Alaska Supreme Court has also held that members of the public are notpresumedtoknowthelevelofdangerrepresentedbyanelectricline.©This isparticularlyimportantinthecaseofalineenergizedat138,000 volts where a person does not have to actually touch the line in order to be seriously injured or killed by anelectricarc.” Under common law,it is generally held that:"Where the circumstances are such that - the probability of danger to persons having a right to be near an electrical line is reasonably foreseeable,power companies have often been held liable for injury or death tesulting from contact between the powerline and a movable.machine.Powercompaniesmustanticipateandguardagainsteventswhichmayreasonablybeexpectedtooccur,and the failure to do so is negligence.”-It has also been held that with regard to electric lines:"When human life is at stake,the rule of due care and diligence requires everything that gives reasonable promise of its preservation to be done,regardless of difficulties or expense.”” It cannot be disputed that the general public uses the Alaska Intertie corridor and surrounding lands for recreational purposes in the winter when snow is on the ground and-on the lines.Nor can it be disputed that the public has the legal right to occupy and use these public lands in this manner.Based upon presentations by Mr.LaRue,MEA has concluded that clearances of sixteen feet or less will periodically occur during most years at some point on the line.It is reasonably foreseeable that persons will come *See,Larman v.Kodiak Electric Association,Inc.,514 P.2 1275,1279-1280 (Alaska,1973). >In the Larman decision cited above,the Alaska Supreme Court specifically adopted the standard set forth by the California Supreme Court in Polk v.City of Los Angeles,26 Cal.2d 519,159 P.2d 931,934 (1945). 'However,the Alaska Court also cited to comparable decisions by courts in Maryland,New Mexico,and Virginia,and the cases cited to by those courts in support of its decision.The Polk decision has also been cited to as persuasive authority by courts in Arizona,Missouri,Nevada,New York,North Dakota and Utah,and in conjunction with decisions from other states on this issue it is clear that the rule stated therein is very nearly a national standard.°See,Ferriss v.Chugach Electric Association,Inc.,557 P.24 763,769 (Alaska,1976)7 In the case Mansfield v.Union 76 Division of Union Oil Co.of California,532 F.2d 446,448 (5"Cir., 1976)the federal court accepted as correct a formula that would tend to show that an arc from a line energized at 138,000 volts would be sufficient to kill a person at a distance of nearly four feet from the line..8 Tiede v.Loup Power District,411 N.W.2d 312,317 (Neb.,1987)*Ashby v.Philadelphia Electric Co.,195 A.887,889 (Pa.,1936) Ronald W.Miller July 25,2005 Page 4 dangerously close to the Intertie conductors when the combination of excessive conductor sag and deep snow cover reduce clearance to sixteen feet or less. AEA has a legal obligation to cure this problem.The risk of injury or death to members of the general public is reasonably foreseeable.Abandonment of the only cure found certain by Mr.LaRue would make liability clear in the event of a tragic accident. The IOC determined on December 8,2004 that inspection of the Intertie for clearance problems would occur whenever more than two inches of snow accumulation during a 24-hour period was reported at Susitna Valley High School or the Talkeetna Airport.The IOC further decided that the line was to be de-energized if such inspection could not be conducted at first light of the day following the over two inch snow accumulation and it was continuing to snow.This was determined by the IOC to be a prudent measure to mitigate the risk of harm to the public caused by the differential snow loading problem ontheIntertie.'°This would reduce the risk of electrocution,but would have no affect on the risk of blunt trauma types of injury from collision with the de-energized line. Unfortunately,based on the record from the 2004-2005 winter,"*the Intertie operator has failed to consistently implement the December 8,2004 protocol.For example,the only patrol effort accomplished in April 2005 was.a partial patrol of the affected area performed on April 20,2005.According to the snow fall records,more than two inches of snow fell at Susitna Valley High School on April 16,on April 17,and again on April 18 when accumulated snow levels hit a seasonal high of 52 inches.By April 20,2005 when the partial patrol was accomplished,almost 10 inches of this accumulated snow had already melted and this untimely patrol could not possibly have determined if the publichadbeenatrisk., Under the IOC's protocol,the Intertie should have been de-energized from April 17 through April 20,but that did not happen.The snow records show that for the winter of: 2004-2005,after December 8,2004,there were at least 12 days in which over two inches of snow fell at Susitna Valley High School.The IOC's contractor only performedfivepartialpatrolsandfourcompletepatrolsduringthistimeperiod.'This blatant disregard of the most basic,and predetermined,preventative action makes the risk ofpunitivedamagesintheeventsomebodyisinjuredasubstantialpossibility. The failure to perform these inspections by the IOC does not relieve AEA from its obligations to protect the public from accidental contact with this line energized at 138,000 volts,given the fact that AEA is aware that the IOC is not enforcing its own ©Owners of electric lines have a legal duty to inspect those lines to ensure that insulation through isolationismaintained.See e.g.,Fleniken,I vy.Entergy Corp.,780 So.2d 1175,1186 (La.App.,2001).."'According to the records posted at http:/ambes.org/DataPlotter.htm there were at least twelve 24-hour periods in which more than two inches of snow fell at Susitna Valley High School between December 8, 2004 and April 19,2005,with additional snow fall the next day."2 One of the four complete patrols was completed on March 1,2005.Susitna Valley High School had reported no new snow accumulation for over a week as of that date,and thus presumably that patrol was .- triggered by conditions at Talkeetna Airport.Effectively,only three complete patrols appear to have been performed in response to the twelve triggering events at Susitna Valley High School. Ronald W.Miller July 25,2005 Page 5 policy decisions.Even if the December 8,2004 protocol were enforced,de-energization does not reduce the risk of blunt force trauma.The only comprehensive solution requires the use of inset towers. Under Section 10.3.4 of the Agreement,an Intertie construction project cannot be undertaken absent unanimous consent of all parties.As was acknowledged at the July 22 meeting,the current Intertie Agreement includes no mechanism for funding major maintenance or upgrade projects.Given the inequitable allocation of costs under the Agreement,an example of which is discussed below,it is unlikely that unanimous consent for any significant construction project will be achievable unless the cost allocation methodology is significantly modified.Such modification would also require unanimous consent under Article 26 of the Agreement.Contrary to the assertions of Mr.Ron Saxton,attorney for some of the Participants,'*at the July 22,2005 meeting,this is not a minor and non-controversial matter that can be easily remedied with a minor modification to the Agreement.In the absence of provisions for funding capital improvements and major construction projects,it is clear that the Intertie Agreement will not function over the long term. A budget proposal was submitted to the IOC for the first time on July 13,2005 for the 2006 fiscal year that began July 1,2005.The functional inadequacy of the Alaska Intertie Agreement is readily apparent from the untimely submittal of this proposal. Section 8.1.3 of the Agreement states in relevant part that: The preliminary Intertie budget shall be provided to the Participants 13 months before the first day of the budget fiscal year for their review and comment.Written comments of the Participants shall be submitted toAPAbyJuly15"of the year preceding the budget fiscal year. The preliminary budget first presented on July 13,2005 could not,under Section 8.1.3 of the Agreement,be adopted for the fiscal year that began two weeks prior to that date. Under this contract,it could not even be adopted for the fiscal year that will begin on July 1,2006.As noted by AEA Board Chair Mike Barry on June 22,2005,these budgetary provisions of the Alaska Intertie Agreement are not being followed by the Participants.Under the Agreement the Intertie will be operated during the next two years without anapprovedbudgetformajorconstructionactivities." The budget proposed on July 13,2005 appeared to assume that AEA would fund the proposed fiscal year 2006 construction projects and recover its funds through wheeling charges.This effectively requires AIDEA to provide an interest free loan to the Intertie, since there has been no notice of debt encumbrance as required by Section 2.2.3 of the Intertie Agreement,and there is no provision in the Agreement allowing AEA to charge 3 Mr.Saxton does not represent MEA's interests in any matters.'4 At the July 21,2005 IOC meeting,there was substantial question raised about the need for upgrading the SVC infrastructure,and some of the tower repair work initially included in the July 13 budget proposal no longer appears necessary.Even if these current issues are resolved without construction,the need for longer term capital project study,planning,and funding for the Intertie is clearly evident,and not provided for under the Intertie Agreement.. Ronald W.Miller July 25,2005 Page 6 Participants interest on AEA funds expended on the Intertie.As also noted by Mr.Barry, AEA does not have a source of capital available to fund major Intertie maintenance and upgrade projects,and thus these projects will never get funded under the current Agreement absent unanimous agreement among the Participants. MEA believes that during the 48 month period before AEA can impose new terms for using the Intertie,public safety concerns should outweigh fiscal concerns.AEA must, pursuant to Section 10.2.1 of the Agreement and the policies adopted by the 1OC on December 8,2004,require that the Intertie be de-energized whenever more than two inches of new snow is reported at Talkeetna Airport or Susitna Valley High School,it is continuing to snow in those areas,and an inspection patrol is not initiated at first light following the more than two-inch accumulation of new snow.The Intertie must then remain de-energized until such time as a thorough patrol of the line for ground clearance inadequacies has been initiated.As you know we have also made an effort to inform the public of the risk of harm from this line.MEA has done what it can to protect the public. Now it is AEA's turn. MEA believes that termination of this Agreement is necessary to start the process of |eliminating a known threat to public safety and to ensure long-term Intertie reliability:. Under AS 44.83.090,any new.agreement for use of the Intertie will necessarily have toaddressthesefundingissues. "Accordingly,MEA recommends that AEA immediately.give the 48 month notice of termination under Section 2.2.3 of the Agreement. The 1OC has failed to adequately deal with these significant public safety issues,and apparently has no interest in timely dealing with them.It is time to present these issues to AEA's Board of Directors with a recommendation to terminate the Alaska Intertie Agreement,so that these public safety issues can finally receive the meaningful attention and resolution they deserve.MEA believes that immediate termination of thecurrentAgreementistheonlypathtowardscreationofasafeIntertie. Kalbe James L.Walker Senior Counsel Sincerely, Cc:Alaska Energy Authority Directors C:\Documents and Settings\wanval_!.MATANUSKA\My Documents\ADMIN\LegaliLtrs\Alaska Energy Authority\Miller re load celis.doc Alaska industrial Development and Export Authority Alaska Energy Authority August 17,2005 Mr.Bradley P.Janorschke General Manager Homer Electric Association,Inc. 3977 Lake Street Homer,Alaska 99603 Fax:(907)235-3323 Mr.Dave Calvert Utility Manager City of Seward P.O.Box 167 Seward,Alaska 99664 Fax:(907)224-4085 Mr.Jim Posey General ManagerAnchorageMunicipal Light &Power 1200 East First Avenue Anchorage,Alaska 99501 Fax:(907)263-5204 RE:July 21,2005 1|OC Meeting Transcript Mr.Joe Griffith Chief Executive Officer Chugach Electric Association,Inc. P.O.Box 196300 Anchorage,Alaska 99519-6300 Fax:(907)562-0027 Mr.Steve Haagenson President &Chief Executive Officer Golden Valley Electric Association,Inc. P.O.Box 71249Fairbanks,Alaska 99707-1249 Fax:(907)458-5951 Mr.Wayne Carmony General Manager Matanuska Electric Association,Inc.and Alaska Electric Generation and Transmission Cooperative,Inc. P.O.Box 2929 Palmer,Alaska 99645 Fax:(907)761-9349 July 22,2005 Alaska Intertie Work Session TranscriptAlaskaIntertieRepairsFinancingScenarios Gentlemen: Enclosed for your information: 1.Transcript of the July 21,2005 1OC meeting at Matanuska Electric Association; 2.Transcript of the July 22,2005 Alaska Intertie Work Session;and3.Alaska Intertie Repairs Financing Scenarios. The recording of the |OC meeting on July 21,2005 was not of the best quality so there are some textual gaps in the transcript,but the substance of the discussions was recorded.The Intertie Repair Financing Scenarios include bond and loan financing of $3,$5,and $7 million over periods of 7,15 and 20 years.A summary table of these scenarios is provided as a cover sheet for the detailed analyses.The table also lists the assumptions for the loan and Bond 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 ANT /VEQ_ANNN e FAY ANT 194A ANAA @ Tall Exan (AL ACWA CARIDVY COE FINN OFDA acaninainiolan now August 17,2005 Page 2 analyses.Please call Bernie Smith at 269-4643 if you have questions regarding the transcripts and Valorie Walker at 269-3011 for questions on the financing scenarios. Ron Mille xecutive Director RWM:bjmf H:\AEA Projects\Alaska Intertie Project\Correspondence\GM2005-02.doc cc:Valorie Walker,Deputy Director-Finance Bernie Smith,Project Manager Transcript of the Alaska Intertie Work Session July 22,2005 @ 10:00 a.m. Alaska Industrial Development and Export Authority Boardroom Anchorage,Alaska Attendees: Mike Barry,Chairman,AIDEA and AEA Mark Davis,DCCED Ron Miller,Executive Director AIDEA and AEA Brenda Fuglestad,AIDEA and AEA Karl Reiche,AIDEA and AEA Bernie Smith,AIDEA and AEA Brian Bjorkquist,Department of Law Joe Griffith,Chugach Electric Association Steve Haagenson,Golden Valley electric Association Jim Posey,Municipal Light &Power Doug Hall,Municipal Light &Power Ron Saxton,Ater Wynne Don Zoerb,Matanuska Electric Association oe Jim Walker,Matanuska Electric Association Frank Bettine,Matanuska Electric Association Rick Schikora,Golden Valley Electric Association Brad Evans,Chugach Electric Association Tim Barnum,City of Seward Rick Eckert,Homer Electric Association Convened:10:05 a.m. "RON MILLER:We're going to keep a record of this meeting for our Board of Directors.For 'those who don't know Mark Davis has joined us and he is the designee from the Department of Commerce,Community and Economic Development.He is Director of Banking and Securities. Three of the General Managers from the utilities requested a work session prior to the AIDEA and AEA board meeting,after we sent our invitation.The topics for this work session are those set out in that June 24,2005 invitation,which are issues related to the Intertie Operating Agreement;no R&R fund or capital fund to finance major maintenance or upgrades;deferment of needed repairs;lack of compliance with the Agreement's terms and conditions;and we also indicated that we are willing to discuss any concerns or other issues the railbelt utilities wanted to raise.As |said,the General Managers requested this meeting so we will open the floor for the discussion of issues,concerns,problems,and solutions. JOE GRIFFITH:|guess we'd like to hear what are your issues that you reference in the letter. RON MILLER:Starting out,no R&R fund or other capital fund to finance major maintenance or upgrades,we can start with that. JOE GRIFFITH:Okay,what else? Alaska Intertie Meeting .Page 2 of 21 June 22,2005 , Suly, RON MILLER:Deferment of needed repairs.We can start with those two and then move on. RICK SCHIKORA:What else do you have on your list? RON MILLER:Well... STEVE HAAGENSON:He said lack of compliance or something. RICK SCHIKORA:Let's get the list all out on the table. RON MILLER:The Agreement's terms and conditions.We have been talking about needed repairs for nearly three years and we have not seen any movement to make those repairs or fund those repairs and our Board is pretty concerned about being stuck with liability for a line that is in serious need of upgrades and repairs.What we have heard through the lOC and other sources is that the railbelt utilities cannot understand why we are raising these issues and these seem to be staff issues but |asked our Chairman and Mr.Davis here so the utilities could hear first hand from Board Members that this is a Board issue,it is not a staff issue.That is one of the reasons we had it on the agenda for the Board Meeting for next Monday. SOEGRIFFITH:But there is no list,no9 agenda for the board meeting?At least we haven'tseenoneifthereis. BRENDA FUGLESTAD:There's an agenda for the AEA meeting.Item 7A has Alaska Intertie, there is no content for the board packet at this time but it is on the agenda. JOE GRIFFITH:Good. RON SAXTON:I'm going to ask Brian,|guess.I'm not sure |understood that we didn't have a plan.|thought we had met a few times with AEA staff to talk about ways of financing repairs and the utilities said that they were agreeable to doing that once we figured out the scope of them and the proper way of financing.I'm not clear why that isn't on track.The IOC was identifying needed repairs and we already agreed and met and talked about working AEA's financing team to move forward and finance that. BRIAN BJORKQUIST:The last |heard with regard to that was that because of moving away from the inset tower fix to the snow load problem there wasn't enough projects to move forward on the financing and so it has falling back to where it was originally.At the IOC meeting yesterday,it was pretty clear that there was no plan.There were conversations about not even funding,even partially funding moving,forward on the repairs because the Alaska Intertie Agreement just doesn't provide a good mechanism for doing so.That there is conversation about not even starting the SVC repairs because to try to finance it in any fiscal year creates too much of a burden on the wheeling rate and therefore it is not doable.There has been some conversation in that regard but again,this is getting back to the Board,there has been no realprogress.Thatis what we heard from the Board and you can hear it from them also,thatcontinuingtotalkaboutpossibilitiesoftheutilitiespossiblydoingsomethingtodofundingwhen -at the IOC level anyway,the only thing that I heard yesterday and that |have been hearing from some time is that there is really no mechanism under this agreement to get things done that need to be done.|think that is the real concern.The other thing is that,and it came up at the |OC meeting yesterday,that the real solution to the problems that we have under the Agreement is that we need an R&R fund.You need a mechanism for funding these things and Alaska Intertie Meeting Page 3 of 21 June 22,2005eyhy : we're not just talking about what's on the table right now because that is just the immediate problem.But we have a defect in the Agreement;there isn't a mechanism for the next major repair that is going to be necessary and the one after that.We have a significant defect in theAgreement;it just doesn't work for prudent management.|think that is also the perception,and we hearing that from the utilities also.And so that's what |think it is.There's a problem with the Agreement,let's get together and let's fix it. JIM POSEY:Question for you Brian,and maybe for the Board or staff.What is the minimum amount that you would consider bondable in order to have a fund to do these capital improvements?Does it have to be over $5-$6 million dollars or can it be as little as $3.5 to $5 million? BRIAN BJORKQUIST:|think that's the question that is on your shoulders. JIM POSEY:No,the question is back to you as AEA and AIDEA.What is that amount for bonding and paying it off over a series of years?We're talking about making capital improvements not R&R. BRIAN BJORKQUIST:That's a question that goes right back to the utilities because you are the ones that need to be comfortable with the financing package for any capital improvements. JIM POSEY:Let's not turn it into a catch 22.Is there a minimum amount that you guys could bond and put it into 15 years for us to pay off? RON SAXTON:It would have been easier to talk about this more casually.We had already agreed,the utilities collectively,at least most of them,that some reasonable amount of money to make repairs was appropriate and that some side agreement to address that was appropriate.And when we were talking about that the assumption was that it would be an amount large enough that it made sense for AEA to sell some bonds and that we would agree in a side agreement to be responsible for the repayment of that.So none of that sounded contentious or controversial and |thought that we had agreed to that already.The only thing that changed was that it turns out that some of the repairs maybe cost less then people had thought so you get the question of has it gone down enough that bonding doesn't make sense anymore and some other method of finding the money makes sense.That's just sort of out - ask bond people... BRIAN BJORKQUIST:And all I'm trying to articulate Jim,is that |think that it is the question on your shoulders,when do you have enough debt for bond financing to make sense?And that's the question for the borrower and the utilities are basically the borrower. STEVE HAAGENSON:But,you'll be issuing the bonds. RON SAXTON:The question in fact is just do we want to have you sell bonds for us.|can get the answer to that,we can figure that out. STEVE HAAGENSON:We can't sell bonds,we don't own the asset. RON SAXTON:No,we want them.Is it cost effective at $5 million or $6 million or $20 million... Alaska Intertie Meeting Page 4 of 21 June 22,2005 , Soy BRIAN BJORKQUIST:Let me be clear here,I'm not running the show here and |think you need to hear from the board members also. JIM POSEY:|did address the question to everyone on this side of the table.What is that amount or is there a minimal amount that you would consider as part of a financing package, 10-15 year bond for up to $6 million or $12 million dollars depending on what we voted on,theIOCvotedonyesterday. BRIAN BJORKQUIST:And there were just several questions with my name as the premise,and |just want to makeit clear that I'm not running the show here. JIM POSEY:Okay. STEVE HAAGENSON:Just a point of clarification too.Brian was talking earlier about the SVC repairs and it would have a big burden on the wheeling costs.That was expensing that season one year,not putting in long term financing.Just so you understand that it won't kill the intertie if you have a long term package,but it will severely limit the intertie's wheeling rate if you try toexpensealloftheSVCrepairsinoneyear. RON SAXTON:|don't think thereis disagreement that some of these repairs need to be madeandIdon't think anybody arguing about who has to pay for them: MIKE BARRY:Is there disagreement that it would be sensible to have an R&R fund? RON SAXTON:We have to talk about that.Whether you put the R&R fund in front and pay for it or whether you just pay for the repairs and have a plan for paying for them as they arise and spreading it out.|think either one of these mechanisms is reasonable. MIKE BARRY:From my experience as.a lender,it is much easier to finance projects that have an R&R fund and have some sense of an operating history that works.And when our board was brought into.place in early 2003 we had orientation meetings,most of us didn't know anything at all about this and we were presented,right in this room here,with a laundry list of things related to AEA and the intertie and the Intertie.Operating Committee,where the Intertie Operating Committee was presented in October of 2002 with a detailed list and agreed,the Intertie Operating Committee,their Technical Subcommittee agreed that these things needed to be done.And now we are sitting here 2 %years later,after our orientation and nothing,not a single thing on that fist has been done.It does not seem to be something that if we own the asset we should allow to continue.If you guys that are responsible for it can't figure out how to get it done then maybe the Agreement doesn't work.That's what the meeting is about.If the Agreement doesn't work,we have the authority to terminate the Agreement with several yearsnotice.It's not like it's going to close the line down tomorrow,but its --how many years should we sit around and wait,until something happens.Do you guys want to go another 10 years or actually until the line itself falls down? JOE GRIFFITH:If it's prudent we should do that,and that's the question that is before us,Mike. MIKE BARRY:It's prudent that we should wait another 10 years? JOE GRIFFITH:|didn't say that. Alaska Intertie Meeting ;Page 5 of 21 dune 22,2005 ° ; "De i MIKE BARRY:That was the question |asked. JOE GRIFFITH:Your question was a hip shot question that said would you want to wait another a 10 years,of course not,we have fixed it in the past and we will fix it in the future, that's where we stand on it. STEVE HAAGENSON:There is a bit of history here also.Every repair that has been done to date on that intertie has been paid for by the utilities already.It's not like we're ignoring maintenance,repair... MIKE BARRY:Nobody is arguing that the utilities aren't responsible to pay it and have the responsibility to pay it and certainly have the capability to pay it.In answer to Jim's question, once the utilities say,we're going to spend X,whether it's $1 million dollars or $20 million dollars then it becomes a financing problem.What's the most economical way to achieve the financing?Nobody's -at your meeting yesterday every time there was a vote to spend money it was voted down. STEVE HAAGENSON:|heard they actually approved the entire budget yesterday. JOE GRIFFITH:They approved the budget. MIKE BARRY:There's no SVC in the budget.Right.Okay.Was there any stanchion repairs? One,out of the three that were identified as defective -one of them is going to get repaired. RON SAXTON:But it's within the last several months that we had meetings in this buildings to talk about,with the utilities acknowledging,once we determine the scope of repairs we'll find a financing mechanism and move forward.We waited for the IOC to determine what the reasonable scope of those repairs was -AEA hired consultants,debated that at different times -they seem to have come to some conclusion so |agree it's time to move forward but it has only been a matter of a couple months since those numbers were figured out so... MIKE BARRY:It's been a matter of nearly three years since the problem was identified and accepted by the IOC,as these things need to be done.It's been nearly three years.And some of them go back longer then that,I'm not here to tell you that some of them don't go back six or seven years,but all of them in the group go back at least to October of 2002.There is a point that that kind of shilly-shally is not acceptable.And there is a point where it becomes prima facie evidence that the agreement doesn't work.The question is whether we are at that point or not. JOE GRIFFITH:Well,apparently you think we are because of the letter you sent out that said you were going to execute the termination arrangement. MIKE BARRY:That's not what the letter said,we're going to consider the termination of... JOE GRIFFITH:Sorta says that. MIKE BARRY:Do you have the letter there Ron? RON MILLER:Yes. Alaska Intertie Meeting Page 6 of 21 -June 22,2005soly MIKE BARRY:Please read into the record what it says as there seems to be some confusion about what it says. RON MILLER:" ...,if no realistic solution is forthcoming,the AEA Board may be compelled to exercise its option to terminate the Agreement under Section 2.2.2,which will enable all thepartiestonegotiateanewAlaskaIntertieAgreement.'MIKE BARRY:We're going to talk about it at the Board meeting but the directors would like to hear from the utilities,what is the impact of the termination of the agreement.There is four years notice on it,that would seem to give people ample time to negotiate a set of documents that would really work.If an R&R fund is necessary then put it in there,in the Agreement. BRIAN BJORKQUIST:And as a backdrop to that -the conventional wisdom I've heard for as long as |have been engaged is that you can't amend the Intertie Agreement.That came outveryloudlyyesterdayattheIOCmeetingalso.So,if there is a defect in the Agreement and we can't fix it,this is a way to require a fixing -to move forward and to fix the Agreement. STEVE HAAGENSON:|think there are amendments to the Agreement already. |RON SAXTON :Why is it that it can't be amended? RICK SCHIKORA:Why can't you amend it? BRIAN BJORKQUIST:That's the conventional wisdom I've heard and that's exactly... RON SAXTON:From who? | BRIAN BJORKQUIST:Well,from the utilities.You can't... JOE GRIFFITH:There have been several amendmentsto it. BRIAN BJORKQUIST:You can't reopen... RON SAXTON:Not from the lawyers or management you haven't heard that. BRIAN BJORKQUIST:You can't reopen the Agreement because reopening the Agreement will cause too much havoc.Basically... STEVE HAAGENSON:But that's exactly what you're recommending after you terminate the Intertie Agreement -starting over from scratch.No utility wants to start from scratch.We should start from what we got that works and make it work for us better with an amendment.