Loading...
HomeMy WebLinkAboutAEA Board Meeting May 29 2007Ww xk Ww "SAIIBIEN.[=ALASKAx*Alaska Industrial DevelopmentWrAleExportAuthority 10. AGENDA Alaska Energy Authority Board of Directors May 29,2007 Anchorage,Alaska Following AIDEA Board Meeting CALL TO ORDER BOARD OF DIRECTORS ROLL CALL PUBLIC ROLL CALL PUBLIC COMMENTS PRIOR MINUTES -March 19,2007 OLD BUSINESS NEW BUSINESS DIRECTOR COMMENTS A.Director's Status Report of AEA Programs and Projects B.Next meeting date BOARD COMMENTS ADJOURNMENT-To be followed by a joint AIDEA and AEA Work Session 813 West Northern Lights Boulevard *Anchorage,Alaska 99503-2495www.aidea.org ¢907/269-3000 *FAX 907/269-3044 ®Toll Free (Alaska Only)888/300-8534 ©www.akenergyauthority.org Ww wsal **Alaska Industrial DevelopmentandExportAuthority =<ENERGY AUTHORITY ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS May 29,2007 10:50 a.m. Anchorage,Alaska MEETING MINUTES 1.CALL TO ORDER Chairman Notti called the meeting of the Alaska Energy Authority to order on May 29,2007,at 10:50 a.m.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Commissioner Emil Notti,Chairman (Department of Commerce, Community &Economic Development);Mr.Mike Barry,Vice Chair (Public Member);Deputy Commissioner Brian Andrews (Designee for Department of Revenue);Commissioner Leo von Scheben (Department of Transportation &Public Facilities);Mr.John Winther (Public Member). 3.PUBLIC ROLL CALL Staff present in Anchorage:Ron Miller (Executive Director);Chris Anderson (Deputy Director - Credit &Business Development);Brenda Applegate (Controller);Sara Fisher-Goad (Deputy Director -Operations);Brenda J.M.Fuglestad (Admin Manager);Leona Hakala (Loan Officer); Mike Harper (Deputy Director -Rural Energy);Chris Mello (Program Manager);Karl Reiche (Projects Development Manager);Karsten Rodvik (Project Manager);Mark Schimsheimer (Project Manager);Sherrie Siverson (Admin Asst);Jim Strandberg (Project Manager);Valorie Walker (Deputy Director -Finance);and John Wood (Technical Engineer). Others attending:Brian Bjorkquist (Department of Law);Judy Bockmen (Department of Law); Tim Bradner (Journal of Commerce);Kathryn Lamal (Golden Valley Electric Association);Mike Mitchell (Department of Law);and Jan Sieberts (Washington Capital Management). 4.PUBLIC COMMENTS No public comments. 5.PRIOR MINUTES -March 19,2007 The March 19,2007 minutes were approved as presented. 6.OLD BUSINESS No old business. 813 West Northern Lights Boulevard *Anchorage,Alaska 99503-2495www.aidea.org *907/269-3000 *FAX 907/269-3044 ®Toll Free (Alaska Only)888/300-8534 *www.akenergyauthority.org AEA Board Meeting May 29,2007 Meeting Minutes Page 2 7.NEW BUSINESS No new business. 8.DIRECTOR COMMENTS A.Director's Status Report of AEA Programs and Projects The status of AEA projects will be reviewed during the work session. B.Next meeting date The Board will be polled for the date of the next meeting. 9.BOARD COMMENTS There were no comments. 10.ADJOURNMENT There being no objection and no further business of the Board,the meeting was adjourned at 10:55 a.m. lepoSecretary,Alaska Energy Authority ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS March 19,2007 11:58 am Anchorage,Alaska MEETING MINUTES 1.CALL TO ORDER Chairman Barry called the meeting of the Alaska Energy Authority to order on March 19,2007,at 11:58 am.A quorum was established. 2.BOARD OF DIRECTORS ROLL CALL Directors present in Anchorage:Mr.Mike Barry (Chairman/Public Member),Deputy Commissioner Brian Andrews (Designee for Department of Revenue);Commissioner Emil Notti (Department of Commerce,Community &Economic Development);Commissioner Leo von Scheben (Department of Transportation &Public Facilities);Mr.John Winther (Public Member). 3.PUBLIC ROLL CALL Staff present in Anchorage:Ron Miller (Executive Director);Chris Anderson (Deputy Director - Credit &Business Development);Bruce Chertkow (Loan Officer);Sara Fisher-Goad (Deputy Director -Operations);Brenda J.M.Fuglestad (Admin Manager);Mike Harper (Deputy Director - Rural Energy);Karl Reiche (Projects Development Manager);Karsten Rodvik (Project Manager); Mark Schimsheimer (Project Manager);Jim Strandberg (Project Manager);Valorie Walker (Deputy Director -Finance);and John Wood (Technical Engineer). Others attending:Lou Agi (ML&P);Steve Agni (O'Malley Gardens LLC);Brian Bjorkquist (Department of Law);Tuckerman Babcock (MEA);Tim Bradner (Journal of Commerce);Henri Dale (GVEA);Ted Leonard (TCC&D);Malcolm Menzies (DOT/PF-SER);Jean McKnight (FNBA);Mike Mitchell (Department of Law);Bob Reagan (ML&P);Ken Vassar (Birch,Horton, Bittner &Cherot);Jim Walker (MEA);and Theresa Obermeyer (Self). 4.PUBLIC COMMENTS Theresa Obermeyer spoke to the group and discussed information available on several websites: The Alaska State Court System;the Alaska Permanent Fund Board Confirmation Committee;and her own personal website -www.tobermeyer.info.[Verbatim transcript available upon request] Verbatim Mr.Babcock,Matanuska Electric Association:|want to congratulate the board on holding a hearing on the public interest associated with potentially selling the Alaska Intertie.The MEA offer last December was genuine.It is an offer that we have discussed in the past.Basically the premise is the book value of the asset,MEA would be willing to discuss in confidential terms the details of what that offer would look like.|think the details of the offer are a confidential discussion.This is not something the board has shied away with respect to discussions with GVEA on the disposition of the Healy Clean Coal Plant or Homer Electric,the confidential discussions over that particular PSA and eventual offer to purchase.Obviously,once an AEA Board Meeting March 19,2007 Meeting Minutes Page 2 agreement is reached the terms would not be confidential.The reasons that MEA believes this is in the public interest include at the current state of affairs,the transmission system in the railbelt is completely regulated by the Regulatory Commission of Alaska with the exception of the Alaska Intertie.The Alaska Intertie is regulated by the Alaska Energy Authority directly and by the Agreement that is currently slated to expire between the various utilities that are part of the Alaska Intertie Agreement.The Intertie runs almost entirely through the MEA service territory.The difficulties with the Intertie especially revolved around the failure of the utilities that are part of the Intertie Agreement to come up with an actual mechanism for funding these repairs. At this time Chairman Barry asked Mr.Babcock to give his testimony later in the meeting under agenda item 7A. 5.PRIOR MINUTES --January 25,2007 The January 25,2007 minutes were approved as presented. 6.OLD BUSINESS No old business was presented. 7.NEW BUSINESS TA.Railbelt Energy Issues Update - Jim Strandberg,Project Manager,provided an update on Railbelt Energy Issues.Included in the board packet is a document entitled Status of AEA Projects March 2007 and a copy of minutes from the last meeting which includes a summary discussion of the five projects being discussed today. At the last meeting,four projects in the Alaska Railbelt and one project for southern Southeast Alaska were discussed.The four projects in the Railbelt include the Alaska Intertie Project,the Unified System Operator Project,the MEA Bypass Transmission Line Project,and the Eklutna Transmission Line Upgrade Project which are defined in the summary. Unified System Operator Project is funded by a legislative appropriation of $800,000 to study the railbelt grid authority concept.That concept envisions a unified system dispatch of generation and power flows and at the finance level,a collective process for planning and procuring new generation over the next 20 years.Under the direction that AEA received from the legislature,AEA will analyze the concept and establish whether it is of benefit to the railbelt rate payer.A draft RFP for a consultant or contractor selection is