| don't think anybody in the room has a problem with that. BRIAN BJORKQUIST:That would be a aood solution to move forward.Let's move forwardNeetWattleWSWeSeewithamendingtheAgreementtofixthedefectsthatthereareinitsothatwedon't have the situation where the AEA Board is in a position where it feels it needs to kick us to get going. And |would just throw out,I've been listening to the Board and you may hear them yelling at you,|hear them yelling at AEA staff too that moving forward as we have with no progress is unacceptable.We need to fix this. Alaska Intertie Meeting Page 7 of 21 June 22,2005 . Soba : RON MILLER:As Brian says,we have been hearing from the IOC that you can't -that it would be impossible to amend the Agreement.And,if what we are hearing from the General Managers is different,that there is interest in moving forward with a plan to amend the agreement it sounds like there is a lack of alignment between General Managers and the !OC. RON SAXTON:The IOC has always been structured as the operators.They are not management,they don't have legal representation,they're just a group of operators there to talk about the right way to operate it efficiently.So,|think a discussion about amendment the Agreement needs to happen at the manager level. JOE GRIFFITH:|agree. STEVE HAAGENSON:|thought we were working towards that solution... JOE GRIFFITH:So did I. STEVE HAAGENSON:...we have a snow load issue out there and we have been studying that quite severely for the last couple years,longer than that probably.We were working on a scope of work to see what was prudent utility practice.Is it wise to upgrade a plant like that,is it not wise -AIDEA has a scope of work on the street right now... BRIAN BJORKQUIST:AEA STEVE HAAGENSON:Sorry,AEA does.There are all of these things you're talking about - static bar compensators.What's the impact if one of them does go down -we need to know that -is it death?Probably not.My guess is,just to my rule of thumb engineer,says you can probably run with one of them down.So,is it the end of the world?No.So,|think we're -all we have to do is sit down and say whai's the final solution,which we haven't decided yet,like on the snow load problem,and work on ongoing maintenance.And then we have to deal with issues that were handed to us in the original design,things that are kind of -they're not stable like we thought they were going to be,they're moving around a little bit and we're fixing those too.|think we're way down the path and I'm kind of surprised that you're saying "oh my god, this isn't working,”|don't think it's broken. MIKE BARRY:Maybe the managers should go to the IOC meetings or at least read the minutes of the meetings. STEVE HAAGENSON:|talk to the guys all the time -our guy. JOE GRIFFITH:We gota report already. MIKE BARRY:And they tell you it's working? JIM POSEY:They also told me they came up -voted on a solution and a number that we can go forward with,so I'm ready to go. MIKE BARRY:So there's,help me here Bernie,|think three stanchions that are precarious? BERNIE SMITH:That's what the (indiscernible)and they are fixing one. Alaska Intertie Meeting.4 Page 8 of 21 wJune 22,2005 .. Svly MIKE BARRY:And one of them gets repaired.How did someone decide that this one gets repaired and the other two don't? DOUG HALL:We're still establishing the data.In fact,our consultant has said that we may in fact have on the Curry Ridge,where we have two towers,one of which hasn't moved in 15 years it appears..The other one we have to wait until everything is dry up there so we can actually get in there and see is the soil settled exactly or if has been movement.That's the one we're thinking based upon what our results are telling us that we're going to have to do something on.Golden Valley and the Moody slide area has been doing for the last 18 months - different studies -we have had consultants doing different studies that tell us now.Initially,we 'thought we were losing the foundation,but come to find out we are not losing the foundation at all and that,in fact,the Moody slide area appears that the hill is settling around the foundation and they may just be able to grout it and get away with it.So,this is all information that over time has to accumulate and that is exactly what we have been doing on that.The same thing in | relation to the SVC.The SVC replacement project started out as their parts inventory.We needed spare parts for the electronic control boards of the units.We had a consultant go in, study,get a list of everything in the three individual units because they were all manufacturedslightlydifferentlyonthemotherboard.We were given a complete inventory of it and then find out if any manufacturer still supports this equipment which we found that no they don't,in fact we have to pull the units out of service,send them to China to be reengineered,reverse engineered and then have recreated them.So that is not prudent utility practice for 25 year old equipment we'll go ahead and proceed with the specification that we can replace these units. And that whole process has been going on since the inventory actually occurred in early 2003. So we have been moving along on that and we just about have a document ready to go on the street now to bid for the three units. MIKE BARRY:Maybe the Board needs to understand more about utility practices.In your own utility,if every manufacturer in the world discontinued supporting equipment and it is 25 years old and you ascertain that your spare parts inventory was depleted,how many years would you study it before you actually implemented the solution? STEVE HAAGENSON:We deal with that every day. JOE GRIFFITH:Every day. STEVE HAAGENSON:You look at taking a sequential staging out of equipment -you keep old technology to pull parts off of as you need them,as you are replacing them or you can just rip _the whole thing out and do it at once.The question is what's the best approach to do it? MIKE BARRY:Would the utilities be willing to indemnify AEA from any liability that we have for letting this go on so long? STEVE HAAGENSON:|don't Know what you're talking about -letting what go on? MIKE BARRY:The studying of these issues that were brought to our attention years ago. JOE GRIFFITH:Should we not study them?Is that what you're suggesting? MIKE BARRY:All we're saying is that we don't have the control to make the repairs.You folks have the control to make the repairs. Alaska Intertie Meeting Page 9 of 21 June 22,2005 Sol 4 JOE GRIFFITH:And that's exactly where we're going. MIKE BARRY:And so we just want to get that in the record.Apparently then you're saying you have already got the liability and we don't have it.Would that be your interpretation Brian? BRIAN BJORKQUIST:That would be my interpretation of the Agreement,'but |certainly don'thearthatfromtheutilitiesastheydiscussthesematters. RON SAXTON:|don't think statements on the record is the way to resolve that.What I've heard is,what we've said is,whatever a scope of work is that the IOC agrees is appropriate,at least the three generators that sell power over the line,you told me a year ago to work with your staff and come up with a way to finance the repairs and they'd agree to an arrangement to pay for it.So,|don't see where there is a disagreement over that it is just a matter of IOC determining what are those actually repairs so we know how much money we are financing. BRIAN BJORKQUIST:Mr.Chairman,to interpret what he just said -if he's the attorney for the utilities they will take the position that AEA is liable.That's what |just heard. JOE GRIFFITH:If |might read into the record,your definition,or the |OC's -the agreement's definition of prudent utility practice."Any of the practices methods and acts which in the exercise of reasonable in light of the facts known at the time the decision was made would have been expected to accomplish the desired result at the lowest reasonable cost consistent with the reliability safety and expedition.”And other things,including but not limited practices used across the industry,is in essence what it says and |think that is exactly what the utilities are doing.But the definition is there,then the question that Jim brought up earlier is the relevant question.What size of a bond package is reasonable,and somebody ought to be able to answer that,|would think.|don't know,it's usually smarter to do bigger ones but,do we want to do it?In fact,we had this discussion several times in the last few years. MIKE BARRY:And is a bond the only way that financing could be achieved?Why wouldn't a loan work? JOE GRIFFITH:It would. MIKE BARRY:And there is certainly some amount,if it's low enough a loan would be more efficient than a bond. JOE GRIFFITH:True. STEVE HAAGENSON:That's what the definition just said,what's the lowest cost way to do it. MIKE BARRY:But it doesn't -do you want my staff to do a study for you in $100,000 increments from 0 to $10 million on what the most effective way to finance is? JOE GRIFFITH:No,that's not... MIKE BARRY:Somebody needs to give us some numbers to work with. JIM POSEY:$3 to $7 million. Alaska Intertie Meeting "-Page 10 of 21 dune 22,2005v\8 MIKE BARRY:$3 to $7? JIM POSEY:$3 to $7 million.Give use some deals on that and we'll act on them. MIKE BARRY:We can do that.We haven't had --from our perception we haven't had any movement on this.From your perception maybe,you know,this study program is the best way to do,just study it. JOE GRIFFITH:Well,we've been talking to your staff about it,Mike,it hasn't been that we've ignored it or got our heads in the sand,we are gathering the information that we need to comply with that definition #35,right there.And the question is,the one you broached,how do you finance it?Do you do it with a loan or do you do it with a bond,and |don't know the answer tothat.You guys can probably answer that overnight. MIKE BARRY:It doesn't sound to me though that you even have a project identified.If you'resayingthatwiththeSVC's -the fix hasn't been determined yet.It was presented to us back in October 2002,the fix was to go buy new ones.That was what the fix was. JOE GRIFFITH:That would be one angle of it,the other way is to put different controllers on itYouhavetodothereasonablecost..; MIKE BARRY:|guess we can study.... STEVE HAAGENSON:Or you can tear them all out and put new ones in... MIKE BARRY:We can study it until one of them actually fails and then we'd have to figure out what the solution is,|guess. JOE GRIFFITH:That is also an option,yes. MIKE BARRY:And then we can find out whether it closes the line down or not if one of them fails,we'll know for sure.|guess everything is hunky-dory.We're just moving right along at the best pace we can. JIM POSEY:So,are we going to get an answer between $3 and $7 million dollars,loan versus bonds fairly soon? MIKE BARRY:Sure. JIM POSEY:The number was $3 million something from the IOC is the possible cost?| DOUG HALL:Depending on the extent of the repairs on (indiscernible)Ridge. JIM POSEY:So,we're looking at something in that zone... MIKE BARRY:In a term of 15 years. JIM POSEY:That's probably a reasonable term,but that depends on the best financing. Alaska Intertie Meeting ,Page 11 of 21 June22,2005 " SO. RON SAXTON:And I think that 1 agree with Brian that the terms of the Agreement doesn't lend itself to the satisfactory repayment obligation,and we're prepared to work on a suitable side agreement to make sure that there is the kind of repayment obligation that needs to exist. BRIAN BJORKQUIST:And then in addition to that what we should be focusing on to make this Agreement work five years from now,ten years from now so we don't have to have a threat from the Board before everybody gets to the table to really act.You have a different perspective so be it,but if there are things in the Agreement that need to be fixed so that we don't have to get to this point the next time something needs to be done we should do that too at this point. RICK SCHIKORA:So,what items in the Agreement do you think need to be fixed at this point? BRIAN BJORKQUIST:One solution would be to create an R&R fund so that you have a funding mechanism for these types of maintenance so that they don't become deferred maintenance for years and years. RICK SCHIKORA:We've heard about that one,what's the next one? BRIAN BJORKQUIST:Well,we can talk about it. RICK SCHIKORA:You've got some issues with it,what are they?I'd like to write them down. MIKE BARRY:With the R&R fund we can't find any other intertie that doesn't have an R&R fund... RICK SCHIKORA:Well,that's fine,that's one issue... MIKE BARRY:...so when you talk.about prudent utility practices you guys can't sit there and say that the accepted prudent utility practices say there's no R&R fund.; RICK SCHIKORA:Mike,we have R&R fund on our list,why don't you tell us what the next issue is.. MIKE BARRY:Okay,number two,|think is important -you have a mechanism that essentially discourages anyone from recommending a capital improvement or a maintenance fix that costs money.Because if they recommend it,like AEA,if we recommend it,we'd have no funding mechanism,AEA has no capital at all.If we say all of your studies have shown us that you need SVC's and we go out and spend the money to buy new SVC's that's what everybody agrees to then you all decide well,we don't go along with that and you don't have to pay the money back.Or individually you opt out,isn't that right Brian? STEVE HAAGENSON:|think that's covered under the R&R fund isn't it? RON SAXTON:|think it's the same issue. JOE GRIFFITH:Same issue. MIKE BARRY:Same issue,but it's in the Agreement.That's part of the Agreement today. Alaska Intertie Meeting :Page 12 of 21 June 22,2005 sul3 JOE GRIFFITH:Part of the Agreement that we would agree to fixes and then refuse to pay for them? MIKE BARRY:Today,yeah.Individually,not collectively,but individually. BRIAN BJORKQUIST:And then there is a long list of items that simply are not followed anymore and in particular are not followed after the '93 reorganization of the Alaska EnergyAuthority.Examples include the budget,the budget process under the agreement is not being followed and the budget provides that it is supposed to be 13 months before the beginning of the fiscal year and that hasn't been done for a decade or more.There are other examples of that type of thing,just things that are no longer applicable,they are ignored by the IOC and there just still in the Agreement lingering.There was some discussion of that yesterday at thelIOCmeeting,some examples of that and those -your utility members on the IOC probablyhaveabetterhandleofthatthen|do right now.Every example of what no longeris followed. RON SAXTON:It was at the |OC meeting yesterday -what I'd like is to get the list so |can look at those and see how we can fix them.Is there a list of what those are? BRIAN BJORKQUIST:There was some discussion of many of the items.I know that John _Cooley gave some recitation;|think Henri Dale may have spoken of a few of the matters,butthebudgetistheonethat|remember having more discussion then anything else." MIKE BARRY:|think they make a transcript don't they,Bernie,of the meetings? BERNIE SMITH:Yes. MIKE BARRY:So,we'll get you the transcript then. RON SAXTON:That would be wonderful,thank you.And your sense,Brian,is that they are not being followed is related to AEA's reorganization?Or why aren't they being followed? BRIAN BJORKQUIST:This came from John Colley,the history of it is that before 1993,the legislature appropriated the budget for a fiscal year,so the budget had to be prepared 13 months in advance to give time to go to the legislature for an appropriate and then the utility payments were a reimbursement of what the state had appropriated.From 1993 forward that hasn't been followed.The legislature is not appropriating the intertie budget anymore and it is not a reimbursement,it is a pay as you go type of system. RON SAXTON:You don't have a desire to return to the old way do you? BRIAN BJORKQUIST:|don't think they're... MIKE BARRY:We just have a desire to get a set of agreements that can be complied with. RICK SCHIKORA:What you're saying is that the Agreement says you have to do the budget 13 months in advance and you want to make it three or four,or some number,but you... BRIAN BJORKQUIST:Let the IOC figure out how... Alaska Intertie Meeting | Page 13 of 21 dune 22,2005 yey)Sy MIKE BARRY:We would like it to work for the utilities.We don't really care how it works,as long as it works. RICK SCHIKORA:It works now,they're just not following 13.That's the...didn't we approve the budget yesterday. MIKE BARRY:|!don't think it really works if we're a couple weeks into the year before the budget gets approved.Do you think that works that way? RICK SCHIKORA:|don't know. MIKE BARRY:Is that the way Golden Valley does its budget?They wait -You're on a calendar year so you wait until January to approve your budget for the year? JOE GRIFFITH:Sometimes,yes. MIKE BARRY:That's not in the utility practice. JOE GRIFFITH:Yeah,it is. BRIAN BJORKQUIST:May i share that my perception is that this is a criticism coming from -- your representatives to the IOC also,that they would like to see this fixed."So what they do matches up with what's in the Agreement.|think they have some ideas how they would like to change it so it would be more useful for them also.Another criticism |heard yesterday was that the Alaska Interite Agreement is tied to the state fiscal year where as the utilities operate on a calendar fiscal year and that is just so awkward for them.That you can't do something that year because utilities can't make adjustments so just moving it so you have the same fiscal yearswouldbeanexampleofafixthatwouldbemorebeneficialtotheutilitiesbasedonwhat|heard from your representatives to the IOC yesterday. RON SAXTON:-But is the budget problem or the calendar year problem causing the State a problem or you're just alerting us that our people want to change this? BRIAN BJORKQUIST:|think it causes us some problems too because we have an Agreement that is not being complied with and that is always a problematic type of situation.It just ignored. JIM POSEY:Since 1993 it has not been followed and the wheels haven't fallen off the vehicle, so since 1993 was the reorganization of AEA,which is part of what happened and we did not change the agreement,what we've done is move forward through expenses and taken care of those things that we have to do.It doesn't seem like it's broken,you just put not applicable and move ahead and look at doing the R&R loan fund to fix the things that you have to do and then look at whatever agreement changes you have to do because the Agreement changes are probably going to be more difficult then coming up with the money to make the things that we need to do in order to make it fun efficiently now. STEVE HAAGENSON:It sounds to me like the Agreement has morphed to what the utilities want and what works for them already. BRIAN BJUORKQUIST:With the exception of the two fiscal years. Alaska Intertie Meeting 3 Page 14 of 21 June 22,2005 Sulu STEVE HAAGENSON:And except for that one that one issue where we're going to be late this year -|don't know if they are or not,but if they're late,then |guess you can spank us for that but |don't think it's broken |think it's been morphed into what really works. MIKE BARRY:It might work for you,Steve,to have an Agreement that we're not following,but it does not work for our Board to have an Agreement that nobody is following,okay.And,if you are saying that it is easy to change it,then please.change it.That's all we're asking. STEVE HAAGENSON:|think it's almost a silly point in my mind,because to have to have this message come from the !OC,apparently through staff of AEA back through the AEA Board back to the managers to tell the IOC staff that they should comply with the Agreement we have signed -it's kind of a circuitous path.It's kind of silly.|think all the guys will say is why aren't you guys complying with the Agreement?It's a short phone call. MIKE BARRY:Well,apparenily there are,as Jim said,there are reasons why the Agreement is not being complied with.And it would be better for everyone to change the Agreement so that it could automatically and routinely be complied with instead of routinely be out of compliance. And that's what we would like to do is to get it so that you can operate routinely in compliance. STEVE HAAGENSON:|don't have a problem with that.JOE GRIFFITH:And that's the genesis of your comment about lack of compliances is the difference between what we're doing and what'sin the agreement. JIM POSEY:It wasn't something that we did,it's something that the State did in reorganizingAEAthatcausedittobeoffcycle. MIKE BARRY:Nobody is trying to make a blame issue out of this,Jim,we're trying to say -you asked us what doesn't work and we don't -this is one of the items that we don't think works. Being out of compliance every day of the year. RON SAXTON:Not minimizing,but beyond the budget issue and the fiscal year issue are there others where you think that they are-routinely not following the contract? BRIAN BJORKQUIST:There certainly may be but I'm not aware of anything right now,but |! would encourage you to ask your IOC representatives.They probably have a better idea ofwhattheydon't follow exactlyin the agreement. RON SAXTON:Changing a budget cycle ought to be a pretty noncontroversial amendment and is easy to do. JIM POSEY:Yes,|agree with that. MIKE BARRY:And changing the requirement that the legislature appropriate the budget,okay. RON MILLER:We have a written document but what is accepted practice isn't reflected in this and so we have a sort of defacto amendment to the Agreement. Alaska Intertie Meeting Page 15 of 21 June 22,2005 Soy STEVE HAAGENSON:So have you tried to go to the legislature lately and get some money appropriated for AEA? BRIAN BJORKQUIST:Are you volunteering? RON SAXTON:|think it would be fortuitous on the funding for repairs and stuff,|think we canworkthatonethrough,|didn't realize it had deteriorated as much as it had and |think we already agreed to do that so we can do that.Cleaning up some language about fiscal years and budget process,|don't hear anything controversial about that,it ought to be easy to do. BRIAN BJORKQUIST:Then tied to the first one is fixing so that we will have an easier mechanism in the future. RON MILLER:Do we want to set a work plan today? RON SAXTON:If we get a list of what the issues are,you know,everybody else can do whatever they want but I'll bet Brian and |in pretty short order could put a list or at least something to talk about,a starting document.|don't view this as very hard at all and then whoever wants to play with it can play with it. BRIAN BJORKQUIST:Then the other issue would be on the financing side of the capital oe repairs that are on the table right now.And correct me if I'm wrong but what |heard was thatthedesiredcourse,for example,to do all three SVC's at the same time so you have the same model so that you can have a single set of components. DOUG HALL:Absolutely,to ensure that the SVC's,all three SVC's are compatible and then you only have to maintain one set of spare parts.We want to purchase all three at the sametime.). JIM POSEY:But not install them all. DOUG HALL:Well you can't install them all at the same time because it is a staged installation.But,yes,we would like to be ableto purchase them,make a contract for the purchase;they may not be manufactured immediately but sequentially.It's computer basically and you don't want to get the next version where they've upgraded and changed the internal parts. JOE GRIFFITH:It seems like we've addressed then the issues that you have articulated.No R&R fund,major maintenance which is sort of a piece of that.Deferred repairs also a piece of it and lack of compliance because of some anomalies that remain in the Agreement because of the 1993 action. BRIAN BJORKQUIST:And that's what |heard from John Cooley yesterday,that's factually inaccurate,so be it,but the reality is that operational procedures in reality are different than what the Agreement says. JOE GRIFFITH:We never did go back after Ramona killed off AEA and cleaned all of that up. We did not,that's true. MIKE BARRY:Bernie,do you have other things that should be added to that list? Alaska Intertie Meeting .Page 16 of 21 June 22,2005oly BERNIE SMITH:One other thing is that there is no roll over on the budget and if you had a rollover-in other words,you have to give everything back -starts back at zero -if you had a roll over it would seem like that roll over,if there was any extra,could go into the R&R fund.And by the Agreement,from what |was understood,was told that you can't do that.So that would be another thing that you might want to look at.If there is money left over after... JIM POSEY:Right back into my auditor who did the Bradley Lake deal... BERNIE SMITH:|don't know,I'm just... JIM POSEY:...we had to change... STEVE HAAGENSON:We have the same issue. JIM POSEY:...the Agreement controlled it and we can't back date the agreement but we can do something forward.It would have to be something that we agreed to... RON SAXTON:|think if we're going to have an R&R borrowing or selling some bonds is a lot cleaner because we do get into the municipal coding and there is tax problems.... BERNIE SMITH:The other thing is that the date that the actual budget -everybody else is on fiscal year December 31"this thing starts at June 30.It would see like you would want it all to be at the same time.And if that's in the Agreement then that would be something you might want to change,change it to where it meets the utilities budget line.If you're going to start changing the Agreement let's make it so it's easy for everybody. RICK SCHIKORA:We got that on our list. STEVE HAAGENSON:Bradley Lake is a different fiscal year then the rest of this,it's not a problem there. BERNIE SMITH:I'm just saying that it seems odd. STEVE HAAGENSON:You just have to get busy and get it done on time. MIKE BARRY:Steve,that's not a problem for us,that's a problem that your people on the IOC are saying is a problem.We're just passing it on to you.You've got to look at the Agreement. You can address it or not,we don't care whether you address that part or not. STEVE HAAGENSON:I've got it down here. ; aA ma n varhat it wsasiehwsMileyaltVVIICILIL¥¥ClO, RON MILLER:Art Copoulos is gathering information.Art Copoulos will be leaving us-next month and Bernie will be stepping in with the IOC in his place. STEVE HAAGENSON:Where's Art going? Alaska Intertie Meeting Page 17 of 21 June 22,2005 , Sovy, RON MILLER:DNR.He'll be available during the transition period to work with Bernie.He is going back to the oil and gas sector from whence he came. MIKE BARRY:Can we have some kind of a time table to put in front of our Board as to whenwemightseethechanges? RICK SCHIKORA:Sure.We can come next week. RON SAXTON:How fast can we get a transcript of what else might be on the list. BRIAN BJORKQUIST:|just want to emphasis that is two components to it:1)what was mentioned yesterday and the other thing is that |would ask every General Manager to ask their IOC representative or whoever has been there,is there anything else.Let's all collectively do the best job we can to clean up everything today so |would ask everybody to ask.Art hasn't been here this week and we will ask him also if there is any other examples. RON MILLER:He'll be back Monday so we will make sure... BRIAN BJORKQUIST:We should have the transcript early next week. -BERNIE SMITH:Yes,I'm doing it this weekend.