approximately 90%complete. An advisory group comprised of the Railbelt general managers held their initial meeting;the minutes of which are available on the AEA website.Since the initial meeting,Homer Electric Association has indicated an interest in participating.The planned schedule is to advertise and bring a contractor on board by late April.In addition,a technical conference that would provide education on electrical network interconnectivity for stakeholders in the railbelt has been proposed and is in the planning stages.We propose that public hearings be held on the disposition of public owned assets that are part of the railbelt,which includes MEA's offer to purchase the Anchorage Fairbanks Intertie. AEA Board Meeting March 19,2007 Meeting Minutes Page 3 MEA Bypass Project.In 2002,the legislature appropriated $20.3 million dollars to the Alaska Energy Authority to upgrade and extend the Anchorage to Fairbanks power transmission intertie.The intertie stretches from Willow to the Healy River;adjacent to Healy Unit One and Healy Clean Coal Project.This will upgrade and extend the line from the Teeland substation on Knik Road to the Douglas substation.The construction of this bypass line will parallel the existing MEA owned line currently being used to transmit power to the north.The project has been approved by the Intertie Operating Committee.Project development contract negotiations with Municipal Light &Power are complete.ML&P has that contract and will present it to their assembly.Mr.Agi informs me that at this time we do not have an assembly date for consideration of this contract.Having this work done by ML&P.was the result of a collaborative effort between AEA and the intertie participant utilities who decided this was the most efficientwaytogetthislineconstructed. Eklutna Project Transmission Line Upgrade.The legislature approved $19.3 million dollars as a grant to the Municipality of Anchorage and AEA was named as the grant administrator.This project consists of rebuilding the existing 115kv wood pole electric transmission line from Eklutna to the point where the Beluga 230kv electric transmission line intersects the line near Fossil Creek Bridge Tap.This line is approximately 22.5 miles long.This project isapproximately90%complete.. In response to the Board,Mr.Strandberg reported that ML&P has not reported any cost overruns associated with this project. Southeast Alaska and the Alaska BC Intertie Project.The legislature appropriated $3.2 million dollars to the Alaska Energy Authority to analyze and confirm the feasibility of a transmission - line to complete the Swan Lake-Tyee Intertie (between Swan Lake Power Plant and Tyee Lake Power Plant)and to construct a transmission line from the Tyee power plant to the Canadian border.The concept behind this is that the excess water energy being wasted at Tyee could be transferred to Ketchikan to offset increasing demands. The other major direction for the project is that a series of three storage hydro projects in the Petersburg area would be developed to produce 100 megawatts of power.This power would | first be used to satisfy Alaska's needs and the rest would be available for export through Canada into the British Columbia power market or even further south to compete in the greenpowermarkets. The consultant has provided a positive interim report about the completion of Swan Tyee Intertie,but has not addressed the issue of exporting power:we expect a draft final report in late March.At the request of the Southeast Conference,the consultant will present the draft final report at the annual Southeast Conference during the Intertie meeting.The advisory group is comprised of stakeholders from the Southeast economic and local government communities. We expect the best assessment available on whether or not this project is economically viable and would be of benefit to the people of the State of Alaska. In response to the Board,Mr.Strandberg reported that the Swan-Tyee Intertie is approximately 50%complete.The Intertie project will connect Ketchikan with Wrangell and Petersburg upon completion.From Tyee it is approximately 30 miles to the Canadian Border.The group has established some very good relationships with BCTC,the Crown Corporation organization that AEA Board Meeting March 19,2007 Meeting Minutes Page 4 owns all of the major transmission lines in British Columbia,and they have attended the last several work group meetings. Mr.Barry added that although there is approximately 8 to 10 megawatts of excess power from Tyee,it is not enough to amortize a transmission line.There is a lot of small hydro potential in that region and although it is only 30 miles to the border on the Alaska side,there are approximately 60 miles on the Canadian side to be able to connect. In response to the Board,Mr.Strandberg reported that Dorothy Lake is a project under construction for AEL&P near Juneau.Presently,Southeast Alaska is segmented as the Southeast Alaskan Northern part which is Juneau and the Upper Lynn Canal and the Southern part which is Ketchikan,Petersburg and Wrangell.A long-term plan to connect the entire Southeast is constrained by money for completion of the intertie between Dorothy Lake and Ketchikan. Mr.Miller pointed out that Dorothy Lake is a project where conduit revenue bonds were issued for AEL&P and Chairman Barry stated that the transmission to the market that they serve is already funded.Discussion on the Southeastern Intertie revolved around where the grant money will come from to connect either Swan-Tyee or the AK-BC project.Mr.Strandberg stated that when the $3.2 million feasibility project was conceived,there was equal emphasis on the Intertie in Southeast and going into Canada.In order to make the economics of the Swan- Tyee better,that particular project could be subsumed into a larger regional energy development. Mr.Strandberg stated that there is not enough money to complete the Swan Lake-Tyee project, but they have about 50%of what is needed to complete the project and that has been put in the budget.There has been discussion regarding phasing the construction.There is a desire to tie in Snettisham going south,but it would be an expensive link. The Anchorage-Fairbanks Intertie is governed bythe Alaska Intertie Agreement negotiated between the Alaska Power Authority,the predecessor of AEA,and five utility participants.The Agreement was signed in 1985:and amended in 1991 to include insurance provisions. Functional operation of this line as well as arrangements for collection and expenditure of annual operations and maintenance funds are part of the Agreement.Presently,the Agreement specifies through interconnection terms and conditions how utilities are allowed to access the Intertie.Recently,AEA gave the participating utilities a 48-month advance written notice of terminating the Agreement.There is a considerable amount of history and facts surrounding that termination.A copy of the termination letter as well as the board resolution that was predecessor to that termination is included in the board packet. AEA is a member of the Intertie Operating Committee:a technical level group that focuses on maintenance and operations.There are a number of subcommittees of the Intertie Operating Committee,some dealing with specific levels of technical operation of the Intertie.There is no debt being serviced by any of the charges for use of the Intertie.The project was built for $124 million dollars and there are no bonds outstanding.The major expenses,aside from the accruing long-term repair and replacement work,are maintenance and operations.Under thetermsofthisAgreement,AEA serves as a financial pool and provides basic accounting services to establish a cost-based wheeling rate.If one of the utilities wishes to transfer or sell power under an economy energy market,the wheeling rate is assessed on the basis of cost without return on any investment.The Intertie