-mn JIM POSEY:Then is it a two week or three week project to deal with the $3 to $7 million dollars as to how would best -loan versus bonds?That analysis,|don't know who you would have to do it. MIKE BARRY:In two weeks we can do it with a range.That's all they can do really... JIM POSEY:That's all we want.Based on what the IOC did yesterday... RON MILLER:$3 to $7 million over 15 years? MIKE BARRY:Right. JOE GRIFFITH:And it may come back that it would be smarter to do it at a less period or longer period or something like that.Have them look at the whole financing idea. JIM POSEY:Look at it something like 7 to 15 years,$3 to $7 million,and see where that crosses over.That's how we do it. BERNIE SMITH:In the Budget Subcommittee started also to do a mid-year review of the budget and such as if one of the SVC's happen blows up,especially the one in Healy and you have another option (indiscernible)you can add (indiscernible). MIKE BARRY:So there's nothing in the Agreement that would allow them to have a budget session whenever it was necessary?Maybe that's something that could be added to the agreement. Alaska Intertie Meeting .Page 18 of 21 June-22,2005 Sol BERNIE SMITH:And my understanding from the history from John Colley,they used to have a mid-year review so (indiscernible)for adding to -this gives you an added place to come here and relook at the budget. MIKE BARRY:|would propose that it would be prudent to have the ability to do that whenever it was necessary. RON SAXTON:Henri is the chair at IOC,can we task Henri with gathering these and then sharing back to all of us whatever the collective list is that is found. BRIAN BJORKQUIST:It's my perception that some utilities have new members on the IOC,if you still have access to the old members ask them too.I'm just encouraging you to get the best information you can.If you have somebody with experience who is no longer on the IOC,still ask them. DON ZOERB:|need to interject a disclaimer here on behalf of MEA.We will be at the.Board meeting on Monday and we will respond to the letter that you sent out at that time.|just need to be real sure that you all understand that at this point MEA is not committing to agree to any modifications of the existing agreement.But the input we are getting here is very valuable as we develop our position for Monday.|also want to convey our grave concern that the publicsafetyhazardposedadifferentialsnowloadingproblemwheretheintertiepassesthroughour service territory.We cannot overstate our level of concern that someone is going to be hurt. There is going to be a tragic event up there sooner or later and we think it is unconscionable that the problem is continuing to go unaddressed. MIKE BARRY:Thanks for your input. JIM POSEY:Since this is a work session Ill address part of that.It was stated and |brought it up once that the and |noticed that the time the intertie was built,so |have been around a long time,that the right-of-way was never closed,never posted and never fenced,and never noticed. |brought that to the attention of AEA and AIDEA in a public meeting once before and that is an option as opposed to $32 million dollar insets (indiscernible)developed in other places then they know where the snow is at any given time.Clearing out and posting is a way to deal with that particular problem and|think,let's put it on the table today. MIKE BARRY:You might get more prima facie evidence as to why the Agreement doesn't work. JIM POSEY:Yes,that's true. MIKE BARRY:What's your response to assessing the utilities for the fencing capital costs andposting? STEVE HAAGENSON:The R&R fund because that's the path we go down,!think that whatwe're doing right now working with AEA staff-which one is it? BRIAN BJORKQUIST:It's AEA. STEVE HAAGENSON:Okay,but aren't you AEA/AIDEA staff still?Anyway,working with staff, you guys can pick the right thing -|thought we had been working on prudent utility practice for Alaska Intertie Meeting Page 19 of 21 aJune 22,2005 SOV the mitigation of snow load monitoring and |do take objection to you saying we're doing nothing. A few years ago we put in monitoring,which is still functioning out there.The IOC took action at the last meeting yesterday to put the alarm levels in at a certain level which is a very safe prudent utility practice.We're looking at a wide range of things,but |have to bring you back to the idea -as an engineer |went through that thing like 15 years ago when it was first brought up to be an issue.It is not a code violation.So,that's an-issue.Everybody keeps saying it's a -safety thing and |liken it back to looking at the Northwest,when you have an ice storm come through.It comes back -you get ice storms down there more regularly then we have problems with this line.They're not saying,sorry we have to make it -build it to withstand one to two or three year occurrences.They're not doing that,they're saying we're going to deal with it when it happens-and we've actually done more than that.We have monitors on it to watch it 24 hours a day,we send people up there to patrol it and keep an eye on it.So,we're not doing nothing.Just for the record. MIKE BARRY:Any other comments on snow load? BERNIE SMITH:I'm new to this so |don't have a lot of history,but it also seems to me that right now when these alarms go off what you're supposed to do is shut the whole intertie down til you get the fix done.It would seem logical that you would have two sets of monitors out there,one to get out there -not to shut the line down -to have it set to where it is getting ready to be shut down without getting to the limit there,you can go out there and look at it first before you actually have the drastic cause of just shutting the whole line down.And that's the way my understanding is it's going to happen if the alarm goes off,the intertie gets shut down at that point.So it seems like if we spent the money,put in external alarms or a second set of alarms to be set lower and go out there and have people look at it.The way it is written into the record that |understand,when the alarm goes off now,the intertie gets shut down.We should be spending the money in there so that you have two sets of monitors.And you may need more monitors in certain areas then others.I don't know,it's pretty drastic to shut the thing down when the alarm goes off. STEVE HAAGENSON:Chairman Barry,let me explain a little bit about the snow load issue. When the whole line loads up evenly,there is not a problem.The question is when is the snow going to fall off.You may have two weeks to two months before that snow actually falls off and creates a situation that may or may not occur.A lot of time,it's not like,oh we're going to go along today and then there's an alarm,boom the blind goes open-we know days,weeks inadvancethattherewillbeanissuebecausethatlinewillbeloadedupwithheavyamountsofsnow,so it's not like,surprise,shut the line down. BERNIE SMITH:Well,when the alarm goes off -my understanding from the compromise for the $32 million dollar -with these alarms -you set these the alarm at what ever stage that you set it at and when that happens the line gets shut down.And that was what was stated at the lOC meeting. ) Nae ?saying is that you'll know weeks aheadoftimewhatmightsetthealarmoffsoyou'll have time to react to it.MIKE BARRY:Steve's not arguing with that,what he's STEVE HAAGENSON:You'll know ahead of time so it's not like it's all a big surprise,shut the line down -you'll know it when MEA gets hammered with snow you go look at the line -do your line patrol,see if it is loaded up and if it is loaded up you say at sometime it is going to unload. At that point you may have an issue. Alaska Intertie Meeting :Page 20 of 21 June-22,2005 ey RICK SCHIKORA:Is there a way to help it unload? STEVE HAAGENSON:Actually,that's really hard.We went down one year when it was really bad and helped MEA out and tried to knock it off with some hotsticks and you could knock off about a foot.It's fairly well loaded up and doesn't come off easy.But when it does come off by itself it really comes off fast.- BRIAN BJORKQUIST:But that is something that Dryden and LaRue is looking at. STEVE HAAGENSON:That's right. BRIAN BJORKQUIST:And the way they characterized,Paul Williams characterized it yesterday;if you have icing of the snow it is the situation that you described,a foot at a time -if you get it earlier before it starts icing up you can whack one line and three spans can unload at the same time.Something of that nature.But Dryden and LaRue is looking at that question - what could be done to help with that. STEVE HAAGENSON:My guess,to maintain,if you snow conditions that were earlier enough they could go out and whack it and it would come off,|guess. BRIAN BJORKQUIST:Id like to add one more thing.|know that MEA doesn't think that the direction that the IOC is going is the ideal solution,but if you have any suggestions to improve what we are doing,notwithstanding the fact that it's not ideal,that would be useful also.If it is MEA or AEG&T,whoever,any suggestions that you have would be useful. DON ZOERB:Okay. RON MILLER:You guys are designating Henri Dale for the contact for all of the IOC members to... STEVE HAAGENSON:He's the chairman of the IOC,that's why we picked Henri... RON MILLER:I'll have Art and Bernie work next week to gather all of the information we have and to share that with you through him,so we have focused points of contact. STEVE HAAGENSON:I'll call him right after this meeting to give him a heads up to get ready. JIM POSEY:We appreciate you calling this work session because|think this is a better way to at least talk through our concerns and gather data so we can move forward.It is really good. STEVE HAAGENSON:It's nice to have a two way interaction instead of just testimonial. 1ON MILLER:As you can see we have two Board members here at a work session,if we have another board member it would be a board meeting so that was one of the reasons we had it set for a board meeting. STEVE HAAGENSON:|understand.Mark's probably feeling like he's drinking through a fire hose right now. Alaska Intertie Meeting a Page 21 of 21 -June 22,2005Soy, MARK DAVIS:Yes,but |do understand what the Chairman is saying as |am a bank commissioner and we look at loans to banks to see whether there is a way to maintain the security of the loans.And if the loan is unsecure because of maintenance then they place the loan into a special category. JIM POSEY:On this loan there is no existing debt so we're talking assuming debt in order to do what needs to be done. MARK DAVIS:|understand. MIKE BARRY:|don't want,Jim,to have you guys perceive this as threat because it is not threatening.We're trying to look at a constructive way to make the intertie work better for everybody.But when you look at financing for example,it's difficult for us in good faith to sponsor financing when we're being told by the IOC that the agreements don't work.As a board,the only way we can force the agreements to work is to terminate them and start over again.If you guys collectively come to an agreement to change it that's the best solution for everybody,but |think it needs to be addressed before somebody talks about financing or we can limit the financing term less than four years. STEVE HAAGENSON:|think we made a big step toward solving it today.Thanks again for themeeting.owe aes ::-woter lle -mols we -7 "Os Adjournment:11:05 a.m. End of Transcript Alaska Intertie Repair Financing Scenarios Annual Payment Comparison AIDEA Loan Participation vs.AEA Revenue Bonds Net Proceeds Term 3 million 5 million 7 million Loan: 7 years 553,211 922,018 1,290,826 15 years 330,264 550,440 770,616 20 years 284,980 474,966 664,952 Taxable Revenue Bonds: T years Debt service 616,804 1,012,679 1,407,721 Net debt service -604,074 990,619 1,375,760 15 years Debt service 351,285 577,053 802,320 Net debt service -337,402 552,309 767,640 20 years ' Debt service 296,377 486,341 675,369 Net debt service 285,143 466,337 645,499 Loan assumptions:AIDEA rate 5.87%for 7 years,6.53%for 15 years and 6.67%for 20 years Bank rate 7%(bank portion 10%of total loan) 3%fee on entire loan which is estimated to include all financing costs Annual payment listed Taxable Revenue Bond assumptions:- Rates:5.5%for 7 years;5.6%for 15 years;5.8%for 20 years Debt Service Reserve Fund is estimated at 8.6-10%of amount borrowed and is funded from bond proceeds Debt service listed is average annual Net debt service is maximum annual debt service,net of interest earned on reserve fund investment.Debt service for final bond year is reduced bydebtservicereservefundinvestment. Costs ofissuance include underwriter's discount,bond counsel,AEA costs and typical closing costs (trustee fee,printing).No rating agencyfeeis included.No utility closing costs are included. 8/17/2005 AkIntertieFinancingScenario.xls Recap AIDEA Loan Participation $3 million 7,15 and 20 years NOnhWM=OOnnntrWN=ae9-015 OOnOarhWh=Alaska Intertie Financing Scenario AIDEA Loan Participation Program $3 Million Net Proceeds 8/8/2005 5:17 PM H:\ALL\VALORIE\SECURE\Excel Files\PROJECTS\AkIntertieFinancingScenario.xls_3million Total AIDEA Portion Bank Portion 3 Fee % __ear Rate:Rate: 3,000,000 Needed 5.87%2,700,000 Needed 7.00%300,000 Needed Payment Interest Principal 90,000 Fee Payment Interest Principal 81,000 Fee Payment Interest Principal 9,000 Fee 3,090,000 Loan 2,781,000 Loan 309,000 Loan §53,211 184,875 368,336 2,721,664 495,875 163,245 332,630 2,448,370 57,336 21,630 35,706 273,294 553,211 162,850 390,361 2,331,303 495,875 143,719 352,156 2,096,214 57,336 19,131 38,205 235,089 §53,211 139,504 413,707 1,917,596 495,875 123,048 372,827 1,723,387 57,336 16,456 40,880 194,209 553,211 114,758 438,453 1,479,143 495,875 101,163 394,712 1,328,675 57,336 13,595 43,741 150,468 553,211 88,526 464,685 1,014,458 495,875 77,993 417,882 910,793 57,336 10,533 46,803 103,665 553,211 60,721 492,490 521,968 495,875 53,464 442,411 468,382 57,336 7,257 50,079 53,586 §53,211 31,245 521,966 2 495,875 27,494 468,381 4 57,336 3,751 53,585 1 Total AIDEA Portion Bank Portion 15 Year Rate:Rate: -3,000,000 Needed 6.53%2,700,000 Needed 7.00%300,000 Needed Payment Interest Principal 90,000 Fee Payment Interest Principal 81,000 Fee Payment Interest Principal 9,000 Fee 3,090,000 Loan 2,781,000 Loan 309,000 Loan 330,264 203,229 127,035 2,962,965 296,337 181,599 114,738 2,666,262 33,927 21,630 12,297 296,703 330,264 194,876 135,388 2,827,577 296,337 174,107 122,230 2,544,031 33,927 20,769 13,158 283,546 330,264 185,973 144,291 2,683,286 296,337 166,125 130,212 2,413,819 33,927 19,848 14,079 269,467 330,264 176,485 153,779 2,529,507 296,337 157,622 138,715 2,275,104 33,927 18,863 15,064 254,404 330,264 166,372 163,892 2,365,616 296,337 148,564 147,773 2,127,330 33,927 17,808 16,119 238,285 330,264 155,595 174,669 2,190,947 296,337 138,915 157,422 1,969,908 33,927 16,680 17,247 221,039 330,264 144,108 186,156 2,004,791 296,337 128,635 167,702 1,802,205 33,927 15,473 18,454 202,585 330,264 131,865 198,399 1,806,392 296,337 117,684 178,653 1,623,552 33,927 14,181 19,746 182,840 330,264 118,817 211,447 1,594,945 296,337 106,018 190,319 1,433,233 33,927 12,799 21,128 161,712 330,264 104,910 225,354 1,369,591 296,337 93,590 202,747 1,230,485 33,927 11,320 22,607 139,106 330,264 90,088 240,176 1,129,415 296,337 80,351 215,986 1,014,499 33,927 9,737 24,190 114,916 230,264 74,291 255,973 873,442 296,337*66,247 230,090 784,409 33,927 8,044 25,883 89,034 30,264 57,454 272,810 600,632 296,337 51,222 245,115 539,293 33,927 6,232 27,695 61,339 30,264 39,510 290,754 309,878 296,337 35,216 261,121 278,172 33,927 4,294 29,633 31,706 330,264 20,384 309,880 -1 296,337 18,165 278,172 0 33,927 2,219 31,708 -1 Total AIDEA Portion Bank Portion 20 Year Rate:Rate: 3,000,000 Needed 6.67%2,700,000 Needed 7.00%300,000 Needed Payment Interest Principal 90,000 Fee Payment Interest Principal 81,000 Fee Payment Interest Principat 9,000 Fee 3,090,000 Loan 2,781,000 Loan 309,000 Loan 284,980 207,123 77,857 3,012,143 255,812 185,493 70,319 2,710,681 29,167 21,630 7,537 301,463 284,980 201,904 83,076 2,929,068 255,812 180,802 75,010 2,635,671 29,167 21,102 8,065 293,397 284,980 196,337 88,643 2,840,425 255,812 175,799 80,013 2,555,658 29,167 20,538 8,629 284,768 284,980 190,396 94,584 2,745,842 255,812 170,462 85,350 2,470,308 29,167 19,934 9,233 275,534 284,980 184,057 100,923 2,644,919 255,812 164,770 91,042 2,379,265 29,167 19,287 9,880 265,654 284,980 177,293 107,687 2,537,233 255,812 158,697 97,115 2,282,150 29,167 18,596 10,571 255,083 284,980 170,075 114,905 2,422,328 255,812 152,219 103,593 2,178,557 29,167 17,856 11,311 243,771 284,980 162,374 122,606 2,299,723 255,812 145,310 110,502 2,068,055 29,167 17,064 12,103 231,668 284,980 154,156 130,824 2,168,899 255,812 137,939 117,873 1,950,182 29,167 16,217 12,950 218,717 284,980 145,387 139,593 2,029,307 255,812 130,077 125,735 1,824,447 29,167 15,310 13,857 204,860 284,980 136,031 148,949 1,880,358 255,812 121,691 134,121 1,690,326 29,167 ©14,340 14,827 490,032 284,980 126,047 158,933 1,721,426 255,812 112,745 143,067 1,547,259 29,167 13,302 15,865 174,167 284,980 115,394 169,586 1,551,840 255,812 103,202 152,610 1,394,649 29,167 12,192 16,975 157,192 284,980 104,026 180,954 1,370,887 255,812 93,023 162,789 1,231,860 29,167 11,003 18,164 139,027 284,980 91,897 193,083 1,177,804 255,812 82,165 173,647 1,058,212 29,167 9,732 19,435 119,592 284,980 78,954 206,026 971,779 255,812 70,583 185,229 872,983 29,167 8,371 20,796 98,795 284,980 65,144 219,836 751,943 255,812 58,228 197,584 675,399 29,167 6,916 22,251 76,544 284,980 50,407 234,573 517,371 255,812 45,049 210,763 464,636 29,167 5,358 23,809 §2,735 284,980 34,682 250,298 267,073 255,812 30,991 224,821 239,815 29,167 3,691 25,476 27,258 284,980 17,904 267,076 -2 255,812 15,996 239,816 -1 29,167 1,908 27,259 -1 Taxable Revenue Bonds $3 million 7 years SOURCES AND USES OF FUNDS Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $3 Million in Proceeds,7-Year Amortization Sources:- Bond Proceeds:. Par Amount 3,505,000.00 3,505,000.00 . Uses: __Project Fund Deposits:. "Deposit to Project Fund 3,000,000:00 Other Fund Deposits:.. Debt Service Reserve Fund 350,500.00 Delivery Date Expenses:°: ; Cost of Issuance .41,999.15 Underwriter's Discount .111,287.50 :..153,286.65 Other Uses of Funds: *Contingency 1,213.35 *3,505,000.00 BOND DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project -Taxable Revenue Bonds,Series 2006 $3 Million in Proceeds,7-Year Amortization ,Annual Period : .Debt Ending -Principal Coupon |Interest Debt Service |Service 01/01/2006 ., 7 07/01/2006 .96,387.50 .96,387.50 01/01/2007 425,000 5.500%96,387.50 |521,387.50 617,775 07/01/2007.;-84,700.00 .84,700.00. 01/01/2008 445,000 "5.500%84,700.00 529,700.00 614,400 07/01/2008 ;”72,462.50 -72,462.50 .. 01/01/2009 .470,000 5.500%72,462.50 542,462.50 614,925 07/01/2009 . .59,537.50 59,537.50 01/01/2010 500,000 5.500%59,537.50 559,537.50 619,075 07/01/2010 45,787.50 -45,787.5001/01/2011 525,000 5.500%45,787.50 570,787.50 616,575 07/01/2011 7 .31,350.00 31,350.00 - 01/01/2012 -555,000 5.500%-31,350.00 586,350.00 .617,70007/01/2012 , _16,087.50 16,087.50 ; 01/01/2013 *$85,000 5.500%16,087.50 601,087.50 617,175 © .3,505,000,---812,625.00 4,317,625.00 4,317,625 NET DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $3 Million in Proceeds,7-Year Amortization Period Total -Debt Service Net Ending Debt Service Reserve Fund Debt Service - 01/01/2007 617,775 15,001.40 602,773.60 01/01/2008 614,400 .15,001.40 599,398.60 _01/01/2009 614,925 15,001.40 599,923.60 01/01/2010 619,075 15,001.40 604,073.60 01/01/2011 616,575 15,001.40 601,573.60 01/01/2012 617,700 15,001.40 602,698.60 01/01/2013 617,175 365,501.40 251,673.60 4,317,625 455,509.80 3,862,115.20 Taxable Revenue Bonds $3 million 15 years SOURCES AND USES OF FUNDS Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $3 Million in Proceeds,15-Year Amortization Sources: "Bond Proceeds: Par Amount 3,505,000.00 3,505,000.00 Uses: Project Fund Deposits: Deposit to Project Fund 3,000,000.00 Other Fund Deposits: Debt Service Reserve Fund 350,500.00 Delivery Date Expenses:>. Cost of Issuance 41,999.15 Underwriter's Discount 111,287.50 153,286.65 Other Uses ofFunds: Contingency 1,213.35 3,505,000.00 BOND DEBT SERVICE Alaska Energy Authority Rail Bett Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 | $3 Million in Proceeds,15-Year Amortization :Annual Period :Debt Debt Ending Principal Coupon Interest Service 'Service 01/01/2006 :07/01/2006 _98,140 98,140 01/01/2007 155,000 5.600%98,140 253,140 |351,280 07/01/2007 ee .93,800 53,800 01/01/2008 165,000 5.600%93,800 258,800 352,600 07/01/2008 89,180 89.180 01/01/2009 175,000 5.600%89,180 264,180 *353,360 67/01/2009 : : 84,280 84,280 : 01/01/2010 185,000 5.600%84,280 269,280 353,560 07/01/2010._79,100 79,100 01/01/2011 -195,000 5.600%79,100 -274,100 353,200 07/01/2011 .73,640 73,640 01/01/2012 205,000 -5.600%73,640 278,640 352,280 07/01/2012 67,900 67,900 01/01/2013 215,000 5.600%67,900.282,900 350,800 07/01/2013 61,880 61,880 |. 01/01/2014 225,000 5.600%61,880 .286,880 "348,760 07/01/2014 55,580 55,580 01/01/2015 240,000 5.600%55,580 295,580 -351,160 07/01/2015 48,860 48,860 01/01/2016 255,000 5.600%48,860 303,860 352,720 97/01/2016 .41,720 41,720 01/01/2017 265,000 5.600%41,720 306,720 348,440 07/01/2017 : 34,300 34,300 01/01/2018 280,000 5.600%34,300 314,300 348,60007/01/2018 .26,460 26,460 01/01/2019 300,000 5.600%26,460 326,460 352,920 07/01/2019 , 18,060 18,060 01/01/2020 315,000 5.600%18,060 333,060 351,120 07/01/2020 9,240 9,240 01/01/2021 330,000 5.600%9,240 .-339,240 348,480 3,505,000 1,764,280 §,269,280 5,269,280 NET DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $3 Million in Proceeds,15-Year Amortization Period Total -DebtService Net Ending Debt Service Reserve Fund Debt Service 01/01/2007 351,280 16,158.06 335,121.94 01/01/2008 352,600 16,158.06 336,441.94 01/01/2009 353,360 16,158.06 337,201.94 01/01/2010 353,560 -16,158.06 "337,401.94 01/01/2011 -353,200 16,158.06 337,041.94 01/01/2012 352,280 16,158.06 336,121.94 01/01/2013 350,800 16,158.06 334,641.94 01/01/2014 348,760 16;158.06 332,601.94 01/01/2015"= "351,160 16,158.06 ©335,001.94 01/01/2016 352,720 16,158.06 -336,561.94 01/01/2017 348,440 16,158.06 332,281.94 01/01/2018 348,600 16,158.06 332,441.94 01/01/2019 »352,920 16,158.06 -336,761.94 01/01/2020 351,120 16,158.06 334,961.94 01/01/2021 348,480 366,658.06 18,178.06 5,269,280 592,870.90 4,676,409.10 Taxable Revenue Bonds $3 million 20 years SOURCES AND USES OF FUNDS Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $3 Million in Proceeds,20-Year Amortization Sources: Bond Proceeds:. Par Amount 3,455,000.00 3,455,000.00 Uses: Project Fund Deposits: Deposit to Project Fund 3,000,000.00 Other Fund Deposits:.. Debt Service Reserve Fund 299,080.00 Delivery Date Expenses:° Cost of Issuance 41,809.65 Underwriter's Discount 110,912.50 , °152,722.15 Other Uses of Funds: Contingency 3,197.85 3,455,000.00 BOND DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $3 Million in Proceeds,20-Year Amortization Annual _Petiod Debt Debt Ending Principal Coupon Interest Service Service 01/01/2006 07/01/2006 -100,195 100,19501/01/2007 95,000 5.800%-100,195 -195,195 295,39007/01/2007 "97,440 97,44001/01/2008 100,000 5.800%97,440 197,440 294,88007/01/2008 94,540 94,54001/01/2009 110,000 5.800%94,540 204,540 299,08007/01/2009 :91,350 -91,35001/01/2010 115,000 5.800%91,350 206,350 297,70007/01/2010 :88,015 88,01501/01/2011 120,000 5.800%88,015 208,015 296,03007/01/2011 ,84,535 84,535 01/01/2012 "125,000 5.800%84,535 209,535 294,07007/01/2012 80,910 80,91001/01/2013 135,000 5.800%80,910 215,910 296,82007/01/2013 76,995 76,995 .01/01/2014 140,000 5.800%76,995 216,995 293,99007/01/2014 72,935 72,93501/01/2015 150,000 5.800%72,935 222,935 295,87007/01/2015 .68,585 68,585 . 01/01/2016 160,000 5.800%68,585 228,585 297,17007/01/2016 63,945 63,94501/01/2017 170,000 5.800%63,945 233,945 297,89007/01/2017 59,015 59,01501/01/2018 180,000 5.800%59,015 239,015 298,03007/01/2018 53,795 53,79501/01/2019 190,000 5.800%53,795 243,795 297,59007/01/2019 48,285 48,28501/01/2620 200,000 5.800%48,285 248,285 296,57007/01/2020 .42,485 42,48501/01/2021 210,000 5.800%42,485 252,485 294,97007/01/2021 36,395 36,39501/01/2022 225,000 5.800%36,395 261,395 297,79007/01/2022 29,870 29,87001/01/2023 235,000 5.800%29,870 264,870 294,74007/01/2023 23,055 23,055 01/01/2024 250,000 5.800%23,055 273,055 296,110 07/01/2024 ©15,805 15,805 . *01/01/2025 265,000 5.800%|15,805 280,805 296,610 07/01/2025 8,120 -$120 . 01/01/2026 280,000 5.800%8,120 288,120 296,240 3,455,000 2,472,540 5,927,540 5,927,540 NET DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $3 Million in Proceeds,20-Year Amortization Period Total Debt Service Net .Ending Debt Service Reserve Fund Debt Service 01/01/2007 "295,390 -13,937.12.281,452.88 01/01/2008 294,880 13,937.12 280,942.88 01/01/2009 299,080 13,937.12 285,142.8801/01/2010 297,700 13,937.12 283,762.88 01/01/2011 296,030 13,937.12 282,092.88 01/01/2012 294,070 13,937.12 280,132.88 01/01/2013 296,820 13,937.12 282,882.88 01/01/2014 293,990 13,937.12 |280,052.88 01/01/2015 295,870 13,937.12 281,932.88 01/01/2016 297,170 13,937.12 283,232.88 01/01/2017 297,890 13,937.12 283,952.88 01/01/2018 298,030 13,937.12 .284,092.88 01/01/2019 »297,590 13,937.12 283,652.88 01/01/2020 296,570 13,937.12 282,632.88 01/01/2021 -.294,970 13,937.12 281,032.88 01/01/2022 297,790 13,937.12 283,852.88 *01/01/2023 294,740 13,937.12 280,802.88 01/01/2024 _.296,110 13,937.12 282,172.88 01/01/2025 296,610 13,937.12 -282,672.88 01/01/2026 296,240 313,017.12 16,777.12 5,927,540 577,822.40 5,349,717.60 AIDEA Loan Participation $5 million 7,15 and 20 years NONhRWN=OONMDHAWN=OONAOAWN=Alaska Intertie Financing Scenario AIDEA Loan Participation Program $5 Million Net Proceeds 8/8/2005 5:27 PM H:\ALL\VALORIE\SECURE\Excel Files\PROJECTS\AkintertieFinancingScenario.xls_Smillion Total AIDEA Portion Bank Portion 3 Fee % 'ear Rate:Rate: 5,000,000 Needed 5.87%4,500,000 Needed 7.00%500,000 Needed Payment Interest Principal 150,000 Fee Payment__Interest Principal 135,000 Fee Payment Interest Principal 15,000 Fee 5,150,000 Loan 4,635,000 Loan 515,000 Loan 922,018 308,125 613,893 4,536,107 826,458 272,075 554,383 4,080,617 95,560 36,050 59,510 455,490 922,018 271,416 650,602 3,885,504 826,458 239,532 586,926 3,493,690 95,560 31,884 63,676 391,814 922,018 232,507 689,511 3,195,993 826,458 205,080 621,378 2,872,312 95,560 27,427 68,133 323,681 922,018 191,263 730,755 2,465,238 826,458 168,605 657,853 2,214,458 95,560 22,658 72,902 250,779 922,018 147,544 774,474 1,690,764 826,458 129,989 696,469 1,517,989 95,560 17,555 78,005 172,774 922,018 101,200 820,818 869,945 826,458 89,106 737,352 780,637 95,560 12,094 83,466 89,309 922,018 52,075 869,943 2 826,458 45,823 780,635 1 95,560 6,252 89,308 1 Total AIDEA Portion Bank Portion 15 Year Rate:Rate: .5,000,000 Needed 6.53%4,500,000 Needed 7.00%500,000 Needed Payment interest Principal 150,000 Fee Payment Interest Principal 135,000 Fee Payment Interest Principal 15,000 Fee 5,150,000 Loan 4,635,000 Loan 515,000 Loan 550,440 338,716 211,724 4,938,276 493,896 302,666 191,230 4,443,770 56,544 36,050 20,494 494,506 550,440 324,793 225,647 4,712,629 493,896 290,178 203,718 4,240,053 56,544 34615 21,929 472,577 550,440 309,955 240,485 4,472,145 493,896 276,875 217,021 4,023,032 56,544 33,080 23,464 449,112 550,440 294,142 256,298 4,215,847 493,896 262,704 231,192 3,791,841 56,544 31,438 25,106 424,006 550,440 277,287 273,153 3,942,694 493,896 247,607 246,289 3,545,552 56,544 29,680 26,864 397,142 550,440 259,325 291,115 3,651,579 493,896 231,525 262,371 3,283,181 56,544 27,800 28,744 368,398 550,440 240,180 310,260 3,341,319 493,896 214,392 279,504 3,003,678 56,544 25,788 30,756 337,644 550,440 219,775 330,665 3,010,654 493,896 196,140 297,756 2,705,922 .-'§8,544 23,635 32,909 -304,732 550,440 198,028 352,412 2,658,243 493,896 176,697 317,199 2,388,724 56,544 21,331 35,213 269,519 550,440 174,850 375,590 2,282,653 493,896 155,984 337,912 2,050,812 56,544 18,866 37,678 231,844 550,440 150,147 400,293 1,882,360 493,896 133,918 359,978 1,690,834 56,544 16,229 40,315 191,525 550,440 123,818 426,622 1,455,738 493,896 110,411 383,485 1,307,350 56,544 13,407 43,137 148,388 550,440 95,757 454,683 1,001,055 493,896-85,370 408,526 898,824 56,544 10,387 46,157 102,231 550,440 65,849 484,591 516,464 493,896 58,693 435,203 463,622 56,544 7,156 49,388 §2,843 550,440 33,973 516,467 -2 493,896 30,274 463,622 ie)56,544 3,699 52,845 "2 Total AIDEA Portion Bank Portion 20 Year Rate:Rate: 5,000,000 Needed 6.67%4,500,000 Needed 7.00%500,000 Needed Payment Interest Principal _150,000 Fee Payment __interest__Principat 135,000 Fee Payment Interest Principal 15,000 Fee 5,150,000 Loan 4,635,000 Loan 515,000 Loan 474,966 345,205 129,761 5,020,239 426,354 309,155 117,199 4,517,801 48,612 36,050 12,562 502,438 474,966 336,508 138,458 4,881,781 426,354 301,337 125,017 4,392,785 :48,612 35,171 13,441 488,996 474,966 327,229 147,737 4,734,044 426,354 292,999 133,355 4,259,430 48,612 34,230 14,382 474,614 474,966 317,327 157,639 4,576,406 426,354 284,104 142,250 4,117,181 48,612 33,223 15,389 469,225 474,966 306,762 168,204 4,408,202 426,354 274,616 151,738 3,965,443 48,612 32,146 16,466 442,758 474,966 295,488 179,478 4,228,724 426,354 264,495 161,859 3,803,585 48,612 30,993 17,619 425,139 474,966 283,459 191,507 4,037,217 426,354 253,699 172,655 3,630,930 48,612 29,760 18,852 406,287 474,966 270,623 204,343 3,832,874 426,354 242,183 184,171 3,446,760 48,612 28,440 20,172 386,114 474,966 256,927 218,039 3,614,835 426,354 229,899 196,455 3,250,305 48,612 27,028 21,584 364,530 474,966 242,312 232,654 3,382,181 426,354 216,795 209,559 3,040,747 48,612 25,517 23,095 341,434 474,966 226,718 248,248 3,133,933 426,354 202,818 223,536 2,817,211 48,612 23,900 24,712 316,722 474,966 210,079 264,887 2,869,047 426,354 187,908 238,446 2,578,766 48,612 22,171 26,441 290,281 474,966 192,324 282,642 2,586,405 426,354 172,004 254,350 2,324,416 48,612 20,320 28,292 261,988 474,966 173,378 301,588 2,284,817 426,354 155,039 271,315 2,053,102 48,612 18,339 30,273 231,715 474,966 153,162 321,804 1,963,013 426,354 136,942 289,412 1,763,690 48,612 16,220 32,392 199,323 474,966 131,591 343,375 1,619,638 426,354 117,638 308,716 1,454,975 48,612 13,953 34,659 164,663 474,966 108,573 366,393 1,253,245 426,354 97,047 329,307 1,125,668 48,612 11,526 37,086 127,577 474,966 84,012 390,954 862,291 426,354 75,082 351,272 774,397 48,612 8,930 39,682 87,895 474,966 57,805 417,161 445,131 426,354 51,652 374,702 399,695 48,612 6,153 42,459 45,435 474,966 29,840 445,126 5 426,354 26,660 399,694 2 48,612 3,180 45,432 3 Taxable Revenue Bonds $5 million 7 years SOURCES AND USES OF FUNDS Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $5 Million in Proceeds,7-Year Amortization Sources: Bond Proceeds: Par Amount §,755,000.00 §,755,000.00 Uses: Project Fund Deposits:-; Deposit to Project Fund . °-§,000,000.00 Other Fund Deposits: -Debt Service Reserve Fund §75,500.00 Delivery Date Expenses:* Cost ofIssuance _49,088.65 Underwriter's Discount .128,162.50 177,251.15 Other Uses of Funds:Contingency 2,248.85 5,755,000.00 BOND DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $5 Million in Proceeds,7-Year Amortization Annual Period Debt Ending Principal Coupon Interest Debt Service Service 01/01/200607/01/2006 ;158,262.50 "158,262.50 . 01/01/2007 695,000 5.500%158,262.50 853,262.50 "1,011,525 07/01/2007 139,150.00 139,150.00 01/01/2008 735,000 5.500%139,150.00 874,150.00 1,013,300 07/01/2008 118,937.50 118,937.50 01/01/2009 775,000 5.500%118,937.50 893,937.50 1,012,875 '=07/01/2009 97,625.00 97,625.00 01/01/2010 820,000 5.500%97,625.00 917,625.00 1,015,250 07/01/2010 75,075.00 75,075.00 01/01/2011 860,000 5.500%75,075.00 935,075.00 1,010,150 07/01/2011 51,425.00 $1,425.00 01/01/2012 910,000 5.500%51,425.00 961,425.00 1,012,850 07/01/2012 .26,400.00 26,400.00 01/01/2013 960,000 5.500%26,400.00 986,400.00 1,012,800 5,755,000 -1,333,750.00 7,088,750.00 7,088,750 A NET DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $5 Million in Proceeds,7-Year Amortization Period Total Debt Service . Net Ending Debt Service 'Reserve Fund Debt Service 01/01/2007 1,011,525 24,631.40 986,893.60 01/01/2008 1,013,300 24,631.40 988,668.60 01/01/2009 1,012,875 24,631.40 988,243.60 01/01/2010 -1,015,250 24,631.40 990,618.60 01/01/2011 1,010,150 24,631.40 -985,518.60 01/01/2012 _1,012,850 24,631.40 988,218.60 01/01/2013 1,012,800 600,131.40 412,668.60 vee "7,088,750 747,919.80 6,340,830.20 Taxable Revenue Bonds $5 million 15 years SOURCES AND USES OF FUNDS Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006$5 Million in Proceeds,15-Year Amortization Sources: Bond Proceeds: Par Amount §,755,000.00 §,755,000.00 Uses: Project Fund Deposits: ".Deposit to Project Fund §,000,000.00. Other Fund Deposits: Debt Service Reserve Fund §75,500.00 Delivery Date Expenses::. Cost of Issuance 49,088.65 Underwriter's Discount 128,162.50 177,251.15 Other Uses of Funds:, Contingency 2,248.85 5,755,000.00 Alaska Energy Authority 'BOND DEBT SERVICE Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 -$5 Million in Proceeds,15-Year Amortization Annual Period ;.Debt Debt Ending Principal Coupon Interest Service Service 01/01/200607/01/2006 161,140 161,14001/01/2007 255,000 5.600%161,140 416,140 577,280 07/01/2007 154,000 154,000 01/01/2008 ”270,000 5.600%154,000 424,000 578,000 07/01/2008 146,440 146,440 : 01/01/2009 285,000 5.600%"146,440 431,440 577,880 -07/01/2009 138,460 138,460 01/01/2010 300,000 5.600%138,460 438,460 576,920 -07/01/2010 130,060 130,060 01/01/2011 315,000 *5.600%130,060 445,060 575,120 07/01/2011 .121,240 121,240 . 01/01/2012 335,000 5.600%121,240 456,240 577,480 07/01/2012 .111,860 111,860 ©. 01/01/2013 355,000 5.600%111,860 466,860 578,720 07/01/2013 101,920 .101,920 01/01/2014 375,000 5.600%101,920 476,920 578,840 07/01/2014 91,420 91,420 01/01/2015 395,000 5.600%91,420 486,420 577,840 07/01/2015 80,360 80,360 01/01/2016 415,000 5.600%80,360 495,360 575,720 07/01/2016 68,740 68,740 01/01/2017 440,000 .5.600%68,740 508,740 577,480 07/01/2017 56,420 ,56,420 01/01/2018 465,000 5.600%56,420 521,420 577,840 07/01/2018 43,400 43,400 01/01/2019 490,000 5.600%-43,400 533,400 576,800 07/01/2019 29,680 29,680 .. 01/01/2020 515,000 5.600%29,680 544,680 574,360 07/01/2020 15,260 15,26001/01/2021 545,000 5.600%15,260 560,260 §75,520 5,755,000 2,900,800 8,655,800 8,655,800 NET DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $5 Million in Proceeds,15-Year Amortization Period Total Debt Service Net Ending Debt Service Reserve Fund Debt Service 01/01/2007 577,280 26,530.56 550,749.44 01/01/2008 578,000 26,530.56 .551,469.44 01/01/2009 577,880 26,530.56 551,349.44 01/01/2010 576,920 26,530.56 550,389.44 01/01/2011 575,120 26,530.56 548,589.44 01/01/2012 577,480 26,530.56 |550,949.44 01/01/2013 578,720 26,530.56 552,189.44 01/01/2014 :578,840 26,530.56 552,309.44 01/01/2015 577,840 26,530.56 §$51,309.44 01/01/2016 575,720 26,530.56 549,189.44 01/01/2017 577,480 26,530.56 550,949.44 01/01/2018 577,840 26,530.56 551,309.44 01/01/2019 ,576,800 26,530.56 550,269.44 01/01/2020 574,360 26,530.56 547,829.44 01/01/2021 $75,520 -602,030.56 --26,510.56 8,655,800 973,458.40 7,682,341.60 Taxable Revenue Bonds $5 million 20 years SOURCES AND USES OF FUNDS > Alaska Energy Authority Rail Beit Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $5 Million in Proceeds,20-Year Amortization Sources: Bond Proceeds: Par Amount 5,670,000.00 §,670,000.00 Uses: "Project Fund Deposits: Deposit to Project Fund -§,000,000.00 Other Fund Deposits: Debt Service Reserve Fund 489,130.00 Delivery Date Expenses:> Cost of Issuance 48,926.10 Underwriter's Discount 127,525.00° 176,451.10 Other Uses of Funds:Contingency 4,418.90 5,670,000.00 BOND DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $5 Million in Proceeds,20-Year Amortization Annual Period , .Debt Debt Ending .Principal Coupon Interest Service Service 01/01/2006 07/01/2006 164,430 164,430 01/01/2007 160,000 $.800%164,430 324,430 488,860 07/01/2007 ;159,790 159,790 01/01/2008 165,000 5.800%159,790 324,790 484,580 07/01/2008 155,005 155,005 01/01/2009 175,000 5.800%155,005 330,005 485,010 07/01/2009 149,930 149,930 01/01/2010 185,000 5.800%149,930 334,930 484,860 07/01/2010 144,565 144,565 01/01/2011 200,000 5.800%144,565 344,565 489,130 07/01/2011 .138,765 138,765 01/01/2012 210,000 5.800%138,765 348,765 487,530 07/01/2012 132,675 132,675 01/01/2013 220,000 5.800%132,675 352,675 .485,350 07/01/2013 ;126,295 126,295 sO 01/01/2014 235,000 5.800%126,295 361,295 487,590 *07/01/2014 : ;119,480 119,480 01/01/2015 245,000 5.800%119,480 364,480 483,960 07/01/2015 112,375 112,375 01/01/2016 260,000 5.800%112,375 372,375 484,750 07/01/2016 104,835 104,835 01/01/2017,275,000 .5.800%104,835 379,835 484,670 07/01/2017 96,860 96,860 01/01/2018 295,000 5.800%96,860 391,860 488,720 07/01/2018 88,305 88,305 : 01/01/2019 310,000 "5.800%88,305 398,305 486,610 07/01/2019 :79,315 79,315. 01/01/2020 330,000 5.800%79,315 409,315 488,630 07/01/2020 69,745 69,745 01/01/2021 345,000 5.800%69,745 414,745 484,490 07/01/2021 59,740 59,740 01/01/2022 365,000 5.800%§9,740 424,740 484,480 07/01/2022 .49,155 49,155 01/01/2023 390,000 5.800%.49,155 439,155 488,310 07/01/2023 37,845 37,845 01/01/2024 410,000 5.800%"37,845 447,845 485,690 07/01/2024 25,955 25,955°| 01/01/2025 435,000.=5.800%25,955 460,955 486,910 07/01/2025 :13,340 13,340 01/01/2026 460,000 5.800%13,340 473,340 486,680 5,670,000 4,056,810 9,726,810 9,726,810 NET DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Reveriue Bonds,Series 2006$5 Million in Proceeds,20-Year Amortization Period Total Debt Service Net Ending Debt Service Reserve Fund Debt Service 01/01/2007 488,860 22,793.46 466,066.54 01/01/2008 484,580 22,793.46 461,786.54 01/01/2009 485,010 22,793.46 462,216.54 01/01/2010 484,860 22,793.46 462,066.54 01/01/2011 489,130 .22,793.46 466,336.54 01/01/2012 487,530 22,793.46 464,736.54 01/01/2013 485,350 22,793.46 462,556.54 01/01/2014 487,590 22,793.46 464,796.54 01/01/2015 483,960 22,793.46 461,166.54 01/01/2016 484,750 22,793.46 -461,956.54 01/01/2017 484,670 22,793.46 461,876.54 01/01/2018 488,720 22,793.46 465,926.54 01/01/2019 .486,610.22,793.46 463,816.54 01/01/2020 488,630 -22,793.46 465,836.54 01/01/2021 484,490 22,793.46 461,696.54 01/01/2022 484,480 22,793.46 461,686.54 01/01/2023 488,310 22,793.46 465,516.54 01/01/2024 485,690 22,793.46 462,896.54 -01/01/2025 *486,910 22,793.46 464,116.54 01/01/2026 486,680 -511,923.46 .-25,243.46 9,726,810 944,999.20 8,781,810.80 AIDEA Loan Participation $7 million 7,15 and 20 years Alaska Intertie Financing Scenario AIDEA Loan Participation Program $7 Million Net Proceeds 8/8/2005 5:27 PM H:\ALL\ALORIE\SECURE\Excel Files\PROJECTSUkintertieFinancingScenario.xis_7million Total AIDEA Portion Bank Portion 3 Fee % 'ear Rate:Rate: 7,000,000 Needed 5.87%6,300,000 Needed 7.00%700,000 Needed Payment Interest Principal 210,000 Fee Payment Interest Principal _189,000 Fee Payment Interest Principal 21,000 Fee 7,210,000 Loan 6,489,000 Loan 721,000 Loan 41 1,290,826 431,374 859,452 6,350,548 1,157,042 380,904 776,138 5,712,862 133,784 50,470 83,314 637,686 2 1,290,826 379,983 910,843 5,439,706 1,157,042 335,345 821,697 4,891,166 133,784 44638 89,146 548,540 3 1,290,826 325,509 965,317 4,474,389 1,157,042 287,111 869,931 4,021,235 133,784 38,398 95,386 453,154 4 1,290,826 267,767 1,023,059 3,451,331 1,157,042 236,046 920,996 3,100,239 133,784 31,721 102,063 351,092 5 1,290,826 206,560 1,084,266 2,367,065 1,157,042 181,984 975,058 2,125,181 133,784 24,576 109,208 241,884 6 1,290,826 141,680 1,149,146 1,217,919 1,157,042 124,748 1,032,294 1,092,888 133,784 16,932 116,852 125,032 7 1,290,826 72,904 1,217,922 -2 1,157,042 64,152 1,092,890 -2 133,784 8,752 125,032 0 Total AIDEA Portion Bank Portion 15 Year Rate:Rate: 7,000,000 Needed 6.53%6,300,000 Needed .7.00%700,000 Needed Payment Interest Principal 210,000 Fee Payment Interest Principal 189,000 Fee Payment interest Principal 21,000 Fee :7,210,000 Loan 6,489,000 Loan 721,000 Loan 1 770,616 474,202 296,414 6,913,586 691,454 423,732 267,722 6,221,278.79,162 50,470 28,692 692,308 2 770,616 454,711 315,905 6,597,681 691,454 406,249 285,205 5,936,073 .79,162 48462 30,700 661,608 3 770,616 433,939 336,677 6,261,005 691,454 387,626 303,828 5,632,245 79,162 46,313 32,849 628,759 4 770,616 411,799 358,817 5,902,188 691,454 367,786 323,668 5,308,578 79,162 44,013 35,149 593,610 5 770,616 388,203 382,413 5,519,775 691,454 346,650 344,804 4,963,774 79,162 41,553 37,609 556,001 6 770,616 363,054 407,562 5,112,213 691,454 324,134 367,320 4,596,454 79,162 38,920 40,242 515,759 ".7 770,616 336,251 "434,365 4,677,849 "°°"">691,454 -300,148 391,306 4,205,748 -:79,162-36,103.43,059 ..472,701 - 8 770,616 307,685 462,931 4,214,918 691,454 274,596 416,858 3,788,290 79,162 33,089 46,073 426,628 9 770,616 277,239 493,377 3,721,541 691,454 247,375 444,079 3,344,211 79,162 29,864 49,298 377,330 10 770,616 244,790 525,826 3,195,715 691,454 218,377 473,077 2,871,135 :79,162 26,413 52,749 324,581 11.770,616 210,206 560,410 2,635,306 691,454 187,485 503,969 2,367,166 79,162 22,721 56,441 268,140 12 770,616 173,346 597,270 2,038,036 691,454 154,576 536,878 1,830,288 79,162 18,770 60,392 207,748 770,616 134,060 636,556 1,401,480 691,454 119,518 571,936 1,258,352 79,162 14,542 64,620 143,128 770,616 92,189 678,427 723,053 691,454 82,170 609,284 649,068 79,162 10,019 69,143 73,985 15 770,616 47,563 723,053 1 691,454 42,384 649,070 -2 79,162 5,179 73,983 2 Total AIDEA Portion Bank Portion 20 Year Rate:Rate: 7,000,000 Needed 6.67%6,300,000 Needed 7.00%700,000 Needed Payment Interest Principal 210,000 Fee Payment interest Principal _189,000 Fee Payment__Interest__Principal 21,000 Fee 7,210,000 Loan 6,489,000 Loan 721,000 Loan 1 664,952 483,286 181,666 7,028,334 596,895 432,816 164,079 6,324,921 68,057 50,470 17,587 703,413 2 664,952 471,111 193,841 6,834,493 596,895 421,872 175,023 6,149,898 68,057 49,239 18,818 684,594 3 664,952 458,120 206,832 6,627,660 596,895 410,198 186,697 5,963,201 68,057 =47,922 20,135 664,459 4 664,952 444,258 220,694 6,406,966 596,895 397,746 199,149 5,764,052 68,057 46,512 21,545 642,914 5 664,952 429,466 235,486 6,171,480 596,895 384,462 212,433 5,551,619 68,057 45,004 23,053 619,861 6 664,952 413,683 251,269 5,920,211 596,895 370,293 226,602 5,325,018 68,057 43,390 =24,667 595,193 7 664,952 396,843 268,109 5,652,102 596,895 355,179 241,716 5,083,302 68,057 41,664 26,393 568,800 8 664,952 378,872 286,080 5,366,021 596,895 339,056 257,839 4,825,463 68,057 39,816 28,241 640,559 9 664,952 359,697 305,255 5,060,766 596,895 321,858 275,037 4,550,426 68,057 37,839 30,218 510,340 10 664,952 339,237 325,715 4,735,051 596,895 303,513 293,382 4,257,044 68,057 35,724 32,333 478,007 41 664,952 317,405 347,547 4,387,504 596,895 283,945 312,950 3,944,094 68,057 33,460 34,597 443,410 12 664,952 294,110 370,842 4,016,661 596,895 263,071 333,824 3,610,270 68,057 31,039 37,018 406,391 13 664,952 269,252 395,700 3,620,961 596,895 240,805 356,090 3,254,180 68,057 28,447 39,610 366,781 14 664,952 242,729 422,223 3,198,738 596,895 217,054 379,841 2,874,339 68,057 25,675 42,382 324,399 15 664,952 214,426 450.526 2,748,212 596,895 191,718 405,177 2,469,162 68,057 22,708 45,349 -279,050 16 664,952 184,226 480,726 2,267,486 596,895 164,693 432,202 2,036,960 68,057 19,533 48,524 236,525 17 664,952 152,002 512,950 1,754,535 596,895 135,865 461,030 1,575,930 68,057 16,137 51,920 178,605 18 664,952 117,617 547,335 1,207,200 596,895 105,115 491,780 1,084,151 68,057 12,502 55,555 123,050 19 664,952 80,926 584,026 623,174 596,895 72,313 524,582 559,569 68,057 8,613 59,444 63,605 20 664,952 41,775 623,177 -3 596,895 37,323 559,572 -3 68,057 4,452 63,605 0 Taxable Revenue Bonds $7 million | 7 years SOURCES AND USES OF FUNDS Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $7 Million in Proceeds,7-Year Amortization . Sources: Bond Proceeds: Par Amount 8,000,000.00 8,000,000.00 Uses: Project Fund Deposits: Deposit to Project Fund 7,000,000.00 Other Fund Deposits: Debt Service Reserve Fund 800,000.00 Delivery Date Expenses:° Cost of Issuance §3,365.00 'Underwriter's Discount 145,000.00 198,365.00 Other Uses of Funds: Contingency 1,635.00 8,000,000.00 BOND DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $7 Million in Proceeds,7-Year Amortization Annual Period Debt Ending .Principal Coupon Interest Debt Service Service 01/01/2006 07/01/2006 220,000.00 220,000.00 01/01/2007 970,000 5.500%220,000.00 1,190,000.00 1,410,000 07/01/2007 193,325.00 193,325.00 01/01/2008 1,020,000 5.500%193,325.00 1,213,325.00 1,406,650 07/01/2008 165,275.00 165,275.00 . 01/01/2009 1,075,000 5.500%165,275.00 1,240,275.00 1,405,550 07/01/2009 wo 135,712.50 135,712.50 : 01/01/2010 1,135,000 5.500%135,712.50 1,270,712.50 1,406,425 07/01/2010 104,500.00 104,500.00 01/01/2011 1,200,000 5.500%104,500.00 1,304,500.00 1,409,000 07/01/2011 oy 71,500.00 -71,500.00 01/01/2012 1,265,000 5.500%°71,500.00 1,336,500.00 1,408,000 07/01/2012 oe :36,712.50 36,712.50 .01/01/2013 1,335,000 5.500%36,712.50 1,371,712.50 1,408,425 8,000,000 .1,854,050.00 9,854,050.00 9,854,050 ° NET DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $7 Million in Proceeds,7-Year Amortization Period Total Debt Service Net -Ending Debt Service Reserve Fund .Debt Service 01/01/2007 1,410,000 34,240 1,375,760 01/01/2008 1,406,650 34,240 1,372,410 01/01/2009 1,405,550 34,240 1,371,310 01/01/2010 1,406,425 34,240 1,372,185 01/01/2011 -1,409,000 34,240 1,374,760 01/01/2012 "1,408,000 34,240 1,373,760 01/01/2013 1,408,425 834,240 574,185 vom "9,854,050 1,039,680 8,814.370 Taxable Revenue Bonds $7 million - 15 years SOURCES AND USES OF FUNDS Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $7 Million in Proceeds,15-Year Amortization Sources: Bond Proceeds: Par Amount 8,000,000.00 - 8,000,000.00 Uses: Project Fund Deposits:Deposit to Project Fund 7,000,000.00 Other Fund Deposits:. Debt Service Reserve Fund 800,000.00 Delivery Date Expenses:' Cost of Issuance .53,365.00 Undervwriter's Discount 145,000.00 198,365.00 Other Uses of Funds: Contingency 1,635.00 8,000,000.00 BOND DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $7 Million in Proceeds,15-Year Amortization . .Annual Period .*Debt Debt Ending Principal Coupon Interest Service Service 01/01/2006 07/01/2006 224,000 224,000 01/01/2007 355,000 5.600%224,000 *579,000 -803,000 07/01/2007 .214,060 214,060 01/01/2008 375,000 5.600%214,060 589,060 803,120 07/01/2008 ,203,560 -203,560 01/01/2009 395,000 5.600%203,560 598,560 802,120 07/01/2009 sm -192,500 .192,500 , 01/01/2010 415,000 5.600%192,500 607,500 800,000 07/01/2010 .180,880 180,880 01/01/2011 440,000 5.600%180,880 620,880 801,760 07/01/2011 _168,560 168,560 01/01/2012 465,000 5.600%168,560 633,560 802,120 07/01/2012 ;*155,540 155,540 ; 01/01/2013 490,000 5.600%155,540 645,540 801,080 07/01/2013 141,820 141,820 01/01/2014 520,000 -5.600%141,820 "661,820 -803,640 07/01/2014 127,260 .127,260 01/01/2015 550,000 5.600%127,260 677,260 804,520 07/01/2015 . :111,860 111,860 01/01/2016 580,000 5.600%111,860 691,860 803,720 07/01/2016 :95,620 95,620 © 01/01/2017 610,000 5.600%95,620 705,620 801,240 07/01/2017 :78,540 78,540. 01/01/2018 645,000 5.600%78,540 723,540 802,080 07/01/2018 ..60,480 60,480 01/01/2019 680,000 5.600%60,480 740,480 800,960 07/01/2019 41,440 41,440 |01/01/2020 720,000 5.600%41,440 761,440 802,880 07/01/2020 ;21,280 21,280 01/01/2021 760,000 -§5.600%21,280 781,280 802,560 8,000,000 .4,034,800 12,034,800 12,034,800 NET DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $7 Million in Proceeds,15-Year Amortization Period Total Debt Service Net Ending Debt Service ReserveFund Debt Service 01/01/2007 803,000 "36,880 766,120 01/01/2008 *803,120 36,880 '766,240 01/01/2009 802,120 36,880 765,240 01/01/2010 800,000 36,880 763,120 01/01/2011 801,760 36,880 764,880 01/01/2012 802,120 _36,880 765,240 01/01/2013 ,801,080 36,880 764,200 01/01/2014 803,640 36,880 766,760 -01/01/2015...:804,520 _36,880 767,640 01/01/2016 803,720 36,880 766,840 01/01/2017 801,240 36,880 764,360 01/01/2018 802,080 36,880 765,200 01/01/2019 -800,960 36,880 764,080 01/01/2020 '802,880 "36,880 766,000 01/01/2021 802,560 -836,880 -34,320 12,034,800 1,353,200 10,681,600 Taxable Revenue Bonds -$7 million 20 years SOURCES AND USES OF FUNDS Alaska Energy Authority Rail Belt Utility Group Intertie Project Taxable Revenue Bonds,Series 2006 $7 Million in Proceeds,20-Year Amortization Sources: Bond Proceeds: Par Amount 7,875,000.00 7,875,000.00 | Uses: Project Fund Deposits:: os "Deposit to Project Fund 7,000,000.00 Other Fund Deposits:: Debt Service Reserve Fund 677,050.00 Delivery Date Expenses:: Cost of Issuance .53,127.25 Underwriter's Discount 144,062.50 197,189.75 Other Uses of Funds: Contingency 760.25 7,875,000.00 wsBOND DEBT SERVICE Alaska Energy Authority Rail Belt Utility Group Intertie Project .Taxable Revenue Bonds,Series 2006 $7 Million in Proceeds,20-Year Amortization Annual Period Debt Debt Ending -Principal-Coupon Interest Service Service 01/01/2006 ;07/01/2006 228,375 228,375 01/01/2007 220,000 5.800%228,375 448,375 676,750 07/01/2007 221,995 221,995 01/01/2008 230,000 5.800%221,995 451,995 °673,990 07/01/2008 a 215,325 215,325 01/01/2009 245,000 .5.800%215,325 460,325 675,650 07/01/2009 .Te 208,220 208,220 _ 01/01/2010 260,000 5.800%208,220 468,220.676,440 07/01/2010 200,680 200,680 01/01/2011 275,000 5.800%200,680 475,680 676,360 07/01/2011-.-192,705 192,705 . 01/01/2012 290,000 5.800%192,705 482,705 675,410 07/01/2012 ,184,295 184,295 01/01/2013 305,000 5.800%184,295 -489,295 673,590 07/01/2013 .175,450 175,450 01/01/2014 325,000 5.800%175,450 500,450 675,900'07/01/2014 166,025 166,025 01/01/2015 345,000 5.800%166,025 -511,025 677,050 07/01/2015 156,020 156,020 |- .01/01/2016 365,000 5.800%156,020 521,020 677,040 07/01/2016 145,435 145,435 01/01/2017 _385,000 5.800%145,435.530,435 675,870 07/01/2017 ,134,270 134,270 . 01/01/2018 405,000 5.800%134,270 .539,270 673,540 07/01/2018 122,525 122,52501/01/2019 430,000 5.800%122,525 552,525 675,050 07/01/2019 110,055 ==110,05501/01/2020 455,000 5.800%110,055 565,055 675,11007/01/2020 '.96,860 96,860 01/01/2021 480,000 5.800%96,860 576,860 673,720 07/01/2021 .82,940 82,940 : 01/01/2022 510,000 5.800%82,940 592,940 675,880 07/01/2022 68,150 68,150 01/01/2023 ,540,000 5.800%-68,150 608,150 676,300 07/01/2023 , :*.52,490 52,490 01/01/2024 570,000 5.800%§2,490 622,490 674,980 07/01/2024 ;35,960 35,960 01/01/2025 605,000 5.800%35,960 640,960 676,920 07/01/2025 18,415 18,415 01/01/2026 635,000 5.800%18,415 653,415 671,830 7,875,000 5,632,380 13,507,380 13,507,380 NET DEBT SERVICE ;Alaska Energy Authority ;Rail Belt Utility Group Intertie Project =Taxable Revenue Bonds,Series 2006 $7 Million in Proceeds,20-Year Amortization Period Total _Debt Service Net Ending Debt Service Reserve Fund "Debt Service 01/01/2007 676,750 31,550.54 645,199.46 01/01/2008 673,990 31,550.54 642,439.46 01/01/2009 675,650 31,550.54 644,099.46 01/01/2010 676,440 31,550.54 ©644,889.46 01/01/2011 676,360 31,550.54 644,809.46 01/01/2012 675,410 31,550.54 643,859.46 01/01/2013 673,590 31,550.54 642,039.46 01/01/2014 675,900 31,550.54 644,349.46 01/01/2015 +677,050 31,550.54 645,499.46 01/01/2016 677,040 31,550.54 645,489.46 01/01/2017 675,870 31,550.54 644,319.46 01/01/2018.673,540 31,550.54 641,989.46 01/01/2019 ,875,050 31,550.54 643,499.46 01/01/2020 -675,110 31,550.54 643,559.46 01/01/2021 673,720 31,550.54 642,169.46 01/01/2022 675,880 31,550.54 644,329.46 01/01/2023 676,300 31,550.54 -644,749.46 01/01/2024 674,980 -31,550.54 643,429.46 01/01/2025 676,920 31,550.54 645,369.46 01/01/2026 671,830 708,600.54 -36,770.54 13,507,380 1,308,060.80 12,199,319.20 INTERTIE OPERATING COMMITTEE MEETING July 21,2005MatanuskaElectricAssociation Conference Room Verbatim Transcript 1.CALL TO ORDER Chairman Dale called the meeting of the Intertie Operating Committee to order on July 21,2005.A quorum was established. _Members present:Henri Dale,(GVEA),Bernie Smith (AEA),Brian Bjorkquist (Department of Law), John Cooley (Chugach Electric,OC Vice-Chairman),Paul Williams (Dryden &LaRue),Tom Kelly (Matanuska Electric),Doug Hall (ML&P),Bob Drake (MEA),Bob Day (ML&P),Frank Bettine (MEA),Brian Hickey (Chugach Electric),Jim Walker (MEA) 2.PUBLIC COMMENTS [INDISTINCT DISCUSSIONS:STARTED AT 0450 ON THE TAPE COUNTER]- Chairman Dale:|sent out two sets of meeting minutes;the April 21"from GV and on June 9"we had interim meeting at AIDEA.I'd like everybody to review or comment on those minutes.|!dohavesomecommentsontheJune9"minutes.In my email |mentioned the title of the documents as being approved by the Committee but it's still considered draft.Various people's names weremisspelled.[I'm in there twice;once spelled correctly and the 2 time incorrectly.Charley keene [indistinct]...From Chugachis John Cooley.From Homer Mr.Bob Drakeis actually Mr.BobDrakefromMEA. We were at AIDEA and|think he held over.There were two things going on and |think he wasthereintheoffice;he's a member of the IOC.. Chairman Dale:There was a member there before him that was there.__[indistinct]..... Chairman Dale:Last time,not this set of minutes but the time before,and |know you weren't here, there was a large argument that the members of the IOC be separated from visitors and the representatives from MEA and AEG&T. It was asked that they be separated in the January minutes. [indistinct conversations] Chairman Dale:So we were joined by Brian Hickey (Chugach Electric). Also on the June 9"minutes,there is a reference in the 2™page about /%way down to the 138 KB line;that should be read "KV line”.On the 3"page about %way down there is a quote from me; apparently |was incoherent at the time.I'm not sure what I was getting at and the author wasn't either.|don't exactly remember the context of it.We were obviously talking about not being able to do controls at certain times due to the rivers being frozen;that sort of thing.We were talking IOC Meeting Minutes =«July 21,2005 Page 2 about access and what was safe.|don't exactly remember what |said so |don't have a problem striking it.It may very well be what |said. There's one more on the last page reference to the IOCMSC.There was some discussion at the time having to do with Martin....[indistincf]..... Any other comments? Bob Drake:At some point in the June 9"meeting you'd made a comment that [indistinct] instructed to stop work on his project.There was no mention in the April minutes. Chairman Dale:|don't remember a vote or what we said.My recollection was that the tower project that they were doing would use the remaining monies of that project to do the other things we'd asked them to do based on the spreadsheet.|don't remember a vote as such. Any other comments on the minutes? John Cooley:On the 2™page under ......[indistinct]...,the TOC authorizes a base beeeee [indistinct]...and |think the word should be "requires”a base project and in the nextparagraph,the 2™sentence goes,"that's basically "The first part is the electrical component whichis4%ft per 135 KV”and delete the rest of that whatever.....and then the 3”to the last paragraph it says (lets change the last sentence to read),"from the design standpoint,it is usually less than 3 feet'.The last paragraph,"the final calculations”...........change the word "calculations”to minimum clearance,snow depth,and then continue with data and obstruction height. That's it. John Cooley:After the work order what was the decision on the wording error;the decision "fromthedesignstandpoint"?Bob Drake:"It is usually less than 3 feet”. Bernie Smith:|think "1 to 3 feet'would be more appropriate. Chairman Dale:On adoption for our meeting,we will adopt the June 9"minutes withmodifications.What about the April 21"minutes? Chairman Dale:April is ok as submitted.Any other comments or is everybody reading? Chairman Dale:Modification of the agenda.You have the agenda before you.Are there any changes or additions anyone would like to add to it?There are two things in there that are not commonly in our agenda is the discussion of some outages that we've had recently. Bob Drake:The only change |request we make to the agenda is under 6L.That's an opinion and not a fact so it should be stated in such a way as to not look like a fact. Chairman Dale:oe.additional changes.Well,we will approve it then.Any reports and Doug Hall:Dispatch Sub-committee met/conducted a teleconference Tuesday at 10 o'clock.The primary was discussing the outages that have been occurring ahd maintenance.Primarily was the outage that occurred last Thursday.It had a significant impact on the electrical system.[indistinct] One of the biggest things the Dispatch Sub-committee came up with was communications between control centers.The Dispatch Committee is meeting next Tuesday prior to [indistinct] . 1OC Meeting Minutes July 21,2005 Page 3 Chairman Dale:Reliability/Protections Sub-committee.As far as |know right now they haven't met.Last regular meeting we assigned Doug Reuter to be the chairman.As far as |know he hasn't brought you guys together.Care to give us a status report on where you are? UNIDENTIFIED SPEAKER:|haven't heard anything from Doug. Chairman Dale:You guys haven't met this quarter? Doug Hall:No. Chairman Dale:Ok.[indistinct........]One of the big issues you have being at these meetings; there's a lot of things we need you guys to look at and if you can't do it yourselves,we need youguystoproposehowelseitistobedealtwith.|know we all have a lot of construction going on and I've written letters to Brian and others.They all say that you guys are really busy but there are things we need you guys to look at also.[I'll talk to Doug about getting you guys together. [indistinct], We're either gonna meet tomorrow.|think they were gonna meet on Friday.Anybody here that normally sits on that.|think Barton usually did;isn't he involved in that?Oh well,|know how it feels.,woe We were talking about "Machine Rating”Sub-committee.Barton used to sit on that;|assume that you do also,or will.[indistinct].Ok,so we'll be hearing from them when they do meet. [indistinct]and Communication Sub-committee.I've been seeing some information.....They were to have a recommendation for communications control center but at the time my understanding is that at the last moment there was some discussion on termination and |know that Paul Johnson is talking with my guy on that. Bernie Smith:What termination are you talking about? Chairman Dale:Instead of using the old control microwave because ......[indistinct]...,we're talking about using fiber and it's called terminating at different locations.[indistinct.......] There was also some discussion that there be dual caps.That doesn't seem to be the case. Apparently we don't have dual caps anyway but one of the selling points they were working on was having...........and that may not be the case either,they are still looking at that. Heat Maintenance Sub-committee?We have the minutes from that.We discussed that. weeaes [indistinct]...Sub-committee had met,or some of the people did.There is a -Bernie did send out the minutes on that also.We have a topic before session to discuss the budget itself.1 guess Chairman Dale:Yes,everybody else wasn't sure whether we were meeting or not meeting and I'd called Baron the day before as |was on vacation |suddenly see that we were meeting tomorrow in Anchorage with a question mark behind it."l'?knew we were meeting. Doug Hall:They actually adopted a budget...... 