Operating Committee Budget Committee establishes a AEA Board Meeting March 19,2007 Meeting Minutes Page 5 budget each year for annual charges.The utilities project how much energy they plan to send up the Intertie and AEA calculates what the wheeling rate should be over the year.At the end of the year there is a true-up so that if more money is collected on the wheeling rate than actual charges accrued over the year,a check is written to the utilities. Staff was directed to begin negotiations regarding the Agreement Notice of Termination,which has not yet begun.We are working on the Unified System Operator contract and everything appears to be connected in one way or another.The disposition of this State asset is being discussed at a planning level as directed by the Legislature. At the request of the Board,a public hearing was held on:an offer from Matanuska Electric Association to purchase the Intertie for approximately $50 million dollars.The record of that hearing consists of two sets of pre-filed comments,a verbatim hearing transcript and two post-hearing written letters.A request from MEA for more information about the Intertie was also entered into the record.MEA,Municipal Light &Power,Chugach,and Golden Valley Electric Association addressed this issue in joint letters submitted to AEA.At the direction of the Board, we will hold additional public hearings on this matter.Under the USO Project,public meetings and hearings to address the disposition of all Railbelt assets will be scheduled. Chairman Barry clarified that the Board's direction to staff was that a public hearing be held to receive testimony about what elements should be considered in any disposition of the asset,not to hold a public hearing specifically about a specific offer for purchase of the asset.The Board wanted feedback from all of the affected utilities on what potential elements should be considered in any disposition of the asset.There was a lot of testimony about what elementsshouldbeconsideredandduringafuturepublichearingonlygeneralgenericelementsshouldbeconsideredinanykindofadisposition. Chairman Barry stated that there was a comment made by Mr.Edwards from Chugach Electric that was troubling.He read from the minutes of the public hearing: "And then the third point |want to make,just briefly,it has come up,the subject of the AEA Notice of Termination of the Alaska Intertie Agreement.Certainly,speaking on behalf of Chugach and [|think also if this is true,of ML&P and Golden Valley,although they can speak for themselves,Chugach does not accept AEA's Notice of Termination as effective.” Chairman Barry asked Mr.Bjorkquist to contact Chugach and clarify what was meant by this statement and report back to the board. In response to the Board,Mr.Strandberg reported that 20 people attended the public hearingandthosenamesarerecordedintheverbatimminutes. Mr.Babcock stated his appreciation that there was a hearing and said MEA approached it along the lines of what would be in the public interest in issuing a public call for offers for the Intertie and that was how they tried to address their comments. Verbatim Mr.Babcock:|think the main observation |would like to share with the board,based on what else is going on with the projects within the Railbelt,is that the grant from the Legislature from last year was in effect and had been approved at the same time the Alaska Energy Authority,or AEA Board Meeting March 19,2007 Meeting Minutes Page 6 AIDEA,proceeded along with negotiations with Homer to resolve the disposition of the Healy Clean Coal Project.Nothing was seen as contradictory in moving forward with the disposition of that State asset and the study of what might be a Unified System Operation for the Railbelt,nor was there any reason that proceeding with the disposition of the Alaska Intertie would undermine or cripple the Unified System Operation review.In fact,the ultimate disposition would be a Unified System Operator that would deal with the transmission and generation throughout the Railbelt to some degree,to some level or another and the transmission lines owned by Golden Valley between Healy and Fairbanks and by Chugach from Anchorage down to the Kenai would also be subject to whatever the disposition was under a Unified System Operation as would MEA's transmission and potentially the Alaska Intertie if owned by MEA. The real public benefit in moving forward with a public offering,and we would hope that's the direction you would take,regarding the Intertie (certainly all the other utilities should come forward with what they think is in the State's interest for the disposition of that intertie or transmission line)is that it really should be regulated.The access to it and the tariffs should be regulated by the Regulatory Commission of Alaska (RCA)just as every other transmission line in the Railbelt is.It's very awkward to have this black hole in the transmission system which is regulated solely by a contract which has now beengiven notice of cancellation as opposed to bytheRegulatoryCommissionofAlaska. There is at least $10 million dollars or more in a backlog 0of work that needs to be done on the Intertie and the current arrangement does not provide for the current utilities to step forward and do that.!n addition,none of the proposals or reactions from the utilities has given an answer to the Alaska Energy Authority's inquiry as to liability.At this point in time,the entire liability for the operation,any harm that comes from the operation of that Intertie is the State's.This should be passed along to an owner,either a group of utilities or MEA,whoever made an offer that you found most acceptable and most in the public interest., So those are the three main points:that it should be regulated by the RCA;that the repairs and liability should be clearly the responsibility of the utilities;and that selling or transferring theAlaskaIntertiewouldnotinterferewithyour.Unified System Operation,just as signing the contract last November with Homer did not interfere with that operation.Thank you very much. End Verbatim Chairman Barry stated that AEA does not accept any liability from the operation of the transmission line which is why there is an Intertie Operating Committee.AEA is one of the participants on that committee and all of the utilities are represented on that committee.The operation of the Intertie has been unsatisfactory.The reason for the termination of the Agreement was because it was deemed to be ineffective in its operating for repairs and maintenance.There is a difference between a single generating facility that is operated by one entity and providing power to the Railbelt and an Intertie that is supposedly capable of moving many utilities power up and down it and perhaps even in more than one direction at the same time. The minutes of the public hearing reflected an insinuation by several different people who gave testimony that there was some sort of conspiracy between AEA and MEA on this offer. Chairman Barry asked Mr.Babcock if he was aware of anyone on the staff or the board of AEA that solicited any kind of an offer from MEA. AEA Board Meeting March 19,2007 Meeting Minutes Page 7 Mr.Babcock stated no offer was solicited.He indicated in the minutes that he spoke about that "alleged conspiracy.”The cancellation notice did not somehow open the door for discussion about MEA acquiring the line.MEA has been interested in discussing a purchase of the Alaska Intertie for five or six years always under the premise of starting at the book value.The other utilities have also made steps toward acquiring the Alaska Intertie,although not by approaching the Alaska Energy Authority,but by forming a Joint Action Agency and supporting legislation to force a transfer from the State to those three utilities. Chairman Barry said we will have continuing opportunity for testimony on the subject of disposition of this particular asset along with some comments on a Unified System Operation.This is a significant issue for all Railbelt utilities and we appreciate your involvementin guidingyourStateaswegoforward. Hearing no objection,Chairman Barry closed the public comment period. 