10C Meeting Minutes 4 July 21,2005 Page 4 Chairman Dale:There was no vote to adopt which is why we're going to be discussing that one in session.My comment on the budget minutes is ......[indistinct]...attributed to working for MEA and there was something about this 3 FDS's having something to do with Bradley and it did not. Chairman Dale:Ok,Intertie Status Reports;|have seen some go through,any that we talked about at all in the Budget Sub-committee,any comments on the related status report? John Cooley:You have a question that said the outage reporting ......findistinct]....MEA getting those off the web and being able to update them.[indistinct] You need to fill out the data for years on any of those outages that affected you. Chairman Dale:Ok,communications received,major communications that we received......letters. One of the things that ......[indistinct]...ordered us to do was to have everybody send each other letters authorizing who was to follow up on that.|sent mine out.|don't know that MEA has responded.|think Tom was at our current meeting;he wasn't in position to say one way oranotherastowhothepersonisthattheauthorizedrepresentative.The Dispatch Sub-committee, when we met backin April,a day or two later,you guys had sent out your letters.Ok,then we got various proposals on statements of work mostly from Dryden &LaRue and Art having to do with snowload. Ok,we have some visitors.Any comments related to items on the agenda?After recess,|wouldrecommendthatwedeferuntillunchtime. Chairman Dale:Ok,we're in a work session.Dispatch Sub-committee,is there anything this body needs to discuss related to the activities that they are doing?Remember that the last time they met they discussed one of the reasons,outages....and we'll talk about that one later in work session;so is there anything else we need to discuss about the activities of the Dispatch Sub- committee? John Cooley:One of the things we need to discuss is _re-emphasize ...[indistinct]....communication,particularly as it involves switching...[indistinct]........ ..online without telling us its online....36 hours ...[indistinct].......dispatchers were working through the numbers figuring out why the numbers were out of range and we looked at manual points and yeah,there it is.It started yesterday about 1400 hours and we called MEA and asked them.........[indistinct]...We called yesterday about 1400 and there's the same thing.You guys choose to leave the switch open in the position,that's your prerogative,it's your switch,but we need to know when you're doing that because it does change the flows system,and depending on which way the ....it's significant and we need to Know when you guys are doing that......[indistinct]... In the control centers,we're trying to get everybody to talking to everybody else as far...[indistinct]. ..Way to improve communications between control]centers.What we need more than anything else is for supervisors to reaffirm with their people that it's imperative that you keep the other utilities advised of your actions and not just to pick on you because all of our people in kind do thesamething.They support this mentality where they think they are cut off from the world when they are not,they are connected to the world.What you do here impacts everything else.Pick up the phone and talk to Golden Vailey.It's just something as supervisors we need to make sure that all the people working in the control center understand. Chairman Dale:The other part is that they need to be specific whether than "can you help me”,or "have you got a little bit for me?” IOC Meeting Minutes July 21,2005 Page 5 Doug Hall:A little bit to MEA is a hell of a lot different than a little bit to you.And that is true;we have actually pulled communications off the tapes where one dispatcher says something,and knows exactly what he means but he says it in such a generic way like "can you help me”.Well, what are you looking for,reactive,real;exactly what kind of trouble are you getting?What the hell are you asking for and ask the questions specifically;say what you mean and mean what you say is what |tell my guys.Pick up the phone and say,"did you loose a unit,did you loose a line?” Something,be strong and specific.[indistinct] {indistinct discussions] Doug Hall:There is an excellent article in the Power News issue of May.It talks about what the Midwest.........[indistinct]....basically holding exercises now because .........[indistinct]....these blackouts.If we can't help each other,we're in trouble.This is what they are doing,they are setting up exercises to try to enhance communications between the control centers and actually putting the guys through drills because that's the key and our system is getting more complicated and more difficult to work than it was 20 years ago.We gotta get our people better adept to handling it and we're gonna have to step up to the plate and figure how best to get some hands on communication training that will allow .........{indistinct].......out there. Chairman Dale:|agree that the control centers do need to communicate with each other more.At one time just before the end,just before MEA got dumped off there was one of my guys I.think - went through you as ("Southern ")operator to one of your guys as Southern operator to tell MEA © they needed to reduce load and it became apparent that they were off.Your guys weren't too familiar with being a middle man in that position.Do you think that's where you should be,if I'm in an "islanded”position and |need to talk to MEA,should |be going through the southern operator; which is what we normally do? Chairman Dale:Yeah,that would normally be correct.|think the difference was even at that point in time;I'm not sure if.......[indistinct].....middle man You were islanded with MEA.|think that you were still sitting there thinking,"well you guys were out there......[indistinct]... Doug Hall:We didn't fully understand because of the 6 pages or 8 pages of alarms coming in. That fact that you guys were.......[indistinct]|don't think he understood;there was a breakdown in communications.Your frequency was not saved correctly. Chairman Dale:We had...[indistinct]......frequency but lousy voltage;we couldn't save a lot of voltage. Doug Hall:So |don't think he understand,and it was a breakdown in communication. Chairman Dale:One thing for you guys,|know you don't control the telephone people but during this outage and not uncommonly in other outages for whatever reason your phone book out here has Golden Valley listed and it's not uncommon for us to get MEA customers calling us with outages.|don't know why that is because MEA serves Cantwell..........and we do get a lot of them and we just tell them to keep on trying;that we don't serve that area.It's gone on for years and every time there's a big outage we get a few calls.It's just something you may want to talk to the telephone people about and clarify ............. There is some confusion in the telephone.Usually when you're having outages,we don't,so it's not a big thing for us;it's not like my guys are busy but there's some confusion for your membership. IOC Meeting Minutes July 21,2005 Page 6 Bob Day:Especially if they don't know who they are a member with [laughter,chatter] Chairman Dale:Reliability/Protection Sub-committee Chairman Dale:Guess we'll just say again what we've said before.I'll be getting with your chairman on that;all you guys,not just you but all the committee leaders,committee members need to get together.And now MEA have its representative for that?Is that gonna be Frank or do you have somebody else that's gonna be on the Committee. Bob Drake:We haven't talked about that yet but |think Frank will probably be involved. Chairman Dale:So is there anything that the IOC needs to discuss versus the work of the Machine Ratings people?I'm not aware of anything. [indistinct].......they are busy doing things,they have not produced anything yet but |know they have quotes from all the vendors and have me doing it.|don't have anything that needs to be discussed on that. Bob Drake:You were going to be replacing ("Douglas”).Have you? Chairman Dale:That's correct.We haven't yet,however,the engineer that's doing that work has been checking in to substations that we have those other meters at.|think he's back on the project.|think the last time |talked to you,it was going to be like fall or somewhere in that time period and we will certainly continue to have access to it also.We all are supposed to have accessbutnobodyhasbotheredtocall.. We also putting in a recording meter at Douglas that takes 15 minute data for the entire month. We have older recording meter that's getting harder to keep software updated on so we're replacing all our old stuff and we're replacing that one also since they are bringing us up to speed on that;we're supposed to be up to speed;gotta get that stuff installed.We have a really old PC sitting in the corner of our dispatch center.|don't even remember if it has Windows on it.It's software we used with those recording meters;!can't throw away that PC.The operating system it uses is the vintage that the DG's use,there's no upgrade for.Every now and then that PC starts making noise and we worry about it. Chairman Dale:Ok,the maintenance Sub-committee;is there anything this body needs to discussabouttheiractivities? Chairman Dale:There was a question we had the other day;apparently you guys had sent a copy of the clearing contract out to all the GM's or something like that.Steve sent it out.Why,after 6 months did that suddenly surface?|thought he'd received it. Doug Hall:Steve asked me to send this;one to you,Posey,Waggoner,Diane,[indistinct] Tape 2 (side 1) John Cooley:.....outside of a single year. BERNIE SMITH:|don't understand why one of them (indiscernible)one of them that goes. Chairman Dale:The SVC one is critical according to the procedures... 10C Meeting Minutes July 21,2005 Page 7 Bernie Smith:It's obvious that you need at least a spare for that particular one?Whether the maintenance plan works or not -|mean how long is it going to take you to get one (indiscernible). Chairman Dale:We would not be able to get one if it did fail.The manufacturing time to have something reverse engineered would be extensive.However,one of the topics that the Reliability Committee is supposed to look at is this need for the SVC is worded back in 1984 the way our systems were.Since then I've built the Northern Intertie,plus upgrading on 37+builder bar best which is just like SVC that's at the end of that 138 line. Chairman Dale:The intertie works just fine without the Healy SVC.The concern is that if it was -off and that you had a problem (many people talking at once,indiscernible)-by default that there could be damage to the Healy (indiscernible).It may be that Golden Valley releases you guys from the liability on the Healy unit. Chairman Dale:That kind of situation.|realize you guys don't understand all of what's behind this but there are a lot of options as it goes out.But right now we have a procedure that we follow that is written up in the mid-1980s that says when the Healy SVC is off you take the intertie |out ofservice.Bernie Smith:(indiscernible)rob parts from other SVs? Chairman Dale:Unfortunately you can't,with some parts you but there are parts that are unique to each one.Unfortunately when they build them the guy came out there -the back of the boardis all wire wrapped pins and they put components on as needed and didn't necessary document what they did so the motherboards are unique for each one and it would be debatablewhetheryouwouldbeabletolookatthatmassofwiresandinatimelymannerputtheproper components on the droper(sic)pins. BERNIE SMITH:So,that just means that you just go out and the Northern Intertie goes,we have to shut it down? |UNIDENTIFIED SPEAKER:Controlled shutdown. Bernie Smith:Controlled shutdown.That means that you would be the one to (indiscernible) GVEA.You depend on the (indiscernible).But you do backup correct?You do have enough power to generate MEA? Chairman Dale:Yes. Bernie Smith:It just costs you more. Chairman Daie: John Cooley:We depend on Golden Valley for spinning reserves. Chairman Dale:....barges,they would also have to carry larger staying reserves -it costs everybody,it is not just me -but |suspect I'm probably affected as much or bigger than anybody else.There are options,one of which is for our reliability... !OC Meeting Minutes July 21,2005 Page 8 Chairman Dale:...To look at are we in the same situation that we were back in 1984?Back in 1984,my night time load in the summer would drop down below 30megawatts.100 megawatts was something you didn't even think about -we were 70 or 80 megawatts for a peak load. Much different system now then we were then.The big thing is that the SVC is a huge -the best,which is a huge SVC compared to what we have installed.Further away but is that sufficient.We don't know but we'd like to know. Bernie Smith:As long as it keeps operating for x number of minutes. Chairman Dale:No,the best -the far side of the (indiscernible)is contiguous.As a matter of fact |can disconnect all of the batteries and it runs just fine. John Cooley:|have a question that's more for the Reliability Committee -would that be better to make a motion and give that to the System Analysis Committee.One thing that we probably ought to face up to is that thereis nobody on the Relo Committee who runs a PSSE anymore,that all went to the SAC of ASCC. (Indiscernible -many people talking at once) Chairman Dale:|don't see -|can't really delegate that to the ASCC as such.|can't delegatethings... (indiscernible -many people laughing/talking at once) Chairman Dale:At one time we had discussed that probably SAC is -the thing is -well,|don't know about the goods on both sides -essentially the same group of people that... Bob Drake:Yeah,but my question was how would we relay the Liability Sub-committee to delegate to the SAC... Chairman Dale:It's something that we would like to see done because it is an important issue. And... Chairman Dale:This is something that being delegated to the utilities,the utilities have absorbed the cost of their own people same as the dispatch centers are absorbing... John Cooley:|think it's a question is that you could just hire Cody to go do it. Chairman Dale:And that's one of the things that we asked them to meet,is how are you going to conduct business when you guys are too busy to do business -are you going to hire consultants,are you going to do that -and they cost money. Bob Drake:At the very least if we're going to do that,say that we hire (indiscernible)then do it. Chairman Dale:Cody would be using the proper model,but somebody needs to oversee what he's doing,interface with him,tell him what to do and make sure the results are reasonable. But,I'm pretty sure that through the stuff that Cody is using model. Bernie Smith:Does that have the best -the intertie model in it? Doug Hall:(indiscernible)last |heard. IOC Meeting Minutes July 21,2005 Page 9 Chairman Dale:|don't know.I've asked on several occasions if we got the parameters and | believe we do.But!don't know that he has. Chairman Dale:Okay.Shall we....So I'm going to put up for a vote itern 7 to not adopt the SVC.-Okay,Item G on the work session:Upgrade extension of intertie to Elin.We kind of talked about that.It's on our agenda as ongoing.Last |heard was it was in ML&P's board and it's just an update is that... Chairman Dale:I've seen a draft this morning (indiscernible)and |would like comments back and |don't know where -further negotiations with you guys or exactly what or...It's pretty rough -maybe.you can get it cleaned up and (indiscernible)the comments,even just that | made this morning were typo (indiscernible) John Cooley:So do you think it is close? Doug Hall:|don't see any reason why not. (Laughter,various people talking at once -indiscernible) Bob Day:This is being half a decade,and |hate to make it sound that bad but just getting aprojectmanagertostarttheprocessandthat's just unheard of. Chairman Dale:Okay. Chairman Dale:Anybody have anything to add onto that -we'll move on. Bob Day:It's just that it's the draft of the (indiscernible)they would be project managers.. Bernie Smith:(inaudible)if that happens,are ya all ready to start the project? Bob Day:You guys got to approve it -itis a stage thing. Bob Day:|did talk to Phil the other day on other things and he was saying that he has a... Chairman Dale :....must be looking for work or something saying they had people available and he really wanted to get started on engineering that project so they're -either business is slow or... Bob Day:Yeah. Chairman Dale :So anyways,they are interested in getting started so they are ready to doengineeringassoonaswegetpastthisprojectmanagementproblem.Again,Item H is probably a placeholder,|don't know if |should keep leaving it in there,|was expecting theCorpstorespondinatimelymanner...We'll justkeep it in there.As we all know,MEA,when the RCA gave the order,MEA went to the courts with it and we're waiting to hear back from them.That's your understanding also is that some day they'll give us a date.So basically that's a placeholder in the schedule to see how that goes.In the meantime we're getting our stuff in order with the RCA.The items they asked us to do. Doug Hall:(indiscernible)...do you guys want to receive all schedules? 10C Meeting Minutes July 21,2005 Page 10 John Cooley:The schedule (indiscernible)and that schedule can change almost two to three times an hour but sometimes 10 times a day,sometimes 12 times a day.|believe the order... Chairman Dale :.The order says that MEA's board delegate will be copied on everything.Now, ML&P is the Southern operator,they get all the paperwork.And I guess the question is ML&P getting all of the paperwork which we have access to look at?Is that what you want or do you want the sheets coming over your fax machine? Bernie Smith:That's a lot of paperwork. Doug Hall:Yeah,it's significant.No problem for my guys to (indiscernible)plus your time,the fax will be huge. Chairman Dale:Each one,we get a stack about that high,you know,of all the schedules. Bob Day:(indiscernible)if that's what you want.You just need to let us know.If you want it. Chairman Dale:Next issue is Item I,Interconnect Agreement.You guys are waiting on me to provide the draft -|haven't got that ready yet.The intent was that the way the Interconnect Agreement that all of the utilities'have agreed to so far really we're talking about small generation.I'm not talking about large generation,so...|will be providing you guys an update on that |don't have one at this time. John Cooley:Is this -|just gotta ask this question,is this -is this the one that Basin (sp)had put together that all of the utilities signed off on,|think it was a collaborative effort,|may have a copy of that here -it talks about.... Chairman Dale:Is that the new one or the old one that we're talking about here? Doug Hall:The old one. John Cooley:Chugach did one for small generations for our own system but |think people are more interested in,you know,if somebody put a 10 or 20 megawait... Doug Hall:The way this thing stays is less than 200 kw,above 200 kw,above a megawatt, well,there are some things |would do with somebody that was 1 megawatt than somebody that was 100 megawatts.There is a big difference between those levels. UNIDENTIFIED SPEAKER:You ought to look at what we did -you shouldn't be starting from ground... (many speakers at once -indiscernible) PRhaieman MVinairmanva lA.ic.nN section and |don't recall what was said. Chairman Dale:It's inappropriate for working with a large generator.For example |think the way this is wrote up,if this were a small generator you're responsible for coming up with 100% of your load,is that what you would expect from a larger generator or would we offer to share it with spinning reserves kind of concept. Doug Hall:Um huh. IOC Meeting Minutes July 21,2005 Page 11 Chairman Dale:Okay.So,we're waiting on that. Chairman Dale:I'll ask Brian.CEA's more modern copy. Doug Hall:|got it. Chairman Dale:Okay. Chairman Dale:Intertie insurance issues.That was the topic that Art had unless he has... Bernie Smith:(indiscernible)that |understand was do we want to spend $25,000 for the Patriot Act,in other words is there...terrorism insurance? Bernie Smith:...terrorism insurance.And |don't see any reason to spend it -it's not going to shut down if somebody blows up the intertie it's just going to make it more costly,so... Chairman Dale:Like good neighbors to the South? (Indiscernible -many people talking at once) Chairman Dale:What |was thinking was also,we did a comprehensive review and we're still reviewing it,but mostly done on Bradley Lake on various coverages.On what is appropriate in this day and age.1|think Mike Cunningham of Chugach spearheaded that -I'm envisioning something similar of that order -the amounts of insurance that we're all supposed to carry and that sort of things dates back to 1984 -are they appropriate figures in this day and age.It is certainly time for a review.There was a quantity put in the budget for doing that sort of thing,| believe it was $50,000.I'll leave that in there as a placeholder but since we have it budgeted we'll have the study done and then we'll have something to talk about in the future. Item K,Intertie snowloading problems and best practices.On the snow load problems,we had an interim meeting a month or so ago -various scenarios of what we could expect to see under the line with the snow conditions -criteria for designing lines -we were unable too -Chugach at that time had made a suggestion for a combination of them,the rest of us needed time to debate it:I'd like us all to decide what we want to do on that and we will be doing a vote on that. There was emails going back and forth and |think everybody was copied on it.Chugach had made a proposition -John had proposed that we use 23 feet as a minimum recommended ground clearance consisting of 4 ¥%feet of electrical,5 %feet of snow,1 foot safety factor and a 12 foot obstruction height,which could be characterized as a skier with a 4 foot pole.He also proposed that the operator would calculate for actual snow depth.If there was less than 5 % .feet on the ground could be allowed depending on actual footage.He says that Golden Valley in the email it says that they were good with that concept.ML&P in an email said they were good with that concept.MEA or AEG&T needed more time to study it and they did get back and emailed us that they did not believe that it was rated off,they did not believe it to be prudentbusinesspracticetorelyonloadcellsononlyonephaseonevery10"tower to tell what is happening on any conductor in any span.Therefore,AEG&T votes no to approving any minimum ground clearance as acceptable before the intertie is deenergized.We weren't actually asking for a vote but they stated what their position was. Does anybody care to discuss any changes to their opinion at this time.GVEA still feels that Chugach's proposal is a good one. IOC Meeting Minutes July 21,2005 Page 12 Bernie Smith:Were you waiting for ML&P? Chairman Dale:Yes,|did get a reply from ML&P. Bernie Smith:You didn't read it... Chairman Dale:No,|just verbally said --|didn't read it.Yes,we did get one from Doug and | got some comments from the State also. Doug Hall:Do you think that statement says it all or is there more you want to expand on or... Chairman Dale:no. Doug Hall:...detract from it,or...Okay.Has anybody changed their opinion from what they had in the emails? Chairman Dale:Nope. Chairman Dale:We will put it up for a vote. Bob Drake:There's one thing |might add.|remember looking at the snow report supplied by (indiscernible)Construction.If |remember right,on one particular day,the snow station at Susitna High School measured at 45 inches of new snow and the one in Talkeetna was just a couple of inches.Tremendous difference between snow stations that are 20 miles apart.That's why we view that it is just not appropriate to base some arbitrary number that is not completely arbitrary.On what conditions may be throughout the entire length of that section of the line - conditions can be vastly different from a few miles away -the way those snow monitoring stations are. Chairman Dale:My understanding was that there would be some kind of a spread sheet so that you would be looking at each station -is that... Paul Williams:...to look at what the snow pack was doing out there... Paul Williams:...at every station... Paul Williams:...basically means every two miles. Bob Drake:The snow pattern this year was significantly different then what we have seen in the past.The snow pattern this year provided unbelievable amount of snow to the entire area that we are talking about here west of the Parks Highway.Trapper Creek,8 miles in off the highway at Trapper Creek,they had 12 foot of snow.It was nothing short of -on the east side of the Parks Highway there was never more than 2 or 3 feet of snow.The conversations we have had with the National Weather Service have indicated that the patterns subs -ihey were pushing the storms up the mountain and they were holding by the mountain and just dumping.They used the Parks Highway,they said that west of the Parks Highway is getting dumped on and there is very little snow falling to the East.We saw the pattern the entire winter.It was an unusual year and there was conceivably heavy snows and it always seemed to stay west of the Parks Highway. Paul Williams:The other thing is with patrol there -if we do want to start looking at the snow pack itself they're basically wanting the entire look for the line,there is nothing keeping us IOC Meeting Minutes July 21,2005 Page 13 from adding a little bit more flexibility.If we want to have a peak at every mile or every half mile, that is certainly a possibility. Chairman Dale:We are still,as |understand,still planning on every 2 inches (indiscernible) _decided to patrol out or by command by the ML&P dispatch center.- Paul Williams:Somebody was... Brian Bjorkquist:MEA do you have any suggestions on how to improve the processes? Bob Drake:Well,there's a solution out here too.And that's (indiscernible)Part of our concern is that at the last meeting it was mentioned that they had no processes set.The snow needs to be taken care of.There needs to be a solution to the problem..Monitoring is not a solution to the problem. Bernie Smith:The estimates are from $18-$30 million... Chairman Dale:$32 million.The cost is only going to go up. Bernie Smith:So,question is who's... Doug Hall:ML&P's position is (indiscernible)for $32 million dollars we can build one hell of a fence around that right of way and keep people out.You can fence that right-of-way and keep people off a lot cheaper than you can do with inset towers with $32 million dollars.It's just aridiculoussolutionwiththosekindofcosts. Jim Walker:You wouldn't think it was a ridiculous solution if it was in your service center and if someone got killed... Doug Hall:Then |guess we need to look at... Doug Hall:...then your liable... Doug Hall:...(indiscernible)this is what they do in America. Jim Walker:(inaudible)The problem is that we are picking up all of the liability issues because if there is a lawsuit if someone gets electrocuted,their estate comes looking for MEA because it is an MEA Service center. UNIDENTIFIED SPEAKER:(inaudible) Jim Walker:The last time |looked it doesn't require you to be the owner to be on the lawsuit. Doug Hall:Andthat's the point.And the reality of it is,that's -the reality is every utilityrepresentedinadditionwwiththeStateofAlaskaisgoingtobenamedinthelawsuit.Golden se S Valley for buying,ML&P for selling,Chugach for State for owning it. ling,MEA for general purposes,and the Jim Walker:Probably AEA as owner and the utility responsible for maintaining and operating that track of the line. Doug Hall:Well,you maintain it,you don't operate it. 1OC Meeting Minutes July 21,2005 Page 14 Chairman Dale:Somebody was going to talk to you about the ability of removing snow load while it was energized.Did that every happen? Tom Kelly:Yeah.Actually,basically there are only two ways to go about this -either through a helicopter or you get out there on snow machines or an all track vehicle or something like that and I figure every time a storm comes through for seven miles of line (1 think that's about 5 to 10 miles)a line is usually impacted on the bigger snow storms.So,that's about $20,000 to clear out a line and if we wanted to do it where we clear out the pole line every time it builds up an inch or whatever else then that's somewhere around $50,000. Bernie Smith:How do you clear it off? Tom Kelly:(inaudible)....hot stick Doug Hall:...The helicopter would clear the line... (indiscernible -many people talking) Paul Williams:Yes,it really has to be done on the ground either with a stick or Tom mentionedabowandarrow. Paul Williams:It really depends on if the loads out and it sticks on there and basically the snow. starts to kind of freeze to the line and you get ice build up and it is extremely difficult to remove only a foot or two so that means walking the entire length of line he is clearing.If it's fresh snow that it will unload the stand. Tom Kelly:|take it,it was mentioned earlier that even if we did inset towers that would beseveralyearsdowntheline. Tape 2 (side 2) Chairman Dale:Okay,back to the budget.We were discussing the SVC.Let's continue on down naming off the big items and it looks like the SVC is going to be a contentious issue.The next good one |see down thereis the right-of-way clearing which sounds like having the moneyforclearingitinthisupcomingbudgetiswhereitisgoingtoneedtobeso|don't see a problemthere.It looks like we're not going to be spending anything last year.And $1,000.. Doug Hall:Last years'budget did not get spent? Chairman Dale:The $100,000.So that big increase probably is -and as |remember we did a 'mid-year budget authorization when the bids came in,so that's probably where that number came in.The insurance risk that was something Art did and we wanted to start with and to sort of do a review of if ihe amount of insurance we have is appropriate in this day and age.|think that was an estimate included in there.Well,no,|was down at $50,000,|missed the tower.Of the three towers that are having distress,we will be doing one of them and it doesn't matter which one that we do,but my understanding is the ones in Talkeetna are close enough together that we would like to do both of them when we do one for mobilization reasons. Doug Hall:The measurement... Doug Hall:That's right,it was in the winter and there was snow in the way or something... 1OC Meeting Minutes July 21,2005 Page 15 Paul Williams:(indiscernible)to determine... Chairman Dale:One of them looked like it had stabilized the other one.We weren't sure if we were getting different readings -we weren't sure because we were measuring in spring and one in summer and you know... Doug Hall:Have they ever gone out to confirm that measurement? Chairman Dale:There is a foundation -we thought there was a tower jacking -the grounds people went out there and cored holes and found that it was all ice lenses in the area and now it's --probably won't be anywhere -hopefully it will be under that,it's not looking like the foundation problem it's the ground is subsiding around it.It is not the pole jacking up it's the world lowering.It's not as bad or severe as it could be.|just heard a week.There's -the consultant,when you get this written,this is just discussion verbally,they haven't written the report yet.But we'll probably drill under it,fill up the gap where the concrete has come out around.We burrow under it,do some drainage repair and that will probably continue to be subsided as the ice lens melt out.Apparently they struck several,cored several holes and they were all substantial amounts of ice.It was just shear luck that the one spot that they drilled.for grounding was in rock and everything around it is ice or substantial amount of ice.We have that in there.ae Doing one of them this year,the other one is stabilized,and the other one we still aren't too sure of.Do the tree trimming and then that brings us back to the SVC. The budget,we've got a couple of expensive projects going on;the clearing and the foundation. That's over %million worth of projects there.I'm not sure that is a good year to be doing the SVC -our budget is over $1 million more than what it was last year and that's a 30%increase... Chairman Dale:Might even be a 50%increase depending on how you do the division. Chairman Dale:|want to hear everybody else's opinion but my feeling on the matter is that | would |ike to strike the one SVC out of there for this year. John Cooley:I'll go first |guess.Since we received three different budgets in the past 6 daysorso.Honestly that causes us some concern.Since obviously yours starts on January 1°it is difficult to take any drastic increase in expenses into account this late therefore,we are not authorizing you to proceed with any of these three proposals.The other thing is funding -the Intertie Agreement,the budget is supposed to be presented to participants 13 months prior to the adoption before the fiscal year starts,and obviously we are a long way from that. Chairman Dale:We haven't... LA mm tenmn JWe haven't done that since AEA disband Chairman Dale:Well,hopefully this isn't an indication that the legislature be funding... Chairman Dale:13 months. Chairman Dale:...to get it through the legislature and other things of that nature. IOC Meeting Minutes July 21,3005 Page 16 John Cooley:So in the absence of having the (indiscernible)we won't agree to any budget expect the extension of the previous budget approved for the fiscal year (indiscernible)With the possible exception of being increased costs for the railway clearing,which is something we approved earlier this year. Bernie Smith:We would probably want to include the increased expense for your wheeling right? John Cooley:Well,if it goes into the budget,it goes into the budget. Chairman Dale:Actually,there were several things that did go down.Let's look at them.|think it was the taking out the SVC at 1.1 that bring us down to 2.2 compared to 2.0 where we are then 10%of what the other budget was. Doug Hall:Would you still need the 55 from last year's SVC repair? John Cooley:No,that was a study wasn't it? Chairman Dale:Last year there was an SVC repair under FERC 570.Was that the transformers?. John Cooley:It was under spare parts. Doug Hall:Yeah,it was transformers. Doug Hail:That's only $12,000 in there,in reality.|mean... John Cooley:There's supposed to... , Doug Hall:There was a transformer for you guys.And we used that to provide... John Cooley:They didn't do that -they got --Golden Valley was going to order a new one. Doug Hall:Yeah,we ordered two new ones actually,one for us and one for Golden Valley. John Cooley:Well,|don't think they were... Doug Hall:So you think it was the transformer failure and not some work for the SVC... (Indiscernible -many people talking) John Cooley:...replacing the transformers,the two or three -|called to try to have a work order set up at the job site (indiscernible-coughing)transformer in there so we could get awayfromtheroundhouse. Doug Hall:lll ask him,|remember there was a 13 inch... John Cooley:|remember that now,|'ll have to ask him. Doug Hall:|think we're talking about two different transformers here.We were ordering some potential transformers that we had bought -we had two failures up there,one was a 1O0C Meeting Minutes 'July 21,2005 Page 17 (indiscernible)the other was a station service transformer,we actually had a fire in the control room. Doug Hall:Right,and that... Brian Hickey:You're right,we brought it back from Beluga because we had the big barge crisis over it.Getting on the barge,it was....We got it here,it may even be installed,|don't know. Doug Hall:...the reason we went ahead -we put it on hold for awhile and then what happened is the second drive back failed.The 2 year old... Brian Hickey:I'll check. Doug Hall:It may be done. Doug Hall:Yeah.|was thinking one of the outages he had he was doing something,maybe he broke it... Bernie Smith:So do we know if we need $55,000 or not? Doug Hall:Well,that's what |say,who cares... Chairman Dale:Yeah,|was just wondering if that was an ongoing... Doug Hall:No... | Chairman Dale:Nothing carries over. Chairman Dale:There are certain ongoing repair charges that are up in the upper parts.Since it had called SVC repair that was something specific so that would be taken care of. Doug Hall:But,if he hasn't done it... Chairman Dale:That's correct. Doug Hall:Energy projects shows 530 million kilowatt hours of what Golden Vailley's projection to take,is that correct? Chairman Dale:That is correct.I'm expecting that a large increase. Doug Hall:When's the North Pole plant going on there. , Chairman Dale:April/May somewhere around that in 2006. Doug Hall:When's the testing start? Chairman Dale:Two months prior to that.It is supposed to be commercial and towards the end of April.I'm pretty sure it is going to be toward the end of May at this point.There will be some testing before then. Chairman Dale:We have load growth of approximately 35 megawatts that we're expecting between now and then. 1OC Meeting Minutes July 2a,2005 -Page 18 Chairman Dale:Substantial amount of unit that you are going above that and coming off will be taken up by a lot of load growth and stuff. Chairman Dale:Alyeska has been electrified and the Pogo Gold Mine should start operations, it's the smaller ones that you measure with multiple hands above... Doug Hall:How do you know there's such a dramatic increase? Chairman Dale:Well,it goes back when we did the forecast for last year which was April a year ago,|was out forecasting $60 dollar a barrel oil,now that it's looking like $60 dollar barre!oil | expect to be buying a lot more night and day throughout the next year. John Cooley:So the projections would stay the same even if we cut the SVC's? Chairman Dale:By usage?Back when |made my projections of my usage was based on costssimilartowhatwewerealreadydoing,|wasn't expecting an $11 dollar megawatt hour wheeling at that time,|was figuring it would be something like it is now and that was based on that.If we clear things a couple hundred thousand either way that's not going to change things dramatically -if we come out with a couple of million dollars it will change projections.Catch 22 that you are always in when you are trying to budget -how much are you going to buy but you don't know how many...We'd run numbers to see what my purchases would be at the higher number although it's safe to say it would probably be lower which would escalate to an even _higher wheeling...The way -typically,basically the intertie is run at cost and what I'm saying is that it is the million dollars or cost.In this budget that we just had handed out and |would like to get it back down.We're doing two expensive projects;the clearing and one foundation and | don't mind doing a few studies;insurance and...- John Cooley:Not insurance,the insurance risk assessment. John Cooley:That $50,000 for that. Chairman Dale:We've got money in there to do a variety of things that we wouldn't normally be doing each year and I'd like to cut the SVC out of it. Doug Hall:(indiscernible)SVC should be running through that grant. Chairman Dale:Just in general,in any year not just this year? Chairman Dale:Yes. Chairman Dale:We'd all like to look at that but we'd also like to -you don't have to have an opinion now but when we do assignments something I'd like an opinion for the State on that. And,it is my understanding that it was to extend and upgrade ihe intertie to the extent that there is money left over from the by-pass.It was that everybody's understanding that could be put toward upgrade sort of projects. Bernie Smith:Is this a State...where the legislators approved it... John Cooley:If it's an appropriation in 2000-2001. 1OC Meeting Minutes July 21,2005 Page 19 Chairman Dale:This is really for the State and ML&P,we got a work item on this to discuss but come up with a project management agreement which |understand has actually been sitting in ML&P's court since July -at the last set of meetings Art said it was in the State's court but I'm hearing that was back in January/April. Brian Bjorkquist:Since end of March and in the middle of May they had a word version of it so they could edit it.So basically nothing has happened since then to my knowledge. Chairman Dale:Anyway,our assumption with several of these things,both the foundations and the SVC was monies left over from that project could be used. Bernie Smith:You have to go back to the intent of the law. Chairman Dale:It's a short paragraph... Brian Bjorkquist:I'm aware of this Bernie,and we can look into it and there have been other expressions from various utilities as to what can and can't be done with the monies.So,it is not just an opinion from the State,it is looking at anything. Chairman Dale:I'm not expecting something right here at the table here.It's just long and drawn out and that we may not ever be able to use then a Jot of stuff that I'm putting offis based -on that !think that it can be used.If I'm wrong then |need to know about it. Bernie Smith:How much did it appreciate? Chairman Dale:Well it's going to increase the amount that |pay by $1.1 million dollars.For something that is at cost sort of thing -operation of the intertie it goes up $1.1 million dollars. Brian Hickey:Well,from a maintenance perspective we'll continue to maintain it to the best of our ability.That ability is being degraded which will result in -in time it will result in longer outages to the intertie. Chairman Dale:We're aware of that. Brian Hickey:|actually support a package whether we go out for a bond sale or whatever we have to do to replace all three at the same time..: Brian Hickey:Rather than trying to push it in one at a time,you're asking for trouble,personally. Chairman Dale:|have concerns with committing the one,now you're trying to force us to commit the other two.It was raised earlier and we didn't discuss it,I'm not too sure that we can commit to future years in the IOC,this is really year to year sort of operation.With the ability of people backing out with relatively short notice and back when -|have concerns like you said of just going by our good faith along saying that in two years from now we agree that we will purchase this item from you -this third component or whatever,but we don't have the... John Cooley:Legally there are organizations that are not allowed to commit to future year purchases without a board of directors approval. Brian Bjorkquist:From the State's standpoint,we need money to pay for it before we could (indiscernible-coughing) IOC Meetiny Minutes July 21,2005 e Page 20 Bernie Smith:$60 dollar barrel of oil: Chairman Dale:|understand where everybody is coming from and anyways,if you guys have an opinion... John Cooley:If you got the $1,150,000 for the SVC out that leaves the budget at $2,176,000 and that puts ML&P's payment at $46,680;Chugach's at $72,830;and AEG&T is at $59,750 which is,you know,3-4 thousand dollar annual budget change,which seems like a reasonable way to go. Doug Hall:|understand your logical about the SVC's and seeing as how you are the one that's paying the lion's share of that bill,you better than anybody understand the ramifications.We cannot under the existing documents that we have fluctuate up... Chairman Dale:And you know which group we're going to be looking at don't you,Luke? Perhaps a year to see if that is still a valid elimination in line of having that vest and having that - other intertie coming out of Healy. Bob Day:Gray was looking at that. Chairman Dale:That's when he was... Bob Day:Okay. Doug Hall:My only concern here is the 250,000 dollars for (indiscernible)repair.If we determine that the Moody Slide area does not require work but Curry Ridge does,in the last estimate we had from Dale,he was talking more like $1/2 million to $3/4 of a million. Chairman Dale:Right.Originally,in Bernie's budget he had $750,000 for two of them. Doug Hall:For both Curry Ridge and Moody? Chairman Dale:No because Holy Cross is going forward. Chairman Dale:Right.(inaudible) Chairman Dale:Yeah.Okay.The $250,000 was something Rich had put in figuring there were problems on the one that is on the Golden Valley side.Which is now looking like it is less than that.And Bernie had --the line above it says zero in the budget that we have that you weren't able to attend.He had $750,000 and we had removed it at that time,or at least |request that it be removed.And it was brought up,the same thing,|remember now,is that we haven't gotten that set.One has to be moving and the other we aren't sure that it wasn't a bad reading at this point. Doug Hall:Right.But it seems to me that all said (indiscernible)If these readings are correct, it's not a question of if,it's a question of when the stacks would fall over -it's going to have to be addressed... 'Chairman Dale:We had mentioned that -John had reminded us that in the past we had made mid-year corrections.If we get readings saying that something bad has moved over there that's something that we had -one of the things that we wanted to do was get a budget that we could agree to at this meeting because we are in the next fiscal year.The being late is actually not 10C Meeting Minutes ;July 21,2005 | Page 21 uncommon for it to be ratified in the July meeting although it probably shouldn't be but first bills don't happen until you guys have heard voices in the middle of August so...You know,having the budget wasn't a big problem because the first bills with the new wheeling rates don't show up for another month from now.But!agree,and Bernie had brought up in the budget meeting that we really need to endeavor to have the budget ready for the fiscal year.That's the appropriate thing to do. John Cooley:Because there are so many expenditures that may increase in a project in the future,having most of you... Chairman Dale:And that's a good point.But... John Cooley:How do you prepare in advance of all of our individual budget years probably is appropriate too so that everybody... Bernie Smith:Does everybody have a budget -a budget starts in January 1... Chairman Dale:Yup. Bernie Smith:Why -1 mean can't you amend this amendment,this agreement that ya all have -and have a budget that..Loe. Doug Hall:Don't go there ..... John Cooley:Actually,the general managers are meeting tomorrow,it's my understanding, about this contract and hopefully they will have some kind of decision about how to fix some of this stuff. Chairman Dale:Right now we abide by what's in the Intertie Contract.The thing -one of the things that |find astounding that at one point in our history,if we all agreed to the same thing that's pretty remarkable.It may never happen again,it's happened once. John Cooley:When a contract was written in the early 1980's,the state legislature was set so that the state legislature would fund the operating expenses for the year and the utilities would reimburse the state as the year went on and the budget process had to go along with getting legislative approval ahead of time and all that kind of stuff.There was a big concern that if there overage the state general fund would get a hold of it,definitely the contract makes you zero everything at the end of the fiscal year and there is no way to carry any money over.The AEA got disbanded -APA turned into AEA and then disappeared and they quit doing that so we started sort of paying as you go.So that is where we are today.But,you know,what we really need is a repair fund or something that... Bernie Smith:R&R fund. John Cooley:...everybody contributes to and the excesses go into it and you fund these capitalrepairsandyouaudititbutit's never been set up. Chairman Dale:Okay.What we really need to do is to start managing like a business. (Indiscernible -many people talking) 10C Meeting Minutes wuly 21,2005 ",.Page 22 John Cooley:The only problem is,who's going to pay for it.You know,somebody says 1'll operate it and pay for everything,you know,that's... Bob Drake:It's the AEG&T handles all railbelts. Chairman Dale:We have different opinions on what that entity may look like too.We've discussed the budget and does everybody think they can go along with the $2.6 million is that a... John Cooley:Yes. Chairman Dale:$2,176,000. Chairman Dale:Basically,the budget as it is without the $1.15 million for the SVC in there? Chairman Dale:It's not quite what MEA has asked for which is an extension of the existing one but monetarily it is very close to the other one. Bob Drake:Actually itis.If you take the increase they have for their right-of-way,the increase in the budget.7 Chairman Dale:And the right of way clearly was something that was supposed to happen then...Yahoo,go with it. Chairman Dale:Okay.Then we get to section 7 on budget we'll have a move to adopt the budget as stated without the line item called SVC Repair. Bernie Smith:(indiscernible) Chairman Dale:What? Bernie Smith:That's one toward your goal. Chairman Dale:Like John said,there is a meeting... TAPE 3 Chairman Dale:Ok,any other discussion on intertie..... Brian Bjorkquist:|just had one thing;that concept is the basis for what was proposed with this de- energizing when you have a certain amount of weight on it;that that was an actual basis for trying to make a determination when the conditions were such that there is a possibility;and if there is some way to improve that -wonderful-but that was the basis for the proposal in the first place.| just want to make that ciear.So if anybody has any suggesiions,on,how to improve it.|think that's what we're about with moving forward with this and the 2™part that |hope nobody loosestrackofisthatwealsohavethe2™half where this is just the 1 stage where we're going to be establishing some parameters and we're going to have the independent engineer take a look at itandgiveusacertificationthatwe're accomplishing the safety factor type of thing.So there's that part coming also so whatever happens today is not the end of the discussion;if there's some way to improve it from the AEA's perspective.Anything we can do to improve it is wonderful. Bob Drake:[indistinct].....one phase every 7 miles.That's just not sufficient.[indistinct] IOC Meeting Minutes July 21,2005 Page 23 Doug Hall:Since we've had that and since we've been monitoring and we've sent Paul out to proof it,to accumulate information on the database.....[indistinct]......and typically we're at a good point now where we can predict because of the nature of the way the storms come through,we can predict where we are getting accumulations and we can see because we're not doing it .....-.[indistinct].....but from 50 to 70 it looks like we're getting accumulation,that's the center of the storm,that's where it's accumulating,.....[indistinct]...,that's what we're looking for.It's proven......[indistinct].......At least we've learned that. Chairman Dale:Ok,we have the majority of the utilities interactive using method of additive distances as Paul has presented.We will have a vote in the formal Operating Committee asking for recommendations on the AEA initiative that Mike ran off earlier.We'll put that up for a vote a little bit later.; , Ok,next issue.Anything going out on that subject? Ok,Item L -recent outages while the MEA 115 KV line was opened.We had a couple of cases with the extreme lightning we've had the 230 line is open that Chugach has where based on an outsider......[indistinct]....it appears that MEA lost significant amount of customers needlessly.If you or Chugach want to talk about .......Golden Valley ended up recording 55 megawatts of your load,approximately 50 megawatts of your load while |had 70 some-odd megawatts and trying to pull a frequency of 59 as high as |could get for about 25 minutes later.We finally had to dump it.Obviously that's not the way my system is designed to have a _ __like that from 60 megawatts importing to 50 some-odd megawatts exporting.Had your 115°line ...[indistinct].......closed,it would probably mean a non-issue.You guys still feeling that's in your best interest to run that way operationally? Bob Drake:Not arguing at all but at times there may well be an argument that having it closed is a good operating decision,but we have found through our own review......[indistinct]....The majority of the time,my system functions better when it's open.[indistinct] Doug Hall:Just so I'm clear,Is this the same issue that we talked about during the RCA/Porter negotiations?° Chairman Dale:|wasn't aware that you've had that from an outside view.|don't see a whole lot of what goes on there.The majority of the time |see you loosing half your load as opposed being able to keep it in and continue.Even though you've taken that one piece of loop and broken it so that only %goes out at a time,you've increased your exposure so that when ¥%goes out another big chunk of your load goes out with it and vice-versa on the other side.From all the outages that I've seen,I'm surprised that your numbers in your statistics are saying you've reduced consumer...[indistinct].... Doug Hall:|would agree with him because |deal with quite a bit of analysis on #4 and #5 and we _were having a lot of blackouts on the Kenai and at that point and time you guys had the best power ...[indistinct]...grid;better than Chugach because you had 3 sources.In the 80's when we had lots of systems blackouts Chugach commissioned SE!to study the grid and they produce a 1992 Southern Engineering Report that has .....[indistinct].....transmission lines.Basically we eliminated most of those blackouts that used to occur 3 or 4 times per year.One of the recommendations of SEI was that we close all .....[indistinct]....of the system.And we went through and did that.Andthat's a lot better way to run a transmission grid.It's much more reliable and it's closed.|find it hard to believe the stats are out there showing opposite,at least up until 1994-95 they weren't,so it would be interesting to look at all the data....[indistinct]....,and then we got some bad data,| guess. 10C Meeting Minutes ,July 21,2005 a Page 24 Chairman Dale:|appreciate everybody's comments but as |said before.......[indistinct]... Chairman Dale:Anybody have any questions on the outage of the 147 Doug Hall:We did have a chance to discuss it,at least in the Dispatch Sub-committee;Doug, myself,Steve from MEA.We discussed it quite a bit.One of my concerns at the time was that the Northern Intertie which contains a big chunk of you guys went .....[indistinct]......on several occasions and |did not see that going on in your system.....[indistinct]....At the time we went out and it was never restored.......[indistinct].....and that's why we never saw; every time we dropped down to......[indistinct].....He felt it was because you'd lost load and it stayed off ........[indistinct]......|had the issue I'd brought up about communication where we were going to talk to you through MLP but that didn't work out too well.As you know I have that relay in place that's supposed to look at rate of change and drop you guys off when we relay out during island conditions.We systemized it so we know that the rate of change is very high.That relay didn't work and we've had emails out trying to figure,find out why the rate of change triggered the reverse power of the 20 megawatts south triggered,there's also a correctional overturn element that triggered as it was supposed to and then dropped out so we think it was either something that ....[indistinct].....algorithm or something bad with relay itself.In either case that element isn't necessary for what we are doing so we will probably tum that piece of ....[indistinct]....off .».[indistinct]....since it is not being used.In this case it did drop you guys off immediately whichwecould've made the thing a very minor problem for us.)° .) Chairman Dale:I'm sure the reliability Sub-committee has a lot to add on to this.[indistinct chatter, laughter] John Cooley:.....If MEA had had a significant outage,our dispatcher would've realized where the problem was and we would've fixed it a lot faster. Chairman Dale:Unfortunately we had,my dispatcher felt pretty strongly that we would likely be islanded but your dispatcher felt pretty strongly that we were together so |didn't want to open up - if we were all going down,we all go down. Chairman Dale:I'm good with that [laughter,indistinct chatter] John Cooley:That's one of those cases of a little ...[indistinct]....,you guys say,"I'm at 59 and |can't hold it”and the other guy says "I'm at 59,9 and I've got a problem”. Chairman Dale:That was one of the problems in the first 5 minutes of frequencies trapped pretty good and that's when my guy called and checked frequency and we were reasonably close.And then immediately |have .........findistinct].....that he'd already checked frequency so that he didn't think that there was a problem and then of course your guy kept reassuring us that we were still tied together.Yeah,it was just bad luck that when they did check frequency it happened to be a time when we were crossing.What ....[indistinct]....said about continuing communications,hadtheykepttaikingtoeachotherandsay,"I'm going through 1"stage shedding,then you would've known we were definitely different at that point.We would've been able to close the situation a lot sooner.When Dennis checked,the first 5 minutes we actually,surprisingly,because |shed 72 megawatts we were real close to the ......[indistinct}.... Chairman Dale:Ok,|just wanted to bring that up;we keep seeing occasions where it looks like it's worse for you and it's certainly worse for us and I'm not seeing that many occasions where it's good for you. 10C Meeting Minutes July 21,2005 "Page 25 Bob Drake:My question is since you said you're willing to close it up for maintenance,how do we determine which ones of those are appropriate., Bob Drake:...findistinct]...request it be closed for some particular reason,we would certainly take that reason into account when we discuss it.....[indistinct]....your decision. Doug Hall:.......[indistinct]......|suggest we set the message.......