8.DIRECTOR COMMENTS r A.Director's Status Report of AEA Programs and Projects ue Mr.Miller stated that the board would receive a full briefing on AEA programss and discuss AEAownedenergyassetsatalaterdate. B.Next meeting date The board will be polled for the next meeting date. 9.BOARD COMMENTS There were no additional comments offered. 10.ADJOURNMENT There being no objection and no further business of the Board,the meeting was adjourned at12:55 p.m. Ron Miller,Secretary Alaska Energy Authority Status of AEA Projects -May 2007 Alaska Railbelt Energy System Alaska Intertie Project The Alaska Intertie transmission line is a 170 mile long,345 kv transmission line between Willow and Healy that is owned by the Alaska Energy Authority (AEA). The intertie was built in the mid 1980's with State of Alaska appropriations totaling $124 million.There is no debt associated with this asset. Alaska Intertie Agreement The operation of the Intertie is governed by the "Alaska Intertie Agreement”that was negotiated between the Alaska Power Authority (the predecessor of AEA)and five utility participants.This agreement was signed in December of 1985 and amended in 1991 to include insurance provisions. Chugach Electric Association (CEA),Municipal Light and Power (ML&P),Alaska Electrical Generation and Transmission (AEG&T)!,and Golden Valley Electric Association (GVEA)are interconnected to the intertie and can move power on the Intertie under the terms of the Alaska Intertie Agreement (Agreement).The interconnected system of utilities,tied together with the Intertie is collectively termed the "Railbelt Energy System.” Both functional operation of the transmission line as well as arrangements for the collection of and expenditure of Annual Operations and Maintenance funds are a part of the Agreement.The Agreement assigns operational responsibility and specifies a governance structure that consists of representatives of participating utilities and AEA.There are a number of other agreements that assign maintenance responsibility. The Agreement specifies,through interconnection terms and conditions,how utilities are allowed access to the Intertie.Each utility is required to maintain a certain level of spinning reserve to preserve the reliability of electrical supply throughout the network and to cooperatively manage the power flows on the transmission line. In October,2006,AEA gave the participating utilities 48 months advanced written notice of the intent to terminate the Agreement. 'AEG&T is comprised of Matanuska Electric Association (MEA)and Homer Electric Association (HEA). Attempts to Cure Alaska Intertie Agreement Defects-A Short History AEA staff first presented a report on the intertie at a meeting on June 30,2003, pointing out problems with the Alaska Intertie Agreement (Agreement).AEA engaged in extensive cooperative interaction with the Utility Participants to seek solutions to the deficiencies in the Agreement in the intervening time period. When participants failed to agree to any amendments to cure defects,2 and determining that the defects were serious,on October 16,2006 AEA Executive Director Ron Miller gave notice of terminating the Agreement in accordance with a board resolution,which is appended. In the notice of termination letter,which is appended herein,the Executive Director pointed out that the AEA list of defects does not deal with interconnection issues,and that AEA seeks to clarify the business relationship for the management and maintenance of the line. Current AEA Project Activity e Ongoing owner activities,including monitoring of operation,and financial management of operations and maintenance activities through participation in the Intertie Operating Committee e AEA serves as a financial pool,providing basic accounting services to establish a cost based wheeling rate that is trued up each year.AEA staff collects payments from intertie users and pays out expense reimbursement for costs accrued by the two operators of the line,ML&P and GVEA,and the three maintenance contrators,MEA,CEA and GVEA. At the end of each year AEA trues up the pool account and either sends out refunds or rolls over end of year shortages into the next year budget, so that users of the line pay only for the actual cost each year of intertie operation.There is limited ability to recover debt service that is spread over a time period greater than one year;therefore,debt financing has not been used to date. e Renegotiation of the agreement -Staff is ready to begin renegotiation of agreement.Initial renegotiation meetings with Utility General Managers are on hold,pending the establishment of the schedule for and the hiring of the Unified System Operations Contractor. 2 Some difficulty arose because the agreement requires a unanimous vote of participants to implement any amendment.To avoid this difficulty,AEA proposed a two-step process to cure defects without unanimous agreement of participants.First,appropriate amendments to cure defects would be negotiated with participants,and would have to be agreed by AEA and one or more participants.Second,AEA would give notice of terminating the agreement,so that the previously agreed amendments could take effect no later than 48 months later (earlier if participants unanimously agreed). H:\AEA Projects\2007 May Status of AEA Projects.doc Page 2 of 7 Unified System Operation Description:This project is funded by a legislative appropriation of $800,000 to study the Railbelt Grid Authority Concept.The Grid Authority concept envisions a unified system dispatch of generation and power flows,and at the finance level,a collective process for planning and procuring new generation over the next 20 years.AEA will analyze this concept and establish whether it is of benefit for the Railbelt ratepayer. AEA's proposed project scope includes elements of public hearings,educational conferences,and a consultant study to develop how Alaska can share resources to unify operation of the Railbelt Electrical Grid. AEA will conduct a technical conference to provide education on electrical network interconnectivity and terminology.AEA will also hire a consultant to define the types of network build-out available and consider the current regulatory regime of the Railbelt and business structures currently in place.The consultant will define different pathways that will achieve the most efficient collective build-out of the network. For the range of Grid Authority concepts considered feasible,AEA will require the Consultant to provide an implementation plan that describes the utilities', RCA's and AEA's required actions,as well as any potential legislative action estimate budget requirements,and provide a schedule and critical path analysis. Key to the analysis will be consideration of the regulatory structure and the range of business structures that could be employed to unify system operations. AEA has invited the Railbelt utility general managers to serve on an advisory group to assist in accomplishing the study.This panel includes the general managers of Railbelt Electric Utilities that have defined service areas.Presently, the panel does not include Aurora Energy (AE)which generates electricity in Fairbanks but has no defined service area,or other potential interconnected generators in the region.There is additional work to determine the right makeup of the advisory group. Status:Project RFP in formulation.Initial advisory group meeting has been held and minutes for the meeting are on the AEA web page at http://www.akenergyauthority.org/USQHomePage.html.AEA project manager will complete the request for proposal with internal input,and present to Advisory group for their review in the next three weeks. 3 The legislation reads as follows: (i)Any balance remaining in the Railbelt energy fund (AS 37.05.520)and interest earnings of the fund,after the appropriations made in (a)-(h)of this section and not to exceed $800,000,is appropriated to the Department of Commerce,Community,and Economic Development,Alaska Energy Authority,for the study of the Railbelt Electrical Grid Authority,an independent system operator,to manage and dispatch electric power on the Railbelt grid. H:\AEA Projects\2007 May Status of AEA Projects.doc Page 3 of 7 At the request of the Executive Director,the contractor selection process is on hold pending the end of the legislative session.Current pending tasks include review of the scope of work with the project advisory group,advertisement of the project request for proposal,and firming of the schedule for the technical conference.Technical conference is to be held as soon as possible,so it can be used both as an educational forum and a means to efficiently amass the business structure,regulatory,physical and operating data that the Contractor needs to develop approaches for unification. AEA has involved its renewable/alternate energy group in the preparation of the RFP,and has technical sessions on consideration of renewable energy alternate energy in the project. MEA TLS Bypass Project Description:The legislature appropriated $20.3M to AEA in 2002,to upgrade and extend the Anchorage to Fairbanks power transmission intertie ("Alaska Intertie”)to the Teeland substation on Knik Goose Bay Road in the Matanuska- Susitna Borough.The project is an integral part of the Alaska Intertie and will replace approximately 25 miles of an existing transmission line operated at 138 KV,owned by MEA+. Construction of this bypass line will parallel the existing MEA owned line,and - allow the present MEA owned intertie link,20 miles of which is insulated at 115 KV and operated at 138 KV,to return to MEA control and service.Continued use of this 20 mile portion of the 25 mile MEA asset by certain Railbelt utilities until January 1,2014 has been provided for through an RCA order. Status:The project has been approved by the Intertie Operating Committee. Negotiations of a project development contract with Municipal Light and Power were completed in August 2006,but cannot be executed without approval by the Anchorage Municipal Assembly and Municipal Administration.When approved, AEA anticipates it and ML&P will execute the contract and begin development. The project is expected to take 3 years to complete. Recently,AEA staff coordinated with the ML&P contract negotiator to appear with the ML&P staff before the Assembly.However,ML&P elected not to seek _this approval until after another ML&P concerning new utility office space has been approved by the Assembly.ML&P has not approached AEA with a new schedule for project approval. 4MEA has terminated a use agreement with AEA that previously allowed use of 20 miles of the existing line in conjunction with the Alaska Intertie.Certain Railbelt utilities are authorized to continue to use this 20 miles through January 1,2014,solely under an RCA order.An agreement between MEA and AEA authorizes perpetual use of the remaining 5 miles of existing line,until it is no longer needed as part of the Alaska Intertie. H:\AEA Projects\2007 May Status of AEA Projects.doc Page 4 of 7 Eklutna Project Transmission Line Upgrade The legislature appropriated $19.3M as a grant to the Municipality of Anchorage, Municipal Light and Power for an Eklutna project transmission line upgrade. AEA was named as grant administrator. The project consists of rebuilding the existing 115 KV wood-pole electric transmission line from the Eklutna Hydroelectric Plant to the point where the Beluga 230 KV electric transmission line intersects the line (near Briggs Tap/Fossil Creek),spanning a distance of 22.5 miles.The project is being constructed in the same alignment,and will upgrade the existing single circuit line to a double circuit line.The existing line has been in existence for 50 years. Status:Project is at 90%completion,and is expected to be completed this year. South East Alaska Intertie Projects AKBEC Intertie Project Description:The legislature appropriated $3.2 Million to AEA to analyze and confirm the feasibility of a transmission line project that would: e Through construction of a 67 mile electrical transmission intertie,connect two parts of the 4 Dam Pool service area,and the two major Southeast hydro electric power plants in the Ketchikan-Wrangell-Petersburg region. The completion of this intertie would allow Lake Tyee unused capacity to power Ketchikan,which is presently short of power. e Connect the 4 Dam Pool transmission system into the Canadian grid,and thus gain access to power markets either in Canada or US Pacific Northwest.As a part of the project concept,the construction of a transmission backbone would entice private or local government entities to develop a number of hydro power projects that could produce as much as 100 MW of power for use in southern SE Alaska or be exported.The bulk of the projects appear to be in the Thomas Bay area near Petersburg. AEA hired Hatch Energy to determine project feasibility and the company is approximately 60%through its scheduled work scope,and is set to deliver a final report on March 28th.They are on schedule,and there have been no change orders to the contract.Of the $3.2M funding,AEA will have expended approximately $450,000 by the end of March.The Hatch Energy study is expected to provide some basis for deciding whether to continue into a project development phase,however,it likely will not be a hard thumbs up or thumbs down feasibility determination,given the complex interplay of political, demographic and development futures that the project faces. H:\AEA Projects\2007 May Status of AEA Projects.doc Page 5 of 7 This project has an advisory committee and steering committee to assist AEA in proper administration of funds.5 The committees have participated actively in the formulation of the consultant scope of work,selection of the consultant.The work of the consultant and the recently released interim feasibility report have been reviewed by the work group and approved by them. All advisory meetings have been advertised as public meetings and have been well attended by all work group members as well as interested members of the public and legislative staff people.Detailed meeting minutes are published and are available on the AEA web page dedicated to this project. The project manager has coordinated with Canadian power companies to ensure that the Alaska consultant secures accurate information about Canadian markets for power as well as the details of their transmission system rules. Status:The draft final report has been issued for public comment by AEA.An advisory work group public meeting was held in Craig,Alaska on May 8.During that meeting,The work group recommended the report be accepted,and offered comments on its adequacy.These comments are currently be reviewed by the AEA project manager.The minutes to this meeting will be available on the AEA web page. The AEA project manager has sent review comments to the Contractor and expects a final report in June. The Advisory Group recommended that additional work be accomplished on the project feasibility to include the following: Discussion of the project with the Governor's office and key legislators,to seek administration buy in to long term commerce between Alaska and British Columbia.(This is being accomplished by the Southeast Conference and other SE interests.AEA is not involved) Continued coordination by the AEA project manager with Canadian power utility officials on status of British Columbia plans for transmission line construction near the Alaska border. Further project definition work,including conceptual design and cost estimates for the Thomas Bay projects,and transmission line routes.In particular,the group recommended review of transmission line costs for the Kake transmission line,which likely can be constructed along a public road right of way,with reduced costs of construction. 