[indistinct]...........that didn'thappenThursdaynight.They were talking but if your guy had said,"You know that's the 2™time I've gone through 59.0 and what the hell is going on down there?”the Chugach and MLP guys are sitting down here going,"what the hell is he talking about 59.0,we are running high” Chairman Dale:|don't know that he brought that up.After the initial,in the first 5 minutes,!think it was discussion going on and various times afterwards.|think when they told you guys you could start restoring load,which didn't help us a whole lot,they also told us we could start restoring load, and that's part of why we kept going for L59 is that we both put in for breakers and frequency go crashing down and my guys said,"you know what,it sure doesn't seem like we're connected.” Bob Drake:How is it that the 3 main generators are the same?It doesn't have a meter up there that shows the other generators,what the frequency is. Chairman Dale:-Part of,!don't see what's going on down here and they don't see what's going on.The 230 line was open on one end only and they tended to fixate at the end that was closed and everything looked good and breakers closed line must be in service instead of looking at the bigger picture,the whole picture. Bob Drake:........[indistinct]....showed me the frequency in the ....[indistinct]....area was 59 and mine was 62.|suspected that we were no longer glued together. Doug Hall:What we were saying here is that there was dispatcher error going on because there's a process,you can go to one map and it'll tell you whether you're idle or not and the guys didn't bring up that map on either assistance.There's dispatcher error and we're not saying guys didn't, you know,there's plenty of information out there and if you've ever been in a control center when the whole thing kinda ices on you......[indistinct]....There's plenty of information out there.......[indistinct]...... Doug Hall:We were absolutely .......findistinct]........until |talked to Kevin.When |asked how the hell did you have me island ......[indistinct]......He said,'It was easy,lightning struck the MacKenzie terminus and as a result we dumped you on the MacKenzie line.The breaker was outofservice.”These guys were on a 2™contingency.The day that breaker was taken out of service for maintenance,the loop should've been wiped out.........[indistinct]...that is it. Bob Drake:Doug,practically we have breakers out of service every day of every week of every year and the loop outta be closed all the time because theirs is;we don't have enough people to sit down and figure out all of the "M”minus 1 scenarios everyday that might take out ceeaeeees [indistinct]......because they chose to open the grid up.|wouldn't buy into that because coming out of me........[indistinct]... Doug Hall:But in this case you got MacKenzie plat 2,you got MacKenzie fueling line all on that one piece of .......You should take that breaker out.... Bob Drake:|understand how the system works Doug.I'm just telling you that we do that everyday of every week,365 days a year somewhere in this system there's a breaker or transformer out of 10C Wleeting Minutes »July 21,2005 Page 26 service and a dozen M minus 1 contingencies or a hundred for every breaker we take out and I'm not saying it could not be fixed figured out everyday with enough time and money an people but,- the answer's close up the transmission system.That's the freaking answer,it's not....[indistinct chatter,noise]..... Chairman Dale:One silver lining that |will add though is that apparently earlier that day MEA when they loop,did report it to .....[indistinct]...control centers.It was in his log and my dispatcher was ....[indistinct]....his memory because we talked about whenever open a loop you need to tell us.When they did open the loop,they did tell us.So at least that was one less thing they had to 'think about because it was just a few hours earlier,during the day shift -(this was 10 o'clock at night),but during the day they'd done some operations and they did report to everybody what they did. Doug Hall:And that's what happened last night. Chairman Dale:Alright,any other words on the recent outages?Hopefully this lightning season is a rarity.We've gotten more this year than we have any other year,even more than a decade. GENERAL DISCUSSION Chairman Dale:Anything anyone would like to discuss?Let's move on to 7;Formal Operating Committee Actions,and Acclamations., 3.Formal Operating Committee And Acclamations Chairman Dale:|have two letters for us to vote on.One is the Intertie Clearance Distance.Two proposals for our ...[indistinct]....One proposal is for,what I'll call is the CEA proposals,which is to use 23 feet of the minimum ground clearance,consisting of 4 %feet for electrical,5 ¥%ft for snow, 1 foot safety factor and 12 ft for obstruction height and also for the actual snow depth.....[indistinct]....Anyways,we have that proposal on the board,which we will vote on and then we also have the MEA proposal.......AEG&T.....So we have the one proposal;the CEA Initiative.Let's go around at the table on the vote: Paul Williams:Before we vote,if |can interrupt for a minute.The snow depth of 5.5 is what Chugach wanted and if it's less than that we interpolate;what is that?1!mean typically we have snow depths out there less than 40 inches so does that mean if it's 3 %feet and now instead of 23 we're at 21 or is there a safety factor you want all the snow capped at? Chairman Dale:I'm gonna let you read it here.My intent was that;5.5 feet was the max we've ever recorded out here.So this year if we only got 3 feet out there we could allow 2 %feet more clearance. Chairman Dale:Golden Valley will vote YES to adopt the CEA proposal.Chugach? John Cooley:YES Chairman Dale:....[indistinct,barely audible}....."The State” Bernie Smith:YES .Chairman Dale:MLP 10C Meeting Minutes July 21,2005 Page 27 Bob Day:YES Chairman Dale:.....[indistinct,barely audible]...."AEG&T” Bob Drake:No Chairman Dale:|show 4 Yes's and 1 No;80%and it passes. Chairman Dale:Ok,the 2™to vote on and that's the budget.The motion is to adopt the budget assubmittedwithoutthelineitemcalledSVCrepair. Chairman Dale:Golden Valley will vote YES to adopt.Chugach? John Cooley:YES Chairman Dale:....[barely audible]....."The State” Bernie Smith:YES Chairman Dale:MLP Doug Hall:YES Chairman Dale:.....[indistinct,barely audible]...."AEG&T” |Bob Drake:Yes Chairman Dale:The budget as modified is adopted. John Cooley:|think we need one more move to adopt the ....[inaudible "Net Peak']that's listed AEG&T 23.3 megawatts,MLP 18.2,Chugach 28.4 and Golden Valley 70. Chairman Dale:Are we required to adopt that or isn't the formula already there? Doug Hall:The formula's already there. John Cooley:We've always had it in the past. [indistinct discussions] Chairman Dale:|understand that......[indistinct]...1 don't have a problem with it.Actually Net Peak is a big deal even outside the budget typically because it happens in one direction;what | mean it's a non-issue but back in the day when .......[indistinct]..... John Cooley:If you end up not using all you say you used and made up for the deficit for the year, we get billed by it so |think it's important.And it's also just in case,you think somebody's lying about their peaks or something.It just makes it - Chairman Dale:|don't have a problem with that.Chugach has made a motion to adopt the Net Peak calculations as are proposed in the budget. IOC Meeting Minutes a July 21,2005 Page 28 Bob Drake:Excuse me but,that part |hadn't considered.|thought that this was something that was already a part of the process and if you have to approve it then I'm gonna have to go look at this closer. Chairman Dale:Is this a closer5 minutes or a closer longer than that?Ok,|guess we will not vote on that.|don't know that that stops the budget but the request that MEA has made is a reasonable request.|didn't have it on the agenda that we would be voting on the Net Per. Bob Drake:.......[indistinct]...long than that... [indistinct discussions] Brian Bjorkquist:On the Net Peak,if you look at §7.2.1,"the Operating Committee shall return aNetPerbyJune1"each year when a new participant becomes a party to this agreement". Doug Hall:It's just a share of that.......[indistinct]......for us to adopt that and |thought that share Brian Bjorkquist:............its is determined each year. Chairman Dale:It 'is'determined each year because it's based on your maximum through yearpeakdemand.oo : Brian Bjorkquist:Now whether that has to be voted upon for it to be determined or whether it's just a calculation that gets determined,|can't read that into this. Chairman Dale:|got last year's notes,July we were here and we voted on the budget but |don't show that we voted on Net Peak.|didn't bring any of my notes from prior to 2004. Bob Drake:Ok,lets go with the numbers that you got [indistinct]......'m not disputing this,|didn't realize that something was there for us to vote on John Cooley:In July of 2003 we're gonna go with the budget [indistinct] Chairman Dale:|was probably conducting the meeting last year and |didn't do it right did I?| wasn't aware that |was supposed to,so.... |guess it would change some parts of the budget if we did a vote on it next time.Steve Bob Drake:It would be fine with me if everybody wants to vote...[indistinct].......or Chairman Dale:And like so many things,it may not matter {loud laughter,indistinct comments] Chairman Dale:Historically |do not have it on the agenda by mistake.Historically it appears that we do generally vote on Net Peak outside of the budget because it does have other ramifications, +if;oo Inhn a ++al +t+hnn AlAtD 1 1 latinonmonetaryramMiications,SO vonn nas Mace a Motion to aaopi ine Wel reaKk Caicwiations. Golden Valley will vote YES on that,yes to adopt the calculations that are there.CEA: John Cooley:YES Chairman Dale:The State? Bernie Smith:YES 1OC Meeting Minutes July 21,2005 Page 29 Chairman Dale:MLP? Doug Hail:YES Bob Drake:YES Chairman Dale:Do you wanna abstain?[laughter,indistinct chatter] Ok,what we have,4 yeses and a question;it passes.It will only be an issue if some time in the next 12 months that the intertie "heads south”and you guys argue if you're gonna get a fair share and |think there is a ....[indistinct]....charge;that there is a monetary ....[indistinct]....charge that's tied up with that. John Cooley:No it's not,once they purchase......[indistinct]......they changed APA to AEA.Then they went away to fix the cash flow. John Cooley:If they can change that,how come you can't change the year end.......[indistinct].... wi? Chairman Dale:It was non-controversial.It's something we knew we were gonna pay and I'm notalawyer,|don't wanna get into their business. John Cooley:But there's no wording in here that says that the Operating Committee can't change this contract. Chairman Dale:Right there,there is a paragraph that we can't change the contract. John Cooley:It has to do with the rates or whatever,so. Chairman Dale:Right.Ok,we had 3 ....[indistinct]....|don't have.Assignments:Dispatch Sub- committee,there are things that they are doing.|don't think we have any additional assignments for them.Anybody recollect differently? Doug Hall:|do have an assignment......[indistinct] Chairman Dale:Ok,Reliability/Protection Sub-committee,|am assigning their chair to get that group together to discuss [indistinct chatter,laughter].We need to know what the solution to thatproblemis.[indistinct chatter,laughter] Machine Ratings:|have no assignments for those.Heater Metering,continue on,|have no additional assignments for them.Maintenance Sub-committee:Don't really assignments for the Maintenance Sub-committee unless somebody else does.We would like the body or one of the Maintenance Sub-committee needs to be appraised on your clearing contract or if you do end up having to go with somebody else or whatever,we just want to keep informed on that. Chairman Dale:Typically,and |don't know how bad it is down there,but the time is critical but it is something you have to do eventually and if you miss a month or miss a couple of months not a ...[indistinct].... Bob Drake:|will probably give thema letter that says he has two weeks to [indistinct] Chairman Dale:Ok,the Budget Sub-committee,we have no assignments for them. Bernie Smith:We are going to have a mid-year budget review. OC Meeting Minutes e July 21,2005 Page 30 Chairman Dale:...1OC to have mid-year to call the committee together for a review.We've never had one before we'll ask for it and maybe we'll get it.For next year the question is,of course, being several weeks into the fiscal year,is this something we wanna have behind us by the end of June? Bernie Smith:YES Chairman Dale:There was a recommendation in Kenai that if your year ends on June 30",itbetterbeoutthereandapprovedbeforeJune30". [indistinct,indistinct chatter,laughter] Chairman Dale:This is not an assignment but if John could provide me with the Qualified Interconnect Agreement that Chugach has.And last one,Bernie had brought up a good point as being quite some time since we'd gotten a list of all the names and emails of the members and alternates and Sub-committee members so |will send out each Sub-committee chair to compile a list their emails,send to me and |will send a copy to you Bernie so you will have an list of everybody. Bob Drake:Frank is on the committee and then can put himself on any committee he wants [indistinct chatter,laughter] Chairman Dale:So officially as of the end of this meeting Frank is the MEA rep and do you recall who your alternate was?Is it still whoever it was,which |don't remember?Charlie will be your alternate. Brian Bjorkquist:Excuse me.As|tried to explain that's not just a question for the State,that's a questions for everybody also because I've heard many opinions from many utilities represented at this table that are very conflicting and if you think that we are just gonna go out and tell you what it is,and,you know,|don't think that's going to happen. Chairman Dale:Ok,and assignment to ourselves to come back with what our utility........[indistinct] Brian Bjorkquist:We may have some discussions about how,what you think it means as what you thought it meant before and that type of a thing....[indistinct chatter,laughter] 'Chairman Dale:Ok,anything in particular anybody want to see on the next agenda?It will be at MLP. Doug Hall:In Oct or Jan? Chairman Dale:Next order is Oct,this is July,Aug,Sept,.......[indistinct] Doug Hall:There's 5 people and only 4 meetings per year,it doesn't stay the same. Doug Hall:We've been doing January for years. Chairman Dale:Last year when we did MEA,the next meeting we did MLP,|didn't look at the date on it. John Cooley:We did MLP in January. 1OC Meeting Minutes July 21,2005 Page 31 Chairman Dale:|think we did Chugach in January. [indistinct chatter] Chairman Dale:I have modified that agenda that we will meet at Chugach in October.|think | dropped AIDEA out of there because so many scheduled meetings that,uh.... Doug Hall:Plus AIDEA won't buy you lunch [indistinct chatter,laughter] John Cooley:.....[indistinct]....MEA and Chugach is on that day,so we need to move one of them. Chairman Dale:|will leave it on the agenda as October 20".If there is a conflict that you guys can't resolve,get back to me asap and I'm sure we can find out another time then. Doug Hall:We'll leave this one and change the other one to a week later?Ok. Chairman Dale:How many more assignments do we have;1 or 2?[indistinct chatter] John Cooley:There's like a $250,000 difference between this and here and it shouldn't have been. There maybe should've been a rounding error of $1,000 or something but I don't know'what you did wrong.Something's not right.[indistinct chatter,noisy background] RECORDING ENDS ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Letter to the Board of Directors September 23,2005 raWwel KPMG LLP Suite 600 701 West Eighth Avenue Anchorage,AK 99501 September 23.2005 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 30,2005,and have issued our report thereon dated September 23,2005.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 30,2005 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 contro]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.The Authority adopted the provisions of Government Accounting Standard's Board Statement No.40,Deposit and Investment Risk Disclosures,during 2005.No other new accounting policies were adopted and the application of existing policies was not changed during 2005. 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. KPMG LLP,a U.S.limited liability partnership,is the US. member firm of KPMG International,a Swiss cooperative. Rana The Board of Directors Alaska Energy Authority (a Component Unit of the State of Alaska) September 23.2005 Page 2 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 of potential loss are charged to operating expense through provisions for loan losses.The allowance totaled approximately $1.5 million at June 30,2005.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.In connection with our audit of the Authority's financial statements,we noted no misstatements that have not been corrected in the Authority's books and records as of and for the year ended June 30,2005 and have communicated that finding to management. 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,for example,Management's Discussion and Analysis.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 2005 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. Rane The Board of Directors Alaska Energy Authority (a Component Unit of the State of Alaska) September 23.2005 Page 3 %OR KKKOK 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 ENERGY AUTHORITY (A Component Unit of the State of Alaska) Financial Statements and Schedules June 30,2005 and 2004 (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 31 32 33 ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Management's Discussion and Analysis June 30,2005 and 2004 Overview of the Financial Statements The Alaska Energy Authority's (AEA or Authority)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. This financial report consists of three sections:management's discussion and analysis,basic financial statements, and supplementary schedules.AEA's operations are business type activities and are considered an enterprise fund.The Authority is a component unit of the State of Alaska (the State)and is discretely presented in the State's financial statements.The Authority's basic financial statements are the Balance Sheets;the Statements of Revenues,Expenses and Changes in Net Assets;the Statements of Cash Flows and the Notes to Basic Financial Statements. Basic Financial Statements The Balance Sheets report the Authority's assets,liabilities,and resulting net assets.The net assets are reported as invested in capital assets less debt,restricted and unrestricted.Restricted net assets are subject to external limits such as bond resolutions,legal agreements or statutes. The Statements of Revenues,Expenses,and Changes in Net Assets report the Authority's income,expenses,and resulting change in net assets during the periods reported. Both statements report on the accrual basis of accounting and economic resources measurement focus. The Statements of Cash Flows report the Authority's sources and uses of cash and change in cash balance resulting from the Authority's activities during the periods reported. The Notes to Basic Financial Statements provide additional information required to fully understand the amounts reported in the basic financial statements. Management's Discussion and Analysis This section presents AEA management's analysis of the Authority's financial position and results of operations at and for the years ended June 30,2005 and 2004.This information is presented to help the reader focus on significant financial issues and provide additional information regarding the activities of the Authority.This information should be read in conjunction with the Independent Auditors'Report,the audited financial statements and accompanying notes. Financial Highlights AEA's assets exceeded its liabilities at June 30,2005 and 2004 by $415 million and $420 million,respectively. Of the total net assets at June 30,2005,$142 million was invested in capital assets net of related debt, $46 million was restricted and $227 million was unrestricted.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. 1 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Management's Discussion and Analysis June 30,2005 and 2004 Financial Analysis Financial Position Total assets,total liabilities and total net assets at June 30,2005,2004,and 2003 follows (stated in thousands): 2005 2004 2003 Current assets $11,196 6,483 9,607 Capital assets 273,321 281,831 291,436 Other noncurrent and restricted assets 290.352 301.656 286.073 Total assets 574.869 589.970 587,116 Current liabilities 34,174 40,614 30,624 Noncurrent liabilities 126.051 129.681 133,405 Total liabilities 160,225 170,295 164,029 Total net assets 414,644 419,675 423,087 Total liabilities and net assets $574,869 589,970 587.116 Certain reclassifications have been made to the 2004 and 2003 information to conform to the 2005 presentation. Current assets were $4.7 million higher at June 30,2005 compared to June 30,2004 and $3.1 million lower at June 30,2004 compared to June 30,2003.Components of the changes were (stated in millions): 2005 vs.2004 vs. 2004 2003 Department of Defense grant expended (received)$1.7 (1.7) Increase (decrease)in receivable from other grants 1.3 (0.2) Net increase (decrease)due to loans originated, net of loan collections 1.7 (1.2) $4.7 (3.1) Capital assets were $8.5 million lower at June 30,2005 compared to June 30,2004 and $9.6 million lower at June 30,2004 compared to June 30,2003 substantially due to depreciation of capital assets. 2 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Management's Discussion and Analysis June 30,2005 and 2004 Other noncurrent and restricted assets were $11.3 million lower at June 30,2005 compared to June 30,2004 and $15.6 million higher at June 30,2004 compared to June 30,2003.Components of the changes were (stated in millions): 2005 vs.2004 vs. 2004 2003 Increase (decrease)in PCE Endowment Fund securities lending $(3.5)6.6 Department of Defense grant (expended)received (1.7)1.7 Increase in PCE Endowment Fund fair value 1.8 Southeast Energy Fund grant expenditures (7.9) $(11.3)15.6 Current liabilities were $6.4 million lower at June 30,2005 compared to June 30,2004 and $10.0 million higher at June 30,2004 compared to June 30,2003.Components of the changes were (stated in millions): 2005 vs.2004 vs. 2004 2003 Increase (decrease)in PCE Endowment Fund securities lending liability $(3.5)6.6 Southeast Energy Fund grant payment accrued (expended)(5.4)5.4 Increase (decrease)in short-term borrowings 0.2 (1.0) Budgeted revenues in excess of actual expenses on hydro and intertie projects 1.4 - Increase (decrease)in other accrued expenditures 0.9 (1.0) $(6.4)10.0 The decreases in noncurrent liabilities between June 30,2005 and 2004 and between June 30,2004 and 2003 were caused by the decrease in the long-term portion of bonds payable at each year end:there have been no new borrowings. The decrease in net assets from June 30,2004 to June 30,2005 and between June 30,2003 and 2004 resulted from the operating losses for those years offset by nonoperating investment income. 3 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Management's Discussion and Analysis June 30,2005 and 2004 Operations Components of the Authority's operating revenues,operating expenses,nonoperating investment income and operating loss for the years ended June 30,2005 through 2003 follows (stated in thousands): 2005 2004 2003 Operating revenues: Federal grants $42,442 34,592 24,354 Revenue from operating plants 16,680 14,161 15,582 State of Alaska appropriations 2,952 9,530 5,190 Other 1,780 1,834 2.696 Total operating revenues 63,854 60,117 47,822 Operating expenses: Grants and projects 46,926 45,861 31,087 Power cost equalization grants 15,575 15,461 15,565 Depreciation 10,006 10,312 10,373 Interest expense 8,553 8,782 9,004 Plant operating 4,044 4,306 3,257 General and administrative 1,539 1,583 1,757 Provision for loan loss and bad debt expense 170 (30)329 Total operating expenses 86,813 86,275 71,372 Operating loss (22,959)(26,158)(23,550) Nonoperating -investment income,net 17,928 22,746 9,015 Decrease in net assets $(5,031)(3,412)(14,535) Operating revenues increased $3.7 million during the year ended June 30,2005 compared to the prior year and were $12.3 million higher during the year ended June 30,2004 compared to the prior year.Components of the changes were (stated in millions): FY 2005-2004 FY 2004-2003 Net change Net change Increased grant revenue from Denali Commission $6.6 6.3 Increased revenue from other grantors 1.1 3.9 Fluctuations in Bradley Lake approved budget expenditures 2.0 (1.4) Increased (decreased)revenue from State of Alaska for Power Cost Equalization program (5.0)5.0 Decreased revenue from State general fund capital appropriations (1.0)(0.4) Decreased revenue from State Department of Environmental Conservation for contract completed during 2004 -(1.1) $3.7 12.3 4 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Management's Discussion and Analysis June 30,2005 and 2004 Operating expenses increased $0.5 million during the year ended June 30,2005 compared to the prior year and were $14.9 million higher during the year ended June 30,2004 compared to the prior year.Components of the changes were (stated in millions): FY 2005-2004 FY 2004-2003 Net Change Net Change Increased grant and project expenses in active rural energy construction projects $6.1 7.4 Increased (decreased)grant expenditures for Southeast Alaska intertie project (5.0)74 Increased (decreased)Bradley Lake plant expenses (0.3)1.0 Decreased other expenses (0.3)(0.6) $0.5 14.9 Nonoperating investment income increased during the year end periods substantially due to fair value gains in 2005 and 2004 on the PCE Endowment Fund investments.The PCE Endowment Fund 1s a managed long term fund intended to generate the income to fund the PCE program.The fund value fluctuates with market changes. Outlook Annual operation of the owned hydroelectric and intertie projects are per annual budgets approved by the utilities that use the assets and pursuant to bond resolutions and other agreements.Annual operation of the rural energy programs are per State of Alaska legislation,annual appropriations and federal grant awards. KPMG LLP Suite 600 701 West Eighth Avenue Anchorage,AK 99501 Independent Auditors'Report The Board of Directors Alaska Energy Authority: 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 30,2005 and 2004,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 consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of the Authority's internal control over financial reporting. Accordingly,we express no such opinion.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 30,2005 and 2004,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 23,2005 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 1 through 5 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. 6 KPMG LLP a US.limited liability partnership,is the US. member firm of KPMG International,a Swiss cooperative. Bana The Board of Directors Alaska Energy Authority 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. KPHcs.LEP September 23,2005 ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Balance Sheets June 30,2005 and 2004 (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. 2005 2004 6,581 3.765 2,745 1,061 554 687 1,316 970 11,196 6.483 22,025 21,801 247,146 258,351 21,181 21,504 435,124 433,628 (161,803)(151,797) 273,321 281,831 563,673 583,487 574,869 589,970 1,014 694 24,191 31,098 5,665 5,370 3,304 3,452 34,174 40,614 125,485 129,205 463 373 103 103 126,051 129.681 160,225 170,295 142,171 147,256 22,025 21,801 23,392 22,974 227,056 227,644 414,644 419,675 574,869 589,970 ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Statements of Revenues,Expenses,and Changes in Net Assets Years ended June 30,2005 and 2004 (Stated in thousands) 2005 2004 Operating revenues: Federal grants $42,442 34,592 Revenue from operating plants 16.680 14,161 State of Alaska appropriations 2,952 9,530 Revenue from state agencies 913 981 Interest on loans 827 701 Other revenue 40 152 Total operating revenues 63.854 60.117 Operating expenses: Grants and projects 46,926 45,861 Power cost equalization grants 15,575 15,461 Depreciation 10,006 10,312 Interest expense 8,553 8,782 Plant operating 4,044 4,306 General and administrative 1,539 1,583 Provision for loan loss and bad debt expense 170 (30) Total operating expenses 86,813 86,275 Operating loss (22,959)(26,158) Nonoperating -investment income,net 17,928 22,746 Decrease in net assets (5,031)(3,412) Net assets -beginning 419,675 423,087 Net assets -ending $414.644 419,675 See accompanying notes to basic financial statements. ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Statements of Cash Flows Years ended June 30,2005 and 2004 (Stated in thousands) 2005 2004 Cash flows from operating activities: Receipts from federal grants $39.626 36.499 Receipts from customers and users 18.606 14.263 Receipts from State of Alaska appropriations 3.278 9.721 Principal collected on loans 5.763 4.903 Receipts from state agencies 913 1.058 Interest collected on loans 598 763 Other operating receipts 40 24 Loans originated (7.294)(4.159) Payments to suppliers (14.286)(12.932) Payments to grantees (59.190)(50.032) Net cash (used)provided by operating activities (11,946)108 Cash flows from noncapital and related financing activities: Funds received in trust for subreceipient grantees -_(470) Net unremitted interest earned (returned)on federal grant advances 18 (9) Net unremitted interest earned (returned)on state appropriation advances (6)5 Net receipt from (payments on)operating loans from AIDEA 181 (975) Net cash (used)provided by noncapital and related financing activities 193 (1,449) Cash flows from capital and related financing activities: Principal paid on bonds (5.370)(5,085) Interest paid on borrowings (6,756)(7.043) Purchase of capital assets (1,496)(707) Net cash used by capital and related financing activities (13,622)(12,835) Cash flows from investing activities: Purchase of investments (36.824)(29,230) Proceeds from sales and maturities of investments 33.746 35.036 Interest received from investments 7,732 7.385 Net cash provided by investing activities 4,654 13,191 Net decrease in cash and cash equivalents (20,721)(985) Cash and cash equivalents at beginning of year 35,444 36,429 Cash and cash equivalents at end of year (note 3)$14,723 35,444 Reconciliation of change in net assets to net cash (used)provided by operating activities: Operating loss $(22.959)(26,158) Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation 10.006 10,312 Provision for loan loss and bad debt expense 170 (30) Bond interest expense 8.553 8,782 Changes in assets and liabilities: Increase (decrease)in due to State of Alaska 326 (61) (Increase)decrease in grants receivable (2.816)1,907 (Increase)decrease in loans receivable (1.531)744 (Increase)decrease in interest receivable (229)62 (Increase)decrease in operating revenue receivable 133 (167) Increase (decrease)in operating accounts payable (3.599)4.717 Net cash (used)provided by operating activities $(11,946)108 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 30,2005 and 2004 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.Among other things,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. 11 (Continued) (2) (b) () (d) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 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 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 year ended June 30,2004,AEA incurred $64,000 in costs for preliminary design work.No costs were incurred in the current year. 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. Summary of Significant Accounting Policies (a)Basis ofAccounting -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. 12 (Continued) (b) (c) (d) (e) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 Capital Assets Capital assets are stated at cost and depreciation is charged to operations by use of the straight-line method over their estimated useful lives.The estimated economic lives of the assets are as follows: Utility plant Life in years Intangible 30-50 Production 30-50 Transmission 20-40 General 5-30 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 money market funds. 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 nsks in the portfolio. 13 (Continued) (3) (g) (h) (i) @ (k) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 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, 2005 and 2004,there were no environmental issues which met both of these criteria and, accordingly,no provision has been made in the accompanying financial statements for any potential hability 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 Bradley Lake 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.These estimates impact revenue and expenses for the period.Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the 2004 financial statements to conform to the 2005 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). 14 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 At June 30,2005 and 2004 the Authority's carrying amount of deposits (all of which were restricted)was $14,723,000 and $35,444,000,respectively.The total of all bank balances was $15,813,000 and $37,117,000,respectively. The restricted and designated cash and investments were held in trust accounts for the following activities as of June 30,2005 (stated in thousands): Cash and cash equivalents Investments Total Power Cost Equalization Endowment Fund §7 192,337 192,344 Bradley Lake Hydroelectric Project 679 29,509 30,188 Rural Energy Loan Funds 5,528 14,341 19,869 Rural Energy Operations 1,145 18,261 19,406 Southeast Energy Fund 123 -_123 Funds advanced from State and federal agencies 1,247 -1,247 Power Development Fund 2,052 ---2,052 Power Cost Equalization and Rural Electric Capitalization Fund 2,434 -2,434 Alaska Intertie Project 1,508 -_-1,508 Total cash and investments $14,723 254,448 269,171 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 §$4 194,038 194,042 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 $35,444 244,708 280,152 15 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financtal Statements June 30,2005 and 2004 At June 30,2005 and 2004,amounts restricted for debt service totaled $22,025,000 and $21.801,000, respectively,for the Bradley Lake Hydroelectric Project. Investment Holdings Power Cost Equalization Fund -The Power Cost Equalization Endowment Fund (PCE Fund),created under Alaska Statute 42.45.070,is under the fiduciary authority of the State Department of Revenue, Treasury (Treasury).The purpose of the fund is to provide for a long-term stable financing source for power cost equalization in order to provide affordable levels of electric utility costs in otherwise high-cost service areas in the state. State investments are managed in pools.PCE Fund assets are held in the State's Short-term and Broad Market Fixed Income Pools,managed by Treasury's investment officers,and the State's Domestic Equity account and International Equity Pool,managed by contracted external investment managers.A complete description of the investment policy for each poo!is included in the State's CAFR (see Department of Revenue,Treasury Division,Policies and Procedures). Fixed income and international equity securities are valued each business day using prices obtained from a pricing service.The Domestic Equity account is valued each business day by the Trustee Committee in good faith and pursuant to procedures established by the Trustee.Securities expressed in terms of foreign currencies are translated into U.S.dollars at the prevailing exchange rates.Income in the fixed income pools and the International Equity Pool is allocated to pool participants daily on a pro rata basis.Domestic equity income 1s distributed quarterly. 16 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 At June 30,2005,AEA had the following cash and investments in the PCE Fund (stated in thousands): Cash Investements at Fair Value Short-term Broad market Securities fixed fixed lending Total Investment type income pool income pool Equity collateral Investments Deposits $-$-_-22 -22 Overnight sweep account 3 ---_- Money market -_-863 11,231 12,094 Commercial paper 194 ----_ U.S.Treasury Bills 142 -=-_-_ U.S.Treasury Notes 123 4,099 --4,099 US.Treasury Bonds -4,485 -_--4,485 U.S.Treasury Strips _-915 -_-915 U.S.Government Agency Discount Notes 31 154 --154 U.S.Government Agency -_3,262 -_-_3,262 Mortgage-backed 358 31,445 --31,445 Other asset-backed 1,005 2,208 --_2,208 Corporate bonds 455 14,763 --14,763 Yankee: Government -263 _-_-263 Corporate 17 318 -_318 Domestic equity _-83,270 -83,270 International equity -_--_-33,490 -_-33,490 Total invested assets 2,328 61,912 117,645 11,231 190,788 Pool related net assets (liabilities)22 (976)182 -(794) Other pool ownership (2,343)2,343 _--2,343 Net invested assets $7 $63,279 117,827 11,231 192,337 17 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 Other AEA Cash and Investments -Bradley Lake Hydroelectric Project investments are substantially invested pursuant to investment agreements with JP Morgan Chase Bank that end the earlier of July 1, 2021 or the date of repayment of the Bradley Lake Power Revenue Bonds First and Second Series.All other AEA assets are managed by AIDEA staff for liquidity.There is no wmtten investment policy; AIDEA staff manages AEA investments following AIDEA's internally managed investment policy for liquidity and minimal nsk.The AEA managed portfolio consists of the following eligible securities: °Debt instruments issued by the U.S.government,its agencies and instrumentalities; °Government National Mortgage Association,the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation mortgage backed instruments as well as asset backed securities; °Other money market instruments described in AIDEA'S investment policy. At June 30,2005,AEA had the following investments in its other funds (stated in thousands): Fair value short-term Investment type fixed income Deposits $60 Money market 14,657 U.S.Government agency discount notes 19,721 Mortgage-backed 12,882 Investment agreements 29,509 Total invested assets $76,829 Interest Rate Risk -Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Short-Term Fixed Income Pool -As a means of limiting its exposure to fair value losses arising from increasing interest rates,Treasury's investment policy limits individual fixed rate securities to fourteen months in maturity or fourteen months expected average life.Floating rate securities are limited to three years in maturity or three years expected average life.Treasury utilizes the actual maturity date for commercial paper and twelve month prepay speeds for other securities.At June 30,2005,the expected average life of individual fixed rate securities ranged from one day to ten months and the expected average life of floating rate securities ranged from less than one year to three years. Broad Market Fixed Income Pool -Through its investment policy,Treasury manages its exposure to fair value losses arising from increasing interest rates by limiting the effective duration of its Broad Market Fixed Income Pool to +20%of the Lehman Brothers Aggregate Bond Index.The effective duration for the Lehman Brothers Aggregate Bond Index at June 30,2005,was 4.16 years. 18 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 Investment Agreements -Bradley Lake Hydroelectric Project investments are invested pursuant to agreements with JP Morgan Chase Bank that guarantees annual interest earnings of 7.38%or 7.41%per annum until the earlier of July 1,2021 or the date of repayment of the Bradley Lake Power Revenue Bonds,First and Second Series.The investment contracts are collateralized. Under the Internal Revenue Code of 1986,certain earnings in excess of arbitrage yield on the Bradley Lake bonds must be rebated to the U.S.Treasury.The bulk of the Bradley Lake investments are subject to rebate. AEA Internally Managed Investments -There is no written policy for interest rate risk for AEA's internally managed investments,but AIDEA's policy is followed.The duration for the investments is 2 years or less. The maximum maturity of any issue shall be 3 years from the date of purchase. Duration -Duration is a measure of interest rate risk.It measures a security's sensitivity to a 100-basis point change in interest rates.Duration is a weighted average term-to-maturity of an investment's cash flows. Treasury uses industry-standard analytical software developed by The Yield Book Inc.to calculate effective duration.The software takes into account various possible future interest rates,historical and estimated prepayment rates,call options and other variable cash flows for purposes of the effective duration calculation.Duration for the AEA managed investments are as reported on Bloomberg. At June 30,2005,the effective duration by investment type (not including the investment agreements)was as follows: Effective duration (in years) Treasury managed AEA managed Money market -0.25 U.S.Treasury Notes 3.91 - U.S.Treasury Bonds 10.39 "- U.S.Treasury Strips 15.97 - U.S.Government agency 7.00 0.39 Mortgage-backed 2.41 1.76 Other asset-backed 1.31 - Corporate bonds 5.39 - Yankees:- Government 6.50 - Corporate 9.86 _ Portfolio effective duration 4.10 0.57 19 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 Credit Risk -Credit risk is the financial risk that an issuer or other counterparty to an investment will not fulfill its obligations and a loss will result. Treasury's investment policy has the following limitations with regard to credit risk:With the exception of the sweep account,Short-term Fixed Income Pool investments are limited to instruments with a long-term credit rating of at least A3 or equivalent and instruments with a short-term credit rating of at least Al or equivalent.For securities with long-term credit ratings,they may be purchased if the median rating of Standard &Poor's Corporation,Moody's and Fitch is A3 or equivalent.Asset-backed and nonagency mortgage securities may be purchased if only rated by one of the rating agencies mentioned above if they are rated AAA.Unexpected daily cash surpluses that arise in this pool are invested overnight in the custodian's repurchase agreement sweep account.Treasury does not have a policy to limit credit risk associated with the sweep account. Broad Market Fixed Income Pool investments are limited to securities with a long-term credit rating of at least BBB3 or equivalent and securities with a short-term credit rating of at least Al or equivalent.For securities with long-term credit ratings,they may be purchased if the median rating of Standard &Poor's Corporation,Moody's and Fitch is BBB3 or equivalent.Asset-backed and nonagency mortgage securities may be purchased if only rated by one of the rating agencies mentioned above if they are rated AAA. Treasury has no policy with regard to credit risk for the money market balance held in the International Equity Pool. There is no written policy with regard to credit risk for investments managed by AEA.Since AEA only invests in highly rated money markets and U.S.government and agency securities,credit risk is minimal. The Bradley Lake Hydroelectric Project investments are substantially invested in collateralized investment agreements,which minimizes credit risk. 20 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 At June 30,2005,the Pools managed by Treasury and the investments managed by AEA consisted of investments with credit quality ratings issued by nationally recognized statistical rating organizations as follows (using Standard &Poor's Corporation rating scale): Short-term Broad market fixed income fixed income International AEA Investment type Rating'pool pool equity pool managed Money market AAA -%-%3%19% Commercial paper A 8 _-_-- U.S.Government agency discount notes Not Rated 1 ---_- U.S.Government agency Not Rated -_-=- U.S.Government agency A -_--26 Mortgage-backed AAA 15 11 -- Mortgage-backed (Agency)Not Rated -41 --_ Mortgage-backed (Agency)AAA _-= 17 Other asset-backed AAA 39 3 --_- Other asset-backed A 3 --- Corporate bonds AAA 1 2 -- Corporate bonds AA 11 2 -_- Corporate bonds A 9 7 -- Corporate bonds BBB -12 -- Yankees -corporate A ]--- No credit exposure 12 16 97 - Investment agreements -_--_-_-38 100%100%100%100% 'Rating modifiers are not disclosed. The Domestic Equity Poo!managed by Treasury is an indexed account that is not rated. At June 30,2005,the securities lending collateral was invested in a registered 2(a)-7 money market fund that was not rated. Custodial Credit Risk -Custodial credit risk is the risk that deposits may not be returned in the event of a bank failure.Treasury's policy with regard to custodial credit risk is to collateralize State deposits to the extent possible.At June 30,2005,AEA's deposits managed by Treasury were uncollateralized and uninsured. With respect to AEA managed investments,amounts totaling approximately $14,600,000 at June 30,2005, are held in money market funds.The investment contracts are collateralized.All other investment securities are registered in AEA's name and are held by its custodian,the trust department of a commercial bank;therefore no custodial risk exists for these securities. 21 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 Foreign Currency Risk -The Commissioner of Revenue formally adopts asset allocation policies for AEA's PCE Fund at the beginning of each fiscal year which places policy limitations on the amount of international securities the PCE Fund is allowed to hold.The following policy was in place during fiscal year 2005 and invested assets included the following holdings at June 30,2005,for the fund's investment in the International Equity Pool: Policy Actual Power Cost Equalization Endowment Fund 17%+5%19.08% At June 30,2005,AEA's PCE Fund had exposure to foreign currency risk as follows (stated in thousands): Currency Fair value Deposits: Japanese Yen $22 Investments -international equity: Euro Currency 14,044 Japanese Yen 7,391 Norwegian Krone 396 Pound Sterling 7,820 Singapore Dollar 384 Swiss Franc 3,455 33,490 Total $33,512 Concentration of Credit Risk -Treasury's policy with regard to concentration of credit risk is to prohibit the purchase of more than five percent of a pool's holdings in corporate bonds of any one company or affiliated group.AEA has no written policy with respect to concentration of credit msk for its other investments. At June 30,2005,AEA's investments included the following concentrations greater than 5%(dollar amounts stated in thousands): Issuer Amount Percent Federal National Mortgage Association securities $26,793 10% JP Morgan Chase Bank collateralized investment agreements 29,509 11% 22 (Continued) (4) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 Securities Lending A portion of the funds managed by Treasury are in the Department of Revenue's securities lending program.Alaska Statute 37.10.071 authorizes the Commissioner of Revenue to lend assets,under an agreement and for a fee,against deposited collateral of equivalent fair value.The Commissioner 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. At June 30,2005 and 2004,the fair value of securities on loan allocable to the PCE Fund totaled $10,897,000 and $14,129,000,respectively.Associated expense for securities lending,$462,000 for fiscal year 2005 and $148,000 for fiscal year 2004,is included in net investment income. 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 collateralized at not less than 105 percent of their fair value.Fixed income security loans are collateralized at not less than 102 percent of their fair value.Loaned securities and collateral is marked to market daily and collateral 1s received or delivered the following day to maintain collateral levels. Cash collateral is invested in a registered 2(a)-7 money market fund.Maturities of investments in the money market fund generally do not match the maturities of the loaned securities because the lending agreements are terminable at will.Collateral securities may be pledged or sold upon borrower default. Since the Commissioner does not have the ability to pledge or sell the collateral securities unless the borrower defaults,they are not recorded in the financial statements.Securities under loan,cash collateral and cash collateral payable are recorded in the financial statements at fair value.The Bank,PCE Fund and the borrower receive a fee from earnings on invested collateral.The Bank and PCE Fund share a fee paid by the borrower for loans not collateralized with cash. 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 or its related income distributions.The Bank further indemnifies against loss due to borrower rebates in excess of earnings on cash collateral.Indemnifications are subject to limitation relating to war,civil unrest or revolution,or beyond the reasonable control of the Bank. For the years ended June 30,2005 and 2004,there were no losses incurred as a result of securities lending transactions and there were no significant violations of legal or contractual provisions or failures by any borrowers to return loaned securities. 23 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements (5)Capital Assets June 30,2005 and 2004 Capital asset activity for the years ended June 30,2005 and 2004 was as follows (stated in thousands): Capital assets: Intangible $ Production Transmission General Total capital assets Less accumulated depreciation for: Intangible Production Transmission General Total accumulated depreciation Capital assets,net $ Capital assets:Intangible $ Production Transmission General Total capital assets Less accumulated depreciation for: Intangible Production Transmission General Total accumulated depreciation Capital assets,net $ Balance at Balance at June 30,2004 Additions Deletions June 30,2005 14 --14 242,980 1,496 -244,476 185,600 --185,600 5,034 -_-5.034 433,628 1,496 -435,124 (3)--_(3) (64,057)(5,014)-(69,071) (82,731)(4,976)-(87,707) (5,006)(16)-(5,022) (151.797)(10,006)-(161,803) 281,831 (8,510)-273,321 Balance at Balance at June 30,2003 Additions Deletions June 30,2004 14 --14 242,284 696 -242,980 185,600 --185,600 5,023 11 -5,034 432,921 707 -433,628 (2)Q)-(3) (59,062)(4,995)-(64,057) (77,756)(4,975)-(82,731) (4,665)(341)-(5,006) (141,485)(10,312)-(151,797) 291,436 (9,605)-_281,831 24 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 (6)Long-Term Debt Long-term debt activity for the years ended June 30,2005 and 2004 was as follows (stated in thousands): Balance Balance at June 30,at June 30,Due within 2004 Additions Deletions 2005 one year Bradley Lake Power Revenue Bonds: First Series (a)$9.910 --9.910 3.270 Second Series (a)11,520 -_-_11,520 -_ Refunding,Third Series (a)48,235 -(3.200)45.035 105 Refunding,Fourth Series (a)41,850 -(2.170)39.680 2.290 Refunding,Fifth Series (a)30.640 --_30.640 -_ Total bonds payable 142,155 -(5,370)136,785 5,665 Arbitrage interest payable (b)373 241 (151)463 -_ Less bond discount and deferred interest (7.580)-_-1,945 (5.635)- $134,948 241 (3,576)131,613 5,665 Balance Balance at June 30,at June 30,Due within 2003 Additions Deletions 2004 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)$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 25 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 The minimum payments related to all bonds for the years subsequent to June 30,2005 are as follows (stated in thousands): Principal Interest Total Year ending June 30: 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 6,030 6,127 12,157 2011-2015 34,665 25,724 60,389 2016-2020 49,255 13,509 62,764 2021 23.740 1,29]25.031 $136.785 72,464 209,249 (a)AEA issued the Power Revenue Bonds,First and Second Sernes (Bradley Lake Bonds),in (b) 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 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. 26 (Continued) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 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 30,2005,the unpaid principal balance of the notes was $21,262,000 and the trust assets had a fair value of $22,584,000. 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 30,2005,the outstanding balance was $44,565,000. The Sitka Bonds are special obligations of AEA secured under a trust indenture by and between AEA and U.S.Bank 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. 27 (Continued) (7) (8) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 Loans The Authority administers the Power Project Loan Program,the Rural Electrification Revolving Loan Program and the Bulk Fuel Revolving Loan Program.Loans outstanding at June 30,2005 and 2004 are classified as follows (dollar amounts stated in thousands): 2005 2004 No.of No.of loans Amount loans Amount Power Project Loan Program 47 §$23,621 43 §22,105 Rural!Electrification Revolving Loan Program 4 909 8 1,208 Bulk Fuel Revolving Loan Program 39 1,232 38 743 90 25,762 89 24,056 Less allowance for loan losses (1,836)(1,491) $23,926 $22,565 Loans that are more than 90 days past due on which the accrual of interest has been discontinued amounted to $1,000,000 and $2,119,000 at June 30,2005 and 2004,respectively. An analysis of changes in the allowance for loan losses for the years ended June 30,2005 and 2004 follows (stated in thousands): 2005 2004 Balance at beginning of year $1,491 1,531 Recoveries 175 - Provision for loan loss 170 (40) Balance at end of year $1,836 1,491 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. 28 (Continued) (9) (b) (c) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 Property Alaska Intertie The utilities participating in the Alaska Intertie operating agreement retain the property risk associated with the Alaska Intertie. 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) 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 2005 and 2004,AEA expensed $2,560,000 and $2,437,000,respectively,for such services.In addition,AEA has a borrowing arrangement with AIDEA to provide working capital funds.At June 30,2005 and 2004,AEA had $1,014,000 and $694,000 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. 29 (Continued) (10) ALASKA ENERGY AUTHORITY (A Component Unit of the State of Alaska) Notes to Basic Financial Statements June 30,2005 and 2004 (c)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 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. 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 mnsurance 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. In the normal course of business,AEA also has various commitments,such as commitments for the extension of credit.At June 30,2005 and 2004,AEA had open loan commitments of $3,991,000 and $5,438,000,respectively. 30 Schedule | ALASKA ENERGY AUTHORITY (A Component Unit ofthe State of Alaska) Schedule of Bradley Lake Hydroelectric Project Trust Account Activities Year ended June 30,2005 (Stated in thousands) 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 30,2004 $8,822 $2,834 4,103 1,789 145 -295 646 28,634 Interest received 517 618 315 20 3 257 1 49 1,790 Bond principal paid (5,370)---_-_-_-(5,370) Bond interest paid (6,756)---_-__-__(6,756) Arbitrage interest paid ----_(51)---(151) Construction expenditures --_(4)(1,478)-_-_--_---(1,482) Operating revenue received --_---16,452 -__-16,452 Operating expenses paid ---_--__--(2,929)-(2,929) Transfers between funds 11,755 (618)1,582 =225 (16,184)3,274 (34)- Balance at June 30.2005 $8,968 12,834 5,996 331 222 525 651 661 30,188 See accompanying independent auditors'report. 31 Assets Current assets: Grants receivable Loans receivable Operating revenue receivable Accrued interest receivable Total current assets Noncurtent assets: Restricted cash and investments. Designated for specific purposes Loans receivable,net of allowance Capital assets Less accumulated depreciation Capital assets,net Total noncurtent assets Total assets Liabilities and Net Assets Current liabilities: Due to State of Alaska Accounts pavable Bonds payable -current portion Accrued interest Total current liabilities Noncurrent liabilities: Long-term debt,net ofcurrent portion: Bonds payable -noncurrent portion,net Arbitrage interest payable Other liabilities Total noncurrent liabilities Total liabilities Net assets: 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 30,2005 {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 293 _-(116)6,404 6,581 ---__-2,745 2,745-_417 8 _129 554 958 __-_358 1,316 1,251 417 8 (116)9,636 11,196 22,025 __--22,025 8,163 1,508 _3,299 234,176 247,146 __-__21,181 21,181 310,463 124,245 416 __435,124 (94,990)(66,397)(416)--(161,803) 215,473 57,848 _-=273,321 245,661 $9,356 _3,299 255,357 $63,673 246,912 59,773 8 3.183 264,993 $74,869 ---1,123 (109)1.014 1,492 1,908 143 (112)20,760 24,191 5,665 __-__5,665 3,304 _-==_3,304 10,461 1,908 143 1011 20,651 34,174 125,485 --__-125,485 463 -_-__463 103 ---_103 126,051 =_----126,051 136,512 1,908 143 toll 20,651 160,225 78,688 57,848 ---_136,536 22,025 -__--22,025 9,687 17 __19.323 29,027 __(135)2,172 225,019 227,056 110,400 57,865 (135)2,172 244,342 414,644 246,912 59,773 8 3,183 264,993 574,869 32 Operating revenues: Federal grants Revenue from operating plants State of Alaska appropriations Revenue from 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 toss and bad debt expense Total operating expenses Operating loss Nonoperating: Investment income,net Decrease in net assets Net assets -beginning Net assets -ending See accompanying independent auditors'report. ALASKA ENERGY AUTHORITY (A Component Unit ofthe State of Alaska) Schedule of Projects -Revenues,Expenses,and Changes in Net Assets Year ended June 30,2005 (Stated in thousands) Administration Schedule 3 Bradley Lake Alaska Larsen Bay and Power Hydroelectric Intertie Hydroelectric Development Rural Energy Combined Project Project Project Fund Programs balance $293 -_--42,149 42,442 15,325 1,345 10 --_-16,680 ----_2,952 2,952 --_-_-913 913 --_--827 827 ----40 40 15,618 1,345 10 -46,881 63,854 ----46,926 46,926 ----15,575 15,575 6,605 3,401 ---10,006 8,553 -__---8,553 2,717 1,300 27 --4,044 263 67 6 -1,203 1,539 -_---170 170 18,138 4,768 33 -63,874 86,813 (2,520)(3,423)(23)-(16,993)(22,959) 1,578 22 --16,328 17,928 (942)(3,401)(23)-(665)(5,031) 111,342 61,266 (112)2,172 245,007 419,675 $110,400 57,865 (135)2,172 244,342 414,644 33