5 Membership of the committees are on the AEA AKBC Intertie project web page under "participants.”The Committees consist of a mix of utility representatives and local government representatives designed to reflect a cross section of stakeholders. H:\AEA Projects\2007 May Status of AEA Projects.doc Page 6 of 7 Four new members were added to the advisory group.They are Robert Prunella, City Manager,Wrangell,Steve ******,Wrangell Light and Power manager,Ms. Jodie Mitchell,incoming general manager of IPEC (utility serving Kake),and Mr. Robert Grimm,CEO of Alaska Power and Telephone. The Advisory Group and Southeast Conference requested AEA comment on the Tongass Forest Plan,to assure that all transmission line corridors are included in the plan,and provide factual data on the benefits of availability of low cost hydro power energy to make communities sustainable and to reduce the carbon emissions from diesel power generation.These comments were prepared by AEA through its consultant. The Administration coordinator from DNR called AEA prior to the comment deadline,and requested the AEA comments be forwarded to DNR for their consideration and integration into the State's comment package.The comments were not included. However,the DNR coordinator invited the AEA project manager to participate in a joint State-Federal work group to review the forest plan and associated EIS. H:\AEA Projects\2007 May Status of AEA Projects.doc Page 7 of 7 Wek Sct ree "*YIDEN ek ot Joint Board Work Session Alaska Industrial Development and Export Authority {=ALASKA and Alaska Energy Authority@=-ENERGY AUTHORITY May 29,2007 /EALASKA@-ENERGY AUTHORITY 1dWHTATieee Work Session a eye eaeFaResins oar Fa sR oe told AIDEA 1. 2. 3. 4. AEA 1. 2. 3. 4. 5. 6. Overview Loan Program Financial Highlights Development Finance Program Overview Loan Program Alternative Energy Energy System Upgrades PCE and Training Program Assets and Projects NOE SCLCRCEAACconateemmaen AIDEA Overview ee-a eetGE tee «AIDEA's core business activities which produce substantial cash flows:development projects,investment portfolio and loan program «Conduit Revenue Bond Program over $1.1 billion issued for 309 projects since 1978 «Loan and Export guarantees =RDIF and SBED Loans *FY 2006 Debt Coverage 4.00x «FYE 2006 Cash and Investments to Debt Ratio is 1.86x «Growing loan portfolio «Delinquency rates =Future of Red Dog,Healy,Ketchikan Shipyard, Skagway Projects Economic Components of AIDEA i Revenues and assets arising from AIDEA's projects,investments and loans Tg se YS amy nr lie=,Loan Program Sau SEF Investment PortfolioKi?FY3,AND ere eal K #6/30/2006 Loans 68 Development Projects# .ey:®6/30/2006 Cash and .Outstanding:$361.5 million Vvectanent Securities:$366.9 See OL otal Net Book=Past several years increase in million j loan sizes and overall =Conservative investment =Cash Receipts FY ending outstandings 6/30/2006policyinplace*Red Dog $17.7 million ®Fed Ex $3.2 million! "Conservative credit criteria *Portfolio focus on quality and«Diversity and quality key liquidityfocusitems =»99.84%of loans are current aBHistoricalCoverageComponents Bapatmramneeas $200 + $150 4 $100 4 Baksas533$50 +Eee ee $0 4 2001 2002 2003 2004 2005 2006 |M@ Loan Principal&Interest 1&1 InvestmentEamings Ml Development Project Receipts | (1)The $3.2 million includes the 7/1/2006 payment that was recetved in June of 2006. rE ee eaer eeeEe woe AIDEA Loan Program ern St ee Fk eee ahE Loan Portfolio on 6/30/06:$361.5 Million ;AIDEA's Loan Portfolio is Comprised of Three Elements:Loan Participation Program;OREOFinancing;Loans Appropriated!to AIDEA by the State #Portfolio Statistics: =»Average on 6/30/06:$1.2 million =Participated loans funded in FY06:$60.9 million m Loans current (less than 90 days past due) =FYE 2006:99.84% =Average since 2001:98.87% =Average for Alaska Commercial Banks:96.90%as of 9/30/2006 =AIDEA's loan history and pricing produce adequate margins for both borrowing and bad debt allowance s Annual net charge-offs averaged .105%of fiscal year-end loan balance for all loans =AIDEA "cost of funds”range from 110 to 150 basis points above U.S.Treasuries of like maturities =»AIDEA's typical margins above "cost of funds”on new loans average 110 basis points (1)Appropriated Loans are less than 1%of AIDEA's Loan Portfolio. SEeT een ae eee ARE ae | OREO Financing & Appropriated Loans Loan Participations FYE Loans Outstanding (§$millions) 2001 2002 2003 2004 2005 2006 Loan Participation Program Overview AIDEA participates in business loans made by local banks Banks submit financial information,feasibility analysis and credit history =AIDEA completes independent credit review of each loan prior to approval =AIDEA conducts periodic portfolio review m=Program parameters $20 million limit for single loan -bank participation minimum of 10% Loan requests above $3 million to the Board for approval,or $5 million aggregate with related debt Loan to collateral value cap 75% Max term:25 years or 75%of economic life AIDEA gets 1st lien position (can also take a 24 lien on a loan if AIDEA has 1*lien on another loan) Split amortizations available m=Underwriting limit on participations kick in if originating bank's other AIDEA loans are delinquent Delinquency Limitations for Originating Bank 100.00%90.00%MaxParticipation20.00% 0.00% 80.00% 60.00% 40.00% 75.00% 65.00% 0.00% 2.00%5.00% Delinquencies Dee a ee REE nS SF "ai!ig SwNe lia Be Ee :ao orn *.Aiod eaeTeeteaeopeegaahfeeesieSAL Loan Portfolio Analysis as of 6/30/06 ;AIDEA's loan portfolio is diverse in terms of industrial sector and Geography =")i Ee Hila oh ti 2 cid ekGeographicDistributionofLoansTeeeeORdli ($value)#atures Pe Day Care/ManufacturingNursing99Restaurant2%%Aircraft & &Other Hanger/Southwest 3%Terminal Recreation 3%Southeast 7%19%Office/ Business Condo 13% Tourism 22% Gulf Coast 7% Anchorage Mat-Su 57% 7% Retail te!Warehouse/28%Northern Shop Number of loans 3%Number of loans ° segs Nursing Home /Day Care 8 Interior eee Anchorage 154 ian Restaurant &Other 14 4%Interior 24Office/Manufacturing 2WarehouseOffice/Business Condo 57 Northern 4 14%Aircraft &Hangar/Terminal 12 MatSu 24 Office Warehouse 32 Gulfcoast 25Recreation12Retail79Southeast44 Tourism 35 Southwest 12Warehouse/Shop 36LS||lee ern Rid A he dis eke ee eeta eB (1)"Other”includes the following categories:Aircraft Hangar,Day Care/Nursing,Manufacturing,Recreation and Restaurant &Other.9 ;Participating Bank Exposures -$millionsFinancialInstitutionNumber of Loans Principal Balance %of Total $ First National Bank Alaska 111 $118.3 32.77% Wells Fargo Bank 54 79.0 21.89 Northrim Bank 53 66.4 18.39 100%AIDEA Owned'21 29.2 8.07 Alaska Pacific Bank 11 22.2 6.15 KeyBank 15 19.7 5.47 First Bank 9 10.8 3.02 Sterling Savings Bank 2 7.6 2.11 "Denali State Bank 2 3.4 0.95 Christiana Bank 1 2.0 0.56 Mt.McKinley Bank 1 1.5 0.41 Alaska USA Credit Union 1 ZT 0.20 ;Top Exposures by Borrower and Related Entities -$millions Name of Borrower Amount Outstanding Collateral Type 1.Anchorage Community Development,LLC?$23.5 Office/W arehouse 2.Kupreanof,LLC 16.3 Retail Boe 3.Alaska Club Partners 16.0 Recreation ($103.6 mm) 4.Huna Totem Corp 8.7 Tourism 5.Mt.Roberts Tram LTD 8.3 Tourism 6.JTS,LLC 8.1 Retail 7.Dimond Center Hotel,LLC 6.3 Tourism ' 8.Seward Hosp,LLC 5.5 Tourism All Other Borrowers9.Spenard Investments,LLC 5.5 Tourism ($257.9 mm) 10.Landing Restaurant,LLC 5.4 Tourism r .-$103.6 4 (1)Purchased from failed banks or OREO funding.Includes $23.5 million loan for ASI OREO sale. (2)Loan for ASI OREO Loan a,AEST ed re Te PA, 10 eo 2 eT Ee A AS oe,Dee AIDEA Financial Highlights PenPInvestment Portfolio Dividend Outstanding Bonds Bond Covenants 11 =Total FYE 2006 Cash and Investment Portfolio:$366.9 million =Fund management balance between external and internal m External goals:Safety and return m Internal goals:Safety and liquidity =Debt instruments issued or guaranteed by the U.S. government,its agencies and instrumentalities and Government Sponsored Enterprises (GSEs) =Money market funds and repurchase agreements collateralized by U.S.Treasury and agency securities =Other investments specifically approved by the board of directors Ga PCT Fe Peeeel Pt Debt instruments issued or guaranteed by the U.S. government,its agencies and instrumentalities and GSEs Dollar-denominated debt instruments that have been issued by domestic and nondomestic entities Mortgage-backed securities issued or guaranteed by Federal agencies of GSEs Asset-backed securities,including collateralized mortgage backed securities and collateralized mortgage obligations (CMOs).CMOs are limited to the more stable classes;prohibited CMO classes include those where principal and interest components are separated or where leverage in employed Certificates of deposit and term deposits of United States domestic financial institutions provided the institutions meet guidelines set forth in the Resolution Other money market instruments described in the Investment Policy Resolution 12 Investment Portfolio on 6/30/2006:$366.9 Million' ;Credit Quality' No Credit Exposure' Non Rated 3%iemMoneyMarkets}i Government iA » Sponsored ee”Baal BBB Securities ;Instruments Asset US Backed Treasuries 2% 26% Mortage Backed 33% US Agencies andGSEs_* 10%: Cash/Cash EquivalentsCorporates8% ;Management External 77 ;Duration in Years? Internal External Money Market 0.17 0.25 US Treasuries 0.48 5.76 US Agencies &GSE's 0.78 4.28 Corporates -5.44 Mortgage Backed -3.88 Asset Backed -0.63 (1)U.S.Treasury securities and securities of agencies of corporations explicitly guaranteed by the U.S.government are not considered to have credit risk. (2)Includes $9.4 million related to the Snettisham Hydroelectric Project. (3)Excludes $9.4 million related to the Snettisham Hydroelectric Project. Sem a Fae oy SaigedeetaleTs Es Se RG 13 AIDEA Dividends to the State [Policy Highlights =Program sets dividend at 25-50%of net income ona trailing 2-year basis =The percentage is set by the AIDEA Board,not the Legislature m Several amendments have been passed since program inception to conform to GASB accounting rule changes and toexcludenon-cash items which changed the definition of net income' =net income became"changein net assets” =exclude grants =exclude the Dividend itself =exclude impairment losses on development projects =exclude capital contributions ;Dividend History -$thousands Ect aw |oer)a, Intergovernmental Year Ending Revolving Fund Transfers!Capital Grant Statutory Base for Dividend/Net Dividend 6/30 Net Income impairment Losses Contributed Capital Revenue Dividend Dividend Income %Payment Year 1995 37,461 37,461 15,000 40.0% "1996 42,902 --42,902 16,000 37.3% 1997 42,880 -42,880 16,000 37.3% 1998 52,374 -52,374 26,000 49.6% "4999 °°- - SO* * * C S* *«S 7,098 37093.=}==)18500»-499% Sti'C S™S"2000 35,507 -35,597 17,500 49.2% ™2001 40,299 :--40,299 20,150 50.0% "20027 (72,508)(91,358)(17,500):36,352 18,176 50.0% 2003 22,374 (1,700)(20,150)12 44,112 22,000 49.9% "2004-'(465):(18,176)85 17,626 8,812 50.0% "2005,16,957 (16,342):33,299 "46,650 50.0% "2006 "42,875 (7,628)459 20,044 10,000 49.9% E™Cumulative Seabye edtiy ome Shatin RIE a ate TN a,rR ae ree Safi AE PERWDp Fe Gf wee sre CSM Sa TP Hak 204,788 oon Beto (1)Defined in statute:Statutory definition based on GAAP as adjusted. ews BAe nr BAH, 14 ;AIDEA's General Obligation Outstanding Bonds at May 11,2007 #Series 1998A (relating to the Healy Project) »$65.7 million "Series 2002A (relating to the FedEx Project) *$13.2 million ="Series 2007A and 2007B (relating to the Red Dog Project) =$113.1 million Ability to issue bonds without legislative approval lapses at 6/30/2007 except for: *Refunding Bonds *Conduit Bonds *Projects with existing legislative authorization SENT6 Cailss TS a ee ed 15 a Revolving Fund Bond Resolution Covenants (AIDEA's General Obligation Bonds) se ole a 4 vos ate ae ee Se Q ;Tome ae wet tee to ee J Blea mer ;=o oe:GE alOe an ee PRAOe PORES i PE eer oe be on ee ;AIDEA's economic strength is legal protection for general obligation bond holders sfpeJuteKeySecuriONS theres nad cata ereniroere rae «General obligation,full faith and credit pledge of Revolving Fund *Statutory non impairment covenant of the State (AS 44.88.130) *Coverage:Shall not borrow,make loans or expend any funds (other than necessary O&M or principal and interest on Revolving Fund Bonds)if it would i)cause coverage to fall below 1.50x ii)cause unrestricted surplus to be below lesser of $200,000,000 or total outstanding Revolving Fund Bonds and in no event less than $100,000,000 «Liquidity:At least 25%of the unrestricted surplus noted above must be held as cash or government obligations maturing within 1 year «Additional Bonds Test:must show 1.50x Maximum Annual Debt Service to issue new money bonds we fT er 6)SSSSseteBERE 16 AIDEA Development Finance Program Go,ora a ie a ee ee ee 17 Prospective and New AIDEA Projects Are Subject to Rigorous Guidelines and Review =The project must contribute to the economic growth of the State m Projects must be compatible with the local economy and the location endorsed by the local government m Projects are owned by AIDEA and leased to or operated by other parties m The project is economically and financially feasible and able to produce revenue adequate to repay the bonds or loans with which it is financed A feasibility study of the project is completed Additional AIDEA business and credit review is also conducted =Projects must provide support for business development and natural resource development Power Generation and Transmission Facilities Ports and airports Infrastructure for tourism destination facilities Roads Other public use facilities SI Sb Fora es Be 18 dee Qe er eemt telnet Persie.pm gs eh?chigd ay:E i:PERE RESE E SENSPea REN Bre aE ES ales Sk RTE AIDEA Development Projects:Program Status ;AIDEA has invested in a wide range of economic development projects throughout the state m™Red Dog and FedEx have been successful from the start,financially and operationally =Other projects have been either sold as planned or as a result of underperformance =»Unalaska Dock -debt paid off and asset returned to municipal government ownership as planned »Alaska Seafood International ("Seafood Center”)-original use not successful,AIDEA disposed of real estate via a sale for which AIDEA carries a note from the buyer m Skagway mineral concentrate load-out facility being rehabilitated;user agreement in place with Canadian mining firm.Estimated first shipment August 1,2007 m Ketchikan Shipyard provides employment in an otherwise challenged economy.24 shiplift and shipyard completion projects under way u Healy Clean Coal Project =Railbelt electricity profile supports positive demand outlook for plant -Management believes that the project can produce competitively priced power even after re-start costs are factored in =Cost to re-start approximately $29 million s AIDEA and Homer Electric Association ("HEA”)signed Project Development and Power Sales Agreements on November 15,2006 -HEA will manage work related to re-start and operate the plant -HEA will market excess power and will be a power purchaser starting in 2014 a»AIDEA and Golden Valley Electric Association are engaged in litigation/mediation process regarding residual claims under original project agreements and access and permit issues related to start up' =Beluga Coal to Liquids Project Se2 Or eh eeeERE 19 ;Figures for Fiscal Year Ending 6/30/2006" Allocable Revolving Fund Book Value Debt Outstanding Minimum Annual Project 6/30/06 (000s)(000s)Receipts (000s)Type of Business Red Dog Project $249,539 $114,115 $17,670 -Public Port and Road Healy Clean Coal Project $48,774 $68,325 N/A °°)Electric Power Plant FedEx Facility $18,769 ")$14,720 $2,981 Hangar &Maintenance Facility Ketchikan Shipyard $4,763 -N/A Vessel Construction and Dry- dock Facility Skagway --N/A Mineral Concentrate Load-Out Facility (1) (2) (3) (4) (65) eh te oe Oe A Net investment in Delong Mountain Transportation System (DMTS). Minimum Annual Assessment from DMTS. Currently maintaining Healy Project in custodial status:In November 2006,AIDEA signed an agreement with Homer Electric Association for potential plant restart. Net Investment in Fed Ex Project. Excludes the Snettisham Hydroelectric Project. 20 /SALASKA@--ENERGY AUTHORITY AEA Overview EEer CRey cde alle et Te Se aE | 21 =,ALASKA @--ENERGY AUTHORITY *Reduce the cost of energy in Alaska =Coordinate statewide energy planning AEA owned Infrastructure:Alaska Intertie,Bradley Lake Hydro, Larsen Bay Hydro and small rural interties Bulk Fuel Revolving Loan Fund,Power Project Fund,Energy System Upgrades,Alternative Energy,PCE,and Training Programs =Rural Energy programs receive federal and state funds «AEA owned assets -costs paid for by participating utilities C356 Seer he pT ots cotePR «Future of Statewide Energy Planning =Continue to assist communities to operate and maintain sustainable energy infrastructure in rural Alaska 22 -/SALASKA@=--ENERGY AUTHORITY AEA Loan Programs AEA's Loan Portfolio is Comprised of Two Elements:Power Project Loan Fund and the Bulk Fuel Revolving Loan Fund m Power Project Loan Fund (AS 42.45)provides loans to local utilities,local governments,and independent power producers for the development or upgrade of electric power facilities =»Revolving loan program funded through repayments and interest earned =Borrower must demonstrate technical and financial feasibility of the project m Bulk Fuel Revolving Loan Fund provides assistance to communities of 2000 residents or less =»Communities,utilities or fuel retailers are eligible to borrow to purchase fuel for emergency,semi-annual or annual bulk fuel supplies =Loan may not exceed $400,000,or,if the borrower is a cooperative corporation or electric cooperative and use the loan to purchase bulk fuel on behalf of more than one community,may not exceed the lesser of $400,000 multiplied by the number of communities on whose behalf the bulk fuel is to be purchased,or $1,500,000 =Borrower needs local eligibility resolution =These are short term loans to be repaid within one year or less Fe hE SM esPeoa eeSeie 23 =ALASKA @=--ENERGY AUTHORITY _¥ Alternative Energy and Energy Efficiency Program mo!Sg ed i ee ee de a as 2 unre ies :aa AG eetteNYweyUaeSFeaTeteaellaBA2eeaeseTohaAervSmtyrs ;Alternative Energy and Energy Efficiency Programs assist in displacing diesel and inloweringthecostofpowerandheattoAlaskancommunities Key Programs: Biomass:Wood Energy,Fish Oil Biodiesel,Municipal Waste Wind Geothermal Hydroelectric Ocean Energy Solar Energy Conservation The US Department of Energy has recently expanded with funding from the Denali Commission.EPA and USDA are also anticipated federal funding sources. 5 EF HR AE Re Aci RUBE 24 JS ALASKA @---_ENERGY AUTHORITY ;Energy System Upgrades consist of bulk fuel,powerhouse,and electrical distributionimprovementsforruralcommunities =Bulk Fuel Upgrade Program:provides funding for the design/engineering,business planning and construction management services to build code-compliant bulk fuel tank farms in rural communities =Anestimated $61 million is needed to complete the bulk fuel upgrades for the remaining 38 communities m Rural Power System Upgrade Program (7 projects completed): =Powerhouse and Electric Distribution Upgrades:efficiency improvements,powerhouse upgrades or replacements,line assessments,lines to new customers,demand-side improvements and repairs to generation and distribution systems.An estimated $100 million is needed to complete the upgrades for the remaining 60 communities. =Technical Assistance:offers preventive maintenance services,on-site operator training to rural electric utilities,specifically the smaller utilities that have difficulty acquiring and maintaining the necessary technical skills. m Emergency Response Services:provides technical support when an electric utility has lost,or will lose,the ability to generate or transmit power to its customers and the condition is a threat to life,health,and/or property in the rural community. en ES hes beh ti Sy ED SE 25 =ALASKA @=-ENERGY AUTHORITY Training Program ;The Training Program provides opportunities to local residents to operate and maintain theirenergyinfrastructure.This helps to ensure that the community has the best skills to sustain their infrastructure.76%of the students trained last year are employed in the trained position.19%are employed in different positions.91 people were trained. a Training provided: m Advanced Powerplant Operator =Bulk Fuel Operator =Bulk Fuel Bookkeeper m Bulk Fuel Manager m Electrical Utility Bookkeeper m Electric Utility Manager m=Hydro Operator , =On-site Bulk Fuel m Power Plant Operator m PCE Utility Clerk ah o,f ee ee 26 -[BALASKA@=-ENERGY AUTHORITY Power Cost Equalization (PCE) I The PCE program provides a subsidy to customers in rural Alaska where the charge for electricity is 2-5 times greater than in urban Alaska.PCE helps to improve rural Alaska's standard of living,and is a subsidy underlying the financial viability of centralized power generation in the rural communities. The PCE Endowment Fund was created and capitalized in FY 2001 with Funds from the Constitutional Budget Reserve and the Four Dam Pool Project sale proceeds.The PCE Endowment Fund is an Alaska Energy Authority Fund managed by the Department of Revenue;it is invested to earn at least 7%over time.$182.7 was appropriated to the fund in FY 2007.The deposit occurred in October 2006. aot Ce i Mee eo ee: 27 =ALASKA/z@--ENERGY AUTHORITY AEA Assets and Projects teEEle eeSka 28 JS ALASKA @=--_ENERGY AUTHORITY ;Assets =Bradley Lake Hydroelectric Approximate cost:$313 million Commercial operation began in 1991 610-foot long,125-foot high concrete faced and rock-filled gravity dam,3.5 mile power tunnel and steel-lined penstock 126-megawatt plant transmits power to the state's main power grid via two parallel 20-mile transmission lines Operated by Homer Electric Association Debt service and operating and maintenance costs paid by participating utilities m Larsen Bay Hydroelectric |Sr:5 Approximate cost:$1.6 million Commercial operation began in mid-1991 475-kilowatt plant provides power for the Kodiak Island community Also provides a better source and quality of water with reduced maintenance Upgrade in progress;project to be transferred to community upon completion ASUS eit OD dads Sa Re 29 =ALASKA @=--ENERGY AUTHORITY ;Assets -continued ms Alaska Intertie Approximate cost:$124 million Operational,Spring 1986 170-mile,138kV transmission line Intertie Operating Committee oversees operations and maintenance Operating and maintenance costs paid by participating utilities Ve Sey ree)ey EP eee0 30 /=ALASKA@-ENERGY AUTHORITY Projects -Status |Projects -Status m Alaska-Canada Intertie Project m Facilitate the development of the southeast electrical intertie through the development of the Alaska-BC intertie for energy export. m Could lead to development of hydroelectric projects in southeast Alaska =Steering group created to provide advice and recommendations to Administration on structure and approach =Unified System Operation Project =Collective planning project to pursue a plan for a future railbelt energy grid =Potential ownership of all Railbelt assets under a possible unified system operations approach m Study funded through an $800,000 Legislative appropriation m By-Pass Project mu 19-mile upgrade of the Alaska Intertie m $20.3 million legislative appropriation m Anchorage Municipal Light &Power to manage project =Contract awaiting City Assembly approval since August 2006 NT,5 5TH ae te a ef, 31